In an odd move, city imposes raises on union | June 28, 2013 | Palo Alto Weekly | Palo Alto Online |

Palo Alto Weekly

News - June 28, 2013

In an odd move, city imposes raises on union

City Council overhauls manager salaries, approves new terms for utility and police managers

by Gennady Sheyner

Palo Alto on Monday night overhauled the salaries of more than 200 city workers, though for more than 40 of them the pay increases arrive as a bittersweet treat.

The City Council voted 7-0 on Monday to change the compensation schedule of its "managers and professional" group — the only major labor group not represented by a union. The goal of the exercise is to bring local compensation levels closer to those in comparable cities, thereby keeping the city competitive in recruiting and retaining top talent, City Manager James Keene and Chief People Officer Kathryn Shen said. Mayor Greg Scharff and Councilwoman Karen Holman were absent.

"I think it's really imperative for the retention of our talented workforce — our managers and professionals — to adopt the new plans," Shen said.

Minutes later, in an unusual move, the council voted to impose a new contract with a 3 percent salary increase on the Utilities Managers and Professionals Association of Palo Alto, which includes 43 managers and administrative staff of the Utilities Department. The Monday vote came after a two-year negotiation process reached a dead end on April 30 with the union rejecting the city's "best, last and final offer" and declared an impasse.

While the new contract wasn't what the relatively new utilities union, formed in 2011, had hoped for during negotiations, the conditions imposed by the council include a 3 percent salary increase. The resolution also includes benefit concessions, namely a greater share of pension covered by the employees (it will go from 2 percent currently paid to either 7 or 8 percent, depending on which formula the employee is enrolled in) and a 10 percent contribution to health care costs, which the city had traditionally picked up in its entirety. Other labor groups had agreed to similar concessions in recent years, in some cases after protracted negotiations.

This wasn't Palo Alto's first recent foray into contract imposition. In 2009, as the economy tanked and local revenues dropped, the city declared an impasse with its largest union, the Service Employees International Union, Local 521. The union, which represents about half the city's workforce, rejected the city's terms, which included benefit concessions.

What was different about Monday's imposition is that the city's offer included, along with the concessions, a 3 percent raise. And far from saving the city's money, it will actually cost an extra $448,432.

According to a report from the Human Resources Department, talks between the city and the union fell apart over "management rights" provisions, which give the city unilateral rights to contract out services, determine work schedules and allocate positions. The new contract also includes an "at-will provision" for all new managers, which gives the city the ability to ask workers to resign at any time with or without cause.

Keene pointed out the unusual nature of imposing a contract with a salary increase but recommended making the change because "it's the right thing to do, even though we couldn't get to an agreement."

"We think it is important to move ahead and try to ensure that our utility managers are more competitive in the market place," Keene said.

Immediately after imposing the contract on the utilities union, the council voted 7-0 to sign a new agreement with the seven-member Palo Alto Police Managers Association, another recently formed union that broke off from the broader managers and professionals group in the aftermath of the economic downturn. Like the utilities contract, the city's agreement with the police lieutenants and captains includes a 3 percent raise and employee concessions on pension and medical care.

But the most significant vote of the night involved the compensation schedule for the entire managers-and-professionals group. The change followed years of analysis — an effort that preceded Keene's hiring in 2008. Calling it a "long and winding road," Keene said the changes are necessary to both keep the city competitive and to "promote more internal equity between jobs in the city." The new salaries are based on a study by the firm Koff and Associates, which surveyed 14 comparable cities, including Mountain View, Sunnyvale and Redwood City, and compared the compensation levels in those cities with Palo Alto's, position by position.

The overhaul ensures that the salary of every Palo Alto manager falls within 20 percent of the median salaries. While Keene emphasized on Monday that this does not mean every position gets a higher salary, managers have far more to gain than to lose from the readjustment. Those employees whose salaries are below the median by more than 20 percent will see them go up. But those whose salaries are more than 20 percent above the median will not see them drop. According to a staff report, they will "not immediately lose income, but will not be eligible for merit increases and general increases" until they are within the market salary range.

The council had discussed the salary adjustments in May and decided then to refer the subject to its Finance Committee for further analysis. The committee recommended approving the overhaul, a suggestion that the full council swiftly adopted Monday.

In some ways, the new salary schedule doesn't tell the full story. Based on 2011 data, it does not include in its calculation the total compensation levels city employees receive today, a key point given that every labor group has been recently asked to make concessions on pensions and medical costs. Councilman Pat Burt, who chairs the Finance Committee, and Councilman Greg Schmid both emphasized the importance of considering the full compensation package rather than just salaries. The Finance Committee had recommended an update to the salary study with consideration of benefits within 18 months.

Given the prior discussions, the council approved the increases Monday with little debate. Council members generally concurred with Keene's argument about the need to be competitive.

The council was equally assured, though far less cheerful, when it voted to approve the contract with the utilities union. Vice Mayor Nancy Shepherd, who was elected in 2009, noted that the city has been discussing compensation changes with the utilities managers during her entire tenure (the utilities managers first petitioned to form a bargaining unit in 2009).

"I think we have a very hard-working and dedicated staff in utilities," Shepherd said. "I think we're doing this for the right reasons. It's just sad we're having to do this with this particular group of employees."

Burt concurred with Keene's assessment that it's odd to have an imposition of terms "where we're actually granting some fairly significant salary increases."

"But they are clearly needed to be able to compete in a market where we've been losing critical employees," Burt said. "That's the reality of the market these days."


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Posted by common sense
a resident of Midtown
on Jun 25, 2013 at 2:20 am

Unfortunately there was not a reform in pay practices - ie. pay for performance.

The key quote "I think that we expect more than median performance out of our group of employees," Keene said. "So I think being at the median now -- certainly we shouldn't be at a lower point than that."

In certain areas, such as the police, I think they have above median performance in solving some crimes, especially with the cut backs they've had to endure.

In other areas, such as public works with the Mitchell Park Library project stalled, the clear cutting of trees on California Ave. I don't think expectations have been met.

And the Community Development Department - it's been years, and still no resolution to downtown parking; the fiasco with the Maybell Ave rezoning, and the Arastradero lane changes, I certainly would say it's way below expectations.

Parks & Recreation - having navigated a change in field allocations, and keeping the parks in good shape - better than expectations.

Like this comment
Posted by Josh
a resident of Another Palo Alto neighborhood
on Jun 25, 2013 at 6:35 am

Raises are ok. It's these out of control pension costs that need to be cut. Do the math: employees retiring at age 55 with 90% of their pay (for life) is what the city needs to get under control.

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Posted by Wayne Martin
a resident of Fairmeadow
on Jun 25, 2013 at 7:26 am

Missing from this article, and from the Council’s understanding of the linkage between salaries and pensions, which should be seen as “deferred income”, is that public sector employees will all be paid millions after their retirement.

Using a COLA of only 2%, public sector retirees receive the following payouts:

Total Pension Payouts
$100K--10-Years: $1.1M | 20-Years: $2.5M | 30-Years: $4.1M
$150K--10-Years: $1.7M | 20-Years: $3.4M | 30-Years: $6.2M
$200K--10-Years: $2.2M | 20-Years: $5.0M | 30-Years: $8.3M

Police and Fire Department employees are routinely drawing over $100K salaries in the larger cities, with pensions as much as 90% of their high salary (or more). Within a decade, it’s hard not to expect some public safety employees to routinely be paid more than $300K/year. Other municipal employees’ pensions can be as much as 82% (or more) of their exit salaries. In another decade, or so, the public sector will totally bankrupt the private sector with their pension demands.

The City of Palo Alto still seems to have its head in the sand, when it comes to classifying pensions as “deferred salary”. Until there is recognition that pensions are not a “gift”—but linked to salaries, our country will continue to spiral towards national bankruptcy. What good is “democracy”—when all we do with it is wreck the state?

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Posted by musical
a resident of Palo Verde
on Jun 25, 2013 at 7:35 am

Just imagine how high they'd be without Prop 13 . . .

Like this comment
Posted by Michael wilder
a resident of Midtown
on Jun 25, 2013 at 8:16 am

Who cares what other towns are paying 'comparable' employees, the county is full of unemployed 'professional' people who would do these jobs for half the money and probably in half the time since they are accustomed to the knock down drag out competitive world of real business, where you either do it right and under budget or they 'Fire' you on the spot. No union whining, padded over time, overpaid exorbitant benefits, fat severances, saved sick time, personal days, holidays, vacation days. In real life you're just 'out the door.'
City employees are not public servants, they are the Masters and looters of the city and the country. thanks to the unions and cowardly, stupid, ambitious local politicians, this will only get worse. Government employees must be paid LESS than the community average - in exchange for the stability, low stress, simple minded jobs they do. [Portion removed by Palo Alto Online staff.]

Like this comment
Posted by Baffling loyalty to unions. Wake up, young folks!
a resident of Another Palo Alto neighborhood
on Jun 25, 2013 at 10:30 am

Retiring before 65 is ridiculous. Who gets to do that any more? And why? People are healthier as they age and living longer. Move up the retirement age! My generation is going to have work longer. Make the inevitable change now and share the wealth.

The younger city workers are being fleeced by their older colleagues. I don't really understand their loyalty to the unions that seem to advocate most effectively for the most senior employees.

The unions are really disfunctional. Younger members need to get active and revamp the system to create more sustainable practises.

Like this comment
Posted by David Pepperdine
a resident of Another Palo Alto neighborhood
on Jun 25, 2013 at 11:02 am

Unions suck the life blood out of our economy.
Just look at the Teamsters.
And the only thing that sucks more? The asleep-at-the-switch City Council.

Like this comment
Posted by FrankF
a resident of Ventura
on Jun 25, 2013 at 11:07 am

FrankF is a registered user.

This county is not "full of unemployed 'professional' people who would do these jobs for half the money..." There is a boom going on here (just check out housing prices).

I don't mind paying a good salary for top people. I do fear the pensions - they are a temptation for the city to under fund, they put us in the position of wishing retirees to die early (not good for either).

In my opinion we should move to a defined contribution scheme like 401k or 403b - let the city have a generous match to make up for the loss of the pension. But this is going to be a big problem for us.

It's in the interest of the City employees too - as they can much more flexibility moving around in their careers and don't get stuck in a position where they hate their job but need to stay for another few years.

Like this comment
Posted by 35 year resident
a resident of Old Palo Alto
on Jun 25, 2013 at 11:18 am

Michael Wilder has it exactly right. There are hundreds of unemployed professionals who could do these jobs for less than what we are "rewarding" these overpaid, union (and non-union) bloodsuckers. Staffing could be reduced by 20% and still be efficient. Too many managers and assistant managers for small groups of workers. Not an efficient way to run an organization.

We need to vote OUT the "lifer" council members and get some people with the guts to just say NO. The city manager can go too. Get someone with experience at half the cost and STOP comparing earnings with other communities. If they want to leave for greener pastures, let them go.

When will we wake up?

Like this comment
Posted by resident
a resident of Barron Park
on Jun 25, 2013 at 11:41 am

Spot on ..Michael Wilder

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Posted by Joe
a resident of Another Palo Alto neighborhood
on Jun 25, 2013 at 11:44 am

> I don't mind paying a good salary for top people.

What is a good salary? More than a similar job would pay in the private sector?

And how does any resident know how good public sector employees are--since their work records are secret?

Like this comment
Posted by Here we go again, the late 90's all over
a resident of Green Acres
on Jun 25, 2013 at 1:36 pm

Nothing ever changes. The same reason for increasing salaries was given during the dot com craze, and look where it got us with out of control municipal spending on salaries, benefits, and pensions. Is this council, and others around the nation trying to say that the recession is over? I think not...It's all a bubble, beginning with housing all over again, and unemployment is not really going down, people have just stopped looking for work due to the lack of opportunity in certain sectors - tech of course is doing very well, but only for the engineers.

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Posted by Sue
a resident of another community
on Jun 25, 2013 at 2:08 pm

City of San Jose raised the minimum age of retirement for employees to 65, including firefighters and police. Also, the maximum pension is now 65% instead of 90% of their yearly paid. Other cities should follow. This is reasonable and needed.

Like this comment
Posted by jake
a resident of Community Center
on Jun 25, 2013 at 3:09 pm

But look! The city sends trucks of workers trimming the trees twice within the last 12 months. Silent is Golden

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Posted by If Only
a resident of Leland Manor/Garland Drive
on Jun 25, 2013 at 5:02 pm

My husband would LOVE to retire before age 70, but due to the high copay the health insurance companies levy on some life-saving medications and IV infusions, he cannot do so--without using up our savings and retirement funds.

COLAs are useless, not enough to help, just enough to raise you into a higher tax bracket where you lose it anyway.

Whatever happened to merit raises only?

Like this comment
Posted by John
a resident of Mountain View
on Jun 25, 2013 at 6:55 pm

You voted in the "lifer" politicians in the last election, so look for more of the same. Maybell, density, development traffic.
All we get is hot air while the public employees go to the bank.

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Posted by @taxpayer
a resident of Midtown
on Jun 25, 2013 at 11:02 pm

What is going on! We struggle and pay for public employees. Here is a quote from a relevant recent article in SJ Mercury. Everyone should read it to see where your taxes are going:

"Not only did the county administrator rack up $462,000 in gross pay last year, and not only did taxpayers contribute an additional $118,000 to her retirement plan, they also picked up the bill for something Muranishi was supposed to pay: the $43,000 "employee" contribution to her pension.

It's called the "pension pickup" -- and like a rich uncle picking up the tab at a big family dinner, Bay Area taxpayers footed the bill for more than $221 million last year for the employee share of 63,000 public workers' pension contributions."

Web Link

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Posted by Wayne Martin
a resident of Fairmeadow
on Jun 26, 2013 at 7:20 am

There are a growing number of public officials who are now making over $300K a year. In Alameda, the County Supervisors have seemingly lost their minds, and authorized a salary/benefits/perks that must end up costing the County's taxpayers over $600,000/year.

I updated my spreadsheet to reflect $300K and $400K per year initial pensions:

----------Total Pension Payouts-------------

$300K--10-Years: $3.3M | 20-Years: $8.6M | 30-Years: $12.4M
$400K--10-Years: $4.5M | 20-Years: $9.9M | 30-Years: $16.5M

Assuming that the Alameda County Executive retires at 30 years, with an initial pension of $400K (or more), this individual will be likely paid more than $17M during her retirement years!

This is simply insane.

And this story is just very tip of the tip of the iceberg.

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Posted by resident
a resident of Barron Park
on Jun 26, 2013 at 11:27 am

Given how most people vote for pro union politicians, against prop 32, against any commonsense reform, against their own or even larger interests of society..I am not optimistic. Unions have gamed the elections and politicians are beholden to them and so the cycle continues. We are ruled by the local, state and fed governments. Private citizens that do not work for the public sector or have a unionized job are at the bottom of this totem pole, just there to feed the system. People in CA don't even realize they are voting against their own children!! Young people wake up.

Like this comment
Posted by resident
a resident of Barron Park
on Jun 26, 2013 at 11:56 am

Given our very short-sighted capitalistic private businesses, that also want all this immigration reform, and a govt. that just wants more tax revenues regardless of how they get it..young people(citizens) will just be left fighting for cashier jobs, sales jobs or work for the govt. or go on the dole. Sorry to be so bleak..but any thinking person would see the truth of it...why don't the young people see it? Maybe they are not taught to think critically on purpose by our state schools, however great they claim to be.

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Posted by John
a resident of Mountain View
on Jun 26, 2013 at 7:43 pm

So true, someone is going to have to pay for the $400,000 yearly pensions. Its the future private workforce. They are underfunded by a long shot.
It is truly insane.
But you are right, the public unions have gamed the elections.
Wasn't prop 30 for the schools? And who were demonstrating for their share of the pie? Public employees! And they got it.

Like this comment
Posted by paco
a resident of Old Palo Alto
on Jun 27, 2013 at 5:31 pm

How odd that the palo alto media is befuddled as to the reason why the City Council and City Manager would "impose" a 3% raise on middle management employees (the highest paid city employees). As City Manager Keene and the City Council are well aware, senior management contracts require that their salary and benefits be "adjusted and aligned " to reflect the 3% increase in lower managements increase in salary and compensation. Pretty sneaky! In effect, City Manager Keene has given himself and his shadow organization of managers a 3% or more raise! The City Manager will now have a salary, compensation, and benefit package equal to or greater than the President of the United States. WOW! His salary and benefits alone are $375,000 and on top of that, he receives undeclared benefits of a furnished house bought and paid for by Palo Alto residents, all property taxes owed on that property paid for by residents, remodeling of his city bought house compliments of city taxpayers, car allowance, gym fees, and the list continues on and on.... What a pity!

Like this comment
Posted by snow
a resident of Charleston Meadows
on Jul 1, 2013 at 8:07 pm

public employees, armed with a high school diploma and nepotism, get all these benefits:

*highest salaries,
*fully paid insurance,
*insane retirements
*paid sick leave and vacation time
*four day work weeks

people in the private sector would be happy to just pick one of these items, but they get all of them and the psuedo-private sector doesn't even bat an eye

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