Palo Alto's labor groups hope to benefit from surging economy

Strong budget has Palo Alto employees calling for higher salaries

Soaring tax revenues from new hotels and other sources have improved Palo Alto's economic climate, allowing city officials to finally move forward with a new police headquarters, accelerate street repairs and construct a new bike boulevard.

The prosperity has also lifted the hopes of the city's major labor unions, which are now in negotiations over new contracts. After taking pay cuts five years ago and agreeing to make greater contributions toward their pensions and health care over the past two years, the city's employees say they are hoping to see a pay bump soon.

City officials, for their part, acknowledge that some salary increases will be forthcoming. A new financial forecast states the city's desire "to retain and attract a talented workforce," an endeavor that has become more challenging as the costs of living in Palo Alto have skyrocketed. The city's forecast also acknowledges that, in comparison to other similar agencies, "The salaries of our employees, primarily safety employees, have fallen behind."

"Therefore," the report states, "this forecast includes salary and benefits increases to adjust employees' salaries to the average of the market over the next few years."

How big should these adjustments be? That's the question the two sides are now trying to hash out.

On Jan. 6, members of the city's largest labor group, the Service Employees International Union (SEIU), Local 521, signaled that the gap between their request and the city's offer remains too wide. While labor negotiators and management's representatives were meeting behind closed doors, about 30 employees gathered outside King Plaza with signs that read "FAIR CONTRACT," "PALO ALTO, REINVEST IN YOUR WORKFORCE" and "PALO ALTO PRESERVE OUR QUALITY SERVICES."

After receiving an update from union organizers, employees marched around the "Rondo" sculpture and recited a familiar chant.

"What do we want?"


"When do we want them?


Lacey Lutes, a utility account representative, said that employees' salaries are not keeping up with the costs of living. In the last contract, she noted, the city's contributions for health care switched from a percentage to a flat rate -- a move meant to reduce fiscal risk for the city. As health care costs have risen, employees have had to spend more.

To be sure, employee salaries have also increased. In March 2014, the city approved a salary hike over two years of 4 1/2 percent for every employee. In addition, 320 employees represented by the SEIU received one-time raises ranging from 2 percent to 10 percent. These were based on the salaries that neighboring cities offer to workers in similar positions. The 2014 salary hike was the first the union had seen since 2008.

That contract expired in December, and the two sides have been negotiating a new agreement since mid-September.

Lutes said the city continues to lose employees to other cities and companies that offer higher pay.

"If we can't offer a comparative package in comparison to other cities in the area and other utilities in the area, we aren't able to retain our workers, let alone attract new workers to our area," Lutes said.

Others shared her concerns. During recent City Council meetings, workers from the Utilities and Public Works departments testified about the challenge of retaining employees. Joseph Duran, a facilities mechanic who has been in the Public Works Department for the past five years, said he has seen many experienced employees leave the city for other opportunities, making it "increasingly difficult for operations to meet residents' expectation."

"In order to recruit and retain quality employees who meet the city's high standards, compensation needs to reflect the competition and the living reality," Duran said. "Living in the Bay Area has become increasingly more difficult. Rent alone takes nearly half of my monthly income. Mixing in food for five and all the other necessities in daily living brings new meaning to 'living on a shoestring.'"

Neither the SEIU nor the city would discuss the specific issues they're debating behind closed doors, though Lutes said they include across-the-board salary increases and additional compensation for positions for which retention and recruitment have been most difficult.

Assistant City Manager Suzanne Mason said the city has already held 12 bargaining sessions with union representatives (the 13th was scheduled for Jan. 13). While SEIU employees expressed some frustration with the city's latest offer, Mason said, she expressed optimism about reaching agreement soon.

"There are a number of economic issues that are still outstanding, but there have been a lot of productive tentative agreements," Mason said. "I do think we're making progress. We earnestly would like to reach an agreement as quickly as possible."

The SEIU's roughly 600 employees aren't the only labor group currently negotiating a new contract. The city is also in talks with its largest police union, the Palo Alto Police Officers Association; its largest firefighters union, the International Fire Fighters Association; and the Utilities Management and Professionals Association of Palo Alto, which represents managers within the Utilities Department. It has also been working on new deals for the small unions representing top brass within the police and fire departments: the Police Management Association and the Fire Chiefs Association, respectively.

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20 people like this
Posted by Numbers
a resident of Barron Park
on Jan 15, 2016 at 10:15 am

How many city workers are laid off for underperformance every year? I bet the answer can be counted on one hand. There are some great employees and some terrible ones, yet we as taxpayers are again being asked to give everyone the same raise. This union nonsense has to stop.

13 people like this
Posted by cm
a resident of Downtown North
on Jan 15, 2016 at 11:59 pm

Despite what the union members claim the city is not rolling in cash. We have hundreds of millions of dollars of unfunded pension liabilities that need to be paid to Calpers to give these same unionized employees their cushy pensions and health care for the rest of their lives. They are overpaid compared to private sector employees, they work fewer days, have better benefits, get automatic yearly raises without any reviews and retire earlier than private sector employees with life long benefits. They can give up more of their pensions and benefits if they want raises. Plus they need to have a review process and no more automatic raises if they are not doing any more work. The entire unionized system is rigged so that they constantly support each other to get higher raises so the supervisors will get raises and then the city manager and his staff get raises. We need to find a way to transition them to 401K plans and make them responsible for their own retirements/healthcare just like the rest of the tax paying residents of Palo Alto.

17 people like this
Posted by Prudent
a resident of Old Palo Alto
on Jan 16, 2016 at 8:37 am

No raise in future liabilities at all!

We should continue to funnel all employees raises into paying down pension liabilities.

Negotiations should focus on moving all employees to pay-as-you-go salaries paid in today's dollars.

The only transparent way to manage government costs is to eliminate the money pit of pensions.

Good governance!

26 people like this
Posted by member
a resident of Crescent Park
on Jan 16, 2016 at 7:04 pm

Enough's enough for PA city employees. PA's infrastructure is in a shabby state. If PA's tax receipts are surging, make a surge in getting infrastructure projects done. D-O-N-E. That is, completed and paid for, not merely started/studied with an eye towards tomorrow's revenue to pay the cost.

1 person likes this
Posted by Carlito waysmann
a resident of Old Palo Alto
on Jan 16, 2016 at 11:31 pm

>>A new financial forecast states the city's desire "to retain and attract a talented workforce," an endeavor that has become more challenging as the costs of living in Palo Alto have skyrocketed.Therefore," the report states, "this forecast includes salary and benefits increases to adjust employees' salaries to the average of the market over the next few years."<<

First of all, what is the percentage of that workforce actually living in Palo Ato?

I find that unions have no place in government either at local , State or federal level government and entities; they are used as political chips for politicians and it represents big trouble for the financial well being of cities, counties and States.

We need to seriously consider to use private sub contractors to staff Palo Alto daily operations; should hire some consultants(the Palo Alto way)to do a feasibility study.

15 people like this
Posted by Foresy
a resident of Evergreen Park
on Jan 17, 2016 at 8:42 am

Most of the comments here are backhandedly promoting the argument for a two or more tier society. That is as unamerican as it can get. While the lucky fat cats enjoy their euro suv, yoga, and latte, the scumbag workers can commute two hours from Livermore to service our city. Seems so Roman.

Posted by taxpayer
a resident of Community Center

on Jan 19, 2016 at 1:23 pm

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12 people like this
Posted by A Noun E Mus
a resident of Professorville
on Jan 19, 2016 at 2:59 pm

Why I hate to live in Palo Alto. "Liberals" until they have to spend one extra nickel so that employees can have benefits and a pension. Then they act like Donald Trump on steroids ("Wages are too high and taxes are also" to that effect). The old bargain was made to "tame" unions such that sit down strikes and the more militant actions didn't occur. But now those seeking to squeeze profits out of wherever/however turn on the workers inside the heartland. An dog put out to the wild turns into a wolf. Only wish I were younger to live for the next 30 years and see how this plays out. While visions of guillotines dance in my head.

6 people like this
Posted by CW
a resident of Downtown North
on Jan 19, 2016 at 3:51 pm

City workers shouldn't be getting a raise just because the city is bringing in more revenue. They ask for raises when revenue goes down, too.

I think they're overpaid. I've seen the salaries printed in another local newspaper, and I can't believe tree-trimmers are getting 70K a year, secretaries 60K, and so on. City Council should be cutting their pay or, at the very least, freezing it.

And when they do pay comparisons to determine what the wages should be for a particular job, they only look at other city governments. These cities all have inflated pay rates. They should look at equivalent jobs in the private sector.

One more thing -- our unfunded pension liabilities are $290 million (Web Link), and that's a conservative estimate provided by CalPERS. CalPERS applies a 7.5% multiplier to their investments, which makes the unfunded liabilities much smaller than one would expect. A more realistic figure would be about $500 million. When we pay excessive salaries, it makes the unfunded liability worse.

One day, the pension bubble will burst and cities will be scrambling to pay off these unfunded liabilities -- and when cities declare bankruptcy, the unions will just slap a lien on every home for their share of the pension debt.

Since city workers are guaranteed a lifetime pension and lifetime health insurance, they should accept lower wages.

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