City council weighs taking tax increases to voters to address employee compensation

Voters in Lee’s Summit could be asked later this year to increase the city’s sales and use taxes to help raise salaries for public employees.

With a room full of city workers looking on, City Manager Steve Arbo laid out the proposed tax increases Thursday to the Lee’s Summit City Council.

Arbo said raising the current 1-cent city sales tax by a half-cent would generate an additional $8 million a year and instituting a 0.01-cent use tax, which would be levied on purchases made from sellers outside Missouri or from sellers who are not engaged in business, would generate about $635,000.

The council is struggling to address a recent compensation study that determined that the city pays its non-union employees on average 10 percent less than the average of similarly sized governments and private organizations surveyed. The pay for the city’s police officers, fire fighters and other unionized employees is also lagging, although the amount varies by position.

City officials have not yet identified exactly how much additional money is needed to address the pay discrepancy although the council last month declined to pass a budget amendment that would have reallocated $1.66 million for salary increases and on Thursday voted 7-1 to table until Feb. 8 an amendment that would bump that number up to around $5 million.

The council also has demanded the creation of a “step pay” system for employees in its collective bargaining units, which would cost several million dollars more.

“In order to do this and be sustainable, we do need to have significant additional funds or (make) substantial cuts that probably would impact our programming and level of service to the community,” Arbo said.

The earliest the city could put the sales and use tax issues before voters for approval would be Aug. 7. To do that, the council would need to ask the Jackson County Board of Elections by May 26 to put the measures on the ballot.

However, the council was not unified in how it should pursue additional revenue or the timing and said it wants Arbo to bring back additional options and information at the Feb. 8 meeting.

Councilman Rob Binney said the council should approve the $1.66 million increase now and then tackle how to pay for the increases in future years rather than rush the process.

“This would show we’re taking a step, a good-faith effort and good direction to get something going,” Binney said. “That’s something we can pay for today.”

Others, such as Councilman Craig Faith, argued that the problem has developed over many years, and employees demand action now. He said he favored the $5 million figure — or higher — and is among those on the council wanting to dip into the city’s reserve fund to pay for it.

“We have kicked it down the road several times as a city, and the problem has become bigger and bigger and bigger,” Faith said. “If we don’t make that commitment, we’re not going to have the services that we have, not because we decided to cut back on them but because (the employees) are going to decide to not work here.”

That opinion was echoed by Police Sgt. Rick Inglima, president of the Fraternal Order of Police Lodge 50, who said the department recently received only 30 applications from people wanting to begin police officer training, compared with the hundreds he said he remembers in past years.

Inglima told the council that the city ranks last among 15 similar-sized cities in terms of starting pay for police officers and 13th among those cities for starting pay for a sergeant. He added that these pay gaps were identified in past compensation studies.

“For those of you who’ve been on this council for a long time, shame on you because you’ve allowed this to occur,” Inglima said.

Tim Arbeiter, president of the Lee’s Summit Chamber of Commerce, advised the council against using the city’s fund balance, which is designed to help the city continue operating even if there is a significant drop in revenues. There is some concern that such a move could affect the city’s credit rating, making it more expensive to borrow money in the future.

“We are requesting and asking for a full consideration in the next fiscal year budget where this should occur,” Arbeiter said.

Councilman Dave Mosby said he opposed new taxes, calling any public support for them a “myth.” Instead, he recommended a “multitiered” approach, which would include asking city departments to cut their budgets, curbing future spending and reducing the use of economic development incentives that reduce incoming revenue at least in the short-term, like tax increment financing.

“What we proposed is 6 percent of the budget,” Mosby said, referring to the $5 million figure. “We’ve heard nothing from staff how departments could come up with 6 percent. That doesn’t sound hard.”

Arbo said he would bring options for cutting city departments and other cost-saving measures at the Feb. 8 meeting.

David Twiddy: dtwiddy913@gmail.com

This story was originally published February 2, 2018 at 9:03 PM with the headline "City council weighs taking tax increases to voters to address employee compensation."