Palo Alto takes aim, again, at binding arbitration

Council committee to debate possible repeal of city's binding-arbitration provision

As Palo Alto's management and firefighters prepare to take their simmering labor dispute to arbitration, city leaders are also pondering whether it's time to kill the binding-arbitration provision in the City Charter altogether.

The City Council considered putting the repeal on last November's ballot but backed off after the police union voiced opposition and some council members said they'd like more information before making a decision. The council ultimately voted 4-5 in August, directing staff to come back with further analysis.

The topic of binding arbitration will return to the table Tuesday night, when the council's Policy and Services Committee discusses whether the city should amend or repeal the 1978 provision, which is encoded in Chapter V of the City Charter. Sandra Blanch, interim director of the Human Resources Department, said in an email that at the May 10 meeting, staff will "provide background information, describe the City's previous experienced with Binding Interest-Arbitration and provide analysis of the options to modify or repeal Binding Interest Arbitration."

During previous discussions, council members characterized binding arbitration as a major obstacle to the city's long-term financial health. Councilwoman Karen Holman, who proposed placing the issue on the 2010 ballot, called it "one of the more significant aspects of how the city does or does not control of its own density." Councilman Greg Scharff agreed and argued it's "antidemocratic" to have an elected council negotiate with the union, only to turn over the negotiation to an arbitrator.

"If you really want structural changes, like with SEIU (Service Employees International Union), you're not going to get that with binding arbitration, or it's going to be difficult," Scharff said.

Historically, the arbitration panel made some findings in favor of the city and others in favor of the union. But when it comes to pension reform, arbitrators have sided with the unions each time the issue has come up. In 1980, the arbitrators sided with the firefighters union to preserve status quo after the city proposed instituting a second tier in the pension formula to be applied to newly hired workers. In 1981-82, the panel sided with the police union and changed pension calculations so that the highest-salary year is used to determine pensions (as opposed to then-status quo of highest 36 months).

The panel also sided with the police union in 1983, when it determined that the city should pay both the employer's and employees' contributions for pensions.

Palo Alto management and the firefighters' union have already set up the three-member arbitration panel that will resolve their dispute. The panel includes Tony Spitaleri, president of the firefighters' union; Richard Whitmore, the attorney representing the city; and Katherine J. Thompson, an attorney who was chosen by the other two panelists.

Palo Alto isn't the only Bay Area community to consider repealing its binding-arbitration ordinance. Vallejo voters repealed their city's ordinance last year, and Gilroy officials considered putting the issue on the ballot last year but decided not to after they reached an agreement with their firefighters.

A Santa Clara County Civil Grand Jury released a report last year arguing that cities must do more to rein in employee costs and recommending that San Jose place its binding-arbitration ordinance on the ballot.

"Binding arbitration is not open to the public and results in an adversarial process between the city and employee groups," the Grand Jury report stated. "Binding arbitration limits the ability of city leaders to craft solutions that work for the city's budget. The process has resulted in wage and benefit decisions that have been greater than the growth in basic revenue sources."

The issue of binding-arbitration is re-emerging in Palo Alto at a time when city officials are pushing for more pension reforms, particularly in the public-safety groups. The city's contributions to California Public Employees' Retirement System (CalPERS) went from comprising about 2 percent of the city's General Fund to more than 10 percent over the past decade, Keene told the council. The retirement fund suffered major losses in the stock market in 2008, Keene wrote, and required additional contributions to fulfill its commitment to retirees.

Other labor groups have already made concessions to solve the looming pension crisis. Workers represented by the Service Employees International Union, Local 521, and the non-unionized group of managers and professionals have agreed to two-tired pension systems and a plan to share medical costs with the city. Keene has repeatedly said he wants to see similar concessions from the public-safety groups, whose workers account for 56 percent of the General Fund's salary and benefits expenditures.

Even though the police and fire department budgets are each set to rise by about $1 million in the proposed budget for fiscal year 2012, Keene told the council Monday night that these budgets also presuppose concessions form the two labor groups.

"The budget we do present to you is really balanced by counting on achieving significant and timely concessions from our public-safety unions, which have yet to make any structural cost-savings contributions in pay or benefits to the city's ongoing fiscal challenges over the past few years," Keene told the council.

Concessions from public-safety unions comprise the biggest wildcard in what otherwise promises to be a calm budget season. The city's budget deficit in fiscal year 2012 is estimated at about $3 million, far smaller than the $7.3 million deficit the City Council wrestled with last year and the $16.2 million budget hole it closed the year before that. This means the city won't have to weight cutting popular programs such as school-crossing guards or shifting the costs of sidewalk repair to residents -- proposals that were on the table last year. Most of the cuts this year will come from department budgets and, presumably, concessions from labor groups.

The city's fiscal future looks fairly bleak, however, with rising pension and health care costs threatening to push budget deficits to about $7 million in fiscal years 2013, 2014 and 2015, barring permanent changes.

Keene indicated on Monday that he wants to use this brief period of relative calm to work on the city's long-term fiscal challenges.

"While we have a lull of sorts this year and we're aided by some good signs on the revenue front locally, the succeeding years will see an increasing gap that, if we don't get these structural concessions, will continue to put our city at risk," Keene said.

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Like this comment
Posted by Sue
a resident of Stanford
on May 4, 2011 at 6:04 pm

Time to put binding arbitration on the Nov 2011 Ballot and not wait another year!

Like this comment
Posted by Me-Too
a resident of Another Palo Alto neighborhood
on May 4, 2011 at 8:00 pm

> Time to put binding arbitration on the Nov 2011 Ballot and
> not wait another year!

I'll second that motion.

Like this comment
Posted by Midlander
a resident of Midtown
on May 5, 2011 at 8:16 am

And I'll third it.

With money tight, this sounds like something the voters should consider.

Like this comment
Posted by Taxpayer
a resident of Downtown North
on May 5, 2011 at 9:40 am

"Binding arbitration is not open to the public and results in an adversarial process between the city and employee groups," the Grand Jury report stated. "Binding arbitration limits the ability of city leaders to craft solutions that work for the city's budget. The process has resulted in wage and benefit decisions that have been greater than the growth in basic revenue sources."

It is hard for me to imagine any citizen or elected representative in Palo Alto who would oppose the elimination of binding arbitration. The thought of having Spitaleri be part of the process of negotiating the union compensation is extremely discouraging. The city should be able to present a reasonable compensation package and replace all the employees who reject it.

A good solution for the city would be to get rid of the entire pafd and turn the operation over to Wackenhut. Get rid of the pension issue and over compensation completely.

Like this comment
Posted by Well
a resident of Downtown North
on May 5, 2011 at 10:26 am

Okay so the City is once again going to consider placing binding arbitration on the ballot which will no doubt get voted down in this climate. That's a foregone reality.

So when that happens, what recourse do the police officers have to work with the City in the future. They can't strike which is why they have arbitration. So with no ability to strike and no ability to have a third party review what other cities have and what makes sense in any given environment, the Council will just get to decide. Sounds fair. Maybe arbitration is perceived as an obsticle for the City, but completely doing away with it will give the police officers less options than other City workers who at least have the option to strike if the City doesn't act reasonably.

This is also not so good on the timeing scale. The City is going to bring this up at a time when they are about to start negotiations with the police union and ask for concessions. I'm sure this effort will win them favor in that process.

What this is really about is the City's fight with the fire union and their lack of willingness to cut costs as the police have done in the past and fires ballot measure last year.

I sure hope the City considers spliting the binding arbitration and go after the problem portion of this equation and doesn't throw the baby out with the bath water.

Oh by the way, isn't it the City who just declared impasse and will use arbitration to force the fire union to make faster concession rather than allowing them to stall for years. Arbitration is a very useful tool for the City also.

Hmm. Maybe not the best time or strategy on this one.

Like this comment
Posted by Privatize
a resident of Barron Park
on May 5, 2011 at 10:51 am

Without binding arbitration, if a police officer or firefighter is unhappy with their compensation package, they can quit and go get a higher paying job elsewhere, which should be easy if you listen to the typical union rhetoric about the quality of their membership.

Wackenhut enthusiastically seconded. Let the private sector bring some long overdue efficiency to our taxpayer-funded public sector. Another benefit of privatization: if a worker is lazy or incompetent, he's shown the door in a hurry. Likewise, an excellent worker is quickly promoted, paid more, and put in a position where his excellence can have a larger impact. None of this happens with a union in place. I'm a lefty but I'm a one-issue voter until we sort this public union scam out. I'm tired of writing ever-larger checks for diminishing returns.

Like this comment
Posted by Carlito Waysman
a resident of Old Palo Alto
on May 5, 2011 at 11:33 am

Binding arbitration has to go. In these lean times, when our taxpayers dollars are at stake and the huge financial problem that the 800 pound gorilla that the Public employees retirement system represent to the city, there is no place for a binding arbitration.

Like this comment
Posted by Arbitration for ballot measure
a resident of Another Palo Alto neighborhood
on May 5, 2011 at 4:16 pm

Binding arbitration has to go. You are absolutely right. So long as the City has to go up against Spitaleri the firefighters Union President it is not an equal playing field. The firefighters have refused any concessions over the last couple of years and Spitaleri is being ominously stubborn during the latest negotiations, that's why we have to go to arbitration again this year.

Also, the firefighters have put unreasonable demands on the ballot, which thankfully the residents of PA voted down. Now it's time for the City to put their elimination of arbitration measure on the ballot

Meanwhile, the Police Union has wisely cooperated with concessions over the last couple of years. Whether they will continue to be cooperative remains to be seen.

Privatize has it right any Police Officer or Firefighter who is unhappy with their compensation agreement can always leave, After all if we don't win concessions we will have to lay off both firefighters and police officers like San Jose.

Like this comment
Posted by DeAngelo
a resident of College Terrace
on May 5, 2011 at 5:22 pm

Thousand times agreed. Kill binding arbitration, and if the union won't then make serious concessions, privatize. I bet the San Carlos residents will be happy with the $2M they will save each year by privatizing their fire department going to roads, parks, schools, and other services that are collectively being rolled back to pay for overpaid public servants.

I'll be voting against any form of increased government revenue until the public sector shows itself capable of reigning in the massive waste being incurred through overpayment of public "servants."

Like this comment
Posted by Bill
a resident of Barron Park
on May 5, 2011 at 5:37 pm

The City Council and its appointed representative, the City Manager, should make salary decisions. To permit an arbitration panel to usurp that function is wrong.

It will not be an impartial panel with one vote solidly in favor of the firefighters. It's a way Spitaleri has of getting back at the city for overwhelmingly voting down Proposition R last election.

Like this comment
Posted by Jake
a resident of another community
on May 6, 2011 at 1:46 am

The City Councils and City Managers, past and present negotiated past and present contracts with the PAFD firefighters. No arbitrator imposed anything on the City. The City and Council blame the FFs? The City Manager and City Council are pointing fingers at Binding Arbitration for something that has not even taken place in relationship to recent contracts.
Anything the Council and City Manager gave the OK to contract wise was done after having proposed contracts reviewed for fiscal cost and if the package was the average for what FFs and paramedics earn in the area. Obviously it was so the City Managers and City Councils signed the contracts.
Now before even finishing the process the Council is pointing fingers at Arbitration being at fault? what contract did any arbitrator EVER impose upon the city?

Like this comment
Posted by DeAngelo
a resident of College Terrace
on May 6, 2011 at 2:39 am

Contracts past and present were negotiated by city managers with the spectre of binding arbitration hanging over the negotiation.

It doesn't matter if PA firefighters are paid a comparable rate to neighboring communities. That merely illustrates that the problem of overpaid public employees is widespread. We don't have to get soaked just because Mountain View and Menlo Park are. What matters is that we the taxpayers are paying our firefighters ~50% more than what the private sector would offer, with gold plated benefits to be paid by our children. There is only one relevant comp, and that's the private sector.

If arbitration is one of the levers that helped create this mess, it has to go. The union should be next.

Like this comment
Posted by Sonny
a resident of College Terrace
on May 6, 2011 at 9:25 pm

Anyone remember the good old days of the boom? During that period of time, most people did not want to work for a public entity because they felt they could make millions in stock options and other perks. Now that that the bubble has burst and people are feeling the sting of unemployment along with their portfolios heading south, they are spewing venom at the people who soldiered on during the boom times and cleaned your streets, sewers and storm drains. They kept your lights on during winter storms, kept your pilots lit and maintained safe drinking water. Why such vitriol?

Like this comment
Posted by DeAngelo
a resident of College Terrace
on May 7, 2011 at 11:51 am

Overpaid is overpaid. Public employees had equal access to the dot-com boom as everyone else. I don't buy the argument that most public workers could have easily make the transition to startup life and tapped into easy dot-com millions, yet chose not to out of dedication to serving the public, and deserve continued taxpayer funded bloat as a result. The public employees that stayed with the job during the boom (the majority) made their own decision to stay -- I suspect not wanting to trade their 9-5 and public sector benefits for startup life had a lot more to do with it than a higher dedication to serving the public.

Which brings us back to today: do we continue to pay 50% above market for fire service, or use the tax dollars for something else?

Like this comment
Posted by Firefighter
a resident of another community
on May 7, 2011 at 12:24 pm

To DeAngelo,
"I suspect not wanting to trade their 9-5 and public sector benefits for startup life had a lot more to do with it than a higher dedication to serving the public.

Your so wrong, because the majority (over 87%) of firefirghters hired in the last 15 years, have a four year degree. I know, I'm one of them.

Like this comment
Posted by Alfred E Newman
a resident of Atherton
on May 7, 2011 at 12:34 pm

Where is all this talk of Wackenhut coming from?!?

SC talks of the Wacks running their FD. That's insane. Do you have any idea of how that would work out in tense, emergency situations that could well involve your family?

from a post today on the Almanac thread about Wack and the SC fire:

"Wackenhut? The vodka shots held in place by their buddies "cheeks" Wackenhut?

Contractors. First priority is shareholders and profit, that's corporate law. You want to count on a for-profit to save your grandchild?

Trust for-profit Wackenhut with a late night emergency call for your family? These guys?

Photos form OUR embassy in Kabul, Wackenhut "guards" (warning - nsfw)
Web Link"

Like this comment
Posted by Chris
a resident of Midtown
on May 7, 2011 at 3:01 pm

All the firefighters I know seem like very good people and appear very dedicated, but I also think the issue of inefficient use of tax revenue is real and needs to be dealt with. Having worked in both, I think the private sector is to its credit much better at streamlining operations (eliminating overstaffing, inefficient overtime, worker accountability, and yes, market level compensation). So on that point I don't agree that the private sector providing fire services is a bad thing, as long as the city retains significant leverage to keep Wack or whoever it ends up being honest, such as contracts with performance metrics and two year renewal cycles.

I'm all for being generous with our FFs but I think we've drifted into unsustainable waters. We're cutting some very important programs and services so we can't afford to ignore efficiency when the opportunity arises.

Like this comment
Posted by Resident
a resident of Community Center
on May 7, 2011 at 8:14 pm

[Post removed by Palo Alto Online staff.]

Like this comment
Posted by Peter Carpenter
a resident of Atherton
on Jul 7, 2011 at 6:20 am

A pending California bill that would allow unions to directly appoint half of city and county civil service commissions is a misguided piece of legislation that would allow "government insiders to set public policy," critics told

The bill, AB 455, passed California's state Senate by a vote of 23-14 on Tuesday and now awaits the signature of Gov. Jerry Brown. If signed into law, AB 455 would allow unions to appoint half of the members of bodies that resolve disputes regarding wages, hours and other terms of conditions of employment. If multiple bargaining units are represented by different recognized employee organizations, the union representing the "largest number of employees would designate commission members pursuant to that provision," according to the bill.

Read more: Web Link

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