SIOUX FALLS, S.D. (KELO) – As the city began its first of four budget hearing meetings, the questions about economic uncertainty loomed. 

City council chairman Curt Soehl cut to the chase and directly asked Shawn Pritchett, the city’s director of finance, if the economy was in a recession. Pritchett responded saying “probably not.”

Pritchett said he could make the case that the local economy is not in a recession but noted the national economy has seen two-quarters of negative growth. 

“It’s still not significant enough that I would contemplate it to be recessionary,” Pritchett said. “You’re still seeing general growth, at least pockets of growth. I see Sioux Falls, we’re still in the growing trend.” 

That set the table for the first department presentations to members of the city council on Tuesday. The main presenter for the August 2nd meeting was the city’s human resource department. With unemployment for Sioux Falls at 1.9% and 159,911 people employed from a labor force of 163,003 within the city, hiring challenges have also hit city services. 

Bill O’Toole, director of human resources, pointed out personnel costs make up 26% ($166 million) of the total $646 million 2023 budget. That’s a rise of 5.3% or an $8.4 million increase over the previous year’s budget. 

The $8.4 million increase is broken down into a $1.3 million increase for part-time employees, $2.7 million for 30 new positions and $4.4 million for ongoing benefits increases. 

The 30 new city employees. Photo from city of Sioux Falls.

O’Toole thanked the city council for supporting raises for part-time employees which helped the city increase pay for lifeguards and other aquatics employees. He showed how personnel costs have usually made up 63% to 68% of the general fund expenditure budget in the past 10 years. 

O’Toole supported the idea of conducting more compensation and benefits studies to look at changes for wages, pay scales and benefits for city employees. One study will be finished in early 2023 and O’Toole noted the city usually only conducts those studies every eight to 10 years. 

“That will inform on changes we need to make going forward,” O’Toole said. “Keeping that focus as being an employer of choice.”  

The city averages a low turnover rate of under 10% almost every year since 2012. In 2021 there was a 9.8% retirement rate and 6% of those were not retirements, the highest in 10 years. 

City turnover rate from 2012 to 2021. Photo from the city of Sioux Falls.

City council member Marshall Selberg asked O’Toole what’s the challenge with employee recruitment and retention. 

“We’re struggling in certain segments just like everybody else,” said O’Toole, who pointed to nurses, civil engineers, animal control and human resource workers as areas the city has struggled to keep enough employees. 

O’Toole showed the number of full-time city employees was 838 in 1990 which was 83 employees per 10,000 people in the population. In 2022, the number of city employees is 1,330 but the number of employees per 10,000 people is down to 65. 

Time of city employees vs. the ratio per population of 10,000. Photo from city of Sioux Falls.

City council member Greg Neitzert called the city’s 30 new full-time positions an “eye-popping” number. He asked if the city is growing incredibly fast during this administration and catching up to demand. 

O’Toole said from 2010 to 2020 the city grew by more than 40,000 but only added 146 new full-time employees. He wasn’t sure if the 65 city employees per 10,000 people were the right number but said it has to be in the range. 

“We have been decreasing the number of employees per population for a very long time,” O’Toole said.  

O’Toole said the biggest complaints his department hears from city employees regard wages against inflation and the capacity or amount of work they are expected to do in a growing city.  

City council member Rick Merkouris asked if O’Toole had data on where work capacity was an issue and mentioned the building permit office as an example. O’Toole said he’d likely hear examples from each city department leader. 

City council member Pat Starr said the city has made a policy decision to bring many services in-house. Starr said that’s been successful for the city so it can call its own electrician or own carpenter when a problem arises. 

“We’re not at the whim of the market,” Starr said.

Starr said Omaha being at 59 employees per 10,000 residents likely means their budget for contracted services is likely much higher.  

O’Toole said 41% of the city’s employees are considered public safety for police (326) and fire (228) departments. The streets department makes up 10% and other infastruce jobs make up 15%. City library and parks and recreation make up 10%, while the operations team makes up 10%, public health makes up 6%, urban and economic development makes up 5%.  

“There have been some more challenges when we do go out to the market to fill our positions,” O’Toole said. “It really emphasizes why the focus on the employer of choice is so important and making sure we continue to invest in city employees.” 

The next budget hearing will have presentations from the city attorney’s office, public parking, entertainment tax, police, fire, parks and recreation, centralized facilities and the city council.