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October 23, 2014

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Henderson weathered recession with cuts to salaries and services, now considers tax hike

When Henderson officials explain the city’s tenuous finances, they point to their prudent spending cuts in the wake of the economic crash in the late 2000s.

How much do they make?

• $299,223: City Manager Jacob Snow's total compensation has been flat since he started in 2012.

• $267,395: City Attorney Josh Reid’s compensation is up 7 percent since he was hired in 2011.

• $221,704: City Clerk Sabrina Mercadante’s compensation is up 36 percent since she was promoted into the position in 2010. Assistant City Manager Fred Horvath said Mercadante was hired at a lower salary than her predecessor, then given raises to be in line with other department directors.

By the numbers

• $130,688: The yearly total compensation for the average Henderson city employee, up 5.8 percent from 2009 o 2014.

• 107: The number of Henderson city employees who haven’t received a raise since 2009.

How compensation for city employees has grown

• In 2000, employee compensation from the general fund was $74,386,946 and made up 71.3 percent of the city’s $104,391,459 general fund spending.

• In 2014, employee compensation from the general fund was $183,616,000 and made up 83.8 percent of the city’s $219,085,971 general fund spending.

Why is total compensation growing?

• Salary: The biggest reason for employee salary growth is union contracts that require annual pay raises and cost-of-living boosts, although some city unions did agree to temporarily freeze certain pay raises after the recession.

• Pension: The state has required cities to boost payments that fund employees’ pensions. It says those payments are needed to keep the retirement system healthy.

One message that’s repeated in the city’s presentations and brochures: Henderson reduced compensation by 6 to 11 percent for employees not protected by a union.

The statement is true. But it’s also an incomplete picture of what has happened with employee pay. Non-union workers represent only a fourth of the city’s employees.

The background

Henderson has long prided itself on being a “premier community.” To deliver on that goal, city leaders have chosen to pay higher salaries to attract top employees.

But after the city’s revenue fell 18 percent in two years during the recession, the City Council was forced to reconsider its spending practices.

This spring, the city cut hours at its recreation centers and reduced services for seniors. And City Manager Jacob Snow says the cuts won’t be enough to maintain the city’s premier status.

The city is considering asking voters to approve a property tax increase in 2015 to raise money to pay for the maintenance of basic infrastructure, such as parks, roads and water pipes.

But as the city cuts other services, the share of city spending that goes toward employee compensation is growing.

Why the city’s statement is true

In 2009, the city eliminated a retirement benefit, reduced holiday pay and ended car allowances for non-union employees. The cuts affected 508 people, about 25 percent of the total workforce.

City officials limited the cuts to non-union employees because they have more authority to make cuts to staff not protected by contracts.

In the wake of those cuts and others, compensation paid to all city employees dropped 5.9 percent to $232 million in 2009.

Why it’s also an incomplete picture

Total compensation across the city has grown 6.8 percent to $246 million over the past five years.

The number of employees in the general fund, the account that pays for the bulk of city operations, has been relatively flat at about 1,400 employees, roughly two-thirds of all staff. But the average employee’s salary grew by 3.2 percent, benefits grew by 12.2 percent and total compensation grew by 5.8 percent.

In 2009, the average employee earned a salary of $87,477 and benefits worth $36,018, for a total compensation of $123,495. In 2014, the average employee earned a salary of $90,279 and benefits worth $40,409, for a total of $130,688.

That growth rate is about half the rate of inflation but also comes at a time when Henderson taxpayers are seeing their own incomes fall. Over the past four years, the median household income in Henderson fell by 18 percent to $61,345.

Nevada Policy Research Institute Vice President Victor Joecks, a libertarian critic of government spending, credited the city for making spending cuts. But he added: “It’s dishonest to say, ‘We cut salaries, we reduced compensation, but we’re not going to talk about the increases since.’”

What’s next

Assistant City Manager Fred Horvath is leading a study comparing Henderson’s pay scale to similarly sized cities.

If Henderson’s pay is found to be too high, some non-union workers could see their pay frozen for years.

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