Feb 5 2012

First Employee Contract after Recommendations from Tax Committee

Retirement benefits cut for new hires, but City-paid costs will continue to increase for current employees –

Staff recommends that the City Council approve a new two-year contract negotiated with City maintenance workers.  Under the new contract, fringe benefits costs paid by the City have not been capped at current levels, despite the 2011 Municipal Tax Review Committee (MTRC) recommendation.

The agreement will reduce the City’s retirement benefit cost for new hires, but current employees are offered the opportunity for increased wages.  Most importantly, future increases in the cost of fringe benefits will continue to be borne by City, in part or in whole.

The City will also continue to pay the employee 8% retirement contribution (7% for new hires), in addition to its own employer contribution.   (This contrasts with a recent agreement between the Pleasanton Police Department and the City of Pleasanton where police employees will begin paying their own 9% retirement contribution.  See article.)

The MTRC recommendation to halt City-paid increases in fringe benefits was based on the soaring increase in these cost over the past decade from 25-33% to 53% of total compensation.

The staff report notes “. . .the last salary increase for this bargaining unit was three years ago, on January 1, 2009”.  However, the public works unit’s gross wages of $53,000 to $61,000 as of 2009 increased substantially to $66,000 to $72,000 in 2010 with one exception.  (See 2009 and 2010 Public Employees Salaries Database.)  This represents a 20% increase, or approximately $10,000 per worker.  Maintenance workers currently receive total compensation of $94,000 – $121,000 (without the effect of the new contract terms).  (See chart below.)

The new agreement includes:

  • A 5% wage increase will be available to every maintenance worker who becomes certified in pipe inspections, as well as Cost of Living Adjustment (COLA) increases matching those offered to any other City unions during the term of the agreement.  (The Firefighter contract is pending.)
  • No ceiling on future cost increases for medical, dental, and vision benefits paid by the City
  • No ceiling on future increases in required PERS retirement contributions paid by the City (City will pay 50% of this cost above 24.42% of wages).  Contributions are anticipated to increase in future years due to current underfunding of PERS at the state level.
  • The City will continue paying all of the employee’s share of retirement contribution cost (8% of wages for current employees, 7% for new hires) in addition to its own employer contribution.
  • Retirement plan benefit for new hires will be lowered, but continue at the higher level for current employees, creating a 2-tier retirement system.  No new hires are anticipated.
  • New hires =  2% at 60 using average of 3 highest years of gross wages
  • Current employees = 3% at 60 using highest single year of gross wages

An example of the formula would be number of  years worked prior to age 60 times  3%. ( 30 years x 3% results in 90% of highest compensated year paid for the lifetime of retiree and surviving spouse.)

Many jurisdictions avoid using “single highest year” due to concerns with “spiking” a final year of gross wages via excessive overtime.

  • For the first time, employees will make a contribution to their retiree health benefit of $1,200 per year.  This represents a shared contribution:  as of 2010 the City started making annual contributions of more than $1 million per year on behalf of all employees to a new trust for this $16 million underfunded liability covering 49 employees.  See article.
  • In the future, any layoffs will be determined by seniority, rather than productivity.  This is apparently a new restriction placed on the City’s management decisions.

Current salary and benefits for maintenance positions

2010 Public Employees Salaries Database

The staff report states that “Following numerous closed sessions, the City Council reached consensus regarding a two-year salary and benefits package for the Public Works UnitStaff maintains that use of in-house maintenance workers is more cost effective than contracting the services to outside companies.

More Agreement Details:

  • 5% wage increase available to all workers
    • if obtain and maintain Pipeline Assessment & Certification Program certification
  • matching COLA increases
    • “Me too” on any COLA offered any other bargaining group between 1/1/2011 and 12/31/12  (Fire Department contract is pending)
  • additional 1/2 day off
    • Christmas Eve full day off, rather than 1/2 day
  • future PERS contribution increases split 50/50
    • payment of PERS contributions above 24.42% of wages paid 50/50 by City and employee
    • one year (FY 2012-13) increase of 0.635%  paid by employees
  • new employee contribution to retiree medical health benefits
    • $100 per month employee contribution
    • $1.8 million was contributed by the City in 2010 on behalf of all employees to set up a trust to start funding this underfunded $16 million benefit;  an additional $1.6 million was contributed by the City in 2011  (See article.)
  • new 2-tier retirement plan
    •  2% at age 60 for any future hires – this would lower City paid PERS contribution cost in the future if new employees were to be hired
    • current employees continue at 3% at age 60
  • Miscellaneous other increases:
  • Tuition reimbursement increased to $1,000 per fiscal year (currently: $500).
  • Uniform Allowance – $450 per fiscal year for uniforms and $450 per calendar year for work boots (currently: $350 uniforms and $200 boots).
  • Vacation – add an additional three days of vacation accrual per year, after 23+ years of service.
  • Jury Duty Pay – Time off with full pay for the duration of the trial (currently: 30 days paid maximum).

A Full List of “Key Provisions” is provided in the staff report for the proposed agreement with Local 1021 (the Public Works Unit) for the positions of Maintenance Worker I, Maintenance Worker II and Senior Maintenance Worker.

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