After nine months of tense negotiations, Palo Alto and its largest police union have reached a tentative deal -- an agreement that would trim salaries, reduce pension benefits for newly hired employees and require officers to contribute toward their pension and health care costs.
The tentative agreement, which the union is scheduled to vote on by Friday and the City Council will have a chance to approve Monday night, caps about nine months of tense negotiations that culminated in the city's declaration of an impasse in February. If the Palo Alto Police Officers Association ratifies the agreement and the council approves it, the 82-member police union would accept the same kinds of concessions that other labor groups have agreed to over the past three years.
The city estimates that the new contract would reduce the city's costs by about $1.4 million in fiscal year 2013, which begins July 1.
Chief among these is the requirement that employees pay 10 percent of their medical costs, a key factor given the rising medical costs. The new contract would also create a second pension tier for new employees that would give them a "3 percent at 55" formula (3 percent pension for each year of service at the age of 55). This pension would be calculated based on the average of the three highest consecutive years of salary. Existing employees would remain under the "3 percent at 50" formula and their pension payments would continue to be calculated based on the single year when salary was highest.
Officers would also be required under the new contract to contribute to the city's pension plan. Under the previous agreement, the city had paid the "employee contribution," which for public-safety workers amounts to 9 percent of salary. Under the new one, officers would have to pay the full 9 percent contribution.
Pension and health care costs were identified by staff as key drivers in the city's expenditures, which would rise by $3.9 million under City Manager James Keene's proposed budget for fiscal year 2013. The city's contributions toward retiree medical care are also expected to jump by $1.9 million in 2013.
The subject of retiree medical care remains the major sticking point in the negotiations between the city and the police union. According to a report from the Human Resources Department, the two sides could not agree on the union's contributions for future retirees' medical costs. Thus, the impasse that the city had declared in February would remain in place, Marcie Scott, assistant director of the city's Human Resources Department, wrote in a report released Thursday afternoon.
"In the interest of moving forward, the City and Union agreed to immediately adopt a new contract that implements all of the provisions agreed upon in the tentative MOA (memorandum of agreement), and proceed through the legally required impasse procedures solely on the issue of the retiree medical contribution," Egli wrote.
The new contract would also trim officers' salaries by 1.3 percent and would eliminate three of their 12 paid holidays.
The union's last contract expired on June 30, 2011, but the conditions of that agreement will remain in effect until the council approves a new contract.