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San Diego City Unions Tentatively Agree To Five-Year Pact

San Diego City Unions Tentatively Agree To Five-Year Pact
GUESTSMichael Zucchet, General Manager, San Diego Municipal Employees Association.

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.

The six unions that represent city of San Diego employees tentatively agreed to a five-year labor deal that is expected to save the city millions of dollars and largely end a 6 percent salary cut implemented several years ago.

Mayor Bob Filner estimated that the city will save $25 million in each of the first two fiscal years, of which $20 million will stay in the general fund, which pays for basic services like public safety and parks. The savings in the third year will be around $10 million, said Filner, who pushed for such a deal during last year's mayoral campaign.

"That's an incredible amount of money for our budget,'' Filner said.


The savings will come from lower annual city contributions to the employee retirement system.

In exchange, municipal workers will see 5 to 5.25 percent non-pensionable compensation increases through flexible benefit allowances that pay for health and other benefits and an elimination of all mandatory furloughs within two years, according to the mayor's office.

Employees had originally sought 14.5 percent raises over five years. Although it might sound like employees ended up with the worse end of the deal, Mike Zucchet, the general manager of the San Diego Municipal Employees Association, one of the city's unions, said that isn't true.

"From the city’s perspective, they’re publishing headlines as to what these increases mean to their bottom line," he told KPBS Midday Edition. "In terms of our employees’ bottom line, this amounts to an 8 percent increase over their first three years. So in other words, they’re going to be better off in terms of where they are today by about 8 percent."

Zucchet said the compensation increase agreements only last for three years, after which point employees will attempt to negotiate for a 3 to 4 percent cost of living pay increase.


“In terms of what the amount of non-pensionable pay increases will be agreed to in year four or five, those are not defined yet," he said. "So in that sense, it’s almost two agreements. On the one hand, it’s a five-year agreement; on the other hand, it only has three years of terms and can rightly be characterized as a three-year deal.”

Councilman David Alvarez said the deal is the best for taxpayers.

"It gives our employees some certainty, but we also are able to plan out over the future years for more services, which is really what taxpayers want,'' Alvarez said. "They want to see some of those services that have been taken away restored.''

The proposed deal would also implement a key provision of a pension reform initiative passed by voters last year, which places a five-year limit on the type of compensation that workers can use to later calculate their retirement pay.

City Councilman Kevin Faulconer, who helped brokered the deal, said if the agreements are signed in time, their savings can be included in the coming year’s budget.

“I’m going to be pressing very hard to be sure that they go to our top priorities, which is public safety, road repair and restoring hours in our neighborhoods to rec centers and libraries,” he said.

The agreements took a lot of work to push through because initially Filner and employees were asking for "double-digit, across-the-board pay increases," he said.

"But we had to hold firm," he said. "We had to hold firm on a deal that made sense for taxpayers, that was fair to our employees. And I knew we could get there."

The compensation raises, which employees won't be able to figure into their future retirement income, would eat up about half of the projected savings the first two years, according to Filner.

The mayor said city workers "have suffered a great deal'' as San Diego recovered from the recession.

The rank-and-file of all six labor groups need to ratify the contract, which would then be voted on by the City Council.

The San Diego Police Officers Association would receive a boost in total compensation of 2 percent in the upcoming fiscal year. Officers have been leaving the San Diego Police Department in droves for nearby agencies in recent years, mainly because of wide differences in take-home pay, according to officials with both the SDPOA and SDPD.

The raise in future years would be 1 percent, 2 percent, 1 percent and 1 percent.

Firefighters and lifeguards would be boosted 2.25 percent, 1.25 percent and 1.75 percent over the next three years. After that, they could reopen negotiations over pay, the mayor said.

The American Federation of State, County and Municipal Employees, Local 127; San Diego Municipal Employees Association; and Deputy City Attorneys Association would get an extra 1.75 percent hike in each of the next three years. They would also be able to reopen negotiations over compensation beginning with the fourth year.

Interim Chief Operating Officer Scott Chadwick said the city calculates the pay increases per union. The extra compensation could vary by employee, however.

Zucchet said the agreement is not perfect for either side, "but it works within all the challenges of politics and letigimate financial challenges that the city still has."

"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," he said.