• To read about what’s driving Palo Alto’s growing payroll, click here.
Click on the links below to read about each group’s employee compensation:
• Service Employees International Union, Local 521
• Police and firefighters union
They are the city’s department heads, supervisors, top technologists and senior analysts. From their perches near the pinnacle of the organization, the roughly 200 people who make up the city’s Management and Professional group are responsible for spearheading Palo Alto’s most complex and demanding initiatives.
Yet when it comes to salary negotiations, their voice is largely muted. They are the only major employee group that does not belong to a union. Rather, their salary adjustments and benefit reforms typically follow and mirror those that the City Council negotiated with (or imposed on) the Service Employees International Union (SEIU).
The unusual setup means that the SEIU workers don’t just negotiate with their managers on salary adjustments. They also, in many ways, negotiate on behalf of their managers.
This long-standing arrangement has at times made the city’s high-level managers feel powerless, particularly when the economy is turning sour. A decade ago, the managers group flirted with the idea of joining the Professional and Technical Engineers Union or forming its own group, though neither idea ultimately carried. In the fall of 2009, when the SEIU was up in arms against proposed benefit cuts, managers approached the Teamsters to discuss possibly joining the union. Rudy Gonzalez, a Teamster Local Union organizer, told the Weekly at the time: “It isn’t until you reach tough economic times that you actually realize you don’t have bargaining powers.”
The managers didn’t end up joining the Teamsters, but dozens of mid-level and high-level employees decided that the time was ripe to unionize. First, a small group of high-ranking police officers formed the Palo Alto Police Managers Association. Then, in June 2011, 45 high-level Utilities Department employees splintered off to form the Utilities Managers and Professionals Association of Palo Alto.
The rest of the employees stayed put.
Last December, the council approved a contract for the Management and Professional group that included the same type of raises that had been given to the SEIU. All members of the management group received a 2 percent pay bump in the first year of the two-year contract, effective July 1. They will also receive a 2.5 percent raise this year, effective July 1.
And just like the SEIU employees, some management workers saw their salaries adjusted based on a benchmark study of wages in 14 jurisdictions, including the cities of Berkeley, Santa Clara, Mountain View and San Mateo. As a result of these adjustments, salaries for 19 positions whose wages were at most at 5 percent below the median were further boosted to better reflect the marketplace. In many cases, these adjustments were minor, raising the salary by less than 2 percent. In a few cases, the salary was increased by more than $10,000. The position “manager, maintenance operations” received a pay bump from $94,827 under the former contract to $107,203 under the new one. The “chief building official” position, meanwhile, saw an adjustment in base salary from $122,990 to $148,291.
The salary for a “principal management analyst” went from $122,012 to $133,182. A “senior engineer” position was adjusted from $124,425 to $133,348; the “chief transportation official” position went from $130,021 to $139,568.
Not all positions were below par, however. The city’s benchmark study identified 38 positions in Palo Alto with base salaries higher than in comparable cities. The chief communications officer position, for example, had a base salary 26 percent above the market median, while a warehouse supervisor was 20.7 percent higher than the median. A principal management analyst in the Administrative Services Department earned 19.9 percent above the median. In the Police Department, the deputy director of the Technical Services Division in the Police Department had a salary 11.7 percent above the median.
For both the SEIU and the managers group, the market-rate adjustments were a one-way street. If their salaries were at most 5 percent below the market median, they went up. But if they were above, they did not go down.
“Their salaries get frozen until they reach equilibrium with the market,” Keene told the Weekly.
As a result, the salaries for most positions in the two largest employee groups are now either close to the median or above it. And when one adds benefits to the mix, the adjustments seem even more generous. There were 60 positions in the managers group with salaries below the market median, but in terms of total compensation, there were only 45 positions that fell below the median. Meanwhile, the number of positions that made more than the median went from 38 to 53, when all the benefits were factored in. As far as the number of actual workers who held those positions, the 45 underpaid positions translated to 63 employees and the 53 above-median positions totaled 122 workers.
In addition to these two types of salary bumps, employees in the management and professional group are also eligible for a third, known as “performance pay.” Unlike SEIU and public-safety employees, managers and professionals don’t have a “step system” that allows them to earn automatic pay bumps based on experience. To compensate, the city has been offering to management and professional employees salary increases based on the discretion of department directors.
Performance pay is different from the city’s former “Variable Management Compensation” program, which allowed managers to get sizable one-time bonuses. In 2009, Keene proposed eliminating that program but, after negotiations with the managers, agreed to revise it so that managers could continue receiving bonuses if they’re willing to trade in the equivalent amount of vacation time or paid leave.
The performance pay bumps — capped at 3 percent — are less steep than the variable bonuses, which Keene said at times were close to 10 percent. But unlike the old bonuses, these pay adjustments are permanent. Rather than one-time payments, they get added to the base salary in much the same manner as the step increases would increase the salaries of SEIU employees, police officers and firefighters. The current budget includes $550,000 in an account called the General Fund Salary and Benefits Reserve to pay for these performance-based increases.
In more than one way, the performance pay system is more fiscally conservative than the former bonus system. Keene noted that, in the past, employees could get a large bonus and then retire, locking in pension benefits based on the just-boosted salary. Now, the 3 percent cap keeps salaries from rising too high.
Performance pay is also “less automatic or routine” than the step increases enjoyed by other labor groups, Keene told the Finance Committee in May 2014, given that it is up to the discretion of the manager’s supervisor.
All three types of pay increases — the two-year 4.5 percent raise, the market-rate adjustments and performance pay — were included in the new two-year contract that the council quickly approved on Dec. 9.
Because of the date of approval and the two-year timeline for the 4.5 percent salary bumps, the recent compensation changes are only partially reflected in the list of employee salaries the city publishes every year. Even so, the trend isn’t hard to spot.
In 2013, eight employees received more than $200,000 in total compensation. In 2014, the number went up to 19: Keene, City Attorney Molly Stump, Fire Inspector John Parks, Utilities Director Valerie Fong, Chief Financial Officer Lalo Perez, Police Chief Dennis Burns, police Sergeant Adrienne Moore, Fire Captain Ryan Stoddard, Chief Information Officer Jonathan Reichental, retired Community Services Director Greg Betts, Public Works Director Michael Sartor, Chief People Officer Kathryn Shen, Police Captain Robert Beacon, fire Battalion Chief Bobby Davis, Planning Director Hillary Gitelman, Fire Captain Mark Shah, Assistant Utilities Director Jane Ratchye, Police Captain Ron Watson and Fire Chief Eric Nickel. Nine of these employees belong to the management group.
The number of employees citywide making more than $100,000 is also on the rise, going from 372 in 2012, to 408 in 2013 and to 440 in 2014, which included 132 employees from the management group, according to Administrative Services Department data.