As thousands of workers across the state, in both the public and private sectors, are grappling with layoffs and pay freezes, hundreds of nonunion employees at the City of Tacoma are getting raises as part of a wide-scale compensation adjustment aimed at streamlining the system and bringing pay in line with going market rates.

Some saw increases of more than 15 percent, a News Tribune review of pay records found.

While admittedly an imperfect measure because of the quirks in the data, the new pay and classification structure gave 776 out of 942 nonunion employees more pay, averaging roughly an 8 percent bump, the review showed. Employees making between $100,000 and $150,000 saw the largest proportional increases.

The rise in cost to the city and its utilities – about $6 million – also comes at a time when the economic downturn and drop in tax revenue has led the city to cut spending in other areas.

But top city leaders are standing by the decision, saying the move assures fairness as union workers continue to see yearly pay raises and also fulfills promises made during previous lean years.

“We have already exercised the fiscal restraint to put us where we are,” City Councilman Mike Lonergan said in a recent interview. “It’s about planning for the future and keeping faith with our employees.”

Trying to figure out the average raise or the biggest raise or the total cost is complicated. That’s because employees not only received more pay, but also many of their job classifications shifted to reflect new duties, preventing an apples-to-apples comparison. Some also received promotions.

To make things more complicated, in the run-up to the market-based salary study, which took a couple of years, many job classifications were frozen, even as duties changed, officials said.

A comparison of the salaries for the nonunion city and public utilities employees who received pay increases showed a $6 million cost increase between 2008 and 2009, from $61 million to $67 million.

But it’s not clear how much a shift there would have been without the changes, which included doing away with longevity pay and cost-of-living increases. The employees had previously been scheduled to get a cost-of-living adjustment totaling 5.5 percent over the two-year budget period.

“It’s not simply a task of taking the old system and bringing people to market” rate, city spokesman Rob McNair-Huff said last week. “Some people were working outside their classifications for a number of years while they were waiting for the study to get done.”

RAISES DURING SHORTFALL

The City Council has especially focused on the effect of the changes to the city’s tax-supported general fund, which pays for things such as police, firefighters and libraries.

More than $2 million of the increase will be paid from the city’s general fund over this year and next year – but a previous set-aside will reduce the impact, at least in this budget cycle, to $365,000.

Still, the additional spending comes at a time when the general fund is already experiencing a $7.1 million shortfall. City Manager Eric Anderson has initiated nearly $12 million in cost reductions – such as not filling vacant staff positions, reducing travel and training, postponing purchases and cutting back on subscriptions.

He wants to wait until midsummer to re-evaluate whether more severe cuts, which would come with noticeable changes to city services, are needed.

Handing out pay raises during the economic crisis might appear questionable, but one must keep in mind the broader context, Lonergan said.

His sentiments were echoed by Councilman Jake Fey.

“Yes, the timing’s bad,” he said. “But I still would point out that even with the belt tightening we’re doing, we’re in a better spot than most jurisdictions are. I don’t want to take political potshots, but if some of the other jurisdictions had been more conservative, they might not find themselves in the situation they’re in.”

NOT KEEPING UP

Records show that in 2004, 2006 and 2007, nonunion employees were held to 1 percent cost-of-living increases. They were promised it would be revisited down the road.

Going back to 1991, both union and nonunion employees received cumulative cost-of-living increases below the official inflation rate. Compounded, the Consumer Price Index rose 94 percent from 1991 to 2009, while, on average, employees for most of the city’s unions saw a 68 percent increase and nonunion employees saw a 62 percent increase.

Lonergan acknowledged that the city’s financial outlook could continue to get worse and necessitate not just current steps including leaving vacancies open and cutting back on travel, but actual cuts to city services.

“But at this time, given the best information we have available, I think we’re going down the right path,” Lonergan said. “We budgeted a sufficient amount.”

A finance report current through the end of April supports that contention. While the city saw a $2.9 million overage in general fund spending on supplies and other services, spending on personnel was $153,000 under what was budgeted.

ATTRACTION, RETENTION

The city’s “classification and compensation study” was completed last year with the assistance of Seattle consulting firm Milliman Inc. The comparison data used by the city varied depending on the position. Some came from published reports, but certain positions required a custom survey. Some positions were compared regionally, others nationwide.

The city set a goal of paying in the 70th percentile of the market rate for comparable positions.

Underlying the study was the assumption that the city needed to pay competitively to attract and keep highly qualified workers. City leaders have cited large turnover among its attorneys and experienced utility workers as examples.

But in the current market, with unemployment in Pierce County running about 10 percent, many job seekers can only dream of a stable gig with the city. When a single position for a water meter reader opened up, it drew 1,400 applicants, with more than 800 showing up to take a written test.

Lonergan acknowledged that market conditions have indeed changed, but said that didn’t necessarily hold for the skilled, technical positions, including lawyers and engineers, for which the city has had a hard time recruiting.

“We still have key positions that 99 out of 100 people or 999 out of 1,000 can’t do, and we need to retain and recruit for them,” he said.

Overall, the city’s own statistics show a relatively low turnover rate – about 4 percent or 5 percent over the last several years compared to a national average for U.S. cities of about 7 percent.

The new compensation changes were implemented in March (retroactive to the beginning of the year), so it’s too soon to tell the effect they were having on filling those skilled position separate from the economic slump, officials said last week.

BIG EARNERS GET BIG BUMP

The biggest beneficiaries of the salary adjustments are employees earning between $100,000 and $150,000 per year, The News Tribune’s review found.

The 145 employees in that range will see an average increase of 12 percent compared with the 9 percent to 10 percent raises employees making less will see. Salary bumps for those making more than $150,000 averaged 6.5 percent.

That distribution was expected, McNair-Huff said. An assessment done in 2005 found some of the higher-paid managers and specialized employees weren’t making as much as their counterparts elsewhere.

That explains why Tacoma Power, public works and water employees account for more than half the number of raises. The rest are spread across 17 different departments.

For the most part, adjustments were capped at 15 percent, but several employees saw bigger raises to bring them up to the bottom level of pay for their job classification. Thirty-six employees saw raises of more than 15 percent – for 25 of those it took more than 15 percent to get them to the bottom rung of pay for their new classification; for the remaining 11 employees, there were other factors such as promotions or extra duties.

During future annual pay evaluations, “We may find that the market has stagnated,” McNair-Huff said. “Certain positions might not see any increases for a while.”

Still, city officials know that perception also is important. In March, following a public outcry, City Manager Anderson declined a 14.5 percent raise to his $200,000 salary, saying it would be better “fiscally and symbolically” if he didn’t take it.

Ian Demsky: 253-597-8872

ian.demsky@thenewstribune.com