City Manager: ‘Time is Now’ To Stop Costly Contract Extensions with City Bargaining Units
07/02/2012
Fresno, CA – Expressing disappointment in the Fresno Police Officers Association’s rejection of the City’s concession proposal, City Manager Mark Scott today said “the time is now” to say no to costly contract extensions in order to bring employee compensation packages in line with current and future economic realities.

“We simply can no longer afford to extend employee compensation packages that were agreed to when economic times were considerably better than they are today,” City Manager Scott said at a City Hall news conference, where he was joined by Mayor Ashley Swearengin and several City Council members.

“Given the severe financial challenges that we’re facing, the reality is our employee compensation programs need to cost us less. We have no choice but to reduce our compensation costs to bring our expenditures in line with our resources. To do that, we clearly need cooperation from our employee bargaining groups if we’re going to operate in a sustainable manner and bring our City back to fiscal health.”

City Manager Scott said Fitch on Friday downgraded the City’s bond rating, citing the ongoing employee compensation issue as a key rating driver. The City will continue to address the issue as bargaining units’ contracts open, Scott said.

“Rating agencies have consistently expressed concern about our compensation packages and their overall impact on the City’s long-term financial health,” Scott said. “Our bond rating will not be upgraded until this issue is resolved and we build back operating reserves.”

As part of the City’s efforts to address compensation packages, Mayor Swearengin said the City asked the Fresno Police Officers Association (FPOA) to accept a one-year, 6 percent concession with no further extension to its contract, which expires in 2015.

FPOA offered the City a proposal that included a one-year contract extension, which the City declined because the extension would have cost the City more in the long run than the City would have saved in the short term under the FPOA proposal.

“By our calculations, a one-year extension to the FPOA contract would have cost the City at least $10 million,” Mayor Swearengin said. “In the past, the City has accepted extensions to the FPOA contracts because of the short-term benefits. But that approach simply is no longer acceptable if we’re going to bring our labor contracts into line with our short- and mid-term revenue projections."

City Manager Scott said FPOA has received significant increases in compensation while the City’s General Fund budget has fallen over the past several years. Scott pointed out that the dollar value of all FPOA contract increases from its 2007 effective date through June 30, 2012, is approximately $38.6 million. Projecting to June 30, 2015, the value of the increases will be approximately $67.2 million.

At the same time, the City calculates the value of FPOA’s deferrals and concessions through June 30, 2012, at approximately $8.6 million and about $14 million through June 30, 2015. City Manager Scott said the while FPOA has agreed to past salary deferrals, its members have experienced no reductions in take-home pay to date, except for a one-time uniform allowance concession and the deferral of holiday cash outs.

In addition, the base pay of an average police officer at the top step cost the City $65,888 in salary and benefits in Fiscal Year 2007. That number increased to $83,100 in Fiscal Year 2012, a 26 percent increasing not counting other significant cost increases due to their pension and medical programs.

“We appreciate the dedication and commitment of our police officers, who perform at a high level day in and day out,” City Manager Scott said. “You cannot put a true value on the courageous work done by police officers, but we simply cannot afford the salary and benefit levels of the past as we look to bring the City back to financial stability."

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NOTE: A copy of City Manager Scott's June 25 letter to FPOA President Jacky Parks with the City's concession proposal is attached.

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