Councilmember Frerichs Expresses Some Misgivings About the Direction of Negotiations – It is not a huge contract or a huge bargaining unit. However, by reaching agreement with the Individual Police Management Employees, the council and city were able to set down on paper for the first time their goals for the ongoing negotiations for labor contracts that expired back on June 30.
On Tuesday night, Steve Pinkerton told the council that the Individual Police Management Employees already pay the full 9% employee portion of PERS, but with this agreement they have also agreed to pay an additional 3% toward the employer portion.
In addition, they agreed to explore a differential compensation package for future employees.
Mr. Pinkerton indicated that they have been most concerned about the retiree medical benefits, from the standpoint of fiscal sustainability.
“They agreed, as part of the POA plan, that consistent as to what we’d like to see with all our groups that we go from retirees receiving a full family plan upon retirement which is costing the city upwards of $1500, $1600 per month prior to age 65, that they would then agree upon retirement to receive just the employee plus one for Medicare which is about the Medicare rate even before they reach Medicare age,” he said.
Given that public safety employees retire well before Medicare age, it’s a huge cost savings to the city. Mr. Pinkerton estimates this would be about a $10,000 to $15,000 a year reduction in cost to the city, per employee.
He argued that this is like taking a four percent per year pay cut.
The other big savings for the city is on the cafeteria cash out benefit. The current contract provides a cash payout to any employee not taking the full health insurance allowance. The new contract would cap the cash-out provision for current employees at $500 per month over a three-year phase-in process.
“Those are all significant reductions in both current costs and more importantly in our long term budget costs so that we can continue to pay our employees a decent wage and have enough employees to provide service,” Steve Pinkerton told the council.
However, off-setting these cuts are 2% pay raises in the 2012-13 and 2013-14 contract years, and a one percent raise in 2014-15 contract years.
“So there is a balance between pay cuts and some increased compensation to balance that out, but overall particularly with the change in retiree medical and the cafeteria cash out, we’ve got a huge long term savings to the city,” Mr. Pinkerton added.
While the council was largely behind this new contract, Councilmember Lucas Frerichs took the opportunity to express his discomfort, if not disagreement, with the direction that the council went with these negotiations.
Councilmember Frerichs noted that this was the first series of negotiations conducted by an outside negotiator. He told the council that he was not part of the budget process and noted, “I was not on the council that passed this past budget, so it’s not exactly the type of budget that I would have fully come up with. I think there are ways to be much more creative.”
“I do think there’s a real need for us to be much more creative in trying to solve some of these issues that also involves looking at other expenses,” he said. “Frankly a sort of top to bottom look at things and where we spend our dollars because I don’t think we’re spending our dollars as wisely as we could be.”
Mr. Frerichs continued by expressing appreciation and gratitude for city employees, arguing that they go above and beyond the call of duty.
“I think people in this town have really come to expect a very high level of service and they get a very high level of service from employees,” he said.
“I will be supportive of this specific contract this evening but I’m reserving my right to be supportive of future ones as they come down the pike as we have not seen the final outcome of negotiations that are continuing behind closed doors,” he added.
VANGUARD COMMENTARY – Mr. Frerichs’ comments caught the attention of several of his colleagues. While they chose not to respond during the meeting, several expressed concerns about the impact of his statement on the ability of the city to negotiate future contracts.
From the Vanguard‘s perspective, the overall direction of the employee contract, dealing with the three-pronged long-term stability problems of PERS, OPEB and cafeteria cashout, strike a critical balance for what the city needs to do going forward.
Our one concern is that the release of these contracts piecemeal may create inconsistent policy, much as occurred with the last round of negotiations starting in 2009.
It is here that we direct our criticism of Councilmember Frerichs. First, if he were concerned with the direction of negotiations that have been clearly laid out both before he was on the council and since, this was not the appropriate time to raise them.
Second, if he is that concerned, why vote to approve this one? If he’s hoping to influence future negotiations, then he should have either opposed this contract or raised the issue more forcefully.
While his colleagues expressed concern that his comments may harm negotiations down the road, we think that’s unlikely as there is still a strong three to four vote block for this direction.
Councilmember Frerichs mentioned Mayor Pro Tem Dan Wolk, but Mr. Wolk chose not to express any misgivings about the contract.
Since his campaign he has argued for creative ways to deal with some of these issues, but his comments have been long on rhetoric and short on specifics.
The Vanguard has laid out the need for reform in these areas for years, as PERS and OPEB are tying up an increasingly large portion of the city’s active payroll. The report by the city manager indicated that 20 to 25 percent of payroll may be taken up with OPEB alone.
There has been no explanation of alternatives that would make that distribution of resources sustainable in the long term.
All of this leads to a question as to whether Mr. Frerichs was sincere in expressing misgivings here, or simply posturing for the benefit of employee groups.
—David M. Greenwald reporting
I too found his comments confusing and not substantial. Several times during the meeting he commented but with little addition of substance. I look forward to more detail and creativity when the time comes!
David, this contract will be the model for the others
If you take these adjustments and apply to the other contracts, how much savings ?
I still 4 member crews in those fire trucks
So far I’m not impressed with budget adjustments
I read the fire operations report. Nothing clear about reducing the fire crews
Pinkerton has been here more than a year.
And one more time: CC members can say whatever they want from the dais, but the only thing that matters is the actual motion and vote. Those are the legal tracks in the sand. Lucas still voted for it.
“If you take these adjustments and apply to the other contracts, how much savings ?”
That’s a critical question that was asked but not answered at the meeting.
“I still 4 member crews in those fire trucks “
That issue was discussed later in the evening.
”Watch what we do, not what we say,” Attorney General John Mitchell
You attack Lucas for thinking out loud. Is that all you got?
What are you reading as “an attack” on Lucas?
I didn’t attack Lucas. I had his sign in my yard across the street from the Coop, and I voted for him and The Wonder Dog. I did not comment on the merits of Lucas’ comments; I was not there and did not hear them. David was, so he gets to write about it.
I really dont care what they say up there. Brett Lee expressed “concerns” about the water project, yet he voted for it. 2x.
Lucas voted for the police management contract that saves only $27,000 per year.
The votes speak for themselves, and that’s all that matters.
If CC members truly want to express concerns, effectively, they should do it with staff, line up a second on a motion, and work the system to make it happen up on the dais. In a motion. With a vote. The rest of it is just fluff, and mostly a waste of everyone’s time sitting around the meeting.
Speaking of votes, whatever has happened to the Dan Wolk motion to commission an independent investigation of the DACHA debacle? I know Lucas is a big fan of coops, which was a significant part of his block of voters (including me), and I keep hoping to hear Lucas getting up on the soap box during CC member comments and asking where the _____ is the independent investigation? Brett Lee would be the obvious second to those concerns.
Now THAT would be leadership. So far as I know, there has been little or no staff follow up to that strong Wolk motion? (Sorry, a bit off topic, but we were talking about votes and process and concerns, right?)
” Brett Lee expressed “concerns” about the water project, yet he voted for it.”
this gets off topic, but it bears a response. brett lee didn’t vote for the water project. he voted to put it on the ballot. that is in fact consistent with what he has said all along that he supports a vote on the water project.
[i] that they would then agree upon retirement to receive just the employee plus one for Medicare [/i]
[i]cap the cash-out provision for current employees at $500 per month over a three-year phase-in process.[/i]
So, basically we are talking about reducing the benefits from a BMW 7 series luxury car to a 6 series when the rest of the private-sector working world has to piece together parts to keep their old Yugo benefit plans running, and councilmember Frerichs is expressing misgivings? Come on now.
The unions worked hard to stick it to taxpayers again in this election. They won because Democrats control the state and have for several decades. When are we going to the real math and grow a pair to deal with the problem of unsustainability?
When it comes down to it, public-sector employees are just employees. The litmus test we use for a basis for negotiation should be what are the standard and customary pay and benefits for employees in general. We need to rewire our brains that these people are deserving of some greater consideration. They are worthy of consideration no different than are the employees of any organization dealing with this level of financial difficulty.
Councilmember Frerichs’s comments are bothersome specifically because they are the standard issue for those that keep pulling us back to a corruptive mindset that somehow these employees are deserving of pay and benefits an order of magnitude greater than their peers. They are not. Let’s get to work taking us back to some level of reasonableness and fiscal sustainability. Just do the dollar comparisons in a whole labor market mark-to-market. There is no reason that taxpayers should be funding public-sector pay and benefits higher than what the market demands.
Jeff, Rich, David, Mark S, Matt: Would one of you have the time to calculate what Jeff mentioned: “dollar comparisons in a whole labor market mark-to-market”? I wouldn’t have any idea how to even start such a study.
In other words, what should Davis be paying its employees?
Also, we really need to know how the police management contract is going to effect the other 7. I asked the City Manager for those numbers, since the city has to have made those estimates in order to arrive at the first MOU. I’ll post the information if David doesn’t do it first.
Growth: off topic, but to respond: I’ve been there …. voting to put the project on the ballot is a vote to endorse it. The CC is going to draft the ballot statement, and Brett is part of the CC. A CC member does not get to pull a pin on a stink gernade and throw it into the voting booth and escape responsibility for tossing it. Voting is endorsing. Which is why it’s relevant to this thread.
[i]”Steve Pinkerton told the council that the Individual Police Management Employees already pay the full 9% employee portion of PERS, but with this agreement they have also agreed to pay an additional 3% toward the employer portion.”[/i]
The police officers (DPOA) have been paying this same share (9% + 3%) for a long time. I am certain that the next fire contract will put Local 3494 on that, too.
The open question with employee funding of pensions is with the non-safety, who mostly now pay 3% (up from 0% a couple of years back). The employee share cap (for 2.5% at 55 pensions) is 8%. My expectation is that the new deals for non-safety will go up to 8% (though for tax reasons it may not all be “employee” share; it may be some or all called “employer” share). Someone inside the City government implied to me that the likely outcome will be a slow ramp-up to 8%, increasing say 1% each year from 3% to 8%. That comment was not a revelation of any closed session language. I have received nothing like that this year. It was more of a prediction based on good knowledge of where the city and the employees can find common ground.
[i]”Given that public safety employees retire well before Medicare age, it’s a huge cost savings to the city. Mr. Pinkerton estimates this would be about a $10,000 to $15,000 a year reduction in cost to the city, per employee.”[/i]
I am unclear on this and doubtful of those savings. This comes from the contract: [quote]For those EMPLOYEES that retire on or after January 1, 2013, EMPLOYEES will receive the same reduced retiree medical benefits as the sworn officers as set forth in the Davis Police Officers Association MOU, however, [b]the reduced benefit amount for retirees [u]shall not be less than[/u] premium for the Supplemented/Managed Medicare plan available from Kaiser-Bay Area for retired employee and one dependent[/b] sponsored by the CITY through CalPERS.[/quote] Maybe I am just misinterpreting that language. However, it does not seem to say that ‘the reduced benefit’ will be capped at the Managed Medicare plan plus one. My read is that it says this is the minimum, and it could be more.
As to the dollar amounts saved, those sound like nominal numbers, not real numbers. In other words, using a 2012 dollar, the savings (if any) are likely far less than $10,000 to $15,000 each.
[i]”The new contract would cap the cash-out provision for current employees at $500 per month over a three-year phase-in process.”[/i]
This is a big deal and a very important change. I do expect it will be the precedent for all other contracts. I think it is equitable to phase it in. For highly paid employees it does not represent a big loss of salary. For lower paid employees it does. However, most of those lower paid employees are making a total compensation package now at least double what they could get in the private market. So it is very unlikely any of them will quit the City in favor of taking a similar job in private industry.
For all professional positions there are nation-wide compensation studies available that include a regional cost of living adjustment.
Certainly municipal safety employees are a bit more difficult. The practice of statewide mark-to-market has been a scam because the statewide union-political connection… i.e., if one municipality increases pay and benefits, it raises the boat for other municipalities and that benefit the union in general.
We all know that a firefighter job opening at 2/3 the pay and ½ the benefits would cause a line of qualified applicants several blocks long. That is a sign that we are paying more than we should for this city labor service.
The artificial inflation of statewide compensation setting is a reason why a nationwide mark-to-market with cost of living adjustments is the mechanism that we should be using and it should be an important part of the labor agreement negotiations.
For other government jobs, there should be private-sector comparisons. Those studies are readily available.
[i]”However, off-setting these cuts are 2% pay raises in the 2012-13 and 2013-14 contract years, and a one percent raise in 2014-15 contract years.”[/i]
The real problem here, beside the fact that the City may simply not have enough money to give these raises without laying off other personnel, is that this contract fails to look at total compensation.
This contract pretends that salary and overtime and paid leave time is one thing; that current benefits are another thing; that pension funding is another; and that retiree medical is yet another. This contract ignores the reality that all of those things together add up to total compensation.
What Davis needs to do to avoid bankruptcy and to avoid decimating its services is to control the growth of total compensation. The City’s revenues in normal times grow at about 2.5% to 3.5% per year. (They have been largely flat over the last 4-5 years.) Their expenses, therefore, can grow no faster than 2.5% to 3.5% per year.
If this were a good contract for the taxpayers and residents of Davis, it would instead look at total comp and cap its growth at about 3% (or, alternatively, at the average growth in revenues over the previous 3 fiscal years). If all of our labor deals did that, we would have alignment between revenues and expenses.
This contract may achieve some savings relative to past practices. But it is still out of alignment. There is no vision for the big picture. The sh#t is still going to hit the fan, as pension funding and medical costs rush out of the Calpers colon.
sorry to continue the off-topic… i don’t support the water project but believe it should go to a vote. how do you know that brett lee doesn’t think likewise?
Firefighter comp from Salary.com
[img]http://www.cscdc.org/miscjeff/firefightercomp.jpg[/img]
That’s what they get in Wisconsin, but not California. What is their metric?
[i]”That’s what they get in Wisconsin, but not California.[/i]
I think that is indicative of the problem… especially if the CA comp is much higher… more so than could be explained by cost of living differences. It is the same job is it not?
From Salary.com…
[quote]
[b]Job Description[/b]
Responds immediately to fires and other emergency situations. Provides protection to public and property. Requires a high school diploma or its equivalent with 0-2 years of experience in the field or in a related area. May need to pass strength tests. Familiar with a variety of the field’s concepts, practices, and procedures. Relies on experience and judgment to plan and accomplish goals. Performs a variety of complicated tasks. May direct and lead the work of others. Typically reports to a manager. A wide degree of creativity and latitude is expected.
[/quote]
I’m not defender of the salaries we are paying. Just wondering how the salary number was derived.
Excuse me while I ramble… again…
When I took over managing for my current employer, I hired a professional firm to do a compensation study… including my compensation. It proved what I suspected; that we have been over-compensating our employees (based on a thorough and comprehensive market study) for some time because of the generosity of the previous management during the days of wild real estate and lending exuberance. Yes, that included my position too.
Now, understanding that you cannot just cut employee pay because they have bill and payment obligations based on an expectation of certain compensation, we discontinued COLA until such time compensation equalized with the job marketplace. Since then we have done away with COLA all together as we have instead decided to increase the employee performance bonus pool every year where the best-performing employees can earn an even greater upside commensurate with their contribution to meeting the establish goals for company, team and self. We did a similar thing with benefits, reduced a bit every year until they too equalized with the job marketplace. Extra PTO time is another bonus benefit that is available based on demonstrated performance.
However, the job marketplace wasn’t/isn’t our only benchmark/criteria. We have a business strategy with respect to employee talent. Our company is focused on high service quality. We cannot change our price (it is a Federal loan program with rates dictated by the Federal agency), so all we can differentiate on is service quality. So, our business strategy includes hiring and retaining the best talent we can find, and the best entry-level people that we can develop to be the best talent we could find. This requires us to pay a premium in compensation. However, that is a conscience business choice we make. If we were a low-cost producer, we might have a strategy to hire less experienced employees and train them and expect more turn-over as our competition offers higher competition. However, there are other employee retention strategies to combat this challenge. Nugget Market and VSP… two area employers that do a great job paying a bit less than market, but manage to attract and retain some of the best employees in their industries. They do this by putting a lot of effort into training and development and using best-practice management and leadership techniques that help employees feel valued and like their company and job. Money is generally not the top motivator for most employees… unless someone feels like they are grossly under-paid or under-appreciated. They also do a good job vetting out employees that are not performing after investing in extensive intervention of training and development. This vetting of under-performing employees has a very big morale benefit to those employees that remain because it reinforces to them that their strong performance is recognized and valued.
Thinking about our challenges in the public sector it is easy to see how this last strategy is difficult to impossible with unions involved. They are at the very least irritants to any attempt for progressive, best-practice employee performance, hiring and retention management processes… more often they are complete blockers of these types of changes.
As for the first strategy, neither price nor competition is variable and/or management considerations (except if we would pursue outsourcing as an option… then competition would become variable/criteria).
That leaves the first part of the first strategy… matching compensation to market and setting a common performance/service expectation for the work. Basically… hitting that sweet spot.
The goal should be to pay employees just enough that they cannot make a case for feeling discounted (they need to be provided the details of the mark-to-market comparison so they can see for themselves how their compensation stacks up), and helps retain good employees without creating a tremendous incentive for under-performing employees to stick around (because they cannot get as good of a deal anywhere else).
Now, the “discounting” problem can occur whenever the company takes something away from employees. It is natural… nobody wants to feel like they are going backward in their professional progress. Also, as we work at doing something for a while, our natural enthusiasm for our work starts to drop. Every day we come to work doing the same things, we feel like another rock was added to the bag we feel like we are carrying. We naturally want to feel like we are appreciated for carrying such a burden. Frankly, we start to lose the perspective we had when we were first hired that we are lucky to have such a job. So, then here comes management telling us they have to cut our compensation. That just added several brinks to the bag of rocks for many employees.
The management techniques for dealing with this require leadership nuance and talent. Management has to hit that sweet spot for involving employees into the basis for this business decision. There needs to be the promotion of the shared goal for helping the organization survive, and a message that management truly cares about the employees and needs their support. Management also needs to demonstrate that they are also participating in the hit.
Having unions in the middle of this makes it next to impossible to do. There are no shared goals to leverage. Unions and management and tax-payers and the other political party are all at odds. The only groups that share goals are the unions and Democrat party.
So, the bad feeling are going to be there with the unionized employees no matter what we do. So, it is time to get tough and just accept that they are going to be pissed off… unreasonably so given that they are so tremendously over compensated… however there is no way around it.
We need political leaders that stop trying to make friends with the unions and the city employees. We ALL respect the job these people do. The issue is not respect… it is simply a case where we are spending too much and we need to get back to a level of fiscal sanity and sustainability. Let’s get to work.
[i]I’m not defender of the salaries we are paying. Just wondering how the salary number was derived.[/i]
I know you are not… i was just making a rhetorical response.
Salary.com doesn’t get too far into their methodoly because I they consider it their intellectual property. If you sign as a paying company client, they will provide some of this but also include a NDA.
Here is something that touches on their process:
[quote]Question. Where does the data in the Salary Wizard come from?
Answer. Every job in the Salary Wizard has been thoroughly researched and validated by Salary.com’s team of compensation consultants. Using more than one survey source to benchmark each job, our analysts extract and report salary data on the median for each position. To ensure jobs are appropriately matched, our analysts benchmark the jobs based on job content, not job title.
Then the consultants apply an aging factor and geographic differentials to the data to accommodate the movement of salaries over time, and to reflect differences in location. Not all salaries move at the same rate. For instance, in the last few years, salaries in information technology have increased much faster than salaries in other jobs. Therefore, IT salaries are adjusted at a higher rate than non-IT jobs. The date of the data is the date to which the data has been aged.
The geographic differential is an adjustment that reflects the differences in pay from one area of the country to another. These differences are similar to, but not the same as, differences in the cost of living. Typically, the national average salary for a job is given a weight of 100.0, and salaries in other regions are expressed in relation to the national average. The compensation consultants review a number of statistical reports to determine appropriate geographic differentials to apply to each location.
The salary data is presented in two formats, base pay and total cash compensation. Results are displayed in a graph to show visually the disparity between the minimum average salary and the maximum average salary. The minimum average is synonymous with the 25th percentile, which means only 25 percent of salaries reported for a particular job fall below this level. The median represents the competitive market rate for a particular job. The maximum average, synonymous with the 75th percentile, represents the reported highest salary made in a particular job. Seventy-five percent of all salaries reported for that job fall below this amount.
The Salary Wizard calculates the total cash compensation for every job in its database. The distribution of the data is presented in the same way as base pay. Total compensation includes all bonuses, incentives, and commissions.[/quote]
Here is another resource, but note that the link to “their methodology” is broken (goes to another site): [url]http://www.career-resumes.com/you-are-the-master-of-your-own-salary/[/url]
On a somewhat related note because it has to do with City political leadership and budget, I just got a notice yesterday that the local company at 407 G Street that picks-up and delivers for laundry/dry-cleaning service for my company is closing down.
I don’t know the reason, but I assume that business has been too slow and rents too high to support them.
Cleaners need a healthy supply of business clients to survive.
We have a crappy business and economic development track record. We protect the statists and downtown merchants at our peril… and apparently (no pun intended) at their peril too.
“What are you reading as “an attack” on Lucas?”It is here that we direct our criticism of Councilmember Frerichs.
Here are three examples of you attacking Lucas in this article:
“First, if he were concerned with the direction of negotiations that have been clearly laid out both before he was on the council and since, this was not the appropriate time to raise them.”
“Second, if he is that concerned, why vote to approve this one? If he’s hoping to influence future negotiations, then he should have either opposed this contract or raised the issue more forcefully.”
“Since his campaign he has argued for creative ways to deal with some of these issues, but his comments have been long on rhetoric and short on specifics.”
You’re using attack as a synonym for criticism?
Jeff: I agree with a lot of your comments on employee comp. and now is the time to be tough.