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Mickie Winkler updates residents on the city's labor negotiations, Safeway development

Original post made by Neighbor, Hillview Middle School, on Nov 29, 2006

Councilwoman Mickie Winkler e-mailed this message to Menlo Park residents on Nov. 27.

Fellow Residents, The following items have accumulated during our long and hopefully happy weekend.

After several months of negotiations, the City of Menlo Park has reached impasse with the Service Employees International Union Local715(SEIU), whose contract with the City expired at the end of October.
The parties have reached impasse on: wage increases, on how to manage the rising cost of health insurance premiums, and on the union's demands for enhanced retirement benefits.
The City's budget is very sensitive to any changes in employee compensation and benefit packages because the city is a service organization and over 80% of total expenditures are on employee costs.(This figure will increase when post-retirement health-care benefits are factored in.)

Retirement benefits
Currently, retirement benefits (not including post-retirement health-care benefits) for non-safety workers are calculated on a 2% at 55 formula, which means that after 30 years of service an employee making $75K can retire at age 55 and receive $45,000/yr for life with an additional cost of living adjustment currently capped at 2%. If the formula goes to 2.5% at 55 that same employee receives $56,250/yr for life.
And if the formula increased to 2.7%, that same employee receives $60,750/yr for life.
The city's contribution varies with the formula -- and the health of the pension fund.
The "years of service" begin when an employee enrolls in the system, and carries over from member municipalities, although each city pays its pro-rated share. The benefit is calculated on the highest 12-month salary, so salary increases directly affect retirement costs.

Next steps
The City and the Union must now agree on a mediator and a schedule. Negotiations will be guided by the new City Council.

1. Safeway will remain open for business during its 3-phase remodeling process. Weather permitting, the current "parking lot" phase will be completed on Jan. 2. (Note, the underground garage has been restriped for increased and better parking while the parking lot is being improved.) Left-hand turn lane from north-bound El Camino Real into Safeway is being prepared.
2. The interior of the grocery store/pharmacy will be reconfigured and expanded.
3. The new retail stores on the north side of the parking lot will be built.

In the last email update re: Menlo Park's new Utility User Tax, some of you correctly pointed out that I neglected to include "cable" in the list of utilities that will be taxed. (Cable, phone, cell phone and DSL will be taxed at the 2.5% rate. Gas, electric and water will be taxed at 3.5%) Sorry.

As always, your comments or (or corrections) are welcome.
Mickie Winkler, Menlo Park City Council until Dec. 5.

Comments (6)

Posted by MPworkingMom
a resident of Menlo Park: Central Menlo Park
on Nov 29, 2006 at 7:06 pm

I thought the utility tax rate still had to be set by the council. Aren't those the maximum tax rates cited by Mickie?

Posted by Neighbor
a resident of Hillview Middle School
on Nov 29, 2006 at 10:58 pm

WorkingMom: You are correct. Those are the maximum rates, and the council sets the rates.

Posted by Political Animal
a resident of another community
on Nov 30, 2006 at 7:26 pm

I suppose it's no secret at this point that I'm a sympathetizer with the city employees and I view anything from Mickie with a high degree of skepticism. She has a record of twisting numbers and misleading the public, and she's had an axe to grind against city employees for some time now. Survey after survey of resident shows that most people are satisfied with city services.

The pension issue has been grossly misrepresented by Winkler and her allies. City employees contribute 7 percent of their pay to the city pension fund, and the city only contributes when employee contributions and investment returns are not enough to keep the system fully funded. For several years, the city was in fact paying nothing for city employee pensions because investment returns were so high.

A large part of the increase in retirement costs for the city has nothing to do with SEIU members; it's due to the police officer pension, which Winkler defends as necessary to stay competitive with other area law enforcement agencies. Becuase of the high risk nature of their work, police officers receive a much better pension than other city employees. The cost of the police officer pension his risen much faster than the cost of the pension for other city employees. I think our police officers do a good job and deserve every penny of it.

To me, the pension issue boils down to two issues: the city's ability to recruit and retain qualified employees, and the city's ability to pay. Most other cities in the area offer a better pension to their employees than Menlo Park. If we want to keep the good employees we have, we have to stay competitive. Measure K puts the city on much stronger financial footing for the future. If employees are willing to share in the cost of an improved benefit (for example, by giving up a pay raise), I think it's a benefit that makes sense. It allows Menlo Park to stay competitive with other employers, is fair to employees, and is fiscally responsible.

Posted by Fact Checker
a resident of Menlo Park: Downtown
on Nov 30, 2006 at 9:54 pm

Political animal - you are correct that the employee contribution rate is fixed at 7% and that the city contribution is variable and during the high tech boom went to 0%. However, the current rate is over 10% and if the requested SEIU pension increase goes through that rate will go to 16% according to CALPERS. Furthermore, under a defined benefit plan, the city takes all of the risk so if the market performs poorly or retirees live longer, the rate will rise even further as it has for the police pensions. If you are interested in more detail on how this works, you can look at MP city staff report Staff Report #06-163 available at Web Link or the CALPERS web site.

Posted by Political Animal
a resident of another community
on Dec 1, 2006 at 1:13 am

Fact Checker, I heard one of the candidates say something interesting about city employee compensation. He doesn't want them to have the best, he doesn't want them to have the worst. Right down the middle is Menlo Park's style. Most other cities in the area offer a better retirement benefit than Menlo Park. Menlo Park is in the bottom third and will soon be dead last.

Don't get me wrong, I don't want to foot the bill for city employees to drive around in Lexuses and Mercedes, but I do think Menlo Park should offer benefits that are comparable to other cities in the area. I like my park, my library, my road, and my safety, and I want skilled, experience, responsible people to provide those services. I don't want Menlo Park serving as a training ground for police officers, librarians, and teachers before they move on to other better paying jobs elsewhere.

It has to be done in a fiscally responsible manner. If the city employees are willing to bear part or all of the cost for the improved benefit they want, then it seems like a win-win for everyone. Yes, the city pays more when the stock market and other investments do poorly, but the city pays nothing when investments do well. It's unfair to compare costs during a recession to costs during a boom. If you look at the materials on the PERS website, you'll see that over time, city retirement costs have been stable and today's cost are not out line with the historic average. The only noticeable spike has been in police officer pension costs, and even Winkler defends that cost as necessary.

Cities get into budget problems when they fail to plan for economic downturns. They assume employee costs will stay at zero forever. That's why it makes sense for employees to share in the cost. We pay you less now in exchange for you getting paid more when you retire. That allows us to afford the cost of your benefits when the economy tanks.

Posted by StatWonk
a resident of Menlo Park: Downtown
on Dec 2, 2006 at 9:23 am

Just a note about the jargon formula (X% at Y), such as "2% at 55."

In this case the X% get used as a multiplier. So 2% at 55 means, a.) the employee must be 55 to be eligible to receive benefits, and the income received is determined by a formula that multiplies Years_of_service x Multiplier x Avg_Highest_salary.

In Mickie's example, under "2% at 55", someone with 30 years of service making $75k gets 2 x 30 = 60% x $75k = $45k per year in retirement benefits.

2.5% at 55 increases the multiplier. In that case the obligation would be 2.5 x 30 = 75% x 75K = $56,250.

So the "simple" increase in multiplier from 2 to 2.5 represents a recurring yearly increase of $11k for the employee after retirement.

I thought, but have not confirmed, that the salary used in the computation is not the highest value, or even the last salary upon retirement, but an average of the highest 3-year period. Someone who knows this fact should confirm it for us.

During negotiations, unions will typically ask for increases in the multiplier, "friendlier" formulas to compute average highest salaries, and lowering the retirement age.

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