DAPHNE, Ala. — The City Council further discussed city employee pay concerns at a work session on Monday evening, with the costs for all available options in front of them, including a 1 percent and 2 percent pay increase for all city employees.

At a council meeting in June, city leaders discussed the possibility of a one-time lump-sum employee pay increase and alternatives since city employees have not had a raise since 2008.

Mayor Fred Small’s original request was a one-time payment of $500 to all full-time employees and $150 to all part-time employees. The total payout would cost the city $153,654. The council did not make a decision on any pay increases in June, but asked finance director Kim Briley to determine the costs for a variety of pay increases, including a cost of living adjustment — or COLA — pay raise and the cost of reinstating step raises for all city employees.

An ordinance to appropriate funds for the one-time lump-sum payment is expected to be on the council’s July 18 agenda.

The council also discussed a pay increase for all city employees, but city leaders are not sure when the measure will be voted on.

“Also to be considered, and there was a little discussion about when this would start — at the end of the fiscal year or included in the 2012 fiscal budget — would be a 50-cent-an-hour increase per hour across the board for all city employees,” City Councilman Ron Scott said. “The 50 cents an hour will give the lower paid-employee a larger increase than it will the higher-paid employees.”

Scott said he thinks the council generally supports the measure and believes it will pass.

Councilman John Lake said he was not in favor of the one-time pay increase, but he was in favor of a raise.

“One thing that we came to an understanding about, but we did not make a decision on, was that we are going to give them the $500 — which I was against — but they also (discussed) going with a 50-cent-per-hour raise,” Lake said. “Those are the ones we are wanting to help because we don’t have attrition in the $20 an hour range. The people who are quitting are the guys cutting the grass.”

The hourly raise would cost the city an estimated $332,488 in the next fiscal year, city leaders said.

To put the city’s financial situation in perspective, Councilman Derek Boulware gave the council an update.

“As of the month of May, our revenue has exceeded our projections in round numbers to be around $650,000. That would be good news under any normal circumstances, except for in this year, when we drew out $800,000 at the beginning of the fiscal year from our general reserve to balance the budget. … We have yet to find ourselves in the black,” Boulware said.

He said the outlook is good, but he can’t condone spending the money that the city doesn’t have.

“Things are looking good. I have high hopes that we will continue to exceed revenue over expenditure and end 2011 with a surplus, but we have yet to reach that point,” Boulware said.

In light of this, Boulware suggested pay raises for city employees should be included in the budget for next year.

“What I proposed to the council was to take into consideration what our picture is right now and to discuss the cost of living increase in the 2012 budget,” Boulware said. “Let’s use this as an element for 2012’s budget process.”

Besides, other projects need to be paid off, he said.

“Our finance director has recommended that the city immediately retire the last little bit of debt on the Daphne High School stadium, which is about $160,000. That would require us to pull another $160,000 out of reserve to retire this debt. We have already made movement in the direction of retiring debt. Retiring debt and giving a one-time bonus in the same year when we are still operating in a deficit, I can see doing one or the other,” Boulware said.

Boulware also said he doesn’t feel that the city can spend more than it takes in.

“The federal government seems to be able to, but I don’t think we can in the city of Daphne.

“We have to be a little bit more responsible with the taxpayers’ money,” Boulware said.

In other news, Monday, the council:

• Discussed the requirements of a memorandum of understanding between the city and New Horizon Retail Development. The council held a public hearing on the matter last week and voted to authorize the mayor, Briley and city attorney Jay Ross to draft the agreement that, Ross assured the council, was not legally binding.

The council further discussed the terms for the M.O.U., which has not been drafted yet. The planned M.O.U. still has the terms the council discussed previously.

“There were no questions for the council and the attorney said he was working with Mr. (Thom) Hickman (New Horizons Retail Development Representative) and there were a few things that they needed to work out, but at this point he didn’t have anything to report,” Scott said. No further decisions were made regarding the M.O.U.

The agreement would be between the city and New Horizon for the proposed development of Academy Village, which would house an Academy Sports and Outdoors location. Under the agreement, the developer would make capital improvements to the area for the public good, and the developer would be repaid through the issue of a limited liability tax warrant in the amount not to exceed $1.9 million with debt payments to be paid from 1 percent of sales tax collections generated by Academy and other businesses within the development.

Terms agreed on by the council at a previous meeting set the amount not to exceed $1.9 million, the interest on the agreement would not exceed 15 years, and the payback period would not exceed 15 years. 

• Discussed recreation fees and expenses for the city’s ball fields. Members of the council questioned whether the city was charging enough for other entities to rent the city’s ball fields.

“I think the general consensus was that there are people who come in and rent our fields and then they turn around and they charge a team entry fee for each team and they are collecting a whole lot more than they are paying us, but that is their business. There was some conversation that maybe we should raise our rates a little bit,” Scott said.

At the request of the council, the recreation director David McKelroy will compare Daphne’s rates with neighboring cities and report back to the council before the council considers raising the rates.

• Held a public hearing to discuss potential uses of National Resource Damage Assessment funds from the BP oil spill. The city can apply for the funds to purchase waterfront property for public use or for preservation.

“Each of the five affected Gulf Coast states each got $100 million. I think there have been some 70-something projects already proposed by the affected areas,” Scott said.

Scott was unsure the city should qualify for the funds, since the city was not directly impacted by the oil spill.

“It is a little bit of a stretch, I think, that we are eligible anyway. Daphne, really, never received any oil. There is something in the application that says loss of use and there is no doubt the fact that we had boom set up in part of the bay out there, that the people couldn’t use the bay, so it is possible. If they stretch the definition a little bit, we would be eligible,” Scott said.

One possible use for the funds, if the city were to receive a grant, was on property near Campbell Swamp, which is adjacent to property the city recently acquired through a land swap with Daphne Utilities.