If rhetoric is fiercest on the brink of a breakthrough, maybe the latest set of demands from San Jose’s public safety unions portends progress in labor negotiations with the city. Or not.
In a letter sent earlier this week to Mayor Sam Liccardo and the City Council, heads of the Police Officers Association and the San Jose Firefighters IAFF Local 230 rejected the city’s proposal to delay implementing aspects of pension reform—similar to the city’s other unions—and urged the city, in light of recent legal victories, to revoke Measure B and start from scratch. Otherwise, the union presidents wrote, they’ll refuse to begin negotiations.
Such a settlement would help the city “recruit and retain a quality workforce at an affordable cost to taxpayers,” POA’s Paul Kelly and Local 230’s Joel Phelan wrote. They also asked to be allowed to make their case in the council’s closed session meetings, citing their lack of trust of the negotiations process.
“Our two unions are committed to expeditiously negotiating a global settlement that resolves all pension litigation, reduces retiree healthcare costs for the city and its employees, and provides fair labor contracts for our members,” Kelly and Phelan wrote. “Settlement must occur in 2015. And it can be achieved without a ballot measure.”
Norberto Dueñas, San Jose’s city manager, responded by welcoming suggestions on how to save enough money to restore service levels to what they were in 2011, before a spate of dramatic layoffs and budget cuts. According to his projections, the city needs $83 million to restore public safety staffing, expand hours at community centers and libraries, and repave aging streets.
Originally, the plan was to save $46 million by fully implementing Measure B. But a judge struck down portions of the measure, forcing the city to scale back savings from the reform to $25 million a year—this included nixing bonus pension checks and switching to a less costly retirement health plan for new employees.
“These savings have assisted in helping to bring our general fund budget in balance and we have slowly begun to restore pay to city employees and make some limited investments in critical service areas,” Dueñas wrote. “Unfortunately, however, there is limited capacity to make significant progress in service restoration to the levels the organization would like to provide and the community deserves.”
If the city continues with the new retiree health plan and elimination of the “13th check” pension bonus, Dueñas said, it could save that $25 million a year. To make up some of the difference, San Jose could put a 1/4-cent sales tax on next year’s ballot.
If the city implements the remaining portion of Measure B—having current employees opt-in to a lower-cost retirement plan for future service or pay more to keep their existing benefits—the savings could total $49 million. Now, the council is proposing that the bargaining units and the city negotiate pension changes that would result in $25 million in annual savings, instead of the original $49 million target.
But Phelan and Kelly questioned the city’s cost-saving estimate from Measure B, calling the $25 million figure “arbitrary” and “inflated.”
“[T]he city’s decision to set an arbitrary savings target was a major step backwards,” the pair wrote. “Not much thought went into the publicly disseminated target that has yet to be formally presented to us, and even less into how it restores competitiveness.”
Mayor Sam Liccardo told San Jose Inside that he’s believes there’s room for agreement. Former POA President and the new mayor were not on speaking terms by the end of Unland’s tenure, Liccardo said, but Kelly and him are apparently now communicating by text from time to time.
The city’s response to the public safety unions’ letter went out Wednesday. “Now we wait,” Liccardo said.
“We have attempted to build our half of the bridge and we need any of the other employees groups who are willing to build their half to do so,” he added.
Calls to Kelly, who’s at a conference with POA staff, were not immediately returned.
Liccardo said he’s hopeful for some headway, and the City Council is ready to “put old battles aside.”
“It’s not a secret that many of the heads of the unions view me as one of the co-conspirators that advocated for Measure B and pension reform,” Liccardo said, mentioning that he has since met with leaders of each of the city’s 11 unions to improve communications. But he admits there is still “a lot of work to do here to build a bridge.
“Our employees want to restore services as much as our residents do,” the mayor continued. “Our employees are tired of being unable to respond to the reasonable needs of our residents because of a lack of staffing and because of a lack of resources. So, when the consciousness emerges that when the residents and the employees are on the same side of this battle, I’m confident that progress will become more rapid. In the meantime, we just need to start the conversations and hopefully the negotiation.”
Below are the letters sent by the POA and Local 230 (first) and the city manager’s response:
February 9, 2015
Honorable Mayor and City Council
City of San Jose
200 East Santa Clara Street
San Jose, CA 95113
Dear Mayor and Council,
Our two unions are committed to expeditiously negotiating a global settlement that resolves all pension litigation, reduces retiree healthcare costs for the City and its employees, and provides fair labor contracts for our members. Settlement must occur in 2015. And it can be achieved without a ballot measure.
This is why, late last week, the San Jose Police Officers’ Association and San Jose Firefighters IAFF Local 230 joined IFPTE Local 21 (AEA, CAMP, and AMSP), AFSCME (MEF and CEO Local 101), IBEW Local 332, and IUOE Local 3 in rejecting your proposed stipulation “…further extending the implementation date for much of Measure B.”  Having already put off implementation four times, we have no interest in kicking the can down the road.
As a critical first step, the City Council must formally state its commitment to a global settlement based on the parameters described in this correspondence.
Once that occurs, we have two overriding goals in settlement negotiations that we hope you will share: make the City of San Jose a competitive employer again and allow it to recruit and retain a quality workforce at an affordable cost to taxpayers.
With these goals in mind, the City’s decision to set an arbitrary savings target was a major step backwards. Not much thought went into the publicly disseminated target that has yet to be formally presented to us, and even less into how it restores competitiveness. Two examples stuck out to us. Both indicate that the City is inflating its target and pocketing savings already achieved—hardly the stuff of good faith negotiations.
First, the City has set a laudable goal of getting back to 1,250 police officers. Great. But does it make sense to assume that will happen immediately (when we currently have less than 1,000 officers) and to consequently inflate the savings target? We think not. The police department will readily admit that it will take many, many years before San Jose may be able to staff up to 1,250, so using 1,250 police officers when devising a savings target unnecessarily inflates the target.
Second, the City’s effort to pocket substantial SRBR and retiree healthcare savings that it attributes to Measure B is extremely problematic. Our unions have always stated their willingness to negotiate the termination of SRBR in a legally allowable manner; thus the City assuming the savings are already guaranteed is misguided and arrogant. The City is just one finalized California Public Employment Relations Board (PERB) ruling away from the SRBR and retiree healthcare savings resulting from Measure B being eliminated, at a cost of tens of millions of dollars. If and when SRBR and retiree healthcare changes are negotiated away, credit needs to be given.
A final PERB ruling against the City is not only possible, it is extremely likely. Two PERB administrative law judge decisions already declare Measure B invalid—each offering a different basis for why the city and its negotiators broke the law. Two other decisions are pending.
In The People ex rel. Seal Beach Police Officers Association v. City of Seal Beach, 36 Cal.3d 591 (1984), the court upheld a quo warranto challenge to a city’s failure to bargain with the labor organizations prior to placing charter amendments before the voters. It invalidated the charter amendments which had been adopted by the city voters. The court awarded attorneys’ fees to the labor organizations for prevailing.
So not only do we have a $1,039,811 attorney fee award from Judge Patricia Lucas in the Measure B litigation, we have the strong likelihood that millions more in attorney’s fees will be awarded once the PERB decisions are final.
We should use the PERB rulings, because they provide the right vehicle for getting rid of Measure B and replacing it, in 2015, with a negotiated settlement that achieves the two goals set out above.
Lastly, the lack of trust we have in the bargaining process, as illustrated by the two PERB rulings referenced above, dictate the necessity of our respective legal counsels attending your closed session meetings to provide our positions in an accurate and unfiltered manner and to answer all of your questions in real-time to expedite the process.
We look forward to discussing with your lead negotiator the outcome of your closed session meeting deliberations on these very important items we have identified in this letter.
Paul and Joel
 See attached email sent to City’s legal counsel.
Here’s the city’s response:
February 11, 2015
Paul Kelly President, POA
1151 N. Fourth Street
San Jose, CA 95112
Re: Measure B
As we have previously discussed, the City is looking forward to working with you in order to settle the issues surrounding Measure B. The City is committed to explore ways to achieve a global settlement involving both changes to Measure B and resolution of the related litigation and administrative actions, including an openness to working on a solution that would take place in 2015.
During the past five years, all City employees made sacrifices to help the City address its significant budget deficits, including reductions in total compensation. Despite these sacrifices, however, the City still had to reduce its workforce and its services significantly in order to bring the budget into balance. Measure B was intended to achieve additional savings to begin restoration of those services.
As you know, we have already achieved approximately $18M in annual General Fund savings from the elimination of the Supplemental Retiree Benefit Reserve (“SRBR” or the “13th Check”) as well as the implementation of a second tier of retirement benefits for new employees. In addition, changes in retiree healthcare have also provided the City with an approximate $7M in additional General Fund savings. These savings have assisted in helping to bring our General Fund budget in balance and we have slowly begun to restore pay to City employees and make some limited investments in critical service areas. Unfortunately, however, there is limited capacity to make significant progress in service restoration to the levels the organization would like to provide and the community deserves.
With that reality, the City Council’s goal continues to be to restore services to at least the levels as of January 1, 2011, in the areas of police, fire, community centers, libraries, and street maintenance. In addition, the City Council also adopted a Police Sworn Staffing Restoration Strategy as part of their adoption of the 2014-2015 Budget. Although there was no General Fund funding toward street maintenance at the time the January 1, 2011 goal was developed, significant additional funding is required to keep our pavement condition from further deterioration.
As discussed at the January 20, 2015 and February 3, 2015, public Study Sessions, approximately $83M is needed to meet these objectives: The City currently estimates that if Measure B were fully implemented, there would be an additional $49M in General Fund savings to help fund these services through the implementation of a Tier 1 additional contributions/opt-in program (after four years) ($46 million in estimated savings) and instituting a disability workers’ compensation offset ($3 million in estimated savings).
However, in the interest of exploring ways to settle the issues surrounding Measure B, the City Council has significantly lowered the additional savings expectations from Measure B from $46M to $25M and is committed to exploring additional funding sources to make up the balance to $83M. It is recognized that this will need to be a multi-year approach; it is not expected that the funding needed nor the service restoration can be achieved in one year.
If the current savings for retiree healthcare and the elimination of SRBR are continued, the following is one proposed solution: Proposed Solutions to Address $83 M in Funding Needs 2016 ¼ % Sales Tax (w/ potential sunset after 9 to 15 years) $38 M City Share for Streets from 2016 VTA Sales Tax Measure $10 M Retiree Healthcare Cost Savings $ 5 M Institute Disability Workers’ Compensation Offset $3 M Police Tier 2 Savings (Discounted from Estimated $3 Million) $ 2 M Proposed Other Solutions Subtotal $ 58 M Target Additional Savings for Measure B Negotiations (In addition to the $25M already achieved) Subtotal $ 25 M Total Proposed Solutions to Address Funding Needs $83 M.
We are committed to working collaboratively with our bargaining units to achieve this savings goal. We respectfully request and welcome for consideration additional ideas to achieve the savings and a global resolution. In addition to lowering the anticipated additional savings goal from Measure B, the City would also like to include the following topics as part of a global settlement of Measure B:
- A compromise regarding the revised definition of disability
- An agreement on an offset for Workers’ Compensation for POA and IAFF employees who leave City service on a disability retirement, as already existing for non-sworn employees.
- Discussion regarding increasing the Tier 2 benefit
- Continue the elimination of the Supplemental Retiree Benefit Reserve (SRBR)
- Willingness to discuss foregoing the emergency provisions related to the Cost of Living Adjustment (COLA).
- Continue to address the significant issues surrounding Retiree Healthcare in hopes that we can achieve at least $5M in General Fund savings.
These elements are open to discussion and we look forward to meeting with you at the bargaining table as we work together to achieve the global settlement all parties would like to see. Your input in this effort is critical. We have received a request from the POA and IAFF to be allowed to speak to the City Council in closed session. As has been discussed with the attorneys for the bargaining units who made that suggestion, that is not a legal purpose for which the Council can meet in closed session. An alternative is for the bargaining units to participate in in our Labor Negotiations Updates which occur every Tuesday morning in the Council Chambers prior to the City Council adjourning in closed session.
We would also welcome your presence to speak and/or present at the Pension Study Session that is currently scheduled on March 16, 2015, at 1:30 pm, with an extended time period for comment and/or presentation. As you know, there is currently a stipulation in place that holds in abeyance the additional 4% in wage reductions as well as the revised definition of disability for Tier 1 employees until July 1, 2015.
The City is open to working towards a solution that could take place in 2015 and is willing to discuss options to do that as part of an overall agreement. However, we believe that these are very complex discussions and want to ensure that the parties have time to work through all issues. Therefore, the City is interested in extending the stipulation to delay the wage reductions and revised disability definition for Tier 1 until January 1, 2017. We believe extending this stipulation will lower the significant concerns on the part of our employees regarding a potential 4% pay decrease in July 2015. We request the bargaining units who are subject to the litigation to agree to the extension so that we can avoid the 4% wage reduction to our workforce.
We have received communication from Gregg Adam, the attorney for the POA, on behalf of the bargaining units who are part of the litigation, that the Unions will not agree to an extension of the stipulation. We ask that you reconsider the City’s offer to extend the stipulation. We are open to considering extending the stipulation to any shorter length of time if you believe extending to January 1, 2017, is either unwarranted or unnecessary.
We look forward to beginning negotiations promptly in order to achieve a global settlement and put this litigation behind us. If there are any remaining issues that are preventing the bargaining units from beginning negotiations, please let us know so we can seek resolution as soon as possible. Thank you for your consideration.
Norberto Duenas, Interim City Manager