San Diego City Unions Tentatively Agree To Five-Year Pact
May 29, 2013 1:23 p.m.
Michael Zucchet, General Manager, San Diego Municipal Employees Association.
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CAVANAUGH: In our headlines, the City of San Diego has announced it's reached a 5-year labor agreement with city unions. The deal sets wage increases of 1% and 2% for employees for the next three year, then allows for a renegotiation of wage increases in years 4 and 5. And to the city's pension obligations, the pay raises can't be added toward city workers' pension income. Michael Zucchet is general manager with the San Diego Municipal Employees Association.
ZUCCHET: Nice to speak with you.
CAVANAUGH: In your opinion, does this agreement provide the city with the pensionable pay freeze that we've heard so much about?
ZUCCHET: Yes, if this agreement is ratified by the members of our union and all the other city unions, it will lock in a pensionable pay freeze over the next five years. And in exchange, the city is providing other nonpensionable pay increases to city employees for the first couple of years, and the contract will then reopen for additional increases in future years.
CAVANAUGH: How much money is the city expected it's going to save in the next few years if this agreement is ratified?
ZUCCHET: The pension actuary has estimated that the general funds saving to the city will begin with about $20 million in the next fiscal year, and that number will slowly grow to about $25 million per year in five years, and $30 million thereafter. So it adds up into the hundreds of millions of dollars over the next 15 or ten years.
CAVANAUGH: In the first couple of years though, aren't the pension savings all set by the pay raises themselves?
ZUCCHET: To a certain extent, yes. And so -- but again that money doesn't exist without the 5-year agreement, and presumably the city would need to compensate its employees and increase their health benefit allowances and be ability to recruit police officers and do all the other things a normal employer would do with cost of living adjustment, so to be able to pay for those things out of savings generated by the 5-year pensionable pay freeze works well for everybody.
CAVANAUGH: City unions had been asking for a 14% pay increase over five years. The agreement as it stands right now delivers significantly less than that. So why did you agree to it?
ZUCCHET: From the city's perspective, they're publishing headlines as to what these increases mean to their bottom line. In terms of our employees' bottom line, this amounts to about an 8% increase over the first four years. So they're going to be better off in terms of where they are today by about 8%, and we intend to reopen the contract in the last two years and secure 3% or 4% cost living wage adjustment at that point. And if you add up those numbers, this could end up being a 14% increase but only in the first three years of terms are guaranteed. But in terms of the general negotiation, I think this is a deal that nobody is jumping up and down and thumping their chest about, which probably means that it's a pretty good deal for everybody because this was a tough deal. Mayor Filner deserves a tremendous amount of credit for having this be his priority and for claiming during the campaign to be the only one who could get it done. And he got it done. And again, it's not a perfect agreement for either side, but it works within all of the challenges and politics and financial challenges that the city still has.
CAVANAUGH: My last question to you, if indeed negotiations on salary increases automatically reopen in years 4 and 5 of this agreement, how can you really call this a 5-year labor deal?
ZUCCHET: Well, it's a 5-year pensionable pay freeze. The reopener doesn't change that no matter what. And you're right, other than that, it's a little bit of an in-betweener. It's a five-year deal, but only the first three years of terms are delineated. So in terms of what the amount of nonpensionable pay increases will be agreed to in year 4 and 5, those are not defined yet. So in that sense, it's almost two agreements. On the one hand, it's a 5-year agreement, on the other hand it only has three years of terms and can be characterized as a 3-year deal. But either way, the city gets to lock in the pensionable pay freeze savings now, which benefits everybody, including employees.
CAVANAUGH: Michael, thank you.
ZUCCHET: Thanks so much.