Firefighters, police brass get raises in new contracts

Palo Alto’s firefighters will receive significant salary increases between now and 2020 as part of a new three-year contract agreement that will also require them to contribute more toward their pension and health care costs.

The new contract, which the City Council approved on Oct. 1, grants three separate 3 percent salary raises to the 88 employees who are represented by the city’s main firefighter union, International Association of Fire Fighters Local 1313 (IAFF). The first takes effect in the first pay period after the contract adoption; the next two increases would kick in in July 2019 and in July 2020.

In addition to the immediate 3 percent raise in base pay, each firefighter is also receiving a 2.5 percent raise that the city is characterizing as “market adjustment,” with the intent of bringing local salaries to market median. The 2.5 percent raise also kicks in immediately.

The council approved the new contract by an 8-1 vote, with Greg Tanaka dissenting. As part of the same vote, the council also approved contracts with two much smaller labor groups: Fire Chiefs Association, which consists of four battalion chief positions; and the Police Management Associations, which is comprised of seven police lieutenant and captain positions.

Much like with the IAFF, employees in the two small labor groups will receive raises coupled with new requirements for pension contributions. All three contracts will expire on June 30, 2021.

The contract with the Fire Chiefs Association roughly mirrors the one with the larger fire union. It grants the four battalion chiefs three 3 percent increases, along with an immediate 2.5 percent salary hike for market adjustment. The city’s new contract with the Police Management Association will grant lieutenants three 4 percent salary hikes, spread out over three years beginning this year. Captains, meanwhile, would get a 1 percent salary increase immediately, followed by 4 percent increases each in July 2019 and July 2020.

The new labor agreements follow months of negotiations between the city and the three labor groups, each of which saw its last contract expire on June 30, 2018. A report from the city’s Human Resources Department notes that the parties did not reach an agreement prior to the expiration of their respective contracts but “continued to negotiate through the summer months with urgency and resolve until agreements were reached.”

The total costs over the three-year term of the three contracts would be $6.6 million in the general fund, according to the department’s report. The contracts would also add about $3.3 million to the city’s General Fund obligations over the next three fiscal years, which includes an extra $685,000 in the current year, $1.2 million in 2020 and $1.4 million in 2021.

The city’s contract with the International Association of Fire Fighters makes up by far the largest share of the total cost increase, adding an estimated $3 million to the city’s forecasted obligations in the next three years.

At the same time, employees in all three labor groups will be required to pay a greater share of their pension obligations. In each case, the employees would have to pay the 9 percent “employee share” as well as contribute 4 percent toward the “employer share” that has traditionally been borne entirely by the city (under the prior contract, they contributed 3 percent toward the employer share). As such CalPERS members will be paying 13 percent of their annual salaries toward pensions, according to the report.

The city is also seeking to stabilize rising medical costs in the new contracts by raising its share of medical costs by 4 percent but then retaining the flat rate for the duration of the three-year agreements.

The terms of the three contracts underscore the tight line that the city is walking as it seeks to simultaneously retain qualified employees and manage its rising costs. The report from Human Resources notes that the new terms are intended to “allow the city to be successful in retaining current public safety personnel” and to “remain competitive in this challenging market.”

At the same time, the council is still looking for ways to reduce the city’s mounting pension obligation. Part of its strategy is to set aside more money annually for pensions. Earlier this year, the council directed staff to identify $4 million in general fund cuts (staff is expected to return with proposed cuts in November). The addition of $3 million to the current budget will only make the job of identifying structural cuts more difficult.

That said, the council approved the three contracts on its “consent calendar” with no discussion or debate. Tanaka was the only person who raised concerns about the new terms, noting that the proposed increases far exceed the city’s projections for general fund growth. The city, he argued, should not be dipping its budget-stabilization reserves at a time when the economy is booming.

“If we were in a deep recession or the economy was really challenging, that’s one thing, but we’re in the best of times,” Tanaka said.