The agreement, reached after almost six months of negotiations, promises the nearly 600 employees in Service Employees' International Union, Local 715 modest salary increases over the next few years but significantly improves their pensions by adjusting the multiplier used to calculate monthly benefits through the California Public Employees' Retirement System.
"I'm relieved because I definitely believe we got a good contract, a reasonable contract," said Phil Plymale, SEIU chapter chair who represented employees in the negotiations. "None of us got everything we wanted."
Councilwoman LaDoris Cordell concurred, saying "no one side got away with anything."
But two of her colleagues, Vice Mayor Yoriko Kishimoto and Councilwoman Dena Mossar, said the agreement was just too generous in tough budgetary times. They voted no, but the contract passed with a 5-2 vote with Mayor Judy Kleinberg and Councilman Bern Beecham absent.
"We're granting the kind of benefits to our employees that very few, if any, people can expect in the marketplace," Mossar said, noting that the ample benefits made sense in the lush dot-com boom days.
Currently, the city pays 100 percent of employees' health-insurance benefits and those of retirees who have put in five years of service. The new agreement requires employees to work for 20 years to receive retirement medical benefits and eliminates the most expensive healthcare coverage from the menu of plans offered to employees. The nearly 60 employees who are enrolled in PERS Care will need to select another plan or begin paying for a portion of their coverage.
Eliminating the top plan will save the city $450,000 a year, it estimates.
But Plymale said he knows of several employees who are planning to retire before the end of the year when the new rules go into effect so they can remain in city-paid PERS Care.
Overall, the contract will swell city spending by $5.9 million over the 38-month deal, raising the annual costs of benefits and salaries to the SEIU employees -- which exclude managers and public safety officers -- from $50.2 million in 2006 to $56.1 million in 2009.
To former Mayor Dick Rosenbaum, the agreement is suicidal for the city.
"(This is) the most irresponsible financial action by a city council in the 35 years I've been watching and participating in city affairs," Rosenbaum said at the Tuesday council meeting.
But his successors, with the exception of Kishimoto and Mossar, didn't agree.
Councilman Larry Klein said the generous pensions, negotiated several years ago, were "water under the bridge."
"The contract we entered into with the SEIU is a good one, not a great one, but a good one that's reasonably fair to both sides," Klein said.
SEIU members will receive a 1 percent salary increase in January 2007, a 3.5 percent increase in June 2007 and a 3 percent raise in June 2008. They will also need to begin contributing to their pensions.
"We have the blessing of long-term committed employees who give great service to our community," said Councilman Jack Morton as he cast his vote for the plan.
But as she voted, Kishimoto cautioned, "We need to creatively rethink the way we deliver services or we're just not going to have the money to invest in infrastructure."