City, fire union reach deal to lower staffing, divide pensions into two tiers

Brush fire burning 20 acres in northeast Morgan Hill

After months of often heated negotiations, the City of Gilroy
reached a three-year agreement with the local firefighters Thursday
that puts three firefighters on an engine and breaks the
firefighters’ retirement plans into two tiers.
After months of often heated negotiations, the City of Gilroy reached a three-year agreement with the local firefighters Thursday that puts three firefighters on an engine and breaks the firefighters’ retirement plans into two tiers.

International Association of Fire Fighters Local 2805, the union that represents Gilroy firefighters, agreed to staff only three firefighters to an engine while maintaining a staff of nine firefighters at all time. It also agreed to reduce the retirement formula for new hires. In exchange, the Gilroy City Council will drop its bid to remove binding arbitration for firefighters from the city charter and will not need to demote three captains and five engineers to firefighters.

The agreement is expected to cut the city’s fire services costs by $380,870 during the next fiscal year and $365,500 in subsequent years of the agreement, Gilroy Human Resources Director LeeAnn McPhillips said.

“(Local 2805) gave us what we needed,” Mayor Al Pinheiro said. “This is the structural change we asked for. I am pleased with the union’s hard work to achieve agreement.”

The new agreement came than a week before a temporary, one-year concessions agreement between the firefighters and the city was to expire. As part of the deal, firefighters will not receive any wage increases through June 2013. The agreement also eliminates a personal leave day, a uniform allowance, a fitness incentive and an annual medical evaluation.

The new agreement also marks the first time that a city union has agreed to two-tier retirement benefits, which means that the city will pay lower pensions to new hires than it does for current employees. The council has identified this as a priority for negotiations with all unions as its unfunded liabilities – or pensions that it must pay – could balloon in coming years.

Under the new system, retired firefighters will receive yearly 2 percent of their highest annual salary for each year they worked. For instance, a firefighter who topped out at $100,000 and worked for 10 years would receive 20 percent of this salary – or $20,000. The earliest firefighters could collect these benefits is at 55 years old. Under the old system – which still applies to current employees – firefighters received 3 percent yearly of their highest annual salary starting at 55 years of age.

In addition newly hired firefighters will now have to pay 9 percent contributions toward their pensions. In the past, the city made this contribution on behalf of the firefighters.

City Administrator Tom Haglund said he did not know precisely what cost savings would result from these changes to the firefighters retirement plan, but he deemed them “significant.”

Cities that previously switched from a “2 at 55” plan to a “3 at 55” plan experienced public safety benefits jumping from between 12 percent to 16 percent of payroll to an anticipated 25 percent to 28 percent, Haglund said.

“This agreement moves the city forward and demonstrates the council’s commitment to a regional call for structural changes to the retirement system,” Haglund said.

In addition to long-term savings, the city should save money in the short term as well.

Although staffing costs will increase 6.6 percent because there previously had not been a mandate to have nine firefighters working at all times, the 13.79 percent reductions related to the memorandum of understanding result in net savings of 7.19 percent.

Jim Buessing, secretary and treasurer for Local 2805, said the union wanted to do what was necessary to keep the Sunrise Fire Station open in northwestern Gilroy during these economically challenging times.

“Once again, the firefighters have stepped up for the benefit of the community,” he said.

Local 2805 voted on the city proposal Wednesday before the council voted on it, Buessing said. He would not reveal what the vote was, saying that was the union’s business, but he said the union had to make tough choices.”

“This was the city’s offer and it was all we had,” he said. “If we were to do nothing, the community was going to suffer.”

City staff has yet to come up with exact language for the new agreement, which will replace the current memorandum of understanding that the city has with the fire union. The council is expected to vote on a finalized agreement during its July 19 meeting.

Meanwhile, the city still has not reached an agreement with the Police Officers Association, whose contract is set to expire Wednesday. The council discussed that agreement Thursday evening during the same closed session in which they discussed negotiations with the fire union.

City staff and the police union plan to meet Monday, and they will continue to meet until reaching an agreement even if that does not happen by Wednesday, McPhillips said.

Pinheiro, who participated in Thursday’s closed session via teleconference from the Azores, said he hoped the police union would be willing to make major concessions as Local 2805 has done.

“Hopefully, they will understand that when we say structural change, we mean strucutural change,” Pinheiro said. “I hope that they will look to this (fire) contract as example of what can be done.”

POA President Mitch Madruga could not be reached for comment Friday afternoon.

Although Pinheiro would prefer not to have allowed binding arbitration as an option — and Councilman Perry Woodward took issue with the agreement for that same reason — they both said firefighters had made significant concessions.

City officials said they were happy to have the agreement under wraps.

“It’s a lot of pressure off of everyone,” McPhillips said.

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