January 29, 2009

Police, city ink tentative pay agreement

The city of San Jose and the Police Union tentatively agreed to a labor contract Tuesday.

The two-year agreement, which is scheduled for a council vote on Feb. 24, must still be ratified by union members.

The provisions include a 3.75 percent raise for the current fiscal year, which is retroactive to July 1, 2008. However, it also includes provisions for the union to relinquish pension enhancements. To sweeten that part of the deal, the city agreed to add 1.75 percent to the raise. On July 1 of the 2009-10 fiscal year, union employees will receive 1.5 percent increase, the same as the city’s other unions.

Mayor Chuck Reed thanked the officers of the union for “recognizing the fiscal challenges that the city of San Jose is facing and working diligently to reach agreement” instead of going through a prolonged and costly arbitration process.

“We felt it was important to help the city over the long haul by agreeing to measures that deal with rising retirement costs,” Police Officers Association President Bobby Lopez said. “But we also felt it was important to increase salaries significantly...We can’t adequately protect San Jose neighborhoods if experienced officers keep leaving because of low wages.”

Facing a severe $65 million shortfall, the mayor and the city manager’s staff continue to seek ways to cut city expenses. In the mayor’s State of the City address two weeks ago, Reed said there likely will be more service cuts and possible layoffs throughout city offices.

The pension enhancement would have cost the city $3.83 million a year. Each percentage point increase amounts to approximately $1.9 million.

Reed also thanked union leaders for “your understanding of the budgetary constraints the city is under, for agreeing to smaller wage increases next year and for accepting increases for this year that are the same as those that other bargaining units have also accepted during these tough times. This agreement will improve San Jose ’s already competitive position in the years ahead as we seek to recruit new officers from the small pool of individuals who are able to meet our high standards. This agreement also forges a solution that will not encourage our officers to retire early, a major concern as we look to the future.”

Union members stressed the need for strong wages and benefits to keep San Jose’s police force competitive in the face of retirements. While 15 officers have graduated from the Police Academy, the force remains shorthanded with 31 officers retiring this month.

The Police Officers Association is the first city union to agree to fund all retiree health benefits. Unfunded retiree health care benefits are a major source of concern, since new governmental accounting standards requires them to publicly acknowledge the liability.

Reed also commended union leadership “for being the first bargaining unit in the city to tackle the tough issue of the unfunded liability for retiree health care benefits. I want to thank the POA for taking a significant step forward to address these costs in a way that will not over-burden the city or the employees.”

San Jose’s retired city workers are eligible for a health plan with premiums that is totally paid by the pension system; they divide annual contributions with the city for that benefit. But those contributions aren’t keeping up with the projected future costs, creating an estimated $1.65 billion liability.

The police and firefighter retirement system has only 5 percent of its projected health care benefit costs funded. Under the agreement, officers’ retiree health care contribution rates will increase over five years, from 3.78 percent to 9.44 percent of their base pay. The city plans to help bridge the gap and leave the fund able to cover those future costs.