Given Los Gatos’ and Worldwide Economic Circumstances, Is This The Time To Increase Town Expenses By $1,000,000?

Dear Honorable Mayor and Council Members,                                      5-3-20

The undersigned respectfully request that agenda item # 8 be removed from the May 5, 2020 consent calendar. We believe the Town and its residents will benefit greatly from a wholistic and transparent process in which the Council discusses the full impact of all salary increases given to the TEA, AFSCME and POA at one time and in consideration of the entire budget and current economic environment.

There is much to be concerned about regarding the Staff recommendation. The Staff memo notes the Town is not obligated to give any increases in FY 20/21 because the existing MOU’s (Memo of Understanding) for the TEA, AFSCME and POA were three year agreements and do not expire until June 30, 2021. The Town is only obligated to “re-open” discussions in good faith on FY 20/21 salary adjustments. Approving salary increases for two of the three Town’s bargaining units at this time guarantees that an increase will be given to the POA. If increases are given to all three bargaining groups, the total amount of these increases will likely approach $1 million.

This raises several obvious questions, namely:

  • Why does the Staff believe that it is prudent and in the best interest of residents and the Town to grant nearly $1 million in additional salary to TEA, AFSCME and POA in FY21, when it is clear that the current economic conditions do not support any increase?
  • How does the Council know whether the Town can afford these increases since it has not yet been presented with an FY21 budget?
  • How is this being fiscally responsible when it is highly likely the Town could experience a 10% decline in tax-based revenues in FY 20/21?

These important decisions also should be made in the context of prior Council decisions. Below are set forth the Council-approved total salaries and benefits budgets for the each of the past 3 years, as well as an estimate of the current Staff proposal for FY21:

Fiscal Year Salaries & Benefits Budget Dollar Increase Percent Increase Cumulative % Increase from FY18
FY18 $27,005,920
FY19 $28,884,9981 $1,879,078 7.0% 7.0%
FY20 $31,117,995 $2,232,997 7.7% 15.2%
FY21 $32,692,3542 $1,574,359 5.1% 21.1%

 

This Staff-recommended increase of 21.1% for the three year period compares to an increase of only 5.9% for the relevant COLA index for the March 2017 to March 2020 period3 .

In addition, we should point out that this recommendation has implications that go far beyond the budgets for the collective bargaining unit compensation. This is because the Staff is recommending that these same increases be applied to “Management, Confidential, and Temporary” staff. In essence, Staff is recommending its own salary increase with this proposal.

The rationale Staff sets forth for this tie-in is to “maintain parity with the represented units and the distance between supervisory and non-supervisory classification salary ranges to prevent any overlapping of supervisory and non-supervisory salary ranges within similar career ladders (also known as compaction).”

However, in fact this tie-in between collective bargaining compensation and management compensation means Staff has a financial incentive to negotiate higher increases in collective bargaining compensation in order to provide the same higher increases to their own compensation. We believe a more appropriate approach would de-link the two compensation structures and permit each to be assessed on its own merits.

We encourage a robust discussion by the Council on the merits of the Staff’s recommendation. These important decisions should not be considered on a “piecemeal” basis. The residents of this great Town deserve to hear each Council Member publicly explain their rational for approving or disapproving the Staff-recommended salary increase for the TEA and AFSCME, and also should disclose to the public their intention regarding FY 20/21 salary increases for the POA.

We look forward to the decisions you reach following a thoughtful consideration of the facts under current economic circumstances.

Thank you,

Philip J. Koen Jak VanNada Rick Van Hoesen

Los Gatos Community Alliance

 

1  adjusted for salary increases approved after the budget was adopted

2  includes the current Staff proposal of a $433,338 increase and an estimated $500,000 for the POA and CALPERs mandated increased payments of $631,021

CPI – All Urban Consumers Index (1967=100), which CALPERS uses for their COLA adjustments. For March 2017, the index was 730.320 and for March 2020, the index was 773.199. That is a total increase of 5.87% over the same period.

 

 

 

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