REPORT TO COUNCIL
SUBJECT
Title
Consider Amending the Employment Agreement between the City of Sunnyvale and City Manager Kent Steffens to Increase the City Manager’s Salary and Modify Certain Benefits
Report
BACKGROUND
The City Council Salary Subcommittee met on October 26, 2023 and December 4, 2023 to discuss the City Manager’s annual compensation survey. The Council met in Closed Session on November 14 and 28 for City Manager Kent Steffens’ annual performance evaluation and on December 5, 2023 with the Council Salary Subcommittee negotiating this amendment to his employment agreement. The City Manager is entitled to a 3% annual salary increase effective December 24, 2023, pursuant to Section 3.3 of his employment agreement. However, the City Council has discretion to modify that amount based on performance. The City Manager’s compensation must be determined in a public meeting.
EXISTING POLICY
Council Policy 7.3.1 Legislative Management - Goals and Policies, Goal 7.3D: Maintain a quality work force, consistent with state and federal laws, City Charter, and adopted policies in order to assure that City services are provided in an effective, efficient, and high-quality manner.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
DISCUSSION
The salary range for the City Manager classification is $302,041 - $422,749. The City Manager, Kent Steffens, was hired on December 31, 2017 with an annual salary of $302,041. Effective January 1, 2019, the City Manager’s annual salary increased by 4.5%. The City Manager received a 5.5% salary increase effective December 29, 2019; a 6.5% salary increase effective December 27, 2020; a 6.0% salary increase effective December 26, 2021; and a 6.0% salary increase effective December 25, 2022, for a current annual salary of $398,470.
The City Manager’s Employment Agreement provides that the City Manager shall be entitled to retirement and other benefits as applicable to department directors. Section 3.3 of the Agreement provides the City Manager shall receive an annual salary increase of three percent (3%), beginning with the pay period including January 1, 2019, until reaching the maximum salary range. If the City Council chooses to increase the City Manager’s salary beyond the established salary range or the scheduled 3% increase already provided in the employment agreement, Council should provide direction to Staff on the desired amount of increase.
The City Council Compensation Subcommittee made the following recommendations:
• Increase the City Manager’s salary from $398,470 by 5.5% to $420,386 effective December 24, 2023
• Provide a one-time $15,000 cash bonus, which staff recommends take effect in the second pay period of the 2024 calendar year
• Approve changes to the City Manager’s employment agreement and existing home loan agreement to extend the repayment period for the loan from the existing period of six months from termination to a longer period based on years of service, such as the number of months equal to the number of full years of service, starting with his original hire date of August 1, 2011. This change would require staff to return to Council with an amendment to the City’s home loan policy, which currently limits the repayment period for director loans to 6 months from the employee’s date of termination (last day on payroll) or 6 months from the date the residence ceases to be used as a primary residence, as well as update clear language for the home loan amendment to allow finance staff to administer. If Council approves this option, staff suggests that the subcommittee be authorized to work with staff to determine the final language for the amendment to the City Manager’s home loan agreement.
Staff will work with the City Attorney to prepare a sixth amendment to the City Manager Employment Agreement (Attachment 1, Attachment 2, Attachment 3, Attachment 4, Attachment 5, and Attachment 6) consistent with the City Council’s direction. CalPERS requires that any changes to the City Manager salary or salary range be consistent with a publicly available published salary schedule.
The compensation program approved by the Council (RTC No. 17-0871) in September 2017 and RTC No. 20-0954, would require the City Manager’s salary range be adjusted to 15% above the Assistant City Manager salary range ($326,497 - $391,796), or a City Manager salary range of $302,041 - $450,565. Council is not recommending a change to the salary range at this time since the subcommittee recommended increase of 5.5% is within the current published salary range for City Manager.
FISCAL IMPACT
The FY 2023/24 Budget for the Office of the City Manager includes funding of salary, benefits, and retirement for the City Manager and included an assumption of an increase in base salary. The Budget includes sufficient funding for the salary increase, but makes no provision for a bonus. The $15,000 bonus is one-time and will be absorbed in the budget of the Office of the City Manager.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the NOVA Workforce Services reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
ALTERNATIVES
1. Provide direction on City Manager salary and benefit changes; authorize the Mayor to approve an amendment to the City Manager’s Employment Agreement, in a form approved by the City Attorney, consistent with the City Council’s approved salary and benefit direction; and, if home loan repayment changes are approved, authorize the Mayor and Subcommittee to work with staff to determine final language to amend the home loan agreement and take appropriate actions to implement such an amendment.
2. Provide other direction regarding the City Manager’s salary and compensation.
STAFF RECOMMENDATION
Recommendation
Staff makes no recommendation. This report is developed to facilitate conversation for the public hearing and action by the City Council.
Staff
Prepared by: Tina Murphy, Director of Human Resources
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
ATTACHMENTS
1. Employment Agreement between City of Sunnyvale and Kent Steffens, City Manager
2. First Amendment to Agreement for Services between the City of Sunnyvale and Kent Steffens, City Manager for the City of Sunnyvale
3. Second Amendment to Agreement for Services between the City of Sunnyvale and Kent Steffens, City Manager for the City of Sunnyvale
4. Third Amendment to Agreement for Services between the City of Sunnyvale and Kent Steffens, City Manager for the City of Sunnyvale
5. Fourth Amendment to Agreement for Services between the City of Sunnyvale and Kent Steffens, City Manager for the City of Sunnyvale
6. Fifth Amendment to Agreement for Services between the City of Sunnyvale and Kent Steffens, City Manager for the City of Sunnyvale
7. 2023 City Manager Compensation Survey