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HomeMy WebLinkAbout07/18/2000, 6 - BINDING ARBITRATION council 'my 18, 200 j acEnaa Report ' CITY O F. .•S•A N LUIS O B I S P O FROM: John Dunn, City Administrative Offic Prepared by: Ann Slate,Director of Human Resources(joe SUBJECT: Binding Arbitration CAO RECOMMENDATION (1) Adopt a resolution in opposition to the proposed Charter Amendment to establish binding arbitration for the San Luis Obispo Police Officers' Association and the San Luis Obispo Firefighters Union, IAFF Local 3523. (2) Adopt a resolution placing an additional measure, "The Taxpayers' Right to Decide",on the November 7,2000,ballot. REPORT-IN-BRIEF The City Clerk has informed the City Council that proponents of a proposed Binding Arbitration Charter Amendment have collected enough signatures to.qualify the measure for the November 7, 2000 election. Based upon the experiences of other .cities, binding arbitration will have potentially negative financial impacts on City services for residents. A city-sponsored measure to ensure that public accountability and safeguards are in place, should binding arbitration be adopted, is being proposed for placement on the ballot. The City's proposed measure was developed with the active participation and input of community leaders who represent constituencies concerned about the potential fiscal impacts of a binding arbitration measure. Some key highlights of this report include: • Current state and local rules assure good faith negotiations and several methods for resolving differences—but without taking away a community's ability to make decisions about its resources. • Current state and local processes have worked very well for public safety employees with top step positions receiving salary and benefits between $75,000 to $87,000 (not including overtime). In addition, salary awards for police and fire union members over the last decade have exceeded the Consumer Price Index and awards for other City employee groups. Other benefits, such as retirement, are much better for public safety employees than other employees. • SB402, the binding arbitration measure moving through the State Legislature conspicuously excludes State safety employees. • The measure advanced by the SLOPOA and Fire Union not only subjects salary to binding arbitration, but also working conditions, undermining the ability of our Police and Fire Chief to manage their departments. • The local measure also ties to the San Francisco-Oakland-San Jose cost of living index— currently the highest consumer price index in the nation. 6-1 Council Agenda Report—Binding Arbitration Page 2 • Experience has shown that the procedural costs of binding arbitration are very high, depending upon the complexity of the arbitration process. Cities such as Anaheim and Salinas have had a multitude of issues referred to arbitration (80 in Anaheim) and excessive salary awards (over 21%in Salinas for a three-year contract). • In order to at least soften the adverse impacts of binding arbitration, should the measure pass in San Luis Obispo, an alternative measure is proposed, "The Taxpayers' Right to Decide". DISCUSSION How Labor Relations Differences Are Currently Resolved What does current State law require? Under the Government Code, Section 3500 et. seq., the Meyers-Milias-Brown Act (MNSA), California cities are required to meet and confer, or negotiate, in good faith with employee organizations on matters related to wages, hours and working conditions. Under the MMBA, resolution of negotiation impasses may be by voluntary mediation or through impasse procedures (e.g. fact-finding) adopted by the employer after meeting and conferring with the employee organizations. If the parties do not agree on mediation or fact-finding, or after so agreeing, the impasse has not been resolved,the local agency,i.e. the City Council,may take such action in its discretion regarding the impasse (for example, maintain the status quo or unilaterally adopt the last, best offer) that best protects the public's interest, particularly with respect to the City's financial health and ability to provide other critical city services, such as senior programs, children's services,parks and libraries. How are differences currently resolved in San Luis Obispo? The City of San Luis Obispo originally adopted impasse procedures in 1977, which were modified for police and fire employee organizations through mutual agreement in 1989. Currently decisions regarding wages, hours and other conditions of employment are made after meeting and conferring with the employee associations or unions. If an agreement cannot be reached through the negotiations process, a mediator is enlisted to attempt to bring the parties together. If mediation does not resolve the outstanding issues, the City's current process for police and fire employees requires a fact finder and a settlement panel who arbitrate the outstanding issues. Although the current process utilizes arbitration as a means of resolving the issues, the final authority rests with the City Council, which is directly accountable to the citizens of San Luis Obispo. As representatives of the community, the Council must balance the needs of strong and fairly paid public safety departments with what would be fair to other employee groups, and with competing priorities from the community, who has interests in neighborhood preservation, children's and seniors' services, public facilities, park improvements and environmental protection. 6-2 Council Agenda Report—Binding Arbitration Page 3 How has the SLO process worked for police officers and firefighters? There are many indicators that the current process of bargaining and resolving impasses is working very well. SLO's process for resolving differences, known as advisory arbitration, has been utilized once in the eleven years since the police and firefighters' associations and City management developed it and adopted it in 1989. That one instance, in 1998, involved the Firefighters' union and lack of agreement over how to restructure entry-level firefighter salaries to reduce overtime expenditures and to redirect the overtime savings realized by the restructure to increase the number of firefighters available per shift. The City of San Luis Obispo offers competitive compensation packages for public safety employees. Total wages/benefits paid for police and fire in the City's 2000-01 budget is $6.5 million, and compensation for top-step police officers,paramedics and firefighters(including fire captains) is $75,000-$87,000, not including overtime, which averages $4,600 per employee per year. Here are some other important facts: • Over the past decade, police salaries have risen 38%, firefighter salaries have risen 50%. Non-safety employees' salaries rose 33%, while CPl increased by 301/a over that same ten-year period. • Over the last 13 years, police officers and firefighters have received 56% and 68% increases in salary, compared to 34% for most management employees and 45% for all other City employees. • Public safety retirement is superior to other employees' retirement benefits, allowing for an earlier retirement age and significant tax advantages to disability retirement benefits. Even after instituting the reduction in starting pay for firefighters as described above, the city received over 800 applications for firefighter openings. The Police and Fire Departments experience little or no turnover or recruitment problems. The current system of advisory arbitration provides for mediation and an impartial arbitrator to assist the parties in reaching agreement but the Council retains local control of the ultimate decision should an arbitrated decision have negative financial consequences for the City. The Movement for Binding and Grievance Arbitration What is binding and grievance arbitration? Binding arbitration, also known as interest arbitration, is an alternative method used to resolve disputes regarding the final terms and conditions of an employee organization contract. It is a process that is utilized when impasse has been declared after meeting and conferring in good faith. The process requires that outside arbitrators be called in to make final and binding decisions on financial and operations issues. The unique aspect of interest arbitration is that an arbitrator, not the agency, is empowered to create final and binding contractual obligations on financial and,operational issues. The unique aspect of interest arbitration is that an arbitrator,not the agency, is empowered to create final and binding contractual obligations between the parties. Outside arbitrators normally do not live in the jurisdiction in which they are rendering their 6-3 Council Agenda Report—Binding Arbitration Page 4 decision, are not trained public safety experts, and, are not directly accountable to the local community. They usuallykrc dw little about a community's goals or needs. Grievance arbitration, also known as "rights arbitration", involves an arbitrator's interpretation of rights under an existing labor contract or other written policies and procedures. Currently, 20 cities out of 475 in the state of California have some form of binding arbitration. What is going on in State government regarding binding arbitration? In January of 1999, Senator John Burton introduced Senate Bill 402 to the State Legislature. This bill would mandate a system of binding arbitration on cities, counties and special districts in California to resolve disputes regarding contract negotiations with public safety employees. Of particular interest to those watching the legislative process and concerned about the passage of SB402 is the fact that the bill was amended early.in the process to exclude State public safety employees. It was a political move that begs the question if binding arbitration is such a worthwhile method for resolving employee disputes then why doesn't the State intend to follow such a process with State employees? SB402 will impact local government while the State will retain the authority over its employee costs that SB402 proposes to take away from cities and counties. Cities throughout California, including the SLO City Council, have voiced strong opposition to SB402. In February of this year, the City Council unanimously passed a resolution opposing SB402. SB402 as it is currently written will not preempt any local charter amendments enacted prior to January 1, 2001 that mandate binding arbitration on charter cities. What is happening in San Luis Obispo? In February of this year, the San Luis Obispo Police Officers' Association and the Firefighters' Union, IAFF, Local 3523, announced their intention to qualify a ballot initiative that would impose a system of compulsory and binding arbitration to resolve employee contract disputes. This was within days of the firefighters' union reaching agreement with the city on a two-year contract that among other things provided a 9% salary increase. The negotiations had reached impasse, the parties entered into mediation as described above and the parties were able to reach agreement, although the union was not able to achieve the 14% salary increase over two years that they had been seeking. Because of a technical failing, the proponents had to collect the adequate number of signatures to qualify their initiative twice. Both efforts proposed essentially the same amendment to the charter. The most significant aspects of the amendment are: • The measure proposes both interest and rights arbitration, as it includes issues related to- wages, hours and other terms and conditions of City employment, including grievance procedures. 6-4 Council Agenda Report—Binding Arbitration Page 5 • Disputes.would be resolved by a three member Board of Arbitrators consisting of one employee organization representative, one City representative and an arbitrator selected by both parties from a list of seven arbitrators from the State Mediation and Conciliation Service of the State of California Department of Industrial Relations. • Absent mutual agreement on the selection of the third arbitrator, the process requires that the parties would alternately strike names from the list until one name remains and that person would be the "neutral" arbitrator. Of particular interest in this section of the proposed charter amendment is the requirement that the City always strike first. Since every other similar process reviewed by staff, including the advisory arbitration process currently in effect for police and firefighters, requires a determination of who strikes first by lot, or a random striking order, this unique provision is intended to always place the City at a disadvantage. • The expenses of the neutral arbitrator will be shared by the employee organization and the City. • The Arbitration Board would make final decisions based on the last offer of each party on an issue-by-issue basis. This contrasts with some other cities' processes, which require final decisions on the total package. While there are pros and cons to both approaches, the total package approach has the greatest potential to require the employee organizations to present more plausible proposals during the negotiating process. Unfortunately that is not the process described in the proposed charter amendment. • The Board will decide each issue by deciding whose final offer of settlement, the City's or the employee organization's, it finds most nearly conforms to those factors traditionally taken into consideration in the determination of wages, hours, benefits and terms of conditions of public and private employment. Another unique provision of the proposed charter amendment when compared to similar processes elsewhere in California is the inclusion of a specific cost of living index. The local measure specifically identifies the San Francisco-Oakland-San Jose index which is currently the highest consumer price index reported in the nation. • No action by the City Council or the voters to modify the decision of the Arbitration Board would be permitted. Therefore, this measure vests the final control over the decision to an outside arbitrator. Why Binding Arbitration Should Be Opposed Why do cities oppose binding arbitration? Proponents of binding arbitration typically claim that the primary benefit of binding arbitration is that it is an alternative to strikes. Another claimed advantage to arbitration is that it brings finality to the bargaining process. 6-5 Council Agenda Report—Binding Arbitration Page 6 Opponents of binding arbitration do not agree that the stated advantages outweigh the disadvantages. Strikes ate prohibited by statute and case law for public safety employees in California so opponents to binding arbitration find the proponent's reference to binding arbitration as a deterrent to striking misleading. The most often cited concern by opponents is that interest arbitration effectively transfers an enormous amount of decision-making authority to a non-elected, unaccountable individual (arbitrator). Again, outside arbitrators normally do not live in the jurisdiction in which they render their decision, and may not be intimately familiar with a city's unique fiscal constraints, or the needs of its citizens. As an appointed, not elected, arbiter, the arbitrator is not directly accountable to the public at large. Opponents also say that interest arbitration will tend to result in more costly labor packages (through wage comparability or by "throwing money at the table" to avoid the process), and at a minimum, create a significant uncertainty in financial planning. The final awards made by an arbitrator may thereby affect a city's ability to prioritize or dispense other critical city services, such as senior services,programs for children and youth,library or park projects. Another concern involves the time and expense of protracted arbitration proceedings. Typical interest arbitrations take months or years to complete and cost from$100,000 to$300,000. Critics also worry about the tendency of interest arbitration to serve as a disincentive to good- faith negotiations within the context of the bargaining process. Reliance upon arbitration may deter efforts to actually resolve conflicts through negotiations. It may discourage compromises on contract issues in order to improve a position through arbitration. Additionally, an imposed resolution tends to be less stable and satisfactory to the parties' relationship than one arrived at through voluntary agreement The fact remains that binding arbitration divests local taxpayers—as represented by their city council—from the ultimate authority to determine how and where public monies will be spent to meet citizen needs. Why does the City Administrative Officer strongly recommend opposing binding arbitration? The City Administrative Officer is extremely concerned about the potential for binding arbitration to be mandated on the City, either by the State or through a local initiative. Attachment 1 outlines his concerns and the reasons why the City Council should continue to oppose binding arbitration. What are the financial implications of binding arbitration? In order to help assess the impact of binding arbitration on the City of San Luis Obispo, staff gathered information from a number of sources that have had experience with binding arbitration in California. 6-6 Council Agenda Report—Binding Arbitration Page 7 The City enlisted the services of Public Financial Management, Inc. (PFM), to evaluate the financial impacts of binding arbitration on the City of San Luis Obispo. PFM is a highly regarded financial and investment advisor to public agencies throughout the United States and has prepared similar analyses for other California cities. In addition, Keith Curry, Managing Director of PFM, has been an expert witness in arbitration hearings, testified before congressional hearings on municipal finance and is a frequent presenter at the League of California Cities. Attachment 2 is the report that PFM prepared for the City. The report provides a detailed explanation of the advantages and disadvantage to binding arbitration. In brief, they are: Potential Advantages • Improves employee morale • Offers finality in the negotiation process Potential Disadvantages • Discourages"good faith"negotiations • Hinders effective government and the ability of public officials to make fiscal decisions prioritizing the most urgent needs of citizens • Expensive procedural costs • Potential increase in salaries and wages of 2% to 5% than would otherwise be expected through traditional meet and confer, thereby potentially affecting the city's ability to provide other critical services for seniors, children and other constituencies • Potential impact on terms and conditions of employment The complete explanation and analysis of these are found in Attachment 2. What has been the actual experience of other cities? In addition to reviewing the analysis performed by PFM, staff contacted individuals from the cities of Anaheim and Salinas, cities whose voters passed binding arbitration charter amendments in the November 1998 election. The charter amendments in those cities covered fire union employees only. Recently both cities concluded arbitration proceedings. The fire unions declared impasse within months of voter approval of their binding arbitration initiatives. Anaheim Over 80 issues were submitted to binding interest arbitration by the union, IAFF Local 2899. Signed tentative agreements were reached on 13 issues during the hearing, which lasted almost twelve months. Nineteen issues remained at the end of the hearings. All other issues were withdrawn by the union. Some of the issues were: • Wages • Union/personal use of City e-mail 6-7 Council Agenda Report—Binding Arbitration Page 8 • Length of probationary period • AIIiount of bereavement leave • Prohibiting increases in staffing to eliminate overtime • Grievance procedure • Drug and alcohol testing based on reasonable suspicion • Fitness for duty • Residency incentive In May, 15 months after the process began, the Board of Arbitrators issued their award. Of significance was acceptance of the union's salary proposal that provided a 15% wage increase over three years; the city's proposal had been 10'/z%. In general, the union's economic proposals were awarded,while the city prevailed in a few management rights issues. The City will now be able to test firefighters for drug and alcohol use based on reasonable suspicion and require fitness for duty assessments. The City will not be able, however, to increase the number of firefighters on an engine company because it would result in the loss of certain overtime earnings. Despite eight days of hearings including expert testimony on municipal finance, the "neutral" arbitrator in his findings cited the City of Anaheim's Section 8.1ousing funds, and gasoline taxes as evidence of the city's sound financial condition and ability to pay for the union's proposal. He failed to realize that both Section 8 housing funds and gasoline taxrevenues are not available for general fund public safety salaries. They are restricted, special-purpose funds and the City is now in the position of reallocating funds to be able to pay for the arbitration award. The City's costs for the arbitration proceedings are estimated to be in excess of $100,000 plus significant staff time and expenses. The union's costs are undisclosed but estimated to be even higher due to the cost of expert testimony and their legal expenses. Salinas The City of Salinas had a very similar experience. IAFF Local 1270 declared impasse after 5 bargaining sessions in early 1999, after expiration of their contract on December 31, 1998. Issues included wages,work schedules and staffing among other issues. The award was issued in late May, over a year after the process began. Again, the union prevailed in wage increases. Their final settlement proposal was awarded providing them with an increase in wages of 21-'/: % over three years. The arbitrator was persuaded by the union's argument that the cost of living in Salinas is comparable to that of cities like Malo Alto and San Mateo, and so granted them the huge increase. In addition to the economic award for the union, the grievance and disciplinary processes are now subject to binding arbitration. This can have the effect of significantly reducing the Fire Chief's ability to properly manage the department and its employees. City officials estimate their costs to be in excess of $100,000 and those of the Union to have exceeded$250,000. 6-8 Council Agenda Report—Binding Arbitration Page 9 A Responsible Alternative: Taxpayers' Right to Decide Given the adverse impacts that binding arbitration may have on the City of San Luis Obispo, staff recommends the Council adopt a resolution (Attachment 3) opposing the proposed charter amendment sponsored by the Police Officers' Association and the Firefighters' Union. This opposition underscores the City's concern about the financial burdens that may be placed on the City by an outside arbitrator not accountable to the residents of San Luis Obispo. Furthermore, since the local initiative has certain features that make it particularly burdensome on the community, it is recommended that the Council place an additional measure on the ballot for consideration by the voters. Entitled the "Taxpayers' Right To Decide", this measure is intended to mitigate the negative aspects of the binding arbitration measure and to place some reasonable, financial safeguards on the arbitration process. The measure is intended to reduce the problems that can be anticipated based upon the experience of other California cities and to involve the voters of San Luis Obispo in determining how public monies should be spent. The proposed measure is provided in Attachment 4. In the event that the binding arbitration charter amendment is approved by the voters of San Luis Obispo, the City Council sponsored measure,the"Taxpayers' Right To Decide"would take effect. The key components include: ■ Limiting arbitration to salary only and requiring voter approval of any salary award arising from arbitration that exceeds the local cost of living index or the City's last offer of settlement which ever is greater. ■ Excluding disputes over working conditions, management rights, discipline, grievances and other benefits from binding arbitration and resolving those issues through existing processes that are the products of good faith bargaining. The current system already provides for arbitration of these issues, but retains local accountability for important operational issues. The will enable the Police and Fire Chiefs to effectively manage their operations to ensure the highest standards of public safety service. ■ Providing sanctions for striking and other work actions that would pose a threat to the public health and safety. This restates what the employees have already agreed to in their contracts but are attempting to dilute in their measure. ■ Requiring mediation. By using mediation as a dispute resolution alterative, negotiations in good faith will be encouraged and differences may be resolved prior to engaging in a lengthy and expensive arbitration process. ■ Not providing interest on any award through arbitration. By eliminating the possibility of interest, there is no incentive to drag out the arbitration process. The Taxpayers' Right To Decide was developed with the active participation and input of community leaders who represent a cross-section of constituencies concerned about the potential fiscal impacts of a binding arbitration measure. The measure is designed to build in responsible safeguards should the local initiative pass. In the event, that the initiative fails, the Council sponsored measure would not go into effect and the City would be able to continue fulfilling its employee relations responsibilities under existing systems. 6-9 Council Agenda Report—Binding Arbitration Page 10 Conclusion The expenditure of public funds is clearly one of the most important responsibilities of elected public officials. Binding arbitration seriously erodes a community's ability to manage a major portion of city services and to provide responsible financial oversight. An outside arbitrator who is not familiar with the community's funding priorities and may not possess the law enforcement or fire service expertise that we expect of those who direct the activities of our police and firefighters should not be given authority over the City Council. The voters of this community selected individuals to make decisions in the best interest of the community. An arbitrator does not have that same perspective. At its core, the governance of the City is founded on representative democracy. The arbitrator severs the representative connection between those who are held accountable for the actions of the City (the City Council) and the people who elect them, the residents of San Luis Obispo. Opposing the binding arbitration charter amendment and providing the voters of San Luis Obispo with a responsible alternative that provides greater local accountability serves the public interest, is good public policy and protects the City's financial resources. FISCAL EWPACT The cost of placing a Council sponsored charter amendment on the November 7, 2000, ballot is approximately $3,000. Funds are available for this expenditure in the current elections budget. No additional funding is required. Staff will provide strictly factual, non-partisan information on binding arbitration to the public in conformance with state law. ATTACIIMENTS 1. Memorandum from the CAO 2. PFM Study 3. Resolution opposing charter amendment 4. Resolution placing the Taxpayers' Right to Decide on the ballot G:agenda reporfs\Binding Arbitration 6-10 ATTACHMENT � council mcmomnbum DATE: July 12,2000 TO: City Council FROM: John Dunn, City Administrative Officer SUBJECT: Binding Arbitration—Why the C' is A t It It is timely for us to re-examine the fundamentals of why this City Council and the Council before them have taken a stance against the State legislature adopting binding arbitration legislation(currently in the form of SB402), and why it is important that the City redouble its efforts to educate the public regarding the ramifications of binding arbitration on the City. With the prospect of a local mandate for binding arbitration, it becomes even more important to focus on the fundamentals of this issue. First, I strongly believe an important introductory note is in order. While some will interpret the difference in opinion on binding arbitration as a personal issue, either on the part of City management staff or on the part of police and fire representatives who are pursuing a local initiative, I do not consider it a"personal"matter at all. I consider it as a critically important public policy issue,ultimately an issue that is diametrically opposed to and injurious to our form of government. That there is a difference of opinion on this matter in no way diminishes the City . staff's view that the protection of life and property is one of the most important functions of local government, that the City is blessed with excellent Police and Fire Departments, and that the men and women of the two departments are dedicated to their tasks and deliver their services to our citizens in a professional way. What are the basics of this situation from a City perspective? 1. Our elected representatives the City Council,must be allowed to be in control of the City's finances and the City's salary and benefits decisions. Of all of the points listed, this is the most"bedrock"issue. City government of the City of San Luis Obispo, like our state and national counterparts, is based on this concept of representative democracy, where our elected representatives have the responsibility to act on City matters based on the needs and interests of the City's citizens. It is fundamental that the City Council, rather than an outside arbitrator,be in control of the City's checkbook.- The City is essentially a service organization,where most of our money is spent on the salaries of employees who provide the City's services. The police and the fire departments represent two of our largest City departments;the City spends almost half of its General Fund budget for salaries and benefits for public safety personnel. Binding arbitration means in effect that an outside arbitrator rather than the City Council decides how the City should spend almost half of the community's General Fund. This is the same fund which is necessary to pave our streets,to present recreational programs to our youth, to provide for the homeless, and to present the full gamut of other services and facilities to our citizens. (n/,. H:WEAf01651P16183.Wr Binding Arbitration ATTACHMENT HMENT 1 July 12,2000 Page 2 2. The Police Chief and Fire Chief must be allowed to make decisions necessary to properlv manage their departments. This is the second fundamental point. Under both Senate Bill 402, and the proposed local initiative, "working conditions"have been included as being subject to binding arbitration. What does the inclusion of working conditions mean? It means whatever the labor units want or interpret it to mean. It means that if they are unhappy with any decision of the Police Chief or Fire Chief, this topic can be subjected to negotiation and ultimately binding arbitration. When Congress adopted the Taft- Hartley Act in 1947, it established the fundamental premise of American labor law. Employees have certain rights which cannot and should not be taken from them, and the employer has certain"management rights"that are necessary to operate a productive and goal-oriented enterprise. There are real dangers in a situation where management rights can become watered down by the union's ability to negotiate or arbitrate`working conditions"for their advantage. It has been said by experts examining the Ramparts scandal in Los Angeles that one of the contributing reasons for the creation of the scandal was the erosion of and the diffusion of the Police Chief's authority to run the Police Department. Eroding the authority of the Police.Chief and the Fire Chief to run their departments would ultimately be to the detriment of the community's public safety. The primary criteria for future negotiations would become what's best for the employees, not what's best for the community. 3. The City has been fair with our employees over the years. Although some, for their own purposes, will argue this point, any rational and factual examination of the data indicates that salaries and benefits for the employees of the City of San Luis Obispo have more then kept pace with the economy and with the actions of other regional local agencies over the years. In the almost 13 years that I have been with the City,police officers have received 56% and firefighters 68% in salary increases while the general employees have received 45%in salary increases over that same time period. The CPI over that same period of time has increased 42%. The City has historically gone from a poorer paying employer, to one where we are among the top public agencies in our region in regard to employee wages and benefits. In our employee salary and benefit negotiations, we have bent over backwards to adhere to the requirements of the law,which is the Meyers- Milias-Brown Act, adopted by the State Legislature in 1969. This requires that City and Employee Association representatives"meet and confer in good faith". We have consistently met both the letter and the spirit of this law. The City Council itself, over the years, has been very supportive of our City employees. 4. We presently have a good system in place to protect employee interests, including advisory arbitration. The State law itself was designed to be protective of employee interests, and the City has gone even further. Working with our Police and Fire Associations in 1989, we agreed to special local provisions to further protect employee interests. This included the concept of advisory arbitration, though this agreement retained the City Council's authority as the formal decision maker. This system was jointly developed by and agreed to by the two employee associations and City management representatives, and approved by the City Council. 6-12 Binding Arbitration 1QTTpiCHMs` July 12, 2000 Page 3 5. The statement has been made by Fire union representatives that the City is the reason they have not had a contract. This, from our perspective, is a distortion of what has happened. The time it takes to complete negotiations depends upon a number of factors, including the volume of issues raised by the parties involved,the complexity of those issues, and ability of each side to organize and reach consensus with their respective decision-makers. While our practice is to never reveal the details of a negotiation process, it is necessary to emphatically say that the unions themselves share responsibility for any delays in reaching agreement that they perceive to be excessive. Were it not for the fact that the City honors its commitment to keep negotiations confidential, this could easily be documented. 6. The local private sector would not tolerate a system where someone else determines their employees' salaries. Just to be hypothetical for a moment, suppose the City Council adopted an ordinance telling all company owners within the City what they could pay their employees. How many nano-seconds would it be before there would be an uprising against an effort by the City to compel external control over local private sector salaries? Yet,before the State Legislature and our local voters are proposals for a measure that would compel Cities to pay salaries and benefits determined by an outside arbitrator. This example illustrates that, fundamentally, even if the State Legislatures target is local government rather than the private sector, the principle is wrong. This is reinforced by the failure of the sponsoring State legislators to impose this requirement on the State's own public safety personnel. They as an employer know the problems this would cause for them. 7. There is no recourse to an arbitrator's decision, even if it is wrong and has horrible consequences for the City. If the arbitrator is overly generous, if the arbitrator is arbitrary, if the arbitrator is wrong, then the City has to live with that decision, and if, as a result, support for the library, or children's programs,or street maintenance has to suffer, then that's the way the cookie crumbles. There is nothing the City can do. 8. Binding Arbitration is about money and control of that money. The proponents of binding arbitration will talk about fairness, equity, or a"level playing field". A listener would naturally say that there are all legitimate and understandable concerns. Indeed, these concerns are the basis of'the existing State law,which was written for just this purpose, obtaining fairness. However,when you actually read the proposed local initiative or SB402, it speaks to a process specially designed to give public safety labor groups an advantage, in the three defined areas of salary,.benefits and working conditions. Binding arbitration is about getting more money for one specific part of local government. It is also about who controls the financial decision-making, our local elected representatives or arbitrators who may or may not have any understanding of prudent municipal financial practices 9. Over time,the effect of binding arbitration will mean more City money going to public safety salaries and benefits. This means there will be less available to build and maintain public facilities and to provide other essential public services. The City has attempted to approach the issue objectively,by retaining a consultant who has experience in this area. Our question was a simple one: look carefully at the twenty cities in Californ63 Binding Arbitration [� /�f Fr, . July 12,2000 "TT�'1vHclJ .:i'J7 Page 4 actually have binding arbitration and tell us whether these cities spend more in public safety salaries and benefits than those cities that do not have binding arbitration. His conclusion,based on the most reliable data gathering we could engage in, is"yes,"those cities which have binding arbitration spend more in public safety salaries and benefits. On page A-2 of our recent budget message to the City Council, the Finance Director and I wrote a section entitled, "The Longer Tenn View". "We must not let our ability to prepare a balanced budget for the'remainder of 1999-01 lull us into a false sense of security about our fiscal future. There continues to be a number of unmet needs based on adopted Council policies and plans that are not fully addressed in the 1999-01 Financial Plan or in this Supplement, including: public safetyfacilities, intersection improvements, railroad crossings, bikeway/pedestrian paths,flood protection, community center/therapy pool,park improvements, downtown plan improvements, railroad area plan, mid-Higuera area plan, open space acquisition, and civic center improvements . Meeting these needs will cost about$100 million over the next ten years; the Ten Year Financial Plan estimates that there maybe about7V million for these purposes. To state the obvious, this is far short of our resource needs: If we want to maintain current service levels and existing infrastructure, achieving these goals in the future will require new revenues. And under Proposition 218, implementing new revenues will require voter approval. " 10. Citizen control of their City government would be greatly reduced. This is another fundamental point, similar to numbers 1 and 2 above. Our citizens elect certain members of the public to represent their interests on matters which are within the province of the City to decide. They have faith in their elected representatives to do the right thing. If, in their view, a City Council member does not make the right choices, then they have a simple recourse of either not re-electing that person or re-calling them from public office. In short, it is a system where the elected representatives are accountable to the citizens who elect them. If the City Council is no longer responsible for almost half of the City's General Fund budget, and the Police and Fire Chiefs no longer effectively manage their departments,then it is difficult if not impossible to hold City officials accountable for what they have no control over. It is a serious distortion of our system of government. The simple truth is that, in our form of government, local elected City-Council members should be the ones who control the City's affairs. Summary City government, in one sense, is more"art"than"science"; it is the art of balancing current services and operations, against maintaining existing City facilities, against building new facilities to meet citizen needs and desires and clearly enunciated City goals. When the equation is thrown out of balance,our future citizens will suffer the consequences, as they will have needs and hopes for services and facilities which will be beyond the City's capacity to provide. roie. Binding Arbitration A17ACHME.-%`T July 12, 2000 Page 5 In conclusion,from the perspective of local government and the citizens we serve, the binding arbitration proposals before the State legislature and the locally-proposed Initiative are flawed proposals which, certainly over time,will do damage to our system of local government and to the service and facilities we provide to meet the needs of our citizens. 6-15 A17f, Htl`, `T J, C PFM Public Financial Management Financial and Investment Advisors City of San Luis Obispo Binding Interest Arbitration Cost Evaluation Report June 22, 2000 Public Financial Management, Inc. Suite 750 660 Newport Center Drive Newport Beach,CA 92660-6408 949 721-9422 949 721-9437 fax e a.V PFM Table of Contents Introduction I Interest Arbitration in California H Recent Developments III National Research IV. Conclusions V Appendix VI 6-17 CPFM Al IACNLE—'-12 Introduction Public Financial Management, Inc. (PFM) is pleased to present to the City of San Luis Obispo (City)this report summarizing our evaluation of the potential costs that may be associated with binding interest arbitration (interest arbitration). It is our understanding that the San Luis Obispo Police and Firefighters unions have placed interest arbitration on the November ballot. This initiative would require that all unresolved disputes relating to the wages, hours and other terms and conditions of employment of police and firefighters be submitted to interest arbitration. The City is interested in understanding the potential costs that may result from the implementation of such a process. As part of this engagement, PFM conducted telephone interviews in 1998 with representatives from 18 cities within the State of California that provide for(or were considering) interest arbitration for police and/or firefighters. In addition,we have contacted national labor relations organizations, reviewed empirical research on interest arbitration and spoken with leading experts in the field of labor negotiations. For the purpose of our analysis,only interest arbitration for police and firefighters were evaluated. In accordance with the City's request,we updated our report to reflect efforts to establish binding interest arbitration in four other Califomia cities in 1998. In reviewing the results presented in this report, it isimportant to note the following: ■ The actual impact of interest arbitration on the City will depend upon a number of variables, including:the market position of the City s current-labor contracts;specific policy language; existing relationships with labor;and the propensity to use interest arbitration in contract negotiations, among others. ■ Our analysis is based in part on the review and analysis of information provided by unrelated sources that are believed accurate, but cannot be assured to be accurate. ■ A decrease in the number of new interest arbitration initiatives nationally and a reduction in the funding for related research has limited the availability of current and reliable interest arbitration research. As such, many of the most comprehensive and detailed studies were conducted in the late 1970's and early 1980's. As a result,this report is not intended to forecast the City's actual costs, but rather to illustrate the potential impacts that may be associated with interest arbitration. 6-18 city of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report I 1 C PFM Interest Arbitration in California Of the 471 cities within California, 20 currently provide for interest arbitration. The following table summarizes the interest arbitration policies for these cities: DescriptionInterest Arbitration i city Effective Date Police Firefighters Arbitration Anaheim 1998 No Yes Final Offer by Issue Alameda 1980 No Yes Conventional Gilroy 1988 Yes Yes , Final Offer by Issue Hayward 1975 No Yes Conventional Modesto 1998 Yes Yes Final Offer by Issue Napa 1996 Yes Yes Final Offer by Total Package Oakland 1973 Yes Yes- Conventional Palo Alto 1976 Yes Yes Final Offer by Issue Petaluma 1989 Yes Yes Final Offer by Issue Redwood City 1987 No Yes Final Offer by Issue Sacramento 1997198 Yes Yes Final Offer by Issue San Frandsco 1990 Yes Yes Final Offer by Issue San Jose 1980 Yes Yes Conventional Salinas 1998 No Yes Final Offer by Total Package San Leandro 1992 Yes Yes Final Offer by Issue Santa Cruz 1996 No Yes Final Offer by Issue Santa Rosa 1995 Yes Yes Final Offer by Issue Stockton 1996 No Yes Final Offer by Issue Vallejo 1973 Yes Yes Final Offer by Issue Watsonville 1998 No Yes Final Offer by Issue ■ Although four cities have utilized interest arbitration for over 20 years, 12 implemented interest arbitration after 1990. ■ All of the cities have interest arbitration for firefighters,while approximately 60%of the cities have interest arbitration for police. ■ Interest arbitration may be categorized as"conventional"when an arbitrator has the flexibility to craft an award or as"final offer"when an arbitrator is required to select from the final offers submitted by each party. Final offer interest arbitration maybe further categorized as"by total package"when an arbitrator must consider a final offer contract in its entirety or"by issue" when an arbitrator may consider each issue individually. A majority of the cities surveyed (approximately 75%).provide for final offer by issue interest arbitration. ■ Anaheim is the only city in Southern California that provides for interest arbitration. 6-19 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 14 PFM Q Interest Arbitration Survey Results PFM interviewed representatives from each of the 20 cities that currently provide for interest arbitration within the State. As part of these surveys,we obtained the number of contract negotiations since the effective date of their interest arbitration policy,the number of these negotiations that went to arbitration and each party's success rate in arbitration. For the purpose of this analysis, "success"was defined as any arbitration award that more closely reflected the party's final offer. The following provides a summary of this survey: ■ Out of the 20 cities that currently provide for interest arbitration,over half (13) have had contract negotiations proceed to arbitration. These cities include:Anaheim,Alameda, Hayward, Oakland, Palo Alto, Redwood City, Gilroy, San Francisco, San Jose, Salinas, Petaluma, Santa Rosa and Vallejo. ■ Out of a total of 101 contract negotiations, approximately 26% (26 negotiations)declared an impasse and proceeded to arbitration. ■ Of the contract negotiations that proceeded to arbitration, 60%of the awards were categorized as a success for the city. In the four most recent arbitrations, a decision has not yet been reached. It should be noted that experiences with interest arbitration varied significantly among the cities surveyed. In addition,the definition of"success" is somewhat subjective for final offer by issue and conventional arbitrations. In total, however, these ratios provide a general idea as to the overall experience of interest arbitration in the State. Length of Arbitration Procedures The 13 cities that have utilized interest arbitration indicated that full-contract interest arbitrations can require approximately 6 to 15 months from the point of impasse to the award decision. Selecting and scheduling an arbitrator and presenting contracts and supporting material were most frequently cited as causing delays in the arbitration process. It is important to note that these estimates reflect full-contract interest arbitrations. Interest arbitrations for a limited number of contract items will require less time. In addition, arbitration procedures may last significantly longer than 15 months. The City of Alameda's arbitration over Charter language lasted in excess of three years. The impact of interest arbitration on the total length of a contract negotiation may in some cases be mitigated by a reduced period of collective bargaining. Procedural Costs The cities that have utilized interest arbitration estimated that the total cost for a full-contract interest arbitration procedure typically range from $100,000 to$200,000 per case. This cost reflects both direct expenses (attorneys, arbitrators fees,consultants,etc.) and indirect expenses (staff time, internal resources, etc.). There were two notable exceptions, however,to this range: 1. The City of San Francisco indicated that their cost per case was significantly lower than $100,000. Because interest arbitration covers most of San Francisco's employees,they have developed the internal capacity to efficiently address the unique requirements of the arbitration process and effectively reduce their cost per case. 6-20 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 15 PFM 2. The City of Alameda's arbitration over the Charter language lasted in excess of three years. Their total cost exceeded$300,000. 3. San Jose reports arbitration costs typically exceed$100,000 and routinely result in a greater compensation package, negatively impacting non-sworn personnel. Impact on Contracts Due to the unique circumstances and the number of issues typically involved in a full-contract negotiation,the impact of interest arbitration on contracts is difficult to accurately measure. In general, however,the cities that we surveyed characterized the impact of interest arbitration on salaries and wages as"slight"to"moderate". In addition,the impact on salaries and wages varied significantly among the cities and tended to depend primarily on the market position of their contracts prior to the implementation of interest arbitration. The following two cases illustrate this variance: ■ The City of Napa had paid approximately 10%below market rates prior to the implementation of interest arbitration in 1996. Following the implementation of interest arbitration,the City of Napa agreed to increase wages by 7% in the first year and to bring wages up to market levels in the following year. ■ The City of San Leandro paid slightly above market wages prior to the implementation of interest arbitration in 1992. Following the implementation of interest arbitration, contract negotiations have not yielded any excessive increases in salaries and wages and may have actually assisted in the reduction of wages back to market levels. As the above cases illustrate, interest arbitration tends to move salaries and wages to a market average. This is largely due to common interest arbitration guidelines that are based on the labor contracts of comparable markets and the growth in the Consumer Price Index(CPI). In addition, the impact associated with interest arbitration appeared to be most significant during the first few years following its implementation. Cities that continue to operate under interest arbitration reach an equilibrium whereby subsequent impacts on salaries and wages are typically not as pronounced. The impact of interest arbitration on general terms and conditions of employment, however, tended to be more pronounced than on salaries and wages, both in the frequency of impasse and the ability to manage public services. The cities that have had contract negotiations proceed to interest arbitration generally indicated that the majority of issues in dispute were related to general terms and conditions of employment. In some of these cases,the arbitrators' award had significant economic and managerial impacts. The following two cases illustrate these impacts. ■ An arbitrator ruled that the City of Oakland could not carry out a staff ing_reorganization that combined two service companies and was prohibited from reducing fire truck crews from five to four firefighters. The cost of this award was estimated by the City to be approximately $1.5 million. ■ Arbitration awards in the City of Vallejo have precluded them from implementing certain staffing and organization decisions and have impacted the ability of the Fire Chief to determine what type of equipment to use to respond to certain emergencies. 6-21 City of San Luis Obispo-Binding interest Arbitration cast Evaivation Report 16 F .41 C PFM ■ In San Jose,arbitration has been used to address over 100 separate issues. It has been used to prevent-.the Police Chief from removing officers who refuse to wear bulletproof vests, block policies preventing retired city employees from being appointed to the Civil Service Commission and even required an arbitration on how to communicate with employees who habitually claim disability leave every holiday season. Because many of the impacts on general terms and conditions of employment are non-economic, they tend to be difficult to quantify. As many of the cities indicated, however,these impacts can have a significant effect on the Citys ability to efficiently manage their public safety operations. Other Key Issues During the course of our interviews, a number of key issues were consistently raised relating to the potential impacts of interest arbitration. The following provides a brief summary of these issues: ■ Interest arbitration tends to hinder effective government by. 1. removing budgetary decisions from elected officials and giving them to less qual'Ifled arbitrators; 2. potentially reducing the City's operating control over critical public services;and 3. creating significant uncertainty in budget and planning activities. ■ Final offer by total package was preferred over final offer by issue interest arbitration. It was generally believed that final offer by issue did not promote good faith negotiations as labor essentially had nothing to lose by taking issues to arbitration where they had a chance of possibly improving on the Citys final offer. It should be noted,however,that the City of San Francisco actually amended their Charter to change from final offer by total package to final offer by issue. The City of San Francisco believed that final offer by total package was too risky because the City's final offer package could be rejected based on one unacceptable issue. ■ Several cities have successfully utilized counter ballot initiatives to mitigate the negative impacts of interest arbitration. These include: 1. requiring excessive awards to be voted on by the public; 2. restricting the length of the arbitration process; 3. limiting interest arbitration to economic issues; 4. restricting interest arbitration to public safety officers only; and 5. establishing a set of"comparable"cities. 6-22 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 17 A C PFM r'- c, Recent Developments Since the initial completion of our report,there have been several developments in California related to interest arbitration. The following is a summary of major developments that may have an impact on San Luis Obispo. Anaheim In the November, 1998 election,the Anaheim Firefighters Association successfully qualified and enacted an initiative providing for binding interest arbitration (by issue). This was the first imposition of binding interest arbitration in a Southern California city. Almost immediately after enactment,the Anaheim firefighters declared an impasse and moved to arbitration. The prior contract had expired in 1996 and negotiations since expiration had not been successful. One of the first issues was that of retroactivity. The union argued that the arbitration could extend back to the end of the pervious contract(1996). The.City argued that arbitration can only be effective from the date of the charter amendment(November, 1998). The arbitrator ruled that certain provisions may be subject to retroactive arbitration; however,the City took a forceful position indicating an appeal of any retroactive settlement. It is interesting to note that in their final offer,the union did not seek retroactive increases in wage rates thus attempting to avoid a basis for appellate review. This leaves unresolved the potential of binding interest arbitration to extend back prior to the enactment of arbitration provisions. The final City position submitted to the arbitrator included wage increases on January 1, 1999 of 3%, 3.5%on July 1, 1999 and 4%on July 1, 2000. The union position was 5% respectively on each date. The City offered a.3% lump sum payment for the 96-99 period and the union requested 4%. Over 80 issues were initially submitted to binding interest arbitration by the union. Signed tentative agreements were reached on 13 issues during the hearing process. The following 19 issues remained at the end of the hearings. All other issues were withdrawn by the union. 1. Union/personal employee use of the City E-mail 2. Length of probationary period 3. Amount of bereavement leave 4. Number of holidays 5. Paid Leave approval process and maximum annual carryover 6. Prohibiting increases in staffing to eliminate overtime 7. Amount of bilingual pay 8. Amount of uniform allowance 9. Grievance procedure 10. Health, pension and retired medical contributions 11. Permanent light duty program 12. Duration of M.O.U. 13. Consecutive shifts rule 14. Drug and alcohol testing based upon reasonable suspicion 6-23 City of san Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 19 Ai=— C PFM 6) 15. Fitness for duty 16. Fitness for duty assessments 17. PERS Re-opener(3%at 50) 18. Residency incentive 19. Wages As part of the arbitration process, the City offered a spirited ability to pay defense against the proposed settlement,citing constrained revenues due to extensive construction within the City and insufficient reserves to fund the settlement. The City expended approximately$200,000 in out-of-pocket-costs on the arbitration. A decision is expected in June 2000,which would result in a 15-month process from the beginning of the initial arbitration meetings. It is the City's view that the arbitration process will result in the embrace of"prevailing"practices vs. "best"practices in ongoing work rule implementation and wage levels. Ultimately they believe this will reduce operating standards to the"lowest common denominator"and limit the City's ability to attract innovative and creative managers. Modesto Police and Fire employee organizations qualified an initiative in the November, 1998 election providing for binding interest arbitration for public safety personnel. The measure involved the "final offer by issue"method of arbitration. In an effort to limit the impact of the employee proposal,the City placed a companion measure on the same ballot. The City measure would have limited arbitration to only wage and benefit issues. It excluded work condition issues and required that any arbitration award would be subject to ratification by the voters. The ratification would have included the adoption of any new revenue sources needed to fund the arbitration award. The companion measure also clarified that binding interest arbitration would apply only to new contracts and defined"strikes". The union sponsored measure was approved 57%-43%and the City sponsored companion measure was defeated 45%-55%. City officials cite the lack of an effective campaign as the primary reason for the electoral result. To date, the City has not experienced an arbitration under the provisions of the ballot measure. In December of 1999,the City concluded what were described as"amicable"negotiations with the Police Officers Association. Negotiations are beginning with the Police Management Association and arbitration is not expected. In September. negotiations will begin with the Modesto Fire Fighters Association. The City reports initial misunderstanding on behalf of rank and file Police officers who thought the proper approach under the new ballot measure was to seek the maximum settlement at the negotiating table and then go to arbitration. Union leadership and reports from other arbitrations disabused them of the wisdom of this approach. 6-24 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 110 BPFM Gilroy Since 1988,the City of Gilroy has had a Charter provision on binding arbitration for police and fire. The provision was last amended in 1997 and is currently being invoked for the first time. Issues with the Gilroy Firefighters Local 2805 of the IAFF include staffing and compensation. The arbitration is currently in the process of selecting witnesses and the length of the process cannot at this time be predicted. The City currently estimates that over$50,000 has been expended to date with more anticipated. Salinas The Salinas firefighters union qualified and enacted a binding interest arbitration measure in the November, 1998 election. This measure covers only firefighters and is a"total package' arbitration structure. The firefighters'contract expired at the end of 1998, and following enactment,the union opted for arbitration after five bargaining sessions. Arbitration hearings concluded in November of 1999 and a ruling is expected in June. Total time will be approximately 15 months. Issues include wages,work schedule and staffing. Specific costs to the City resulting from the arbitration process were estimated to be over$70,000. IAFF costs are comparable. The arbitrator has ruled that the results of the arbitration process will cover the current three-year contract period,which has approximately 18 months remaining. The City is hopeful that the results of the arbitration process will dissuade the union from invoking it in future negotiations. The results of the process are currently unknown. Petaluma Petaluma is currently undertaking its initial arbitration under a 1989 Charter amendment providing for arbitration by both police and fire. Issues include both financial and operational issues. Budgetary impact of the firefighters proposal is estimated at approximately$1 million per year in an environment where City revenues are below estimate. Witnesses are currently being determined and there is no estimate on the estimated completion of the arbitration process or the total cost impact to the City of Petaluma. 6-25 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 111 C PFM Watsonville Watsonville firefighters qualified a ballot measure on the November, 1998 ballot that provided for binding interest arbitration by issue. Watsonville is currently negotiating its contract with its firefighters and had not yet experienced an arbitration under the new charter provisions. Sunnyvale Public safety employee organizations brought a binding interest arbitration initiative to the November, 1998 ballot in the City of Sunnyvale. This measure provided final offer by issue arbitration for both policy and firefighters. The City countered with a companion ballot measure that required all arbitration settlements impacting on the City budget to be submitted to the voters,. Both ballot measures were defeated. The City reports no current activity to revive this issuer Senate Bill 402 A significant development since 1998 was the introduction on February 12, 1999 of Senate Bill 402 (Burton-D San Francisco). SB 402 would establish binding interest arbitration by final package for all California localities not subject to a binding interest arbitration process as of January 1, 2000. The provisions of the bill would apply to both fire and police personnel. The bill is sponsored by the public sector labor organizations and has passed the State Senate. On March 6, 2000 the bill was removed from the inactive file in the State Assembly and moved to the third reading file. Final Assembly action could occur at anytime. As currently structured,the bill will sunset on January 1, 2005 unless extended by the legislature. The bill has been amended to remove issues defined in Government Code Section 3504 as "management rights"from the scope of arbitration. The enactment of SB 402 would immediately extend binding arbitration to all California local agencies. A copy of the bill in its current form is attached as an Appendix to this report. 6-26 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 112 C PFM C National Research In addition to the surveys summarized above, we reviewed a variety of literature and research on interest arbitration from throughout the US. Although the impacts of interest arbitration are difficult to accurately quantify and many of the most current and detailed analyses were conducted in the tate 1970's and early 1980's,these sources serve to confirm many of the conclusions obtained through our survey. The following provides an overview of this research. Interest Arbitration Success Rates Studies of the success rates for cities and labor entering into interest arbitration tend to suggest that on average, each party has an equal chance of winning an interest arbitration award. Individual studies may vary significantly from this ratio, however, as specific interest arbitration cases are analyzed and different definitions of"success"are employed. A study presented in the March 1988 issue of The Arbitration Journal analyzed the decisions for 1,574 police interest arbitration cases'. The following chart illustrates the results of this study. 63% 70.0%- 55% 60.09" M � 45% W rr h 50.096 3796 ti 40.0%- 30.0%- 20.0% 0.09630.0%20.0% "„ pFrnployer ■labor ]0.090 r. 0.0% Final Offer By Issue Final Offer by Package Although the results of this study were skewed toward labor success by defining"success"for labor as any award that deviates from the city's final offer, it does illustrate a difference between final offer by issue and final offer by total package. In this study, labor was successful in 63%of the cases under final offer by total package and 55%of the cases under final offer by issue. This suggests that labor may be more conservative in their positions under a"by total package"format than under a"by issue„format. This supports our Califomia survey that suggests that final offer by issue interest arbitration is not conducive to good faith negotiation and tends to lead to an increase in the number of issues brought to arbitration. Impact on Salaries and Wages Studies examining the impact of interest arbitration on salaries and wages vary significantly in their conclusions, ranging from an impact in excess of 15%to no observable impact This variance demonstrates the difficulty in attempting to quantify salary and wage impacts and is illustrated in the following sample studies. ' Peter Feuille and Susan Schwochau,"The Decisions of Interest Arbitration,"The Arbitration Journal, March 1988, Vol.43, No. 1. 6-27 city of San Luis Obispo-BirKling Interest Arbitration Cost Evaluation Report 114 PFM C— ■ The New Jersey.Employment Relations Commission analyzed salary increases for public safety officers in New Jersey negotiated under interest arbitration from 1990 through 1992. As illustrated in the following chart,the study found that over this three-year period,salaries increased by an average of 7.17%annually compared to a national average of only 2.73% annually. 8.0% 7.17% 7.0% 6.090 5.0%- 4.0%- 3.0%-'x .0964.0903.0% 2090 National Average L090 ■Arbitration Awards in New Jersey 0.0% 19% 1991 1992 Average ■ The New York Labor Relations Department analyzed the annual increase in salaries in the City of New York under interest arbitration and the increase in salaries in the State of New York under collective bargaining. As illustrated in the following chart, the study found that from 1991 through 1994, salaries increased an average of 4.27%annually under interest arbitration compared to an average of 2.19%annually under collective bargaining. 5.0%- 4.5%-IX .0% 4.5% 4.27% 4.0% a .3.5% 3.03° T 2.5°ti e',= ` . d 2.19% iC .•y iC 2.0%-Z Q Interest Arbitration 1.0'90 ■Collective Bargaining 05%-Z o.o% 1991 1992 1993 1994 Average ■ Although somewhat dated,the Michigan Municipal League conducted a comprehensive stud that compared wage structures in the State of Michigan for police and firefighters established through interest arbitration to those negotiated under collective bargaining. The study 6-28 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 15 - •moi• s C PFM C— �e= covered a period from 1970 through 1975 and concluded that during this period,wages established under interest arbitration were 8.31%greater for firefighters and 6.08%greater for police relative to the average wages negotiated under collective bargaining. The following chart illustrates the results of this study. tg.o96 ° 16.096 OPolice Salaries a 14.0%-X/ ■Firefighter Salaries R 120% v 'c E 10.096 8.31% 6. 0 8.096 OB c 6.0% ar ' S 4.0%-Z v . c 2.0%- 0.0%_ .096 0.0% - E v u `u x.096 ' a 4.096 1970 1971 1972 1973 1974 1975 Average ■ Several authors collaborated on a comprehensive statistical analysis of police and firefighter salaries throughout the states of Michigan and Wisconsin 2. This study accounted for a variety of potential variables to quantify the observed salary impact associated with the implementation of final-offer interest arbitration. The study concluded that"final-offer arbitration tended to raise the salaries of the police and firefighters in Michigan and Wisconsin by more than 1.0% but less than 5.0%and that the positive effect was much smaller, if it was present at all, in the subsequent year." ■ Orley Ashenfelter and Dean Hyslop recently completed a statistical analysis of police wages throughout the US,taking into account a number of independent variables in order to isolate the impact of interest arbitration 3. The results of this study indicate that there is"no strong evidence that the presence of arbitration statutes has had any effect on overall wage levels. There is actually some weak evidence that wage levels may actually be lower as a result of arbitration statutes." ■ Binding interest arbitration has been commonly used in the state of Illinois with over 200 recent arbitration decisions covering police and fire employees. Attorneys active in public agency representation report that arbitrations can include upwards of 50-80 issues with a significant impact on both wages and work rules and management control. Settlements are estimated by the public sector to be 0.5%to 1.25%higher in arbitrated cases. As the studies summarized above indicate,the impact of interest arbitration on salaries and wages depends on a variety of variables. One of the most critical variables is the nature of salary negotiations prior to the implementation of interest arbitration. Peter Feuille and John Delaney 2 J.L. Stem,C.M. Rehmus,J.J. Loewenberg, H. Kasper, and B.D. Dennis, Final-Offer Arbitration, D.C. Health, Lexington, Massachusetts, 1975. 3 Orley Ashenfelter and Dean Hyslop, "Measuring the Effect of Arbitration on Wage Levels: The Case of Police Officers".January 13, 1998. 4 Jim Baird, Esq., Seyforth, Shaw, Fairweather and Geraldson 6-29 City of San Luis Obispo-Bimfing Interest Arbitration Cost Evaluation Report 116 C PFM conducted a study in 1986. that attempted to quantify the impact on police wage structures that resulted:from moving from non-unionized to collective bargaining negotiations,collective bargaining to arflnterest arbitration environment, and an interest arbitration environment to the implementation of an interest arbitration policy 5. This study included police wages structures from over 900 cities throughout the US. The following chart summarizes the cumulative impacts observed in this study: 18.0% ■Impact of an Interest Arbitration Policy 16.0% 0Impact of an Interest Arbitration Environrnmt e 14.0% ■Impact from Collective Bargaining 0 u 3 12.0% u 3 10.0% 1.4% 8.0% 32% a 5.8% fi 2.0% 0.0% -2.0% 4.0% 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 Average As the chart illustrates, moving from non-unionized to a collective bargaining environment had the most significant impact on wage structures, averaging 5.8%. Moving from collective bargaining to an interest arbitration environment had a 3.2% impact,while moving from an interest arbitration environment to an interest arbitration policy had a 1.4% impact. It is interesting to note that in three years (1975, 1977,and 1980), moving from an interest arbitration environment to an interest arbitration policy actually reduced wage structures. As the effects presented above are cumulative,the average impact on wage structures caused by moving from non-unionized negotiations to an interest arbitration policy averaged approximately 10.4%. The average impact on wage structures caused by moving from a collective bargaining environment to an interest arbitration policy averaged approximately 4.6%. 5 Peter Feuille and John Delaney,"Collective Bargaining, Interest Arbitration, and Police Salaries", Industrial and Labor Relations Review, January 1986, Vol. 39, No.2. 6-30 City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 117 =PFib1 Conclusions_ Based on the results of our analysis,the following appear to be the major advantages and disadvantages associated with the implementation of interest arbitration. The Citys actual experience with interest arbitration, however,will depend on a number of variables that have not yet been determined or are unable to be assessed at this time. As such,these impacts reflect only the potential impacts.identified through our analysis. Potential Advantages ■ Improves Employee Moral Although highly dependent on the City's relationship with labor, implementation of an interest arbitration policy may improve employee moral by providing a viable avenue for labor to challenge contract disputes. As such, interest arbitration may reduce the potential for any disruptions in public safety operations. ■ Offers Finality in the Negotiation Process Although interest arbitration is inherently risky to both.parties, it does provide a structured process through which contract impasses may be resolved. Irrespective of it's outcome,the interest arbitration process may offer both parties a sense of finality in the negotiation process. Potential Disadvantages ■ Discourages"Good Faith" Negotiations Interest arbitration, particularly final offer by issue interest arbitration, may discourage labor from compromising on contract issues in order to improve their position through arbitration. This may minimize the opportunities for the City and labor to negotiate a mutually satisfactory contract and increase the impact of the arbitrator. ■ Hinders Effective Government Interest arbitration may hinder the Citys ability to provide public safety services in the most efficient manner by removing budgetary decisions from elected officials and giving them to less qualified arbitrators, potentially reducing the Citys operating control over critical public services, and creating significant uncertainty in budget and planning activities. ■ Expensive Procedural Costs Interest arbitration procedures may represent a significant cost to the City,with full-contract interest arbitration costs ranging from.$100,000 to$200,000 each. Although the use of interest arbitration can vary dramatically, the City risks consistent and repetitive use of interest arbitration by labor as well as a complicated and lengthy dispute which could cost in excess of $300,000. It should be noted that in Ohio,the state pays 500/6 of arbitration costs for agencies following the state model. - ■ Potential Increase In Salaries and Wages The City may experience an increase in salaries and wages of approximately 2.0%to 5.0% over what would be expected under the current collective bargaining process following the implementation of an interest arbitration policy. This impact is a"one-time"increase and would likely be incorporated over the first few years following the implementation of interest arbitration. The actual impact on salaries and wages, however,will depend on a number of variables, including the market position of the City's existing salaries and wages and the actual application of interest arbitration by labor. 6-31 city of San Luis Obispo-Birdng Interest Arbitration Cost Evaluation Report 119 C PFM ICS t� ■ Potential Impact on Terms and Conditions of Employment The City may experience an impact on terms and conditions of employment. As with salaries and wages,'however,the actual impact will depend on a number of variables that include the market position of the City's existing terms and conditions of employment and the actual application of interest arbitration by labor. It is important to note that the City may mitigate the potential disadvantages of interest arbitration through counter ballot initiatives. Specifically,the City may require excessive arbitration awards to be voted on by the public, restrict the length of the arbitration process, limit interest arbitration to economic issues, restrict interest arbitration to public safety officers only, and establish a set of "comparable"cities, among others. 6-32 city of San Luis Obispo-Binding Interest Arbf fion Cost Evaluation Report 120 AMENDED IN ASSEMBLY JUNE 29, 2000 AMENDED IN ASSEMBLY SEPTEMBER 7, 1999 AMENDED IN ASSEMBLY JUNE 28, 1999 AMENDED IN SENATE MAY 28, 1999 AMENDED IN SENATE MAY 18, 1999 AMENDED IN SENATE APRIL 20, 1999 AMENDED IN SENATE APRIL 8, 1999 SENATE BILL No. 402 Introduced by Senator Burton and Assembly Member Villaraigosa (Principal coauthors: Senators Baca,Karnette,.and Ortiz) (Principal coauthors: Assembly Members Shelley and Wiggins) (Coauthors: Senators Dunn,Escutia,Figueroa,Hayden,.. . Perata, and Solis) (Coauthors: Assembly Members Aroner, Cardoza, Firebaugh, Havice, Keeley, Knox, Kuehl, Machado, Mazzoni, Rod Pacheco, Pescetti, Romero, Scott, Thomson, Washington, and Wildman) February 12, 1999 An act to add and repeal Section 1281.1 of, and to add and repeal Title 9.5 (commencing with Section 1299) of Part 3 of, the Code of Civil Procedure, relating to public employment relations. 92 F 6-33 SB 402 —2— LEGISLATIVE 2—LEGISLATIVE COUNSE S DIGEST' SB 402, as amended, Burton. Employer-employee relations: law enforcement officers and firefighters. Existing law provides..: -that employees of the fire departments and fire services of the counties, cities, cities and counties, districts, and other political subdivisions of the state have the right to self-organization, to form, join, or assist labor organizations, and to present grievances and recommendations regarding wages, salaries, hours, and working conditions to the governing body, but do not have the right to strike or to recognize a picket line of a labor organization while in the course of the performance of their official duties. This •bill would provide that if an impasse has been declared after the representatives of an employer and firefighters or law enforcement officers have exhausted their mutual efforts to reach agreement over wages, hours, and other terms and conditions of employment within the scope of arbitration, if the parties are unable to agree to the appointment of a mediator, or if a mediator is unable to effect settlement of;;.a dispute between the parties, the employee organization: may request, by written notification to the employer, that. their differences be submitted to an arbitration panel. Each. ,patty would designate one member of the panel, and those members would designate the chairperson of the panel pursuant to specified procedures. The arbitration panel would meet with the parties within 10 days after its establishment or any additional periods to which the parties agree, make inquiries and investigations, hold hearings, and take any other action, including further mediation, that the panel deems appropriate. Five days prior to the commencement of the arbitration panel's hearings, each of the parties would be required to submit a last best offer of settlement on the disputed issues as a package. The panel would decide the disputed issues by selecting the last best offer package that most nearly complies with specified factors. There would then be a waiting period of 5 days prior to public disclosure, or a longer period if agreed to, during which the parties could mutually amend the decision. At the end of that period, the arbitration panel's decision, as amended by the 92 6-34 -3— SB 402 - parties, would be disclosed, and would be binding upon the )arties. The bill would authorize the chief law enforcement officer of an employer to "notify the- arbitration panel of his or her intent to remove from consideration any issue included as a part of a last best offer of settlement on the basis that. it would foreclose the ability of that law enforcement officer to protect the public. An employee organization would be authorized to take specified actions upon receipt of such a notice. This bill would provide that unless otherwise agreed to by the parties, the costs of the arbitration proceeding and the expenses of the arbitration panel, except those of the employer representative, shall be borne by the employee organization. The provisions of this billwould repeal on January 1, 2005. Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. The people of the State of California do enact as follows: 1 SECTION 1. Section 1281.1 is added to the Code 'of 2 Civil Procedure, to read: 3 1281.1. (a) For the purposes of this article, any 4 request to arbitrate made pursuant to subdivision (a) of 5 Section 1299.4 shall be considered as made pursuant to a 6 written agreement to submit a controversy to arbitration. 7 (b) This section shall remain in effect only until 8 January 1, 2005, and as of that date is repealed, unless a 9 later enacted statute, that is enacted before January 1, 10 2005, deletes or extends that date. 11 SEC. 2. Title 9.5 (commencing with Section 1299) is 12 added to Part 3 of the Code of Civil Procedure,to read: 13 14 TITLE 9.5. ARBITRATION OF FIREFIGHTER AND 15 LAW ENFORCEMENT OFFICER LABOR DISPUTES 16 17 1299. The Legislature hereby finds and declares that 18 strikes taken by firefighters and law enforcement officers 19 against public employers are a matter of statewide 20 concern, are a predictable consequence of labor strife and 92 6-35 SB 402 —4- 1S :�Q;.; 1 poor morale that is often the outgrowth of substandard 2 wages and adverse working conditions, and are not in the 3 public interest. The Legislature further finds . and 4 declares that the dispute :resolution procedures contained . 5 in this title provide the appropriate method for resolving 6 public sector labor disputes- that would otherwise lead to 7 strikes by firefighters or law enforcement officers. 8 It is the intent of the Legislature to protect the health 9 and welfare of the public by providing impasse remedies 10 necessary to afford public employers the opportunity to 11 safely alleviate the effects of labor strife that would 12 otherwise lead to strikes by firefighters and law 13 enforcement officers. It is further the intent of the 14 Legislature that, in order to effectuate its predominant 15 purpose, this title be construed to apply broadly to all 16 public employers, including, but not limited to, charter 17 cities,counties, and cities and counties in this state. 18 It is not the intent of the Legislature to alter the scope 19 of issues subject' to collective bargaining between public 20 employers and employee organizations representing 21 firefighters or law enforcement officers. 22 The provisions of this title are intended by. the 23 Legislature to govern the resolution of impasses reached 24 in collective bargaining between public employers and 25 employee organizations representing firefighters and law 26 enforcement officers over issues that remain in dispute 27 over their respective interests. However, the provisions 28 of this title are not intended by the Legislature to be used 29 as a procedure to determine the rights of any firefighter 30 or law enforcement officer in any grievance initiated as 31 a result of a disciplinary action taken by any public 32 employer. The Legislature further intends that this title 33 shall not apply to any law enforcement policy that 34 pertains to how law enforcement officers interact with 35 members of the public or pertains to police-community 36 relations, such as policies on the use of police powers, 37 enforcement priorities and practices, or supervision, 38 oversight, and accountability covering officer behavior 39 toward members of the public, to any 40 community-oriented policing policy or 'to any process 92 e 6-36 -5— SB 402 �lti�i �4Rr . , 1 employed by an employer to investigate firefighter or law 2 enforcement officer behavior that could lead to discipline 3 against any firefighter or law enforcement officer, nor to 4 contravene any: provision -of a charter that governs an 5 employer that is. a city, county, or city and county, which 6 provision prescribes a procedure for the imposition of any 7 disciplinary action taken against a firefighter or law 8 enforcement officer. 9 1299.2. This title shall apply to all employers of 10 firefighters and law enforcement officers. 11 1299.3. As used in this title: 12 (a) "Employee" means any firefighter or law 13 enforcement officer represented by an employee 14 organization defined in subdivision(b). 15 (b) "Employee organization" means any organization 16 recognized by the employer for the purpose of 17 representing firefighters or law enforcement officers in 18 matters relating to wages, hours, and other terms and 19 conditions of employment within the scope of arbitration. 20 (c) `Employer" means any local agency employing 21 employees, as defined in subdivision (a), or any entity 22 acting as an agent of any local agency, either directly or 23 indirectly. 24 (d) "Firefighter" means any person who is employed 25 to perform firefighting, fire prevention, fire training, 26 hazardous materials response, emergency medical 27 services, fire or arson investigation, or any related duties, 28 without respect to the rank, job title, or job assignment of 29 that person. 30 (e) "Law enforcement officer" means any person who 31 is a peace officer as defined in Section 830.1 of, 32 subdivisions (b) and (d) of Section 830.31 of, subdivisions 33 (a), (b), and (c) of Section 830.32 of, subdivisions (a), (b), 34 and (d) of Section 830.33 of, subdivisions (a) and (b) of 35 Section 830.35 of, subdivision (a) of Section 830.5 of, and 36 subdivision (a) of Section 830.55 of, the Penal Code, 37 without respect to the rank, job title, or job assignment of 38 that person. 39 (f) "Local agency" means any governmental 40 subdivision, district, public and quasi-public corporation, 92 6-37 SB 402 —6— I 6-1 joint powers agency, public agency or public service 2 corporation, town, city, county, city and county, or 3 municipal corporation, whether incorporated or not or 4 whether chartered or not 5 (g) "Scope of arbitration" shall be limited to only those 6 issues that are within the scope of representation as 7 defined in Section 3504 of the Government Code. The 8 scope of arbitration shall not include any issue that is 9 protected by what is commonly referred to as the 10 "management rights" clause contained in Section 3504 of 11 the Government Code. 12 1299.4. (a) If an impasse has been declared after the 13 parties have exhausted their mutual efforts to reach 14 agreement over wages, hours, and other terms and 15 conditions of employment within the scope of arbitration, 16 if the parties are unable to agree to the appointment of 17 a mediator, or if a mediator agreed to by the parties is 18 unable to effect settlement of a dispute betweenthe. 19 parties after his or her appointment, the employee 20 organization may, by written notification to the 21 employer, request that their differences be submitted to 22 an arbitration panel. 23 (b) Within three days after receipt of the written 24 notification, each party shall designate a person to 'serve 25 as its member of an arbitration panel. Within five days 26 thereafter, or within additional periods to which they 27 mutually agree, the two members of the arbitration panel 28 appointed by the parties shall designate an impartial and 29 experienced person to act as chairperson of the 30 arbitration panel. In the event that the two 'members of 31 the arbitration panel are unable to agree upon a 32 chairperson, the mediator referred to in subdivision (a) 33 may be designated chairperson. 34 (c) In the event that the mediator is unable or 35 unwilling to serve as chairperson,, the two members of the 36 arbitration panel shall jointly request from the American 37 Arbitration Association a list of seven impartial and 38 experienced persons who are familiar with matters of 39 employer-employee relations. The two panel members 40 may as an alternative, jointly request a list of seven names 92 6-38 -7— SB 402 1 from the California State Mediation and Conciliation 2 Service, or a list from either entity containing more or less 3 than seven names, so long as the number requested is an 4 odd number. If after five. days of receipt of the list, the two 5 panel members cannot agree on which of the listed 6 persons shall serve as chairperson, they shall, within two 7 days, alternately strike names from the list, with the first 8 panel member to strike names being determined by lot. 9 The last person whose name remains on the list shall be 10 chairperson. 11 (d) During the course of the dispute resolution process 12 initiated pursuant to subdivision (a), any employee 13 subject to this title who willfully engages in a strike 14 against his or her employer that endangers public safety 15 shall be dismissed from his or her employment and may 16 not be reinstated or returned to employment except as a 17 new employee. 18 1299.5. (a) The arbitration panel shall, within 10 days. 19 after its establishment or any additional periods to which 20 the parties agree, meet with the parties or their 21 representatives, either jointly or separately, make 22 inquiries and investigations, hold hearings, and take.. any 23 other action including further mediation, that the 24 arbitration panel deems appropriate. 25 (b) For the purpose of its hearings, investigations, or 26 inquiries, the arbitration panel may subpoena witnesses, 27 administer oaths, take the testimony of any person, and 28 issue subpoenas duces tecum to require the production 29 and examination of any employer's or employee 30 organization's records, books, or papers relating to any 31 subject matter in dispute. 32 1299.6. (a) The arbitration panel shall direct that five 33 days prior to the commencement of its hearings, each of 34 the parties shall submit the last best offer of settlement as 35 to each of the issues made in bargaining as a proposal or 36 counterproposal on those issues not previously agreed 'to 37 by the parties prior to any arbitration request made 38 pursuant to subdivision (a) of Section 1299.4. The 39 arbitration panel, within 30 days after the conclusion of 40 the hearing, or any additional period to which the parties 92 6-39 SB 402 1 agree, shall separately decide on each of the disputed 2 issues submitted by selecting, without modification, the 3 last best offer that most nearly complies with the 4 applicable factors described in subdivision (c). Thus 5 subdivision shall be applicable except as otherwise 6 provided in subdivision (b). 7 (b) The arbitration panel shall direct that five days 8 prior to the commencement of its hearings, each of the 9 parties shall submit as a package, the last best offer of 10 settlement made in bargaining as a proposal or 11 counterproposal on those issues not previously agreed to 12 by the parties prior to any arbitration request made 13 pursuant to subdivision (a) of Section 1299.4. The 14 arbitration panel, within 30 days after the conclusion of 15 the hearing, or any additional period to which the parties 16 agree, shall decide on the disputed issues submitted by 17 selecting, without modification, the last best offer 18 package that most nearly complies with the applicable 19 factors described in subdivision (c). This subdivision shall 20 be applicable in lieu of subdivision (a) only if the 21 employer, in the same written notification specified ' in 22 subdivision (a) of Section 1299.4, receives written .notice 23 from the employee organization that it has elected to be 24 subject thereto. 25 (c) The arbitration panel, unless otherwise agreed to 26 by the parties, shall limit its findings to issues within the 27 scope of arbitration and shall base its findings, opinions, 28 and decisions upon those factors traditionally taken into 29 consideration in the determination of wages, hours, and 30 other terms and conditions of employment within the 31 scope of arbitration, including but not limited to the 32 following factors, as applicable: 33 (1) The stipulations of the parties. 34 (2) The interest and welfare of the public. 35 (3) The financial condition of the employer and its 36 ability to meet the costs of the award. 37 (4) The availability and sources of funds to defray the 38 cost of any changes in wages, hours, and other terms and 39 conditions of employment within the scope of arbitration. 92 6-40 -9— SB 402 1 (5) Comparison of wages, hours, and other terms and 2 conditions of employment within the scope of arbitration 3 of other employees performing similar services in 4 corresponding fire or law.rnforcement employment. 5 (6) The average consumer prices for goods and 6 services, commonly known as the Consumer Price Index. 7 (7) The peculiarity of requirements of employment, 8 including, but not limited to, mental, physical, and 9 educational qualifications; job training and skills; and 10 hazards of employment. 11 (8) Changes in any of the foregoing that are 12 traditionally taken into consideration in the 13 determination of wages, hours, and other terms and 14 conditions of employment within the scope of arbitration. 15 1299.7. (a) Notwithstanding subdivision (g) of 16 Section 1299.3, the chief law enforcement officer of an 17 employer may, prior to the commencement of the 18 arbitration hearing, notify the arbitration panel of his or. 19 her intent to remove from consideration any issue 20 included as a part of a last best offer of settlement, upon 21 the basis that it would foreclose his or her ability to 22 protect the public, including his or her ability to eradicate . 23 any existence of law enforcement corruption, deploy. .law 24 enforcement personnel during an emergency, staff patrol 25 cars, control weapons usage, or impose discipline. 26 (b) Upon receipt of a notice from the chief law 27 enforcement officer of the employer, the employee 28 organization may do any of the following: 29 (1) Withdraw the last best offer of settlement that 30 addresses the issue noticed for removal from 31 consideration. 32 (2) Serve notice of an intent to dispute the basis of the 33 noticed removal of the issue included as a part of the last 34 best offer of settlement. 35 (c) 1f the employee organization has withdrawn a last 36 best offer of settlement that addresses any issue noticed 37 for removal from consideration, the arbitration panel 38 shall proceed to those issues that have not been removed 39 or withdrawn. 92 6-41 SB 402 —10— 1 (d) An employee organization that intends to dispute 2 the basis for the noticed removal of any issue from 3 consideration may seek a hearing in a court. of competent 4 jurisdiction to" determine.- de novo whether the issue 5 included as a part of a last best offer of settlement would 6 foreclose the ability of the chief law enforcement officer 7 to protect the public. 8 1299.8. (a) The arbitration panel shall mail or 9 otherwise deliver a copy of the decision to the parties. 10 However, the decision of the arbitration panel shall not 11 be publicly disclosed, and shall not be binding, for a 12 period of five days after service to the parties. During that 13 five-day period, the parties may meet privately, attempt 14 to resolve their differences and, by mutual agreement, 15 amend or modify the decision of the arbitration panel. 16 (b) At the conclusion of the five-day period, which 17 may be extended by the parties, the arbitration panel's 18 decision, as may be amended or modified by the parties. 19 pursuant to subdivision (a), shall be publicly disclosed 20 and shall be binding on all parties. 21 x299$— 22 1299.9. Unless otherwise provided in this title, Title. ..9 23 (commencing with Section 1280) shall be applicable to 24 any arbitration proceeding undertaken pursuant to this 25 title. 26 1299.9. 27 1299.10. (a) The provisions of this title shall not apply 28 to any employer that is a city, county, or city and county, 29 governed by a charter that was amended prior to January 30 1, 2000-2001, to incorporate a procedure requiring the 31 submission of all unresolved disputes relating to wages, 32 hours, and other terms and conditions of employment 33 within the scope of arbitration to an impartial and 34 experienced neutral person or panel for final and binding 35 determination, provided however that the charter 36 amendment is not subsequently repealed or amended in 37 a form that would no longer require the submission of all 38 unresolved disputes relating to wages, hours, and other 39 terms and conditions of employment within the scope of 92 6-42 -11— SB 402 ,�,} l.r�;. - 1 arbitration to an impartial and experienced neutral 2 person or panel, for final and binding determination. 3 (b) Unless otherwise agreed to by the parties, the costs 4 of the arbitration proceeding and the expenses of the 5 arbitration panel, except those of the employer 6 representative, shall be borne by the employee 7 organization. 8 ,2�0. 9 1299.11. This title shall remain in effect only until 10 January 1, 2005, and as of that date is repealed, unless a 11 later enacted statute, that is enacted before January 1, 12 2005, deletes or extends that date. 13 SEC. 3. The Legislature finds and declares that the 14 duties of local agency employer representatives under 15 this act are substantially similar to the duties required 16 under present collective bargaining procedures and 17 therefore the costs incurred by the local agency employer 18 representatives in performing those duties are not, 19 reimbursable as state-mandated costs. O 92 6-43 IoarrKl': :i':� J RESOLUTION NO. (2000 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO OPPOSING A PROPOSED BINDING ARBITRATION CHARTER AMENDMENT WHEREAS, proponents of a proposed charter amendment requiring that labor disputes between the City of San Luis Obispo and public safety unions be resolved by binding arbitration have collected enough signatures to qualify the measure for the November 7, 2000, election; and WHEREAS, the proposed Binding Arbitration Charter Amendment allows an arbitrator to make binding decisions regarding compensation,benefits, grievances, deployment of the work force and virtually any issue he/she finds to be a term and condition of employment; and WHEREAS, the proposed Binding Arbitration Charter Amendment severely limits the Police Chief and Fire Chief, who have extensive law enforcement and fire service expertise,from effectively directing public safety operations in order to maintain the highest standards for public service; and WHEREAS, the proposed Binding Arbitration Charter Amendment purports to use arbitration to prevent public safety employee strikes, when.such actions are already illegal under law and court decisions; and WHEREAS, the proposed Binding Arbitration Charter Amendment transfers significant decision making authority to a non-elected individual who has no accountability to the local community, thereby disenfranchising local taxpayers, as represented by the City Council elected to represent them, from the ultimate authority to determine how and where public resources will be allocated to meet citizen needs. NOW, THEREFORE, BE IT RESOLVED that the Council of the City of San Luis Obispo declares its opposition to the Binding Arbitration Charter Amendment, and calls upon the voters of San Luis Obispo to recognize the importance of local control of local resources and services, and to vote against this unreasonable approach to resolving labor disputes with public safety unions. Upon motion of , seconded by , and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of , 2000. 6-44 Resolution No. (2000 Series) Page 2 ATTEST: Lee Price, City Clerk VED AS TO FORM: /GAA Jeffrey G. Jorgensen, City A, orney 6-45 RESOLUTION NO. (2000 SERIES) A--RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO,CALIFORNIA,ORDERING THE SUBMISSION OF A PROPOSED CHARTER AMENDMENT(THE TAXPAYERS' RIGHT TO DECIDE) REGARDING VOTER APPROVAL OF CERTAIN BINDING ARBITRATION DECISIONS RELATING TO LABOR DISPUTES AT THE GENERAL MUNICIPAL ELECTION TO BE HELD ON TUESDAY NOVEMBER 712000 WHEREAS, a General Municipal Election on Tuesday,November 7, 2000 has been called by Resolution No. adopted on July 18, 2000; and WHEREAS, the City Council of the City of San Luis Obispo desires to submit to the voters a proposed charter amendment which would add Section 1106,The Taxpayers' Right to Decide,to the City Charter, and WHEREAS, the Elections Code and applicable local law provide the Council with the authority to submit a Charter amendment to the electorate; and;. WHEREAS, the Council finds that it is fiscally prudent:and in the public interest to refer to the voters certain financial burdens associated with a binding arbitration award involving Police Officers' Association or Firefighters' Union employees. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, DOES RESOLVE, DECLARE,DETERMINE AND ORDER AS FOLLOWS: SECTION 1: That the City Council,pursuant to its right and authority, does order submitted to the voters at the General Municipal Election on Tuesday,November 7, 2000, the following question: Measure_ Shall the"Taxpayer's Right to Decide"be enacted, Yes amending the City's Charter to ensure fiscal accountability to the --------- San Luis Obispo citizens by requiring voter approval of any binding No arbitration award that imposes a financial burden greater than the increase in the local cost of living or the City's final offer, whichever is greater, limiting binding arbitration to salary only, and enacting other provisions to implement binding arbitration if it is _ approved by Measure ? SECTION 2. That the text of the charter amendment submitted to the voters is attached as Exhibit A. 6-46 Al IACH NA.E..'.- �I Resolution No. (2000 Series) Page 2 SECTION 3.Charter Section 1106 shall be effective only if Measure entitled,"A Measure Amending The City Charter To Require That Labor Disputes Between the City Of San Luis Obispo Be Resolved By Binding Arbitration"is enacted by the voters. The provisions of Subsections (A),.(B) and(C) of Section 1106 are intended as alternatives to certain provisions of Measure and shall supercede those provisions. The provisions of Subsection(D), (E) and (F) of Section 1106 are intended to clarify, implement and supplement that Measure. SECTION 4. That in all particulars not recited in this resolution, the election shall be held and conducted as provided by law for holding municipal elections. SECTION 5. That notice of the time and place of holding the election.is given and the City Clerk is authorized, instructed and directed to give further or additional notice of the election, in time, form and manner as required by law. SECTION 6: That the City Clerk is hereby directed to file certified copies of this resolution with the Board of Supervisors, the County Clerk.and Registrar of Voters of the County of San Luis Obispo. - SECTION 7. That the City Clerk shall certify to the passage and adoption of this resolution. On motion of , seconded by , and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was passed and adopted this day ,2000. Mayor Allen K. Settle ATTEST: Lee Price, C.M.C. 6-47 Resolution No. (2000 Series) Page 2 City Clerk APPROVED AS TO FORM: City Attorne 6-48 Exhibit A A CHARTER AMENDMENT ADDING SECTION 1106 TO THE CHARTER OF THE CITY OF SAN LUIS OBISPO IMPLEMENTING THE TAXPAYERS' RIGHT TO DECIDE Section 1106.The Taxpayers' Right to Decide To protect the public health, safety and welfare, to ensure responsible fiscal authority, and to require the highest standards of public safety employee performance,the binding arbitration established by Section 1107 of this Charter shall be subject to the following provisions notwithstanding any provision to the contrary contained with that Section: (A) To protect the financial health of the City, any decision resulting from arbitration that would result in the payment of salaries greater than the increase in the local cost of living since the last change in that salary,or.the City's last offer of settlement made pursuant to Section 1107 (d) (4),whichever is higher,will not become effective unless and until approved by a majority vote of the electorate. The City Clerk and City Council shall expeditiously take all steps necessary to submit the matter to the voters. (B) Arbitration shall be limited to salary only. To provide the Police Chief,Fire Chief and other city management with the ability to maintain the highest standards for public safety service, other issues besides salary related to working conditions, management rights, employee discipline and other employment benefits, including the assignment or deployment of personnel, will not be subject to arbitration. (C) The San Francisco-Oakland-San Jose Consumer Price Index (CPI) shall not be used as a factor by the arbitrator. (D)Mediation as a form of alternative dispute resolution and as described in Resolution 6620, 1989 series, shall be a requirement prior to binding arbitration. (E) Participation by an employee in a strike shall be deemed to pose an imminent threat to public health or safety and is unlawful and shall terminate the employment relation. "Strike"shall be interpreted to include,but shall not be limited to, the following job actions,whether taken individually or in concert with others,when an employee is scheduled to be on duty: sick out, slow down, work stoppage, curtailment of production,Blue flu, sympathy strike, strike,. refusal to perform police and/or fire department duties, and refusal to cross picket lines. (F) No award through arbitration shall provide for interest for any period nor shall interest be provided for the time required to bring a decision to a vote. (G)If any provision or portion of this measure or the application to any person or circumstances is held invalid,that invalidity shall not affect any other portion, provision, or application of this measure. 6-49 MEETING AGENDA DATE LLO D ITEM #_ Taxpayer's Right to Decide! Cou�► G/L; It would seem appropriate to make minor changes to the last bullet. I believe that this would facilitate the positive intention of the statement and eliminate the possibility that it could be misconstrued as accusation. • Not providing interest on any award through arbitration. By eliminating the possibility of interest, there is no incentive to drag on the arbitration process. • CHANGE: Not providing interest on any award through arbitration. By eliminating the possibility of interest, there is inherent incentive to expedite the arbitration process. EErAW&MrL. O ODD DIR ❑FIN DIR O FIRE CHIEF I hope this helps. Y ❑PIN DIR RIG O POLICE CHF AM 0 REC DIR Thanks. t>6 O UnL DIRA1Fs 67'ERS DIR ✓ M,I.I�ar► ,y. David =RECEIVED Lee Price- RQN -Eetter re: Binding Ar!?'ttion -He Date 7%18%00 Page 1 :STING AGENDA DATE ^�S O° ITEM # From: "rcholc"<rcholc@gateway.net> • To: "John Ewan"<jewan@ci.san-luis-obispo.ca.us>, "Jan Marx" <jmarx@ci.san-luis-obispo.ca.us>, "Dave Romero"<dromero@ci.san-luis-obispo.ca.us>, "Ken Schwartz" <kschwartz@ci.san-luis-obispo.ca.us>, "Allen Settle" <asettle@ci.san-luis-obispo.ca.us> Date: 7/18/00 8:29AM Subject: RQN - Letter re: Binding Arbitration - Hearing Date 7/18/00 COUNCIL 7CD R July 18, 2000 RfAO AOHIEF Re: Binding Arbitration TTORNEY PW mCCERKIOR14 CXF ❑M MT TEAMRHonorable Mayor and City Council Members, �' IRIR Due to our summer hiatus, the RQN Board of Directors has not been able to f,j I 1__Qn vote on this issue. However, as Chairperson, I represented RQN at the 4T an input meetings. I spoke with Jason Berg, representative of the San Luis Obispo Police Officers'Association. I spoke with Ann Slate, Director of Human Resources for the City of San Luis Obispo, and I have read the report and attachments prepared by staff in regard to this matter. In reviewing all of this information it seems fundamental to me that our "elected officials"should be the arbiters of the City's finances,just as it seems fundamental that our Police and Fire Chiefs should be the managers of their respective departments. Binding arbitration would clearly infringe on the right to have these accountable, local decision-makers deciding "our" fiscal and public safety issues. I, therefore, urge the council to: Adopt a resolution in opposition to the proposed Charter Amendment to establish binding arbitration for the San Luis Obispo Police Officers' Association and the San Luis Obispo Firefighters Union, IAFF Local 3523. Adopt a resolution placing an additional measure, "The Taxpayers' Right to Decide", on the November 7, 2000, ballot. Respectfully submitted, Cydney Holcomb Chairperson, RQN CC: "Ann Slate"<aslate@slocity.org>, "John Dunn" <jdunn@ci.san-luis-obispo.ca.us>,"Ken Hampian" <khampian@ci.san-luis-obispo.ca.us>, "Lee Price"<Iprice@ci.san-luis-obispo.ca.us>