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Request for Council Action Date: 4/19104 Item Number:ll. Department Approval Manager Approval Agenda Section Item Description: Consideration of City Manager's Contract � Compensation Background: This is to complement the memo dated April 14,2004 from City Attorney Jay Squires regarding City Manager compensation cap and referencing the letter of February ��'a 2004 from DOER. To avoid salary cap issues, the City Manager's car allowance under his Council-approved employment contract must be reduced $1,700. Considerations: Benefits that are offered to the majority of full-time staff and those that are not subject to taxation as income under IRS seem to be the most obvious solutions. The $284.000 cash received by those opting out of tl�e City's Health Insurance plan for 2004 is not given to the City Manager due to the cap. Providing that either this amount or the $1,700 formerly spent on a car allowance is spent on another City benefit it is not considered taxable income and does not count toward the salary cap. Because of cap concerns the City Manager does not currently receive the health care insurance opt-out cashbenefit, but all other City employees do. Options include the following: 1. Optional Life Insurance outside of that provided by the City. 2. There may also be a possibility of having the City Manager be considered a group of one for the Post Employment Health Care Spending Account. After some discussion with Minnesota State Retirement Systems they would not want to do this; however, perhaps ICMA would allow it. This is a viable option if the vendor will allow a group of one. This option will entail more research. Financial Implications Although the allocation may be amended differently, the financial impact will be the same. In fact since the income would not be taxable to the City Manager it would also not be taxable to the City so there may be some slight savings to the City. Council Action Requested Motion authorizing the City Attorney to prepare amendments to the City Manager's 2001 employment contract to comply with the state's salary cap and to keep the City Manager whole in terms of the overall compensation package the Council unanimously approved for him in Apri12001.