City Council Agenda
|
Memo to: |
Manteca City Council |
|
|
|
|
From: |
Andy Pinanso, Interim City Attorney |
|
|
|
|
Date: |
June 16, 2026 |
|
|
|
|
Subject: |
Approval of an Amendment to the Employment Agreement Between the City of Manteca and City Manager Toni Lundgren, an at-will employee establishing the Base Salary for Fiscal Years 2026-27 Through 2028-29 and Amending Section 3(d) to Provide That the City’s Executive Management Compensation and Benefits Plan Governs the City Manager’s Benefits. |
Recommendation:
title
Adopt the attached Amendment to the Employment Agreement between the City of Manteca and Toni Lundgren an at-will employee, establishing the City Manager’s base salary for fiscal years 2026-27, 2027-28, and 2028-29, and amending Section 3(d) of the Agreement to provide that the City’s Executive Management Compensation and Benefits Plan governs the City Manager’s Benefits and controls over Attachment 1 to the Agreement; and Authorize the Mayor to execute the Amendment on behalf of the City.
body
Background:
Effective July 1, 2023, the City Council approved an employment agreement with Toni Lundgren to serve as City Manager (the “Agreement”). The Agreement was amended on June 18, 2024 to adjust compensation and certain benefits. The City Manager’s current base salary is $278,409 annually, effective July 1, 2025. Under the 2024 amendment, the base salary was scheduled to increase to $286,761 effective July 1, 2026. The proposed Amendment supersedes that scheduled figure and establishes a new three-year salary schedule.
Section 3(b) of the Agreement provides that the City Council and the City Manager may conduct a salary review at least annually, concurrently with the annual performance evaluation. The Council conducted that review and directs this item to open session for final action.
DISCUSSION
A. Legal Authority and the Proper Vehicle for the Adjustment
Section 14 of the Agreement permits the parties to amend the Agreement by mutual written agreement. The City Manager’s base salary is set through her individual agreement and the Council’s salary-review process, not by operation of the City’s Executive Management Compensation and Benefits Plan (the “Plan”) or the salary matrix adopted under it:
• Agreement, Section 3(a)-(c): the City Manager’s salary is fixed by the Agreement, subject to an annual salary review under Section 3(b) and to adjustment in the Council’s discretion under Section 3(c).
• Plan, Article I, Section 2: the terms of the Plan “apply to all listed positions unless otherwise specified in the incumbent’s employment agreement.” The Agreement specifies the City Manager’s salary, so the Plan’s salary matrix does not set or trigger an adjustment to it.
Read together, these provisions mean the salary matrix adopted under the Plan does not automatically set or trigger an adjustment to the City Manager’s salary. Instead, her salary is established through the Council’s salary review under Section 3(b) and memorialized by written amendment under Section 14. A Council-approved amendment, not a Plan or matrix revision, is the legally correct vehicle for the salary adjustment.
The Amendment separately revises Section 3(d), which governs the City Manager’s benefits. As currently written, Section 3(d) provides that the City Manager’s benefits are set forth in Attachment 1 to the Agreement and are not tied to the Plan. The Amendment revises Section 3(d) so that the City Manager’s benefits are governed by the Plan and so that the Plan controls in the event of any conflict with Attachment 1. This change affects only the benefits component of the City Manager’s compensation; her base salary remains set by individual agreement as described above, and the compensation analysis in Section B is unaffected.
B. Compensation Analysis
The Council’s review was informed by the City’s recent classification and compensation study and by an internal compaction analysis. Three objective findings support the adjustment.
1. Below-market total compensation. The classification and compensation study places the City Manager’s total compensation approximately 12.46% below the median of the comparable agencies surveyed. The proposed adjustment is calibrated to move the position toward that market median; it does not place the City Manager above the surveyed market.
2. Compression of the executive salary differential. The City applied market-based adjustments across its executive management classifications through the adopted salary matrix. Because the City Manager’s compensation is set by individual agreement rather than the matrix, her base salary did not move with those adjustments. As a result, the differential between the City Manager and the executive group reporting to her has compressed substantially, and in at least one classification has inverted, so that the top of the subordinate executive group would meet or exceed the City Manager’s pre-adjustment base salary. A sound structure maintains a reasonable differential between the chief executive and the executives that the chief executive supervises; here, that differential had effectively disappeared.
The compression is summarized below, measured against the top of the executive management group that reports to the City Manager:
|
|
Without Adjustment |
With Year 1 Adjustment |
|
City Manager base salary |
$286,761 |
$338,113.00 |
|
Top of subordinate executive group |
~$307,000 |
~$307,000 |
|
City Manager differential |
-6.7% (inverted) |
+10.0% |
“Without adjustment” reflects the City Manager’s base previously scheduled for July 1, 2026 ($286,761); the differential is wider still against the current base ($278,409). “Top of subordinate executive group” refers to the highest-compensated classification reporting to the City Manager under the adopted executive management salary matrix.
3. One-time correction, followed by restraint. The Year 1 adjustment is a one-time correction of the accumulated below-market gap and the compressed differential described above. The scheduled increases in Years 2 and 3 (4.75% and 3.0%) are modest and predictable, consistent with ordinary cost-of-living movement, and do not commit the City to continued escalation at the Year 1 level.
In setting the figure, the Council also considered the scope of the position. The City Manager serves as the City’s chief executive officer, directs an organization of approximately 486 employees, and administers an annual operating budget of approximately $391 million.
Proposed base salary schedule:
|
Effective Date |
Annual |
Semi-Monthly |
Increase |
|
July 1, 2026 |
$338,113.00 |
$14,088.04 |
21.4% / 17.9%* |
|
July 1, 2027 |
$354,173.37 |
$14,757.22 |
4.75% |
|
July 1, 2028 |
$364,798.57 |
$15,199.94 |
3.0% |
* Year 1 reflects a 21.4% increase over the current base ($278,409) and a 17.9% increase over the base previously scheduled for July 1, 2026 ($286,761). Semi-monthly figures are paid over 24 pay periods; de minimis rounding differences between the schedule and the City’s payroll system may occur.
C. Performance
The salary review was conducted concurrently with the City Manager’s performance evaluation. The Council’s review reflected the City’s operational and financial progress during the City Manager’s tenure, including voter approval of Measure Q, a new property tax exchange agreement with San Joaquin County, restoration of the City’s audits to a current and regular schedule, the award of substantial competitive grant funding, completion of the General Plan and Housing Element updates, and advancement of major capital and downtown revitalization initiatives. Continuity of executive leadership during a sustained period of growth and service demand also weighed in the Council’s decision.
D. Basis for the Council’s Action and Fiscal Stewardship
Approval of this adjustment is consistent with, and not contrary to, the Council’s duty to manage public funds prudently. The following points provide the basis for the recommendation and the record supporting it:
Market-calibrated, not market-leading. The adjustment is designed to bring the position to the market median identified in the City’s compensation study, correcting a documented below-market position rather than placing the City Manager ahead of comparable agencies. Setting compensation at market is the fiscally disciplined result: it neither overpays nor allows the position to fall further behind, which only increases the eventual cost to correct.
Objective and documented process. The figure was not set in the abstract. It rests on an independent classification and compensation study, an internal compaction analysis, and a salary review conducted under Section 3(b) of the Agreement concurrently with the performance evaluation. A decision grounded in that record is transparent, auditable, and defensible.
Internal equity and consistency. The City has already applied market-based adjustments to its executive management classifications through the adopted salary matrix. Applying the same market discipline to the chief executive position is a matter of consistency. Declining to do so leaves the City Manager as the only executive not brought to market, perpetuates the compressed differential described above, and creates upward pressure across the organization over time.
Avoided cost of turnover. The incremental cost of retaining experienced leadership at market compensation is modest relative to the cost and disruption of executive turnover. A city manager vacancy typically entails executive search fees, an extended period under interim leadership, onboarding time, and the loss of institutional knowledge and continuity on major capital, financial, and growth initiatives now underway. Retention at market is the lower-cost course for the City and its taxpayers.
Budgetary discipline. The planned General Fund excess revenue in the proposed Fiscal Year 2026-27 budget is able to fund the recommended contract increases for that fiscal year. Additional appropriations are not needed to implement the agreement at this time and will be included in a future budget update. As detailed below, the incremental cost is immaterial relative to the City’s overall budget, and the out-year increases are restrained and predictable.
Taken together, a market-based correction grounded in an independent study, applied consistently with the City’s treatment of its other executives, documented through the salary-review process, and absorbed within the adopted budget, is the course that best protects the City’s interests and its public funds. Declining to address a documented below-market and compressed compensation position is not a cost-free choice; it carries elevated turnover risk and continued internal compression that the City would ultimately pay to resolve.
Fiscal Impact:
Fully-loaded total compensation for the City Manager position (base wages, additional pay, benefits, and CalPERS employer cost) is projected as follows under the City’s FY 2026-27 baseline budget model:
|
Fiscal Year |
Total Compensation |
Base Wages |
|
FY 2026-27 |
$391,518.78 |
$338,113.00 |
|
FY 2027-28 |
$409,322.61 |
$354,173.37 |
|
FY 2028-29 |
$421,101.25 |
$364,798.57 |
The City Manager's position is allocated to the General Fund is partially recovered from other funds utilizing central services through the cost allocation plan. The initial FY 2026-27 General Fund share of the increase is approximately $64,821, of which roughly 55.5% ($35,976) is allocable to other funds and potentially reimbursed. The adjustment will be included in future budget updates and is immaterial relative to the City’s approximately $391 million operating budget. No additional appropriation is required beyond the adopted baseline to implement the contract at this time.
LEGAL AND BROWN ACT COMPLIANCE
The City Manager is a “local agency executive” within the meaning of Government Code section 3511.1(d). Under Government Code section 54953(c)(3), before the City Council takes final action on the salary, salary schedule, or compensation paid in the form of fringe benefits of a local agency executive, an oral report summarizing the recommendation for that final action must be made during the open meeting in which the action is taken. This item is agendized for open session, and the required oral summary will be presented before the Council votes.
Any review of the City Manager’s performance or discussion of her compensation conducted in closed session is authorized under Government Code sections 54957 and 54957.6; final action establishing compensation is taken only in open session as set forth above. The Amendment has been reviewed and approved as to form by the City Attorney.
Documents Attached:
Attachment 1 - Amendment to the Employment Agreement