Text Size:   A+ A- A   •   Text Only
Find     
Site Image

IA-2099
In the Matter of an Interest Arbitration Between THE CITY OF McMINNVILLE and McMINNVILLE POLICE OFFICERS' ASSN. IA-20-99.
 
This case came on for hearing at the City Hall in McMinnville, Oregon, on March 3, 2000. Each party had a full opportunity to make its opening statement and to present testimonial and documentary evidence. Witnesses were sworn. The testimonial evidence was accommodated within the time constraints agreed to by the parties. The documentary evidence was voluminous. All exhibits were admitted, subject to later written challenge. There were 79 exhibits in all.
 
Each party subsequently commented by letter on the exhibits of the other party, at the request of the Arbitrator, who examined their objections and ruled thereon. Post-hearing briefs together with attachments (other arbitration decisions, in excerpt or in full) were submitted on April 3, 2000. Both parties agreed that the hearing should be ruled closed as of that date, with the 30-day period for the Arbitrator to make a decision to begin running at that time.
 
BACKGROUND
 
This matter came on under Oregon Revised Statutes (ORS) 243.746(4) which provides, in part, as follows:
 
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).
 
The criteria set forth in the statute are 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. Notwithstanding the provisions of this paragraph, 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; and
 
(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 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 facts in paragraphs (a) to (g) of this subsection provide sufficient evidence for an award. (See, ORS 243.746(4)).
 
Since the overriding and overarching concern is the "interest and welfare of the public" (paragraph (a)), some general comments are in order.
 
"In the world of collective bargaining, stability and continuity are values of primary importance. The status quo is not realistically subject to major alteration or modification unless (a) there is demonstrable evidence that the status quo has proved to be unworkable or mischievous, or (b) external evidence establishes 'changed circumstances' which impel modification, or (c) there is a perceptible trade-off in which the party seeking change has 'bought' agreement." Collective Bargaining in Public Employment (4th edition) Wollett, Grodin, and Weisberger, West Publishing Company (1993), p. 328.
 
In my view, this is the fundamental analysis which serves the public interest and welfare. Professor Carleton J. Snow of Willammette University puts the point differently. "Inherent in the legislative decision to use a 'last best offer package' approach to interest arbitration is a requirement that each party either meet the 'compelling need' test or show that a quid pro quo exists to justify taking away a benefit previously obtained through a negotiated settlement." Bend Firefighters Union and City of Bend, Snow (1996), p. 6.
 
The secondary priorities must also be examined.
 
Paragraph (e) of ORS 243.746(4) requires the arbitrator to look at comparisons of the overall compensation of other employees performing similar services with the same or other employers in comparable communities. In rough terms, this is the concept of "equal pay for comparable work"-- a standard of basic fairness, looking at in-house employees of the same employer and employees of "communities of the same or nearest population range within Oregon." Speaking generally, the concept of pay means emoluments of value, which benefit the employees at the employer's cost. (paragraph (d))
 
It is real income that should be measured, and, accordingly, dollar income should be adjusted to reflect movements in the Consumers Price Index, All Cities Index. (paragraph (f))
 
Because the quality of the service performed by the governmental agency involved is directly related to public welfare, the arbitrator must take into account the ability of the governmental unit to attract and retain qualified employees at the wage and benefit levels proposed. (paragraph (c))
 
Finally, the arbitrator must be cognizant of the ability of the governmental unit to fund the proposals consistent with funding other priorities as determined by the public employer without invading operational reserves. (paragraph (b))
 
The Oregon statute requires each party to submit to the other its last best offer 14 days prior to the day of the arbitration hearing. It permits the parties to "modify" the last best offer within a 24-hour period thereafter. The City chose to do this. The arbitrator must chose one proposal or the other. He cannot compromise.
 
THE PARTIES' LAST BEST OFFERS
 
The Association's LBO
 
First Year Wages
 
1.5% effective July 1, 1999.
 
Second Year Wages
 
Effective July 1, 2000, adjustment pursuant to Portland CPI (Consumer Price Index) of no less than 2% and no more than 5%. [This turned out to be 3.7%.]
 
Third Year Wages
 
Effective July 1, 2001, adjustment of no less than 2% and no more than 5% pursuant to the Portland CPI.
 
Educational Incentive Pay
 
Effective July 1, 2001, members of the bargaining unit who earn associates or bachelors degrees shall receive an increase of 1%.
 
The City's LBO
 
Effective July 1, 1999, wages shall be increased by 2%.
 
Effective January 1, 2000, wages shall be increased by 1%.
 
Effective July 1, 2000, wages shall be adjusted no less than 2%, no more than 6% pursuant to the Portland CPI.
 
Effective July 1, 2001, wages shall be adjusted by no less than 2% and no more than 6% pursuant to the Portland CPI.
 
Co-Pay on Increased Health Insurance Premiums
 
Effective with the insurance year 2000-2001, the City and the employees will share equally increases in the premium for medical, dental, and vision insurance over the base year (1999-2000).
 
City's Modified LBO
 
The City's modification of its last best offer made three changes as against its original LBO: First, the City proposed that the wage increases effective July 1, 2000 and July 1, 2001, should be governed by the All Cities CPI, instead of the Portland CPI. Second, the City proposed that the adjustments in the third year should have a maximum of 5% instead of 6%.
 
Third, the City proposed that the wage adjustment in the third year should be governed by the All Cities CPI January 2000 (same as the adjustment during the second year): 2.8%.
 
At the hearing, a City witness testified that it was the intent of the City to have the adjustment in the third year of the contract based on the January 2001 All Cities CPI, not the one for January 2000. This correction came 13 days after the submission of the City's modified last best offer.
 
In Union Exhibit No. 9, the Union stated that the wage adjustment proposed by the City was 2.8% for the year ending January 2000, and 2.8% for the year ending January 2001 because both were based on the All Cities CPI for 2000. The City answered that this was a scrivener's error and that the error should be corrected to make it clear that the CPI governing the third year is the one for the year ending January 2001. This would mean that the City's proposed wage adjustment would be between 2% and 5% based on the All Cities CPI (presumably more than 2.8%).
 
Issue No. 1 THE THRESHOLD ISSUE RAISED BY THE UNION: SHOULD THE CITY BE PERMITTED TO CHANGE ITS MODIFIED LAST BEST OFFER?
 
In my decisions on each party's objections to the exhibits of the other party, I ruled that the assertion in Union Exhibit No. 9 that the City wage adjustment in the third year would be 2.8% should be stricken. However, in subsequent correspondence I ruled that the Union should be permitted to challenge my ruling. I had characterized the Union's objection to permitting the City to modify its modified last best offer as a "technical" claim which should not be a turning point in my decision.
 
Upon further consideration, I have concluded that I was wrong, or at least simplistic in my response to the issue. The objective of the last best offer system embraced by the Oregon legislature is to encourage the parties to settle. The system is not necessarily aimed at doing equity or achieving fairness. Theoretically both last best offers could be unreasonable, and the arbitrator might be forced to choose between two unreasonable proposals.
 
I accept the City's assertion that the error in its modified last best offer was inadvertent. However, the fact is that the error did mislead. It stood for 13 days. It subverted the process because it had an adverse impact (presumably) on the Association's willingness to settle because it was regressive. The purpose of permitting modification of the LBO is to permit the parties, now that they've seen the other side's last best offer, to consider settlement. And to reduce the risk that the arbitrator will choose the other side's proposal. But this didn't work here or at least it didn't work properly because the City's MLBO was regressive, i.e., less attractive to the Association. Moreover, it would be less appealing to the Arbitrator. The City had 13 days to try to return the process to optimal function, but it did not do so.
 
I was wrong in my original judgment on this point. The error was substantive, not merely technical. The statute seems to contemplate that the parties will be more careful in formulating their modified last best offer than the City was here. If the parties are not careful, the process contemplated by the legislature may misfire.
 
There is an additional reason for my decision on this matter. The statute limits the Arbitrator's discretion. He must choose between one set of proposals or the other. He has no other power. The City is, in effect, asking me to do something which is beyond my authority, viz., to change the terms of its modified last best offer and permit a second modification.
 
My answer to Issue No. 1 is "No." The rigidities of the statute must be honored. The City's modified LBO shall stand as submitted.
 
Issue No. 2 WHICH PROPOSAL, THE CITY'S OR THE ASSOCIATION'S, BETTER MEETS THE REQUIREMENTS OF ORS 243.746(4)?
 
For the three years of the new collective bargaining agreement, about the length of which they agree, the City and the Association are in disagreement over wages, educational premiums, and the co-pay on health and welfare insurance.
 
The City proposes a 2% increase for the first six months of the contract, an additional 1% increase during the second six months, 2.8% in the second year (based on the All Cities CPI), and 2.8% in the third year; a change to the All Cities CPI for the second and third years; a reduction in the maximum for the third year from 6% to 5%; and a co-pay for increases in insurance premiums beginning in the second year.
 
The Association proposes 1.5% effective for the first year, 3.7% effective for the second year, 2% - 5% for the third year,(1) and a 1% increase in educational incentive pay during the third year.
 
The first priority criterion in the statute--"the interest and welfare of the public"-- is best served if the collective bargaining relationship between the present employer and the Union is characterized by continuity and stability. The party proposing 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-- in this case, the commitment of the City that it will pay the entire cost of health and welfare premiums. This is the view of Professor Snow, supra. I agree.
 
(a) The Proposed Changes in the Status Quo
 
(1) The City proposes an upward wage adjustment over the life of the Collective Bargaining Agreement of 8.6%. The Association also proposes a wage adjustment over the life of the Agreement. The total over the three-year period is not susceptible to precise prediction.
 
(2) The City proposes the use of the All-Cities CPI instead of the Portland CPI which has been used in the past, the Association proposes continuation of the Portland CPI.
 
(3) The Association proposes a 1% increase in educational incentive pay in the third year; the City proposes the status quo.
 
(4) The City proposes that, beginning in the second year, the employees pay one-half of the increase in insurance premiums over the base year; the Association stands on the status quo which calls for the employer to pay all.
 
(b) Which of the Proposed Changes in the Status Quo Better Fits the Statutory Criteria?
 
(1) The Wage Adjustment
 
The figure of 8.6% under the City's proposal is the total of 3% in the first year and 2.8% in each of the subsequent two years. The Association figure would be the total of 1.5% during the first year, 3.7% during the second year, and whatever percent was generated by the Portland CPI for the third year (at least 2% but not more than 5%).
 
Since the City's proposal is front-loaded (3% as against 1.5% in the first year), the employees will gain more over the three-year life of the contract under its proposal than under the Association's proposal. However, this difference may be reduced prospectively by the fact that the Portland CPI proposed by the Association as the source of the third year adjustment probably will exceed 2.8%.
 
As a practical matter, the wage proposals of the parties are a wash, or close to it. That is to say, that while both parties propose changes in the status quo, each set of proposals is likely to produce about the same result. As the City says on page 21 of its brief, in talking about where a top step officer would be in the third year, this is "anybody's guess." To the extent that one can calculate it, the two wage proposals are very close. The City virtually concedes this on page 8 of its brief. It falls back on a quote from a decision by an interest arbitrator, William Dorsey, who stated as follows in Clackamas County Peace Officers Association and Clackamas County:
 
[The arbitrator should] defer to public officials or to the expression of the electoral process. In this case, where the last best offers are so similar, the arbitrator should defer to the policy choice expressed by the County's last best offer, as the clearest expression of the "interest and welfare of the public."
 
In other words, in the view of Arbitrator Dorsey, in close cases, the arbitrator must accept as datum the proposition that the public employer is a better judge of the interest and welfare of the public. I do not agree.
 
The late George Taylor of the Wharton School of the University of Pennsylvania, who was one of the primary architects of omnibus legislation for public employee collective bargaining, made the following comments in 1967:
 
A strike of government employees interferes with the orderly performance of the functions of the representative government. Compulsory arbitration is a greater threat-- it entails a delegation to "outsiders" of the authority assigned by the electorate to elected officials, who are subject to the checks and balances of our governmental institutions. (cited at page 333 of Wollett, Grodin, and Weisberger), supra.
 
Professor Taylor identified the principal risk of binding interests arbitration, a risk which cannot be avoided. The arbitrator must adhere to the statutory criteria and follow the record evidence. He must make a decision which is not based upon deference but is, rather, based on that evidence. Whether it is a close call or not is irrelevant. One of the inherent difficulties with compulsory interest arbitration is that the arbitrator's award may require the public employer to reorder its priorities. The arbitrator should not be permitted to avoid this responsibility by deferring to the public officials whose decisions are under challenge.
 
In coming to grips with this question, I have disregarded the wage proposals, standing alone, on the ground that there is little clear substantive difference between the proposals of the parties in their predictable impact on the status quo over the course of the three-year life of the collective bargaining agreement. As I stated above, the front-loading of the City's proposal (3% in the first year as against 1.5%) would predictably be offset by 3.7% in the second year as against 2.8% and the utilization of the Portland CPI in the third year as against the 2.8% proposed by the City. However, on this record the total impact is "anybody's guess."
 
There is no evidentiary basis for a choice. However, the question of whether the City's wage proposal is an adequate quid pro quo for the insurance premium co-pay needs further consideration, which it will be given later. Under the statute we are required to look at "overall compensation presently received" by employees performing similar services for comparable communities. If one of the parties is able to show that the overall compensation provided to the employees is more generous or less generous than that provided by the comparator communities, that fact should be considered in evaluating the adequacy of the overall compensation proposal, including wages.
 
The statute requires the arbitrator to look at "vacations, holidays and other paid excused time, pensions, insurance benefits, and other direct or indirect monetary benefits received."
 
The Association asserts that insurance and retirement payments are not to be included in overall compensation because, while they cost the employer money, they are not benefits "presently received" by the employee. The Association's argument is based upon the statutory language which refers to compensation "presently received." However, the statute also includes "other . . . benefits received," and the antecedent words are "pensions, insurance, benefits." In my opinion, the Association is giving the statutory language an inordinately narrow interpretation.
 
This is also true of benefits which are not received by everyone in the bargaining unit, perhaps only a few. They are received by individual members of the bargaining unit when they satisfy a particular condition such as earning an educational incentive premium. Or they may vary because of experience levels or status, e.g., canine officers. They should be counted.
 
It may make some sense not to include reimbursed time off such as vacations, holidays and sick leave, because the employee does not receive additional income at the employer's expense. However, in any realistic sense they are, in fact, benefits -- time is money -- and the statute seems clearly to include them.
 
Then, there is the question of what communities should be included on the list of comparators. The Association provided a list of six communities; the City, 21 communities.
 
There are differences between the parties in analytical methodology in looking at the overall compensation data. There are also differences in lists of comparators. But if one follows the inquiries of Professor Snow, what of these differences? Do they help us find an answer to the question of whether or not the proposed changes in the status quo are required by a "compelling need?" Or do they show that a quid pro quo exists to justify taking away a benefit previously obtained through a negotiated settlement? These data are helpful only if they show that McMinnville is way out of line in comparative overall compensation.
 
The evidence (statewide) shows that the average total compensation for the City's comparators is $4,778 as against the McMinnville average of $5,032. However, if one looks at the Association's comparators -- Lake Oswego, Keizer, Oregon City, West Linn, and Tualatin -- the figures range from $5,019 in Lake Oswego, to $5,171 in Tualatin. See Employer Exhibit 34.(2) These data do not support the conclusion that McMinnville is substantially out of phase with other communities in total compensation comparison. The answer to the questions posed above is no.
 
(2) Replacement of the Portland CPI
 
Use of the All-Cities CPI is a secondary priority under the statutory criteria. However, the significance of that requirement can be overridden by the priority criterion of "the interest and welfare of the public." The Portland CPI has been used by these parties in the past. Furthermore, it was used as recently as last year by the City in its negotiations with its firefighters. Does the fact that the All-Cities CPI is thought by some to generate a more accurate measure of the rise in the cost of living than the Portland CPI constitute a compelling need for change? My answer is no.
 
Accuracy was not the City's motive for change. It was seeking, rather, to reduce the value of its quid pro quo in the second year from 3.7% to 2.8%. There is no evidence that the use of the Portland CPI has been a problem in the past, nor is there any evidence that it was a problem in the recently concluded negotiations with the firefighters. There was no compelling need for change.
 
(3) How about the 1% increase in educational incentives effective in the third year of the contract? There is evidence in the comparative data that the Association's proposal is in line with the competition. Exhibit 27. However, this hardly constitutes a compelling need. The testimony (and in this context, the expert testimony) of Chief Brown that a better educated workforce is the key to improved law enforcement does not provide a sufficient evidentiary basis to support a finding that the present incentive levels are unworkable or that the need for change is compelling.
 
(4) Finally, there is the question of whether the trade-off or quid pro quo proposed by the City as the price it was willing to pay to gain a 50% co-pay for increases in insurance premiums in the second year of the contract should have been enough to cause the Association to lose a benefit (the employer pays all) obtained in prior negotiations?
 
A preliminary question is whether institution of the City's proposal re co-pay would adversely impact on the City's ability to attract and retain qualified personnel. While there was testimony that many employees in the bargaining unit were extremely concerned about the City's proposal, and that they view it with apprehension, especially in light of projections of a 15% increase per year in premiums, the evidence was not compelling. The City pointed out in its brief (page 27) that the testimony of one witness that he would leave the employ of the City if the co-pay were awarded by the arbitrator was not credible. I agree with the City. The Association did not carry its burden on this point.
 
The overriding component of the City's package is the co-pay proposed for premium increases in health and welfare insurance. The co-pay proposal is the component of the package which has greatest weight. The other parts pale in significance by comparison.
 
To sum up -- The wage proposals are basically a wash.
 
The Association proposal on educational incentive pay is important but not overriding. The case is more philosophical than evidentiary.
 
The City's change in the CPI, while given support by the secondary criterion in the statute, is a change -- a "take away." The case for this change was not made. If there was a compelling need for change, why did the City keep the Portland CPI for the firefighters?
 
This leaves for consideration the co-pay proposal. It is the heart of the dispute. It is the centerpiece of the package. It is the factor upon which this decision turns.
 
The City's case for this major change in the status quo is based upon two propositions. First, it argues that there is inequity based on in-house comparisons between the non-unionized employees (100+), the firefighters, and the police. The former two groups now have a co-pay. The police officers do not, unless the City wins this arbitration.
 
I have difficulty with the inequity argument. The inequity was created by the City when it prevailed in bargaining with the firefighters (15 employees) and obtained their agreement to a co-pay. Now the City, having created an inequity, argues that it must be turned against the police (31 employees) in order to remove the inequity which the City created. I do not find this argument persuasive.
 
Where the employees of a public employer have more than one bargaining unit and bargaining representative, inequities are inevitable. There are a number of variables which may produce this result. But these inequities are inherent in the system and are not, standing alone, an adequate basis for a major change in the status quo in one of the bargaining units. If the non-union employees feel disadvantaged, they have an option: organize. The turning question here is whether there is a quid pro quo which is large enough to justify taking away from the police officers a benefit which they have had in the past. Using the common verbiage of collective bargaining, is it in the public interest to award the employer a "take-away?"
 
Second, the City argues that its wage proposals, based primarily on the maintenance of real income, are an adequate quid pro quo to justify the co-pay. In my view, the price for this take-away has to be higher than a wage adjustment based on an increase, past or predicted, in the cost of living as measured by the CPI. To the extent that a wage adjustment is designed to protect real income, it is not enough. The City argues that its LBO wage proposal of a 2% increase effective July 1, 1999 and another 1% increase effective January 1, 2000 increases the base pay for all bargaining unit positions by 3% in the first year; it bases the salary increases for the second and third years of the Agreement on the All-Cities CPI. The first year increase, says the City, is not compelled by the CPI data. Indeed, the wage adjustment for the first year exceeds the CPI and provides the employees a cushion as they assume shared responsibility for the increased premium costs they will face during the second and third years of the Agreement. The City is right about this. The record evidence confirms that the All-Cities index registers 1.6% for January 1999, which is below the City's first year proposal. Even further below the City's proposal is the Portland index which runs to 1.1% increase for the same period.
 
The City's argument carries weight in the first year, but it breaks down in the second and third years. The second year increase of 2.8% is below the increase generated by the Portland index of 3.7%. In the third year the City slips again with a 2.8%, predictably less than the Portland index. So, if one takes a look at what is going to happen to wage levels during the life of the Agreement, the quid pro quo offered by the City is basically no more than an increase necessary in order to protect the police officers' real income.
 
In my judgment, wage increases designed to protect real income do not constitute the kind of quid pro quo necessary in order to justify a major departure from the status quo. The City might argue that the comparative data concerning overall compensation show that the City works from such a generous base that its wage increase must be given greater weight than would otherwise be the case. The difficulty with this argument is that while the benefits of overall compensation made by the City of McMinnville to the police are within reasonable norms, and in some cases better, they are not excessive. The City's proposal for co-pay must stand on its own.
 
The City might also argue that it cannot pay a greater price for the change in the status quo which it seeks without impairing its ability to meet its other priorities. This is the inability to pay argument -- that the employer's position must prevail if it is to be able to maintain other governmental services at reasonable levels. But this argument was not made in the hearing; and if it had been made, I would have been foreclosed from considering it by the stipulation of the parties that ability to pay was not an issue.
 
A comparison of the wage proposals for the firefighters in McMinnville with the police officers is instructive. For their agreement to a co-pay, the firefighters got an increase of 1% in incentive pay, a 3% across the board wage increase in the first year, a cost of living increase generated by the Portland CPI in the second year of 3.7%, and an increase generated by the Portland CPI in the third year, probably higher than the one generated by the All-Cities CPI for the police. Indeed, this may be the reason the City reduced the maximum in the third year of its proposal for the police to 5% (as against 6% for firefighters). It is evident that the firefighters received more for their agreement to the co-pay than the City's modified last best offer.
 
The City argues correctly that its first year wage proposal exceeded monies generated by the Portland CPI. But then, in the second year, the City took part of that back by offering 2.8% instead of 3.7%. And finally, in the third year, it moved away from the Portland CPI and to the All-Cities CPI in order to retrench further on its wage proposals. Furthermore, the firefighters got an increase in incentive pay; the police will not.
 
In arguing that there was a compelling need for the City's 50/50 co-pay proposal, the City argues that public interest/welfare concerns bolster the need for cost containment of health insurance because "runaway premium costs are the bane of the public in general and have a direct effect on the ability for the County to meet its programs and needs. The County proposal is one way to meet the challenge of ever-increasing premium costs." Clatsop County, Oregon versus Clatsop County Employees, Local Union 2746-0, Sheriff's Unit, Oregon AFSCME, cited at page 7 of the employer's brief. See also Arbitrator Calhoun, cited on the same page, urging that under the employer's co-pay proposal, "unit members will be forced to pay more . . . or consume less."
 
The assumptions underlying this proposition are that if employees share in premium costs, they will seek less expensive health care or chose cheaper programs. Is there an evidentiary basis for these assumptions? Is there any evidence that sharing premium costs has a stabilizing effect on premiums and/or inhibits their escalation or causes the insured to shop more prudently? Certainly there is no such evidence in this record. On the evidence here one is entitled to say that the proposition is an unsubstantiated hypothesis.
 
There is no doubt that rising premium costs for health insurance is a serious problem which demands public attention. Some observers think that rising costs is a function of tension between providers and insurers and is unavoidable in a system where a free market driven by the profit motive operates to provide health care. But there is no evidence, certainly not in this record, to support the proposition that a 50/50 cap has any relevance to ever-increasing insurance premium costs. What the co-pay does is to shift half the costs of increase over the base to the employees. The impact, if any, on total premium costs is unknown.
 
The City argues that its 50/50 co-pay is supported by the evidence in respect of the comparator agencies. It states that 13 of the City's 20 comparators, including 5 of the Association's 6, have some form of cap. But many of the communities with a co-pay have utilized something less than the 50/50 formula. This raises the question of why the City didn't take an incremental approach in proposing a co-pay -- something less than a 50% contribution from the employees as a first step? This would have given the scales better balance. The quid would have been more in line with the quo. Gradualism is often an important "other factor" in labor relations.
 
In Dallas, La Grande, Lebanon, Newberg, Roseburg, Troutdale and Woodburn, the employees make no contribution toward insurance premiums. Of the 13 other cities on the City's list of comparators, four ( Keizer, Klamath Falls, Lake Oswego and West Linn) call for a 50/50 split of premium increases over a specified base. Grants Pass, Milwaukie, Oregon City and Tualatin provide for splitting premium costs with the employees, but there are other variables which reduce the employees' responsibilities below that proposed by McMinnville for police officers.
 
If one averages the "total premium," for all jurisdictions in Employer Exhibit E-20, attached herewith as Exhibit A, the figure is $521.72. The comparable figure in McMinnville is $464.45.
 
The City projects insurance premium costs for 7/1/00 to 6/31/01 (assuming a 15% increase) of $534. For the next period, 7/1/01 to 6/31/02, the City predicts the premium will be $614. The employees would split with the City the increase of $70 for the year 7/1/00 to 6/31/01; this would also be true of the increase of $150 over the base year for the year 7/1/01 to 6/31/02. See the table on page 30 of the City's brief: attached as Exhibit B.
 
The comparator data do not support a claim that McMinnville had a "compelling need" for a 50/50 cap formula for all increases in premiums over the base year in order to stay in place. If premium costs in McMinnville go up by 15% per annum, they will also go up for the comparators. Thus the average premium of $521.72 will go to $599 in the second year, and to $679 in the third year, both figures well above McMinnville. Arithmetic averages can be misleading, but the fact is that the City's proposal in this case would give it one of the most favorable co-pay arrangements among its comparators.
 
CONCLUSION
 
The basic issue under consideration is which package proposal, the City's or the Association's, better meets the requirements of ORS 243.746(4)? I have concluded that the Association must prevail. The Association's proposal for educational incentive pay was not supported by a compelling need or by evidence of a quid pro quo. The City's proposal to replace the Portland CPI with the All Cities CPI similarly was not shown to be supported by compelling need or a demonstrable quid pro quo. The City's proposal for a 50/50 co-pay of increases in insurance premiums also fell short.
 
If I had the authority, I would probably make an award reflecting a compromise on the basis of a judgment as to how the parties would have come out if they had been negotiating in a context of free collective bargaining. However, I do not have the authority to do that. The statute requires me to choose one or the other. In my view, the Association's package is more in line with the interest and welfare of the public. And it finds as much support in the secondary criteria as that of the City.
 
AWARD
 
For the reasons set forth above and after considering all the evidence submitted by the parties in light of the statutory criteria, I have concluded that the Association's Last Best Offer package should become a part of the next collective bargaining agreement between the parties.
 
So ordered.
 
I will retain jurisdiction over this matter for 60 days to deal with such problems as the parties may have in the implementation of my Award.
 
Date: April 27, 2000
 
Donald H. Wollett, Arbitrator
 
APPEARANCES: Kenneth E. Bemis, Attorney at Law for the City of McMinnville
 
Jaime Goldberg, Attorney at Law for the McMinnville Police Officers' Association
 
Exhibit A - Comparability of Premium Caps
 
Agency: Ashland / Cap Language : N/A / Contract Expiration Date: 6/30/00 / Total Premium: $486.00
 
Agency: Canby / Cap Language: City to pay full cost of premium for 1999-2000; split the first 10% of increases above the base in 2nd and 3rd year of agreement; City responsible for increases above 10% / Contract Expiration Date: 6/30/01 / Total Premium $576.53
 
Agency: Coos Bay / Cap Language: City to pay 90% and employee to pay 10% / Contract Expiration Date: 6/30/01 / Total Premium: $538.25
 
Agency: Dallas / Cap Language: None / Contract Expiration Date: N/A / Total Premium: $560.02
 
Agency: Forest Grove / Cap Language: City to pay 90% and employee to pay 10% / Contract Expiration Date: 6/30/02 / Total Premium: $456.35
 
Agency: Grants Pass / Cap Language: City and employee split increases above base of $375; employee contribution not to exceed 10% of total premium / Contract Expiration Date: 12/31/00 / Total Premium: $560.02
 
Agency: Keizer / Cap Language: City to pay up to $520.69, split increases above that 50/50 / Contract Expiration Date: 6/30/01 / Total Premium: $445.05
 
Agency: Klamath Falls / Cap Language: City's current contribution under cap; 7/1/00-increase cap to $530 and split 50/50 above cap; 7/1/01-increase cap to $560 and split 50/50 above cap / Contract Expiration Date: 6/30/02 / Total Premium: $495.00
 
Agency: La Grande / Cap Language: None / Contract Expiration Date: 6/30/99 / Total Premium: $430.78
 
Agency: Lake Oswego / Cap Language: City and employee split increases above $430 / Contract Expiration Date: 6/30/99 / Total Premium: $512.05
 
Agency: Lebanon / Cap Language: None / Contract Expiration Date: 6/30/01 / Total Premium: $498.82
 
Agency: Milwaukie / Cap Language: City and employee split increases above base of $357.84, with employee not to pay more than 5% of increase in each year / Contract Expiration Date: 6/30/01 / Total Premium $560.20
 
Agency: Newberg / Cap Language: None / Contract Expiration Date: 6/30/00 / Total Premium: $516.88
 
Agency: Oregon City / Cap Language: City to pay $330; split increases 50/50 or City pay 95% of premium, whichever is greater / Contract Expiration Date: 6/30/01 / Total Premium: $461.66
 
Agency: Pendleton / Cap Language: City pays employee coverage, plus up to $250 or 80% towards dependent coverage, whichever is greater / Contract Expiration Date: 6/30/02 / Total Premium: $494.89
 
Agency: Redmond / Cap Language: City pays $543.50; employees pay 8.60 for ortho / Contract Expiration Date: ? / Total Premium: $552.10
 
Agency: Roseburg / Cap Language: None / Contract Expiration Date: 6/30/01 / Total Premium: $667.00
 
Agency: Troutdale / Cap Language: None / Contract Expiration Date: 6/30/01 / Total Premium: $551.60
 
Agency: Tualatin / Cap Language: City to pay first 10% of increases above base; split increases 50/50 above 10% / Contract Expiration Date: 6/30/01 / Total Premium: $526.82
 
Agency: West Linn / Cap Language: City and employee split increases above base of $521.87 / Contract Expiration Date: 6/30/00 / Total Premium: $565.16
 
Agency: Woodburn / Cap Language: None / Contract Expiration Date: 6/30/00 / Total Premium: $500.90
 
Agency: McMinnville / Cap Language: City pays full cost of premium / Contract Expiration Date: 6/30/99 / Total Premium: $464.45
 
City's LBO / Cap Language: City to pay full cost of premium for 1999-2000, and split additional increases above the base / Contract Expiration Date: 6/30/02 / Total Premium: $464.45
 
Assn LBO / Cap Language: City to pay full cost of premium / Contract Expiration Date: 6/30/02 / Total Premium: $464.45
 
Exhibit E-20
 
Exhibit B
PeriodMonthly Base WageImpact of First Year Cushion (compounded)Insurance Premium Cost (15% projection)Employee Insurance Co-payNet Gain/(Loss) Over Period
7/1/99-12/31/99$3,500$18$464$0$108
1/1/00-6/31/00$3,535$53$464$0$318
7/1/00-6/31/01$3,634$54$534$35$228
7/1/01-6/31/02$3,707 *$56$614$75($228)
TOTAL NET GAIN/(LOSS)$426
 
* Assumes worst case scenario of a minimum 2% CPI adjustment in the third year.
 
Footnotes:
 
1. 1 The fact that the Association proposes a smaller wage increase in the first year than the City reflects a kind of negative quid pro quo, in the hope that it will cause the City to abandon its proposal for an insurance co-pay in the third year.
 
2. 2 Tigard is disregarded because it is not on the City's list.