Colfax City Council members and City Manager Joan Phillipe have reached a mutual agreement not to renew her contract.

The decision was announced following a closed session of Tuesday night’s council meeting.

Former Placer County Supervisor Bruce Kranz will step in immediately as interim city manager, based on a vote by council members.

Phillipe was hired in September 2006 under a three-year contract that would have expired Sept. 15. Under the contract, she was guaranteed a salary of $92,000 per year.

The council decided in March not to renew Phillipe’s existing contract as written and subsequently appointed a council sub-committee to negotiate a new contract.

In recent weeks, council members had discussed pay reductions for Phillipe and other city employees as one of several options for closing a gap in the city’s 2009-10 fiscal year budget.

Phillipe, a resident of Loomis, will remain at City Hall briefly to tie up a few loose ends.

“We want to have a smooth transition between Bruce and myself,” Phillipe said. “I’ve been mentoring him, transferring information to him and so on. (After that) I’ll still be available for questions or in any way I can assist.”

Phillipe said she has not yet finalized her own future plans.

Prior to accepting the position in Colfax, Phillipe was city manager of Colusa for 3-1/2 years. She was executive director of the California State Sheriff’s Association from 1997 to 2002 and, before that, the 10-year city manager for Loomis.

Council members said parting ways with Phillipe was a difficult decision.

“I truly admire and respect Joan,” Mayor Suzanne Roberts said. “I think we need to move forward in a positive way.”

“She has done one heck of a job, especially in the area of wastewater treatment,” Councilman Ken Delfino said. “This was a tough decision, but we came to a mutual agreement.”

In the meantime, council members are looking at potential candidates for the permanent position – a pool Delfino said could include Kranz, if he so chooses.

“His resume is pretty impressive,” he said. “He has political experience. He’s also a partner in a small business…and he wants to see positive things for Colfax.”

Kranz, who resides in Weimar, served on the Placer County Board of Supervisors from 2004 to 2008. He is a retired state parks supervisor.

Negotiations for the new city manager’s salary have not been completed by council members, Roberts said.

-- Gloria Beverage contributed to this story.