City previews personnel cost drivers for 2026: proposed pay‑scale increase, health‑insurance pressures and plan for third‑party compensation study

City human‑resources staff and the city manager outlined personnel‑related cost drivers and asked the council to authorize continued study of classification and compensation.

Proposed pay scale adjustment: staff proposed a 3% across‑scale pay adjustment for positions on the city pay scale for 2026 to help maintain market competitiveness; finance staff said a 3% adjustment would increase personnel spending by roughly $358,749 versus the 2025 budget, and that with annual step progression the combined increase is larger. The presentation noted the state minimum wage will rise to $15 per hour on 01/01/2026 and that inflation and labor market pressures were key drivers.

Health‑insurance concerns: the city’s broker projected a large increase in health‑insurance costs for 2026 (staff cited a broker projection range and said claims experience was high in 2024). Staff recommended exploring alternative approaches that avoid shifting large cost burdens to employees. Staff also described a possible “Samaritan Fund” option — a third‑party program designed for employees with very high medical spending — as one way to manage extreme claim years; staff said the program requires additional review and would not reduce care access for employees who do not qualify.

Classification and compensation study: city management proposed a third‑party compensation and classification study to review job descriptions, reclassifications, and equity across departments. Management said the city’s pay structure had accumulated inconsistencies over time and that a consultant‑led study (estimated under $50,000 and requiring employee participation and several face‑to‑face meetings) would supply a defensible, market‑based structure. Management said union leadership was supportive of a transparent, third‑party review.

Next steps: staff will bring a detailed budget impact for the 3% scale proposal and return with health‑insurance options (with the broker and the Samaritan Fund vendor) at the October study session. Management requested council approval to issue a request for proposals for the classification and compensation study and to budget the consultant cost in 2026 planning.