After much contention, the Davis City Council discussed an area being used to curb the city’s expenditures in the face of a suffering economy.
The council passed the Individual Management Employees Memorandum of Understanding in a three to two vote at last Tuesday’s meeting. The MOU supplements the Management Group’s labor contract. The group includes 40 employees from all city departments.
The three-year agreement (July 1, 2009 to June 30, 2012) specifies that the Management Group will take on an additional seven furlough days this year: six days next year and three days for the last year of the contract, or the 2011-12 fiscal year.
It will also pay a share of the employer’s contribution to the Public Employee Retirement System if rates exceed three percent a year. Meanwhile, the city will continue to pay the full employees’ share. The contract also establishes a 10-year vesting period for employees to receive retiree health care.
Along with the cuts, the MOU also includes a 3 percent Cost of Living Allowance (COLA) increase over the three years of the contract.
Councilmembers Lamar Heystek and Sue Greenwald voted against the decision.
“There’s no reason for a COLA increase, especially since it has been shown that cost of living is going down,” said Councilmember Lamar Heystek.
The “cafeteria cash-out” for public employees will be capped at $1,483 per month, or $18,000 per year. The cash-out plan has been in place since 1986. It allows employees’ families with spouses who have health insurance to take out money that would otherwise be used for health insurance benefits as part of their paychecks.
“We want to put a cap on these benefits because they are becoming increasingly costly to the city,” said Councilmember Stephen Souza. “Of course we want our employees to be insured but we would prefer to have them insured with us from here on out.”
Greenwald suggested that the cafeteria cash-out should have been either eliminated or reduced to $4,000 per year.
“This benefit currently costs the city $4 million a year,” Greenwald said. Neither the university nor the state has this provision. If we substantially reduced the cash-out, we could probably save about $3 million a year.”
Souza estimated that about 25 percent of the current management employees take the cafeteria money. New management employees will only be able to take out a maximum of $500. New employees can expect to have fewer benefits than pre-existing employees under a second-tier retirement system.
“New employees take the job with full knowledge of the fact that they will have fewer benefits,” Souza said. “And that’s full disclosure. It’s unfair to cut current employee salaries and if we asked for that it would be unfair bargaining.”
While the council majority felt that the employees had made concessions that would help bring fiscal stability to the city, Greenwald and Heystek argued the concessions were minimal.
“I think the management group should set an example as leaders and take on more responsibility,” Heystek said. “Higher paid employees can afford to shoulder more of the burden.”
Greenwald argued that the city management had not made concessions equal to those made by the university or state workers.
“The city has a number of benefits that are far greater than those of other public agencies such as the university, the state and the school districts,” Greenwald said. “My goal has been to get the benefits structure in line with those of other public agencies such as the university and the state.”
The majority of the projected savings will come from furloughs.
“Furloughs are a short term fix,” Heystek said. “Nobody is denying that we will get savings, but the question is: should the bulk of our savings come from a short term fix?”
Some believe the projected $744,000 in savings is a fictional figure and that savings in “real money” is only about $244,000 as compared to the base year, or the last fiscal year 2008-9 that is used as a comparison point. The bulk of these savings is projected to come from the first year of the plan and decrease from year to year. In fact, the third year has a 1.9 percent projected increase from the MOU base line year.
Greenwald felt the lower figure was a more useful savings estimation.
“The $744,000 is the savings from hypothetical pay increases that were built into the long-range budget,” Greenwald said. “The $244,000 is the actual savings from the baseline cost of the management contract to the city in fiscal year 08-09.”
Souza sees the MOU as groundwork for the future.
“The analogy I used is that we’re not a ski boat and we can’t just turn on a dime,” Souza said. “We are an aircraft carrier and it takes time to turn it around. I believe we have laid the groundwork for turning this ship around financially.”
Heystek feels City Council could have done more.
“It has been said that we’re setting the tone for future councils, but I don’t want to ascribe responsibility for making the city fiscally sound to future councils. It’s my responsibility now,” Heystek said.
JANE TEIXEIRA can be reached at email@example.com.