Contract Falls Well Short of Needed Savings and Allows For No Period of Public Vetting
Contract Falls Well Short of Needed Savings and Allows For No Period of Public Vetting The contract includes a decrease in salary over the next three years including a 6% decrease over the REMAINDER of the current fiscal year, in July of 2010 the salaries will be reduced by 4% over the current salary and in July 2011, a 3% reduction from current salaries.
The city’s goal was to reduce its compensation by $1.25 million this fiscal year and they are agreeing to a contract with the highest paid bargaining group that falls well short of that percentage goal.
The City estimates the contract will result in a total of $886,586 of savings when compared to original baseline budget projections for the next three years, a 4.23% overall reduction. For the current year alone, the savings represent a 4.19% reduction from the original MOU costs built into the 9-10 budget.
In addition to the salary decreases, the contract includes other conditions.
The City will contribute a total of 1.5% Total Compensation Increase for fiscal year 2010-2011 and 2% for fiscal year 2011-2012 to cover CalPERS retirement benefit and medical increases. Any unused portion will be applied to the retiree medical unfunded liability. The Union will not receive any of this compensation in salary. Any increases in total compensation beyond these percentages will be paid by employees.
The contract includes a “vesting” period before an employee can receive retiree medical benefits from the City. Once an employee has been with the city of Davis for at least five years and with the City or any other PERS agency for at least 10 years, the City will cover 50% of the retiree medical benefit. Upon 20 years of service, that amount increases to 100% of the benefit. This change will provide long-term savings to the City.
The new contract provides for a 20% reduction in the amount firefighters may cash-out from the city’s cafeteria health benefit plan.
The new contract includes a provision to allow for the reduced cafeteria cash-out to be converted to salary for employees with 25 years or more City of Davis service.
Bobby Weist, the president of Local 3494:
“The firefighters recognize the difficult financial situation the city is faced with and have been willing to do our part to work with the city to achieve needed cost savings. We want to be part of the solution. The challenge was trying to figure out exactly what changes to benefits and compensation would help the city’s budget situation while still being fair to our members. We recognize this agreement requires sacrifice on the part of firefighters, but I believe it is a contract everyone can live with.”
City Manager Bill Emlen said about the contract:
“It addresses some of the structural issues the City Council has voiced during the negotiation process and provides for immediate and clear cost savings. These negotiations have not been easy, but from the beginning of the process it was clear the firefighters were willing to work collaboratively with the City to help address the budget challenges we anticipate over the next couple of years.”
Commentary
From our perspective, the city has failed to have any sort of transparency on this process. The public has exactly four days to review the nearly 70 page MOU. There is a Finance and Budget Commission meeting on Monday but this is not slated for review at that meeting. There were suggestions that there might be a one month vetting period for the public to review and allow for full transparency. The city has instead allowed 96 hours.
The contract fails to achieve the savings that the city needed to balance this short-term budget. The amount of savings achieved from the contract is misleading, the 6% decrease in the 2009-10 budget is over six months meaning that the real decrease is less than half of that.
The 4.23% reduction from baseline is not absolute savings, it is savings from the projected budget. It is worth noting that the city staff report makes a point of clarifying that the salary terms are actual decreases from existing salaries.
“The salary terms in the contract represent actual decreases to existing salaries, rather than foregoing new salary increases and depicting them as decreases, as we have seen in a number of other cases with labor contracts cited in various news services.”
However, that 4.23% is not actual savings from existing salaries, it is a reduction in what they had projected to spend previously. So on the one hand, they mock other jurisdictions for depicting non-cuts as cuts, but on the other, they have no problem throwing out the 4.23% reduction as a real number.
It fails to deal in a sufficient manner with most of the longer term concerns regarding retirement benefits. The city represents factors such as the 1.5% total compensation increase, the vesting period, and reduction in cafeteria cash-outs as some sort of savings, but there is no analysis to demonstrate this saves the city money in the short or long term. Again, this goes to the transparency of the process.
While we have not had time to read the full MOU in detail, we do note that there is no change at all to the Union Hours Bank. There is no oversight or transparency over how those hours were used and they remain the only such group to receive that benefit.
The bottom line is that if this represents key concessions, the city did not drive a hard enough bargain and this contract means that further cuts to city services will be needed.
And that doesn’t even get to fact that the city has masked increases in costs in the fire department as cost-savings in the form of cuts to positions that were already primed for deletion in order to balance the books on a $400,000 battalion chief model.
—David M. Greenwald reporting
Corrupt or Inept?
Any city councilman who votes for this thing should be ousted.
I do NOT understand how these clowns negotiate.
“Dear Firemen, you will take a 20% cut in wages, no battalion chief and no union pool- if that is not acceptable, you will be fired. Have a nice day.”
We can replace 100% of the fireman at 50% of what they are being paid, heck we could probably get replacements for free…
Why is Emlen so hopelessly (inept/corrupt)?
http://cbs13.com/local/CalPERS.CalSTRS.downgraded.2.1364538.html
California’s two giant state-run pension funds have been downgraded by the Moody’s Investors Service.
Moody’s blamed steep losses suffered by the public employees CalPERS and teachers CalSTRS funds, which could affect their future ability to meet obligations to retirees.
They fell three notches from the top Aaa category to Aa3. But short-term ratings remained at their previously high levels.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
Will the Finance and Budget Commision discuss on Monday?
Whose decision was it to limit review to 96 hrs, the Mayor?
Since the City of Davis cannot be assured that the state-run pension funds will pay the benefits contracted for, the City budget needs to include those costs. Then, if the pension funds make the needed payments, the City can include those contributions in its balance sheet.
I don’t think that the City can sign contracts that assume that the state-run pension funds will make the payments contracted for when the rating agencies have found that they can’t.
I will have a special* column in Tuesday’s Enterprise giving my thoughts on the proposed contract. Crystal Lee will have a news story on it in tomorrow’s paper. I don’t think she will quote me for her story, but (before the contract was published on-line), she interviewed me on Friday for background.
*It’s only “special” because of the date. My next scheduled piece is not due until December 23.
One important calculation in the full cost of a fire union MOU hasn’t been considered in this discussion: The percent of salary that CalPERS requires from employers. Based upon Davis’ pension cost obligations as determined by actuarial data from CalPERS, today Davis must contribute the following: Public Safety: 22.6% of salary and for non-public safety or miscellaneous employees: 12.5%.
I copied it off the webpage as follows:
Public Agency Employer Contribution Rate Search
The rates displayed are based on information in our records as of June 30, 2007. Each rate represents the percentage of reported active member payroll that the employer must contribute to CalPERS.
Employer Code Employer Name
437 City of Davis
Rates
Employer Plan 2009 2008 2007
MISCELLANEOUS PLAN 12.542 % 12.089 % 12.351 %
SAFETY PLAN 22.755 % 22.469 % 22.5 %
Here’s the kicker: In an article published by Calpensions on August 10, 2009, Ron Seeling who is the Chief Actuary for CAlPERS said, “I don’t want to sugarcoat anything. We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters)…unsustainable pension costs. We’ve got to find some other solutions”.
State treasurer, Bill Lockear, while saying that Seeling’s comments were a bit apopolyptic, when pressed by a reporter, admitted he does not have any solutions and acknowledges that the present financial condition are unsustainable. On a positive note he said that all stakeholders are constantly meeting to find solutions. (He left out the taxpayer as being part of the stakeholders).
Has the director of finance or city manager factored in these new percentage calculations employers will be required to pay to CalPERS that will double the present costs for future budgeting? For political purposes CalPERS will wait until FY 2011 before it begins enforcing the new cost requirements.
Why are the city employees such as corrupt Katherine Hess and Danielle Foster, etc etc etc getting a pay cut. IMO, they get enough from developers. they need to take a huge pay cut too..
also, wasting 10 million dollars on a football field that’s loud and obnoxious shows exactly where the city of davis’s priorities are.
FU.k, the city of davis.
Melanie, your comment here is not only misinformed in multiple regards, it is libelous. I recommend the Vanguard remove it. (And if you do, remove this comment.)
I just looked at the Finance & Budget Commission agenda for tomorrow night. No mention of the fire contract. It saddens me that the group in the best position to really examine the numbers in the fire contract and put them in context — since this deal will form the basis for the other contracts, including the police contracts in 2010 — will never weigh in on the fire deal.
I’m not sure if being left out of the loop like that is what the members of the FBC desire. If so, I don’t see the point of that commission at all. And if they think they should thoroughly study the fire contract in advance of the council vote, I think they need to say so at their meeting Monday night and then show up en masse to on Tuesday and let the council and community know how they feel.
lets remember We sent alot of firefighters the past two or three years on mutual distress call,up north and down south…it’s easy to forget all that when it’s nice,damp and cool!
I looked at the proposed Mou for the FD but there aren’t any numbers regarding salary. I then looked at the current contract but found the same problem. Not sure how anyone can calculate anything given the lack of information. Some things I did find.
Raises for a four year period:
2005: 10%
2006: 8%
2007: 8%
2008: 6%
Couple of things (1) an 8% increase to salary will increase cost by approx. a factor of 1.4, or (.08*1.4)= 11.2%. It is important to understand that increasing wages also increases pension obligations and other backend benefits, and(2) in 2005 the contract increased compensation by 10% at the same time they increased the pension to 3@50. I’m guessing the previous pension was 2@50, or 2@55, so the pension payout probably increased by 50%, before the 10% wage increase was applied. it was a windfall for the FD.
One of the comparable cities Davis uses (as a reference) is fairfield. Fairfield pays zero dollars for retiree medical. Davis is only asking that employees have 5 years service, if they worked elsewhere under Calpers, to be eligable for 50% of there retiree healthcare. Some people consider retiree healthcare a bigger issue than the Calpers Pension problem. I would hope that the city will provide hard data regarding this generous perk.
It also appears that employees can recieve 80% of their medical paid in cash if they can prove other insurance. The language states that the 80% is based on Calpers employee +2 plan. The monthly cost is about 1200 dollars. Ive never heard of anyone giving employees 80% as a cash payment. Hopefully I’ve misread the terms.
Not sure why captains get 15% above firefighter 2 category. It seems excessive. A captain in the FD only has a crew of 3.
Not sure why a battallion chief gets paid 25% above a captain. This seems to way excessive.
Davis must be one of very few departments to staff four people per Engine. Most cities run a crew of 3, and some only have 2.
$2000 for uniform uniform allowance is absolutely ridiculous. $600 per year is probably much closer to the norm. Uniform allowance is also used in the pension calculation so the city will be paying this for the 30 years the employee is retired.
On a side note, when looking at the benefits summary for city employees, the city is paying the employer & employee portion of the pension funding. Most cities don’t do this, and the ones that do are changing the rules. I think it’s an abuse of taxpayer dollars to guarantee employees a 2.5%@55 retirement and not expect them to contribute a single penny (the only groups that contribute are public safety). The city is paying the 8% contribution that the employee should be paying. Very generous!