Minneapolis top officials up for big raises

More than 100 top city officials in Minneapolis are getting significant salary increases this year as part of an effort to hire and retain the most talented senior staffers.

The unusual raises are emerging at a time when the issue has been a volatile one at the State Capitol, as Republicans sharply criticized Gov. Mark Dayton for granting significant raises for his state commissioners. Under their new pay, 10 Minneapolis officials — including the city coordinator, engineer and convention center chief — will make more than any state commissioner.

"We expect a lot from our appointed employees. And if we want that level of talent, we have to pay for it," said Employee Services Director Tim Giles, highlighting a consultant's report showing that top manager salaries lag 6 percent behind comparable cities and Hennepin County.

The top-paid city employee, the convention center executive director, Jeff Johnson, will earn $180,773 after the increases kick in over several phases this year. That's about $69,000 more than Mayor Betsy Hodges. The city engineer clocks in at $172,039, followed by the city coordinator at $170,015, Giles at $167,980 and the chief of police at $167,267. The top appointed official in St. Paul, the police chief, earns about $156,770 — the only appointee in that city making more than $150,000.

Along with ensuring top wages were competitive for hiring purposes with similar positions in other cities, officials said the raises were also needed to restore a pay gap that encourages other employees to seek promotions. The change boosted salaries by an average of 10 percent — partly due to employees advancing in an expanded salary range — and allowed for 16 percent higher pay when employees ­ultimately reach their position's top ­financial tier.

Dayton cited local ­salaries — specifically school superintendents making more than $185,000 — as one reason behind his commissioner raises of about 20 and 30 percent.

This creates a problem of government agencies continually raising salaries to stay competitive with each other, said Senate Minority Leader David Hann, R-Eden Prairie, who was a fierce critic of Dayton on the salary issue. He said it is concerning that local raises are used to justify state adjustments.

"Generally, I think that pay levels for … public bureaucrats, especially at the upper levels, there needs to be some exposure to that," Hann said. "And the public should be aware that that's how their taxpayer dollars are being spent."

Not all Minneapolis top manager positions appear to lag behind comparable governments. A Star Tribune review of the consultant's 2012 comparison of 62 positions found that in 15 cases, Minneapolis paid higher minimum and maximum salaries than the average of its peers.

City spokesman Matt Lindstrom said that the city relies on a broader analysis, since individual comparisons are swayed by Minnesota's gender equity rules, differing job descriptions and the strategic importance of a position in a given city.

The city saw the limits of its salary scale recently, while seeking a new auditor to spearhead a revival of the city's internal watchdog department. Private consultants helping with the recruitment wrote to city staff last year that, "We are consistently hearing from our network that the pay scale for the open position may be low for the specific qualifications you are seeking."

Minneapolis ultimately increased the position's salary last fall. It hired an auditor in Target's health care division, Will Tetsell, who said this week that he is already making more than the position's previous top salary.

"If we're not going to offer a competitive wage … for some of these different roles, like in audit, or in finance, or in records management, then we're just kidding ourselves that we're going to be able to grow well as a city," said Council Member Linea Palmisano, chair of the city's audit committee.

Paying 3,700 employees is a major component of the Minneapolis budget. City data shows that salaries — not including overtime — for non-park employees will make up about $266 million of the city's $1.2 billion budget in 2015. Even after their $1.3 million raise, top managers will represent a mere 5.5 percent of total city pay. By comparison, the nearly 800 police officers account for about 24 percent of the total.

Many city employees endured frozen wages in 2011 and 2012, but that has begun to thaw in recent years. Most employees saw cost-of-living adjustments of just over 2 percent this year, while another 2.2 percent increase was spread out among those staffers who have not yet reached top pay step — just under half of the workforce.

Three people involved in the city's union negotiating were optimistic that the raises for top managers would result in more generous future contracts for their employees. Jim Michels, an attorney who represents police, fire and public works employees, ran into problems with top manager pay last year while negotiating for his professional engineers, many highly skilled with advanced degrees.

"The problem was that these guys were starting to bump up against the salaries of some of the [top managers]," Michels said of their contract, which was ultimately shorter in anticipation of the top-level pay raises. His own analysis concluded these top managers were due for 6 to 8 percent raises.

Laura Spartz, who represents supervisors and foremen, said she was "delighted" by the change, citing how many city positions pay uncompetitive salaries ahead of the anticipated wave of baby boomer retirements.

"This is a ripple effect. … You're still going to have to make your case for why you think you need a different kind of increase," Spartz said. "But at least you've got the opportunity to have the argument."

Top official pay isn't unlimited, however. Public entities, excluding schools and medical organizations, are barred from paying employees more than $165,003 in 2015 without a special waiver — an inflation-adjusted state limit that is unique nationally. Minneapolis has obtained five of the 25 waivers on file, more than any other jurisdiction in the state. Giles said the city may need to obtain more waivers.

Hennepin County has obtained four waivers, though its three top paid employees (including the medical examiner at $250,766) are exempt from the cap.

So why are some local officials making more than state commissioners, who in most cases oversee vastly larger budgets? Lindstrom, the city spokesman, said while commissioners tend to change with the governor, city management jobs are intended to be long-term.

Jay Kiedrowski, a senior fellow at the Humphrey School of Public Affairs and former state finance chief, said state commissioner pay faces extra skepticism from outstate legislators unaccustomed to such high salaries. He said even after Dayton raised commissioner pay to a top salary of $154,992, that's still not enough.

"In comparison to the private sector, and even the nonprofit sector, given the responsibilities they have — the pressures, the time they put in, the skills required — it's still less than what they deserve," ­Kiedrowski said.

Eric Roper • 612-673-1732