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2025-28 McMillen, Jon - CM Employment Agreement Amendment 2SECOND AMENDMENT TO EMPLOYMENT AGREEMENT This SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second Amendment") is made and entered as of July 1, 2025 (the "Second Amendment Effective Date"), by and between the City of La Quinta, a public body (the "City" or "Employer"), and Jon McMillen, an individual (the "Employee"), both of whom understand as follows: WITNESSETH: WHEREAS, the City desires to continue to employ the services of Employee as the City Manager as provided by the La Quinta Municipal Code; and WHEREAS, the City and Employee entered into that certain EMPLOYMENT AGREEMENT made and entered July 1, 2022 ("Original Agreement"), as amended by that certain FIRST AMENDMENT TO EMPLOYMENT AGREEMENT made and entered October 4, 2022 ("First Amendment" and, collectively with the Original Agreement, the "Agreement") which is the operative agreement for the city manager's employment with the City; and WHEREAS, it is the desire of the City to extend the Term and to amend certain conditions of employment of said Employee as more particularly described herein; and WHEREAS, Employee desires to accept the continued employment as City Manager of said City. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree to the following amendment to the Original Agreement, as follows: AMENDMENT: Section 2 of the Original Agreement is deleted in its entirety and amended, to read: Section 2. Term. A. The initial term of this Agreement shall be from July 1, 2022, through and including June 30, 2025 ("Initial Term"). Commencing on the Second Amendment Effective Date, the renewal term shall be from July 1, 2025, through and including June 30, 2028 ("Renewal Term"), unless earlier terminated as provided in the Original Agreement as amended by this Second Amendment. The Initial Term and Renewal Term collectively shall be referred to as the "Term" of the Agreement. The parties may subsequently renew the Agreement pursuant to their mutual agreement. B. Nothing in this Agreement shall prevent, limit or otherwise interfere with the right of the City Council acting for the City to terminate the services of Employee at any time, with or without cause, subject only to the provisions set forth in Section 4, Paragraphs A, B and D of the Original Agreement. Page 1 C. Nothing in this Agreement shall prevent, limit or otherwise interfere with the right of the Employee to resign at any time from his position with Employer, subject only to the provision set forth in Section 4, Paragraph E, of the Original Agreement. Section 6 of the Original Agreement, as amended by the First Amendment, is deleted in its entirety and amended, to read: Section 6. Salary. A. Employer agrees to pay Employee for his services rendered pursuant hereto a base salary of $310,000.00 ("Employee Base Salary") commencing from July 1, 2025 ("Base Salary Effective Date"), payable in equal installments at the same time as other employees of the Employer are paid. Commencing on the second fiscal year after the Base Salary Effective Date (commencing July 1, 2026), and for each fiscal year thereafter in which Employee is employed pursuant to the Original Agreement (as may be amended including by this Second Amendment), Employee's base salary for the applicable fiscal year shall be subject to any increase set forth in Section 10 of the Original Agreement (as may be amended including by this Second Amendment) applicable to management -level employees approved by the City Council. Employer may review the base salary and/or other benefits of Employee at the time of an annual evaluation which shall be initiated in May or June for each year of the Term. Employer may recommend adjustments to salary and/or other benefits to be memorialized by written amendment to this Agreement. B. In addition to the annual base salary in Paragraph A above, Employer shall make a $30,000 annual contribution on behalf of Employee to a City -sponsored IRC Section 401(a) plan ("401(a) plan"). Prior to any Employer payment, City Council shall establish and authorize, or amend a previously established 401(a) plan to accept such contributions in accordance with United States Internal Revenue Code (Title 26 of the United States Code, and herein "IRC"). The City's defined contribution shall be paid no later than December 31 after the immediately completed prior fiscal year. City Council authorizes Employee or his designee(s) to execute any documents necessary to maintain the 401(a) plan subject to the IRC. Section 6, Paragraph C, of the Agreement is added, to read: C. For any fiscal year commencing on and after the Second Amendment Effective Date, and for the duration of the Renewal Term, Employer shall match 100% of Employee deferrals made to City's IRC Section 457(b) plan ("457(b) plan") to the City - sponsored 401(a) plan up to IRC limits. The City's matching contributions will be made to the 401(a) plan no later than December 31 after the immediately completed prior fiscal year, pursuant to Section 6, Paragraph B of the First Amendment (as may be amended including by this Second Amendment). All Employer contributions to the 401(a) plan, including the defined contribution pursuant to Section 6, Paragraph B, of the First Amendment (as may be amended including by this Second Amendment), shall not exceed annual IRC limits on a combined basis. Page 2 Section 10 of the Original Agreement is deleted in its entirety and amended, to read: Section 10. Other Benefits. Employee shall be provided with the same health, dental, vision, life insurance, and retirement benefit options and any future cost of living/cost of labor increases that occur after the Effective Date of the Original Agreement (and continuing after the Second Amendment Effective Date), as other general management -level full time employees of the City. Employee may receive an annual physical examination at City expense. MISCELLANEOUS: Except as specifically defined in this Second Amendment, all capitalized words and phrases shall have the same meaning ascribed to them in the Original Agreement and First Amendment. The Original Agreement, First Amendment, and this Second Amendment shall constitute the entire agreement between the parties. Except as expressly amended by this Second Amendment, all of the terms and conditions in the Original Agreement as amended by the First Amendment remain in full force and effect. If any provision, or any portion thereof, contained in this Second Amendment is held unconstitutional, invalid or unenforceable, the remainder of this Second Amendment and the Original Agreement and First Amendment, or portions thereof, shall be deemed severable, shall not be affected, and shall remain in full force and effect. This Second Amendment may be signed in counterparts with signature pages transmitted by email, facsimile, personal delivery or overnight delivery, all of which will be treated as originals. [signatures on next page] Page 3 IN WITNESS WHEREOF, the City of La Quinta has caused this Second Amendment to be signed and executed in its behalf by its Mayor, and duly attested by its City Clerk, and the Employee has signed and executed this Second Amendment, both in duplicate, to become effective as of the Amendment Effective Date. ATTEST: MONIKA RADEVAity Clerk City of La Quinta, California APPROVED AS TO FORM: William H. Ihrke, CITY ATTORNEY City of La Quinta, California EMPLOYER: CITY OF LA QUINTA LINDA EVANS Mayor of the City of La Quinta EMPLOYEE: By: a4V1 illen, an individual Page 4 CONSENT CALENDAR ITEM NO. 9 City of La Quinta CITY COUNCIL MEETING: June 17, 2025 STAFF REPORT AGENDA TITLE APPROVE SECOND AMENDMENT TO EMPLOYMENT AGREEMENT FOR THE CITY MANAGER RECOMMENDATION Approve Second Amendment to Employment Agreement for the City Manager. EXECUTIVE SUMMARY • At its June 21, 2022, Regular Meeting, Council approved City Manager Jon McMillen's current employment agreement, effective July 1, 2022 (Original Agreement) (Attachment 3). • The Original Agreement memorialized Council's decision to extend the employment term for three years but kept in place, subject to future amendment, compensation provisions that were from the original employment agreement effective July 1, 2019. • The First Amendment to Employment Agreement (First Amendment) (Attachment 2), approved on October 4, 2022, modified specified compensation provisions. • The proposed Second Amendment to Employment Agreement (Second Amendment) (Attachment 1) would extend Mr. McMillen's term for three additional years, commencing July 1, 2025, and, in general, keeps the same compensation provisions from the First Amendment but has an adjusted base salary and additional deferred compensation "match" provision. FISCAL IMPACT If the amendment is adopted, the City Manager's base salary would be $310,000, commencing in fiscal year (FY) 2025-26. In the following fiscal years, any increases in base salary would be tied to any Council -approved cost of living/cost of labor increases for management -level full-time City employees. The Second Amendment would continue the $30,000 in annual deferred compensation established by the First Amendment, and it would authorize the City to match, on an annual basis, such deferred compensation subject to contribution limits under federal law. The City Manager will continue to receive the same fringe benefits as authorized for City full-time management -level employees. 217 BACKGROUND/ANALYSIS In February 2019, the City hired an independent consulting firm with expertise in city management recruitment to assist the Council in the process of hiring a new city manager. After a national recruitment that attracted 72 applicants from around the country, the list of finalists was narrowed to six semi-finalists and two finalists after discussions in closed session with Council, a series of interviews with candidates, and a thorough review of references, among other recruiting actions. At its May 21, 2019, regular meeting, Council unanimously voted (5-0 in favor) to appoint Mr. McMillen as City Manager, effective July 1, 2019, and to approve terms and conditions of a three-year employment agreement. At its June 21, 2022, regular meeting, Council approved a new employment agreement, effective July 1, 2022, for an additional three-year term and kept in place, subject to future amendment, the City Manager's then -effective compensation provisions. The First Amendment integrated into Mr. McMillen's contract specified revised compensation provisions, including the allowance of $30,000 in annual deferred compensation, subject to being paid to a qualified retirement or supplemental retirement plan. At its October 4, 2022, regular meeting, Council unanimously approved the First Amendment. The proposed Second Amendment modifies the current agreement's base salary and deferred compensation provisions as outlined in the Fiscal Impact discussion, above. The modified compensation package brings the City Manager's base salary and deferred compensation to be comparable and competitive with salaries and benefits of other city managers in the Coachella Valley. Additionally, the proposed amendment revises the deferred compensation text based on comments from the City's administrator of deferred compensation plans. As the Council may recall, when the First Amendment was adopted, a qualified retirement or supplemental retirement plan, authorized pursuant to federal law, had to be established for the implementation of the City Manager's $30,000 deferred compensation provisions. At that time, Council authorized City Staff to proceed to establish a qualified deferred compensation plan. Since then, the plan has been established, and for clarification purposes, the City's plan administrator provided text amendments to Paragraph (B) of Section 6 to memorialize the relevant deferred compensation plan actually established, but substantively, there is no change from the First Amendment relating to the $30,000 allowed deferred compensation. Additionally, the City's plan administrator provided text for newly added Paragraph (C) of Section 6, which would add the City's "matching" contribution allowance to the City Manager's contract. The plan administrator's suggested text has been integrated into the proposed Second Amendment. The proposed Second Amendment also makes conforming and clarifying modifications to Section 10 to bring the Original Agreement in -line with potential increases in cost of living/cost of labor, as those adjustments may be approved by Council as part of any annual review of compensation for employees, including management -level employees. 218 Except for the 3-year extension term, adjusted base salary, and deferred compensation "match" provisions, no other substantive modifications to the current employment agreement are proposed. ALTERNATIVES . None Prepared by: Bill Ihrke, City Attorney Approved by: Jon McMillen, City Manager Attachments: 1. Amendment No. 2 to Employment Agreement for City Manager 2. Amendment No. 1 to Employment Agreement for City Manager 3. Employment Agreement for City Manager 219