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Eight City staffers, some senior in rank, were notified last week they would be laid off from their positions, and the City is making other moves – including inviting employees to consider early retirement – as officials confront a projected $10.6 million economic shortfall as a result of the Coronavirus. According to one estimate, the layoffs would produce savings of $912,000 in salaries and benefits.
The positions included staffers in the Public Works, Fire and Life Safety, Police, and Digital Services departments.
Asked about the makeup of the group, Interim City Manager Erika Storlie said about half the employees were senior staff and half regular staff.
As to what criteria were used, Ms. Storlie said she worked with individual department directors, who evaluated the operations of their department and made a determination based on how they could continue the services currently provided.
She stressed that the City is not eliminating any of the positions. The layoffs run for six months, and, if the City finds itself in a better financial position at the end of that period, those employees will be recalled to their jobs, she said.
She said any job cuts would come during City Council discussions of the 2021 budget, which will likely start earlier this year because of the necessity to deal with the shortfall.
“I’m not eliminating any positions, just looking at potentially the layoffs that we did, and then whether it makes any sense at this point in time to do any more,” she said.
In an April 9 letter to employees, Ms. Storlie attached a spreadsheet showing the estimated loss of revenue reduction of current year budgeted revenue, adding up to more than a $10.6 million shortfall. Because of the virus and social distancing, areas such as basic and home rule sales tax (nearly $3 million between them), the hotel tax ($1.1 million), and liquor tax (more than $1 million) could be hit particularly hard.
“This is a challenge to estimate,” Ms. Storlie wrote, “since we do not know if the stay-at-home order will be extended, and we do not know how long it will take for people to feel comfortable congregating in large groups, but this is a start.”
“Right now it looks like a minimum of $10.6 million dollar shortfall for the current year. It is fair to characterize this as catastrophic. We will be adding an agenda item to the April 27 City Council meeting to approve a line of credit in case we get into a cash shortage.
“Since we didn’t have a robust cash reserve before the pandemic, it puts us in a bad position to be able to weather this storm. We are aggressively renegotiating existing contracts and looking at creative ideas for cost savings and operational efficiencies. In addition, there is a hiring freeze on all non-essential positions and a pause on all non-essential purchases. To the extent we can, we need to reduce our expenses for the current year as we will not have the revenue coming in that was budgeted.”
In the April 9 letter, Ms. Storlie noted that for employees considering retirement and chosing to retire before April 30, the City will pay for their insurance for five months. “If you would like to take advantage of this, please consider HR [Human Resources]. We are not in a financial place to offer much but I do hope this will provide an incentive,” she said.
In a follow-up interview on April 14, Ms. Storlie explained that the City was not able to offer much “because the shortfall is so large, and we don’t know how much more it’s going to grow between now and whenever the stay-at-home order is lifted, and whatever the ‘new normal’ looks like after people start returning to previous activities and work and school.” For that reason, the City has “to base its actions on the preliminary shortfall estimate,” she said.
The eight people laid off were non-union employees. However, anybody eligible to retire, through their perspective or IMRF (Illinois Muncipal Retirement Fund, who did in fact retire by April 30 would be eligible for the City’s five-month paid health insurance offer, she said.
Currently, she estimated there are 29 staff members in the City’s employee force of nearly 800 who are over 66 years old and would be eligible for Medicare. She said there are far more people over the age of 55 who are eligible to retire, but may not currently chose to, either for financial reasons or because they do not have Medicare.
With that group, the number of people eligible to retire probably numbers more than100, she said.
The situation is particularly painful, Ms. Storlie indicated, noting that before the coronavirus, “I think we were well on a path to getting to a better financial place,” she said. “Council was making some good decisions and trying to shore up the fund balance. And we had planned on putting $1.5 million into the fund balance reserve over the course of three years. We did it for the first time last year and then we were going to do it again this year and again next year.”