The Morgan Hill City Council Wednesday night approved the City’s operating and capital budget – including about $32 million in general fund expenses – for fiscal year 2013/2014, as well as new salary and benefits agreements with two groups of City Hall employees.
The four Council members present (Mayor Steve Tate was absent) approved the budget, after City Manager Steve Rymer suggested adding a donation of $1,500 to Morgan Hill’s annual Freedom Fest, to assist that organization in conducting the upcoming Fourth of July celebration.
The only other significant change to the budget since Rymer proposed it to Council in May is additional expenses of $15,000 annually for the El Toro Youth Center – currently in danger of cutting its hours or closing altogether – and a one-time addition of $20,000 for the Santa Clara Family Health Plan, which provides healthcare for low-income children through a variety of local programs.
The Council also approved new contracts for two groups of City Hall employees – the Police Officers Association and the non-unionized “management, professional and confidential” employees. The current agreements expire June 30.
Both agreements aim to shift some of the City’s burden of retirement expenses to the employees themselves, while still trying to remain competitive with other cities.
“The compensation and benefits provided to our employees allow the City the ability to recruit and retain a highly skilled workforce,” a staff report presented to the Council Wednesday said.
The two-year agreement with the POA gives unionized officers a 2-percent pay raise each year (starting July 1), but also requires the employees to split the projected annual rate increases in CalPERS payments which are now picked up fully by the city.
For example, starting July 1, that rate will jump from 32.7 percent to 34.63 percent of Morgan Hill police officers’ salaries. Traditionally, the City has picked up the tab for the full rate. However, starting July 1, the City and individual employees represented by the POA will each pay for half the annual rate increase. The total rate increase as of July 1 comes out to about 1.92 percent of salaries, so the City and association members will split that in half, with each paying about .96 percent.
Other changes in the POA contract, compared to the current one that expires June 30, include an increase in vacation and other paid absentee time accrual limits from 160 hours to 180 hours, and an increase in the officers’ uniform allowance from $1,160 to $1,360 annually.
The new agreement also replaces the formula by which officers are paid for bilingual skills. Instead of receiving 5 percent of their base salary for bilingual certification as officers are paid now, those hired and certified for bilingual services after July 1 will gain a $100 monthly stipend.
POA president Sgt. Carson Thomas said at Wednesday’s Council meeting that when negotiations for the new contract began, POA members were “standoffish” about giving up more of their wages for retirement expenses, but they warmed up to the idea after the City’s negotiating staff assured them the police and City would be able to work together in a viable “partnership.”
“As they began to lay the foundation of the City, and where the City is going, the POA got behind that because they said we believe in the leaders of today and tomorrow,” Thomas said.
Councilwoman Marilyn Librers said she was pleased the negotiations with the POA proceeded smoothly and that the union “understood we have budget problems.”
“I was extremely pleased when I read this, that we were able to meet their needs and our needs,” Librers said. “In the past it has been a struggle, some years, and it is very heart-warming to know we were able to reach this agreement.”
POA members will continue to pay their full employee’s share of CalPERS contributions, which stands at 9 percent of salary, according to City staff.
The City’s management, professional and confidential employees – a group of about 30 City staff who include department managers, the assistant city manager, the chief of police and police captains – will also split the City’s share of CalPERS rate increases for the length of the contract approved by the Council Wednesday. The City and individual employees in the group will each pay for half the annual rate increase, as the POA agreed to do for the first time.
In addition, four of the employees agreed to increase their employee contribution to CalPERS from 1 percent to 8 percent of their salary, and will be given a 7 percent raise in base pay to offset the higher CalPERS expenses, according to City staff.
The non-unionized employees can also elect to continue diverting 3 percent of their base pay to “deferred compensation” accounts held by the City, or to receive that amount directly in their salary. Also, safety employees in this group will receive an increase in their uniform allowance.
The City is still negotiating new contracts for its two other bargaining groups – the Community Service Officers Association and the American Federation of State, County and Municipal Employees. Those groups’ current contracts also expire June 30.
The City’s share of CalPERS retirement costs for all employees is projected to increase significantly over the next five years – a trend that Council members and City staff have known about for some time. For public safety employees, the City’s share of CalPERS costs is expected to reach about 43 percent of salaries by 2017, according to the City budget.
For other employees, the City’s share of retirement costs is projected to rise from about 17 percent of salaries in 2014 to about 21 percent in 2017.
The $31.6-million general fund budget approved by the Council includes personnel costs of about $17 million.
Other revisions to the general fund budget approved by the Council are a Redevelopment Agency wind-down payment to the City from Santa Clara County for about $974,000, which was expected next year; and an increase in projected property tax revenues of about $183,000, due to higher assessed property values than expected.
The Council also approved the five-year Capital Improvement Plan, and budgets for sewer and water, recreational services, planning and development and other funds that are not financed by tax dollars.
