Palo Alto reaches labor deal with largest union

New contract with SEIU includes salary raises, health care reforms

The labor standoff between the City of Palo Alto and its largest employee union concluded this week when workers voted to accept an offer that raises salaries and aligns local positions with market rates.

The agreement, which the City Council is scheduled to approve on March 17, applies to the 570 employees represented by the Service Employees International Union, Local 521 – about half of the city's workforce. Members of the union voted on Tuesday to accept the city's proposal, which includes a 4.5 percent raise for every employee over two years. This includes a 2 percent cost-of-living adjustment upon adoption of the contract and another 2.5 percent in the second year of the contract.

In addition to the 4.5 percent raise, more than half of the SEIU workforce will see salary increases as part of the city's effort to align local salaries with those in other jurisdiction. The city had recently completed a compensation study that compared local salaries with those in 12 comparable jurisdictions. As part of the realignment, 89 job classifications representing about 315 workers will see upward adjustments, according to the city.

The agreement will also shift some of the risk in rising medical costs from the city to the workers. While the city currently pays 90 percent of the employees' health care costs (an amount that can go up significantly as medical premiums rise), the new agreement would require the city to provide flat fixed-rate contributions.

The new agreement will add about $7.6 million in expenses to the city over the two-year period, which is roughly a 6.3 percent increase in total compensation. About $2.7 million of that will come from the city's General Fund, with the rest drawing from various enterprise funds relating to utilities and public works.

The union reached an agreement after initially balking at the city's proposals to realign salaries and shift the medical formula. At a January meeting, the city declared an impasse in negotiations, prompting dozens of union workers to attend a council meeting and voice concerns about the proposed contract. Several utilities and public works employees argued that the city is no longer able to attract and retain workers because of insufficient pay.

Since then, the two sides held more meetings and negotiated a deal that was ratified by the workers, according to the union's announcement. The union described the deal in a statement as one that "provides workers with some relief after years of cuts." The SEIU was the first worker group to undergo benefit cuts in 2009, which included employee contributions for pensions and health care. Since then, the city has reached similar deals with other employee groups.

"The contract provides city workers with some immediate relief, but I doubt the wage requirements and cost-of-living adjustments will be enough to reverse Palo Alto's current staffing and retention crisis," Margaret Adkins, chair of SEIU, Local 521, said in a statement. "But, it is a step in the right direction."

According to the city, bringing employee salaries in line with the market median will cost the city roughly as much as providing the cost-of-living adjustments. The agreement also allows several positions to receive "additional adjustments to address unique recruitment and retention challenges," according to the city. The two sides have been negotiating since last fall.

"We are pleased that the SEIU membership has voted to accept this proposal, which offers a fair and balanced deal that seeks to ensure we can retain our excellent employees, where we are seeing heightened marketplace competition, especially in the utilities and enterprise sector, while also controlling health care costs in the future," City Manager James Keene said in a statement.

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Posted by Bill
a resident of Community Center
on Mar 5, 2014 at 6:24 pm

Congratulations on keeping our city employees happy. It would be a real tragedy if many were to leave. Seven and a half million dollars is such a small price to pay. Our city leaders are obviously working very hard to keep an eye on our spending and should be commended for their fiscal restraint.

[Pffft! Yeah, right.]

Like this comment
Posted by Wayne Martin
a resident of Fairmeadow
on Mar 5, 2014 at 6:42 pm

Over the next ten years, this pay increase for the unions will come to around $40M (more-or-less). So what will the residents, and business owners, get for that additional money? There isn't one word in this article about increased productivity, or any increased quality of output of these unionized workers.

We know that the City wants us to pay $40+M for a new police station--caving into these people has just seen about $40M thrown out to window.

Also missing from this article is any sense that the City has factored into this salary demand the millions that retired City workers will receive in pension payouts:

Over thirty years, CalPERS retirees receive the following payouts:

Total Pension Payouts
$100K--10-Years: $1.1M | 20-Years: $2.5M | 30-Years: $4.2M
$150K--10-Years: $1.7M | 20-Years: $3.7M | 30-Years: $6.2M
$200K--10-Years: $2.2M | 20-Years: $5.0M | 30-Years: $8.3M
$250K--10-Years: $2.8M | 20-Years: $6.2M | 30-Years: $10.3M

Not surprising that the City Council is not asked why this pay increase is being approved.

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Posted by Anna
a resident of Downtown North
on Mar 5, 2014 at 7:47 pm

Another reason to vote our special interest serving council out this November. The pension hole we are passing on to our children just got 4.5 percent worse.

How many city workers were fired last year for incompetence or underperformance ? I'm guessing between 0 and 0. There is no accountability to performance. Has the staff that pushed so hard to ram the costly and ultimately doomed Maybell project down the residents, throats been punished for wasting over $1M in city resources (to say nothing if lost time and the cost imposed on the residents who has to referendum the project?). I work in the private sector . If I make a seven figure "oops," you better believe I'd have to answer for it.

Why does it cost the city over 100k to employ a tree trimmer or a secretary?

That this city is pleading broke and trying to raise taxes is asinine. The city is being run as a jobs program for a bloated, unaccountable employee pool. I'm voting against the incumbents this election. And would somebody with the know how please please please start a recall drive against Li Kniss and Marc Berman. Otherwise, they'll be serving their developer and union friends until 2016.

What a failure of leadership. I'm beyond exasperated.

1 person likes this
Posted by XDM
a resident of another community
on Mar 6, 2014 at 6:31 am

Why don't you people stop whinning. If City jobs were so Great, all you richies would be doing them instead of the Cush million dollar High pay jobs you have. I'm sure you are not telling your kids to set a goal for a city job. I know im not. We live in a part of the country where the cost of living is so high that all jobs in the area need to be paid a bit more due to the cost of living.

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Posted by musical
a resident of Palo Verde
on Mar 6, 2014 at 7:20 am

Circular reasoning. High pay is the cause of high cost of living.

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Posted by resident
a resident of Another Palo Alto neighborhood
on Mar 6, 2014 at 8:08 am

The problem here is that pay issues are all wrapped together with
policy/performance issues. If the residents see the direction of the
city and their neighborhoods, the quality of life and character of the
city as drastically changing and deteriorating, as a direct result of
City policy and how it is carried out,then any discussion of staff compensation as somehow detached from this reality, is unsettling and just
stirs up residents even more. That is where we are in Palo Alto.

Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on Mar 6, 2014 at 8:17 am


Actually, most of these windfall jobs are not easy to get. The extreme is public safety, where every time there's an opening for a firefighter on the peninsula, over 500 people apply before they stop taking names.

The city needs to stop comparing its employee compensation to other cities, and start comparing it to everybody, including private sector. And, the cost of pension and healthcare, including retirement age, needs to be part of the equation as well.

1 person likes this
Posted by Not so fast
a resident of Downtown North
on Mar 6, 2014 at 10:50 am

It's pretty short sighted to simply blame city workers for declining quality of services when city managers, with the complicity of city council, have spent the last five years cutting salaries, leaving open positions unfilled and hiring more managers and less blue collar workers in an effort to shift work to employees who aren't protected by the unions. Oh, and the city is increasingly dependent on private contractors, who by definition pay poorer wages and cut corner on the services they provide in order to maximize profits. Capacity is dwindling, and the city's finance department crows about savings! How tone deaf.

Then there are the pensions. I'd like a pension, wouldn't you? Hedge fund billionaires like John Arnold want to destroy the pensions system because they don't collect nearly as much in fees when investors pool their money together at such a large scale. That's what this is all about: Wall Street is rapacious and wants to get its hands on the billions of dollars tied up in public pensions ... so they can gamble it on the market, collect their fees and lose retirees' savings. We should be figuring out how to provide defined-benefit pensions for more of us, both in the public and private sector. There's a bill (SB1234) that has yet to be enacted that will help accomplish that, if the financial industry torpedo it first.

Jim Keene and City Council need to stop drinking the pro-privatization, small government Kool-Aid. Sit down now, before the next contract battle, with public employee unions to come up with a plan that actually fills vacancies, improves quality of services and accountability, and maintains retirement security for workers. Otherwise, services, workers and residents will just continue to suffer.

Like this comment
Posted by bick
a resident of University South
on Mar 6, 2014 at 11:14 am

After comparing employee salaries with other cities, how many positions were over the average and therefor saw a reduction?

Web Link

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Posted by A Noun Ea Mus
a resident of Professorville
on Mar 6, 2014 at 11:40 am

Geez scratch a Palo Alto "liberal" and you get an arrogant John Galtish elitism pouring forth. Maybe need an "ALEC for Liberals" group on FB.

Like this comment
Posted by Roberto
a resident of University South
on Mar 6, 2014 at 12:07 pm

This is basically taxpayer funded welfare for city bureaucrats. When we are so inept at running an efficient government, I'm all for outsourcing everything. For example:

Private sector secretary: $35-50K per year, Social Security (about 12K per year at age 67) and a 401K to fund your own retirement. Fired if you perform poorly. Work 5 days a week.

Palo Alto secretary: $65K-70K per year, retire at 55 with $3,500 per month for the rest of your life. Nearly impossible to fire. Work 9 days every 2 weeks.

Like this comment
Posted by Silly
a resident of Embarcadero Oaks/Leland
on Mar 6, 2014 at 12:19 pm

XDM, Although the web link someone posted showing the total compensation for employees disappeared, the first page showed about 20 people making more than $300,000 while employed, a figure very close to what they will make in the 30-40 years they'll be retired.

Many of us "richies" -- including most of the employees at Google etc. -- would be very glad to get that type of salary and benefits package. Private sector employees making that kind of compensation never get overtime pay.

Also, the real ALEC has worked very hard to eliminate all pensions for private sector workers and stock market manipulation destroyed the value of our 401ks. They have however made the old joke "What did you get for your 50th birthday?" answer "Laid off." part of the national conversation.

You don't have to be liberal or conservative to realize the middle class has been screwed.

Like this comment
Posted by David Pepperdine
a resident of Another Palo Alto neighborhood
on Mar 6, 2014 at 2:12 pm

Some cities (Los Altos Hills for example) are explicit in their charters that they are to be run for the benefit of their residents.

Palo Alto does not have this in its charter. So you get people whining about treating employees fairly, paying them a living wage, etc. The city is not a charity. We should pay the lowest price at which the market can provide a given level of service. That's just fiscal efficiency.

Pensions are a scam: they create an open-ended future cost for a fixed current service.

It's time to turn this stupidity upside down.

Gut most (but not all) city departments (starting with utilities) and outsource these services to private enterprise with an annual contract.
No more pensions (defined benefit) -- just 401k plans (defined contribution).

Hire sharp managers with a focus on quantitative metrics for ROI.

Wouldn't that be sweet?

Anyone for a ballot measure?

1 person likes this
Posted by How about you?
a resident of Adobe-Meadow
on Mar 6, 2014 at 2:28 pm

So when was the last time all of you got a raise? Why do you put employees at the city down so much when they're working just like you do??

1 person likes this
Posted by Not so fast
a resident of Downtown North
on Mar 6, 2014 at 2:32 pm

If the city actually paid market rates for utility workers, their raises would have been even higher. As it is, maybe the city will slow the bleeding of talent, but it isn't going to reverse the trend of these people leaving the public utilities to go work for the private-sector competition.

So much for solving this thing through privatizing the utilities, all that will accomplish is higher rates for residents and higher profits for energy executives.

Try again.

Like this comment
Posted by David Pepperdine
a resident of Another Palo Alto neighborhood
on Mar 6, 2014 at 3:01 pm

@Not so fast:

One word: hogwash.

Palo Alto's water rates are among the highest in the country.
The utilities department has been a cesspool of corruption and misappropriation: witness the resignation of former utilities Ulrich, and utilities workers doing private jobs on city time.
Don't forget the $21M the city paid ENRON!! after that company went bankrupt.

No need to use such scare tactics. If the market rates are higher, we'll gladly pay them. But I'll bet my 401k against your pension plan that they'll be lower, especially once we're not paying for lifetime pension and health benefits for the workers and their families.

So: hogwash!

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Posted by only a college grad
a resident of JLS Middle School
on Mar 6, 2014 at 4:12 pm

the weblink to the people getting compensated 300k? Those people aren't even the ones getting the raises talked about in this article. those guys are the managers.

many of the "richies" at google probably are not qualified for those jobs, or don't have the years of work experience for it.

please be careful to make sure you are comparing apples to apples and not to oranges. A labor deal like this usually does not involve management salaries, it involves staff salaries.

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Posted by Not so fast
a resident of Downtown North
on Mar 6, 2014 at 4:40 pm

If I had a pension plan, I wouldn't be dumb enough to wager it for a 401K. But then again, I also don't like casinos.

Web Link

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Posted by Resident
a resident of Another Palo Alto neighborhood
on Mar 6, 2014 at 5:20 pm

@Roberto above has it right, except for one detail: the private-sector secretary, if he/she lives in Palo Alto (say works for HP etc), actually PAYS FOR the City of Palo Alto secretary's pension and healthcare, through things like utility bills.

Even after the private-sector secretary retires at 65 or 67, he/she continues to pay for that COPA secretary's pension, essentially out of his/her Social Security check.

A question that nobody seems to ask is: given we're paying much higher than market rate for SEIU (and management) work, what "extra" are we getting in return to justify the difference? Other than just everybody showing up for work every day? (er, 4.5 out of 5 days?)

1 person likes this
Posted by Wha?
a resident of Another Palo Alto neighborhood
on Mar 6, 2014 at 5:42 pm

I don't think Googlers would want city jobs. Not with the kind of "campus" life they have.
From the Google MV page:
"There’s beach volleyball, a bowling alley, a climbing wall, over 25 cafeterias, more than 100 micro-kitchens and seven fitness centers."
Oh, throw in the free transportation and great salaries and ask any employee there if they want to work here, pension or not.

Think before you make silly statements like that.

Like this comment
Posted by Shell Game
a resident of another community
on Mar 6, 2014 at 6:24 pm

First, the City Council decides to ask the voters to approve an increase to the hotel tax, then the same City Council tells the voters that they will spend most of that tax increase on employee salaries at the same time voters are being told that the hotel tax increase will be used for something else. If the City Council didn't increase employee salaries, we wouldn't need an increased hotel tax.

“The funds, coupled with construction of several new hotels that are expected to come online this year, are expected to bring in $4.6 million in additional annual revenue” Web Link

Like this comment
Posted by There goes my vote
a resident of College Terrace
on Mar 6, 2014 at 8:03 pm

Shell game said all that needs to be said. We're being asked to vote on a tax increase for raises for already bloated city salaries. The city is selling it to us as an "infrastructure investment." They are trying to sneak it through by passing the tax against a small subset of businesses and hoping the public will take an "as long as its not me" attitude.

It's clear that this council needs to be bounced before they do more irreparable harm to this city.

Like this comment
Posted by Resident
a resident of Community Center
on Mar 6, 2014 at 8:08 pm

XDM commented on whether folks would want to have their children working in a city job. I have thought about this and it depends on the child. If I had a really bright, motivated, hard working child I would encourage them to go in to a career where they would be compensated for their hard work and creativity. There are many options including being a doctor in private practice, a lawyer in private pracice, a teacher at a private school, a contractor etc. If I had a child who was bright and a medium hard worker, I would encourage them to seek a job in a corporate environment. There is room for slackers in corporations but hard work can be rewarded. If I had a child who was not academically gifted and not a hard worker I would encourage them to find a job in government. Government work is not rewarding and you are often surrounded by slackers who are waiting for retirement. There is very little creativity but the job is very secure. There are exceptionsn but finding motivated government workers is the exception. This way I would know my slacker off spring would have a steady paycheck, early retirement, and fat pension. Ideally I would encourage the slacker to be a union fire employee.

Like this comment
Posted by Wayne Martin
a resident of Fairmeadow
on Mar 6, 2014 at 9:06 pm

> who by definition pay poorer wages and cut corner
> on the services they provide in order to maximize profits.

Who says? Keep in mind that the City has the final say on quality of out-sourced work. If the City’s inspectors are not capable of inspecting private sector work product properly—then they are not capable of inspecting the work product of city employees. In either case, the project managers should be responsible for the final product. If they can’t do their jobs—they need to go too.

> Wall Street is rapacious and wants to get its hands on
> the billions of dollars tied up in public pensions

Good lord! What bilge!

> We should be figuring out how to provide defined-benefit
> pensions for more of us, both in the public and private sector.

Anyone who promotes this silliness has no idea how much money is involved in the current pension underfunding that has been caused by defined benefit pension packages and the failure of elected officials to pay the bills to which they have committed the taxpayers. We (both the public and private sectors) are underfunded by trillions of dollars. And this guy wants to drive our children and grandchildren into ever-increasing tax loads to pay people to not work!

Like this comment
Posted by bg
a resident of St. Claire Gardens
on Mar 6, 2014 at 9:55 pm

Monopolies need to be regulated or broken-up.
Unions are monopolies.

In order to finance their high compensation and benefits, city employees (ie, the city manager) are selling off city assets - i.e., adding billboards on 101, allowing developers to over-densify our city to raise property taxes and enable higher city wages.

The objective of city government has become not to improve our quality of life, but to develop revenue sources to fund their employees artificially excessive compensation.

Like this comment
Posted by Silly
a resident of Embarcadero Oaks/Leland
on Mar 6, 2014 at 10:13 pm

Only someone working for a city could take 8 years to PLAN how to change a traffic light that's causing gridlock. Maybe in 10 or 15 years they'll get it done.

If they took that long in the private sector to do something that simple, they would have gotten a warning after the first year and then fired after the second year. And that's if the company moved slowly.

Our utility rates are ridiculously high, WAY higher than surrounding communities. Why? Because when the city has a shortfall in sales tax revenue they simply raise utility rates to cover it. Now the city has a surplus but are we seeing any rate reductions? Of course not.

No one would mind the ridiculous salaries that are so much higher than surround communities so much IF the employees were competent and responsive.

Like this comment
Posted by Wayne Martin
a resident of Fairmeadow
on Mar 6, 2014 at 10:27 pm

> Because when the city has a shortfall in sales tax revenue they
> simply raise utility rates to cover it

This is probably not true. Gas rates are higher--largely because we buy in small lots and no one wants to see to us at the same rates they sell to large lot buyers, like PG&E. Water prices are a little higher than those sources not linked to Hetch Hetchy--which is undergoing a $5+B refurbishment. Electricity is a little bit cheaper than some PG&E sources, but about the same as sources not linked to PG&E. Other costs on our utility bills--such as the UUT, the hidden street lighting charge and the new street sweeping charge all drive the utility bill up at the bottom line.

The City is limited by the amount it can pass through from the Utility to the General Fund. But that said--this pass-thru has amounted up to a lot of money in the past, and will amount up to an even bigger amount in the future.

Like this comment
Posted by Alice Schaffer Smith
a resident of Green Acres
on Mar 10, 2014 at 8:56 am

Alice Schaffer Smith is a registered user.

Congratulations. I think the problems of finding affordable housing for staff who haven't been with the city for 20 years or more is huge; the time spent commuting to these jobs is boggling. I wish the staff and the council well for their efforts.

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

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