RP, employees agree to labor deal
Three-year deals expected to save city $8.4 million in cumulative costs
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By Mira Brody  July 25, 2014 12:00 am

Rohnert Park’s City Council unanimously approved deals with its public safety managers and employee unions that City Manager Darrin Jenkins says will save the city $8.4 million in cumulative costs.

The contracts bring in more than 60 public safety employees under three-year contracts designed to save Rohnert Park money on long-term retiree health care. The council’s 4-0 vote – Councilman Jake Mackenzie was absent – concludes the city’s negotiation process for 2014.

“City council’s ratification of these last two agreements represent the substantial progress and our ongoing efforts for the long term financial sustainability for our community,” said Mayor Joseph Callinan, reading from an official mayor’s statement. “These agreements also give employees more control over their medical savings. I think all of us wish we could do more for our employees, but we have to live within our means. We are reminded of what a truly special group of people we have working here in Rohnert Park.”

This is the first time since 2004 the city entered into three-year agreements with public employees. Since 2007, two-year deals have been the norm.

The new deal changes the city-provided retiree medical benefits for current employees once retired, according to Jenkins’ staff report to the council. It calls for retiring public safety employees to receive $500 per month toward a retiree health savings account. The payments will cease when the retiree becomes eligible for Medicare.

Under the previous agreement, employees hired before July 1, 2007, were entitled to lifetime medical benefit for themselves and one dependent, usually a spouse. These benefits could last for more than 40 years, depending on the age of the employee at retirement.

The agreement, according to Jenkins’ report, reforms employees’ retiree medical benefits by buying down their existing level of benefits. Employees will receive a lump sum payment in a Retiree Health Savings Account, managed by the employee, for their future retiree medical expenses. With these individual retiree health savings accounts, employees can make investment decisions and access investments not available to the city, thereby growing their funds at a faster rate than the city can. In exchange for the lump sum, the employees once retired receive a lower benefit amount for a shorter period of time.

Medical premiums in the new agreements are not subject to market fluctuations, giving the city certainty when it comes to premium contribution obligations over the next three years, according to the report.

Under the prior contract, Rohnert Park contributed 80 percent of the medical premium costs of the lowest cost health care plan. And the contribution automatically increased each year to whatever the medical premium increase was for that year. The city reported an increase of 13 percent in medical premiums, equating to a $208,000 increase in costs in a single year.

The new deals incorporate a table of medical premium contributions Rohnert Park will make on behalf of employees and their families. The city will contribute $469 to a single employee in 2014-15, $485 in 2015-16 and $500 in 2016-17. For an employee with one dependent, the city will contribute $938 in 2014-15, $971 in 2015-16, and $1,000 in 2016-17. For a family of three or more, the city will contribute $1,327 in 2014-15, $1,373 in 2015-16 and $1,400 in 2016-17.

Rohnert Park changed its approach when it came to salary compensation. Rather than comparing salaries with neighboring cities, the city first looked at what it can afford and what similar cities can afford, with per person revenue as the driving force. Healdsburg, for example, has a per person revenue of $1,200 while Rohnert Park’s stands at $604 per person. Rohnert Park was compared to commensurate cities with between $500-$700 per person per year revenues.

Also, the city developed a 10-year financial forecast that looks at all revenues and expenses and tries to make reasonable assumptions about the growth of those revenues and expenses for the next 10 years. The forecast model, the report says, allows the city to make short-term decisions while considering long-term interests. 

The forecast indicates that under the status quo, retirement costs from CalPERS, medical costs and retiree medical costs are all increasing faster than revenues. This will create a structural imbalance in future years, thus limiting the city’s ability to increase employee salaries.

The city’s budget for Fiscal Year 2014-15, however, is balanced, with revenues exceeding expenditures by $310,000, so it can afford a three-percent lump sum payment to employees to help them cope with the increase in inflation. The lump sum payments don’t increase pension costs for the city, which was an important consideration.

“I want to thank the council for working with me – there is a lot of times when council has put a lot of pressure on staff to work these things out and they’ve always responded great,” Callinan said at the conclusion of the item. “We are all on the same page when it comes to working toward our financial stability.”

 

News team leader Dave Williams contributed to this article.

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