SAN FRANCISCO - Vallejo, Calif., has tentatively agreed to contract changes with its police union, the first breakthrough in months of negotiations on a plan for the city to exit bankruptcy.
The City Council will vote on the revised collective bargaining agreement today. The Vallejo Police Officers Association voted on the contract over the weekend and the results will be announced at today's meeting. The deal was detailed in a staff report attached to the agenda for the council meeting.
"The proposed supplemental agreement reduces salaries agreed to in the current contract by more than 18%," said city manager Joseph M. Tanner and his negotiating team in a memo recommending approval of the contract revisions to the City Council.
Vallejo last May filed the biggest municipal bankruptcy since Orange County, Calif., in 1994. The San Francisco Bay Area city of 117,000 claimed it could no longer afford contracts with its municipal employee unions, and in September, U.S. Bankruptcy Court Judge Michael McManus agreed that the city was bankrupt.
City workers have appealed that insolvency ruling, and the Bankruptcy Appellate Panel of the Ninth Circuit Court of Appeals will hear the appeal Feb. 19. The police union has agreed to drop its appeal, Tanner's memo said.
That would leave just two labor groups still contesting the city's bankruptcy, the Independent Association of Firefighters and the International Brotherhood of Electrical Workers. Negotiations continue with them and a fourth union that hasn't opposed the bankruptcy filing.
Vallejo has been paying workers less than their contracted salaries since shortly after filing bankruptcy under a court-approved pendency plan. Judge McManus has scheduled a hearing for Feb. 3 on a city motion to formally reject its collective bargaining agreements.
The revised police contract would cap salaries at the level the city has paid under the bankruptcy through June 2010, and it would tie future pay raises to the mean of seven Bay Area cities. It would cap health care payments for current and former employees, eliminate minimum staffing requirements, and reduce leave payouts.
"That's very significant, and I think it may be a model for the future," said James Spiotto, a municipal bankruptcy expert at Chapman and Cutler LLC in Chicago. "They're going to have significant savings, and they perceive they can afford this."
Vallejo's police would get a contract extension through 2012 and receive $1 million in damages to be paid between 2012 and 2015.
The deal would save the city - which has a general fund budget of about $77 million - $6 million in fiscal 2009 and 2010. It also removes the biggest employee union from the bankruptcy battle and aims to stem the loss of police officers that has occurred since the bankruptcy.
"An adjustment to salary that brings Vallejo officers to the mean salary as of July 1, 2010, is very important to retaining existing officers and recruiting new officers," the memo said. Since the bankruptcy filing, the police force has shrunk to 114 officers, down from 145 in late 2007.
The city's $53 million of general fund-backed debt has been in limbo since the Chapter 9 filing. Vallejo has capped interest payments on the variable-rate debt under the protection of the bankruptcy court, but both the city and Union Bank of California - the letter of credit provider that now holds the vast majority of the debt - have said in court filings that they can't negotiate a plan to adjust the debts until they know what the city's labor costs will be.
