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City of Fremont

City of Fremont. Budget Development Strategies. Reduction in Overall Employee Compensation Expenses Transition to Alternative Service Delivery Models Reduction or Elimination of Services to the Community Revenue Enhancements. Average Employee Cost.

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City of Fremont

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  1. City of Fremont

  2. Budget Development Strategies • Reduction in Overall Employee Compensation Expenses • Transition to Alternative Service Delivery Models • Reduction or Elimination of Services to the Community • Revenue Enhancements

  3. Average Employee Cost

  4. CalPERS Rate HistoryPublic Safety Employees -- Projected based on PERS Achieving 7.75% (Could increase to 49% with poor returns)

  5. CalPERS Rate HistoryMiscellaneous Employees -- Projected based on PERS Achieving 7.75% (Could increase to 30% with poor returns)

  6. CalPERS Rates Total Change = $3.5 million 6

  7. Labor Negotiation Parameters(Multi-Year Agreements) Short -term • Compensation reduction equivalent to a 4.25% salary reduction • Option to pay via PERS Cost Sharing of Employer Rate Long -term • 2nd Tier Retiree Medical for new hires • 2nd Tier Retirement for new hires • Safety = 3% @ 55, 36 month calculation • Misc. = 2% @ 60, 36 month calculation and 2% COLA

  8. Council Adopted Labor Relations Policy • All labor negotiations will be conducted by designated representatives at the bargaining table. All City representatives operate upon the direction of the City Council. • No individual Council member will individually negotiate with any bargaining group member. • City representatives commit to keeping the Council fully informed and advising them of all substantive proposals. • Each Council member shall inform the City Manager at their earliest convenience and publicly disclose in open session any communications he or she may have had with any City bargaining group member(s) that has any reference to the negotiations. • Consistent with Government Code section 54963, confidentiality of closed session discussions will be maintained.

  9. Cost Sharing Employer Rate Government Code 20516 Section 20516 permits the City to share the cost of optional benefits provided to employees under its PERS contract via: • PERS contract amendment (section a) • MOU deduction outside of the PERS contract (section f)

  10. Cons Constraint (max amount of cost sharing) based on enhancement (varies by agency) Timing required to implement Lack of flexibility CalPERS Contract Amendment • Requires vote of impacted employees • Requires all units agree to same amount of cost sharing (employer rate) • Option for “fixed” amount or “up to” amount • - Must adopt 414(h)(2) Council Resolution • Pros • Employee funds remain employees’ • Clarity with tax liability

  11. MOU Deduction Process: • Reach agreement with labor association(s) • Must have 414(h)(2) Council Resolution • Recommend Tax Attorney Opinion Letter • Pro • Immediate implementation • Flexibility – can amend the amount as quickly as payroll can implement and allows for varying amount of cost sharing by labor association • Cons • Funds are treated as employer contribution, thus employee would not be eligible to receive if they take refund prior to retirement • Tax liability – no IRS letter ruling on “pre-tax” contribution

  12. Fremont Labor Relations Results • All labor associations have settled • 7 of 9 labor associations elected PERS cost sharing option • 2 of 7 labor associations via PERS Contract Amendment (Fire) • Other 5 labor groups cost sharing amount vary • 2 of 9 elected salary reduction • 4 of 9 required mediation from State Mediation and Conciliation Authority

  13. Fremont 2nd Retirement Benefit Actuary Estimated City Savings (000’s) Savings 3% @ 55 (Safety) Savings 2% @ 60 (Misc) Year Employer Employee Total Employer Employee Total Year 2011/12 $ 41 $ - $ 41 $ 128 0 $ 128 Year 2012/13 $ 85 $ - $ 85 $ 262 0 $ 262 Year 2013/14 $ 137 $ - $ 137 $ 397 0 $ 397 Year 2014/15 $ 193 $ - $ 193 $ 539 0 $ 539 Year 2015/16 $ 254 $ - $ 254 $ 684 0 $ 684 Year 2016/17 $ 320 $ - $ 320 $ 835 0 $ 835 Year 2017/18 $ 388 $ - $ 388 $ 991 0 $ 991 Year 2018/19 $ 462 $ - $ 462 $ 1,147 0 $ 1,147 Year 2019/20 $ 535 $ - $ 535 $ 1,311 0 $ 1,311 Year 2020/21 $ 609 $ - $ 609 $ 1,479 0 $ 1,479 Year 2021/22 $ 682 $ - $ 682 $ 1,648 0 $ 1,648 Year 2022 Total Savings= $2,330

  14. Fremont Lessons Learned • Openly adopt labor negotiation strategies • Research options prior to negotiations • Provide justifying budget information to unions • Help employees understand benefits of cost sharing retirement costs • Pre-tax deduction • Public perception / participation with cost of retirement • Aligned with pension reform efforts • Consider hiring outside labor negotiators • Consider consulting tax attorney (if cost sharing via MOU)

  15. Contact Details Brian Stott Human Resources Director 510-494-4664 bstott@fremont.gov

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