Municipal contracts with public employee unions are much in the news these days, what with the filing of bankruptcy by the city of Detroit and the emergence from bankruptcy by the city of Stockton. Neither city is out of the woods, but it will be important for all California cities to watch two developments arising from these cases.
In Detroit, the city's pension obligations to its employees can be modified by the bankruptcy trustee in righting the city's finances. In Stockton, retiree health benefits were cut as part of that city's plan for financial solvency.
What relevance do these cases have to Piedmont? In the short and near term, none. Piedmont is in great financial shape thanks to the real estate market and is building up reserves in its general fund and facilities maintenance and equipment replacement funds. The general fund reserve cannot exceed 25 percent of the annual budget so any time the transfer tax exceeds $3 million (as it did last year), the city is in a position to put away reserves. Even during the recent lean years, Piedmont avoided service cuts and layoffs and just recently implemented pay raises in new contracts with its employees. Here's a quick synopsis of those contracts, which can be read in detail at http://www.ci.piedmont.ca.us/citycouncil/?p=3 (staff reports for the Nov. 18 City Council meeting).
Wages: As of July 1, 2013, all employees receive a 3 percent raise per year for the next four years. As an example, an entry-level police office will make $6,172 per month in 2013 and $6,947 in 2016.
Medical: The city's contribution toward medical plan premiums is capped at the Jan. 1, 2013, CalPERS Kaiser Bay Area rate plus 50 percent of any future increase above 2013 rate, and beginning on Jan. 1, 2014, employees will contribute 50 percent of increases to the Kaiser Bay Area rate. In short, a 50-50 split of medical increases between city and staff going forward. In addition, employees continue to contribute $100 a month to their retiree medical benefits and a vesting schedule is implemented so employees must work at least 5 years to receive retiree medical benefits. Side note to SchoolMates fans: Many employees don't work long enough to vest but are still required to contribute to retiree medical.
Retirement: It depends whether the employee is in public safety (police and fire) or miscellaneous (parks, recreation, administration) and when the employee was hired (before or after Jan. 1, 2013). Public safety employees already contribute 9 percent of the city's employee contribution to CalPERS. Miscellaneous employees previously made no contribution and beginning in 2013 will contribute an additional 2 percent a year so that in four years, they will be contributing 8 percent of the city's employee contribution to CalPERS. Both employee groups pay 50 percent of the increase in the CalPERS rate, capped at 37 percent for public safety and 22 percent for miscellaneous. And there have been changes in the retirement plan in terms of the percent of salary and years of service that determine an employee's pension, but roughly 90 percent of Piedmont's employees were hired before Jan. 1, 2013, so those older plans are still in place: 3 percent at age 50 years for public safety and 3 percent at age 60 for miscellaneous. Tough it out in Piedmont for 30 years and you can retire on 90 percent of your salary, with medical!
There are many other terms in the contract, such as vacation and holidays and car allowances, but the terms described above pretty much set the tone for the next four years and it's pretty good for employees, compared with other cities of our size.
Coming off a $3.4 million transfer tax, that was to be expected, given that no raises have been awarded over the past three years. And all employees are now contributing 8 percent to 9 percent to their retirement. But long-term projections by the Municipal Tax Review and Budget Advisory and Financial Planning committees led to recommendations of a complete cap on benefits and that was not achieved in these latest contracts. And neither report factored in the annual $1 million contribution independent auditors recommend Piedmont set aside for retiree medical costs. The next City Council should not wait another four years to implement the changes that are needed for Piedmont's long-term financial stability.
Garrett Keating is a Piedmont City Council member.