HomeMy WebLinkAboutCC 2026-04-28_11d Second Amendment_CM Employment AgreementItem 11.d.
MEMORANDUM
TO: City Council
FROM: Isaac Rosen, City Attorney
SUBJECT: Proposed Second Amendment to City Manager Employment
Agreement
DATE: April 28, 2026
RECOMMENDATION:
Approve the Second Amendment to the Employment Agreement Between the City of
Arroyo Grande and Matthew Downing (“Second Amendment”) following an oral report by
the City Attorney summarizing any changes in the salaries, salary schedules or
compensation paid in the form of fringe benefits consistent with the Brown Act.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The Second Amendment does not result in an immediate change to the City Manager’s
existing salary; City Manager compensation may change when the City Council next
amends its Salary Schedule. For the proposed change in the Second Amendment relating
to deferred compensation, the fiscal impact to the City increases slightly: from an annual
City match contribution of $2,200 to $3,000 for the City Manager . There is sufficient
funding available in the current fiscal year’s budget to absorb this increase and no
additional budget appropriation is required. Future fiscal year budgets will be adjusted as
needed to account for the ongoing cost of this adjustment.
BACKGROUND:
Matthew Downing (“Mr. Downing”) has served as the City Manager since January 8,
2024, in accordance with the negotiated and executed Employment Agreement approved
by the City Council on December 12, 2023 (“Employment Agreement”)1. On July 22, 2025,
the City Council approved a First Amendment to Mr. Downing’s Employment Agreement
(“First Amendment”)2.The Employment Agreement, as modified by the First Amendment,
provides City Council with discretion to consider changes to City Manager compensation,
among other existing terms.
1https://www.arroyogrande.org/DocumentCenter/View/13842/City-Manager-Employment-Agreement-for-
Matthew-Downing
2https://www.arroyogrande.org/DocumentCenter/View/13843/First-Amendment-to-City-Manager-
Employment-Agreement-for-Matthew-Downing
Page 205 of 209
Item 11.d.
City Council
Proposed Second Amendment to City Manager Employment Agreement
April 28, 2026
Page 2
Following a satisfactory performance evaluation and annual review held during a properly
noticed closed session, the City Council provided direction to bring forward a Second
Amendment to Mr. Downing’s Employment Agreement. That Second Amendment leaves
Mr. Downing’s current salary at its current annual rate ($265,661.76). However, the
Second Amendment clarifies that the City Manager’s salary amount will be increased
automatically, based on top step for the City Manager position, when the City’s salary
schedule is next amended by the City Council in open session.
The Second Amendment makes Mr. Downing’s deferred compensation consistent with
that of the City’s executive management team (described below under Fiscal Impacts),
and as approved by City Council resolution in June 20253. The Second Amendment also
makes additional changes to the term of the Employment Agreement, the timing of when
the City Manager may be terminated without cause, and changes to Mr. Downing’s annual
management leave.
Specifically, the Second Amendment: extends Mr. Downing’s contracted term with the
City from January 8, 2028 to January 8, 2032; Mr. Downing may not be terminated
“without cause” for 60 calendar days before a general election (but may still be terminated
with cause during that period); and Mr. Downing’s management leave is increased to 80
hours annually, starting this year. Those management hours are not entitled to be cashed
out, meaning the increase in management leave hours does not create an additional
financial impact on the City.
ANALYSIS OF ISSUES:
The attached, proposed Second Amendment is to be considered by the City Council in
open session and approved by formal action, following an oral report by the City Attorney
pursuant to the Brown Act (Government Code Section 54953).
All other provisions from the existing Employment Agreement and First Amendment
remain in effect, including existing fringe benefits. If approved, the effective date of the
Second Amendment would be April 28, 2026.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Approve the Second Amendment;
2. Do not approve the Second Amendment and keep the existing First Amendment
and underlying January 8, 2024 Employment Agreement for the City Manager in
effect; or
3. Provide other direction to staff.
3 https://pub-arroyogrande.escribemeetings.com/filestream.ashx?DocumentId=14879
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Item 11.d.
City Council
Proposed Second Amendment to City Manager Employment Agreement
April 28, 2026
Page 3
ADVANTAGES:
Making substantive changes to City Manager contract is consistent with other cities that
provide incentives to their local agency executive for high performance, encouraging the
City Manager to exceed expectations, innovate, and deliver measurable results. Offering
a competitive contract helps preserve institutional knowledge by retaining skilled staff who
has valuable experience with and knowledge of local government operations. Retention
also prevents disruption and reduces costs associated with frequent turnover.
DISADVANTAGES:
The City will be committing additional resources under the proposed Second Amendment.
ENVIRONMENTAL REVIEW:
Find the action is not a project subject to the California Environmental Quality Act
(“CEQA”) because it has no potential to result in either a direct, or reasonably foreseeable
indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060, subd.
(c)(2)-(3), 15378).
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the Cit y’s website in accordance with
Government Code Section 54954.2.
ATTACHMENTS:
1. Proposed Second Amendment to Employment Agreement between the City of
Arroyo Grande and Matthew J. Downing
Page 207 of 209
ATTACHMENT 1
SECOND AMENDMENT
EMPLOYMENT AGREEMENT – CITY MANAGER
This Second Amendment to Employment Agreement (“Second Amendment”) between the City of
Arroyo Grande (hereinafter “City”) and Matthew J. Downing (hereinafter “Employee”)
(collectively, the “Parties”) is entered into this ___ day of April 2026 (“Effective Date”). Except
as modified in this Second Amendment, the Employment Agreement, effective as of January 8,
2024, between the City and Employee shall remain in full force and effect, as amended by the First
Amendment entered into on July 22, 2025. The parties to this Second Amendment agree to the
following changes:
1. SECTION 4 relating to “Term” is hereby amended to read as follows:
“4. Term. The term of this at-will Agreement shall be from the Effective Date, through
January 8, 2032 (“Initial Term”), unless terminated earlier by either party in accordance
with the provisions set forth in paragraph 6. Unless either party provides notice of non-
renewal to the other party on or before one-hundred twenty (120) days prior to expiration
of the Initial Term as set forth in paragraph 6(d), the Agreement shall continue in effect
until terminated by either party in accordance with the provisions set forth in paragraph 6.”
2. SECTION 5(a) relating to “Compensation - Salary” is hereby amended to read as follows:
“(a) Salary. Employee shall receive the base annual salary set at the top step of the City
Manager salary schedule as adopted by the City Council and amended from time to time,
payable on a pro-rata basis in the same manner as all full time City employees, and subject
to all applicable payroll taxes and withholdings.”
3. SECTION 6(a)(3) relating to “Termination without Cause” is hereby amended to read as
follows:
“(3) Notwithstanding any provisions in this Agreement to the contrary, the City shall
not terminate Employee without cause for a period of sixty (60) calendar days immediately
preceding a general election and one hundred twenty (120) calendar days immediately
following a general election unless (1) the City has cause to terminate under paragraph
6(b)(1); or (2) Employee is convicted for abuse of office or position as defined in
Government Code section 53243.4.”
4. SECTION 8(c) relating to “Deferred Compensation” is hereby amended to read as follows:
“(c) Deferred Compensation. The City shall contribute a dollar-for-dollar match of up
to $3,000 per year to a defined contribution supplemental retirement plan established in
accordance with section 401(a) and 501(a) of the Internal Revenue Code of 1986 and
California Government Code section 53215-53224. Upon successful completion of ten
(10) years of service to the City, Employee is eligible for an additional $500 annual
employer contribution.”
5. SECTION 8(g) entitled “General Benefits” is hereby added to the Agreement to read as
follows:
Page 208 of 209
ATTACHMENT 1
“(g) General Benefits. In addition to the benefits specifically set forth in this
Agreement, Employee shall be entitled to the same benefits as those provided to Executive
Team Classifications, as such benefits may be amended from time to time. To the extent
any benefit provided under this Agreement conflicts with or differs from the benefits
provided to Executive Team Classifications, the specific terms of this Agreement shall
control.”
6. SECTION 9(b) entitled “Management Leave” is hereby amended to read as follows:
“(b) Management Leave. Employee will be provided with eighty (80) hours of
management leave each calendar year. Hours do not accumulate from year to year. At the
beginning of each calendar year, Employee’s management leave bank will be replenished
to a total of eighty (80) hours. Notwithstanding the foregoing, upon execution of this
Second Amendment, Employee’s management leave allotment for the calendar year in
which this Second Amendment is executed shall be increased from forty (40) hours to
eighty (80) hours, and Employee’s management leave bank shall be credited with the
additional forty (40) hours of use during the remainder of that calendar year. Any
management leave remaining upon separation of employment will not be cashed out.”
The City and Employee have duly executed this Second Amendment as of the date first written
above. This Amendment is effective as of the date first written above.
CITY OF ARROYO GRANDE EMPLOYEE
___________________________ __________________________
Caren Ray Russom, Mayor Matthew J. Downing
Approved as to Form:
___________________________
Isaac Rosen, City Attorney
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