| | Labor Negotiations Home  |  |  | | After five months of negotiations, the City presented its Last, Best, Final offer to the SEIU negotiating team on October 16. This week, on October 20, the City met with SEIU and the Union rejected the City's Last, Best, Final offer. As a result, the City declared that the parties are at impasse and requested a discussion of possible means of resolving the impasse, pursuant to the City’s Merit Rules. The parties met again on October 22 but did not agree on a way to resolve the impasse. The terms of the Last, Best, Final offer will be placed on the City Council agenda on Monday, October 26 for implementation. The parties will begin negotiations again this spring for a contract beginning July 1, 2010. If the parties cannot come to agreement before July 1, the terms of the City's Last, Best Final offer will remain in effect until an agreement is reached. |  |  |
Over the past few months, the City has been making concessions in its negotiations with SEIU, reducing its two year contract proposal by nearly $2 million each year. While other cities are laying off many in the workforce, Palo Alto has not. Under the terms of the Last, Best, Final offer, the City is making every effort to keep jobs, despite difficult economic conditions. ( View Fiscal Year 2010 Budget Update, CMR 349:09, 10/5/09 for more details. ) We are 4 months into the fiscal year; every day without a labor agreement increases the growing cost impact to the City, employees and community. For that reason, the City must move ahead with implementation of the Last, Best, Final offer. The City of Palo Alto, other local governments, the States of California and the federal government, along with individuals, families and businesses across the nation are facing exceptionally challenging economic times. For Palo Alto, sharp declines in sales, transient occupancy, and documentary transfer taxes, as well as declines in permit revenues produced a $10 million deficit for Fiscal Year (FY) 2010.
To close this deficit, permanent and temporary expenditure reductions were included in the Adopted Operating Budget for FY 2010. These included $3.7 million in departmental service level reductions, $1.4 million in revenue enhancement, and the temporary suspension of General Fund transfers to the Capital Improvement and Retiree Medical Liability Funds of $2.2 million. Also included was $3 million in permanent employee compensation reductions to be negotiated. The City has a proposed method for closing the FY 2010 deficit, but has yet to complete negotiations to achieve the needed $3 million savings in employee compensation for FY 2010. Beyond that, however, are growing future costs for the California Public Employees' Retirement System (CalPERS) employee pensions, significant infrastructure and facility funding deficits, and rising unfunded retiree medical costs. The City is taking these facts into account in addition to closing the immediate FY 2010 deficit. You may follow these links for additional information on the budget. Examples of Long-Term Budget Liabilities: - Deferred Repair of City Infrastructure
The City has for many years deferred maintenance for streets, parks, open spaces, bridges and other infrastructure. This cannot go on indefinitely. The City estimates that to bring all maintenance of its infrastructure into a proper current state of repair would require $307 million over 20 years; however, the infrastructure revenue fund has less than $5.2 million set aside for these needs. - Facility Replacement Needs
In some cases City buildings are seriously outdated, and in need of replacement. Examples include two fire stations, and the Municipal Service Center. The City estimates the current level of unfunded need at $148 million. This is in addition to the $307 million for deferred infrastructure maintenance.
- Increased Pension Costs
City pension costs have increased 86% for SEIU and Management employees over the last five years, in large part due to an enhanced pension formula implemented in FY 2007. At that time, City employees agreed to contribute 2% of their salary towards the 8% employee share of pension costs. Yet the City must absorb all additional cost increases. - Increased Retiree Medical Insurance Costs
According to its most recent actuarial study, the City's unfunded liability for retiree medical insurance grew by over $27.5 million over the past 2 years alone, from $102.2 million to $129.7 million. To properly fund the benefit in FY 2010 and FY 2011, the City will need to set aside $9.8 million each year rather than the $7.7 million on which it premised the FY 2010 budget. - State Takeaways
The State of California recently "borrowed" $2.44 million in City local property tax revenue (our largest source of revenue) to help plug the gap in state funding. The State is legally required to repay these borrowed funds by FY 2013, but the City has concerns with the State's ability to repay. In the meantime, the City will have to rely on reserves to balance its budget. For more information on State takaways, visit http://www.saveyourcity.net/ Update on Current SEIU Negotiations
The Memorandum of Agreement (MOA) for the Service Employees International Union (SEIU) general employee unit defines pay and benefits for 617 employees who provide many services in every department in the City. These dedicated, hard-working employees pave streets, maintain parks, operate heavy equipment, repair utility distribution systems, administer programs, operate libraries, review building plans, provide recreation and art programs, and perform many other services for members of the community. The MOA with SEIU employees expired June 30, 2009. As of October 22, 2009, the parties have met 26 times. The City sees a future of sustained economic pressures, coupled with long-term upward pressure on salaries and particularly benefit costs. There are also important unfunded service and infrastructure needs that the City will need to fulfill. While the Union acknowledges the current financial difficulties, their proposals have centered on short-term cost saving measures such as pay freezes, furlough time and suspending employee development funds. These are temporarily helpful, but their proposals do not provide ongoing assistance for the City to meet its obligations. The City and Union have been negotiating for 5 months and have been unable to reach agreement. Impasse was declared and the Impasse procedures concluded on October 22. The Last, Best, Final offer will be presented to the City Council for implementation on October 26. For SEIU employee information, see the following: | |
