Fountain Hills staff propose formula for annual salary adjustments; council asks for legal guidance on elected stipends

Fountain Hills town staff presented a proposed, formula‑driven approach to annual salary adjustments at a council work session, recommending a blended “annual general adjustment” (AGA) that uses 50% Employment Cost Index (ECI) and 50% a local municipality market index (League of Arizona Cities and Towns survey) as the starting point for budget planning.

Paul Soledinger and other staff described the proposal as a way to make pay adjustments more transparent and less ad hoc. Soledinger summarized the calculation as “50% of each of the metrics added together to create that AGA” and said staff tested the approach against the last four years of adjustments; the formula would have produced slightly different numbers than council action in two of those years but would have provided more stability overall.

Council response and merit pay Council members generally endorsed the idea of standardizing the cost‑of‑living component for budget planning. Several council members asked whether a merit or performance component should be layered on top of the AGA. Staff said merit pay is a more complex policy change that would require further work (staff described merit systems as a separate, deeper project that could take 18–24 months to design and implement) and that the AGA proposal is intended to address the annual, budget‑level adjustment rather than performance pay.

Elected stipends and timing Staff proposed reviewing elected‑official stipends every two years aligned with the mayoral and council election cycle and noted that council stipend adjustments should take effect in the January following an election. Council members asked staff to seek legal guidance about timing and statutory constraints; staff said they have received preliminary legal direction and will follow up with formal guidance and a proposed resolution so council can consider any stipend update before the next body is seated.

Why it matters: Council and staff said a consistent, data‑driven method will make budgeting simpler and provide employees with clearer expectations about annual adjustments, while leaving the council the final authority to modify or withhold increases based on financial conditions.

Key details - Proposed AGA formula: 50% Employment Cost Index (BLS) + 50% local market index (League of Arizona Cities and Towns annual survey), calculated each year and included in budget planning; council retains final approval. - Timing: staff expects to receive the necessary index data by January for prior calendar‑year values, which aligns with the town’s budget calendar and supports inclusion in the FY budget process. - Council stipends: staff recommended a one‑time catch‑up or “bulk” adjustment to bring stipends current, effective January after the next election cycle, and then periodic reviews every two years; staff will obtain formal legal guidance before presenting a resolution.

Discussion highlights - Volatility of CPI: staff explained why they favored the ECI over the consumer price index (CPI), saying CPI can be volatile and ECI specifically measures employer labor costs for comparable jobs. - Budget constraints: staff emphasized this formula is a recommendation for budget planning, not an automatic entitlement. If town finances are constrained, council retains discretion to adjust or withhold increases. - Merit: several council members advocated exploring merit pay in the future; staff responded that merit systems require additional design work and greater administrative capacity.

Outcome and next steps Council voiced broad support for adopting a formulaic approach to annual general adjustments and asked staff to obtain formal legal guidance on stipend timing and statutory constraints. Staff will return with a proposed resolution and legal analysis for council consideration ahead of the next election cycle; no compensation changes were adopted at the work session.