City employees, Staff has recently submitted the recommended City Budget for FY2014 to Mayor and Council

for their consideration and direction. This document provides the framework for our organizational work plan and it is important that all City employees be provided with an understanding of where our organization stands financially for the present and for the future. The budget that was submitted was focused on maintaining service levels although the costs for providing services are increasing. It is my observation that we have done our best to maximize efficiencies and the credit goes to the employees of this organization who have demonstrated their unwavering commitment to bring quality service to our community. The Mayor and Council in the course of the review of the budget gave direction to provide a framework that would articulate short and long term strategies that would infuse investment to our employees. With that direction the following was approved by the Mayor and Council to go forward. Compensation - On April 23, Mayor and Council made the following decisions regarding compensation. City staff has been directed to develop the platform with all stakeholders a merit pay system for review and consideration by Mayor and Council. Secondly, staff was directed to make recommendations within 30 days on inequities within the current system of compensation for consideration by Mayor and Council. Finally, Mayor and Council have approved the implementation of a 55 cent pay raise for all employees to go into effect no later than January 1, 2014. Pension - On March 27, Mayor and Council adopted the recommendation to change the variable rate of member contribution requirements for the Tucson Supplemental Retirement System (TSRS). The variable rate for employees hired between July 1, 2006 and June 30, 2011 will be 6.715% and for employees hired after July 1, 2011 the rate will be 5.16% (formerly 13.976% for FY2013). The rate change will take effect on July 1, 2013. Medical Insurance Benefits - The City has awarded a multi-year contract for a new medical, pharmaceutical, and employee assistance program for active and retired employees. The result is a more cost effective contract for the City with no increase in premiums to either program participants or the City. While the recommended budget is in balance and the economy is slowly improving, we still have many challenges ahead. The $15 million dollar shortfall in the FY2014 budget was covered primarily by one-time revenue resources, which is not sustainable moving forward. However, I am confident that we as a community can continue to make it observable to all that the city of Tucson is a great place to live, work, recreate and invest in and the future is bright with economic development. We must understand there are many issues that need to be addressed in future budgets. Therefore, we must begin work now to address these and other long-term issues so that we can continue to provide exemplary service to the citizens

of our community, and I strongly believe this budget provides that foundation. You can read the budget in its entirety at: http://cms3.tucsonaz.gov/budget And you can review the PowerPoint presentation made to Mayor and Council at: http://cms3.tucsonaz.gov/files/budget/4_16_13_Budget_Powerpoint.pdf Thank you, Richard Miranda City Manager