Council Majority in Need of a Math Lesson on MOU

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Stephen-SouzaLast night the Davis City Council ratified yet another MOU by a 3-2 vote with Councilmember Sue Greenwald and Lamar Heystek dissenting.  The contract with the management group was a small step forward over the firefighters contract, however, on the whole it fails to deal with the most serious structural issues in a meaningful and sustainable way.

The discussion on Tuesday, was particularly enlightening, as the Council Majority essentially made three points, first they argued that this contract represents a savings of $744,000.  Second, they argued that while not as much as they might have liked, this contract marks the first time that the council has decreased the size of contracts.  Finally, they argue that this contract begins to deal with the structural issues.

Councilmembers Sue Greenwald and Lamar Heystek counter that this contract does not go nearly far enough, it leaves the bulk of the work to be done by future councils, the amount of savings is a third of the claimed $744,000, and at the bottom line, we could have gotten a better deal.

We also see from this discussion confusion, misplaced analogies, mixed metaphors, math problems, and general spin.

Councilmember Stephen Souza sums up the problems with the council majorities position as he attempts to counter statements from Councilmember Greenwald and myself, speaking during public comment.

Said Councilmember Souza,

“This is a $744,000 savings over what people are being paid right now.  What they’re being paid in the baseline in salary and all-funds benefits this is a savings of $744,000, that’s the math I was taught in school.  And that’s the math that I see when you add the numbers up.  Calculating what is being paid on an annual cost this year, or salary from last year, if you look at 08-09, it was $8,638,000.  You multiply that times three you end up with $26,414,000.  If you take the contract, all funds, in this MOU, you have $25,670,000.  That is a savings of all funds of $744,000.  I think that’s all funds that we’re talking about, not just salaries.”

The math I learned in school tells me that $8,638,000 multiplied by three is not $26,414,000, rather it is $25,914,000.  You subtract this MOU from that and you end up with $244,000 in real savings over the next three years, not $744,000.

He continued:

“That is a changed, that is a change, there is two analogies that have been used here tonight and I’m going to use both of them to turn them on their head.  The first one is the analogy that you can turn something around immediately.  That is a ski boat.  This city and the progression over the last 30 years, and I’ve looked at contracts going back to ’96, has been a progression that has gotten us to the point, from all the councils, up to this council, where it was continually upward, in benefits, in salaries.  This is the first contract that is the beginning of the turning of this aircraft carrier.  And it takes a long time to turn an aircraft carrier around for anyone who has ever been on one, it doesn’t happen overnight.  Doesn’t happen quickly, it takes awhile.”

This is the first of two places where he misplaces his analogies.  First he claims that there is “the analogy that you can turn something around immediately.”  Leaving aside the fact that there is not an analogy, he constructs his own and then imposes it on the conversation arguing that the city is an aircraft carrier.

The problem with his argument is that no one is arguing we can fix the problems overnight, the dispute is over how far to go in this first contract and his opposition is arguing that we have not gone far enough. 

In fact, he seems to agree in part when he continues the analogy saying:

“I would have loved to have seen a much further turning of this aircraft carrier in this year, but I’m happy that I’m on a council that has begun that movement and that turn in the direction of the citizens of this community that are paying those salaries and benefits.”

Councilmembers Greenwald and Heystek are simply arguing that we could have gotten a better deal and Mr. Souza’s analogy does little to disprove that contention.

He then continues by torturing the analogy that I made in my comments:

“Second one is, I would much rather punt rather than continue to have a score on you as a city by the bargaining groups.  That score is a continued upward movement.  That means we’re playing good defense when you force someone to punt.”

My argument and use of the punting analogy was to suggest that the current council was punting the bulk of the difficult decisions to future councils.  His statement that we’re playing good defense when you force someone to punt is completely misplaced.  We haven’t forced anyone to punt, they forced us to punt.  Apparently he is arguing that the bargaining groups are playing good defense against us.  I’m not sure how us punting prevents the bargaining groups from scoring on “us” as a city.  It seems it simply gives them the ball back in three years and we have not proven we can stop them from scoring except this year when we had the aid of a huge penalties in the form of a $3.5 million deficit not only for this year but for the foreseeable future.  Without such impediments, it does not seem nearly as likely that future councils will have the leverage to continue with structural changes.

Not content to stop here, he continued:

“I would also add that there are structural changes here, not huge.  We could have gone for one.  We could have said okay, let’s not do four, let’s just do one.  But we attacked four different areas.”

He admits that we did not make huge structural changes.  We may have actually been better off attacking one structural change and actually fix it.  Instead, we have done very little on four as he suggests.

As far as I can tell, here are the structural changes, for the next three years:

“Employees agree to cover any additional cost of the FY 2008/09 PERS employer contribution rate, up to an additional 3%, for the life of the contract. For Fiscal Year 2009/10, employees will pick up 0.453%.”

This is not really a structural change per se as it only extends for three years and it was traded for a small increase in salaries for the two succeeding years.

They achieve a vesting period for retiree medical benefits.

“The MOU proposes to implement the standard CalPERS vesting for current and future employees for retiree medical benefits. Once an employee has ten years of service with a PERS agency or agencies, a minimum of five of which must be with the city of Davis, then the employee receives 50% of the benefit level. The percentage paid by the City increases 5% with each year of service after that, until the full benefit is attained at 20 years of service with a CalPERS agency/agencies, at least 5 of which must be with the city of Davis.”

This is a small change that does not attack the underlying problem and the $42 to $65 million unfunded liability which will have to be dealt with by changing the retirement age and reducing the gap between when city retirement benefits kick in and medicare picks them up.  This may reduce the number of people who receive the maximum benefits, but given that this is the management group, it may be that the majority end up working the full 20 years anyway, so the savings will be negligible.

The cafeteria plan is to cap the current $18,000 per year payments and then cap benefits for new employees.

While this is a small step up from the fire contract, it does throw new employees under the bus compared to existing employees who take no cut (whereas the firefighters actually had to take a small reduction).

The problem here is that you are giving people cash when they do not need to use their medical benefits due to a spouse having coverage.  No one does this.  And while this reduces it in the future, as Councilmember Heystek pointed out, we have a hiring freeze right now so we are looking at this impact way in the future.

The fourth one must be looking at reduced second-tier retirement benefits for new employees, but this has not been acted on as of yet and it’s not clear what that would entail.

As far as I can tell, we have not really gotten at any of the real structural issues.  The Cafeteria plan is not a structural issue, it is just poor policy.  The structural issues are the retiree medical benefits, they dealt with a vesting period but not the vast majority of the unfunded liability.  The vesting period for new employees was little skin off the back of the bargaining groups anyway.  And we have not dealt with the pension costs in any meaningful way.

The city needs to deal with the retirement age, that would solve a lot of the problems with the unfunded liability.  It needs to increase the amount that employees contribute for the pensions and produce a two-tired system so that we do not give out unsustainable retirement pensions to new employees.  Short of dealing with those issues, we have no resolved the structural issues.  We have given them lip-service here, that’s about all.

Councilmember Souza continued:

“In this contract and sought through negotiations, it’s not demands, it would be great if we could just demand upon our employees, we are going to tell you that you are going to take this, well that’s not the way that negotiations work, it’s a give and take and you get to a point where you reach an agreement hopefully and not have to go to a process called impasse, as we have and are in the process of with one of the bargaining units.”

This is again a strawman argument.  No one suggested that we go outside of the bargaining situation, the desire was to push for a better agreement and if the bargaining groups were unwilling to deal with these issues, we could have imposed impasse.

Instead, we saw that the first signers got the best deal, as the council faces scrutiny, each succeeding group will get a tougher and tougher settlement.  So far the managers and the firefighters have gotten off with some very small concessions, the majority of the employees have not reached agreement however and the rank and file are likely to get a far worse settlement.  We will be monitoring that for certain.  There is a fairness issue at play here that some bargaining groups should not be given advantages over others.

Next Mayor Pro Tem Don Saylor stepped up to the firing line.

“I support this contract, I do believe it is a fair deal between the employees and the city.  That’s the bottom line.  If we had no change in the contract, what would happen is the existing contract from last year would persist, the cost of that contract as Stephen pointed out is $8.6 million a year.  That would go up if we didn’t have this contract, we would see increased cost.  By agreeing to the provisions of this contract, there is savings to the city of $744,000 from what we had budgeted for this year and what we had projected for next year and the year after.  That’s a clear savings.  How much it is, we can quibble about that.”

At least the Mayor Pro Tem got the argument correct here.  The city has calculated the $744,000 in savings as savings over what would have happened had the current contract been extended.  But that is not savings in a real way.  That’s a government sleight of hand to suggest that they made “cuts” when in fact all they did was reduce from the projected number–a number that would never have been re-upped given the current economic demands.  This contract savings the city about $244,000 over the baseline that we spent in the previous fiscal year.  That’s roughly $80,000 per year and the majority of that is in year one.

He continued:

“But the situation is that for the first time in anybody’s memory we have a city contract with employees, this one and the firefighting contract, that both reduce the city’s compensation cost.  They were both arrived at through negotiated agreements with employee bargaining groups.”

He fails to note that this is probably also the first time in recent memory that the city has faced a $3.5 million deficit during the time when it was negotiating new contracts.

The Mayor Pro Tem continues:

“There’s always disagreements of different sorts.  Should there be more or less?  Each of the employees involved in this bargaining unit is putting up…

[He confirms with Assistant City Manager Paul Navazio that we are saving $360,000 this year and that there are 49 employees in this bargaining unit, the average amount of savings is between $5,000 and $8,000 according to Navazio ]

So it’s between $5,000 and $8,000 per person that the city of Davis management employees are giving up as a part of this contract.  You know that’s money, that’s real compensation to people, to their families, it is a change, I realize that many that many people in our community have experience more than that, or at least that.  Would you like to do that?  Is that what you want?  I don’t think you do?  I’m supporting this contract.”

But again this is all in contrived money.  These employees are not receiving between $5000 and $8000 less than they did last year.  It’s not even close.

The $340,000 savings that Mr. Saylor refers to is the amount under the baseline.  But a good portion of that is not a pay cut but rather the forgoing of a pay increase.

Over the course of the three year contract, the city is saving $244,000.  That means over a three year period, the employees are receiving a TOTAL of $4980 less in TOTAL COMPENSATION than they did this year.  That is roughly $1660 per year.  Remember these are the managers, the people who are making between $100,000 and $150,000 per year and more than that still in total compensation.  And from that total compensation all they are losing in real dollars that they had in their pocket this year is $1660 per year. 

State workers who are making less than $40,000 have had to take 5% or more cuts.  In others, these people who are making a fraction of what these managers are making are in some cases taking larger cuts in real and absolute dollars than our managers are.

What is more is that the city manager last year signed a contract where all he did was forgo his salary increases, he did not take a real pay cut.

That’s the leadership of this city and the example that they have set, they have taken what amounts to a $1660 cut in total compensation per year for a three year period and the council majority has the audacity to call this progress and say this is our first cut.  Yes, it may be the first cut, but it’s the only time I know of where we had a $3.5 million deficit.

No wonder these are making poor decisions, they are not even dealing in real math.  Councilmember Souza did not even bother to use a calculator before trying to give Councilmember Greenwald a math lesson.

With all due respect to the councilmember, the meeting last night was indeed the Council Majority lining up in punt formation and handing the problem over to the rank and file employees as well as the next council to clean up the mess.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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11 thoughts on “Council Majority in Need of a Math Lesson on MOU”

  1. EastDavid

    Hard to believe that no one has commented. This seems to be a critical issue for the future security (financial) of our community. And it seems that the council (in general) has dropped the ball while simultaneously patting themselves on the back. Perhaps they worry more about future revenue for their campaigns than the future legacy for our city. Why can’t they tune in here and respond/defend themselves? They sure don’t allow any give and take between citizens and themselves at the council meetings.

  2. Mike Adams

    I agree that this is certainly a missed opportunity. To me it is a slam dunk to say to the city employees we are not going to give a huge bonus to those workers who have other health insurance coverage – just a large bonus of 25% of the amount otherwise spent. This seems like a no brainer. Instead they settl on 80% of the total cost? And this bonus is patently unfair to households with a singe earner, or a spouse who doesn’t have employer provided health care. I am disappointed.

  3. Sue Greenwald

    Management didn’t even agree to cap the cashout at 80% of medical. Council capped the cashout at $17,796, which is safely over 100%, so there was no structural change at all in the cashout. The council majority was trying to sell a theoretical cap that won’t be reached during this contract period as a “structural” reform.

  4. hpierce

    To Ms Greenwald… what is the CC benefit for medical/dental? what is the benefit if any, for retiree medical? do you folks have to vest at the same levels that the Management MOU will require? Are you folks able to cash out benefits if you are covered under your spouse’s medical, dental?

  5. Greg Kuperberg

    hpierce, I don’t know the details of the benefits packages for the city council itself. But the short answer is that it doesn’t cost much, and in general the compensation for serving on the city council is basically chicken seed.

    A lot of qualified people would never consider serving on the city council, a number of qualified people who have served might well think that no good deed goes unpunished, and in general the city council can only have so much clout because they are semi-volunteers. Lack of compensation for the city council shifts influence onto the city manager. Still, I respect anyone who serves on the city, because these are people who are trying to help, despite the marginal terms of the job.

  6. hpierce

    Greg… agree on total $’s… Sue has made point ( & Lamar? ) on the principle of “setting an example”… if the vested members of the Council get ~ $18,000 per year, in benefits and/or cash, during their lifetimes (yes, I know Lamar won’t vest)(not just during the terms of service on the Council), shouldn’t this be disclosed? During the terms of service, I agree that the benefits are appropriate, given their small stipend… still are there two classes of people who work for the City? Those who are hired & those who are elected? I feel that the concessions given are are a step in the right direction. The cash-out of unused medical contributions is flat-out wrong, but emploees have built their budgets on it, so in my opinion they should be “weaned” but not instantly.

  7. David M. Greenwald

    But they get $500 per month as a stipend, so the only benefit they get is health coverage if they have served two terms, that doesn’t seem like a huge cost to the city especially compared to city employees who get that plus a large salary and more.

  8. Rich Rifkin

    As far as I can tell, serving on the City Council takes about double the hours a month as serving on the Board of Supervisors. (The Supes each have full-time staffers, who are paid $63,000/year + benefits, serving their secretarial, research and outreach needs.) In contrast to the small stipend given to the members of the Davis City Council and health insurance, the Supes get a $59,000 salary and $20,107 for their health care ($79,107 total), which they can cash out. In Davis, the CC members, I think, cannot cash out their health care coverage.

    Because all of the Department Heads (DA, Sheriff, Clerk, Assessor, Tax Collector, Guardian, etc.) are elected independently, the supervisors have very little authority over them. They have some powers, but not a lot. Like with the city of Davis, which is run day-to-day by the city manager, the county is run day-to-day by a County Administrator.

  9. rakvet

    The problem here is that you are giving people cash when they do not need to use their medical benefits due to a spouse having coverage. No one does this.

    Not a true statement, other cities, counties etc. do have cafeteria cashback, albeit most are not as substantial.

  10. David M. Greenwald

    It might be helpful if you cited examples and amounts. I called a few months ago to comparable cities and none of them had a cafeteria cashout plan.

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