By City Staff
City leaders and employees pleased with fair agreement – At their meeting on December 18th, the Davis City Council adopted three resolutions approving the employment contracts between the City of Davis and the Davis Police Officer Association (DPOA), the Program, Administrative and Support Employees Association (PASEA) and the Individual Management Employees. These agreements bring an end to negotiations that began in the spring of 2012. With the adoption of these contracts, two-thirds of the City employees will have reached agreement with the City. These employees work as Police Officers, Professionals, Administrative support staff and Management.
The Council gave direction to city negotiators to realign employee contracts to be more comparable with other agencies and more sustainable in the long-term for the City. The process has been difficult for both the employee groups and the City. The City is fortunate to have labor partners who were part of the solution. Over the term of the agreements, the City will save approximately $4.9 million as a result of structural benefit changes ensuring the City’s ability to preserve positions, programs and services.
Term of Agreement
These agreements are effective immediately through December 31, 2015.
Retirement Benefits
As with many other California public agencies, the City Council believes employees should pay at least the full portion of the employee share of retirement costs. This will be fully realized in 2014 for miscellaneous employees. Currently miscellaneous employees pay 5 percent and this amount will increase to 7 percent on January 1, 2013 and then to 8 percent on January 1, 2014. There is no change for Police Officers who currently pay 12%.
Two-Tier Retirement Benefit
Another objective was to explore differential compensation packages for future employees. State Law has changed for new hires, effective January 1, 2013. The new benefit for non-sworn employees is a 2% @ 62 formula and sworn employees is 2.7% @ 57. CalPERS estimates that this will save jurisdictions 4.7 percent annually.
Retiree Medical Benefit
Both sides have agreed to a sustainable retiree medical benefit that reduces the long -term liability of retiree medical costs, while still providing a reliable benefit. Currently, retiree health consumes 20 percent of payroll. This proposal brings it down to 17.25 percent for an approximate annual savings of $178,234 for these three groups. Over the term of this contract, this will amount to $534,000 in savings.
The Council has been mindful of the impact of proposed changes on long-term employees who may be retiring in the next several years. As a result, current employees with more than 25 years of service (20 years for sworn) will receive 100 percent of the benefit if they retire prior to December 31, 2025. Employees with less service will receive 75 percent of the benefit and new employees will receive the Medicare Supplemental/Managed Medicare rate for an employee and plus one-dependent which is about a third of the current benefit.
To offset the significant changes made to the retiree medical benefit, the City has provided a modest salary increase of 3% in 2012-13, 2% in 2013-2014 and 1% in 2014-15 for Miscellaneous employees. For Sworn it is 2% in 2012-13, 2% in 2013-2014 and 1% in 2014-15.
Health Benefit
Health costs have risen at an alarming rate and continue to increase. The City Council identified a need to effectively manage health benefit costs while maintaining comprehensive coverage for all employees. 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. The average amount for jurisdictions providing a cash-out amount is $400 per month.
To help rein in escalating health benefit costs while maintaining coverage for all employees, the agreement also continues a 50/50 cost sharing provision with future increases to health care costs shared between the City and the employee.
The reduction in the cash-out contribution and the cost-sharing provision will have an approximate cost savings of $816,827 over the contract period.
Next Steps
The City is in the process of negotiating with other employee bargaining units, including Davis Professional Firefighters Association Local 3494 and Davis City Employees Association.
To read the MOU’s please click the links:
[i]”The new benefit for non-sworn employees is a 2% @ 62 formula and sworn employees is 2.7% @ 57. CalPERS estimates that this will save jurisdictions 4.7 percent annually.”[/i]
This language is not in any of the new contracts. That was what I was hoping to speak with the Council last night.
Unfortunately, during public comments, when I was in line to speak, Joe Krovoza said that anyone who wishes to speak on an item on the consent calendar should wait until the Council hears those items. So I got out of line, public comment ended, and then no one on the Council pulled the MOUs, there was no discussion, and no one from the public was allowed to speak on the new contracts.
What bothers me is that such a crucial item for the future of our City is put on the consent calendar. Each of these contracts needs a full public airing. This was the worst case I have ever seen of this, as the contracts were not even published until a couple of hours before the 6:30 meeting was scheduled to start.
More specifically, to your understand about the exact new second-tier formulas, I am (assuming you are right) confused about that “2.7% @ 57” formula for new sworn public safety employees. In the police management contract, where the second-tier formula was actually published, it said “3% at 55.” I am quite certain that whatever settles in the wash, the new hires who are in police management and the new DPOA hires will have the same new formula. I just don’t know what that formula is.
Consider this math to see how important a change in formulas can be. In 2013-14, the City will have roughly $11 million in PERSable salaries for its 3% at 50 public safety employees. The employer share will be 30.3% minus the 3% that those employees will be covering. So the City’s cost will be $3 million ($11m x 27.3%), and in future years that number will grow substantially as CalPERS rates rise to cover our massively underfunded pensions.
If all those safety employees on the 3% at 50 were instead on 2% at 55 in 2013-14, the City’s cost would fall to $2.19 million ($11 x 19.9%). Also, the employee share would fall by 2% of salary. In other words, it would cost roughly 2/3rds as much every year for the City if all safety employees were on the 2% at 55 plan.
Of course, everyone who is on 3% at 50 is guaranteed that by law. We cannot lower their plans. But for the long-term health of Davis, we need to pick a new formula which the City can afford.
What I worry is that the new formula for public safety will be 3% at 55 (the number used in the police management contract). That formula saves us very little. If everyone were on it in 2013-14, the City’s expense would be $2.83 million, which is hardly any savings at in comparison with what we now have.
An argument I don’t buy is that Davis cannot attract or keep good safety employees if we had 2% at 55. The problem is many other cities about our size — for example Cathedral City, pop. 52,381 — have been adding 2% at 55 as their new second-tier formula.
Also, it seems to me that employees with a less generous pension have a stronger incentive to stay on the job longer. If they can retire at 50 or 55 making $100,000 plus COLAs for the rest of their lives, they have little reason to stay with the DPD or the DFD. Those young retirees very often work another 10, 15, or 20 years at a non-CalPERS agency (such as Sacramento County) and they make their pension income and their second job income, and they build up a second pension in their new jobs. But if they were on 2% at 55, they would not be taking home a $100,000 per year pension at age 50 or 55. They would keep working until they were actually ready to retire.
I just noticed that this piece was written by “city staff.” So that seems completely authoritative as to the new formulas. The only problem is that they are not in the contracts. This is the language in the new DPOA MOU: [quote] 2. The following provision applies to SWORN EMPLOYEES hired into city service on or after January 1, 2013.
The CITY shall continue providing SWORN EMPLOYEES with the applicable CalPERS local safety retirement plan. The CITY will continue to structure the salary and required employee pension contributions to maximize compensation reported to CalPERS and to take advantage of the federal Internal Review Code 414(h)(2) and related CalPERS Board rulings. [/quote] It is essentially the same language in this one for civilian police employees and for the management MOU and for the PASEA MOU.
Note: Because the contracts were published so late, and because there was no discussion of them by the Council last night, I would guess that no one on the Council even knew when they approved them that the second-tier language is absent.
Somebody please get Rich the correct contracts. I won’t beleive anything from the city on this issue until and unless Rich blesses it. He is the deserving representative of our collective interests on this topic.
Now we must move on to DCEA. Possibly a harder sell on these contracts. Understanding that some of these employees worked all night as the city had 3 seperate water main breaks. Don Saylor sent some kind words to the city manager and the council, he probably understands that call outs are not mandatory and these were volunteers. This is one day out of the lives of these DCEA employees. Keeping it real, i don’t think Don saw anyone from PASEA or management there. Keeping this in mind, was the me too clause really logical?