Lexington council advances first readings, debates reinstating step raises and bonus cuts

Lexington’s City Council met in a special session to consider budget amendments, personnel step increases and one-time bonus options as leaders sought ways to close recurring revenue shortfalls and fund retirement obligations.

The council advanced first readings on budget items for fiscal years 2026 and 2027, but much of the meeting centered on personnel costs and how step and market adjustments have changed the city’s pay structure. Council discussion repeatedly returned to the ‘‘step’’ system that awards periodic pay increases and a separate merit/market adjustment system staff say has produced overlapping pay ranges across positions.

A councilmember described personnel costs as the city’s largest expense and urged a pause on new hires and a review of longevity and bonus payouts to help balance the general fund. Council members and staff noted the city has previously funded both step and cost-of-living adjustments, which — when combined — shifted the market for many positions and created situations where employees in different ranks earn similar pay because of overlapping steps.

Councilmember Roger moved to reinstate step raises and to provide back pay tied to prior step decisions; the motion carried after discussion and a mayoral tie-break was recorded. The motion directs staff to implement steps while the board works to finalize the FY2027 budget.

Miss Wood, a staff member addressing the board, said the previously commissioned salary survey had been delayed about a year and that the survey cost ‘‘up to $30,000’’ as she recalled; she said she would share the survey materials with councilmembers for review. Councilmembers asked for clearer documentation of the survey, the timing of step increases, and which employees remain eligible for upcoming steps.

Councilmembers also reviewed options for one-time bonus payouts, citing possible amounts of $250 or $500. Several members cautioned that one-time bonuses or eliminating a single year of step increases would produce only a temporary reduction in recurring costs and estimated a mid-six-figure shortfall could remain if structural changes are not adopted.

The council heard staff warnings about retirement/pension contributions that have been behind in recent years and the calendar constraints for making required adjustments before the new fiscal year. Members agreed to hold additional work sessions, with staff and the HR director assigned to provide detailed numbers and options so the board can make more informed decisions at the second reading.

Votes at a glance
- Motion to reinstate step raises and provide back pay: moved by Roger; passed (mayoral tie-break noted).
- First reading: FY2026 budget amendment: advanced (first reading passed at the meeting).
- First reading: FY2027 ordinance (initial budget ordinance): advanced (first reading held; second reading to follow after additional review).

The council closed debate by asking staff to compile clearer salary, step and pension figures and to schedule work sessions in advance of the second readings. No final ordinance adoptions were completed at the special meeting; the board reserved substantive adjustments for the second-reading sessions.