Menlo Park's City Council voted unanimously Tuesday, May 4, to impose terms on the city's largest union, including a "two-tier" pension system.
Members of the Services Employees International Union (SEIU) and other regional labor leaders packed the council chambers, holding signs and urging the council not to impose.
They argued that the city had dismissed their ideas for saving money, and alleged that the city's decision to go to a two-year system was essentially punitive and politically motivated. Council members responded by saying the city needs to address a projected long-term budget deficit, and the instability of the CalPERS pension fund.
The system would increase retirement age for non-police city employees from 55 to 60, and would decrease pension benefits from a maximum of four-fifths of annual salary to three-fifths. While the council voted to impose it on the 152 SEIU employees, the system would only go into effect if the city negotiates the same deal with the city's middle management employees when their contract expires in 2011.
Henry Riggs, a leader of the "pension reform" drive, said Monday that the council's action would not affect his group's efforts, noting that the imposition is only temporary and contingent on future negotiations, and that the pension initiative would also require voter approval of any future pension enhancements.
The terms the council imposed also include a salary freeze, and a provision that would potentially increase employees' contributions to future pension and health care costs. The terms are similar to those agreed to by the union representing middle-management employees in December.
While the city initially made the same offer to both unions, SEIU rejected it, according to Personnel Director Glen Kramer. Negotiations have been at a standstill ever since.
Since December, the council's position on the two-tier system has apparently shifted. In a staff report, Mr. Kramer cites the continued economic downtown, as well as political factors, including the "public perception that the existing plans in place ... are excessive when compared to the private sector."
The "pension reform" group began gathering signatures for its campaign after the city agreed to that initial contract, and the issue has generated a lot of public interest since the recession began.
While several union representatives have suggested that the council's shift on the issue may have more to do with politics than financial stability, Councilman John Boyle said in an interview that the proposal is all about managing the city's risk.
"I certainly don't think this is just a political ploy," he said. "In my various conversations with other council members and with staff, I never heard anybody say anything (to that effect).
"There's a sincere intent here: We have to fundamentally change the model, and come up with something that is sustainable in the long run."
Asked why the city wasn't eyeing a two-tier system in late 2009, Mr. Boyle said that it's become clearer since then that the city's revenues are lagging. He also said that other nearby cities are implementing or exploring two-tier systems with more gusto, giving Menlo Park more confidence that it can be competitive in the labor market.
Councilwoman Kelly Fergusson said the two-tier plan will help the city's long-term financial situation.
"Without taking significant steps to modify the pension structure over the long term, we are looking at layoffs and a decrease in services," she said. "That's what we want to avoid."