This week members of the Sunnyvale Employees Association (SEA) met to discuss the current impasse with the City of Sunnyvale over a new labor contract. The SEA had been negotiating with the City for two years and have come to an impasse over 11 points of contention.
To try to break the impasse, the Sunnyvale Employees Association and the City of Sunnyvale asked Barry Winograd, an arbitrator and mediator, to be a neutral fact finder to offer his opinion on the 11 issues dividing the employees and the City.
On April 24, 2017, Mr. Winograd released the Factfinding Report to the public. The Factfinding Report sided with the City of Sunnyvale on 7 points. The report sided with the Sunnyvale Employees Association on 4 points.
The four points that the report sides with the Sunnyvale Employees Association are enacting a 14% raise in wages; paying retroactive compensation; maintaining overtime pay eligibility for employees in exempt classifications; and maintaining the status quo for out-of-class pay.
Here is an excerpt of the report:
SEA proposes a net 14.0 percent wage increase. It seeks 2.0 percent as of July 2015; 2.0 percent as of July 2016; 5.5 percent as of the first full pay period after MOU notificaion; 4.0 percent as of July 2018; and, 3.5 percent as of the first full pay period of January 2019. From these increases, SEA proposes a precudtion of 1.0 percent of the City’s EPMC as of the first full pay period in July of 2017, 2018 and 2019, with the last reduction effective at the outset of the term of the next MOU.
The City proposes a net 10.0 percent wage increase. It offers 5.5 percent the first full pay period following City Council approval; 3.0 percent effective the first full pay period of July 2017, or the first full pay period following City Council approval; and, 1.5 percent effective the first full pay period of July 2018, or the first full pay period following City Council approval. Embedded in the increases and the net result proposed by the City is its continued payment of a 4.0 percent EPMC.
The City does not dispute that it has an ability to pay a wage increase, and indeed offered one that appears reasonable. Most significant, the City points to potential funding problems for employee pensions related to increased contribution costs and a change in the discount rate for the pension system, matters beyond the City’s direct control. Other factors cited by the City also support its wage proposal, including its attempt to close the pay gap with nearby communities, the roughly comparable outcome of the City’s labor agreement with the management association which also continues the EPMC, and figures showing the desirability of a job in Sunnyvale.
As a contrary perspective, substantial evidence was offered by the Association supporting its proposal. The record shows a historic flattening of bargaining unit wages due to the minimal improvement in net pay of the past several years. The city argues that this past history is irrelevant under the statue, but this objection is misplaced as history is a traditional factor in analyzing employee compensation. Stated simply, employee paychecks are not static as they reflect a continuum, which in this case, included significant wage deferrals. Further, ending fund balances consistently have exceeded budgeted projections, employees have trailed in comparison to cumulative increases in other municipalities, especially those closest to Sunnyvale, and the unit lags behind consumer price indices in the San Francisco Bay Area over a several year period.
If the facts summarized in the preceding passages were the only features of this dispute at issue, it could be argued, notwithstanding the detailed contentions of the parties and the accompanying panel opinions, that the parties are in equipoise, with balanced interests. However, two other aspects of this proceeding justify a compensation recommendation favoring the Association.
First, employees in the unit face the prospect of a further potential shift in EPMC pension contribution amounts by 2018 if the City’s proposal is adopted. On this subject, unlike the City, the Association is prepared to follow the sound fiscal premise of the pension reform stature by shifting most EPMC costs sooner rather than later. The City’s unwillingness to accept the statutory standard heightens the risk that the issue will be a destabilizing factor in bargaining at the end of this successor MOU, contrary to the public’s interest in stable labor relations. The City maintains that it expects to pay the EPMC for years beyond the term of the new MOU. However, this expectation not only is counter to the statutory objective, but it is based on speculation about future economic and political conditions, and overlooks the potential for the disruptive imposition under Government Code Section 20515.5 of an employee0paid EPMC upon an impasse in bargaining.
Moreover, delaying a shift for the EPMC permits the City to secure a substantial monetary benefit by attributing a gain to the unit as a whole, even though the gain is not payable to new hires who, by law, do not receive the EPMC. At present, over 20 percent of the unit is excluded from the EPMC. The City’s offer to pay a four percent EPMC will this be relevant to a declining number of employees as the workforce continues to mature and change in the next few years, with more senior workers departing and new employees being hired. In effect, by tying the EPMC to overall compensation, the City is proposing a two-tier wage structure, but without giving it a two-tier label.
Here is a link to Mr. Winograd’s Factfinding Report
I support SEA in their fight for a fair labor contract with the City. I am doing o.k. with my wages and benefits, but many other workers in the City are struggling with the rising costs of living in Santa Clara County. I will strike to support those workers who aren’t doing as well.
In the last labor agreement in 2011 the Sunnyvale employees had agreed to forgo pay increases to help the City with its budget struggles due to the 2008 economic downturn. Since 2011 rents and housing prices have skyrocketed in the Sunnyvale area.
In 2011 the average rent for a 2 bedroom apartment in Santa Clara County was $1918 per month.
According to Zillow, a real estate website, the median rent price in Santa Clara County is now $3400, which is the same as the San Jose median rent price of $3400.
In 2011 the average price to buy a home was around $585,000.
According to Zillow, the median home value in Santa Clara County is now $1,004,400. Santa Clara County home values have gone up 3.5% over the past year and Zillow predicts they will rise 0.9% within the next year.
Here is the Zillow website with the rent and home price trends over the past few years in Santa Clara County
In recent days several friends have asked me about the possibility of a strike in the City where I work. I support the Sunnyvale Employees Association in their efforts to strike a fair deal for its members. I don’t think the opposing side is evil or anything of the sort, in spite of some heated moments in negotiations. I think the two sides are coming into the negotiations from two very different points of view and two different interests. I think the employees side is more fair, and I will be in the picket lines with my fellow striking workers.
One of the things I wanted to investigate to better understand the situation is the health of the City of Sunnyvale’s budget. Both the City of Sunnyvale and the Sunnyvale Employees Association agree that the City budget has been getting more revenues than was expected. My guess for the City’s reluctance may be that the City planners were really spooked by the experience of the 2008 downturn and they are a lot more cautious now. Also I wonder if they are looking at a Trump administration that promises to cut federal funding as something that threatens the local Santa Clara County economy.
I found in the Sunnyvale website the Comprehensive Annual Financial Report for the Fiscal Year Ending June 30, 2016. According to the report, the local economy has been robust and development related revenue, property taxes, and transient occupancy taxes all exceeded expectations. One thing that surprised me was the fact that the City work force is 15 percent smaller than it was 15 years ago. I knew from my experience that there are less people doing more work, but I didn’t realize the percentage was that big.
Here is an excerpt of the report:
Driven by the technology sector, Sunnyvale is at the forefront of a strong state-wide economic recovery led by the Bay Area region. The economic expansion has fueled development activity and job growth in the City. Development activity was very robust in fiscal year 2016, resulting in a record fifth year of very high activity. Development-related revenues, Property Tax, and Transient Occupancy Tax all exceeded expectations. Based on the development activity currently underway, revenues are poised for growth going forward due to the residual effect that commercial development has on the General Fund’s other sources of revenue. A continuing concern and vulnerability, however, is the high volatility levels for Sales Tax, Transient Occupancy Tax, and development-related revenues. Over time, these revenue sources have experienced significant year-to-year variances, which have made long-term revenue projections challenging. The fiscal year 2017 budget reflects the anticipated activity and resulting revenue growth over the next several years. Beyond the next several years, growth projections have been moderated to reflect the inevitable volatility of several of the City’s revenues. However, the City continues to monitor how its revenue base is being affected by the robust economy and will adjust long-term revenue projections annually as part of the budget development process.
Despite a strong performance for several major revenue sources, the City’s fiscal situation still remains tightly balanced. While the economy is on solid ground, we are now in the seventh straight year of recovery with development activity and several revenues at all-time record levels. Factored with global economic volatility, housing and transportation constraints, and potential actions by the federal government, a cautious approach is warranted about the sustainability of the current economy. Further, the City of Sunnyvale is under several pressures, including continuing increases in personnel costs, especially with regard to pensions and medical costs, which are driving up the cost of total employee compensation. As the economy has rebounded, the City is also experiencing an increase in the demand for services. Operational and capital costs are facing upward pressure as increased development, environmental regulation, and aging infrastructure all strain current resources. Additionally, the bidding climate has tightened, as greater competition due to more demand for work has increased construction costs.
In the face of these pressures, the City has successfully managed expenditures, particularly related to personnel costs, to ensure that they do not grow at a rate that exceeds revenue growth. With the pressures noted above, continuing to maintain sustainable personnel costs will be a challenge. An added factor is that the City is constrained by a workforce that is approximately 15% smaller than it was 15 years ago. This presents significant challenges because our resources are not able to keep pace with operational demands, while there is also interest and need to implement key initiatives that require additional resources. The fiscal year 2017 budget begins to address these needs with additional funding for resources. However, the additional resources only begin to address the gap between workload and staff capacity. As demands continue to pressure our existing assets, we will continue to look to strategically add resources where appropriate while keeping the goal of maintaining a sustainable fiscal position for the long-term.
Although I can understand the City’s caution, I still think the Sunnyvale Employees Association is right in its negotiating positions. According to SEA, Sunnyvale budget reserves increased by 55% between 2010-2015. The City has averaged an $11 million surplus every year since 2004. The City refuses to offer any pay increases for the first two years of their contract proposal, despite the fact that they already budgeted for those raises and the money sits in their bank account.
The SEA are making very persuasive arguments that the City can afford the wage increases that the Sunnyvale Employees Association is asking for. With many Sunnyvale employees struggling to keep up with rising rents and rising housing costs, and with a shrinking workforce taking on more tasks, I think the Sunnyvale Employees Association is making reasonable demands to address the concerns of its members.
I owe my pay and my benefits to past SEA representatives who negotiated a fair deal for me. It’s only right support the Sunnyvale Employees Association now in its moment of need.