REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager to execute the Side Letter Agreement that amends the 2019-2023 Memorandum of Understanding Between the City of Santa Clara and the City of Santa Clara Employees’ Association (Units 5/7/8), that incorporates the terms of the Side Letter Agreement and Related Budget Amendments
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency.
BACKGROUND
The City of Santa Clara and the City of Santa Clara Employees’ Association (Units 5/7/8) (hereafter, “Employees’ Association”) reached agreement on a Memorandum of Understanding (hereafter, “MOU”) in December of 2020 with a term of December 15, 2019 to December 23, 2023. As part of the MOU, the parties agreed to meet and confer under a reopener provision in the event the City reached an agreement with another nonsworn bargaining unit subject to the General Fund for a general wage increase above 3.0% for calendar year 2023. The City reached an agreement on a successor MOU with another bargaining unit, the American Federation of State, County and Municipal Employees, Local 101 (hereafter, “Unit 6”) that included a general wage increase of more than 3.0% for calendar year 2023. Accordingly, the Employees’ Association requested to meet and confer with the City pursuant to the terms of the reopener in their current MOU.
In August 2022, the City and the Employees’ Association reached agreement on a Side Letter Agreement that amends the terms of the current MOU as follows:
§ Effective December 25, 2022 (the first pay period of calendar year 2023), all salary ranges for employees holding positions in classifications assigned to the Employees’ Association will be increased by approximately 5.0% (instead of the 3.0% previously agreed to as part of the agreement on the current MOU).
§ The City will exercise its discretion and provide employees in classifications assigned to the Employees’ Association at the time of disbursement a one-time lump sum non-pensionable payment of $5,000 (prorated for part-time employees) no later than the first pay period in October 2022.
It should be noted that no other terms of the current MOU are amended or otherwise altered, and that the Side Letter Agreement between the City and the Employees’ Association fulfills the meet and confer requirement pursuant to the terms of the reopener in their current MOU.
On or about August 23, 2022, the Employees’ Association notified the City that its membership had ratified the terms of the Side Letter Agreement amending the current MOU.
DISCUSSION
The recommended action authorizes the City Manager to execute the Side Letter Agreement that amends the current Memorandum of Understanding with a term of December 15, 2019, through and including December 23, 2023, that incorporates the terms of the Side Letter Agreement reached between both parties.
The following is a summary of the notable provisions of the Side Letter Agreement, and a complete copy of the Side Letter Agreement is attached:
Wages:
Effective December 25, 2022 (the first pay period of calendar year 2023), all salary ranges for employees holding positions in classifications assigned to the Employees’ Association will be increased by approximately 5.0% (instead of the 3.0% previously agreed to as part of the agreement on the current MOU).
One-Time Non-Pensionable Discretionary Cash Payment:
In recognition of, and to help secure the employees' speedy ratification of this MOU, the City has exercised its discretion to provide a one-time discretionary cash payment of $5,000 for regular employees (pro-rated for part-time employees) in the bargaining unit following Council approval of this MOU. The Parties intend and understand that this lump sum payment is non-pensionable and will not be reported to CalPERS. An employee must be employed in a classification assigned to the Employees’ Association at the time the one-time discretionary cash payment is made to receive the payment.
No other terms of the current MOU are amended or otherwise altered, and the Side Letter Agreement between the City and the Employees’ Association fulfills the meet and confer requirement pursuant to the terms of the reopener in their current MOU.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
The costs of this MOU Side Letter Agreement are within budget authority approved by the City Council through the negotiation process. As shown in the table below, the ongoing annual costs associated with the additional 2% wage increase (from 3% to 5%) is $813,000, of which $450,000 is in the General Fund. With an implementation date of January 2023, the impact will be one-half in FY 2022/23 ($406,500 all funds/$225,000 in the General Fund). In FY 2022/23, there is also a one-time impact associated with the $5,000 non-pensionable cash payment. Based on the currently filled positions in Units 5/7/8, this one-time cost totals $1.3 million, of which $829,000 is in the General Fund.
The City regularly budgets the total compensation cost for its current employees and integrates known and projected cost increases from MOUs in the City’s annual budget. The ten-year forecast also incorporates the projected labor costs. The costs of this MOU are within budget authority approved by the City Council through the negotiation process, and the negotiated agreement generates savings when compared to assumptions included in the FY 2022/23 budget and ten-year forecast.
The chart below reflects the estimated changes in costs in the General Fund as well as all funds over the term of the MOU.
Estimated Costs
|
Item |
Description |
Estimated General Fund Cost |
Estimated All Funds Cost |
|
Wages (2023) |
5% increase (instead of 3%) |
$450 K ($225 K in FY 2022/23) |
$813 K ($407K in FY 2022/23) |
|
One-time Non-Pensionable Discretionary Cash Payment (2022) |
$5,000 (one-time) |
$829 K |
$1.3 M |
The City regularly budgets the total compensation cost for its current employees and integrates known and projected cost increases from MOUs in the City’s annual budget. The additional ongoing costs will be factored into the FY 2023/24 and FY 2024/25 Biennial Operating Budget. The ten-year General Fund forecast also incorporates the projected labor costs and this adjustment was factored into the latest General Fund shortfall figure of $27 million.
In FY 2022/23, the additional one-time and ongoing costs will be spread across the City departments and funds. The related budget amendments to cover these additional costs are outlined in Attachment 2. In the General Fund, this will result in an additional cost of $1.1 million, which will be offset by the use of the Land Sale Reserve. The cost in other funds totaling $0.7 million will be covered by the fund balances or the recognition of additional funding sources as detailed in Attachment 2.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>, or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager to execute the Side Letter Agreement that amends the current Memorandum of Understanding with a term of December 15, 2019, through and including December 23, 2023, that incorporates the terms of the Side Letter Agreement reached between both parties; and
2. Approve the related FY 2022/23 Budget Amendments as detailed in Attachment 2 (five affirmative votes required for the use of unused fund balances and to appropriate additional revenue).
Reviewed by: Aracely Azevedo, Director of Human Resources
Approved by: Rajeev Batra, City Manager
ATTACHMENTS
1. Side Letter Agreement Amending the Current MOU Between the City and the Employees’ Association dated August 8, 2022
2. FY 2022/23 Budget Amendments - Units 5/7/8 Side Letter