By Robbie Ward
TUPELO – City of Tupelo administrative and department leaders will spend the next few months identifying ways to reduce the $20 million paid for personnel costs, an unsustainable long-term cost compared to overall tax revenue.
Higher personnel costs means less money for infrastructure, parks and other quality-of-life services that encourage people to visit and live in Tupelo.
Personnel costs also have an indirect impact on when the city’s 451 current full-time employees will see a pay raise – nonexistent since a 3 percent cost-of-living adjustment more than two years ago.
Mayor Jason Shelton last week informed the City Council of intentions to craft a “personnel improvement plan,” an effort to find overall savings in personnel costs and use part of the savings to fund pay raises.
“We’re going to find ways to both save the taxpayers’ money and also get pay raises for people who help the city run on a day-to-day basis,” Shelton said Friday.
Tupelo Chief Financial Officer Lynn Norris has identified for years the critical importance of lowering personnel costs, the highest expense for most city governments each budget year. Tupelo personnel costs have ranged from roughly 50 to 63 percent each fiscal year from 2000 to the present. Norris has said personnel costs should closely mirror the percent of sales tax revenue related to the overall city budget.
Personnel costs in Tupelo government have outpaced sales tax collection 13 times since 1992.
In the last five years, the city has dipped into reserves a couple of times to cover expenses. Tupelo’s current financial health appears solid, having navigated through the worst of the most recent economic downtown with $18.5 million in reserves and no tax increases.
Tupelo’s city finance leaders believe policy changes related to personnel will lower costs and help ensure continued financial vitality.
Prior to returning to Tupelo city government in 2010, Norris worked as a consultant to cities and counties throughout the state, often working with local governments facing bleak financial realities.
“I’ve worked in distressed cities and personnel costs were a contributing factor,” he said.
Norris and city department heads during Jack Reed Jr.’s administration focused on limiting employee overtime, but resulting savings still left a desire for further cost reductions.
Of course, improved economic activity in the city, which involve some factors outside local government control, can improve Tupelo government’s tax revenue and corresponding personnel costs. A change directly controllable, the city intends to encourage improved efficiency through improved management, operational and personnel practices while maintaining the same level of services.
Shelton anticipates completion of a seven-year plan by April 1. He said employees shouldn’t expect anything radical, such as mass layoffs. Instead, the city will look for smart improvements and continue to limit replacement of some positions after employees retire or leave city employment.
Budgeted employees for the city in the last decade has ranged from highs of 486 in 2009 and 2010 to a low of 468 in 2005.
An existing effort to encourage early retirement, city employees with 25 years of service can retire and keep city insurance for five years or until they turn 65, whichever happens first. Shelton also points out savings by recently hiring department heads in Public Works and Parks and Recreation at lower salaries than their predecessors.
Also part of the plan is evaluating personnel costs within the city, management structure, salary ranges and possibly moving positions within departments or elsewhere.
Shelton and city department heads said specific details of expected changes beyond basics already identified will emerge in coming months. Until then, they plan to analyze and evaluate different ways city employees can provide services at less expense.
“We’re going to look at all options,” said Don Lewis, city chief operations officer. “Everything is on the table.”
As for pay raises, both Shelton and City Council members voice support for providing a bump in city employees’ income. The challenge comes in creating ongoing revenue necessary to implement them.
Raises of 3 percent for 2014 budgeted employees in general operations will cost the city $530,878. For a 5 percent raise, the cost jumps to $884,797. These numbers don’t include employees from Tupelo Water & Light and other revenue-generating city departments; however, they historically receive raises when council approves pay raises.
Shelton said personnel savings must happen before pay raises can begin.
“We’re trying to implement a plan that will provide raises that will correspond at some amount with the savings,” he said.
The City Council will decide after receiving the personnel recommendations whether to pass, tweak or ignore them.
There currently are no conversations to raise pay for City Council members or the mayor.
Shelton recently shared with the council plans to fund additional capital projects through $1.5 million in savings from the Fiscal Year 2013 budget. However, he said funding pay raises require more than a one-time windfall.
“Sustainability is key,” he said. “Once you give a raise it’s hard to take it back.”