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HomeMy WebLinkAbout11. Reso to Impose-DSPAA AGENDA MEMO DATE: November 22, 2011 TO: Mayor and Members of the City Council FROM: Office of the City Manager By: Irma Youssefieh, Human Resources Director SUBJECT: Adoption of Resolution to Impose the City’s, Last, Best and Final Offer to the Downey Public Safety Auxiliary Association RECOMMENDATION That the City Council adopt the attached Resolution: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY IMPOSING THE CITY’S LAST, BEST, AND FINAL OFFER TO THE DOWNEY PUBLIC SAFETY AUXILIARY ASSOCIATION PURSUANT TO THE CITY OF DOWNEY EMPLOYEE RELATIONS ORDINANCE NO. 1118 AND GOVERNMENT CODE SECTION 3505.4. BACKGROUND The Memorandum of Understanding (MOU) between the City of Downey and the Downey Public Safety Auxiliary Association (DPSAA) expired on October 31, 2010. The City commenced labor negotiations with the DPSAA on September 13, 2010, and the parties spent seven months and six meetings negotiating for a successor agreement on the terms and conditions of employment in spite of the City’s increasing financial challenges. Under State law, the City of Downey is required to bargain in good faith and cannot unilaterally make changes to the terms and working conditions of employment for represented employee groups. Although the DPSAA MOU has expired, the parties must maintain the status quo and continue to observe the terms and conditions of the expired MOU until a new MOU is negotiated. While the City may not implement a MOU, Section 3505.4 of the California Government Code provides the City the ability to unilaterally implement terms that change the status quo following good faith negotiations and impasse. As a result of discussion on proposals for a successor MOU, the parties were unable to reach agreement and the City provided the DSPAA with its last, best, and final offer on July 28, 2011. On August 17, 2011, the DSPAA formally rejected the City’s last, best, and final offer. Following the DPSAA’s rejection, the City declared that the parties were at impasse. Pursuant to the City of Downey Employee Relations Ordinance No. 1118, on September 8, 2011 the parties engaged in an impasse meeting with the City Manager and on November 14, 2011, a mediation session to resolve the impasse. The parties did not reach an agreement. Beyond such discussions, there are no other required impasse resolution procedures. Government Code Section 3505.4 authorizes the City to implement terms of its Last, Best and Final offer as follows: If after meeting and conferring in good faith, an impasse has been reached between the public agency and the recognized employee organization, and impasse procedures, where applicable, have been exhausted, a public agency that is not required to proceed to interest arbitration may implement its last, best, and final offer, but shall not implement a memorandum of CITY OF DOWNEY, CALIFORNIA understanding. The unilateral implementation of a public agency’s last, best, and final offer shall not deprive a recognized employee organization of the right each year to meet and confer on matters within the scope of representation, whether or not those matters are included in the unilateral implementation, prior to the adoption by the public agency of its annual budget, or as otherwise required by law. DISCUSSION On September 8, 2010, the City communicated to the DPSAA its fiscal concerns and alerted the DPSAA to possible contract concessions to address the rise in personnel costs, specifically in the areas of pension and medical/healthcare. In response, the DPSAA communicated an understanding of the City’s fiscal challenges and took the position of being at the forefront among other City bargaining groups to agree to no economics and contract extensions during a difficult fiscal time. Their proposals were: (1) one year contract term from November 1, 2010 to October 31, 2011 with a unilateral option to extend the contract for one additional year (through October 31, 2012); and (2) no salary increases during the term of the contract. After additional fiscal review, on November 30, 2010 the City responded to the DPSAA and provided proposals which focused on maintaining existing employee compensation and benefits to avoid employee layoffs or furloughs, and communicated the need for a long term structural budget change in benefit cost containment in the areas of pension and medical/healthcare costs, specifically as it pertained to future new hires. Below is a summary of the City’s response and additional proposals: (1) Two year contract term (November 1, 2010 to October 31, 2012) to address economic uncertainty and agreement on no salary increases during the contract term; (2) Modest City proposals aimed at long-term concessions to reduce personnel costs through implementation of the 2% @ 60 second tier retirement formula for new hires with the 7% member contribution paid by the City with no impact to existing employee retirement benefits; (3) City paid medical coverage for new hires and their qualified dependent(s) in the Kaiser HMO plan only (freezing enrollments in the City’s self-funded medical plan); (4) Increase in the Kaiser HMO plan co-pay from $5.00 to $10.00 for premium savings; and, (5) Activation of the City-wide Medical Committee with the goal of reducing costs in the City’s medical benefits program. Notwithstanding City action to constrain General Fund spending during labor negotiations, which included holding personnel costs by imposing a freeze on full-time hiring, a freeze on part-time employee merit increases, a freeze on purchase of new and replacement equipment, and other focused efforts to meet year end budget deficit projections for FY 2010-11 and FY 2011-12, the City Council approved the $6.4 million General Fund deficit for FY 2010-11. This deficit included $2.5 million resulting in frozen positions and deferral of across the board salary increases previously scheduled for the Police Association and the Police Management Association in July, 2010 and other cost cutting measures. According to the Finance Director, the deficit was due to projected declining property and sales tax revenues and anticipated increased employee retirement costs just to name a few operating cost factors. Significant concerns with the continued General Fund revenue decline and overall budget deficit projections, in late March and early April of 2011, City negotiators were tasked with the need to revise proposals (Exhibit 2) to the DPSAA to include a shorter term contract from two years to a one year contract and the change that future new hires would pay the full 7% member retirement contribution rather than the City paying the employee’s (member) contribution for the 2% @ 60 second tier retirement formula. The DPSAA did not agree. The City maintained its proposal to limit medical plan coverage for future new hires to the Kaiser HMO plan only. The last negotiations session between the City and the DPSAA was held on April 25, 2011 and concluded with both parties in disagreement over whether the DPSAA had rejected the City’s January 24, 2011 proposal (City’s #2 - Exhibit 1) since the DPSAA began the meeting accepting City’s #2 (Exhibit 1) and the City communicating withdrawal of its January 24, 2011 proposal (Exhibit 1) and presented its revised April 25, 2011 proposal (City’s #3 - Exhibit 2). The City sent the DPSAA a letter dated May 3, 2011 (Exhibit 3) that described the history of the negotiations to date and reiterated the City’s belief that the DPSAA’s conduct and verbal statements on January 24, 2011 communicated a rejection of the City’s January 24, 2011 proposal (Exhibit 1) prior to the April 25, 2011 negotiations session. The DPSAA asserted that the City’s April 25, 2011 proposal (Exhibit 2) constituted improper regressive bargaining and that the City had engaged in bad faith bargaining. On June 21, 2011, the City received an Unfair Practice Charge filed by the DPSAA with the California Public Relations Board (PERB). On August 2, 2011, the City filed its Position Statement with PERB in response to the Charge (Exhibit 4). Although there was disagreement on whether the City acted in good faith by revising two of its proposals, it is important to acknowledge that the City and the DPSAA did have tentative agreement on the remaining City proposals as follows: (1) Agreement of no salary increases during the term of the MOU; (2) Agreement to increase the Kaiser HMO co-pay change from $5.00 to $10.00 provided other employee bargaining groups that were impacted by the change were in agreement; and, (3) Agreement to activate the City-wide medical review committee to study the City’s medical plans for cost savings. From May 3, 2011 through June 28, 2011, the City submitted requests and provided dates to the DPSAA to continue to engage in good faith negotiations. For a period of time, the DPSAA did not respond to inquiries or demonstrate a desire to proceed with negotiations. On July 22, 2011, the DPSAA submitted a proposal to resolve the Unfair Labor Practice Charge and continue labor negotiations. With the parties being unable to reach resolution on the Unfair Labor Practice Charge, the City issued its Last, Best, and Final Offer (Exhibit 5) on July 28, 2011. On August 17, 2011, the City received written notice from the DPSAA rejecting the City’s Last, Best, and Final Offer, therefore, the City declared impasse. On September 14, 2011, the DPSAA withdrew its Unfair Labor Charge with PERB. The City believes there are long-term systemic costs issues that a change in the economic cycle and any upswing in revenues will not address. As communicated to the DPSAA, the City faces major liabilities in FY 2011-12 such as the following: (1) 23.3% increase in Miscellaneous employee retirement costs (Employer plus Employee rate contributions) (approx. $810,000) (2) 15.7% increase in Safety employee retirement costs (Employer plus Employee rate contributions) (approx. $1,075,000) (3) 5% reduction in property-related taxes (approx. $1.4 million) (4) 22% reduction in permit fees (approx. $213,000) (5) Major equipment replacement (approx. $1.2 million) (6) Loss of Redevelopment Agency funding (approx. $1.2 million) (7) Police Association and Police Management Association across the board deferred pay raises (approx. $957,000) (8) Persistent high unemployment rates in Downey and in surrounding cities - March 2011 rates: Downey at 9.8%, Gateway Cities 13.7%, LA County 12.2%, CA 12.3%, US 8.8%. May 2011 rates: Downey at 9.6%, Gateway Cities 13.4%, LA County 11.9%, CA 11.4%, US 9.1% To control future retirement costs, the City’s proposal to implement the 2% @ 60 second tier retirement formula for future employees is understood to provide modest financial impact in the early years of implementation, but would result in much lower costs over time. The second part of the City’s retirement reform proposal for the new hire to pay the full 7% (of reportable earnings) member contribution would provide immediate cost savings. Although there is no impact to existing employees, the DPSAA has been persistent in rejecting the two key features that were incorporated in the City’s proposals, as well as the City’s last, best, and final offer: (1) Implementation of the 2% @ 60 retirement benefit formula for new hires and new hires paying the full 7% of the member contribution and, (2) Kaiser HMO medical coverage for new hires only. The DPSAA’s counter proposals to maintain the City’s existing 2.7% @ 55 retirement formula with a new hire contribution in place for up to five years as allowed by CalPERS law were not acceptable to the City because they did not meet the long-term structural change needed to curb retirement costs into the future, especially with the constraints of CalPERS law that an amendment to the City’s retirement contract for miscellaneous employees impacts all miscellaneous employees regardless of bargaining group representation. At the time of the DPSAA’s rejection to the City’s last, best, and final offer, the City had already obtained agreement with the Downey City Employees’ Association – Miscellaneous and Maintenance Units to implement the CalPERS second tier 2% @ 60 retirement formula for new hires with the new hire paying the full 7% member contribution in addition to the Kaiser HMO only for new hires and co-pay change. Overall, with the exception of the Kaiser HMO medical plan co-pay change from $5.00 to $10.00, the compensation and benefits for existing employees represented by the DPSAA are not impacted. Existing employees continue to receive 100% City paid medical coverage under both the Kaiser HMO plan and the City’s self-funded medical plan that provides a 90% In Network/ 80% Out of Network coverage and $3.00 (generic) and $5.00 (preferred brand) prescription co-pays and City paid member contribution of 8% of reportable earnings under the 2.7% @ 55 CalPERS retirement formula. Staff regrets that a negotiated MOU was not reached, but that fiscal responsibility necessitated difficult bargaining in an uncertain economy. Based on the City’s budget situation and good faith efforts to reach agreement with the DPSAA for FY 2011-12, staff recommends that the City Council adopt the terms and conditions of employment included in the City’s last, best, and final offer (Exhibit 5). FISCAL IMPACT The change in co-pay in the Kaiser HMO plan from $5.00 to $10.00 results in premium cost savings of $91,000 based on current enrollment in plan year 2012. For plan year 2011, premium cost savings was estimated at $70,000. Cost savings on the 2% @ 60 second tier retirement formula and the Kaiser HMO medical plan coverage as applicable to new hires only will be based on the number of new full-time employees hired and will have modest financial impact in the short term, but would result in much lower costs in the long term. Attachments: Exhibit 1 - City’s Proposal #2 dated January 24, 2011 Exhibit 2 - City’s Proposal #3 dated April 25, 2011 Exhibit 3 - Letter dated May 3, 2011 Exhibit 4 - City’s Response to PERB Charge Exhibit 5 - City’s Last, Best, and Final Offer dated July 28, 2011 Resolution S:/Agenda Memos.CC.2011-12/Reso.ImposeLBFO.DPSAA.11-22-11 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY IMPOSING THE CITY’S LAST, BEST, AND FINAL OFFER TO THE DOWNEY PUBLIC SAFETY AUXILIARY ASSOCIATION PURSUANT TO THE CITY OF DOWNEY EMPLOYEE RELATIONS ORDINANCE NO. 1118 AND GOVERNMENT CODE SECTION 3505.4. WHEREAS , the City has engaged in negotiations with the Association pursuant to the City of Downey Employee Ordinance No. 1118 and the Meyers-Milias-Brown Act in an attempt to reach a successor Memorandum of Understanding; and WHEREAS , the parties did not reached an agreement outlining the terms and conditions of employment for the Association to be incorporated into a successor Memorandum of Understanding; and WHEREAS , pursuant to Government Code Section 3505.4, the City now desires to impose its Last, Best, and Final Offer which outlines the terms and conditions of employment for the members of the Association. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF DOWNEY DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. That the City Council of the City of Downey pursuant to its rights granted under City of Downey Ordinance No. 1118 and Government Code Section 3505.4 hereby imposes the terms and conditions of employment outlined in the City’s Last, Best, and Final Offer to the Downey Public Safety Auxiliary Association. A copy of the City’s Last, Best, and Final Offer is attached as Exhibit A and incorporated herein by reference. SECTION 2. The Mayor is hereby authorized to execute the terms and conditions of employment outlined in the City’s Last, Best, and Final Offer to the Downey Public Safety Auxiliary Association on behalf of the City of Downey. SECTION 3. The City Clerk shall certify to the adoption of this Resolution and shall provide for appropriate distribution thereof. SECTION 4. The Resolution shall become effective immediately upon adoption. nd APPROVED AND ADOPTED this 22 day of November, 2011. ________________________ LUIS H. MARQUEZ, Mayor ATTEST: ______________________________ JOYCE E. DOYLE, Interim City Clerk I HEREBY CERTIFY that the foregoing Resolution was adopted by the City Council of the City of Downey at a regular meeting held on the 22nd day of November, 2011, by the following vote, to wit: AYES: Council Members: NOES: Council Member: ABSENT: Council Member: ABSTAIN: Council Member: _______________________________ JOYCE E. DOYLE, Interim City Clerk EXHIBIT A The following terms and conditions of employment as outlined in the City’s Last, Best, and Final Offer to the Downey Public Safety Auxiliary Association are approved and adopted for implementation effective November 22, 2011: Medical Insurance 1. An employee hired on or after City’s November 22, 2011 shall have the election to enroll him/herself and qualified dependent(s) in the Kaiser HMO Plan only. 2. The City shall amend the Kaiser HMO Plan co-pay from five dollars ($5.00) to ten dollars ($10.00). Such change shall be implemented on the first of the month following authorization by Kaiser Permanente. Retirement 1. The City shall amend its California Public Employees’ Retirement System (CalPERS) miscellaneous contract to implement the benefit known as 2% @ 60 retirement formula for employees hired or who become eligible for enrollment in the CalPERS Retirement Plan on or after the effective date of the City’s contract amendment with CalPERS. 2. Upon the effective date of the amendment to the CalPERS miscellaneous contract to implement the second tier 2% @ 60 retirement formula, all employees hired on or after the amendment date will pay the full seven percent (7%) member contribution. Such payment will be handled on a pre-tax basis by way of a bi-weekly payroll deduction.