13 Staff Report - Extend Memorandum of UnderstandingtpW N 0~
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COUNCIL AGENDA REPORT
DATE: December 13, 2007
MEETING DATE: 12/17/07
ITEM NO:
TO: MAYOR AND TOWN COUNCIL
FROM: PAMELA S. JACOBS, INTERIM TOWN MANAGER V2
SUBJECT: ADOPT RESOLUTION APPROVING AN EXTENSION OF THE
MEMORANDUM OF UNDERSTANDING BETWEEN THE TOWN OF LOS
GATOS AND TEA FOR THE PERIOD NOVEMBER 1, 2008 THROUGH
OCTOBER 31, 2010 AND AUTHORIZE THE INTERIM TOWN MANAGER
TO EXECUTE THE SIDELETTER AGREEMENT TO EXTEND THE
MEMORANDUM OF UNDERSTANDING
RECOMMENDATION:
Adopt resolution approving an extension to the Memorandum of Understanding between the
Town of Los Gatos and the Town Employees' Association (TEA) for the period
November 1, 2008 through October 31, 2010 and authorizing the Interim Town Manager to
execute the sideletter agreement to extend the memorandum of understanding (MOU).
DISCUSSION-
In accordance with the Town's Employer-Employee Relations Resolution No. 1974-41,
representatives of the Town and TEA have met and conferred in good faith and within the scope
of representation. Adoption of the attached resolution approving the extension of the MOU for
TEA-represented positions is recommended. TEA represents Town employees in technical,
professional and administrative occupation groups throughout the Town.
The tentative agreement reached with TEA to extend the existing MOU was ratified by a vote of
the union membership and is subject to adoption by Council.
- 1 ` l r
PREPARED BY: (UMI POR'FILLO
Human Resources Director
N:\PSL\Rumi\Current\Negotiations\TEA Reopener 2007\TEA Reopener Council Memo 12-1 1-07.doc
Reviewed by: Assistant Town Manager Of- Town Attorney
Clerk Administrator Finance Community Development
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT RESOLUTION APPROVING AN EXTENSION OF THE MEMORANDUM
OF UNDERSTANDING BETWEEN THE TOWN OF LOS GATOS AND TEA FOR
THE PERIOD NOVEMBER 1, 2008 THROUGH OCTOBER 31, 2010 AND
AUTHORIZE THE INTERIM TOWN MANAGER TO EXECUTE THE SIDELETTER
AGREEMENT TO EXTEND THE MEMORANDUM OF UNDERSTANDING
December 13, 2007
The tentative agreement reached between the parties includes the following provisions:
■ Two-year extension of the existing MOU for the period November 1, 2008 through
October 31, 2010;
■ 3% wage increases in each year of the extension, effective on November 1, 2008 and
November 1, 2009; and
■ An option to exercise an enhanced retirement formula effective July 2008 at no cost to the
Town. To absorb the cost of the enhanced retirement, employees will waive the
November 1, 2008 wage increase, pay the increase in the employee's retirement contribution
rate and change the retiree medical vesting period from 5 to 15 years for employees hired
after July 1, 2008.
Option for Enhanced Retirement to be Paid by Employees
The proposed agreement includes an option to exercise a restructure of the retirement benefit
with the California Public Employees' Retirement System (Ca1PERS) effective July 1, 2008,
with employees absorbing the cost of the enhanced retirement. Should this option be exercised,
the retirement formula will change from 2% at age 55 to 2.5% at age 55. The enhanced
retirement will increase the mandatory contributions paid by the employee and the employer.
The employee-paid contribution will increase by I% and the employer-paid contribution is
estimated by Ca1PERS actuarial reports to increase by 2.7%. Employees will absorb both
increases by paying the I% directly on an ongoing basis and by waiving the 2008 wage increase
of 3%, resulting in a slight savings to the Town.
To capture further savings for the Town and offset potential impact to future rates, the retiree
vesting schedule will be changed from 5 years to 15 years. Under CalPERS law, a change in the
vesting schedule may not negatively affect employees already hired under a pre-existing vesting
schedule. As such, the change in the vesting schedule will apply to employees hired after
July 1, 2008. The change in the vesting schedule is expected to result in long-term savings for
the Town.
In accordance with Ca1PERS law, the enhanced retirement formula must apply to all non-sworn
employees. Thus, to implement a change for TEA, all non-sworn employees including
AFSCME, Management and Confidential will be impacted. To implement the enhanced
retirement at no cost to the Town, all employee groups will be required to absorb the costs in the
same manner as TEA.
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT RESOLUTION APPROVING AN EXTENSION OF THE MEMORANDUM
OF UNDERSTANDING BETWEEN THE TOWN OF LOS GATOS AND TEA FOR
TIIE PERIOD NOVEMBER 1, 2008 THROUGH OCTOBER 31, 2010 AND
AUTHORIZE THE INTERIM TOWN MANAGER TO EXECUTE THE SIDELETTER
AGREEMENT TO EXTEND THE MEMORANDUM OF UNDERSTANDING
December 13, 2007
Before the enhanced retirement option can be exercised, a Town-wide vote of all affected
employees must be conducted in accordance with CAPERS law. If a majority of the employees
vote for the rate change, the 2008 wage increase will be withheld, employees will begin paying
the higher contribution rate and the 15-year vesting schedule will be implemented for new hires
effective July 1, 2008.
If a majority of the employees do not vote for the change in the retirement formula, the
retirement plan would remain unchanged and employees will receive the scheduled wage
increase for 2008. The wage increase for 2009 is not affected by the Town-wide vote or a
change in the retirement formula.
ENVIRONMENTAL ASSESSMENT:
Is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
A 1% salary increase for TEA is equivalent to approximately S50K. There are two cost
scenarios that could result from the proposed extension agreement:
1) If the option to restructure the retirement formula is exercised, the extension agreement will
result in no increase in costs to the Town for FY 2008-09 and 3% for a wage increase in FY
2009-10. It is anticipated that the Town will realize long-term savings from the change in the
vesting schedule, as it is likely that fewer employees will qualify for retiree medical coverage
than if the vesting schedule remained the same.
2) If the option to restructure the retirement formula is not exercised, the extension agreement
will cost 3% to the Town for a wage increase in FY 2008-09 and 3% for a wage increase in
FY 2009-10.
Should the extension agreement be approved, the associated wage increases will be included in
the proposed annual budgets.
Attachments:
Resolution approving an extension to the Memorandum of Understanding between the Town of
Los Gatos and the Town Employees' Association (TEA) for the period November 1, 2008
through October 31, 2010 and authorizing the Interim Town Manager to execute the sideletter
agreement to extend the memorandum of understanding (MOU).
RESOLUTION 2007-
RESOLUTION APPROVING AN EXTENSION OF THE
MEMORANDUM OF UNDERSTANDING
BETWEEN THE TOWN OF LOS GATOS AND TEA
FOR THE PERIOD NOVEMBER 1, 2008 THROUGH OCTOBER 31, 2010
AND AUTHORIZE THE INTERIM TOWN MANAGER TO EXECUTE
THE SIDE LETTER AGREEMENT TO EXTEND
THE MEMORANDUM OF UNDERSTANDING
WHEREAS, representatives of the Town and the Town Employees' Association (TEA), in
accordance with the Town's Employer-Employee Relations Resolution No. 1974-41, have met and
conferred in good faith within the scope of representation; and
WHEREAS, the Town and TEA have agreed to extend the existing MOU for the period November 1,
2008 through October 31, 2010, with 3% wage increases in each year of the extension, effective on
November 1, 2008 and November 1, 2009;
WHEREAS, the Town and TEA have agreed to exercise a restructure of the retirement benefit with
the California Public Employees' Retirement System (CalPERS) to change the vesting schedule for
retiree medical from five to fifteen years and to change the retirement formula from 2% at 55 to 2.5% at
55 once all statutory requirements for implementing the restructure are met;
WHEREAS, to implement the retirement restructure, the 3% wage increase for 2008 will be
eliminated and employees will be required to pay the increase in the employee rate on an ongoing basis;
WHEREAS, the agreement reached with TEA to extend the existing MOU was ratified by a vote of
the union membership and is subject to adoption by Council;
RESOLVED, by the Town Council of the Town of Los Gatos, County of Santa Clara, State of
California, that the Town of Los Gatos approves the extension of the Memorandum of Understanding
between the Town and TEA for the period November 1, 2008 through October 31, 2010 and the Interim
Town Manager is hereby authorized on behalf of the Town to execute a sideletter agreement that include
the provisions stated in the recitals above.
PASSED AND ADOPTED at a regular meeting of the Town council of the Town of Los Gatos,
California, held on the day of 2007 by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
N1MGR\AdminWorkFi1es\2007 Council Reports\RESOLUTION 2007 TEA.doc