title
MEMORANDA OF UNDERSTANDING BETWEEN THE CITY OF STOCKTON AND THE STOCKTON CITY EMPLOYEES’ ASSOCIATION, TRADES AND MAINTENANCE UNIT, OPERATIONS AND MAINTENANCE UNIT, WATER SUPERVISORY UNIT, AND MODIFICATIONS TO THE UNREPRESENTED MANAGEMENT/CONFIDENTIAL AND LAW EMPLOYEES’ COMPENSATION PLAN
recommended action
RECOMMENDATION
It is recommended that the City Council adopt by resolution the attached successor Memoranda of Understanding (MOU’s) effective July 1, 2016 through June 30, 2019, and amended Unrepresented Compensation Plan, with the following groups:
1. Stockton City Employees’ Association (SCEA);
2. Trades and Maintenance Unit (T&M);
3. Operations and Maintenance Unit (O&M);
4. Water Supervisory Unit; and
5. Unrepresented Management/Confidential and Law Employees’
It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the resolution, including implementation and funding of these successor MOU’s, and Compensation Plan.
body
Summary
In April 2016, representatives of the City began meeting with labor representatives to discuss successor MOU’s. All bargaining unit MOU’s are set to expire June 30, 2016, and the City and bargaining units desired to negotiate successor MOU’s effective after that expiration. The successor MOU’s presented herein, for SCEA, T&M, O&M and the Water Supervisory Unit, include a contract term of three (3) years; contain an increase to the City’s health contribution effective July 1, 2016; a 6% cost of living increase adjustment (COLA) to base pay effective July 1, 2016, with no additional COLA’s in the following two years of the contract; base pay salary adjustments for positions significantly below market; and a vacation cashout option in years 2 and 3 of the contract. Although COLA increases have been restructured to address market conditions, the overall level of increase is consistent with the City’s Long-Range Financial Plan (L-RFP). Additional compensation adjustments have been negotiated to remedy current recruitment and retention difficulties. All compensation increases have been included in an updated L-RFP as described below, and long-term sustainability remains viable. The ability to address market pressures and maintain fiscal sustainability is due to City Council action to set aside funds for Employee Compensation on December 8, 2015, as well as adoption of a new Reserve and Available Fund Balance Policy on March 29, 2016. These successor MOU’s contain similar terms and conditions as the prior two years, with other minor changes. The City reached tentative agreements with these units on the following dates: SCEA on May 6, 2016; and the Operating Engineers’ Local 3 Units (T&M, O&M and Water Supervisory Unit) on May 20, 2016. The City has received notification from these bargaining units that their memberships have ratified their respective successor MOU’s.
Staff is recommending that the City Council also authorize the City Manager to implement adjustments to the Unrepresented Employees’ Compensation Plan which includes general updates to be consistent with the other bargaining units’ MOU provisions, and compensation terms. The successor MOU’s, and the updated modified Unrepresented Compensation Plan are attached in red-line versions, as Attachments A - E respectively. Finally, Staff recommends the same cost of living, health plan and changes afforded to the unrepresented employees be applied to the unrepresented Council appointed positions of City Manager, City Attorney and City Clerk.
DISCUSSION
Background
The City has had substantial fiscal shortfalls over the past several years culminating in the bankruptcy filing in June of 2012. From 2008 through 2013, employee compensation was impacted through salary and benefit concessions, including base pay reductions due to work furlough. On June 26, 2012, the City Council adopted a final budget for FY 2012-13 under the Pendency Plan filed for the bankruptcy proceedings. It also adopted as part of its Pendency Plan changes in compensation and benefits. In July 2012, the City Council adopted successor MOU’s for bargaining units with a term of one year, July 1, 2012 through June 30, 2013. For FY 2013/2014, most bargaining units at the City agreed to a “contract rollover” and amendment to extend their MOU for a one-year term through June 30, 2014, with minimal changes. Employees received no COLA in FY 2013-14 and FY 2014-15. Subsequently, Council approved successor MOU’s with the SCEA, T&M, O&M, and Water Supervisory Unit, effective July 1, 2014 through June 30, 2016. The expiring MOU’s included a 2% COLA that became effective for members in FY 2015-16, and a small increase to the City’s health insurance premium contribution. Unrepresented employees also received the same 2% COLA and small increase to health insurance premium contributions effective July 1, 2015.
Because employee compensation had been reduced or stagnant for several years prior to FY 2015-16, the City’s labor market competitiveness was affected negatively. The lack of competitiveness manifested in recruitment difficulty, increased turnover and retention problems. In June 2015, the City hired a compensation consultant who surveyed City positions and other comparable agencies with regards to base salary and total compensation. Numerous positions City-wide and across all bargaining units were identified as being significantly under market (i.e., more than 6% under market) with regards to base salary. The compensation study also identified that the City was significantly under market with regards to the employer paid health insurance premium contribution. City Council took action on April 12, 2016 to improve and increase the options for health care available to employees. The proposed changes include increases to base salary, the employer contribution for health care and other compensation items to maintain market competitiveness.
The City Council identified retention and recruitment of employees as a high priority and took action to set aside funds to address market conditions through the adoption of the General Fund Reserve policy on March 29, 2016 and approval of one-time funding for Employee Compensation on December 8, 2015, Resolution No. 2015-12-08-1502.
Present Situation
The relevant amendments under the successor MOU’s and Unrepresented Compensation Plan are summarized as follows:
1. MOU contract term for three (3) years - July 1, 2016 through June 30, 2019;
2. 6% base pay increase (COLA) effective July 1, 2016, consistent with the City’s L-RFP (SCEA MOU Article 17.1; T&M MOU Section 15.1; O&M MOU Section 15.1; Water Supervisory Unit MOU Section 15.1; Unrep Comp Plan Section 13.1);
3. Market base salary adjustments implemented over 3 years effective July 1, 2016, (SCEA MOU Appendix B; T&M Appendix A; O&M Appendix A; Water Supervisory Unit Appendix A; Unrep Comp Plan Appendix A);
4. City contribution towards health insurance - the City’s capped health insurance premium contribution would be reset at 90% of the lowest cost Kaiser Plan premiums, effective July 1, 2016; effective FY 2016-17 the City’s contribution amount would increase approximately 14% consistent with Council’s one-time funding approval. The monthly increase in the City’s contribution will be:
• $76 per month for Employee Only;
• $136 per month for Employee plus 1 Dependent; and
• $183 per month for Employee plus 2 or more Dependents.
In FY 2017-18 and FY 2018-19 of the contract, the dollar value of the City’s health insurance premium contribution will increase by 2% each year respectively, consistent with the City’s L-RFP (SCEA MOU Article 16.1(c); T&M MOU Section 14.1 (c); O&M MOU Section 14.1 (c); Water Supervisory Unit MOU Section 14.2 (c); Unrep Comp Plan Section 4.1 (c));
5. Vacation Cash Payment Option- This proposal would allow vacation cash payment option/sell-back during the last two fiscal years of the contract term. The vacation cash payment option was available prior to February, 2012. This option will allow employees to cash out up to 40 hours of vacation each year in FY 2017-18 and FY 2018-19, (SCEA MOU Article 11.1(e); T&M MOU Section 9.1 (f); O&M MOU Section 9.1 (g); Water Supervisory Unit MOU Section 9.1(e); Unrep Comp Plan Section 6 (e));
6. Overtime - Sick leave, jury duty, and bereavement leave will count as time worked for Fair Labor Standards Act (FLSA) overtime calculation purposes (SCEA MOU Article 13.2 (a); T&M MOU Section 11.2 (a); O&M MOU Section 11.2 (a); Water Supervisory Unit MOU Section 11.2 (a); Unrep Comp Plan Section 14.3 (a));
7. Health Insurance - Agreement to a reopener clause to meet and confer upon City’s request regarding proposals related to City sponsored medical plans and implementation of the Affordable Care Act (ACA) (SCEA MOU Article 16.0; T&M MOU Section 14.0; O&M MOU Section 14.0; Water Supervisory Unit MOU Section 14.1);
8. Bi-Weekly Pay Period - Agreement that the City may move to bi-weekly pay as soon as administratively possible (SCEA MOU Article 17.14; T&M MOU Section 15.14; O&M MOU Section 15.15; Water Supervisory Unit MOU Section 15.16);
9. Elimination of obsolete language and other language cleanup changes;
MOU specific amendments are summarized as follows:
Trades and Maintenance Unit:
10. Increase annual footwear allowance from $170 to $200, to be consistent with the other Operating Engineers’ Local 3 units (T&M MOU Section 13.3 (b));
Water Supervisory Unit:
11. City Health Reimbursement Account (HRA) contribution in the amount of 5.5% of base salary for reimbursement of current and retiree medical cost reimbursement, to address compaction issues with the Operations and Maintenance Unit who already receive this benefit (Water Supervisory Unit MOU Section 14.7);
All Operating Engineers’ Local 3 Units (O&M, T&M, Water Supervisory Unit):
12. State Disability Insurance - The City has agreed for OE3 members to elect to receive State Disability Insurance (SDI) coverage at their own expense (O&M MOU Section 14.3; T&M MOU Section 14.3; Water Supervisory Unit MOU Section 14.6); and
Unrepresented Compensation Plan:
13. For equity purposes to provide similar benefits for all Police Safety personnel, staff proposes that the Police Chief and Deputy Police Chief positions receive longevity add pay consistent with the represented Stockton Police Management Association (SPMA), for a maximum 4.5% longevity add pay upon completion of 24 years of service, (Unrep Comp Plan Section 9).
FINANCIAL SUMMARY
COLA
The total cost for the 6% COLA beginning July 1, 2016 for all five employee groups is $4,243,715 of which $1,632,268 is a General Fund cost. The table below shows COLA increase by bargaining unit for the 3 years. A complete list of all fund and impacts is provided as exhibit 6 to the resolution. Funding for an annual 2% COLA was planned in the L-RFP. The additional cost in the first and second years of front-loading a 6% COLA is offset by costs in year three and beyond due to the elimination of the annual compounding of COLAs and there is not a negative effect on the L-RFP. The additional cost to address market conditions and front load the COLAs in the first year will be funded using one-time savings from prior years.
Market Adjustments
The total cost for the base salary market adjustments beginning July 1, 2016 through June 30, 2019 is $808,234 of which $300,522 is a General Fund cost. The table below provides a 3 year impact of the market adjustments by bargaining unit. These market adjustments were not part of the L-RFP.
Health Insurance Contribution
The cost for the health contribution increase beginning July 1, 2016 for employee groups listed above is $1,388,424 of which $543,291, is a General Fund cost. The health contribution cost increase for FY 2017-18 is $,232,284, and FY 2018-19 is $235,284, which is a 2% increase from the FY 2016-17 cost, as planned in the L-RFP. The available fund balance in the City’s Health Internal Service Fund will be used to fund the increased health contribution for the first two years. After these one-time funds have been exhausted, the ongoing cost will be absorbed in the operating funds including the General Fund.
Vacation Sell-Back / Cash-out
The City previously allowed the option to sell-back vacation time, or take cash in lieu of time off, prior to February 2012. Discontinuing the sell-back option was necessary to preserve cash during the fiscal crisis. The annual average cost of restoring this benefit for these employee groups could be as much as $1.2 million of which $471,000 is a General Fund cost. These one-time costs will also be funded from prior year savings and will be made part of the FY 2017-18 and FY 2018-19 annual budgets. However, there could be an offsetting increase in productivity if staff take cash in lieu of time off as the hours worked could increase.
Fair Labor Standards Act (FLSA) Overtime Changes
Counting sick leave, bereavement leave and jury duty leave hours as time worked for FLSA overtime calculation purposes for the three year contract period will be a total cost of $65,919 of which $25,355 is a General Fund cost.
Footwear Allowance Increase for Trades and Maintenance Unit
Amending the T&M footwear allowance from $170 to $200 per year will cost an additional $1,300 per year.
HRA Contribution for Water Supervisory Unit
The cost for the 5.5% HRA contribution is $62,000 per year beginning July 1, 2016.
Longevity Adjustment for Unrepresented Police Safety Personnel
The cost for aligning the Unrepresented Police safety positions to the represented SPMA longevity add pay provision is a cost of $11,000 all which is a General fund cost.
Prior year savings has enabled the City to direct more funds than previously anticipated toward employee compensation in the near term, and will accelerate the City’s effort to provide compensation consistent with median market levels. This should improve recruitment and retention efforts, and ultimately reduce costs associated with staff turnover. Most of these compensation changes are ongoing costs to the City and have to be sustainable in the long-term. With the approval of these MOU terms, the General Fund available balance will be diminished. If labor negotiations for the remaining bargaining units result in similar compensation adjustments, the General Fund available balance is projected to drop close to the 5% minimum reserve level in FY 2026-27 as shown in the L-RFP chart below. However, Council adopted a new Reserve and Available Fund Balance Policy in March, 2016 and it is estimated that an additional $15 million would be set aside in reserves for economic uncertainties and unforeseen events. Approval of these MOUs establishes a fiscal commitment to fill vacancies and meet existing expectations for service. The City’s ability to direct funds toward other priorities and expand City services will continue to be constrained.
Note: Updated L-RFP includes known costs for the MOUs recommended for approval in this report, and assumes similar compensation terms for the bargaining units still negotiating agreements.
The above MOU terms were not included in the FY 2016-17 Proposed Budget as released on May 16, 2016 because confidential labor negotiations were still underway. The recommended action includes directing the City Manager to incorporate the cost of these labor changes into the proposed budget in the amounts shown below and in Exhibit 6:
Transfer from GF (010-0000) to Library Fund (041-0000) $ 138,000
Transfer from GF (010-0000) to Recreation Fund (044-0000) $ 89,000
Increase various Salary & Benefit accounts $ 5,051,949
(Detail by fund provided in Exhibit 6 to the resolution)
Attachment A - SCEA MOU - redlined
Attachment B - Trades and Maintenance Unit MOU - redlined
Attachment C - Operations and Maintenance Unit MOU - redlined
Attachment D - Water Supervisory Unit MOU - redlined
Attachment E - Unrepresented Compensation Plan - redlined