In The Matter of The Interest Arbitration Between American Federation of State, County And Municipal Employees and The City of Cornelius, Oregon. IA-01-99
This Interest Arbitration arises between the American Federation of State, County and Municipal Employees, Council 75 ("Union"), and City of Cornelius ("City"). Nancy E. Brown was selected to serve as Arbitrator.
At a hearing held on March 26, 1999, in Cornelius, Oregon, the parties had an opportunity to examine and cross-examine witnesses, introduce relevant exhibits, and argue the issues in dispute. Evidence was entered into the record as corrected. The hearing was recorded and the City will retain these hearing tapes for no less than 180 days from the date of this award. Both parties submitted the matter on closing arguments.
I. Relevant Criteria
In arriving at her Decision and Award, the Arbitrator weighed and considered the following criteria set forth in the Oregon Public Employees Collective Bargaining Act, ORS 243.746(4), and the Rules of the Oregon Employment Relations Board ("ERB"), OAR 115-40-015(8):
ORS 243.746(4) Where there is no agreement between the parties, or where there is an agreement but the parties have begun negotiations or discussions looking to a new agreement or amendment of the existing agreement, unresolved mandatory subjects submitted to the arbitrator in the parties' last best offer packages shall be decided by the arbitrator. Arbitrators shall base their findings and opinions on these criteria giving first priority to paragraph (a) of this subsection and secondary priority to subsections (b) to (h) of this subsection as follows:
(a) The interest and welfare of the public.
(b) The reasonable financial ability of the unit of government to meet the costs of the proposed contract giving due consideration and weight to the other services, provided by, and other priorities of, the unit of government as determined by the governing body. A reasonable operating reserve against future contingencies, which does not include funds in contemplation of settlement of the labor dispute, shall not be considered as available toward a settlement.
(c) The ability of the unit of government to attract and retain qualified personnel at the wage and benefit levels provided.
(d) The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other paid excused time, pensions, insurance, benefits, and all other direct or indirect monetary benefits received.
(e) Comparisons of the overall compensation of other employees performing similar services with the same or other employees in comparable communities. As used in this subsection, "comparable" is limited to communities of the same or nearest population range within Oregon. Notwithstanding the provisions of the subsection, the following additional definitions of "comparable" apply in the situations described as follows:
(A) For any city with a population of more than 325,000, "comparable" includes comparison to out-of-state cities of the same or similar size;
(B) For counties with a population of more than 400,000, "comparable" includes comparison to out-of-state counties of the same or similar size; and
(C) For the State of Oregon, "comparable" includes comparison to other states.
(f) The CPI-All Cities Index, commonly known as the cost of living.
(g) The stipulations of the parties.
(h) Such other factors, consistent with subsections (a) to (g) of this section as are traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of employment. However, the arbitrator shall not use such other factors, if in the judgment of the arbitrator, the factors in subsection (a) to (g) of this section provide sufficient evidence for an award.
The City of Cornelius is a full service city serving a population of 8,170 within six square miles. The City shares a border with the City of Forest Grove to the west and the City of Hillsboro on the east. Cornelius is included in the Portland Metropolitan boundaries and is located in Washington County. The City is considered a bedroom community with limited commercial and industrial properties.
The bargaining unit consists of police officers, corporals, and sergeants represented by the American Federation of State, County and Municipal Employees. They are employees of the City of Cornelius, Oregon. Currently the bargaining unit includes eleven members: two are Sergeants, one is a Corporal and the other eight are police officers. The parties are bargaining over a successor agreement that expired on June 30, 1998; two mediation sessions were held in November 1998 and there was no settlement. This matter was submitted to interest arbitration in accordance with ORS Chapter 243. Two issues remain in dispute: wages and health insurance. The parties are in agreement on the term of the contract.
In summary, the last best offer of AFSCME is as follows:
For Police Officers:
Effective July 1, 1998 5%
Effective July 1, 1999 3%
Effective July 1, 2000 3%
Effective July 1, 1998 6%
Effective July 1, 1999 4%
Effective July 1, 2000 4%
Effective July 1, 1998 8%
Effective July 1, 1999 6%
Effective July 1, 2000 6%
Insurance: Current Language - Maintains the historical cost sharing ration of 95% employer and 5% employee.
In summary, the last best offer of the City of Cornelius is as follows:
For Police Officers:
Effective July 1, 1998 4%
Effective July 1, 1999 2.75%
Effective July 1, 2000 2.75%
Effective July 1, 1998 5%
Effective July 1, 1999 2.75%
Effective July 1, 2000 2.75%
Effective July 1, 1998 6%
Effective July 1, 1999 2.75%
Effective July 1, 2000 2.75%
Insurance: City maximum cost to $533.00 in year 1, $570.00 in year 2 and an opener on cap in year 3. No cost sharing above this cost.
III. UNION ARGUMENT
The Union argues that this case presents a clear issue of what is in the best interest of the public. Because of the City's compensation policy, police employees have left City employment with alarming regularity. Within the last 8 years, a bargaining unit of 11 people has seen 10 fellow officers gain employment elsewhere; in 9 of those cases, the employee has gone to departments within the Metro area where pay is greater. Cornelius acts as a training department for other Metro Cities at tremendous costs to the City. There is the economic cost of hiring and training new employees; this cost is $80,000 per employee. In addition there is the intangible cost to the City of losing trained and experienced officers. The reason for this outflow of police officers is a great wage disparity between Cornelius and the surrounding police departments. The City's offer in wages will perpetuate this discrepancy. This wage disparity gets progressively worse as one moves to the corporal and sergeant top step. This relative wage position is further diminished when other forms of compensation are reviewed. The City falls behind in vacation, pay for certificates issued by the state for police proficiency, longevity pay and pay for special assignments, i.e. detective or motor cycle pay. Including all forms of compensation, Cornelius is more than 12% behind the labor market. The Union's proposal seeks to begin the process of correcting the problem. For this reason the City's proposal is not in the public interest.
At the bargaining table, the City did not mention that it is in any sort of fiscal distress. The cost of the Union's requested increase amount to about $20,000 per year for a three-year total of $60,000. An audit of the City's financial record reveals a fund balance that is more than sufficient to meet this increase in cost. This is particularly true when one looks at the difference in dollars between the Union's offer and that of the City, a difference of less than $15,000 over the course of the three years.
The labor market problem outlined above is so severe that similar statewide comparison between police jurisdictions of similar size is inconsequential to the public interest. Nevertheless, the statute requires that we look to salary comparability on a statewide basis using in this instance police officers in communities of the same and nearest population range within Oregon. Using as comparables, Sherwood, Cottage Grove, St. Helens, and Monmouth, Cornelius is about average in wages and in total compensation. However the employee's contribution to health insurance impacts negatively the officer's pay and this places this bargaining unit behind its comparitors.
The City wants to cap the employer's contribution to the insurance premium. The Union wants to retain current language that reflects the long-standing practice that requires the City to pay 95% of the health insurance premiums and the police officers continue to pay 5%. Under the City's proposal, the cost over the cap will be borne by the bargaining unit. There is no public interest in this proposal. It will further erode the compensation package and could lead to still more turnovers. There is no research to show that by making police officers contribute more to their health insurance, this will keep health costs low. The cost of health insurance is driven by factors outside the control of the employees. In fact, the cap will not save the City money in the first year of the agreement; the cap proposed of $533.00 is exactly what the City's 95% contribution is for 1998. Under the current contract provision, the cost sharing of 95%-5% is spread throughout the bargaining unit. The City has a step rate and not a composite rate for its health insurance. The new proposal would only impact families on the Blue Cross plan; the cost of premiums for single and two party and families on the Kaiser plan will fall below the City's proposed cap; those employees will not pay anything for their health insurance. Because employees with single and two party coverage no longer contribute, the City will be paying their full premium. The net effect is that the City will pay more than they would have to pay under the current language. Assuming a 10% increase in premiums the second year, this could amount to one hundred dollars a month additional costs. In addition, the City's proposal will disproportionately shift the burden of higher employee contributions to the officers with families. The Union opposes a reopener on insurance in the third year. Because there is no possibility of trade-offs to settle a contract, negotiations over a single issue are difficult and especially difficult when dealing with insurance, thus creating a potential for interest arbitration to resolve the impasse.
In conclusion, the Union's proposal is compatible with the public interest. It provides significant, yet modest, pay increases that will begin to allow the City to retain quality officers. It does this by spreading the cost of the increase over a three-year period. At the same time, it maintains the historical practice with respect to health insurance.
IV. CITY'S ARGUMENTS
The City's argues that its final offer is clearly in the interest and welfare of the public. The City's wage proposal is comparable with wages paid to police officers in jurisdictions of the same size. The City as directed by ORS 243.746(4)(b) selected comparable jurisdictions with care; those of the same size as close to the Portland Metro region as possible. The jurisdictions selected are west of the Cascades and in the northern section of the state. The comparables show that under the City's proposal the wages of police officers in Cornelius would be above the average wage at both entry and top step.
The Portland Metro area has experienced substantial growth especially in the Washington County area including the City of Cornelius. With that growth has come an increase in the need for public services; one of those public service is law enforcement. Hillsboro, Beaverton, and Washington County have expanded its law enforcement services to meet this need and have been hiring police officers at a rapid rate. The impact of this on Cornelius has been substantial turnover among its police officers. The City argues that better salaries alone have not been the reason that Cornelius officers have left to take employment in neighboring jurisdictions. There are a variety of reasons including better working conditions, more opportunity for promotion or specialization and better job security that influence an officer to leave Cornelius. Increasing the wages even as proposed by the Union will not stem the potential for continued turnover in the Cornelius Police Department.
The City agreed in negotiations to eliminate the bottom step on the salary schedule so that police officers will reach the top step sooner. In addition the City is proposing in its wage offer additional increases to both the corporal and sergeant steps. Both of these changes will place the City in a more competitive position for recruitment as well as retention of experienced officers. While the City recognizes the importance of retaining its experienced and trained officers and has addressed this in its final offer, there is a limit to what the City can realistically afford and still address the other needs of the City.
Cornelius is located within the Portland Metro region and is a full service city. Because the City is located the METRO boundaries, it must comply with all Metro land use planning mandates unlike cities of the same population outside METRO. As a full service City, the General Fund supports not only Police, but Fire, Parks, Court, Finance and Administration as well. The General Fund also supplements the activities of the Library and General Government including social services, elections and Council Activities.
The demands on City government are great and increasing with its growth in population, yet its tax base is primarily residential property. Typically a community's tax base will be evenly divided between residential and industrial and commercial property. However in Cornelius 85% of the tax base is residential. The tax rate in Cornelius is the third highest in Washington County yet this high tax rate does not generate much in the way of revenues. For incidence, Forest Grove, the next city West has only twice the population and yet four times the General Fund Budget as Cornelius. The City's reserves have been decreasing as the City adjusted to the impact of Measure 47. City services are based on population and the City struggles to provide the needed services to an increasing population.
The police serial levy ended two years ago and the cost of police services was absorbed into the General Fund. Despite four attempt to pass a replacement serial levy for police services, the voters have said no. Of the City's General Fund Budget for 1997-98 and 1998-99, the expenses for the police constitute fifty percent of the total budget. This is disproportionate; in Oregon it is typical to have expenditures for police represent 27% to 28% of the general fund budget. While police services are important, this disproportionate amount of the general fund budget devoted to the police department negatively impacts the City's other programs and needs. At some point, the City must look at the other City services and priorities and address them for they too contribute to a livable city.
The City proposes in its final offer that the employer's contribution to health insurance be up to $533.00 per month per employee for 1998-99. This amount covers the $62.00 increase per month for Blue Cross premium and maintain the 95% City and 5% employee payment. The Kaiser payment is much lower and is fully covered by the City. For 1999-20000, the City will pay up to $570 of the premium per month and the employee will pay any premium costs above that cap. Again this will cover all the premium costs for Kaiser family coverage. It appears to be enough to continue the 95% City and 5% employee payment but the final premium costs will not be available until April 1999. For 2000-2001, the City proposes a reopener on this issue. In the interim the City proposes an insurance committee to study ways to reduce premium costs by looking at changes in coverage and/or plan. In addition, the City would begin the process to establish a plan where the employee could pay for their contribution with pre-tax dollars.
The City proposes this final offer on insurance to control premium costs to the City in order to budget. An insurance cap is a priority to the City even if to gain a cap, the City must incur a modest cost initially. The purpose of the cap is to control the employer's cost for insurance premiums by (1) cost sharing with the employees and (2) controlling future costs by plan or coverage changes. The City proposes a reopener on insurance for the third year of the agreement so that changes in plan or benefit level can be explored, a pre tax plan put into effect and premiums for 2000-2001 can be more certain.
In conclusion, the City is working with tighter budgets, dwindling reserves, increasing mandates from other agencies, and a growing population that puts additional strain on its existing services. Considering the limited financial resources of the City and giving due consideration and weight to the other services and compelling priorities of the City, the City's final offer is clearly in the interest and welfare of the public.
The arbitrator must base his or her findings and opinions on the statutory criteria listed in ORS 243.746(4) (a) through (h) giving first priority to paragraph (a) the interest and welfare of the public and secondary priority to subsections (b) to (h). While arbitrators must give the interest and welfare of the public first priority in determining an award, there is no statutory definition of interest and welfare of the public. The term is nebulous and hard to define. However, it is clear that the interest and welfare of the public is not the determining factor standing alone, but rather is to be given first priority in conjunction with the secondary criteria. It is also clear that among criteria (b) though (g) all should be given equal consideration by the arbitrator and (h) - such other factor traditionally taken into consideration in determining wages and conditions of employment - should not be considered if the arbitrator determine there is sufficient evidence produced by the other criteria listed.
In the case before me, both parties argue that their final offer is in the interest and welfare of the public. Although my decision in this matter must ultimately turn on which of the two final offer packages better serves the "interest and welfare" of the public, this issue cannot be decided without a full consideration of the listed secondary criteria. After considering all of the secondary criteria, my final decision must still be judged in terms of its impact on the public interest and welfare.
There are two issues in dispute, wages and health insurance. For ease of analysis and discussion, I will first discuss the parties' final offers on wages in relation to the criteria (b) through (h) and then I will address the parties' final offers on health insurance. However as the arbitrator, I must choose either the City's final offer encompassing both wages and insurance or the Union final offer. I will conclude with an analysis of the final offer package in relation to its impact on the interest and welfare of the public.
1. ORS 243.746(4)(b) The reasonable financial ability of the unit of government to meet the costs of the proposed contract giving due consideration and weight to the other services, provided by, and other priorities of, the unit of government as determined by the governing body. A reasonable operating reserve against future contingencies, which does not include funds in contemplation of settlement of the labor dispute, shall not be considered as available toward a settlement.
The City has calculated its final offer on wages using actualsalaries including payroll costs for the three years of the contract. It has made the same calculation for the Union's final offer proposal on wages. The City's final offer on wages for the three-year period is $120,274 additional costs over current expenditures. The Union's final offer on wages again for three years is $151,287 additional costs over current expenditures. (City#1, page 14,15) The Union's final offer on wages is $31,013 greater over a three-year period. It is important to note that this is over a three-year period.
Due to the impact of Measure 47, the City has experienced dwindling reserves. While the tax rate in Cornelius is the third highest in Washington County, the tax base is 85% residential and does not therefore generate as much revenue as other jurisdictions with more industrial or commercial property on its tax rolls. Four attempts to pass police serial levy have been defeated and the cost of police services has been absorbed in the General Fund Budget. Expenditures for police services comprise 50% of the General Fund Budget which negatively impacts other services and priorities of the City. Expenditures for police services are a disproportionate portion of the budget. In fact the cities used in the City's comparability study spend less than 50% of their budget on police services. The City has other needs, priorities and mandates that must also be addressed and that require General Fund revenues to do so. Therefore, from the City's perspective, it is imperative that the expenditures for police services not exceed, in fact should be less than, 50% of the General Fund Budget. (Testimony of City Manager) While the City evidence regarding its financial conditions and the need to address other City priorities is persuasive, the difference between the two final offers is $31,013 additional costs above current expenditures over three years. This difference will impact the General Fund; however, it will not do so significantly and is spread over the three years of the contract. The General Fund revenues have remained stable throughout the last eight years and have in fact increased over that same time frame. Giving due consideration and weight to the other services provided by the City and its priorities, the arbitrator finds that the City has a reasonable financial ability to pay the cost of the proposed contract if the arbitrator was to award the Union's final offer on salary.
2. ORS 243.746(4)(c) The ability of the unit of government to attract and retain qualified personnel at the wage and benefit levels provided.
The City of Cornelius has not experienced difficulty in attracting qualified employees for its police department. However it has experienced significant turnover; in the last eight years, ten officers in a police department of eleven employees have sought employment in other departments -- nine within the Portland Metropolitan area. (Union Exhibit 13) There is no question that cities and counties in the metro area pay higher salaries for police officers, corporals and sergeants than does Cornelius. (Union Exhibit 14 and 15) There is also a disparity when comparing time off in the form of vacation or holidays, pay for certification and specialized duties with those in the Metro area paying more. (Union Exhibit 16,17 and 20) Because of these compensation disparities in the Metro area labor market, it is not surprising that Cornelius is experiencing difficulty retaining its trained and experienced officers.
This retention problem is at considerable cost to the City; the cost to hire and train a new officer is $80,000. (Union Exhibit 3) An inexperienced police officer must attend the BPST police academy for six weeks and work with another officer or coach for another 15 to 16 weeks before a new hire can work alone. (Testimony of Le Corre) The City did not argue that the estimate of $80,000 to train a new officer was inflated but that it included all costs for training a new hire. Those costs would include six weeks wages in order for the new hire to attend the Academy and an additional fifteen to sixteen weeks of wages while the new hire works with an experienced officer/coach and related overtime costs. (Testimony of City Manager) Not only does the loss of an experienced officer to another jurisdiction have financial implications but also the loss impacts the efficiency and effectiveness of the police service provided by the City. (Union Exhibit 3)
Cornelius officers have left the City because of the improved salaries available in nearby jurisdictions. However there were other factors, in addition to salary increases, influencing these police officers' decisions: better working conditions, better job security, and more opportunity for promotion and specialization. (Testimony of Hoskins, LeCorre, Rau) The City argues persuasively that the Union's final offer while it will increase Cornelius's competitive position in its labor market will not "stem the tide" as the City cannot replicate the other factors that influence its police officers to seek employment elsewhere. However the Union argues that there are experienced police officers who prefer the environment of a small police force, who prefer the challenge of seeing a case through to closure and who prefer variety over specialization. (Testimony of LeCorre and Jensen) The Union's argument is equally persuasive especially when applied to the recruitment and retention of experienced police officers from a smaller police force, what the parties refer to as a "lateral transfer".
I find that retention of experienced police officers has been a significant problem to the City of Cornelius. The loss of experienced officers has both financial and service related costs to the City. I find that neither parties proposal on wages will increase the wages of Cornelius police officers to a level that would stem the tide of its officers leaving for employment in other Metro area police forces. However, both final offers on wages address the retention problem as it relates to "lateral transfers"; both salary offers will improve the City's competitive position with smaller jurisdictions and attract those candidates who prefer a small police department. Both final offer proposals eliminate the recruitment or bottom step of the salary schedule allowing an officer to progress more quickly to the top step of the schedule. Both proposals would improve the City's competitive position relative to Forest Grove, a neighboring city with smaller police force.
3. ORS 243.746(4)(d) The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other paid excused time, pensions, insurance, benefits, and all other direct or indirect monetary benefits received.
There was limited evidence placed before me regarding this particular statutory requirement. Union Exhibits 17-21 and 25 addressed the components of overall compensation as they relate to the labor market and the comparable jurisdictions selected by the Union. After a review of the evidence presented, the arbitrator finds that in regard to vacations and holidays Cornelius does not exceed in fact was less than that granted in the selected jurisdictions. Nor did the City argue that compensation, other than direct wages, was greater in Cornelius than in those cities it had selected for comparison. It is relevant in this analysis only to this extent: the indirect compensation paid to the Cornelius police officers is not greater than that paid to comparable jurisdictions or labor market area and should not be considered as an offset for direct compensation or wages.
4. ORS 243.746(4)(e) Comparisons of the overall compensation of other employees performing similar services with the same or other employees in comparable communities. As used in this subsection, "comparable" is limited to communities of the same or nearest population range within Oregon.
The parties have selected many of the same jurisdictions for comparison. They are Sherwood, Cottage Grove, St Helens, and Monmouth. The City's list of comparable jurisdictions includes in addition Sweet Home, and Lincoln City. The City explained that it chose cities with comparable population but limited its selection to west of the Cascades and the northern portion of the state believing this to be a more rational geographic area for comparison. The population numbers for Sweet Home and Lincoln City are within the nearest population range to the City of Cornelius and there is a rational basis for the City's selection. For this reason, the arbitrator will use the comparable jurisdictions used by the City. The average wage at step one of these regional comparables is $2,465 and the average wage at step 6 is $3,129. (City Exhibit 1, page 18) Both the City's wage proposal and the Union wage proposal will raise the salaries of police officers above the regional average at both entry and top step. It is at the sergeant pay range that Cornelius has been behind the comparable jurisdictions.
Both parties recognized and addressed this disparity; their first year wage proposals provide additional percentage increases above that proposed for police officers. In the second and third year of the agreement, the Union is proposing a 6% increase each year - a percentage increase twice that proposed for police officer. The City in years two and three of the agreement is proposing the same percentage increase, 2.75%, for all pay ranges. The City's proposal raises the pay range for the sergeants approximately $80 higher than the regional average. I t is reasonable to assume that the City's proposal for the remaining years of the contract will continue the sergeant's pay range at the same relative position. However, the Union's proposal of a 6% increase for years two and three could result in this pay range exceeding that of its comparable.
5. The remaining statutory criteria are not relevant to this interest arbitration. Both parties' final offer wage proposals exceed the CPI. There were no stipulations of the parties. The factors in subsections (a) to (g) in the judgment of the arbitrator provide sufficient evidence for an award.
In summary, the Union's final offer wage proposal is $31,013 greater than the wage proposal of the City. I find that the City has the reasonable financial ability to pay the Union's wage proposal should that be the award. I also find that the City has experienced significant turn over in its police department over the last eight years. Both parties address the retention problem and both parties' wage proposals would make Cornelius police department more competitive in the recruitment and retention of experienced police officers from smaller jurisdictions or "lateral transfers". While attempting to stem the tide from competition within the Metro area may be impossible at this point in time, it is reasonable to assume that more competitive salaries would draw lateral transfers to the Cornelius police force. The recruitment and retention of experienced officers from smaller jurisdiction is significant. The ability to recruit experienced officers would be a definite cost savings to the City. An experienced police officer after a brief orientation period would be "on board"; the costs associated with the police academy, coaching period and related overtime would not be necessary. Of the two wage proposals, that of the Union places the City in a better competitive position. I also find that both wage proposals are in comparable to the average police officers salary in comparable jurisdictions.
B. HEALTH INSURANCE:
The Union's proposal continues the current practice of cost sharing: the City contributes 95% of the premium costs and the employee pays the remaining 5%. The City has proposed in its final offer a change in the current practice by capping the employer's contribution to health insurance at a flat dollar amount. The City would contribute up to $533 per family on the premium for 1998-99; this represents the current 95% contribution by the City to health insurance. In year two, the City would contribute up to $570 of the premium costs. In the third year of the agreement, the City proposes a reopener on health insurance. In all three years the Kaiser premium would be fully paid by the City.
The City argues that this change to a cap is needed in order to control the employer's cost for insurance premiums by (1) cost sharing with the employees and (2) controlling future costs by plan change or reduction in coverage. During the term of the contract, the City suggests that an insurance committee reviews of the current plan design and benefit levels in order to find a way to reduce the cost of the premium. And that once reductions have been reviewed, that there be a reopener in the third year on health insurance. The Union argues that cost sharing with the employees is already in place and has been historically. The Union also argues that the burden of cost sharing will not be born equally throughout the bargaining unit but rather will shift unfairly to those officers with families. In addition the Union opposes a reopener in the third year citing the potential is high for an impasse with only a single issue on the bargaining table.
There are two statutory criteria that are relevant to the issue of health insurance. The arbitrator will take each in turn beginning with (b) the reasonable financial ability of the City to meet the costs of the proposed contract giving due consideration and weight to the other services provided by, and other priorities of the City as determined by the governing body. The City's proposal on health insurance would cost potentially $34,407 for the three years of the contract if all eleven officers use the Blue Cross plan. (City Exhibit 1, page 9) Because there is a step rate and not a composite rate used, in the second year of the agreement under its proposal the City would be providing fully paid health insurance for all single and two party employees which it is not doing currently. (City Exhibit 1, page 10) Therefore the Union's proposal to continue the 5% contribution by all employees would be less costly to the City. However, the City acknowledges that it is willing to incur a modest cost in order to cap its future contribution. Regardless of which final offer package-either a reopener or continuation of the 95% City contribution- is awarded; the costs for the third year can not be determined at this time. As the City's final offer on insurance is the more costly of the two, it is reasonable to assume that it has the ability to pay for its offer for the term of the agreement.
The second relevant statutory criterion is (c) the ability of the City to attract and retain qualified personnel at the wage and benefits levels provided. As discussed previously, the City has had significant turnover in its police department. Both parties final offer addresses this issue in regards to wages. However the City's proposal to cap its contribution to health insurance will further erode its competitive position within the Metro area. (Union Exhibit 30) This is particularly true for experienced officers with families; increasing premium cost above the cap will erode any salary increase. The City's insurance proposal could also impact its ability to attract and retain experienced officers from smaller jurisdictions. The arbitrator does not have before her information concerning what cities of comparable size contribute towards health insurance. However it is reasonable to assume that an experienced officer with a family will weigh any salary increase gained by coming to Cornelius against increased employee contributions for family health insurance. It is also reasonable to assume that an experienced officer would more likely than not be married with a family. I find that the City's proposal on health insurance would erode its competitive position not only in the Metro area but could negatively its ability to attract and retain "lateral transfers"
As was mentioned at the beginning of this discussion, after an analysis of the parties final offers in relation to the secondary statutory criteria, I must make my determination giving first priority to the interest and welfare of the public. I must also select either the City's or the Union's final offer on the two issues in dispute- wage and insurance.
Both parties' final offers on wages address a significant problem: the city's ability to attract and retain experienced police officers. While I am not persuaded that the either parties' wage proposals will "stem the tide" of Cornelius police officers leaving for employment in the Metro area, both proposals would improve the City's competitive position relative to jurisdictions of comparable size or smaller. The potential for "lateral transfers" is high if the wages paid Cornelius police department are competitive. Attracting and retaining experienced officers from smaller jurisdictions could result in not only cost savings but also more effective and efficient police services and therefore would be in the interest and welfare of the public. The Union's wage proposal is close to that of the City's with only 1.5% over three years separating the two offers. Both wage proposals improve the City's competitive position relative to lateral transfers. It could be argued that under these circumstances it would be appropriate to defer to the City's proposal. However, I am not persuaded that the City's health insurance proposal is in the interest and welfare of the public and I must consider the final offers as a package.
The City's proposal is for an insurance cap and that is a major change from the current practice of the parties. The City argues that it needs to control its costs by capping the employer's contribution to health insurance. Costs would be controlled under the City's proposal by: (1) cost sharing by the employee and (2) reducing the cost of premiums by reductions in coverage or benefit level. The current practice provides for cost sharing by all employees; the City's proposal would shift the cost sharing to only one segment of employees, those who have Blue Cross family coverage. This shift in the cost-sharing burden will impact the city's second goal - a reduction in cost by changes in coverage or benefits in the following way. There is no question that going to a plan with reduced coverage or a lower benefit level lowers the cost of the premiums. However in order to achieve agreement on reduced benefit levels all employees must be negatively impacted by the increased cost of the current plan. The City's proposal during the life of this contract will have the opposite effect. Four of the employees who currently contribute 5% to their health insurance will no longer have to pay any employee contribution. Add these four employees to the three from Kaiser who are fully covered and a majority of the bargaining unit will be virtually unaffected by any premium increases for the term of this contract. The City's proposal will make it difficult if not impossible to achieve agreement on plan reductions. The City's proposal on insurance will have the effect of unfairly shifting the burden of cost sharing to only one segment of the employees and making it more difficult to achieve cost savings by plan reductions. It is in the public interest to control the cost of health insurance premiums and reducing benefit level is an effective means to achieve this end. However it would not be in the interest and welfare of the public to adopt the City's proposal, as it would make it more difficult that the current practice of cost sharing to achieve cost savings.
Both parties have acknowledged the need to improve their competitive position in order to attract and retain experienced officers and their wage proposals reflect that as both are above the CPI. The ability to attract and retain experienced police officers especially lateral transfers is in the public interest; the cost savings is substantial and the potential to attract experienced police officers from smaller jurisdictions is high. A cap on the City's contribution to health insurance would undermine any ground gained in making the wages of Cornelius police department competitive.
In conclusion, I find the final offer of the Union to be preferable to that of the City when evaluated against the criteria set forth in the ORS 243.746(4). While I find the two final offers for wages to be a close call, I find for the reasons stated above the health insurance proposal of the City not to be in the interest and welfare of the public. Since I must determine which of the final offers viewed as a package best serves the public interest the insurance offer is in the interest and welfare of the public, I will award the Union's final offer.
Adopt the Union's final offer proposal.
Respectfully submitted this 26th day of April 1999.
Nancy E. Brown
Attorney for the Union: Michael J. Tedesco
Attorney for the Employer: Kenneth H. Zenger