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.
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• 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.
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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
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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.
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• 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.
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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.
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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
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• 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.
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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.
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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
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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.
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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.
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A17f, Htl`, `T J,
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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
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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.
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city of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report I 1
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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.
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City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 14
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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.
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City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 15
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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.
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City of San Luis Obispo-Binding interest Arbitration cast Evaivation Report 16
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■ 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.
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City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 17
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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
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City of san Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 19
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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.
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City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 110
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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.
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City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 111
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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.
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City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 112
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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
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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
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City of San Luis Obispo-Binding Interest Arbitration Cost Evaluation Report 15
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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
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City of San Luis Obispo-Bimfing Interest Arbitration Cost Evaluation Report 116
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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.
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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.
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city of San Luis Obispo-Birdng Interest Arbitration Cost Evaluation Report 119
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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.
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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.
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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
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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
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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
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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,
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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
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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
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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.
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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.
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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
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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
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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.
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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>