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City of Fremont

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Budget Development Strategies

1. Reduction in Overall Employee Compensation Expenses

2. Transition to Alternative Service Delivery Models

3. Reduction or Elimination of Services to the Community

4. Revenue Enhancements

Average Employee Cost

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CalPERS Rate HistoryPublic Safety Employees

0%

5%10%

15%

20%25%

30%

35%40%

45%

Per

cent

of

Wag

es

Employer Contribution Employee Contribution

-- Projected based on PERS Achieving 7.75% (Could increase to 49% with poor returns)

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CalPERS Rate HistoryMiscellaneous Employees

0%

5%

10%

15%

20%

25%

30%

Perc

ent

of

Wages

Employer Contrubition Employee Contribution

-- Projected based on PERS Achieving 7.75% (Could increase to 30% with poor returns)

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CalPERS Rates

2009/10 2010/11 2011/12

Public Safety 29.7% 30.0% 36.5%

Change from previous year +$1.6 million

Miscellaneous 18.6% 18.4% 22.9%

Change from previous year +$1.9 million

Total Change = $3.5 million

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Labor Negotiation Parameters(Multi-Year Agreements)

Short -term • Compensation reduction equivalent to a 4.25%

salary reduction– Option to pay via PERS Cost Sharing of Employer

Rate

Long -term• 2nd Tier Retiree Medical for new hires• 2nd Tier Retirement for new hires

– Safety = 3% @ 55, 36 month calculation– Misc. = 2% @ 60, 36 month calculation and 2% COLA

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Council Adopted Labor Relations Policy

1. All labor negotiations will be conducted by designated representatives at the bargaining table. All City representatives operate upon the direction of the City Council.

2. No individual Council member will individually negotiate with any bargaining group member.

3. City representatives commit to keeping the Council fully informed and advising them of all substantive proposals.

4. Each Council member shall inform the City Manager at their earliest convenience and publicly disclose in open session any communications he or she may have had with any City bargaining group member(s) that has any reference to the negotiations.

5. Consistent with Government Code section 54963, confidentiality of closed session discussions will be maintained.

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Cost Sharing Employer Rate Government Code 20516

Section 20516 permits the City to share the cost of optional benefits provided to employees under its PERS contract via:

– PERS contract amendment (section a)

– MOU deduction outside of the PERS contract (section f)

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CalPERS Contract Amendment

Cons Constraint (max amount of cost sharing) based on enhancement (varies by agency)

Timing required to implement

Lack of flexibility

•Requires vote of impacted employees- Requires all units agree to same amount of cost sharing (employer rate)- Option for “fixed” amount or “up to” amount- Must adopt 414(h)(2) Council Resolution

ProsEmployee funds remain employees’

Clarity with tax liability

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MOU DeductionProcess:

– Reach agreement with labor association(s)– Must have 414(h)(2) Council Resolution– Recommend Tax Attorney Opinion Letter

ConsFunds are treated as employer contribution, thus employee would not be eligible to receive if they take refund prior to retirement

Tax liability – no IRS letter ruling on “pre-tax” contribution

ProImmediate implementation

Flexibility – can amend the amount as quickly as payroll can implement and allows for varying amount of cost sharing by labor association

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Fremont Labor Relations Results

• All labor associations have settled– 7 of 9 labor associations elected PERS cost

sharing option • 2 of 7 labor associations via PERS Contract

Amendment (Fire)• Other 5 labor groups cost sharing amount vary

– 2 of 9 elected salary reduction

• 4 of 9 required mediation from State Mediation and Conciliation Authority

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Fremont 2nd Retirement Benefit Actuary Estimated City Savings (000’s)

$ 1,648 0 $ 1,648 $ 682 $ - $ 682 Year 2021/22

$ 1,479 0 $ 1,479 $ 609 $ - $ 609 Year 2020/21

$ 1,311 0 $ 1,311 $ 535 $ - $ 535 Year 2019/20

$ 1,147 0 $ 1,147 $ 462 $ - $ 462 Year 2018/19

$ 991 0 $ 991 $ 388 $ - $ 388 Year 2017/18

$ 835 0 $ 835 $ 320 $ - $ 320 Year 2016/17

$ 684 0 $ 684 $ 254 $ - $ 254 Year 2015/16

$ 539 0 $ 539 $ 193 $ - $ 193 Year 2014/15

$ 397 0 $ 397 $ 137 $ - $ 137 Year 2013/14

$ 262 0 $ 262 $ 85 $ - $ 85 Year 2012/13

$ 128 0 $ 128 $ 41 $ - $ 41 Year 2011/12

TotalEmployeeEmployerTotalEmployeeEmployer Year

Savings 2% @ 60 (Misc)Savings 3% @ 55 (Safety) 

Year 2022 Total Savings= $2,330

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Fremont Lessons Learned• Openly adopt labor negotiation strategies• Research options prior to negotiations• Provide justifying budget information to unions• Help employees understand benefits of cost sharing

retirement costs– Pre-tax deduction– Public perception / participation with cost of retirement– Aligned with pension reform efforts

• Consider hiring outside labor negotiators• Consider consulting tax attorney (if cost sharing via MOU)

Contact Details

Brian Stott

Human Resources Director

510-494-4664

bstott@fremont.gov

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