News

Palo Alto offers raises to largest labor union

SEIU employees would see salary increases of 10% over three-year period, with some utility workers getting extra

Citing significant recruitment and retention challenges, Palo Alto is preparing to approve a new three-year contract with the city's largest labor union that would include an immediate 3.5% salary hike and raises as high as 20% for critical utilities positions that have been particularly difficult to fill.

The city's contract with the Service Employees International Union, Local 521, will also give the union's 580 employees a 3.5% raise on Dec. 1 and a 3% raise on Dec. 1, 2020, while requiring them to add an additional 1% of their salaries toward the "employer paid" portion of pension contributions. The city had traditionally footed the entire employer-paid portion, but has recently required workers to contribute 1%, which would be raised to 2% starting in Dec. 1, 2020.

Some of the biggest salary increases will be in the Utilities Department, where recruiting challenges have been most acute. The city's electric operation, which has 68 positions, has 18 vacancies, including all three electrical assistant positions, according to a Feb. 6 presentation that utility staff gave to the Utilities Advisory Commission. And five of the department's 15 electrical lineperson positions were vacant, requiring the city to increasingly rely on contractors to maintain transmission lines.

Tomm Marshall, assistant director of utilities, told the commission at the meeting that the city is also likely to see "a large number of people" leaving the city at the end of the year, in many cases because of retirement. Currently, some utilities employees commute from as far as Lodi and at least one lives in a car throughout the week, he said.

"After a while, they look for closer jobs so that they don't have to make the two-to-three-hour commute each way to get here," Marshall told the commission.

According to city data, in 2017 the lineperson position had a pay rate of between $46.90 and $61.51 per hour, with the highest paid lineperson earning $161,672 in total compensation that year (which included $37,160 in overtime).

The new contract tries to make these positions more lucrative by adding a 20% salary increase in addition to the across-the-board increases every union member will receive. When coupled with the two subsequent across-the-board salary increases granted to all SEIU employees, workers in these and other hard-to-fill positions would get a 30% raise over the contract's three-year term.

The proposed contract, which the City Council is scheduled to approve on April 22, is estimated to increase city costs by $3.7 million in fiscal year 2020 (which begins on July 1, 2019), and by $4.4 million and $4.8 million in the two subsequent years. The majority of the costs will be in utility funds, which are disproportionately impacted by the city's recruitment and retention challenges, according to staff.

In the general fund, which covers most basic services (outside utilities), the projected increases are $917,000 in 2020, $1.2 million in 2021 and $1.3 million in 2022, though some of the costs will be offset in the third year by greater pension contributions from employees.

Despite the increased expenditures, top management believes the adjustments are necessary to bring stability to a workforce that beset with vacancies — a trend that staff attributes largely to the high cost of housing. The problem is particularly pronounced in Palo Alto. A new report from the Human Resources Department notes that geography "plays a greater role in impacting Palo Alto than many of our comparator agencies because 60% of the City's workforce lives more than 30 miles from Palo Alto."

"This key factor makes Palo Alto vulnerable to losing employees to other cities or employers who are closer to their residences," the report states.

In the SEIU bargaining unit alone, there are currently 70 vacancies, according to staff, a number that has grown steadily over the past three years.

The Human Resources Department states that compensation package "will allow Palo Alto to be more successful in retaining current employees and to compete for new talent." The parties had met 23 times between September 2018 and last March to reach these terms, with the SEIU voting to ratify the tentative agreement on March 27, according to staff.

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Comments

4 people like this
Posted by Annette
a resident of College Terrace
on Apr 12, 2019 at 1:23 pm

Annette is a registered user.

Almost daily there is a news item that makes it glaringly clear that we need a moratorium on commercial development and a housing development program for people with community serving jobs. And yet we never read stories about the creation of new job centers or fully housing-mitigated development. On the contrary, we read about mega commercial development plans in the pipeline that are blatantly short on housing. If you will pardon an unpleasant analogy, this is like a person with lung cancer smoking a pack a day: the inevitable result cannot be good.

In today's paper alone we have this story about staffing (an infrastructure issue), the cell tower (also infrastructure) story, the SFO pothole (again, infrastructure) story that delayed 218 flights, and the news article about 28,000 homeless in the region. Are our elected officials and other decision makers so enamored of developer $ that they are impervious to the very real, very serious, possibly insurmountable problems that the unsustainable job creation is visiting on this city and the region generally?


7 people like this
Posted by Wayne Martn
a resident of Professorville
on Apr 12, 2019 at 2:21 pm

The City’s budget is clearly on auto-pilot. This can be clearly seen in the City’s yearly Long-Range-Financial-Forecast. No one on the City Council has any idea about how big these future expenditures for labor will be, or what the implications of these yearly, almost guaranteed pay increases will cause future residents because of the linked pension obligations. Sadly, no one on the Council ever asks about linked pension obligations.

The cost of labor for City services has grown quickly over the past few years. Using the City’s own data, the average per employee cost was about $148K in 2014. The 2019 per employee costs jumped to about $205K. This is a $57K increase in just six years. The 2020 per employee costs will likely jump by another $6K-10K. These increases will go on forever—unless somehow capped. Moreover, the City uses a geometric (non-linear) multiplier to determine pay increases. This is the same formula used by banks when computer interest. So, the taxpayers can expect to see bigger salary increases for City employees in the future.

Using the 2017 data which the City provided TransparentCalifornia, the following data about SEIU unit costs was obtained:

Number of emps:.......~600
Average salary:.......$76.7K
Average Total Salary:.$83K
Benefits:.............$39K
Total Cost-to-employ:.$122K

Of the number of SEIU employees during 2017, about 157 were paid over $100K.

Looking forward just twenty years, the City will be paying the following for SEIU labor:

Year...Tot-Comp....Tot. Salary
2028…..$159,182...$108,296
2038…..$213,927...$145,541

And the costs continue growing geometrically into the years beyond 2038.

When salary increases are awarded, the UAL (Unfunded Actuarial Liability) goes up. It currently is over $400M. As the costs of labor go up, the UAL is increased. The article indicates that SEIU employees will be required to contribute 1% of their salaries to help pay for their future pension payouts—which could be as much as 82% of their exit salaries, providing they were hired prior to 2013. Government agencies will see lowered pension costs sometime after 2033 because of the PEPRA law. However, the salaries will continue to increase—and the pension payouts will grow to the PEPRA limits, which will likely be about $188K by 2038.

Needless to say, this issue of pensions is raging throughout the country. Palo Alto is no different for other government agencies, although it does not seem to have done very much to provide the public all of the pension-related data that is needed to fully model our full post-retirement obligations for public employees (which includes healthcare costs also).

All of these increased labor costs will ultimately result in higher fees/fines/utility costs—which will not map into actual service increases, or anything that will look like increasing the quality of life for Palo Altans.


9 people like this
Posted by The Public Interest
a resident of Charleston Gardens
on Apr 12, 2019 at 5:55 pm

Didn't Eric Filseth say Palo Alto's pension liability was $900 million? How can the city afford these kinds of raises?


7 people like this
Posted by Palo Alto Is Not For Tea Party Indians
a resident of Community Center
on Apr 12, 2019 at 6:19 pm

> Didn't Eric Filseth say Palo Alto's pension liability was $900 million? How can the city afford these kinds of raises?

Simple. By increasing taxes & usage fees.


Like this comment
Posted by To Mr. Martn
a resident of Duveneck/St. Francis
on Apr 15, 2019 at 9:14 am

To Mr. Martn is a registered user.

While I agree with some of your points, for employees who are not Prop 13 protected, housing costs are increasing much faster then 3.5%. That's not being driven by government spending. That is being driven by a severe jobs:housing imbalance. Other cities increasing pay, and PA has to compete with them for employees.

Instead of just criticizing, what feasible solution can you offer to this complex problem?


Like this comment
Posted by Mark Weiss
a resident of Downtown North
on Apr 22, 2019 at 8:37 am

Mark Weiss is a registered user.

A better story might be the conflict between management of Stanford Hospital and the nurses union, CRONA.
The nurses voted to authorize a strike by an 80% margin.
This is the third time the negotiations have faltered like this.
Most of those nurses come a very long way to work here meaning there is no way to afford housing in this area on that pay.
And ever since Stanford brought in senior leadership from the state of Utah – a notoriously anti-union state – they have been giving the workers hell and ever since Stanford brought in senior leader ship from the state of Utah – a notoriously into union state – they have been giving the workers hell. Repeated for emphasis
So don’t do any elective surgery there for a while. And if you end up in the ER you might be treated by scabs .

Don’t get fooled again by Entwistle.


45 people like this
Posted by Baba O'Reilly
a resident of College Terrace
on Apr 22, 2019 at 9:03 am

> Don’t get fooled again by Entwistle.

Uh...did you mean 'Won't Get Fooled Again' by Pete Townsend of The Who from the 'Who's Next' album?

Are you a Millennial? I find they often like to quote things they think they've read somewhere.

Or were you referring to an obscure Palo Alto resident/local politician named Entwistle?


35 people like this
Posted by Parker Leahy
a resident of Leland Manor/Garland Drive
on Apr 22, 2019 at 11:46 am

Parker Leahy is a registered user.

"Don’t get fooled again by Entwistle."

John Entwistle wrote "My Wife" on that particular album.

Mr. Weiss is obviously not a rock musicologist.


25 people like this
Posted by Don't Get Fooled...AGAIN
a resident of Downtown North
on Apr 22, 2019 at 5:21 pm

Roughly 500,000 attendees were at Woodstock in 1969 yet over 1 million people have memories of actually being there.

And in Palo Alto alone, hundreds claim to have taken guitar lessons from Jerry Garcia at the Dana Morgan & Son music store in 1963.

Ludicrous embellishments are apparently a part of being a bonafide Palo Altan...as in yesterday and today.





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