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MEMORANDA OF UNDERSTANDING BETWEEN THE CITY OF STOCKTON AND THE STOCKTON POLICE MANAGEMENT ASSOCIATION, STOCKTON FIREFIGHTERS’ LOCAL 456 FIRE UNIT, AND STOCKTON FIREFIGHTERS’ LOCAL 456 FIRE MANAGEMENT UNIT
recommended action
RECOMMENDATION
It is recommended that the City Council adopt by resolution the attached successor Memoranda of Understanding (MOUs) effective July 1, 2022 through June 30, 2025 with the following groups:
1. Stockton Police Management Association (SPMA);
2. Stockton Firefighters’ Local 456 Fire Unit; and
3. Stockton Firefighters’ Local 456 Fire Management.
It is further recommended that the City Manager and the Employee Relations Officer be authorized to take all appropriate and necessary actions to carry out the purpose and intent of the resolution, including implementation and funding of these successor MOUs.
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Summary
In March 2022, representatives of the City began meeting with the SPMA, Fire, and Fire Management Units to discuss successor MOUs. The aforementioned MOUs expire on June 30, 2022. On June 23, 2022, the City reached a tentative agreement on a successor MOU with SPMA, Fire, and Fire Management Units.
The successor MOU presented herein for the SPMA, and Fire Management Units includes a contract term of three (3) years; a 10% increase to base pay (comprised of a 2% COLA and an 8% Market Adjustment) effective the first full pay period following adoption but no earlier than July 1, 2022, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2023 plus a lump sum payment of $5,000 payable to all represented employees in paid status on January 1, 2024, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2024; and an increase to the City’s health contribution effective the first full pay period following adoption.
The successor MOU presented herein for the Fire Unit includes a contract term of three (3) years; a 9.65% increase to base pay (comprised of a 2% COLA and a 7.65% Market Adjustment) effective the first full pay period following adoption but no earlier than July 1, 2022, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2023 plus a lump sum payment of $5,000 payable to all represented employees in paid status on January 1, 2024, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2024; an increase to the City’s health contribution effective the first full pay period following adoption; and an update to the member’s overtime calculation to include vacation leave during a work period as “time worked.”
Although salary 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 with the Units 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 City received notification on June 24, 2022 that the SPMA members ratified the successor MOU. The successor MOU is attached in redlined format as Attachment A. The City received notification on June 27, 2022 that the Fire and Fire Management Units’ members ratified the successor MOUs. The successor MOUs are attached in redlined format as Attachments B and C respectively.
It is recommended that Council adopt by resolution the attached successor MOUs with the SPMA, Fire, and Fire Management Units effective July 1, 2022 through June 30, 2025. The proposed resolution authorizes the necessary FY 2022-23 budget amendment as outlined in Exhibit 4 of the Resolution.
DISCUSSION
Background
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 toward retention and recruitment. The ability to front-load the COLA with the contracts effective July 1, 2016 was due to one-time funding that was available.
In 2016, the City entered into 3 year contract terms with all 9 bargaining units and was able to provide market salary adjustments to address recruitment and retention. Additionally, a 6% COLA was front-loaded in year one of the contracts for each bargaining unit. The City re-set the City health insurance premium contribution to 90% of the low-cost Kaiser plan and allowed employees to begin electing vacation cash-out/sell-back.
In 2020, the City entered into a three (3) year contract term with SPMA, Fire, and Fire Management Unit wherein the bargaining unit members received a 4% COLA to base pay following adoption and a 2% COLA in the first full pay period following July 1, 2021. SPMA members in the classification of Police Captain and Police Lieutenant received a base pay salary adjustment of 1% following adoption and an additional 0.5% in the first full pay period following July 1, 2021. Fire and Fire Management Unit members received a base pay salary adjustment of 1% following adoption and a 0.41% was added to the suppression classifications on the salary schedule for the addition of the Birthday Holiday effective in the first full pay period following July 1, 2021. Additionally, the Units received a one-time lump sum payment of $1,650, a vacation cash-out option of 40 hours in years 2 and 3 of the contract, and an increase to the City’s health contribution effective the first full pay period following adoption.
Present Situation
The City’s Long-Range Financial Plan (L-RFP) assumptions for employee compensation include 2% annual COLAs and 2% annual increases in the City’s health contribution. Prior to the start of labor negotiations, the City contracted with a compensation consultant to perform an updated market salary survey in 2022. Based on these findings, staff recommends market salary adjustments to classifications in this unit. Market salary adjustments are salary increases above the planned COLAs that are necessary to maintain compensation at levels competitive with similarly situated agencies. Market adjustment costs are incorporated in the L-RFP.
The relevant amendments under the successor MOUs for SPMA, Fire, and Fire Management Units are summarized as follows:
1. MOU contract term for three (3) years effective July 1, 2022 through June 30, 2025 (SPMA MOU Section 19, Fire Unit MOU Section 19, and Fire Management MOU Section 19).
2. Lump Sum Payment. Employees in the respective bargaining units as of January 1, 2024, will receive a $5,000 lump sum non-pensionable bonus to be paid in January 2024 (SPMA MOU Section 15.1 (c), Fire Unit MOU Section 15.11, and Fire Management MOU Section 15.10).
3. City Health Contribution. 2% increase to City’s health insurance premium contribution effective upon the first full pay period following adoption of this agreement by City Council, and 2% each fiscal year thereafter with the last increase effective July 1, 2024 (SPMA MOU Section 14.1 (c), Fire Unit MOU Section 14.1 (c), and Fire Management MOU Section 14.1 (c)).
4. Amend the birthday holiday language to clarify that employees may take the holiday beginning on the day of the employee’s birthday (SPMA MOU Section 12.1 (b), Fire Unit MOU Section 12 (f), and Fire Management MOU Section 12 (f)).
5. Elimination of the Vacation Sellback provision allowing a vacation cash payment option/sell-back of up to 40 hours of vacation. The provision has a sunset date for FY 2021-22 (SPMA MOU Section 9.1 (d), Fire Unit MOU Section 9.1 (f), and Fire Management MOU Section 9.1 (e)).
6. Update to state language regarding the mutual non-discrimination commitment (SPMA MOU Section 3, Fire Unit MOU Section 3.1, and Fire Management MOU Section 3.1).
7. Elimination of obsolete language, update to pronouns, and other language cleanup changes.
The relevant amendments under the successor MOUs for Fire and Fire Management Units are summarized as follows:
8. Retiree Medical Trust. New section provides for the City to facilitate payroll deductions into a retiree medical trust designated by IAFF Local 456 for benefit of its members (Fire Unit MOU, Section 14.4 and Fire Management MOU Section 14.4).
9. EMPC Payrate Conversion. Allows an option for employees to elect a one-time retroactive application of their employee contribution at the time of retirement rather than monthly payroll deductions for the 12 months leading to their retirement date (Fire Unit MOU, Section 13.1 (d) and Fire Management MOU Section 13.1 (d)).
MOU specific amendments are summarized as follows:
SPMA Unit:
10. COLA and Market Adjustment. 10% increase to base pay (comprised of a 2% COLA and an 8% Market Adjustment) effective the first full pay period following adoption but no earlier than July 1, 2022, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2023, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2024 (SPMA MOU, Section 15.1(a)).
11. Salary Step Advancement. New section adds language memorializing the City’s current practice that unit members are required to serve six (6) months at each applicable salary step before advancing to the next (SPMA MOU Section 15.11).
Fire Unit:
12. COLA and Market Adjustment. 9.65% increase to base pay (comprised of a 2% COLA and a 7.65% Market Adjustment) effective the first full pay period following adoption but no earlier than July 1, 2022, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2023, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2024 (Fire Unit MOU, Section 15.9(a)).
13. Overtime Calculation. New section that provides for the inclusion of vacation leave during a work period as “time worked” for purposes of calculating overtime (Fire Unit MOU, Section 11.1(f)).
Fire Management Unit:
14. COLA and Market Adjustment. 10% increase to base pay (comprised of a 2% COLA and an 8% Market Adjustment) effective the first full pay period following adoption but no earlier than July 1, 2022, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2023, a 3% increase to base pay (comprised of a 2% COLA and a 1% Market Adjustment) effective July 1, 2024 (Fire Management MOU, Section 15.8 (a)).
FINANCIAL SUMMARY
BASE PAY INCREASE
The total three-year cost for the COLA and Market Adjustment increases to base pay for the 210 employees in SPMA, Fire, and Fire Management is $19,412,168 of which $16,940,310 is a General Fund cost. The table below shows the base wage increase cost for the 3 years based on a July 1, 2022 implementation. Funding for an annual 2% COLA for the term of the contract was planned in the L-RFP. The market adjustments were not included in previous L-RFP projections.
HEALTH CONTRIBUTION INCREASES
The cost for the health contribution increases based on a July 1, 2022 implementation is $417,960 of which $363,928 is a General Fund cost. The ongoing cost will be absorbed in the operating funds, including the General Fund.
LUMP SUM PAYMENT
The cost to pay SPMA, Fire, and Fire Management Unit employees a lump sum payment of $5,000 is $1,112,521 of which $963,005 is a General Fund cost.
FIRE UNIT OVERTIME CALCULATION
The cost of counting vacation leave during a work period as “time worked” for purposes of calculating overtime for the Fire Unit based on a July 1, 2022 implementation is $521,409 of which $447,018 is a General Fund cost.
All of these recommended compensation changes except the one-time lump sum payment are ongoing costs to the City and should be sustainable in the long-term.
The total three-year cost of the successor Memoranda of Understanding (MOU) for the three units is $21,392,656 based on a July 1, 2022 implementation. The FY 2022-23 Annual Budget adopted by Council on June 21, 2022 must be amended to accommodate the increases in employee compensation. With an effective date of July 1, 2022, the total FY 2022-23 cost of compensation changes are $5,017,091 with 87% attributable to the General Fund. The FY 2022-23 cost will be slightly lower if implemented in a later pay period. The recommended budget amendment needed to implement the three MOUs will increase the General Fund budget by $4.3 million from the fund balance. Future year salary and benefit increases will be incorporated into the annual budget development process.
To make this affordable in the long term, some of the assumptions in the City’s Long-Range Financial Plan need to be adjusted. The revised L-RFP graph incorporates the employee compensation increases identified in this staff report and the offsetting assumption changes leaving similar annual fund balances to the previous version of the chart provided on June 21, 2022.
Below is a summary of the revised assumptions:
1. Projected year-end savings of $12 million was factored in to offset the cost of front loading the salary increases into the first year. At the close of the FY 2021-22 fiscal year, these funds will not be available to spend and will need to be reserved for future year expenses.
2. Future year (FY 2023-24 and beyond) staffing, capital spending, and expenditure growth was reduced below levels presented in the L-RFP during the review of the FY 2022-23 budget. These future spending amounts are all the same or greater than amounts assumed in the November 2021 version of the L-RFP.
3. Adjust the assumed vacancy savings from 5% in FY 2022-23 reducing to 3% over 7 years to 8% in FY 2022-23 reducing to 3.5% over 5 years. This assumption change impacts FY 2022-23 and requires an additional budget amendment detailed in Exhibit 4. The General Fund budget is being reduced by an additional $3.6 million with the change in overall vacancy rate from 5% to 8%. Total vacancy savings budgeted in the General Fund for FY 2022-23 is $9.7 million. The assumed 8% rate has not been applied evenly across all departments. Based on current and historical vacancy data, the Police Department has a budgeted vacancy rate of 9% and the Fire Department has a budgeted vacancy rate of 6%.
Attachment A - SPMA MOU - Redline
Attachment B - Fire Unit MOU - Redline
Attachment C - Fire Management Unit MOU - Redline