Staff photo by Erin O. Smith / Daisy Madison, an administrator with the Chattanooga Mayor's Office, speaks with council members during a city council meeting Tuesday, Aug. 22, 2017, at City Hall in Chattanooga, Tenn.

After erroneously including raises for 500 employees in the budget for the fiscal year that started July 1, the city of Chattanooga wants to retroactively remove $1.5 million from the plan.

In an apparent clerical error, an incomplete and inaccurate draft of the schedule of wages for hundreds of lower- and mid-level employees was included in the version of the budget presented to and approved by the City Council in June, factoring in $1.5 million in raises not intended for FY 2021.

The city initially planned to implement significant pay increases this year after a compensation study that highlighted disparities between Chattanooga and comparable markets. In the final weeks of the budget season, the financial impact of COVID-19 created a more than $8 million projected loss in revenue, leading the raises to be cut across the board, among other last-minute, money-saving changes.

But an outdated draft of a single page from the human resources department made its way undetected into the final budget.

"When you start unpacking it, you can see that it was somebody's draft that they were tinkering with to try and get it right," Chief Operating Officer Maura Black Sullivan told the Times Free Press on Tuesday. She added that a clerk noticed the error while doing payroll and alerted the finance department shortly after the budget went into effect.

"That means, of course, that the budget is out of balance. And we can't have an unbalanced budget, so we then began the process of figuring out what it was that needed to be attached, how this got attached incorrectly and what we needed to do," Sullivan said. "And that's where we are today, is that we have the correct attachment."

On paper, the raises would have applied to each pay period beginning July 1, but the city has not adjusted wages for any employees yet this year.

"We have just put a hold on any changes to payroll until we're able to get this corrected," Sullivan said Tuesday.

The earliest date the amendment could pass after all required notice, hearings and votes is Sept. 29, or roughly one quarter of the way through the fiscal year. That means nearly $375,000 in wages reflected in the current budget will have been withheld. Asked if the city will retroactively pay employees affected by the error the difference between their actual pay and the higher wage reflected in the period, Sullivan said it's unclear.

"This will cost money, and we've got to look at where our finances are. COVID-19 is lasting a lot longer for our budget than we anticipated. We'll do our best to do what we can related to back pay for this mistake," she explained. "I'm not sure that legally we're bound to do that, but I mean that's just something that we've got to look at. We are going to look at our budget versus what we can do with regards to back pay."

While the flawed budget document itself creates confusion, City Finance Officer Daisy Madison said no employees expected a raise, given the administration's consistent message that there would be no pay increases, due to COVID-19, beginning in May.

"It was an honest mistake and was not the plan that was intended, was not incorporated and, as such, it was not a final plan to even know how to best implement it," Madison said. "It was a work in progress."

The City Council set dates for an education session and public hearing on the amendment for later this month during Tuesday's strategic planning meeting. An email was sent to city employees late Tuesday after the council discussion notifying them of the error and impending amendments.

"We talked about it with the members of the council individually, we've talked about it with the leadership of the unions with whom we do business. They have been, for the most part, very gracious, very understanding," Chief of Staff Kerry Hayes said Tuesday. "I think each member of our council is a terrific champion for everyone who works for the city of Chattanooga, particularly those folks on the front line who are the most vulnerable economically and those who have been most vulnerable to the pandemic It remains to be seen what questions they'll have for us when Tuesday comes or what the public sentiment is when the public meeting takes place."

With council members not discussing the actual amendment in a meeting until next week, Budget and Finance Chairwoman Carol Berz said Tuesday it's too soon to discuss the outcome of the amendment.

"I think it probably would be inappropriate to talk about it until council has had its full hearing," Berz said.

The administration also will introduce more routine amendments to accept more than $500,000 in federal transportation funding, appropriate $150,000 in fiscal year 2020 capital funds to the Southeast Tennessee Development District and appropriate $1.5 million in capital funds to a local partnership providing internet to low-income students.

Contact Sarah Grace Taylor at or 423-757-6416. Follow her on Twitter @_sarahgtaylor.