By Erin Freeman | Lynnwood Times Staff
- City Council considers voluntary early separation and budget policy changes to fill $1.8 million revenue gap
The city of Lynnwood held a virtual special finance meeting on May 14 to discuss city incentives and budget policy changes to confront the $5 million general fund shortfall imposed by COVID-19.
Human Resources Director Evan Chinn announced that the city will offer a voluntary separation package to staff who have five years or more of service with the city or a total of five years of service in combination with other qualified State of Washington retirement systems. There are currently 15 to 20 employees predicted to have plans to retire soon.
Applicants will maintain six months of city-paid COBRA coverage for medical, dental and vision, or will receive a one-time cash incentive payment based on years of service. The employee will receive $800 for every full year up to a maximum of $20,000. Applicants must respond by mid-June, will be notified of the approval decision by July 1, and the date of separation will be September 19.
Councilmember Jim Smith responded with puzzlement as to why someone would choose the early separation program over being laid-off and receiving more benefits through unemployment.
“Perhaps I’m not understanding this- why would an employee prefer to take the voluntary separation, when all they get is the COBRA coverage or the $800?” questioned Smith. “As opposed to asking the city ‘hey I’m ready to go if you’ll just fire me when I can get unemployment and get quite a bit more money on unemployment.’ Am I missing something?”
Director Chinn responded saying that if a city staff member were to ask to leave, it would still be considered voluntary separation and they would be ineligible for unemployment. However, predicting that most employees who will take advantage of the program will have accumulated 25 to 30 years of service with plans to retire soon, he explains that their seniority would most likely protect them from layoffs.
“The goal here is to incentivize folks who are near retirement to make that decision to leave a little sooner than they had planned,” explained Chinn. “On the other hand, if someone hasn’t been here very long… that might be another segment of our population that might take advantage of this. Hopefully, that will allow some people to leave the city under fairly good terms, and also would give us some salary savings for the rest of the year.”
Lynnwood’s finance team has already identified an estimated $3.2 million in city expenditure reductions/savings, leaving a $1.8 million deficit. Employees who volunteer for the early separation program positions will need to stay vacant for an average of three to six months to realize savings going into 2021-2022 and recoup investments in the program.
“This is our first cut, and we’re hoping it’ll put a dent into the $1.8 million gaps,” stated Chinn. “We did the numbers and it’s not going to be a huge cut for the city… it’s not a cure-all but it’s an opportunity for people to leap to retire sooner than they have.”
The forecasted savings to be accumulated through the early separation program was not announced, but Finance Director Springer stated that other staffing cost reduction measures may be pursued if necessary. Reviewing additional options to fund the remaining $1.8 million revenue shortfall from COVID-19, Director Springer proposed city policy decisions for the city council to consider.
The budget proposal would keep permit revenues and/or sales tax revenues currently transferred into the Economic Development Infrastructure Fund (EDIF) in the General Fund, augmenting the General Fund revenue by approximately $1,00,000 in 2020. Springer said another option would be to “cap” the construction sales tax revenue transferred to EDIF by the biennial budgeted amount of $1,475,721 and let the remaining amount remain the General Fund, which would provide approximately $630,000 to the General Fund.
The council was in favor of both options of the temporary suspension of EDIF and to cap the transferred construction sales tax revenue, recommending that the finance team draft two ordinances for each proposed.
“The direction about EDIF is going to help with the financial strain,” said Springer. “Hopefully there’s a lot of construction going on this year and we can keep that in the general fund to help with this.”
Future Lynnwood City Council Business Meetings, Work Sessions and Committee Meetings can be streamed live by the public at https://www.youtube.com/user/CityofLynnwood/live.