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IA-05-01
 
In the Matter of an Interest Arbitration Between Coos Bay Police Officers' Association and City of Coos Bay. IA-05-01.
 
BACKGROUND
This is a statutory interest arbitration between the Coos Police Officers' Association ("Association") and the City of Coos Bay ("City"), under the Oregon Public Employees Collective Bargaining Act, ORS 243.650 et seq. On May 4, 2001, the parties exchanged their last best offer packages, in accordance with the statutory requirement. I held a hearing on May 18, 2001 at City Hall in Coos Bay, Oregon.
 
Both parties were present at the hearing, and represented by counsel. Each party was given a full opportunity to examine and cross-examine witnesses, present evidence, and argue its position. Neither party objected to the conduct of the hearing. At the close of the hearing the parties asked for the opportunity to file written briefs. I received the last brief on June 25, 2001, at which time I declared the hearing closed. The parties stipulated that my Award would be due on July 27, 2001.
 
STATUTORY CRITERIA
ORS 243.746
 
(4) …unsolved 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) Comparison of the overall compensation of other employees performing similar services with the same or other employees in comparable communities. As used in this paragraph, "comparable" is limited to communities of the same or nearest population range within Oregon . . . .
 
(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 paragraphs (a) to (g) of this subsection 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 paragraphs (a) to (g) of this subsection provide sufficient evidence for an award.
 
STIPULATIONS OF THE PARTIES
The parties stipulated that the new contract would contain the existing Articles 2, 3, 6, 7, 8, 13, 15, 17, 18, 19, 22, 23, 28, 29, 32, 34, and 36 as they exist in the 1998-2001 Collective Bargaining Agreement. The parties also stipulated that the new contract would contain the preamble and Articles 1, 4, 5, 9, 10, 11, 12, 14, 16, 20, 21, 24, 25, 26, 27, 30, 33, 35, 37, 38, and 39, as tentatively agreed to by the parties. The parties also stipulated that they would have a three year contract commencing July 1, 2001 and remaining in effect until June 30, 2004.(1) All of the stipulations of the parties are made part of this Award.
 
LAST BEST OFFERS OF THE PARTIES
 
CITY
 
ARTICLE 31. SALARIES: 5% Increases effective July 1, 2001, 2002, and 2003.
 
ARTICLE 31.4 MASTER POLICE OFFICER
 
1. Master Police Officers pay scale shall be five percent (5%) higher than the top step police officer.
 
2. Qualifications for a Master Police Officer shall be advanced DPSST Certification.
ASSOCIATION
 
ARTICLE 31. SALARIES: 5% increases for all employees effective July 1, 2001, 2002, 2003. Additional 2% increase for dispatchers effective January 1, 2003 and another 2% effective January 1, 2004. In addition the Association proposed the following language on CPI.
 
Should the increase in the US CPI-W Index (May to May) be 3.5% or greater, then all employees shall receive a raise effective January 1, 2003 of the amount that the above referenced change in the US CPI-W exceed [sic] 3%. For example, if the US CPI-W (May to May) was 4% then all employees would receive a raise of 1%, which for the dispatchers would be in addition to the 2% increase.
 
The Association proposed the same CPI adjustment to be effective January 1, 2004. In addition, the Association proposed changing other salaries as follows:
 
31.10 Motorcyle Officer. An employee assigned to ride a motorcycle in the course of the employee's duties shall received [sic] five percent (5%) of base salary for the time spent at such an assignment.
 
31.11 Hazmat Team. Employees who are assigned Hazmat Team shall receive five percent (5%) of base salary for time spent to the Team.
 
At the hearing the Association explained that "time spent to the Team" means only that time during which an employee is working an assignment as part of the Hazmat Team or is training on the Hazmat Team.
 
The Association proposed the following additional increases:
 
18.1 Vacations shall accrue as follows:
 
Years of Service Annual Leave Hours Per Month
 
1 through 5 12 days 8 hours per month
 
6 - 10 15 days 10 hours per month
 
ll - 15 20 days 13.33 hours per month
 
16-24 22.5 days 15 hours per month
 
25+ 25 days 16.67 hour per month
 
34.1 The City shall pay a clothing allowance to all officers assigned to the Investigations Unit or other approved, non-uniformed position. Receipts shall be required for clothing purchased.
Allowances shall be paid according to the following schedule:
 
First Year of Assignment $500
 
Each Subsequent Year
 
of Assignment: $300
 
Allowances shall be paid on July 1 of the year in which they are earned.
34.3 The City shall reimburse officers one time a year for purchase of appropriate footwear which will not exceed $125 per year.
 
This last best offer represents an increase in vacation time for employees during their first year, as well as the addition of more vacation time for employees with 16 to 25+ years of service. The clothing increases amount to $100 for the first year of assignment, $50 for subsequent years of the assignment. The provision on footwear is entirely new.
 
INTEREST AND WELFARE OF THE PUBLIC
The statute requires that an arbitrator give "first priority" to the interest and welfare of the public when deciding which last best offer package to award. The parties have different views of the significance of "first priority." The City argues that in a close case the arbitrator should assume that the governing body's last best offer package represents the interest and welfare of the public. He or she should consider only whether the secondary criteria force another conclusion. According to the City, this is a close case, if one assumes no increase in the CPI over 3.5% during the term of the contract. With that assumption, the only real difference is the 2% increase for dispatchers and the relatively small amounts of money required for the other demands of the Association. Thus, in the City's view, its last best offer package presumptively represents the interest and welfare of the public. The arbitrator should only consider rejection of the City's package if the Association shows a "compelling need" to reject the City's package based on the secondary criteria. Since the Association has not done that, the City argues, the arbitrator must defer to the City Council's determination of the interest and welfare of the public.
 
There are two difficulties with the City's position. First, it assumes away the major issue in this case. In its opening statement the City asserted that the "real" issue in this case is the allocation of the risk of inflation. That is, the parties agree that an annual 5% increase is warranted. The only question is whether the employees bear the entire risk of inflation, or the City bears the risk of inflation in excess of 3% a year in any year during which inflation exceeds 3.5%. Under the Association's proposal, if inflation exceeds 3.5% in a year employees get a percentage increase equal to the difference between 3% and the actual CPI increase. They lose only 3% of their increase to inflation. Under the City's proposal the employee's scheduled increase would be eroded by the full amount of any increase in the CPI. According to the City's figures, except for the CPI proposal, the total three-year difference in cost between the proposals is $58,784. If CPI were to increase 5% per year over the course of the next three years, according to the City's figures, the Association proposal would cost $276,473. more than the City's proposal. Thus, by the City's own analysis, this is not a "close case" in which the arbitrator should - even arguably - defer to the governing body's determination of the interest and welfare of the public. There could be a significant difference in cost between the proposals.
 
Second, the City's assertion that the Association must demonstrate a "compelling need" for each of its proposals in order to have the arbitrator award a change in the status quo is based upon a misinterpretation of an interest arbitration award. In that award Arbitrator Wollett said:
 
The party proposing a change in the status quo has the burden to show, using statutory criteria, that its last best offer is either supported by a 'compelling need' or a quid pro quo that justifies taking away a benefit previously obtained through a negotiated settlement. City of McMinnville and McMinnville Police Officer's Assn. IA-20-99 (Emphasis added.)
That is, only when there is a proposal to take away a negotiated benefit must a quid pro quo or compelling need be shown. Otherwise, the burden of the Association is simply to show - by a preponderance of the evidence, in accordance with the statutory criteria - that its package should be awarded.
 
The Association asserts, quoting many arbitration decisions, that the only way in which the interest and welfare of the public can be understood is through the "secondary priority" criteria enumerated in the statute. These criteria are each secondary, but taken together they give meaning to the interest and welfare of the public. Since the City's argument is not convincing in this case, and since the Association offers a well-accepted definition of the interest and welfare of the public, I have accepted the Association's definition. Consequently, I will examine each last best offer package in light of the statutory criteria.
 
Secondary Priority Criteria
 
Financial Ability to Meet the Cost of the Proposed Contract
 
The City has not argued financial inability to meet the cost of the Association's proposed increases. Indeed, the entire difference between the two proposals is $59,000 over the three year term of the agreement, if there are no CPI increases over 3.5%. Instead, the City argues that any increase in its costs over 3% (which is the amount it can increase property taxes) must come from economic growth. It notes that its increases from economic growth have been about at the rate of inflation for fiscal years 98 to 01. Thus in the City's view, its long term financial picture is "troubling." The City estimates that its carryover will decrease from the current $1.6 million to nothing in fiscal year 03.(2) According to the proposed budget for FY2001/2002:
 
Since the passage of Ballot Measure 50, each year Coos Bay's adopted budgets have provided spending appropriations that have exceeded income, but each year staff has spent less than authorized to generate year-end carryovers larger than budgeted. We'll attempt to do this again during FY2001-2002. (CB-6A)
 
It is not clear that there is a solid basis for predicting the decline in year end carryover, especially in light of the City Manager's assertion that staff will attempt to underspend. Since he notes that staff has been successful in the past, he has a basis for his optimism. The City also cites the increased cost in health insurance for the FY2001-2002 as indicative of potential danger to its budget.
 
The Association notes that at no time during the proceedings has the City expressly claimed a financial inability to pay for the Association's package. Rather, the City has simply asserted that the uncertainty of the Association's potential pay increases may endanger future budgets. The Association notes that two factors limit any danger. First, there is no increase in cost to the City unless the CPI increases in excess of 3.5%. Second, even if that occurs, the six month's lag in implementation minimizes the impact on existing budgets. There is no evidence that the City has an inability to pay for the last best offer package proposed by the Association. Thus, on this criterion, the Association has proven its case.
 
Ability to Attract and Retain Qualified Personnel
 
The City has an admitted difficulty in attracting and retaining qualified personnel. The Police Department has 28 sworn personnel. Since January 1, 1998, the City has lost 14 sworn personnel. Six went to other departments, mostly because of better compensation. Four retired and four were terminated or resigned during probation. In the City's proposed FY2001/2002 budget the City Manager reported: "Turnover and recruitment difficulties in the Police Department are major concerns that I share with Chief Knight." (CB-6A, p.viii)
According to the Chief, the City is not "attracting qualified laterals." That means it must replace experienced officers with new hires. In addition, the Chief testified that there is a higher than desirable rate of employees failing on probation. That suggests that the applicant pool has insufficient numbers of highly qualified potential employees. For each employee that the City must recruit it expends both recruitment and training expenses. These training expenses are the cost of equipping and paying these potential police officers while they go through a state financed training program. In addition, new officers must be carefully supervised and provided on-the-job training during their probationary period. This represents an additional cost to the City. Chief Knight was candid in conceding that the chief reason for losing experienced sworn personnel was compensation. There is convincing evidence in this record that the City's ability to attract and retain qualified personnel has been compromised by its compensation package.
 
Overall Compensation Currently Received
 
The total compensation for a top step police officer in Coos Bay is a net figure of $3218.56 per month before taxes and after health insurance deduction. This represents a City expenditure of $4,356.53 per month, including the employer's retirement contribution of 6.48%, pickup of employee retirement contribution of 6%, and a monthly insurance cost of $664.94, less the employee contribution. For dispatchers, the employer's total cost of compensation is $3,504.36 per month, including a 6.48% retirement contribution, a 6% pickup of employee' retirement contribution and the net of health insurance. Dispatchers receive a net monthly pay of $2463.56 before taxes and after health insurance deduction.
Police officers in their first year of employment earn two weeks of vacation at the rate of 6.673 hours per month. After their fifteenth year they earn 15 hours a month of annual leave. Since Coos Bay Police Officers work 4 twelve hour shifts per week this amounts to approximately 3-3/4 weeks annual leave. On an eight hour day basis it is 22.5 days per year. Police officers who are assigned to the investigations unit or any other non-uniform position receive $400 in clothing allowance their first year and $250 in each subsequent year. Police officers do not receive any reimbursement for footwear. Nor do they currently receive any additional compensation for working on a motorcycle. Neither officers nor dispatchers receive compensation for being on the Hazmat Team.
 
Comparison to Other Employees in Comparable Communities
 
The parties disagree about what represents comparable communities. They agree that the statute defines comparable communities as "communities of the same or nearest population range within Oregon." The City proposes a comparison with cities ranging in population between 10,000 and 20,000. It rejects the idea that only the cities with populations closest to Coos Bay should be considered. For its presentation at the hearing, the City selected among cities in the 10-20,000 population range. It justified this group by showing that the cities closest in population to Coos Bay have experienced greater growth than Coos Bay since 1998. Therefore, in the City's view they cannot be used in the comparison. At the hearing the City presented a group of 16 jurisdictions for comparison. Twelve were smaller than Coos Bay and 4 were larger.(3)
 
By contrast, the Association presented comparison groups containing all cities whose populations were 3, 4, 6, or 10 up and down from Coos Bay. In each instance the Association chose an equal number of jurisdictions that were above and below the City in population. That is more consistent with the requirement of the statute and more objective than the City's assortment of jurisdictions within the 10-20,000 population range. Using jurisdictions that are 3 up and down, Coos Bay Police Officers receive 10.8% less than the average in gross income; at 4 up and 4 down it is 11.3% less in gross income; at 6 up and 6 down it is 9.5% less in gross income and at 10 up and 10 down it is 4.6% less in gross income. Thus, by any supportable measure of comparability, Coos Bay Police Officers are paid significantly below the average in comparable communities.
 
The City makes one additional argument about comparability. It asserts that the closeness of the last best offers, both of which call for annual 5% increases, indicates the issue has less to do with comparability than who should bear the risk of inflation. Nevertheless, the Association used comparables that indicated the City was from 11.3% to 4.6% below average for police officers and between 22 and 17% below average for dispatchers. The City argues:
 
Since the City's comparables, not the Union's, are in fact closest to both parties' last best
offers, the City's comparables should be accepted as the comparables for the purposes of the arbitrator's decision. (Brief at 14)
 
This formulation turns the statutory provision upside down. Instead of first determining which jurisdictions are "comparable communities" under the statute, the City would have me first accept that the overlap in offers represents the appropriate increase, then work backwards to determine what group of "comparable communities" would support that increase. I must decline the City's invitation to read the statute in this way.(4)
 
I find that the comparison jurisdictions used by the Association are more consonant with the statutory requirement than those used by the City. The Association's comparables demonstrate a significant compensation shortfall for both police officers and dispatchers, relative to average total compensation in other jurisdictions. Thus, on this criterion, the Association has established that pay raises of 7% (annualized) for the dispatchers and pay raises which guarantee police officers a real increase in wages even if inflation exceeds 3.5% are justified.
 
CPI-All Cities Index
 
The parties agree that the 5% increase represents a real increase in wages above inflation. It is an attempt by the parties to have Coos Bay Police Officers "catch-up" to comparable jurisdictions. The Association's provision guaranteeing actual catch-up even if the CPI exceeds 3.5% in any year is justified by both the need to "catch-up" with other comparable jurisdictions and the related recruitment and retention problems that the City has been experiencing.
 
Stipulation of the Parties (see above)
 
Specific Proposals
 
1. Wages
 
The parties agree on an annual 5% increase but disagree on the additional 2% increase for dispatchers and the Association's proposal to protect the "catch-up" from erosion by inflation. The Association's proposal is justified by comparability, the City's difficulty attracting and retaining qualified personnel, and the City's ability to pay for the increases. Thus, the statutory criteria argue strongly in favor of the Association's last best offer package, based on its wage proposal.
 
2. Other Proposals
 
None of the Association's other proposals has a significant cost. The proposal for motorcycle premium pay would provide the same premium as the majority of jurisdictions 6 up and 6 down that have motorcycles. Similarly, the proposal for a clothing allowance is better aligned with comparable jurisdictions than what is contained in the current contract. The proposal on Hazmat pay, to the extent it is understood as requiring a premium only when the members of the Hazmat Team are actually performing Hazmat duties or training for them, is justified by internal comparisons. Firefighters and police officers who go into the hot zone are exposed to the same risks, but only the firefighters get a premium for the work.
 
The proposal on vacation pay is more problematic. No clear pattern emerges among the comparable jurisdictions. Some have 25 days annually after 20 years; some have it after 15 years; some have as much as 30 days annually. The Association's proposal is not consonant with any specific jurisdiction but represents a range that is within the range established by jurisdictions 6 up and 6 down. There is no comparability data that justifies the payment for footwear. Thus, the question becomes whether this proposal is so egregious that it alone should result in awarding the City's last best offer. It is not. At most, it could cost the City $3500 per year.
 
I find that the Association's last best offer package is clearly justified by the secondary criteria. It represents a balance between the needs of the City and the needs of the police officers and is therefore consonant with the primary criterion, the interest and welfare of the public.
 
By reason of the foregoing, I make the following:
 
AWARD
The parties are ordered to adopt the last best offer package of the Coos Bay Police Officers' Association, including the unchanged current language and the language modified by tentative agreement.
 
San Francisco, CA
 
July 27, 2001
 
Norman Brand
 
For Coos Bay Police Officers' Association: John Hoag, Esq., Law Office of John Hoag PC
 
For City of Coos Bay: C. Randall Tosh, Esq., Office of the City Attorney
 
1. That agreement necessarily requires a change to Article 40.2 so that November 1, 2000 is changed to November 1, 2003. While there was no explicit stipulation on this point, there was agreement at the hearing that this was the intent of both parties.
 
2. The carryover is used to fund payroll from 1 July to 15 November each year, which amounts to $1.2 million. It is not a contingency account. Rather, it represents the City's use of "saved" funds in order to avoid issuing revenue or tax anticipation notes as is done in other jurisdictions. The savings that the City enjoys by using its own funds amounts to the interest on portions of the money over 4-1/2 months. That is, the City would not be obliged to borrow the entire amount in July but only what is needed for the July payroll followed by what is needed for the August payroll, etc.
 
3. In a document produced February 22, 2001 the City included 20 jurisdictions as having populations between ten and twenty thousand. In its submission at the arbitration hearing the City included only 16 jurisdictions. It is unclear what basis the City used for including or excluding jurisdictions.
 
4. If the parties had stipulated that 5% is an appropriate increase, which they did not, there might be some basis for the City's argument. Instead, they presented last best offer packages embodying different financial terms.