Editorial: More pressure on city wages, benefits

Police union final hurdle in city's quest to close budget gap

After years of paying higher and higher costs for salary and pension benefits to its public safety employees, Palo Alto finally gained some leverage when voters approved repeal of binding arbitration last November.

But now, with moderately increasing revenues wiped out by higher pension commitments and other obligations, the city is facing a projected $2 million shortfall in fiscal year 2013 and deficits of $3.7 million and $4 million in the following two years. Back in 2006, the cost of public safety, made up almost entirely of personnel costs, was 25 percent of the city's General Fund. By fiscal year 2011 the cost had increased to 36 percent of the General Fund, a trend that cannot continue.

The challenge for city labor negotiators is convincing all unions to roll back wages and begin to pay for more of the cost of health and pension benefits now so this structural budget deficit can be brought under control. City Manager Jim Keene has already achieved that goal with fire fighters and the Service Employees International, the city's largest union.

But talks that started six months ago with the Palo Alto Police Officers Association have stalled. As a result, last week the city's chief negotiator, Darrell Murray, declared an impasse. This means the union, which by law cannot strike, may have to accept the city's final terms, although several steps remain, including a request to seek fact-finding or even the courts. Nevertheless, without binding arbitration, the police and firefighters' unions will find it more difficult to continue pushing their wages and pensions upward.

Under the current contract, the city says the average police union member receives an annual salary of $104,013, but when benefits are added, the total jumps to $185,616 a year. And even after retirement at age 50, officers can receive 90 percent of their highest pay for life and receive a full compliment of health care and other benefits. Municipal governments all over the state are beginning to come to grips with this huge, often unfunded, liability. But if Palo Alto and other small cities are to recover, the growth in these extraordinary wages and pensions must be brought under control, and if possible rolled back. Rising salary and pension expenses are expected to continue to grow at an alarming pace.

For example, in a new long range financial forecast released this week, the city projects the cost of all employee health care and pension benefits to grow from $36.8 million this year to $51.2 million in 2017. This is driven by health care spending, up 126 percent in the last 10 years, from $6.6 million in 2002 to $14.9 million this year. Pension costs are following a similar trend, from $15.6 million in 2005 to $23.9 million this year. In addition, a recent actuarial valuation found that the city needs to set aside an additional $2.7 million this year and another $3.5 million next year just to cover this growing backlog of the city's unfunded medical liability.

City Manager Keene is correct when he asks every labor group to take on more of their members' health care and pension costs, which in prior years have been entirely covered by the city. Most groups have agreed to or have been forced to shoulder some of the load. The Service Employees International, Local 521, the city's largest union, already has agreed to, among other things, establish a second tier of pension benefits for new workers and require current members to pay a portion of their health care costs. Firefighters agreed to similar rollbacks last fall.

But the city may have a fight on its hands with the police union, which claims it is being asked to give back more that the firefighters, a move negotiator Peter Hoffman says could amount to a loss of $20,000 or more for each rank and file police officer. Hoffman says the police union simply wants to match the rollbacks given up by the firefighters. It is not clear what the union's next step will be but Hoffman did not rule out attacking the city's bargaining tactics in court.

Now, as the city manager seeks to settle contracts with all the city's unions, there is increasing pressure for the police officers association to accept reduced pay and benefits. In his explanation of why the city declared an impasse, negotiator Murray said:

"Even the Firefighters Association eventually accepted a package that took their 2009 wage increases into account, effectively rolling back the 2009 increase and assuming an additional total compensation reduction of nearly 4 percent."

The police association simply wants a similar deal, Hoffman said, who added that the request fell on deaf ears during negotiations.

At this point, it does not appear that the police will be willing to give up more than the firefighters to help the city balance this year's budget. The union says members are willing to accept lower wages and pay a share of their health insurance costs, but believe they should only pay a fair share. Now the question is whether the ultimate outcome will produce enough savings for the city to reach its goal of delivering more sustainable budgets in the years ahead.

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Posted by The Bottom Line
a resident of Downtown North
on Mar 2, 2012 at 7:57 pm

The Police Union has and continues to offer the exact concessions the Fire Union gave just months ago and the city refuses.

The Police Union was the only union that voluntarily deferred salary increases in the past 3 years. No other union offered to do anything for the city. SEIU had to have their contract forced on them. Fire gave in only after the threat of arbitration.

The Police officers have lost over a dozen police officer positions in the past decade while the fire fighters haven't lost a single fire fighter position.

The police officers have cooperated with the city during both negotiations and city budget discussions. The fire fighters have sponsered ballot measures and faught all the way.

Even with all that, the city council and the city want the police officers to give up more than any other group in the city and ultimately become the only group that takes a cut in their salary. All the other groups had to pay more for benefits, contribute sizable portions of salary towards retirement, reduce retirement, eliminate some benefits, and pay for medical. The city is demanding the police officers do all that and take a substantial pay cut, something no one else has done.

I guess that whole removal of arbitration was designed so the city council could destroy the police departments good will for decades to come.

On our way to 20 vacancies.........

Like this comment
Posted by Carl
a resident of Midtown
on Mar 2, 2012 at 8:18 pm

This is exactly why public employees should not be allowed to unionize. FDR and RR understood this. Palo Alto is stewing in its own juices.

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Posted by Lineman for the City
a resident of another community
on Mar 2, 2012 at 9:14 pm

Easy on SEIU bottom line. I was at the table for that negotiation. We offered to give up benefits which equaled the City's proposal in savings. It's great that you offered to give up raises, we haven't been offered one in four years.

You think it's difficult to hire a qualified police officer, try to hire a lineman, substation electrician, or electric system operator. I ran into a PG&E crew and thought I'd do some recruiting. Once we talked about pay and benefits they laughed in my face. So the people who post here and think Palo Alto is some Mecca with lavish pay and benefits need a good dose of reality.

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Posted by The Bottom Line
a resident of Downtown North
on Mar 2, 2012 at 10:06 pm

To The Lineman

You are absolutely correct. My comments aren't in any way to suggest others in the city haven't significantly suffered from the actions of the city, they are ony to point out how ubsurd it is that they want more from us than fire.

For many workers across the city, they find their counterparts at PG&E or like fields receiving more compensation. Fact is the city is using the world wide economic crisis to hide their failures over the years and suggest that the city is in financial trouble. We have one of the most financially stable citys in the country, just check all the ratings and look at all the reserves.

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Posted by Fair Deal
a resident of Midtown
on Mar 2, 2012 at 11:00 pm

Based on the statements made by the Police union's attorney, it certainly does not sound like the Police union is asking for anything unreasonable and it seems like they understand the need to take cuts to help the City. If the City's deal with the Fire union was a reduction of x % with respect to their previous contract, then why not offer the Police union the same reduction? Why ask them for x + y %? It seems understandably objectionable (from the Police union standpoint) to be asked to give up more than the Fire union when the Police union has been cooperative with the City. As I recall, they agreed to defer a raise several years ago when the City asked while the Fire union not only withdrew their offer to defer a raise after initially agreeing to, but shortly thereafter also threw Measure R on the ballot. If the Police union is willing to accept the same cuts the Fire union did and the City wants to be "fair," I'm having a hard time seeing where the difficulty lies in these negotiations. Give the Police union similar terms. The City is going to get pension reform, reduced health care costs, and a reduction in wages. It seems like it should be pretty straightforward.

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Posted by To Fair Deal
a resident of Downtown North
on Mar 3, 2012 at 10:25 am

To Fair Deal,

Thank you and you make some excellent points, some things we often forget over time.

As much as I know we are being treated differently, I had completely forgotten that fire played that game of offering to defer their raise, got a bunch of public cudos, and then didn't follow through on the offer like police did. The city manager and council need to be reminded of that.

Can you please email the city manager and the council and remind them about the offer to defer, pulling back the offer, and then luanching a ballot measure and then this is how they treat the good guys. Emails are on the website.

Like this comment
Posted by Sell-The-PAU
a resident of Another Palo Alto neighborhood
on Mar 4, 2012 at 1:11 pm

> it's difficult to hire a qualified police officer, try to hire
> a lineman, substation electrician, or electric system operator

The City needs to divest itself of this operation. There is no reason at all that the City should be in the electricity sales business. It is not an essential function of government. The City should look for a buyer at the earliest opportunity, and use those funds to begin the refurbishment of legitimate infrastructure projects.

Sorry, but further commenting on this topic has been closed.

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