More than 200 City Hall employees, including department heads, managers and supervisors, received a 3% raise this month under a new contract that the Palo Alto City Council approved in its final meeting before the summer break.

The council unanimously approved on June 24 a compensation plan for the 229 positions in what's known as the "management and professionals" group — the only employee group that is not represented by a union. Raises for these employees typically mirror those for other labor groups, including the more than 600 city workers represented by the Service Employees International Union, Local 521.

The raises are expected to add about $1.4 million to the city budget, according to a report from the Human Resources Department. The compensation plan took effect July 1 and runs until June 30, 2020.

In explaining the raises, staff pointed to the fact that all other employee groups, including SEIU, the police and fire unions and Utilities Management and Professional Association (UMPAPA), have all received raises of at least 3% in the current fiscal year under recently approved contracts.

The council also agreed on June 24 to extend its contract with UMPAPA for another year. The agreement, which the council supported by a unanimous vote, grants the 48 members of UMPAPA a 3% raise in the coming year. The vote came just six months after the council approved its first contract with UMPAPA after nine years of on-and-off negotiations and litigation. The initial contract, which the council approved in December and which expired on June 24, granted UMPAPA members 12% raises while also capping the city's contributions toward their medical expenses and requiring them to devote an additional 1% of their salaries toward pensions.

As part of its new compensation plan with the unrepresented group of managers, the council also approved additional raises for the positions of division manager in library services (which will see an additional 3.5% pay bump) and urban forestry manager (a 6.4% raise, reportedly to align with the market).

Both contracts reflect City Hall's recent trend toward higher salaries across the organization. The city's expenditures on salaries and benefits have risen from $176.4 million in fiscal year 2017 to $198.1 million in fiscal year 2019, which ended on June 30. The council's newly adopted budget for fiscal year 2020 includes $216.3 million for salaries and benefits, an increase of 9.2% over the prior year.

In the general fund, which pays for most city services not related to utilities, the salary and benefit costs are projected to increase by 7%, from $125.2 million in 2019 to $134.2 million in the current fiscal year.

In approving the salary hikes, management has consistently pointed to the high costs of living in the area and the challenges in recruiting employees. In the Utilities Department, the city had more than 30 vacancies earlier this year and staff cautioned about the difficulty of finding qualified applicants for some of the more technical positions. Some of these positions have taken several years to fill, according to Utilities staff.

The city's new contract with UMPAPA will expire on June 30, 2020. The raises will add $326,000 in total costs, which will be spread out over various utility funds, according to the Human Resources report.