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In the Matter of the Interest Arbitration Between CLACKAMAS COUNTY PEACE OFFICERS ASSOCIATION and CITY OF WEST LYNN. IA-17-03.
The last best offer of the union should be adopted.
This matter came for hearing pursuant to ORS 243.742-243.756 and relevant administrative rules. The arbitrator complied with the statutory requirements as well as administrative directives set forth in OAR 115-40-015 and OAR. 11 5-40-030 in hearing and deciding the case. A hearing occurred on February 23, 2004 in a conference room of the City Hall located in West Linn, Oregon. Mr. Robert G. Black, attorney at law, represented Clackamas County Peace Officer's Association. Mr. Craig R. Armstrong, with the law firm of Miller Nash LLP represented the City of West Linn, Oregon. The hearing was conducted without complication. The parties had full opportunity to submit evidence, to examine and cross-examine witnesses, and to argue the matter. All witnesses testified under oath as administered by the arbitrator. The arbitrator tape-recorded the proceeding as an extension of his personal notes. The advocates fully and fairly represented their respective parties.
There were no challenges to the substantive or procedural arbitrability in the matter, and the parties stipulated that the case properly had been submitted to arbitration. At the close of hearing, the parties agreed that post hearing briefs would be submitted to the arbitrator postmarked by April 2, 2004. Prior to the receipt of the briefs, the union made a motion to reopen the evidentiary record and proposed two exhibits. That motion was later withdrawn and the parties entered into a stipulation dated March 19, 2004, which is received and made part of the record. Both post-hearing briefs were received in a timely fashion.
243.742 Binding arbitration when strike prohibited. (1) It is the public policy of the State of Oregon that where the right of employees to strike is by law prohibited, it is requisite to the high morale of, such employees and the efficient operation of such departments to afford an alternate, expeditious, effective and binding procedure for the resolution of labor disputes and to that end the provisions of ORS 240.060, 240.065, 240.080, 240.123, 243.650 to 243.782, 292.055 and 341.290, providing for compulsory arbitration, shall be, liberally construed.243.746 Selection of arbitrator; arbitration procedure; last best offers; bases for findings and opinions; sharing arbitration costs. (1) In carrying out the arbitration procedures authorized in ORS 243.712 (2)(e), 243.726 (3)(c) and 243.742, the public employer and the exclusive representative may select their own arbitrator.
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(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 paragraphs (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 factors, if in the judgment of the arbitrator, the factors in paragraphs (a) to (g) of this subsection provide sufficient evidence for an award.
(5) Not more than thirty days after the conclusion of the hearings or such further additional period to which the parties may agree, the arbitrator shall select only one of the last best offer packages submitted by the parties and shall promulgate written findings along with an opinion and order. The opinion and order shall be served on the parties and the board. Service may be personal or by registered or certified mail. The findings, opinions and order shall be based on the criteria prescribed in subsection (4) of this section.
The parties are three years into a five year agreement. The contract calls for a wage reopener for the final two years. The sole issue in controversy is Article 17 Salary and Schedules D & E. The union's last best offer is to increase wages 3% in 2003 and 3% in 2004.The city's last best offer is that the contract should not increase in either year.
The 1995 Oregon legislature expressed the decision making process an arbitrator should follow in ORS 243.746(4). It elevated a determination of "...the interest and welfare of the public" into first priority and enumerated several items (described in brief - entity's ability to pay, ability to attract and retain qualified personnel, overall compensation received by employees, overall compensation received by similar employees in similar communities, the CPI- All Cities Index, and stipulations by the parties, as having second priority. Finally, the statute allows the arbitrator to turn to factors beyond those already considered if two conditions are met. First, the arbitrator must conclude that the factors already considered do not constitute sufficient basis for an award, and, second, the factors the arbitrator turns to must be among those "...traditionally taken into consideration in determination of wage, hour, and other terms and conditions of employment."
This analysis, then, will consider "interest and welfare of the public" first. Each of the secondary priority items will then be considered in turn. The discussion then returns to interest and welfare of the public to reach the conclusion.
(a) The interest and welfare a/the public
The analysis of ".. .interest and welfare of the public" in most cases is elusive. Both "interest" and "welfare" are abstract, subjective terms. Interest is a term of art in negotiation and is used to refer to what motivates a party, that is, what they truly seek.(1) Interests are abstract and are things like security, respect, happiness, etc. Parties take positions on specific issues like wages or shift bidding rights in an attempt to satisfy interests. Similarly, welfare is subject to interpretations. The first dictionary definition of welfare is "the state of being or doing well: the condition of health, prosperity and happiness; well being.(2) Those decisions, then, that advance health, prosperity and happiness, or improve the general well being, or some other factor that motivates the public advance the interest and welfare of the public.
In part, both the employer and the union represent the public's interest. They agree on many manifestations of the public interest, for example, serving the public with a competent, well-trained, well-equipped, professional and motivated police force is likely to advance the public's welfare. The recent passage by the voters of West Linn of the serial levy to support the police department is evidence that the citizenry is motivated by these goals. While agreeing with these goals, the union and employer often find themselves in disagreement on the means to these ends. Like consumers in all fields, the public has an interest in financial security, suggesting they are not served by paying more than they need to secure such a police force. Here, the union and the employer differ over the amount of compensation needed to achieve or maintain such a force.
The employer's task is made more complicated by the reality of the needs for such a police force being just one of the needs it has to secure for its citizens. They likewise have similar interests in all other services provided by the city. As Arbitrator Jane R. Wilkerson put it recently, the interest and welfare of the public " ... would be served by an award of fair and competitive wage that allows the unit of government to spend its resources elsewhere in order to meet public needs."(3)
There are likely to be other interests at the table as well. The employer and the union, as well as the individuals representing them, bring their own interests. Through agency, the representatives of the city at the arbitration hearing are, legally, the representatives of the public. The positions taken by the employer mayor may not be those in the interest and welfare of the public. The legislative creation of arbitration, including this process for decision making, establishes that it is for the arbitrator to determine what is in the public's interest and welfare.
The question presented in this matter is, given the resources available to the city, which of two competing wage compensation packages best serve the interest and welfare of the citizens of West Linn?
The discussion of interest and welfare of the public should include the six factors enumerated for consideration by ORS 243.746(4) but is not exhausted by their examination. By turning to those factors and then returning to interest and welfare, the latter discussion can be informed by those findings.
(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 burden of proof on this issue rests with the city. On this issue, the city offered three witnesses to sustain its burden, Robert Gibson- Director of Human Resources and Risk Management, Elma Magkamit - Finance Director, and Mayor David Dodds. The portions of their testimony most relevant to this consideration are recounted below.
Director Gibson said that the contract offer was prepared with the priorities and goals of the city council in mind. Given those priorities, funds were not available for raises. He also testified that the city had recently experienced double digit increases in health care and that other expenses were going up, while the PERS increases were not as high as the city had feared. He recounted the city's offer in mediation was to go with no raises in 03 - 04 and reopen on wages for 04-05. Finally, he said if there were savings in the budget they would be used in areas other than compensation.
Finance Director Magkamit testified that one budgeting goal was to adopt a 5% contingency fund. They adopted a budget, J4, with a 2.9% contingency. She has included cigarette taxes in the 04-05 budget, and those could be reduced or eliminated by the state. She said the budget was prepared based on the priorities of Council, city needs and infrastructure and the uncertainty of PERS. She expressed her desire to have a higher contingency. She testified that initial submissions for the 04-05 budget were $700,000over available revenue, and that the city needed to have actual carry over at the end of 2003.
Mayor Dodds said this is his second term as mayor. He ran on livability and quality of life platform that included doing what was possible to keep and maintain streets. That campaign did not include a promise not to raise salaries. He said the city needed to try very hard to live within its means or it would tax some out of the city. He thought that the prior council had not been good stewards and that had contributed to difficulties the city had had getting bonds or levies passed. A street levy had expired in1996, and a replacement measure for roads had been defeated. A water measure was defeated in 2001. A police levy, that added positions to the police force, had failed. The city had pared out the new positions and sent the police levy back to the voters who passed it in May of '02.
The statutory directions call for the arbitrator to determine ability to pay after giving due consideration for the governing body of the city to establish other priorities and not touching a city's reasonable reserve. I will first discuss ability to pay and then address separately the other priorities and reserve issues.
The city has the ability to pay. Due largely to departures, the liability to police salaries turned out to be quite a bit less than anticipated. The amount budgeted 03 - 04 for total association salaries was $1,196,645. (U29, J4). The amount projected to be spent is $1,054,654.39 (U29). That budget line currently carries $141, 990.61 over expenses. The cost of the raise in 2003 -2004 is $31,387.48 (U27). In the second year, the cost is$31,387.48 (first year raise now in base budget) and $32,329.70 (U28) for a total of$63,717.18. In 03 - 04, the raise being sought could be paid from the existing allocation to police in the budget and still result in funds that can be reallocated for the city from that line item of over $100,000. If the amount budgeted in 2003 -2004 were carried forward to the 2004 - 2005 budget, which would have been the result had a no-raise policy been adopted and staffing patterns met budgeters expectations at time of drafting the 2003 - 2004 budget, there would still be more than $75,000 in that line available to the city for use elsewhere. It also follows that a proposed raise would not be drawn against the currently existing reserve.
The question remains what would the city do with these available funds if they did not use them for the raises proposed. The mayor did not say explicitly. The closest he came was in drawing his conclusion from the defeated measures of the past; he said the city "... would have to look at the existing budget for infrastructure." Finance Director Magkamit said she would really like to have a contingency. Director Gibson addressed the issue most clearly. He said if savings were found, they would not be spent on raises, but he did not indicate what the "other priorities" of the city were. There was no clear city position on "other priorities." Simply having representatives of the city say raises aren't the priority or that we might need the money for any number of other things does not establish priorities. Director Gibson also said, the budget reflects the goals and priorities of the city council. The budget he referred to shows more than this amount of money going to police.
The city also raised the possibility that they might be required to dip into their contingency to fund priorities in 03 - 04 or 04 - 05. Measure 50, escalating expenses, PERS rates, possible actions of the legislature and the initial state of the draft 2004 -2005 budget are all potential causes of alarm. Each of these is a valid concern, and proof that we live in treacherous budget times, but none of them advances the city's ability to meet its burden. City leaders made a policy decision to lower their contingency. They then passed a budget with a set contingency. By their vote they declared the contingency they have set as reasonable, it is not the arbitrator's role in this case to disagree with them. Measure 50 limits revenue, our inquiry is whether or not the requested raise can be afforded within the available revenue. Escalating expenses, PERS and possible actions of the legislature are all reasonable but speculative events. Finally, Finance Director Magkamit also testified that the initial submission of budget requests is often over available resources.
There is no need to discuss, here, any of the other issues raised by the union. The city failed to sustain its burden that the city lacked the ability to pay.
(c) The ability of the unit of government to attract and retain qualified personnel at the wage and benefit levels provided.
Positions of the parties:
The union offered evidence on the city's ability to retain its employees. The department's current staffing scheme carries 30.5 FTE positions. During 2003, the city lost 15 members of the department. Eleven members, of that fifteen, left West Linn to accept employment with other police agencies (U31). The union called one of the departed officers, Nick Amendolara, to testify. He stated that his departure came after bargaining on this reopener had begun, and that the city's position of no raises for two years (currently the city's last best offer) was part of his motivation to depart.
The city offered evidence on both the ability to attract and the ability to retain employees. First, the city offered its positive history of attracting candidates for vacant police positions. It advertised for police officers twice in 2002, once in 2003 and once in 2004. The smallest number of resulting applicants was 25 and the largest number of applicants was 143 (EI4). It administered its written test, the city's first screen to separate qualified applicants, once in each of those three years. The number of applicants passing the written test was 39, 38 and 66 respectively (EI4).
The city's evidence on retention came through the testimony of Director Gibson. He explained that he conducted exit interviews with all departing employees. None of the departing members of the police force mentioned compensation as a reason for their departure. The reasons generally fell into two categories: organizational culture within the department and/or a desire for some other type of law enforcement experience.
Discussion: The city is correct when it maintains that it can attract sufficient numbers of qualified applicants at the current level of compensation. As the union correctly pointed out, the number of applicants cited by the city doesn't show the pass results of the next screens including the physical and psychological exams, as well as how many fail to meet the standards during training. Notwithstanding this normal attrition, the city has been able to hire 9 qualified recruits since July of 2003. Seven of those were hired before the city offered an additional written exam and added 66 to their potential officer pool. There is no credible evidence suggesting the city cannot attract qualified applicants.
It is also clear that the city has had trouble recently retaining its police officers. It is not clear, however, whether compensation is part of that causation. Whether Officer Amendolara mentioned compensation as part of his motivation for departure, as he testified, or he did not, as Director Gibson recalled, does not settle the matter. The credible evidence is that 10 of the 11 officers who went to other agencies did not identify compensation as part of their motivation.
Director Gibson quoted Officer Amendolara as saying he was concerned ".. .about support of police by (the) mayor and council." Wages are one tangible measure of support. All of the departing officers went to larger agencies, and two of the agencies, Lake Oswego and Oregon City are comparables for West Linn. Lake Oswego is higher at the bottom and at the top under the city's proposal, and Oregon City is higher at the top. Three of the departed officers went to Lake Oswego and one to Oregon City (U31).
The city can attract qualified applicants at the existing level of compensation. The city may have a retention problem going forward. It has had a retention problem this past year, but it has not lost a police officer to another agency since December of 2003.
(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
The parties are in close agreement about the content of the overall compensation package. Compensation consists of the wages, and Education and Professional Pay provision through which an employee can earn up to an additional 17% of salary, PERS 6% pick-up, medical and dental premium 95% city paid, life insurance, and a long term disability insurance program.
Employees receive the equivalent of 12 holidays per year. Vacation at 5 years, 10 years and 15 years (where it tops out), is respectively 15, 20 and 25 days a year. Uniforms are provided and employees are allotted a cleaning/equipment allowance of $400 per year. There is holiday pay up to 80 hours per year; paid jury leave; and paid court appearance leave. There is no premium pay and there is no tuition reimbursement.
(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.
Before reaching the comparisons, neither party was in accord with the arbitrator's decision naming appropriate communities for comparison. The union objected to the inclusion of Ashland, Klamath Falls and Roseburg because they are outside of the market in which West Linn is most likely to compete for employees. These three were included because of their proximity in size to West Linn and the language of the statute. The union's argument was considered as to weight, but not admissibility. The city objected to the inclusion of Lake Oswego because it is approximately 12,000 citizens larger than West Linn. Lake Oswego is included because of it's participation in West Linn's employment market. The city's argument was considered to what weight to give the evidence.
The list of comparable communities is Ashland, Forest Grove, Grant's Pass, Keizer, Klamath Falls, Lake Oswego, McMinnville, Milwaukie, Newberg, Oregon City, Tualatin, Roseburg, and Woodburn. West Linn's different classes of employees compare relatively similar regardless of which proposal is adopted.
The overall compensation package offered by each agency differs in particulars. But they are all similar enough to suggest a rough equity between them. That allows this comparison to focus on the direct wage issue.
Comparing Rankings resulting from the Last Best Offers:
All but four members of the bargaining unit are classed as police officers. For 2003 - 2004, under the city's LBO police officers would be ranked 10th out of the 12 comparators (2 jurisdictions, Keizer and Ashland, were still in negotiation when this arbitration was conducted) for starting pay, behind all but Newberg and Roseburg. The starting salary would be $76.00 below the average. Under the union LBO, that rank would improve to 6th, surpassing Woodburn, McMinnville, Grant's Pass, Klamath Falls as well as Newberg and Roseburg. The starting salary would be$18 above the average. On the top of the range, the city's LBO would rank West Linn 7th, with a higher top pay than McMinnville, Woodburn, Newberg, Klamath Falls, and Roseburg. The salary would be $5 over the average. On the union's LBO, a top step officer gains two positions, going to 5th, and adds Oregon City and Milwaukie to the communities paying less than West Linn. The union top step salary would be $128 above average.
For 2004 - 2005, under the city LBO, West Linn's position deteriorates. Each raise granted worsens West Linn's position as relates to average and in relation to the comparisons. Newberg (already scheduled for a 4% raise), for example, will climb past West Linn in starting salaries and close the gap at the top of the scale. Under the union LBO, the city would have an opportunity to improve or move with the target.
There are three records clerks. Records Clerks fare better than their counterparts. Under the city's LBO, the Records Clerk is 5th out of 12 for starting salary in 2003-2004, and 4th of 12 at the top step. Currently $73 and $117 over the average at the bottom and the top respectively, the 2004 - 2005 raises to other cities would be softened. The union LBO moves these clerks to 2nd in each category.
There is one community service officer. Community service officers are more difficult to compare. The closest comparison, based on duties, is with Lake Oswego, McMinnville, Newberg, and Oregon City. Under the city's LBO, CSOs would be ahead of only Oregon City in starting pay (West Linn's 2361 to Oregon City's 2285) but almost $200 behind the top three (Newberg at 2533, McMinnville, at 2582 and Lake Oswego at 3028 West Linn is at 2361). At the top step, the city's LBO is 5th out of the five (Lake Oswego 3759, McMinnville 3295, Newberg 3233, Oregon City 3123 and West Linn 3071). Raises in 2004 - 2005 will further deteriorate these relationships. Under the union LBO the city's position in both starting and top remains 4th. The position would avoid falling much further behind in 2004 -2005.
In regards to police officers, the city LBO puts West Linn in the bottom half of the cities for 2003 and guarantees the situation will worsen in 2005. The union's LBO puts the city in the middle of the comparison group for 2003-2004 and allows for potential improvement in that ranking in 2004 -2005. It is also important to note that of the 11 jurisdictions that have concluded their negotiations, all of them received wage increases. The average wage increase was 3.5%.
(f) The CPI -All Cities Index, commonly known as the cost of living.
The CPI-U for 2003 was 2.3. The CPI-W for 2003 was 2.2. While the union's LBO would exceed these figures, it argues that the current trajectory for 2004 is significantly higher than 3.0 (U25). The city's position is that the past three years of wage increases have more than covered any current CPI increase.
(g) The stipulations of the parties.
Post hearing, the parties stipulated that the city manager received a 5% bonus on her 2003 salary.
The city has attempted to negotiate a 0% and 0% raise for the police force for2003 - 2004 and 2004 - 2005. The city sweetened that deal in mediation to include a reopener on wages for 2004 - 2005. If that package were in front of the arbitrator it would make this a more difficult case, but it is not. The city's last best offer is to forego raises for two years. The city was able to negotiate that deal with its other unionized employees.
The inability of the parties to successfully negotiate a conclusion to this reopener, taken in addition to the large number of employees departing during 2003 and the testimony that in one exit interview the departing officer said "I can't come to work and despise the people I work for" suggests a management employee relationship in trouble. It may not be. The cited incidents may be coincidental or they may reflect a problem now cured by the number of departures. But they do add up to a relationship requiring care and attention.
The city's proposal does not offer anything to that relationship. The city asks the employees to rely on previous gains they thought they had bargained for and achieved to carry them through a steady erosion of their buying power. The city argues against this interpretation saying that not only past wage increases and benefits more than compensation for foreseeable inflation in the CPI, but there remains the step increases that will add 5% to the salaries of most members of the bargaining unit - an increase the city just saw fit to give to the city manager as a bonus. The problem with this approach is that of the 24 officers, only 14 of them are eligible for such an increase. The 10 officers (40% of the force) who have been here the longest are being told to freeze their wages for two years while all other police forces improved their position in 2003 - 2004 and most are poised to do so in 2004 -2005.
Such unequal treatment is a potential cause for dissension in the ranks. It is a cousin to the internal consistency that has been so persuasive in other cases. Given a police force, and the need for solidarity and teamwork, inequality that will result in a workplace between unions is better than inequality of treatment between members of the same work unit.
I turn now to the union's last best offer. I do not find it attractive. Given the CPI and the sacrifice of the union's brother employees in the other bargaining unit, I conclude that the union asked for too much. It does compare favorably with the higher rate of increase granted to police forces across the comparison communities, but it is too much for the particular circumstances unique to West Linn.
The last best offers in this case confront the arbitrator with two unattractive positions. The law requires that one be chosen. I conclude that implementing the union's offer is most likely to be in the interest and welfare of the public.

Bryan Johnston, Arbitrator
May 3, 2004

1. See Fischer, Roger and Dry, Bill, Getting to Yes: Negotiating Agreement Without giving In, Boston: Houghlin Mifflin, 1981
2. McKenchnie, Jean L. ed., Webster's New Universal Unabridged Dictionary, 2d ed, New York: Dorset & Barber 1983
3. Wilkerson, Jane R. In the Matter of the Arbitration Between the City of Bend and Bend City Police