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2011-06-20 City Council Agenda Packet
CITY OF PALO ALTO Special Meeting CITY COUNCIL Council Chambers June 20, 2011 6:00 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Friday preceding the meeting. 1 June 20, 2011 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Call to Order Study Session 1. Study Session Regarding the Valley Transportation Authority’s El Camino Real Bus Rapid Transit (BRT) Project 7:00 PM or as Soon as Possible Thereafter Special Orders of the Day 2. Proclamation Celebrating 80 Years in Palo Alto- Gleim the Jeweler 3. Selection of Candidates to be interviewed for the Planning and Transportation Commission for one term ending on July 31, 2015 City Manager Comments Minutes Approval Oral Communications Members of the public may speak to any item not on the agenda; three minutes per speaker. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. Consent Calendar Items will be voted on in one motion unless removed from the calendar by two Council Members. 4. Adoption of Resolution Determining the Proposed Calculation of the Appropriations Limit for Fiscal Year 2012 2 June 20, 2011 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. 5. Adoption of a Resolution Approving a Professional Services Agreement between the Northern California Power Agency and the Cities of Alameda, Palo Alto and Santa Clara for Electric Transmission, Generation and Regulatory Consulting Services 6. Approval and Authorization of the City Manager to Execute a Contract with Pacheco Utility Line Builders in the Amount of $371,412 for the Electric Pole Replacement and Overhead Wire Install Project on City’s Electric Distribution System 7. Approval of a Utilities Enterprise Fund Contract with Dresser, Inc. in an Amount of $935,700 for Supplying Regulating Equipment for Rebuilding of Gas Receiving Stations 1, 2, 3, and 4 Capital Improvement Program Projects GS- 09000, GS-08000, GS-10000, and GS-11001 8. Approval Of Software Consulting Service Contract Amendment with Sierra Infosys, Inc. in the amount of $84,000 for the SAP Basis Support of SAP Industry-Specific Solution for Utilities, SAP Financials, Customer Relationship Management System, Business Intelligence System and Utilities Customer Electronic Services 9. Adoption of a Resolution Approving the Reorganization of an Approximately .65 Acre Territory Designated “Major Institution/University Lands” Located in the County of Santa Clara and Second Reading for the Adoption of Two Ordinances: (1) Amendment of Title 18 of the PAMC to add a new Chapter 18.36 (Hospital District), adding Section 8.10.95 (Tree Removal in HD Zone) to Chapter 8.10 (Tree Preservation and Management Regulations) of Title 8 (Trees and Vegetation) and amending Section 16.20.160(a)(1) (Special Purpose Signs) of Chapter 16.20 (Signs) of Title 16 (Building Regulations) and amending Section 18.08.010 (Designation of General Districts) and Section 18.08.040 to Chapter 18.08 (Designation and Establishment of Districts) and (2) Approval of a Development Agreement Between the City of Palo Alto and Stanford Hospital and Clinics; Lucile Salter Packard Children’s Hospital at Stanford; and the Board of Trustees of the Leland Stanford Junior University 10.Annual Adoption of the City’s Investment Policy 3 June 20, 2011 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Agenda Changes, Additions and Deletions HEARINGS REQUIRED BY LAW: Applications and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and put up to three minutes for concluding remarks after other members of the public have spoken. Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 11.PUBLIC HEARING: Approval of an Ordinance Adopting the Fiscal Year 2012 Budget, including the Fiscal Year 2012 Capital Improvement Program, and Changes to the Municipal Fee Schedule; Adoption of Five Resolutions: (1) Amending Utility Rate Schedules for a Storm Drain Rate Increase; (2) Amending Utility Rate Schedules for Fiber Optic Rate Increases; (3) Amending Utility Rate Schedules for Wastewater Rate Increases pursuant to Proposition 218; (4) Amending Utility Rate Schedules for Water Rate Increases; (5) Amending the 2010-2011 Compensation Plan for the Management and Professional Personnel and Council Appointees; and Adoption of an Ordinance Amending Chapter 2.08 to Create a New Department of Information Technology (Continued from June 13, 2011) 12.Policy & Services Committee Recommends the City Council Increase the Number of Flex Positions in the Table of Organization in the Fiscal Year 2012 Proposed Budget 13.Policy & Services Committee Recommends the City Council Make Policy Decision Regarding Removal or Modification fo City Charter Provision on Binding Interest Arbitration 14.Adoption of Two Resolutions: (1) Adopting Utility Rate Schedule E-16, as amended; and (2) Approving the Master License Agreement and Exhibits For Use of City-controlled Space on Utility Poles and Streetlight Poles and in Conduits Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) Adjournment AMERICANS WITH DISABILITY ACT (ADA) Persons with disabiltities who require auxilliary aids or services in using City facilities, services 4 June 20, 2011 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. PUBLIC COMMENT Members of the Public are entitled to directly address the City Council/Committee concerning any item that is described in the notice of this meeting, before or during consideration of that item. If you wish to address the Council/Committee on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council/Committee, but it is very helpful. 5 June 20, 2011 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Standing Committee Meetings Standing Committee Packets from the City Clerk Standing Committee Packets from the Administrative Services Standing Committee Packets from the City Clerk Schedule of Meetings Schedule of Meetings from the City Clerk Tentative Agenda Tentative Agenda from the City Clerk Informational Report Public Letters to Council Public Letters to Council from the City Clerk Supplemental Information City of Palo Alto (ID # 1534) City Council Staff Report Report Type: Study SessionMeeting Date: 6/20/2011 June 20, 2011 Page 1 of 7 (ID # 1534) Council Priority: {ResProject:ClearLine} Summary Title: El Camino Real Bus Rapid Transit Project Title: Study Session Regarding the Valley Transportation Authority’s El Camino Real Bus Rapid Transit (BRT) Project From:City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council receive the Valley Transportation Authority (VTA) staff report regarding the VTA El Camino Bus Rapid Transit project and provide comments and discussion. Executive Summary The El Camino -Bus Rapid Transit (BRT) project is supported by the VTA’s Measure A Transit Sales Tax program along with federal and state sources. The goal of the project is to improve transit access along the El Camino Real Corridor by providing faster service with target stops and more reliable service with specialized transit vehicles and facilities. The El Camino Real BRT Corridor extends from Downtown San Jose (Arena Station) to Downtown Palo Alto (Palo Alto Transit Center) passing through the cities of Santa Clara, Sunnyvale, Los Altos, and Mountain View. The El Camino Real Corridor is currently served by the VTA Local 22 bus route and the VTA Rapid 522, which together carry 20% of the VTA’s daily ridership. The current Rapid 522 is the first step to initiating a BRT type of service with limited stops, but lacks the upgraded stations and branded vehicles. An example of a branded VTA BRT vehicle is illustrated in Attachment A. In May 2009, the VTA Board of Directors adopted the El Camino Real BRT Strategic Plan, which identifies the goals that the BRT project would be measured against. The goals are described in more detail in the Discussion section of this report. Staff from VTA will be making a presentation to Council regarding the El Camino Real BRT Project. Staff and VTA will outline the next steps in the process. June 20, 2011 Page 2 of 7 (ID # 1534) Background The 2000 Measure A VTA Transit Sales Tax program identified an integrated transit network linking target “activity centers” comprised of regional business districts, shopping centers, and mixed-use projects throughout Santa Clara County, through an enhanced bus service known as Bus Rapid Transit (BRT). In March 2008, VTA initiated a BRT Strategic Plan, the goals of which are to: 1) Establish a brand identity for VTA’s future network of BRT services, 2) Evaluate the feasibility and effectiveness of developing BRT facilities in the candidate corridors, 3) Seek input from project stakeholders prior to beginning engineering efforts, and 4) Develop an action plan for implementation in each corridor. The El Camino Bus Rapid Transit project supports the goals of the ongoing Peninsula El Camino Real Grand Boulevard Initiative by enhancing El Camino Real as a multi-modal complete street by making improvements to the pedestrian connections at stations and to the streetscape in selected areas. The BRT network will create a pedestrian oriented environment and maintain and improve mobility of people and vehicles. Discussion VTA has contracted with Parsons Transportation Group as the lead design consultant for the El Camino Real BRT Corridor project. Meetings with City staff began in summer 2010 in the form of a Project Development Team (PDT). The PDT meetings include staff from the northern County cities of Palo Alto, Los Altos, and Mountain View, along with VTA and the consultant team. The PDT meetings focus on potential roadway configurations along El Camino Real to help support BRT activities including the use of exclusive (dedicated) bus lanes down the center of El Camino Real,shared-use mixed-flow lanes travelling along the curb lanes of El Camino Real, and enhanced station location alternatives. In Palo Alto, mixed-flow lanes (at the curbs) with two potential enhanced stations are proposed. A Policy Advisory Board (PAB) for the El Camino Real BRT Corridor was established in 2010, comprised of elected officials.The PAB meetings began in February 2011 and the group meets quarterly. Councilmember Shepherd represents the City of Palo Alto at the PAB. Design Options The El Camino Real BRT Corridor project represents a unique opportunity to implement specialized transit access through the City of Palo Alto with vision-setting civil improvements through the City’s most heavily-traveled corridor. Alternatives proposed for the BRT have three potential cross sections: ·BRT operating with automobile traffic in mixed flow lanes (at the curbs) with the existing six travel lanes (three lanes in each direction) ·BRT operating in an exclusive median lane with six travel lanes, and ·BRT operating in an exclusive median with four travel lanes (two lanes in each direction) June 20, 2011 Page 3 of 7 (ID # 1534) Proposed renderings for each of the potential street cross-sections are provided in Attachment B. An illustration of the BRT branded vehicle is provided in Attachment A. Based on input from the PDT, preliminary design, and cost estimates, VTA staff is recommending that the project include a combination of BRT operating in either a mixed flow lane with six travel lanes or BRT in the center (dedicated) median lanes with four regular travel lanes on El Camino Real. Cross sections with BRT in the median lanes with the six travel lanes will have significant impact on private property along El Camino Real, especially at the station locations and intersections. Where conditions do not warrant dedicated bus lanes, such as is the case through the City of Palo Alto, BRT would operate in mixed flow lanes along the curb (with appropriate street and signal enhancements) alongside local automobile traffic. Staff has expressed concern with the impacts that a dedicated lane would have in the City, such as loss of parking, right of way take of private properties and removal of the landscaped medians along El Camino Real. Segments with the dedicated BRT lanes, such as through the City of Mountain View, would have two 12-ft lanes in the median and would be restricted to only the BRT buses. These 12-foot wide lanes would be placed in the median and would be separated from the mixed flow lanes by 6-inch concrete curbs. On these streets, the original number of traffic lanes would be maintained to the extent possible, with additional width gained by removing existing curbside parking or by cutting into the existing medians and dedicated left-turn lanes. Additional right-of-way acquisition may be required where center median BRT stations are needed. These buses would also have Bus Signal Priority, so that as the bus approaches the intersection, the traffic signal will turn green to allow the vehicle to move through without sitting at a red light. Buses would also be able to accommodate additional bikes both outside of the vehicle and possibly inside. More detail will be available as VTA continues with the design phase of this project. BRT Stations Station locations will be selected based on transit demand, station visibility and access, connections to bus and rail, surrounding land uses, station spacing, public support and right-of- way impacts. The potential BRT station locations in Palo Alto are being proposed at the vicinity of Maybell Avenue/Arastradero Road, California Avenue and the Palo Alto Transit Center (near University Avenue). Station design would include an off-board fare collection system where passengers would buy tickets at the station and board the bus through the front and rear doors without needing to show proof of payment. This would allow faster boarding and, like the light rail, transit officers would be onboard checking passengers for tickets. The enhanced stations would be more substantial than regular bus stations by providing shelters for weather protection, more seating and better lighting for safety. The station locations in the areas without dedicated lanes (mixed –flow option) would be designed to have June 20, 2011 Page 4 of 7 (ID # 1534) sidewalk bulb-outs, where the station platform would extend out into the travel lane, so that the bus would stop in the travel lane while the passengers board. This would potentially speed up the travel times since the buses would not have to pull in/out of traffic, like regular buses do. Development of this study will also include data collection efforts for ridership modeling, traffic analysis, parking inventory and occupancy survey, urban design inventory and land use analysis of the El Camino corridor. Staff from both Planning and Transportaion will review and provide comments as needed. Architectural and design elements for the BRT will be a focus of intensive design study and stakeholder outreach in the Preliminary Engineering phase of the project. The community outreach process during preliminary engineering will build on the outreach work already accomplished in conceptual engineering by continuing to include business and property owners along the project corridor. VTA will also continue to work with Caltrans on the approval of the design of the roadway since El Camino Real is a State highway (Route 82). More information can be found on VTA’s project website at: http://www.vta.org/brt/index.html, which covers the entire El Camino Real corridior. El Camino Real Bus Rapid Transit Project Goals: The BRT project will be measured against quantitative and qualitative goals that will be revisited as the project progresses. The following sets of goals have been adopted by the VTA Board of Directors and the 2009 Bus Rapid Transit Strategic Plan. The primary goal of the project is to improve transit in the El Camino Corridor by providing faster, more frequent and more reliable service with specialized transit vehicles and facilities. Also, as part of the effort to improve transit, improvements will also be made to pedestrian connections to the stations and improvements to the streetscape in selected areas The Policy Advisory Board was asked to endorse the following goals at its May 13, 2011 meeting: 1)Ridership El Camino BRT project will achieve increased ridership (compared to the existing bus service) and improve efficiency, consistent with VTA's Service Design Guidelines: o Average boardings per revenue hour: 45 -55 o Average boardings per route mile: 200 -350 o Boardings per station per day: 150 –350 2)Transit Travel Time Savings El Camino BRT Project improvements will reduce bus in-vehicle travel time by30% when compared to a local bus (Line 22). June 20, 2011 Page 5 of 7 (ID # 1534) 3)Competitiveness with automobile travel times El Camino Rapid BRT Project exclusive lane improvements will achieve Rapid Transit travel times within 10% of automobile travel times. 4)Bus Signal Priority All signals on El Camino will have bus signal priority for Rapid Transit vehicles. 5)Station Design All BRT stations will have branded shelters and amenities such as real-time arrival and departure information, fare collection machines and upgraded lighting. 6)Vehicle Design All BRT buses will be articulated, hybrid powered, branded vehicles. 7)Support City Land Use Plans The BRT Project will be consistent with the goals of city general plans and precise plans. 8)Enhance El Camino as Multimodal “Complete” Street Ensure good pedestrian environment adjacent to stations. 9)Create a pedestrian-oriented environment and improve streetscapes, ensuring full access to and between public areas and private developments Provide an integrated pedestrian environment with wide, continuous sidewalks, landscaping, lighting and signage, all with human-scale details, with a commitment to maintain those amenities 10)Develop a balanced multimodal corridor to maintain and improve mobility of people and vehicles along the corridor ·Design transit stops for easy passenger loading, unloading and fare payment. ·Improve signal timing ·Implement transit-preferential street treatments such as signal priority, bulb out stops, bus by-pass lanes and high occupancy vehicle (HOV)/Bus-only lanes where needed and feasible ·Implement programs designed to reduce auto trips during congestion periods VTA staff will continue to provide updates on how well the goals are met throughout the project definition process. Timeline The VTA is proposing the following schedule for the El Camino Real BRT Corridor project: ·Conceptual Engineering thru Summer 2012 June 20, 2011 Page 6 of 7 (ID # 1534) ·VTA Board Approves Project Description Fall 2011 ·Begin Environmental Studies Fall 2011 ·Final Environmental Document Winter 2012 ·Preliminary Engineering Begins Summer 2012 ·Final Design Summer 2014 ·Construction Award Fall 2014 ·Begin Operation 2016 Conceptual engineering will continue through Summer 2012 and will include civil engineering, transit operations, branding and marketing of the vehicles and stations. Staff from the participating cities and Caltrans will continue to meet monthly to provide input to the study. The Policy Advisory Board will continue to provide policy input. Community input will be sought through multiple outreach effort later this year and as planning activities proceed. Resource Impact Staff participates in monthly Project Development Team meetings. Upon project implementation, the corridor will be operated and maintained by the Valley Transportation Authority so there are no on-going resource impacts to the City of Palo Alto. Policy Implications The propsed BRT project is consistent with the City’s Comprehensive Plan policies: ·Policy T-1: Make land use decisions that encourage walking, bicycling and public transit use; ·Policy T-4: Provide local transit in Palo Alto. ·Policy T-6: Improve public transit access to regional destinations, including those within Palo Alto. ·Policy T-7: Support plans for a quiet, fast rail system that encircles the Bay, and for intra-county and transbay transit systems that link Palo Alto to the rest of Santa Clara County and adjoining counties. ·Policy T-10: Encourage amenities such as seating, lighting, and signage at bus stops to increase rider comfort and safety. The propsed BRT project is consistent with the El Camino Real Master Planning Study which was drafted in 2003 providing detailed design guidelines for the El Camino Real Corridor through Palo Alto. This project also supports the ongoing Peninsula El Camino Real Grand Boulevard Initiative, with the goal of improving the performance, safety and aesthetics of El Camino Real for all users. Environmental Review Upon completion of the conceptual design/engineering, VTA will begin environmental analysis of the proposed alternatives in order to identify impacts, if any, along the El Camino Corridor. June 20, 2011 Page 7 of 7 (ID # 1534) ATTACHMENTS: ·Attachment A: Proposed BRT Vehicle (PDF) ·Attachment B: Proposed BRT Cross Sections (PDF) Prepared By:Shahla Yazdy, Traffic Engineer Department Head:Curtis Williams, Director City Manager Approval: James Keene, City Manager BUS RAPID TRANSIT Attachment A BUS RAPID TRANSIT 2 3 Travel Lanes, BRT in Mixed‐Flow Attachment B BUS RAPID TRANSIT 3 3 Travel Lanes, BRT in Dedicated Lane, Parking Removed BUS RAPID TRANSIT 4 2 Travel Lanes, BRT in Dedicated Lane CITY OF PALO ALTO PROCLAMATION GLEIM THE JEWELER CELEBRATING 80 YEARS IN PALO ALTO WHEREAS, Gleim the Jeweler has contributed to the economic vitality of Palo Alto for 80 years, as well as participated marking auspicious life occasions for generations of Palo Altans; and WHEREAS, Gleim the Jeweler is one of the premier independent, family owned and operated jewelers in the United States; and WHEREAS, Frederick Gleim opened the first Gleim jewelry store on University Avenue in downtown Palo Alto in 1931; and WHEREAS, Frederick’s son, Arthur continued to successfully build the business gaining a national reputation for quality and expertise; and WHEREAS, Arthur Gleim earned the coveted Robert M. Shipley award ~ the highest honor in the jewelry industry ~ and was the only person to have ever served as President of the American Gem Society, President of the Jewelers of America and Chairman of the Board of the Gemological Institute of America; and WHEREAS, Arthur’s daughter, Georgie Gleim, has continued the family legacy of leadership in the industry, and as President of Gleim the Jeweler she has also received the Robert M. Shipley award and has served as President of the American Gem Society and President of the Jewelers of America, a national retail organization; and WHEREAS, Gleim the Jeweler has a tradition of community involvement, through supporting many nonprofit organizations, and presenting the annual Gleim Community Service Award to a local volunteer; and WHEREAS, Gleim the Jeweler received the prestigious Tall Tree Award for Outstanding Business in 1994, and in 2007 Georgie Gleim received the esteemed Athena Award given to an exceptional business woman. NOW, THEREFORE, I, Sidney Espinosa, Mayor of the City of Palo Alto, on behalf of the City Council do hereby proclaim congratulations to Gleim the Jeweler for 80 years of business excellence and service to Palo Alto. Presented: June/2011 ______________________________ Sidney A. Espinosa Mayor CITY OF PALO ALTO OFFICE OF THE CITY CLERK June 20, 2011 The Honorable City Council Palo Alto, California Selection of Candidates to be interviewed for the Planning and Transportation Commission for one term ending on July 31, 2015 Enclosed are three applications submitted for one term, ending on July 31, 2015 on the Planning and Transportation Commission. At the Council Meeting on June 20, 2011, the City Council will select the candidates to be interviewed for the Planning and Transportation Commission, with the interview date to be determined. Council may move to interview all applicants, only specific applicants, or reopen the recruitment. Copies of all applications are attached. The applicants are as follows: Doria SummaLai TinSerena Torvik REPORT PREPARED BY:Ronna Jojola Gonsalves, Deputy City Clerk ATTACHMENTS: ·Planning & Transportation Commission Applications (PDF) Department Head:Donna Grider, City Clerk Updated: 6/15/2011 11:20 AM by Ronna Gonsalves Page 2 City of Palo Alto (ID # 1806) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 2 (ID # 1806) Summary Title: GANN Limit Title: Adoption of Resolution Determining the Proposed Calculation of the Appropriations Limit for Fiscal Year 2012 From:City Manager Lead Department: Administrative Services Recommendation Staff recommends that Council adopt the attached resolution determining the Proposition 4 (Gann) Appropriations Limit calculation for Fiscal Year 2012. The City's Fiscal Year 2012 appropriations are estimated to be $30 million under the limit, assuming Council approval of the Fiscal Year 2012 Adopted Budget. Discussion Article XIIIB of the State Constitution (Proposition 4) limits the annual appropriations for State and local governments. The Appropriations Limit (Limit) is adjusted annually on the basis of population and per capita income “change factors.” These factors are received from the State in May, after the City's proposed budget has been submitted to Council. Attached is the final Appropriations Limit calculation, based on the “change factors” that have been received from the State. The Appropriations Limit for Fiscal Year 2012 is $119 million. When compared to the recommended 2012 Budget, the City's Fiscal Year 2011 budgeted appropriations are $30 million under the Limit. Based on Article XIIIB, the City of Palo Alto can use the larger of two measurements of population growth, (county or city population growth) in the Limit calculation. For Fiscal Year 2012, the City is using the Santa Clara County population factor, which is greater than the population factor for the City of Palo Alto. In Fiscal Year 2011, the city population factor was used in lieu of the County’s since the City’s population factor was higher than the County’s. The City typically uses the highest factor in order to provide maximum appropriation flexibility. As required by State law, documentation used to compute the Limit has been made available to the public at least fifteen days prior to the Council meeting at which the Limit is being adopted, and notice was published of the availability of these materials. Resource Impact The adoption of the Fiscal Year 2012 Limit has no impact on City resources. June 20, 2011 Page 2 of 2 (ID # 1806) Policy Implications This recommendation is consistent with existing City policies. Environmental Review This is not a project under section 21065 of the California Environmental Quality Act. Attachments: ·Attachment A: Appropriations Limit Compliance Calculation (XLS) ·Attachment B: Resolution Determining Calculation of the Appropriation Limit (DOC) Prepared By:Sherry Nikzat, Senior Financial Anlyst Department Head:Lalo Perez, Director City Manager Approval: James Keene, City Manager Combined General Capital Debt Special Funds Fund Projects Service Revenue Total Budgeted Appropriations FY 2012 Proposed Budget ($ millions)150.41 118.56 11.83 4.48 15.55 Less:Debt Service Transactions 4.48 Capital Outlay 11.83 Non-Proceeds of Taxes 45.10 Net Proposed Appropriations Subject to Limit $89.00 $118.56 $11.83 $4.48 $15.55 FY 2012 Appropriations Limit 119.00 Under Limit By 30.00 Computation of Appropriation Limit: FY 2011 Appropriations Limit:$115,057,884 FY 2012 Santa Clara County Population Change (estimated)0.89% 2009-10 Per Capita Income Change (estimated)2.51% (1.0089) x (1.0251) x $115057884 = $118,995,555 Historical Appropriations FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Appropriations Subject to the Limit 73.30 78.64 72.00 78.94 89.00 Appropriations Limit 106.68 113.17 116.38 115.06 119.00 Under Limit By 33.38 34.53 44.38 36.12 30.00 Projected Appropriations FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Estimated Appropriations Subject to Limit 96.12 103.81 112.11 121.08 130.77 Estimated Appropriations Limit 126.24 133.91 142.05 150.69 159.85 Under Limit By 30.12 30.10 29.94 29.61 29.08 APPROPRIATIONS LIMITATION COMPLIANCE CALCULATION FOR FY 2012 PROPOSED BUDGET ($ IN MILLIONS) Attachment A The City of Palo Alto remains well within its appropriations limit in FY 2012.Future year limit trends can be made based on the average change in regional population and income growth. The appropriations subject to limitation includes proceeds of taxes from the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Improvement Funds. The following is a summary of estimated limits and estimated appropriations subject to the limit. 1 RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO DETERMINING THE CALCULATION OF THE APPROPRIATIONS LIMIT FOR FISCAL YEAR 2012 WHEREAS, under Article XIIIB of the Constitution of the State of California, the City of Palo Alto (City) may not appropriate any proceeds of taxes in excess of its appropriations limit (Limit); and WHEREAS, since fiscal year 1991, the City is permitted to annually adjust its Limit in accordance with inflation and population adjustment factors; and WHEREAS, pursuant to Government Code Section 37200, the calculation of the Limit and the total appropriations subject to the limit were set forth in the annual budget of the City for fiscal year 2012, which will be adopted by ordinance of the Council on June 20, 2011; and WHEREAS, pursuant to Government Code sections 7901 and 7910, the final calculation of the Limit has been determined, and the adjustment factors on which the calculation is based are a 2.51% percent change in California per capita income and a .89%percent change in the population growth for Santa Clara County; and WHEREAS, the documentation used in the determination of the Limit has been made available to the general public for fifteen (15) days prior to the date of adoption of this resolution; and WHEREAS, according to the final calculation, the City’s appropriations subject to limitation are approximately $89 million. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION 1.The Council of the City of Palo Alto hereby finds that, for fiscal year 2012, the final calculation of the Appropriations Limit of the City of Palo Alto has been determined in accordance with the adjustment factors referred to above, the documentation used in the determination of the calculation has been made available to the general public for the period of fifteen days as required by law, and the City’s appropriations subject to limitation are under the Limit by approximately $30 million. SECTION 2.The Council hereby adopts the final calculation 2 of the Appropriations Limit of the City for fiscal year 2012, a copy of which is attached hereto as Exhibit A. SECTION 3.The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, and, therefore, no environmental assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST:APPROVED: ______________________________________________________ City Clerk Mayor APPROVED AS TO FORM:_______________________________ City Manager ___________________________ Senior Assistant City Attorney ______________________________ Director, Administrative Services City of Palo Alto (ID # 1706) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 4 (ID # 1706) Summary Title: Professional Services Agreement with NCPA Title: Adoption of a Resolution Approving a Professional Services Agreement between the Northern California Power Agency and the Cities of Alameda, Palo Alto and Santa Clara for Electric Transmission, Generation and Regulatory Consulting Services From:City Manager Lead Department: Utilities Recommendation Staff recommends that Council adopt a resolution approving and authorizing the City Manager to execute the Professional Services Agreement between the Northern California Power Agency and the Cities of Alameda, Palo Alto and Santa Clara for Electric Transmission, Generation and Regulatory Consulting Services. Executive Summary Palo Alto along with two other Northern California Power Agency (NCPA) members, the Cities of Alameda and Santa Clara, have requested that NCPA provide professional consulting services related to electric transmission issues affecting the three cities. The Cities of Palo Alto, Alameda, and Santa Clara (collectively the Bay Area Municipal Transmission Group, or BAMx) require consulting services unique from other NCPA members, because of the BAMx members’ location in the Bay Area, an area that has electric transmission constraints. NCPA has a contract with Flynn Resource Consultants, Inc. (Flynn RCI) to provide these professional consulting services to BAMx. The current contract between NCPA and Flynn RCI expires on June 30, 2011 and NCPA staff is preparing a new agreement to continue the consulting services for Fiscal Year (FY) 2012. For consulting agreements executed by NCPA on behalf of one, or a subset of, NCPA members, NCPA requires that those members enter into a Professional Services Agreement with NCPA. The City’s 23% share of the Flynn RCI contract is incorporated into the Electric Fund budget for FY 2012 and will be up to a maximum of $173,604 for the one-year contract term. Background NCPA is a joint powers agency whose members are municipal electric utilities including the City of Palo Alto (City). NCPA arranges for delivery of the City’s electric power and manages electric resources that Palo Alto jointly owns with other NCPA members. June 20, 2011 Page 2 of 4 (ID # 1706) In 2003, the City along with the Cities of Alameda and Santa Clara, requested that NCPA provide professional consulting services related to electric transmission, power generation, regulatory issues, and electric market design issues affecting the three cities. Prior to 2003, the City had a contract with Flynn RCI to provide regulatory and technical consulting services for the City’s electric utility. Following the 2000/2001 California electricity market crisis, the California Independent System Operator (CAISO) initiated a major redesign of the electricity markets, which the City participated in with the consulting assistance of Flynn RCI. The Cities of Palo Alto, Alameda, and Santa Clara identified common interests in advocating for certain market design proposals and hence formed BAMx. Recognizing their need for technical and regulatory consulting services, the BAMx members considered ways to reduce costs by sharing a consultant. The options considered included forming a new joint powers agency that would then retain a consultant; entering into three separate consulting agreements with one consulting company; or working through NCPA. At the time the members decided that the best alternative was to ask NCPA to provide the consulting services, thereby reducing administrative costs and facilitating coordination with other NCPA members when common interests were identified. The wider NCPA membership was not engaged in the issues of interest to BAMx, so on March 1, 2003 NCPA entered into a consulting agreement with Flynn RCI to provide these services to the BAMx members. Since March 2003, Flynn RCI has been representing BAMx in Bay Area electric transmission expansion planning processes, at CAISO proceedings related to electric market design in California, in filings at the Federal Energy Regulatory Commission, and in other regional electric transmission planning venues. An early success for BAMx was the implementation of a single hourly market price that is charged to electric load in Northern California. Earlier proposals would have had electric customers paying different prices according to their location on the electric grid. For customers of the City’s electric utility this would have meant exposure to higher anticipated market prices because of the City’s location in the electric transmission constrained Bay Area. BAMx, through its consultant, has also advocated for improved reliability of electricity transmission service in to the Bay Area, and has influenced the CAISO’s electric transmission planning process to provide for more effective stakeholder participation. Discussion As the current contract expires on June 30, 2011, NCPA staff is preparing a new agreement to continue the consulting services from Flynn RCI for FY 2012. NCPA also requires that the BAMx members execute a new Professional Services Agreement for FY 2012. The Professional Services Agreement between NCPA and the BAMx members (Attachment B) states that NCPA is performing or providing these services at the request of the BAMx members, and formalizes NCPA’s role in processing invoices from Flynn RCI and allocating the monthly charges to each BAMx member. The allocation of charges between the BAMx members is in proportion to each member’s share of energy delivered in the calendar year prior to the contract term. For the contract period (July 1, 2011 through June 30, 2012), Palo Alto’s June 20, 2011 Page 3 of 4 (ID # 1706) share is 22.92% based on energy deliveries in calendar year 2010. The agreement also contains provisions that limit NCPA’s liability and that of non-participating NCPA members. NCPA includes these protection provisions in all of its agreements, many of which the City is not a party to but which achieve protections for the City as a non-participant. Resource Impact The City’s share of the Flynn RCI contract is incorporated into the Electric Fund’s proposed budget for FY 2012. The Consulting Agreement between NCPA and Flynn RCI (attached for information as Attachment C) specifies a not-to-exceed contract amount of $750,000 for FY 2012. NCPA will also charge a fee for billing and contract preparation of $625 per month. The City’s share of the total cost is 23% and will be up to a maximum of $173,604 for the one-year contract term. The value to the City from participation in the BAMx group is the continued advocacy for fair and equitable electric market rules beneficial electric transmission solutions, and effective stakeholder participation in electric transmission planning processes. BAMx is currently taking a lead role in advocating for rigorous economic and needs analyses in the CAISO’s latest transmission planning proceedings to build new transmission to potential renewable electric resource sites in remote locations. By the CAISO’s own estimations this new transmission could triple the charge to electric utilities for transmission access, currently around $11 million a year for the City. Policy Implications Entering into this agreement does not create new policy, is consistent with existing policy, and is consistent with the Utilities Strategic Plan’s focus on system reliability and cost control. Environmental Review The provision of these services does not constitute a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under CEQA is required. Attachments: ·Attachment A: Resolution for Professional Services Agreement with NCPA (PDF) ·Attachment B: Pending Final FY 12 Professional Services Consulting Agreement -BAMx and NCPA (PDF) ·Attachment C: Pending Final FY12 NCPA Consulting Agreement with Flynn RCI (PDF) Prepared By:Debra Lloyd, Manager Department Head:Valerie Fong, Director June 20, 2011 Page 4 of 4 (ID # 1706) City Manager Approval: James Keene, City Manager PROFESSIONAL SERVICES AGREEMENT BETWEEN NORTHERN CALIFORNIA POWER AGENCY AND THE CITIES OF ALAMEDA, PALO ALTO AND SANTA CLARA (THE "BAY AREA MUNICIPAL TRANSMISSION SERVICES AGREEMENT" OR "BAMx AGREEMENT") This Professional Services Agreement (“Agreement”) is made by and between the NORTHERN CALIFORNIA POWER AGENCY (“NCPA”), a joint powers agency and the Cities of Alameda, Palo Alto and Santa Clara (such cities each being a "Contracting Member" and jointly referred to as “Contracting Members” or "BAMx Participants"). NCPA and the Contracting Members are together sometimes referred to herein individually as a “Party” and collectively as “the Parties.” This Agreement is made as of July 1, 2011 (the “Effective Date”) in Roseville, California. Section 1. RECITALS This Agreement is entered into based on the following facts, among others: 1.1 NCPA is a public agency created by a joint powers agreement established under California law for the purpose of assisting its members in the efficient use of their common powers. 1.2 Contracting Members are engaged in, among other things, transmitting and distributing electric power within their respective corporate limits. Contracting Members are also each a member of NCPA. Contracting Members jointly desire that NCPA provide Contracting Members with the Services described in this Agreement. 1.3 Article III, section 3 of the “Amended and Restated Northern California Power Agency Joint Powers Agreement” (as amended and effective January 1, 2008) (hereinafter “JPA”) entitled “Powers and Functions” provides that "none of the debts, liabilities or obligations of NCPA shall be the debts, liabilities or obligations of any of the members of NCPA unless assumed in a particular case by resolution of the governing body of the member to be charged." Notwithstanding the foregoing, Article V, section 1 of the JPA entitled “General Provisions” provides that “[t]he governing Commission of NCPA is authorized to procure public liability and other insurance as it deems advisable to protect NCPA and each of the parties hereto, charging the cost thereof to the operating costs of NCPA.” 1.4 Contracting Members desire to secure NCPA’s Services under this Agreement in a manner that balances their interests and the interests of other NCPA members with the ongoing financial viability and professional responsibilities of NCPA. Accordingly, Contracting Members desire to secure NCPA’s Services under this Agreement by accepting a limited insurance based recourse against NCPA, with the option of procuring additional insurance at Contracting Members' sole expense. By so doing, the Parties thereby ensure that NCPA will substantially limit its risk for the provision of such Services and allocates risks back to the Contracting Members in the event NCPA is not adequately insured. 1 BAMx PROFESSIONAL SERVICES AGREEMENT NOW THEREFORE, in consideration of the mutual covenants and promises set forth, NCPA and Contracting Members agree as follows: Section 2. DEFINITIONS Whenever used in this Agreement with initial capitalization, these terms shall have the following meanings as applicable, whether in the singular or plural: 2.1 "Good Utility Practice" shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result of the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods, or acts generally accepted in the region and consistently adhered to by the electric utility industry. 2.2 “NCPA Members” shall mean the signatories to the JPA or those agencies which have executed an Associate Member Agreement with NCPA. 2.3 “Stranded Costs” shall mean all costs incurred by NCPA in providing Services to Contracting Members under this Agreement that could not reasonably be avoided by NCPA from the date it receives a written Notice of Termination. Such costs may include, but not be limited to, salary and employment costs, rent, utilities, or contracts incurred to provide Services under this Agreement. In this regard, Contracting Members acknowledge that NCPA will be entering into professional services agreements with third persons under the terms of this Agreement, and that sums owing to such third persons may become Stranded Costs upon termination of this Agreement. Section 3. SERVICES TO BE PROVIDED; AUTHORIZED REPRESENTATIVES; STANDARD OF PERFORMANCE 3.1 This Agreement is entered into by the Parties in order for NCPA to provide services to Contracting Members for the services described in Exhibit A hereto (“Services”). The Services do not include supervision of the performance of any of the third persons with whom contracts are entered into; such supervision shall be provided by the Contracting Members. 3.2 The following are the Authorized Representatives of the parties for contract administration purposes under this Agreement: Don Dame, AGM Don.Dame@ncpa.com Northern California Power Agency 651 Commerce Drive Roseville, CA 95678 916-781-4207 916-781-4255 fax 2 BAMx PROFESSIONAL SERVICES AGREEMENT Debra Lloyd, Debra.Lloyd@cityofpaloalto.org 650-329-2369 Valerie Fong, Valerie.Fong@cityofpaloalto.org 650-329-2277 Fax 650-326-1507 City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 Girish Balachandran, Girish@alamedamp.com General Manager Alameda Municipal Power 2000 Grand Street P.O. Box H Alameda, CA 94501-0263 510-748-3908 510-748-3956 Brad Wetstone, wetstone@alamedamp.com Alameda Municipal Power 2000 Grand Street P.O. Box H Alameda, CA 94501-0263 510-814-6412 510-814-5699 Ken Sims, ksims@svpower.com 408-615-6678 Diana Shiles, Dshiles@svpower.com 408-615-6672 Fax 408-261-2717 1601 Civic Center Dr. # 201 Santa Clara, CA 95050 No Authorized Representative is authorized to amend any provision of this Agreement except in accordance with Section 12.16. 3.3 Standard of Performance. NCPA will perform the Services using that level of skill and attention reasonably required to complete the Services in a competent and timely manner. 3.4 Assignment of Personnel. NCPA shall assign only competent personnel to perform Services pursuant to this Agreement. In the event that Contracting Members, in their sole discretion, at any time during the term of this Agreement, jointly desire the reassignment of any such persons, NCPA shall, immediately upon receiving notice from each Contracting Member of such desire of the Contracting Members, reassign such person or persons. 3 BAMx PROFESSIONAL SERVICES AGREEMENT 3.5 Time. NCPA shall devote such time to the performance of Services pursuant to this Agreement as may be reasonably necessary to meet the standard of performance provided in Section 3.3, above and to satisfy NCPA’s obligations hereunder. Section 4. TERM AND TERMINATION 4.1 Authorization to Perform Services. NCPA is not authorized to perform any Services or incur any costs whatsoever under the terms of this Agreement until its receipt of a written resolution and/or other appropriate/applicable authorization from each Contracting Member’s governing body confirming each Contracting Member’s authority to enter into this Agreement and confirming that each Contracting Member has allocated funds for and approved contract payments to NCPA under this Agreement. 4.2 Term. The term of this Agreement shall begin on the Effective Date and shall end on June 30, 2012. 4.3 Early Termination and Stranded Costs. This Agreement may be terminated by either NCPA or by the Contracting Members, upon 30 days written notice to all other Parties (“Notice of Termination”). Provided, however, that a Notice of Termination on behalf of the Contracting Members shall be executed by each Contracting Member to be effective. In the event of an early termination, Contracting Members shall pay NCPA for all fees and costs required under this Agreement through the effective date of their Notice of Termination plus all Stranded Costs. Upon payment of the above amounts, no Parties shall have any further obligations under this Agreement except as otherwise set forth in Section 5.7 regarding the survival of defense and indemnity obligations. Section 5. INDEMNITY AND INSURANCE 5.1 Limitation of NCPA’s Liability. 5.1.1 Except as provided in this section 5.1, NCPA shall not at any time be liable for any injury or damage occurring to Contracting Members or any other person or property from any cause whatsoever arising out of this Agreement. 5.1.2 The provisions of section 5.1.1 shall not apply where the injury or damage occurring to Contracting Members is caused by the negligence of NCPA or of any employee, agent or contractor of NCPA; provided that any liability under this subsection is limited to the extent of the actual coverage and coverage limits of the NCPA insurance policies described in this Section 5. 5.1.3 Notwithstanding Section 5.1.2 above, the Contracting Members agree to reimburse NCPA, in a timely manner, for all deductibles and/or self-insured retentions payable for any claim, liability or damage arising out of this Agreement. 4 BAMx PROFESSIONAL SERVICES AGREEMENT 5.2 Indemnification of NCPA. Except as specified in Section 5.1.2 above, Contracting Members shall, at their sole cost and expense, indemnify and hold harmless NCPA and all associated, affiliated, allied, member and subsidiary entities of NCPA, now existing or hereinafter created, and their respective officers, boards, commissions, employees, agents, attorneys, and contractors (hereinafter referred to as “Indemnitees”), from and against any and all liability, obligation, damages, penalties, claims, liens, costs, charges, losses and expenses (including, without limitation, reasonable fees and expenses of attorneys, expert witnesses and consultants), which may be imposed upon, incurred by or be asserted against the Indemnitees arising out of this Agreement. 5.3 Defense of Indemnitees. In the event any action or proceeding shall be brought against the Indemnitees by reason of any matter for which the Indemnitees are indemnified hereunder, Contracting Members shall, upon reasonable prior written notice from any of the Indemnitees, at Contracting Members' sole cost and expense, resist and defend the same with legal counsel mutually selected by Indemnitee and the Contracting Members, unless mutual selection of counsel is expressly prohibited by an applicable insurance policy; provided however, that neither Indemnitee nor Contracting Members shall admit liability in any such matter or on behalf of the other without express written consent, which consent shall not be unreasonably withheld or delayed, nor enter into any compromise or settlement of any claim for which Indemnitees are indemnified hereunder without prior express written consent. The Contracting Members' duty to defend shall begin upon receipt of a written notice identifying with specificity the allegations that give rise to this duty to defend. 5.4 Notice. The Parties shall give each other prompt notice of the making of any claim or the commencement of any action, suit or other proceeding covered by the provisions of this Section 5. 5.5 Insurance. During the term of the Agreement and prior to beginning any work under this Agreement, NCPA shall maintain, or cause to be maintained, in full force and effect, and at its sole cost and expense, the types and limits of insurance as are annually approved by the governing Commission of NCPA. The types and limits of insurance that are applicable to this Agreement are evidenced by list of insurance coverages which is attached hereto as Exhibit C. NCPA warrants and represents that the types of insurance and coverage limits shown in Exhibit C are in full force and effect and shall remain so during the term of this Agreement unless NCPA gives prior written notification (of not less than 15 days) of modification, cancellation or rescission of such coverage. 5.6 Contracting Members' Acknowledgment of Option to Secure Additional Insurance. The Contracting Members acknowledge that there are limitations on NCPA’s liability to the Contracting Members under this Section 5 and that the Contracting Members may need to purchase additional insurance of their own to cover the additional risks and the potential additional liabilities they are assuming under this Agreement. Contracting Members agree that they will, with respect to any additional insurance they obtain or which is otherwise available to Contracting Members, cause their insurers to issue an endorsement providing a waiver of subrogation rights as to Indemnitees. 5.7 Survival of Obligations. The defense and indemnity obligations of Section 5 shall 5 BAMx PROFESSIONAL SERVICES AGREEMENT survive the termination of this Agreement. Section 6. COMPENSATION 6.1 Charges and Reserves 6.1.1. Monthly Charges. Charges for the Services provided hereunder shall be the sum of (a) and (b) below, and shall be billed separately to each BAMx Participant in accordance with Exhibit B: (a) Six-Hundred-Twenty-Five Dollars ($625) per month for services provided by NCPA to the BAMx Participants under this Agreement; and (b) Sixty-Two-Thousand-Five Hundred Dollars ($62,500) per month for services provided to the BAMx Participants directly by Flynn Resource Consultants Inc., under the CONSULTING SERVICES AGREEMENT BETWEEN THE NORTHERN CALIFORNIA POWER AGENCY AND Flynn Resource Consultants Inc., dated July 1, 2011. 6.1.2 Security Deposit. Contracting Members shall each maintain on deposit in its General Operating Reserve Account held at NCPA the sum of Zero Dollars ($0) as security to NCPA for liabilities NCPA could incur under this Agreement. Contracting Members hereby authorize NCPA to reserve and commit this sum in its General Operating Reserve Account for the payment of the aforementioned liabilities should same become necessary. Interest on monies held by NCPA pursuant to this section shall be credited in accordance with the then standard practices of NCPA relating to the General Operating Reserve Account. Section 7. BILLING AND PAYMENT 7.1 Invoices. NCPA shall submit invoices to Contracting Members, not more often than once a month during the term of this Agreement, for Services performed and reimbursable costs incurred prior to the invoice date. 7.2 Monthly Payment. Contracting Members shall make monthly payments, based on invoices received, for Services performed, and for authorized reimbursable costs incurred. Contracting Members shall have thirty (30) days from the receipt of an invoice that complies with all of the requirements above to pay NCPA. Any amount due on a day other than a business day, i.e., any day except a Saturday, Sunday, or a Federal Reserve Bank holiday, may be paid on the following business day. If all or any portion of a bill is disputed by Contracting Members, the entire amount of the bill shall be paid when due, and NCPA’S Authorized Representative shall be concurrently provided written notice of the disputed amount and the basis for the dispute. NCPA shall reimburse any amount determined to have been incorrectly billed, within ten (10) days after such determination. Amounts which are not paid when due shall bear interest computed on a daily basis until paid at the lesser of (i) the per annum prime rate (or reference rate) of the Bank of America NT & 6 BAMx PROFESSIONAL SERVICES AGREEMENT SA, or its successor, then in effect, plus two per cent (2%) or (ii) the maximum rate permitted by law. The provisions of this Section 7 shall survive expiration of this Agreement until satisfied. 7.3 Contracting Members shall pay for the Services pursuant to this Agreement. Contracting Members shall not pay any additional sum for any expense or cost whatsoever incurred by NCPA in rendering Services pursuant to this Agreement. Contracting Members shall make no payment for any extra, further, or additional service pursuant to this Agreement. In no event shall NCPA submit any invoice for an amount in excess of the maximum amount of compensation provided above either for a task or for the entire Agreement, unless the Agreement is modified prior to the submission of such an invoice by a properly executed change order or amendment in accordance with this Agreement. 7.4 Hourly Fees. Fees for work performed by NCPA on an hourly basis shall not exceed the amounts shown on the following fee schedule attached hereto as Exhibit B. 7.5 Reimbursable Expenses. Reimbursable expenses are specified in Exhibit B. Expenses not listed in Exhibit B are not chargeable to Contracting Member. Reimbursable expenses are included in the total amount of compensation provided under this Agreement that shall not be exceeded. 7.6 Payment of Taxes. NCPA is solely responsible for the payment of employment taxes incurred under this Agreement and any similar federal or state taxes. 7.7 Payment upon Termination. In the event that Contracting Members or NCPA terminates this Agreement pursuant to Section 4, Contracting Members shall compensate the NCPA for all outstanding costs and reimbursable expenses incurred for work satisfactorily completed as of the date of written Notice of Termination. NCPA shall maintain adequate logs and timesheets in order to verify costs incurred to that date. 7.8 Authorization to Perform Services. NCPA is not authorized to perform any Services or incur any costs whatsoever under the terms of this Agreement until receipt of authorization from Contracting Member’s Contract Authorized Representative following receipt of the required approvals under the terms of this Agreement. 7.9 The addresses of Contracting Members to which invoices shall be sent is: Jon Abendschein City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 Fax: 650-326-1507 Alameda Municipal Power Assistant General Manager 7 BAMx PROFESSIONAL SERVICES AGREEMENT Energy Resource Planning 2000 Grand Street P.O. Box H Alameda, CA 94501-0263 Bob Kazlauskas City of Santa Clara Attn: Electric Department 1500 Warburton Ave Santa Clara, CA 95050 Bkazlauskas@svpower.com 408-615-6688 Fax: 408-261-2717 Section 8. STATUS OF NCPA; FACILITIES AND EQUIPMENT 8.1 Independent Contractor. At all times during the term of this Agreement, NCPA shall be an independent contractor and shall not be an employee of Contracting Members. Contracting Members shall have the right to control NCPA only insofar as the results of NCPA'S Services rendered pursuant to this Agreement and assignment of personnel pursuant to Section 3.4; however, otherwise Contracting Members shall not have the right to control the means by which NCPA accomplishes Services rendered pursuant to this Agreement. Notwithstanding any other agency, state, local or federal policy, rule, regulation, law, or ordinance to the contrary, NCPA and any of its employees, agents, and subcontractors providing Services under this Agreement shall not qualify for or become entitled to, and hereby agree to waive any and all claims to, any compensation, benefit, or any incident of employment by Contracting Members, including but not limited to eligibility to enroll in the California Public Employees Retirement System (PERS) as an employee of Contracting Member and entitlement to any contribution to be paid by Contracting Members for employer contributions and/or employee contributions for PERS benefits. 8.2 Facilities and Equipment. The facilities and equipment that may be necessary to perform the Services required by this Agreement shall be provided as follows: None. Section 9. UNCONTROLLABLE FORCES 9.1 Obligations of the Parties, other than those to pay money when due, shall be excused for so long as and to the extent that failure to perform such obligations is due to an Uncontrollable Force; provided, however, that if either Party is unable to perform due to an Uncontrollable Force, such Party shall exercise due diligence to remove such inability with reasonable dispatch. Nothing contained in this Agreement shall be construed as requiring a Party to settle any strike, lockout, or labor dispute in which it may be involved, or to accept any permit, certificate, contract, or any other service agreement or authorization necessary for the performance of this Agreement which contains terms and conditions which a Party determines in its good faith judgment are unduly burdensome or otherwise unacceptable. 8 BAMx PROFESSIONAL SERVICES AGREEMENT 9.2 Each Party shall notify the other promptly, by telephone to the other Party’s operating personnel and Authorized Representative identified in Section 3.2, upon becoming aware of any Uncontrollable Force which may adversely affect the performance under this Agreement. A Party shall additionally provide written notice in accordance with Section 12.8 to the other Party within 24 hours after providing. Each Party shall notify the other promptly, when an Uncontrollable Force has been remedied or no longer exists. Section 10. LEGAL REQUIREMENTS 10.1 Governing Law. The laws of the State of California shall govern this Agreement, without regard for the choice of law doctrine. 10.2 Compliance with Applicable Laws. NCPA and any subcontractors shall comply with all laws applicable to the performance of the Services hereunder. 10.3 Other Governmental Regulations. To the extent that this Agreement may be funded by fiscal assistance from another governmental entity, NCPA and any subcontractors shall comply with all applicable rules and regulations to which Contracting Member is bound by the terms of such fiscal assistance program. 10.4 Licenses and Permits. NCPA represents and warrants to Contracting Member that NCPA and its employees, agents, and any subcontractors have all licenses, permits, qualifications, and approvals of whatsoever nature that is legally required to practice their respective professions. NCPA represents and warrants to Contracting Member that NCPA and its employees, agents, any subcontractors shall, at their sole cost and expense, keep in effect at all times during the term of this Agreement any licenses, permits, and approvals that are legally required to practice their respective professions. 10.5 Nondiscrimination and Equal Opportunity. NCPA shall not discriminate, on the basis of a person’s race, religion, color, national origin, age, physical or mental handicap or disability, medical condition, marital status, sex, or sexual orientation, against any employee, applicant for employment, subcontractor, bidder for a subcontract, or participant in, recipient of, or applicant for any services or programs provided by NCPA under this Agreement. NCPA shall comply with all applicable federal, state, and local laws, policies, rules, and requirements related to equal opportunity and nondiscrimination in employment, contracting, and the provision of any services that are the subject of this Agreement, including but not limited to the satisfaction of any positive obligations required of NCPA thereby. NCPA shall include the provisions of this Subsection in any subcontract approved by Contracting Members' Contract Administrator or this Agreement. Section 11. KEEPING AND STATUS OF RECORDS. 11.1 Records Created as Part of NCPA’s Performance. All reports, data, maps, models, 9 BAMx PROFESSIONAL SERVICES AGREEMENT charts, studies, surveys, photographs, memoranda, plans, studies, specifications, records, files, or any other documents or materials, in electronic or any other form, that NCPA prepares or obtains pursuant to this Agreement and that relate to the matters covered hereunder shall be the property of the Contracting Members. NCPA hereby agrees to deliver those documents to the Contracting Members upon termination of the Agreement. It is understood and agreed that the documents and other materials, including but not limited to those described above, prepared pursuant to this Agreement are prepared specifically for the Contracting Members and are not necessarily suitable for any future or other use. Contracting Members and NCPA agree that, until final approval by Contracting Members, all data, plans, specifications, reports and other documents are confidential and will not be released to third parties without prior written consent of both Parties, except as may otherwise be required by applicable law. 11.2 NCPA’s Books and Records. NCPA shall maintain any and all ledgers, books of account, invoices, vouchers, canceled checks, and other records or documents evidencing or relating to charges for services or expenditures and disbursements charged to the Contracting Members under this Agreement for a minimum of three (3) years, or for any longer period required by law, from the date of final payment to the NCPA to this Agreement. 11.3 Inspection and Audit of Records. Any records or documents that Section 12.2 of this Agreement requires NCPA to maintain shall be made available for inspection, audit, and/or copying at any time during regular business hours, upon oral or written request of the Contracting Member. Under California Government Code Section 8546.7, if the amount of public funds expended under this Agreement exceeds TEN THOUSAND DOLLARS ($10,000.00), the Agreement shall be subject to the examination and audit of the State Auditor, at the request of any Contracting Member or as part of any audit of any of the Contracting Members, for a period of three (3) years after final payment under the Agreement. 11.4 Confidential Information and Disclosure. During the term of this Agreement, any Party (“Disclosing Party”) may disclose confidential, proprietary or trade secret information (the “Information”), to another Party (“Receiving Party”). All such Information made available in a tangible medium of expression (such as, without limitation, on paper or by means of magnetic tapes, magnetic disks or other computer media) shall be marked in a prominent location to indicate that it is the confidential, proprietary and trade secret information of Disclosing Party at the time of disclosure to Receiving Party. Receiving Party shall hold Disclosing Party’s Information in confidence and shall take all reasonable steps to prevent any unauthorized possession, use, copying, transfer or disclosure of such Information. Receiving Party shall not attempt to reverse engineer or in any manner create any product or information which is similar in appearance to or based on the Information provided by Disclosing Party. Receiving Party shall not disclose Disclosing Party’s Information to any person other than Receiving Party’s employees, agents, contractors and subcontractors who have a need to know in connection with this Agreement. Receiving Party’s confidentiality obligations hereunder shall not apply to any portion of Disclosing Party’s Information which: (a) Has become a matter of public knowledge other than through an act or omission of Receiving Party; (b) Has been made known to Receiving Party by a third party in 10 BAMx PROFESSIONAL SERVICES AGREEMENT accordance with such third party’s legal rights without any restriction on disclosure; (c) Was in the possession of Receiving Party prior to the disclosure of such Information by Disclosing Party and was not acquired directly or indirectly from the other Party or any person or entity in a relationship of trust and confidence with the other Party with respect to such Information; (d) Receiving Party is required by law to disclose; or (e) Has been independently developed by Receiving Party from information not defined as "Information" in this Agreement, as evidenced by Receiving Party's written records. Receiving Party shall return or destroy Disclosing Party’s Information (including all copies thereof) to Disclosing Party promptly upon the earliest of any termination of this Agreement or the Disclosing Party’s written request. Notwithstanding the foregoing, Receiving Party may retain one copy of such Information solely for archival purposes, subject to the confidentiality provisions of this Agreement. The parties understand that each Party is a public entity and is subject to the laws that may compel either to disclose information about the other’s business. Section 12. MISCELLANEOUS PROVISIONS 12.1 Attorneys’ Fees. If a Party to this Agreement brings any action, including an action for declaratory relief, to enforce or interpret the provisions of this Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees in addition to any other relief to which that Party may be entitled. The court may set such fees in the same action or in a separate action brought for that purpose. 12.2 Venue. In the event that either Party brings any action against the other under this Agreement, the Parties agree that trial of such action shall be vested exclusively in the state courts of California in the County of Placer or in the United States District Court for the Eastern District of California. 12.3 Severability. If any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, or if any provision of this Agreement is rendered invalid or unenforceable by federal or state statute or regulation, but the remaining portions of the Agreement can be enforced without failure of material consideration to any Party, then the remaining provisions shall continue in full force and effect. To that end, this Agreement is declared to be severable. Provided, however, that in the event any provision is declared to be invalid, void or unenforceable, any Party may terminate this Agreement upon 10 days written notice given within five (5) days of receipt of notice of final entry of judgment. 12.4 No Implied Waiver of Breach. The waiver of any breach of a specific provision of this Agreement does not constitute a waiver of any other breach of that term or any other term of this Agreement. 12.5 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and shall apply to and bind the successors and assigns of the Parties. 12.6 Use of Recycled Products. NCPA shall endeavor to prepare and submit all reports, written studies and other printed material on recycled paper to the extent it is available at equal or 11 BAMx PROFESSIONAL SERVICES AGREEMENT less cost than virgin paper. 12.7 Conflict of Interest. NCPA shall not employ any Contracting Members' official or employee in the work performed pursuant to this Agreement. No officer or employee of Contracting Member shall have any financial interest in this Agreement that would violate California Government Code Sections 1090 et seq. 12.8 Notices. Unless this Agreement requires otherwise, any notice, demand or request provided for in this Agreement, or served, given or made shall become effective when delivered in person, or sent by registered or certified first class mail, to the persons specified below: Don Dame Assistant General Manager – Business Development Northern California Power Agency 651 Commerce Drive Roseville, CA 95678 With a copy to: Michael F. Dean General Counsel, Northern California Power Agency c/o Meyers Nave 555 Capitol Mall, Suite 1200 Sacramento, CA 95814 Debra Lloyd Valerie Fong City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 With a copy to: City of Palo Alto Attn: City Attorneys office P.O. Box 10250 Palo Alto, CA 94303 Girish Balachandran, General Manager Brad Wetstone Alameda Municipal Power 2000 Grand Street P.O. Box H Alameda, CA 94501-0263 With a copy to: Farimah Faiz 12 BAMx PROFESSIONAL SERVICES AGREEMENT Alameda Office of the City Attorney 2263 Santa Clara Avenue, Room 280 Alameda, CA 94501 City of Santa Clara Attn: Electric Department 1500 Warburton Ave Santa Clara, CA 95050 With a copy to: City of Santa Clara Attn: City Attorneys office 1500 Warburton Ave Santa Clara, CA 95050 Whenever it is required, permitted, or desired in this Agreement that written notice or demand be given by any Party to any other Party, such notice or demand may be either personally served or sent by United States Mail, or facsimile. Notice shall be deemed to have been given when personally served, when deposited in the United States Mail, certified or registered with postage prepaid and properly addressed, or when transmitted by facsimile provided however, notices delivered by facsimile shall only be effective if delivered during regular business hours on a day that is considered a regular business day for NCPA by the involved Parties. 12.9 Integration; Incorporation. This Agreement, including all the exhibits attached hereto, represents the entire and integrated agreement between Contracting Members and NCPA relating to the subject matter of this Agreement, and supersedes all prior negotiations, representations, or agreements, either written or oral. All exhibits attached hereto are incorporated by reference herein. 12.10 Dispute Resolution. If any dispute arises between the Parties that cannot be settled after engaging in good faith negotiations, Contracting Members and NCPA agree to resolve the dispute in accordance with the following: 12.10.1 Each Party shall designate a senior management or executive level representative to negotiate any dispute; 12.10.2 The representatives shall attempt, through good faith negotiations, to resolve the dispute by any means within their authority. 12.10.3 If the issue remains unresolved after sixty (60) days of good faith negotiations, despite having used their best efforts to do so, either Party may pursue whatever other remedies may be available to it. 12.10.4 This informal resolution process is not intended to nor shall be construed to change the time periods for filing a claim or action specified by Government Code § 900, et seq. 13 BAMx PROFESSIONAL SERVICES AGREEMENT 12.11 Other Agreements. This Agreement is not intended to modify or change any other agreement between any of the Parties, individually or collectively. 12.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one agreement. 12.13 Obligations of Contracting Members Joint and Several; No Joint Venture. The duties, obligations and liabilities of the Contracting Members, including the obligations to make payments to NCPA, are intended to be joint and several. Provided that nothing contained in this Agreement shall be construed to create an association, trust, partnership or joint venture or to impose a trust or partnership duty, obligation or liability on or with regard to the Contracting Members. 12.14 Effect of Section Headings. Section headings and subheadings appearing in this Agreement are inserted for convenience only and shall not be construed as interpretation of text. 12.15 Authority of Signatories. The signatories hereby represent that they have been appropriately authorized to execute this Agreement on behalf of the Party for whom they sign. 12.16 Amendments. The Parties may amend this Agreement only by a writing signed by all the Parties following each Party’s receipt of written resolution/authorization from their governing bodies, which resolutions/authorizations shall be condition precedents to any amendments of this Agreement and shall be attached as exhibits to this Agreement. The Parties have executed this Agreement as of the Effective Date. Northern California Power Agency ________________________________ JAMES H. POPE, General Manager Attest: ________________________________ Assistant Secretary of the Commission Approved as to Form: ________________________________ General Counsel 14 BAMx PROFESSIONAL SERVICES AGREEMENT CONTRACTING MEMBERS: CITY OF ALAMEDA Approved as to Form: By: ____________________________ By:_______________________________ Its:_____________________________ City Attorney CITY OF PALO ALTO Approved as to Form: By: ____________________________ By:_______________________________ Its:_____________________________ City Attorney CITY OF SANTA CLARA Approved as to Form By: _____________________________ By:_______________________________ Its: _____________________________ City Attorney 15 BAMx PROFESSIONAL SERVICES AGREEMENT EXHIBIT A Scope of Services NCPA shall perform the following Services on behalf Contracting Members: A. NCPA will enter into a contract with Flynn Consulting ("Consultant") on behalf of Contracting Members. In general Consultant will provide services including monitoring, meeting participation, coordinating with affected or other participating parties, and, as necessary, preparing and submitting formal position submittals for the following activities: 1. Grid Planning Activities CAISO/PG&E annual transmission expansion planning process Support or oppose specific transmission additions Greater Bay Area long term studies CAISO local capacity technical study process Other regional and sub-regional transmission planning activities CAISO Tariff and BPM Change Management Process Generator Interconnection Procedure Transmission cost allocation Impacts due to Once-Through Cooling (OTC) requirements Transmission for renewables CTPG planning process Tracy to Bay development activities Integration requirements for renewables 2. CPUC and CEC transmission matters Integrated Energy Policy Report Strategic transmission investment plan Resource adequacy issues Development of Renewable Portfolio Scenarios Long Term Procurement Proceeding Approval of CPCNs for new transmission lines 3. California Market Design Activities CAISO markets proceedings and implementation matters Resource Adequacy / Local Capacity/ Deliverability LMP congestion and losses incidence and impacts 4. Western Area Power Administration Activities SMUD/Western balancing authority area footprint, performance and allocation of costs and effort Western Transmission Development Western Transmission Infrastructure Program 5. Communicate Regularly with BAMx Members Client meetings, telephone conferences and written summaries of activities on key issues. B. NCPA will accept invoices from Consultant and transmit them to Contracting Members for their review, and if acceptable, the Contracting Members will direct payment by NCPA. Such payment direction shall be provided by each Contracting Member as designated in Section 12.8 of this agreement, in writing, utilizing appropriate approval forms as shall be developed and/or revised by NCPA from time to time. An example of such form is 16 BAMx PROFESSIONAL SERVICES AGREEMENT included in Exhibit D of this agreement. NCPA will prepare invoices indicating the share of Consultant's costs to be paid by each Contracting Member along with the appropriate charges by NCPA for its services; however, as provided in the Agreement, each Contracting Member is jointly and severally liable for the entirety of any amounts billed under this Agreement. NCPA will then pay Consultant utilizing Contracting Members' funds. C. Contracting Members will be solely responsible for payment of the Consultant’s invoices, as well as determining whether or not the professional services have been satisfactorily performed. The "Services" under this Agreement by NCPA to Contracting Members are limited to the contracting for services with Consultant and billing/payment function. 17 BAMx PROFESSIONAL SERVICES AGREEMENT EXHIBIT B COMPENSATION SCHEDULE AND HOURLY FEES Compensation for all tasks, including hourly fees and expenses, shall not exceed $757,500. The hourly and monthly rates and or compensation break down and an estimated amount of expenses is as follows: B-1 Monthly Charges for Services provided by NCPA for billing and contract preparation under this Agreement shall be allocated to each BAMx Participant in proportion to each BAMx Participant’s proportionate share of energy delivered in CY2010 as derived from the 2011-2012 NCPA Annual Budget Document, Page D-3 and as reflected Table 1 below. The total charge for these services shall be Six-Hundred-Twenty-Five Dollars per month. B-2 Monthly Charges invoiced by Flynn Resource Consultants Inc to NCPA for services provided to the BAMx Participants under the CONSULTING SERVICES AGREEMENT BETWEEN THE NORTHERN CALIFORNIA POWER AGENCY AND FLYNN RESOURCE CONSULTANTS INC., dated July 1, 2011 shall be allocated to each BAMx Participant in proportion to each BAMx Participant’s proportionate share of energy delivered in CY2010 as derived from the 2011-2012 NCPA Annual Budget Document, Page D-3 and as reflected Table 1 below. Compensation to Flynn Resource Consultants Inc. for all tasks, including hourly fees and expenses, shall not exceed Seven-Hundred and Fifty Thousand Dollars ($750,000). The hourly rates and or compensation break down and an estimated amount of expenses is as follows: Flynn Resource Consultants Inc. hourly rates for services are listed below. Labor Category Hourly Rate Principal $240-285 per hour Senior Consultant $190-240 per hour Consultant $160-190 per hour Associate Consultant $130-160 per hour Analyst $ 80-130 per hour Support Services $55 per hour Travel, food, and miscellaneous expenses, except automobile mileage, associated with the provision of services hereunder shall be billed at cost. Automobile mileage will be billed at the rate approved by the Internal Revenue Service. 18 BAMx PROFESSIONAL SERVICES AGREEMENT TABLE 1 Proportionate Share of Energy Delivered MWH % Share Alameda Municipal Power 400,101 9.293% Palo Alto 986,719 22.918% Silicon Valley Power 2,918,531 67.788% 4,305,351 100.000% 19 BAMx PROFESSIONAL SERVICES AGREEMENT EXHIBIT C Insurance Maintained by NCPA WORKERS’ COMPENSATION INSURANCE $1,000,000 EXCESS LIABILITY INSURANCE $35,000,000 AUTOMOBILE INSURANCE $1,000,000 ERRORS & OMISSIONS INSURANCE $10,000,000 20 BAMx PROFESSIONAL SERVICES AGREEMENT EXHIBIT D Bay Area Municipal Transmission Services Agreement (BAMX) Participants Transmittal Payment Voucher For the Period: _________________ To: Northern California Power Agency VIA PDF EMAIL 651 Commerce Drive Roseville, California 95678 Attention: Accounts Payable (*AcctsPayable@ncpa.com) From: Contracting Members—The Cities of Alameda, Palo Alto and Santa Clara (such Cities each being a "Contracting Member" and jointly referred to as “Contracting Members” or "BAMx Participants") I the undersigned hereby certify that I am authorized to approve payment of the ATTACHED billing statement and or invoice(s) and do hereby approve payment thereof by the Billing Agent (Northern California Power Agency) as indicated below: No exceptions. With the deduction of the following exceptions: For City of Alameda: _____________________________ _______________ Name Date No exceptions. With the deduction of the following exceptions: For City of Palo Alto: _____________________________ _______________ Name Date No exceptions. With the deduction of the following exceptions: For City of Santa Clara: ___________________________ _______________ (Silicon Valley Power) Name Date Attachment(s) 21 BAMx PROFESSIONAL SERVICES AGREEMENT 22 BAMx PROFESSIONAL SERVICES AGREEMENT 1424737.1 CONSULTING SERVICES AGREEMENT BETWEEN THE NORTHERN CALIFORNIA POWER AGENCY AND Flynn Resource Consultants Inc. This agreement for consulting services (“Agreement”) is entered into on July 1, 2011 (the “Effective Date”) between the NORTHERN CALIFORNIA POWER AGENCY, a public joint powers agency, with offices located at 651 Commerce Drive, Roseville, CA, 95678-6420 (“Agency”) and Flynn Resource Consultants Inc., (“Consultant”) (together sometimes referred to as the “Parties”). Section 1. SERVICES. In accordance with the terms and conditions set forth in this Agreement, Consultant agrees to perform all services described in the Scope of Work attached as Exhibit A. In the event of a conflict in or inconsistency between the terms of this Agreement and Exhibit A, this Agreement shall prevail. 1.1 Term of Services. This Agreement shall begin on the Effective Date and shall end when Consultant completes the work described in Exhibit A, or on June 30, 2012, whichever is shorter, unless the term of the Agreement is otherwise terminated or modified, as provided for herein. 1.2 Standard of Performance. Consultant shall diligently perform all services required in connection with this Agreement in the manner and according to the standards observed by a competent practitioner of the profession in which Consultant is engaged in the geographical area in which Consultant practices its profession. 1.3 Assignment of Personnel. Consultant shall assign only competent personnel to perform services in connection with this Agreement. 1.4 Termination. Agency may cancel this Agreement, after consultation with BAMx representatives as defined by Exhibit A, at any time and without cause upon written notification to Consultant. In the event of termination, Consultant shall be entitled to compensation for services satisfactorily completed as of the date of written notice of termination; Agency, however, may condition payment of such compensation upon Consultant delivering to Agency documents and records identified in Section 8.1 of this Agreement. Section 2. COMPENSATION. Agency hereby agrees to pay Consultant an amount NOT TO EXCEED Seven-Hundred and Fifty Thousand Dollars ($750,000) for all work set forth in Exhibit A, in accordance with the Consultant’s fee schedule and reimbursable expenses which is attached as Exhibit B, and made a part of this Agreement. In the event of a conflict between this Agreement and Consultant’s proposal regarding the amount of compensation, this Agreement shall prevail. 2.1 Invoices. Consultant shall submit invoices once a month during the term of this Agreement, based on the cost for services performed and reimbursable costs incurred prior to the invoice date to: Northern California Power Agency 651 Commerce Drive Roseville, California 95678 Attn: Accounts Payable Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 2 of 10 2.2 Payment. Agency shall make monthly payments, based on invoices received, for services satisfactorily performed, and for authorized reimbursable costs incurred. 2.3 Hourly Fees / Reimbursable Expenses. If applicable, fees for work performed by Consultant on an hourly basis shall not exceed the amounts shown on the fee schedule attached to this Agreement as Exhibit B. Reimbursable expenses are specified in Exhibit B. 2.4 Payment of Taxes. Consultant is solely responsible for the payment of employment taxes incurred under this Agreement and any similar federal or state taxes. Section 3. INSURANCE REQUIREMENTS. Before beginning any work under this Agreement, Consultant, at its own cost and expense, shall procure the types and amounts of insurance listed below for the period covered by the Agreement. 3.1 Workers’ Compensation. If Consultant employs any person, Consultant shall maintain Statutory Workers’ Compensation Insurance and Employer’s Liability Insurance for any and all persons employed directly or indirectly by Consultant with limits of not less than ONE MILLION DOLLARS ($1,000,000.00) per accident. 3.2 Commercial General and Automobile Liability Insurance. 3.2.1 Commercial General Insurance. Consultant shall maintain commercial general liability insurance for the term of this Agreement, including products liability, covering any loss or liability, including the cost of defense of any action for bodily injury, death, personal injury and property damage which may arise out of the operations of the consultant. The policy shall provide a minimum limit of $1,000,000 per occurrence/$2,000,000 aggregate. 3.2.2 Automobile Liability. Consultant shall maintain automobile liability insurance for the term of this Agreement covering any loss of liability, including the cost of defense of any action, arising from the operation, maintenance or use of any vehicle whether or not owned by the Consultant, on or off Agency premises. The policy shall provide a minimum limit of $1,000,000 per each accident. This insurance shall provide contractual liability covering all motor vehicles and mobile equipment to the extent coverage may be excluded from general liability insurance. 3.2.3 General Liability/Umbrella Coverage. The coverage amounts set forth above may be met by a combination of underlying and umbrella policies so long as in combination the limits equal or exceed those stated. 3.3 Professional Liability Insurance. If Consultant performs design work pursuant to this Agreement, Consultant shall maintain professional liability insurance for licensed professionals performing design work in connection with this Agreement in an amount not less than One Million Dollars ($1,000,000.00) covering the licensed professionals’ errors and omissions. Any deductible or self-insured retention shall not exceed Two Hundred Fifty-Thousand Dollars ($250,000.00) per claim. Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 3 of 10 3.4 All Policies Requirements. 3.4.1 Verification of Coverage. Prior to beginning any work under this Agreement, Consultant shall, at the sole option of the Agency, provide Agency with (1) Certification of Insurance that demonstrates compliance with all applicable insurance provisions contained herein; (2) policy endorsements to the general liability policy adding the Northern California Power Agency as an Additional Insured and declaring such insurance primary in regard to work performed pursuant to this Agreement; or (3) upon request by the Agency, complete copies of all policies and/or complete copies of all endorsements that demonstrate compliance with this Section 3. 3.4.2 Notice of Reduction in or Cancellation of Coverage. A certified endorsement must be attached to all insurance obtained in accordance with this Agreement stating that coverage shall not be canceled, except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the Agency. Consultant shall also provide thirty (30) days’ prior notice to the Agency by certified mail of any impending reduction in the limits or coverage of any insurance policies that form a part of this agreement. 3.5 Waiver of Subrogation. Consultant agrees to waive subrogation which any insurer of Consultant may acquire from Consultant by virtue of the payment of any loss. Consultant agrees to obtain any endorsement that may be necessary to effect this waiver of subrogation. The Workers' Compensation policy shall be endorsed with a waiver of subrogation in favor of Agency for all work performed by Consultant, its employees, agents and subcontractors. Section 4. INDEMNIFICATION AND CONSULTANT’S RESPONSIBILITIES. 4.1 Consultant shall to the fullest extent allowed by law, with respect to all services performed in connection with this Agreement, indemnify, defend and hold harmless the Agency and its officials, commissioners, officers, employees, agents and volunteers from and against any and all claims that arise out of, pertain to or relate to the negligence, recklessness or willful misconduct of the Consultant. Consultant will bear all losses, costs, damages, expense and liability of every kind, nature and description that arise out of, pertain to, or relate to such Claims, whether directly or indirectly (“Liabilities”). Such obligations to defend, hold harmless and indemnity the Agency shall not apply to the extent that such Liabilities are caused by the sole negligence, active negligence, or willful misconduct of the Agency. Section 5. STATUS OF CONSULTANT. 5.1 Independent Contractor. At all times during the term of this Agreement, Consultant shall be an independent contractor and shall not be an employee of Agency. Consultant shall have no authority, express or implied, to act on behalf of Agency in any capacity whatsoever as an agent. Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 4 of 10 Section 6. LEGAL REQUIREMENTS. 6.1 Governing Law. The laws of the State of California shall govern this Agreement. 6.2 Compliance with Applicable Laws. Consultant and any subcontractors shall comply with all laws applicable to the performance of the work in connection with this Agreement. 6.3 Licenses and Permits. Consultant represents and warrants to Agency that Consultant and its employees, agents, and any subcontractors have all licenses, permits, qualifications, and approvals of whatsoever nature that are legally required to practice their respective professions. 6.4 Nondiscrimination and Equal Opportunity. In compliance with federal, state and local laws, Consultant shall not discriminate, on the basis of a person’s race, religion, color, national origin, age, physical or mental handicap or disability, medical condition, marital status, sex, or sexual orientation, against any employee, applicant for employment, subcontractor, bidder for a subcontract, or participant in, recipient of, or applicant for any services or programs provided by Consultant under this Agreement. Section 7. MODIFICATION. 7.1 Amendments. The Parties may amend this Agreement only by a writing signed by all the Parties, and after consultation with BAMx representatives as defined by Exhibit A 7.2 Assignment and Subcontracting. Consultant may not assign this Agreement or any interest therein without the prior written approval of the Agency. Consultant shall not subcontract any portion of the performance contemplated and provided for herein, other than to the subcontractors noted in the proposal, without prior written approval of the Agency. 7.3 Survival. All obligations arising prior to the termination of this Agreement and all provisions of this Agreement allocating liability between Agency and Consultant shall survive the termination of this Agreement. 7.4 Options upon Breach by Consultant. If Consultant materially breaches any of the terms of this Agreement, Agency’s remedies shall include, but not be limited to, the following: 7.4.1 Immediately terminate the Agreement; 7.4.2 Retain the plans, specifications, drawings, reports, design documents, and any other work product prepared by Consultant in accordance with this Agreement; Section 8. KEEPING AND STATUS OF RECORDS. 8.1 Records Created as Part of Consultant’s Performance. All reports, data, maps, models, charts, studies, surveys, photographs, memoranda, plans, studies, specifications, records, files, or any other documents or materials, in electronic or any other form, that Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 5 of 10 Consultant prepares or obtains in accordance with this Agreement and that relate to the matters covered under the terms of this Agreement shall be the property of the Agency. 8.2 Consultant’s Books and Records. Consultant shall maintain any and all records or documents evidencing or relating to charges for services or expenditures and disbursements charged to the Agency under this Agreement for a minimum of three (3) years, or for any longer period required by law, from the date of final payment to the Consultant to this Agreement. 8.3 Confidential Information and Disclosure. During the term of this Agreement, either Party (the "Disclosing Party") may disclose confidential, proprietary or trade secret information (the "Information"), to the other Party (the "Receiving Party"). The Receiving Party shall hold the Disclosing Party's Information in confidence and shall take all reasonable steps to prevent any unauthorized possession, use, copying, transfer or disclosure of such Information. Consultant understands that the Agency is a public agency and is subject to the laws that may compel it to disclose information about Consultant’s business. Section 9 MISCELLANEOUS PROVISIONS. 9.1 Attorneys’ Fees. If a Party to this Agreement brings any action, including an action for declaratory relief, to enforce or interpret the provision of this Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees in addition to any other relief to which that Party may be entitled. The court may set such fees in the same action or in a separate action brought for that purpose. 9.2 Venue. In the event that either Party brings any action against the other under this Agreement, the Parties agree that trial of such action shall be vested exclusively in the state courts of California in the County of Placer or in the United States District Court for the Eastern District of California. 9.3 Severability. If a court of competent jurisdiction finds or rules that any provision of this Agreement is invalid, void, or unenforceable, the provisions of this Agreement not so adjudged shall remain in full force and effect. 9.4 No Implied Waiver of Breach. The waiver of any breach of a specific provision of this Agreement does not constitute a waiver of any other breach of that term or any other term of this Agreement. 9.5 Contract Administration. This Agreement shall be administered by Don Dame, Assistant General Manager - Business Development, who shall act as the Agency’s representative. All correspondence shall be directed to or through the representative. 9.6 Notices. Any written notice to Consultant shall be sent to: Flynn Resource Consultants Inc. 5440 Edgeview Drive Discovery Bay, CA 94505-9278 Attn: Doug Boccignone Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 6 of 10 Any written notice to Agency shall be sent to: James H. Pope General Manager Northern California Power Agency 651 Commerce Drive Roseville, CA 95678 With a copy to: Michael F. Dean General Counsel Northern California Power Agency Meyers Nave 555 Capitol Mall, Suite 1200 Sacramento, CA 95814 9.7 Professional Seal. Where applicable in the determination of the Agency, the first page of a technical report, first page of design specifications, and each page of construction drawings shall be stamped/sealed and signed by the licensed professional responsible for the report/design preparation. 9.8 Integration; Incorporation. This Agreement, including all the Exhibits attached hereto, represents the entire and integrated agreement between Agency and Consultant and supersedes all prior negotiations, representations, or agreements, either written or oral. All Exhibits attached hereto are incorporated by reference herein. 9.9 Alternative Dispute Resolution. If any dispute arises between the Parties that cannot be settled after engaging in good faith negotiations, Agency and Consultant agree to resolve the dispute in accordance with the following: Each Party will designate a senior management or executive level representative to negotiate the dispute. Through good faith negotiations, the representatives will attempt to resolve the dispute by any means within their authority. If dispute remains unresolved after fifteen (15) days of good faith negotiations, the Parties shall attempt to resolve the disagreement by mediation through a disinterested third person as mediator selected by both Parties. Mediation will begin within thirty (30) days of the selection of this disinterested third party, and will end fifteen (15) days after commencement. The Parties shall equally bear the costs of any third party in any alternative dispute resolution process. The alternative dispute resolution process is a material condition to this Agreement and must be exhausted as an administrative remedy prior to either Party initiating legal action. This alternative dispute resolution process is not intended to nor shall be construed to change the time periods for filing a claim or action specified by Government Code § 900, et. seq. Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 7 of 10 9.10 Counterparts: This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one agreement. The Parties have executed this Agreement as of the date signed by the Agency. NORTHERN CALIFORNIA POWER AGENCY CONSULTANT Date: _______________________ Date: _____________________________ ____________________________ ______________________________ JAMES H. POPE, General Manager DOUG BOCCIGNONE, Chief Financial Officer Attest: __________________________ Assistant Secretary of the Commission Approved as to Form: ____________________________ General Counsel Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 8 of 10 EXHIBIT A SCOPE OF SERVICES EXHIBIT A BAY AREA MUNICIPAL UTILITIES (BAMx) SCOPE OF SERVICES FOR FY2012 NCPA is entering into this agreement with Flynn Resource Consultants, Inc. (Flynn RCI) at the request of the cities of Alameda, Palo Alto and Santa Clara (the BAMx members), so that NCPA may assist the BAMx members in securing professional consulting services related to electric transmission, power generation, regulatory issues, and electric market design issues affecting the BAMx members. NCPA's provision of related billing services is further addressed in the Professional Services Agreement Between Northern California Power Agency and the Cities of Alameda, Palo Alto and Santa Clara (the "Bay Area Municipal Transmission Services Agreement" or "BAMx Agreement”). Each BAMx member shall be represented by a BAMx Representative, listed below. During the Term of this Agreement the BAMx Representatives shall complete the Payment Voucher attached as Exhibit D to the Bay Area Municipal Transmission Services Agreement to approve invoices from Flynn RCI prior to NCPA remitting payment for services rendered by Flynn RCI . The Designated BAMx Representative will also coordinate, as necessary, work related communications, task orders and invoice matters between and among the BAMx participants and Consultant BAMx Representatives: Brad Wetstone, Alameda Municipal Power Debbie Lloyd, City of Palo Alto Utilities Ken Sims, Silicon Valley Power The BAMx Representatives and Flynn RCI intend to pursue the activities listed below during Fiscal Year 2012. Such activities will include monitoring, meeting participation, coordinating with affected or other participating parties, and, as necessary, preparing and submitting formal position submittals. 1. Grid Planning Activities CAISO/PG&E annual transmission expansion planning process Support or oppose specific transmission additions Greater Bay Area long term studies CAISO local capacity technical study process Other regional and sub-regional transmission planning activities CAISO Tariff and BPM Change Management Process Generator Interconnection Procedure Transmission cost allocation Impacts due to Once-Through Cooling (OTC) requirements Transmission for renewables CTPG planning process Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 9 of 10 Tracy to Bay development activities Integration requirements for renewables 2. CPUC and CEC transmission matters Integrated Energy Policy Report Strategic transmission investment plan Resource adequacy issues Development of Renewable Portfolio Scenarios Long Term Procurement Proceeding Approval of CPCNs for new transmission lines 3. California Market Design Activities CAISO markets proceedings and implementation matters Resource Adequacy / Local Capacity/ Deliverability LMP congestion and losses incidence and impacts 4. Western Area Power Administration Activities SMUD/Western balancing authority area footprint, performance and allocation of costs and effort Western Transmission Development Western Transmission Infrastructure Program 5. Communicate Regularly with BAMx Members Client meetings, telephone conferences and written summaries of activities on key issues. Consulting Services Agreement between NORTHERN CALIFORNIA POWER AGENCY and Flynn Resource Consultants Inc. Page 10 of 10 EXHIBIT B COMPENSATION SCHEDULE AND HOURLY FEES Compensation for all tasks, including hourly fees and expenses, shall not exceed Seven-Hundred and Fifty Thousand Dollars ($750,000). The hourly rates and or compensation break down and an estimated amount of expenses is as follows: Flynn RCI hourly rates for the professional services are listed below. Labor Category Hourly Rate Principal $240-285 per hour Senior Consultant $190-240 per hour Consultant $160-190 per hour Associate Consultant $130-160 per hour Analyst $ 80-130 per hour Support Services $ 55 per hour Prior to implementing an increase within the Hourly Rate range for any Labor Category, Flynn RCI shall provide written notice to the BAMx Representatives of such change. Travel, food, and miscellaneous expenses, except automobile mileage, associated with the provision of services hereunder shall be billed at cost. Automobile mileage will be billed at the rate approved by the Internal Revenue Service. For any month in which specialized modeling software is used to perform services under this agreement, the following charges shall apply: Power flow modeling - $225/month Short circuit modeling – $700/month OASIS Data - $900/month Market modeling - $3,500/month Specialized software costs that exceed the above amounts may be billed with the prior approval of the Designated BAMx Representative. NOTE: As a public agency, NCPA shall not reimburse Consultant for costs in excess of those permitted by the Internal Revenue Service. City of Palo Alto (ID # 1712) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 3 (ID # 1712) Summary Title: Electric Overhead Rebuild Project 1 Title: Approval and Authorization of the City Manager to Execute a Contract with Pacheco Utility Line Builders in the Amount of $371,412 for the Electric Pole Replacement and Overhead Wire Install Project on City’s Electric Distribution System From:City Manager Lead Department: Utilities Recommendation Staff recommends that Council: 1.Approve and authorize the City Manager to execute the attached contract with Pacheco Utility Line Builders, in the amount of $371,412 for the Electric Pole Replacement and Overhead Wire Install project on the City’s electric distribution system in various locations throughout the City of Palo Alto (see attachment C). 2.Authorize the City Manager or his designee to negotiate and execute one or more change orders to the contract with Pacheco Utility Line Builders for related, additional but unforeseen, work which may develop during the project; the total of which shall not exceed $37,141. Background The City’s Utilities Department continuously inspects the various components of the electric system to ensure safety, reliability, and performance. Each of these poles and sections of overhead electrical wire, listed in Attachment C, have been engineered and re-designed for replacement. These jobs are now being bundled together into one project to be put out for bid to ensure that the City receives competitive pricing and quality service. Discussion This project involves the replacement of 17 aged electric poles in various locations that have been identified during pole audits and investigations. These poles have been selected to be replaced due to reliability and safety concerns. New poles will be installed and built to current City and industry standards. The project also includes rebuilding the overhead electric secondary system on Fulton St. and Iris Way to clear conflicts with trees, and service wire encroachments. Removing the existing cable and installing new aerial cable will correct the violations, reduce energy loss, and June 20, 2011 Page 2 of 3 (ID # 1712) minimize exposure to the surrounding trees, thus increasing the area’s sustainability, and also the overall reliability and efficiency of the system. The design of all pole replacements and the overhead wire construction has been completed by in-house City staff. All materials to complete the project will also be procured by the City. The work to be performed under this contract is for the construction activities to replace poles and install electric wire, and includes labor, equipment, and management of all field activities in coordination with City’s operations staff. This part of the project is being contracted out as there are insufficient resources within the department to staff these larger projects. The following table is a summary of the bid process: Bid Name / Number Electric Pole Replacement and Overhead Wire Install Project / IFB –140423 Proposed Length of Project 3 months Number of Bids Mailed to Contractors 9 Number of Bids Mailed to Builder’s Exchanges 13 Total Days to Respond to Bid 21 Pre-Bid Meeting Yes Number of Company Attendees at Pre-Bid Meeting 6 Number of Bids Received 3* Bid Price Range From $234,887 to $384,218 * Bid summary provided in Attachment B. As shown in the bid summary, Attachment B, Kathy’s Lift Truck & Lighting Service submitted a bid in the amount of $234,887 but has withdrawn their bid. Staff has reviewed all bids submitted and recommends that the bid of $371,412 submitted by Pacheco Utility Line Builders be accepted and that Pacheco Utility Line Builders, Inc. be declared the lowest responsible bidder by Council. Staff confirmed with the Contractor’s State License Board that the contractor has an active license on file. Staff checked references supplied by the contractor for previous work performed and found all to be satisfactory. Timeline Construction is scheduled to begin the week of July 5th, 2011 and is to be completed within 90 days. Resource Impact Funds for this capital improvement project are available in FY2010 –2011 Electric System Improvement Capital Improvement Program (EL-98003) budget. June 20, 2011 Page 3 of 3 (ID # 1712) Policy Implications The approval of this contract is consistent with existing City policies, including the Council approved Utilities Strategic Plan to operate the distribution system in a cost effective manner and to invest in utility infrastructure to deliver reliable serivce. Environmental Review This project is categorically exempt from California Environmental Quality Act (CEQA). Attachments: ·Attachment A -Contract (PDF) ·Attachment B -Bid Summary (PDF) ·Attachment C -Project Locations (PDF) Prepared By:Jim Pachikara, Power Engineer Department Head:Valerie Fong, Director City Manager Approval: James Keene, City Manager Rev. August 3, 2010 CONSTRUCTION CONTRACT Contract No. C11140423 City of Palo Alto and Pacheco Utility Line Builders, Inc. PROJECT “Electric Pole Replacement and Overhead Wire Install” Rev. August 3, 2010 C11140423.DOC i CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1. INCORPORATION OF RECITALS AND DEFINITIONS....................................1 1.1 Recitals................................................................................................................................1 1.2 Definitions ...........................................................................................................................1 SECTION 2. THE PROJECT ...................................................................................................1 SECTION 3. THE CONTRACT DOCUMENTS........................................................................1 LIST OF DOCUMENTS.....................................................................................................................1 3.2 ORDER OF PRECEDENCE ...............................................................................2 SECTION 4. THE WORK.........................................................................................................2 SECTION 5. PROJECT TEAM ................................................................................................2 SECTION 6. TIME OF COMPLETION.....................................................................................3 6.1 Time Is of Essence .............................................................................................................3 6.2 Commencement of Work ...................................................................................................3 6.3 Contract Time......................................................................................................................3 6.4 Liquidated Damages...........................................................................................................3 6.4.1 Entitlement...................................................................................................................3 6.4.2 Daily Amount................................................................................................................3 6.4.3 Exclusive Remedy........................................................................................................3 6.4.4 Other Remedies...........................................................................................................3 6.5 Adjustments to Contract Time ..........................................................................................3 SECTION 7. COMPENSATION TO CONTRACTOR ..............................................................3 7.1 Contract Sum ......................................................................................................................3 7.2 Full Compensation..............................................................................................................4 7.3 Compensation for Extra or Deleted Work ........................................................................4 7.3.1 Self Performed Work....................................................................................................4 7.3.2 Subcontractors.............................................................................................................4 Rev. August 3, 2010 C11140423.DOC ii SECTION 8. STANDARD OF CARE.......................................................................................4 SECTION 9. INDEMNIFICATION ............................................................................................4 9.1 Hold Harmless.....................................................................................................................4 9.2 Survival................................................................................................................................5 SECTION 10 NONDISCRIMINATION ......................................................................................5 SECTION 11. INSURANCE AND BONDS................................................................................5 SECTION 12. PROHIBITION AGAINST TRANSFERS.............................................................5 SECTION 13. NOTICES ............................................................................................................6 13.1 Method of Notice.................................................................................................................6 13.2 Notice Recipients................................................................................................................6 13.3 Change of Address.............................................................................................................6 14.1 Resolution of Contract Disputes.......................................................................................7 14.2 Resolution of Other Disputes............................................................................................7 14.2.1 Non-Contract Disputes.................................................................................................7 14.2.2 Litigation, City Election.................................................................................................7 14.3 Submission of Contract Dispute.......................................................................................7 14.3.1 By Contractor...............................................................................................................7 14.3.2 By City..........................................................................................................................8 14.4 Contract Dispute Resolution Process ..............................................................................8 14.4.1 Direct Negotiations.......................................................................................................8 14.4.2 Deferral of Contract Disputes.......................................................................................8 14.4.3 Mediation......................................................................................................................9 14.4.4 Binding Arbitration........................................................................................................9 14.5 Non-Waiver........................................................................................................................10 SECTION 15. DEFAULT..........................................................................................................10 15.1 Notice of Default ...............................................................................................................10 15.2 Opportunity to Cure Default.............................................................................................10 SECTION 16. CITY'S RIGHTS AND REMEDIES....................................................................11 16.1 Remedies Upon Default ...................................................................................................11 16.1.1 Delete Certain Services .............................................................................................11 16.1.2 Perform and Withhold ................................................................................................11 Rev. August 3, 2010 C11140423.DOC iii 16.1.3 Suspend The Construction Contract..........................................................................11 16.1.4 Terminate the Construction Contract for Default........................................................11 16.1.5 Invoke the Performance Bond....................................................................................11 16.1.6 Additional Provisions..................................................................................................11 16.2 Delays by Sureties............................................................................................................12 16.3 Damages to City................................................................................................................12 16.3.1 For Contractor's Default.............................................................................................12 16.3.2 Compensation for Losses ..........................................................................................12 16.5 Suspension by City for Convenience .............................................................................12 16.6 Termination Without Cause.............................................................................................12 16.6.1 Compensation............................................................................................................12 16.6.2 Subcontractors...........................................................................................................13 16.7 Contractor’s Duties Upon Termination...........................................................................13 SECTION 17. CONTRACTOR'S RIGHTS AND REMEDIES ..................................................13 17.1 Contractor’s Remedies ....................................................................................................13 17.1.1 For Work Stoppage....................................................................................................14 17.1.2. For City's Non-Payment.............................................................................................14 17.2 Damages to Contractor....................................................................................................14 SECTION 18. ACCOUNTING RECORDS...............................................................................14 18.1 Financial Management and City Access.........................................................................14 18.2 Compliance with City Requests ......................................................................................14 SECTION 19. INDEPENDENT PARTIES................................................................................14 SECTION 20. NUISANCE........................................................................................................14 SECTION 21. PERMITS AND LICENSES...............................................................................15 SECTION 22. WAIVER............................................................................................................15 SECTION 23 GOVERNING LAW ...........................................................................................15 SECTION 24 COMPLETE AGREEMENT ..............................................................................15 SECTION 25 SURVIVAL OF CONTRACT.............................................................................15 SECTION 26 PREVAILING WAGES......................................................................................15 Rev. August 3, 2010 C11140423.DOC iv SECTION 27 NON APPROPRIATION ...................................................................................15 SECTION 28 GOVERNMENTAL POWERS...........................................................................15 SECTION 29 ATTORNEY FEES ............................................................................................15 SECTION 30 SEVERABILITY ................................................................................................16 1 Rev. August 3, 2010 C11140423.DOC CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on June 20, 2011 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and PACHECO UTILITY LINE BUILDERS, INC. ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a C-10 (Electrical) duly organized and in good standing in the State of California, Contractor’s License Number 750251. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On March 22, 2011, City issued an Invitation for Bids (IFB) to contractors for the “Electric Pole Replacement and Overhead Wire Install” (“Project”). In response to the IFB, Contractor submitted a bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Bid Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the construction of the “Electric Pole Replacement and Overhead Wire Install” ("Project"). SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Change Orders 3) Contract 4) Project Plans and Drawings Rev. August 3, 2010 C11140423.DOC 2 5) Technical Specifications 6) Special Provisions 7) Notice Inviting Bids 8) Instructions to Bidders 9) General Conditions 10) Bidding Addenda 11) Invitation for Bids 12) Contractor's Bid/Non-Collusion Affidavit 13) Reports listed in the Bidding Documents 14) Public Works Department’s Standard Drawings and Specifications dated 2007 and updated from time to time 15) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards dated 2005 and updated from time to time 16) City of Palo Alto Traffic Control Requirements 17) City of Palo Alto Truck Route Map and Regulations 18) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 19) Performance and Payment Bonds 20) Insurance Forms 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. SECTION 4 THE WORK. The Work includes all labor, materials, equipment, services, permits, fees, licenses and taxes, and all other things necessary for Contractor to perform its obligations and complete the Project, including, without limitation, any Changes approved by City, in accordance with the Contract Documents and all Applicable Code Requirements. SECTION 5 PROJECT TEAM. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Project requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. Rev. August 3, 2010 C11140423.DOC 3 SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed within ninety calendar days (90) after the commencement date specified in City’s Notice to Proceed. 6.4 Liquidated Damages. 6.4.1 Entitlement. City and Contractor acknowledge and agree that if Contractor fails to fully and satisfactorily complete the Work within the Contract Time, City will suffer, as a result of Contractor’s failure, substantial damages which are both extremely difficult and impracticable to ascertain. Such damages may include, but are not limited to: (i) Loss of public confidence in City and its contractors and consultants. (ii) Loss of public use of public facilities. (iii) Extended disruption to public. 6.4.2 Daily Amount. City and Contractor have reasonably endeavored, but failed, to ascertain the actual damage that City will incur if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time. Therefore, the parties agree that in addition to all other damages to which City may be entitled other than delay damages, in the event Contractor shall fail to achieve Substantial Completion of the entire Work within the Contract Time, Contractor shall pay City as liquidated damages the amount of $500 per day for each Day occurring after the expiration of the Contract Time until Contractor achieves Substantial Completion of the entire Work. The liquidated damages amount is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. 6.4.3 Exclusive Remedy. City and Contractor acknowledge and agree that this liquidated damages provision shall be City’s only remedy for delay damages caused by Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.4.4 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and agreed to by Change Order executed by City and Contractor in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of Three Hundred Seventy One Thousand Four Hundred Eleven Dollars and Seventy Cents ($371,411.70). 4 Rev. August 3, 2010 C11140423.DOC 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work. The Contract Sum may only be adjusted for Change Orders issued, executed and satisfactorily performed in accordance with the requirements of the Contract Documents. 7.3 Compensation for Extra or Deleted Work. The Contract Sum shall be adjusted (either by addition or credit) for Changes in the Work involving Extra Work or Deleted Work based on one or more of the following methods to be selected by City: 1. Unit prices stated in the Contract Documents or agreed upon by City and Contractor, which unit prices shall be deemed to include Contractor Markup and Subcontractor/Sub-subcontractor Markups permitted by this Section. 2. A lump sum agreed upon by City and Contractor, based on the estimated Allowable Costs and Contractor Markup and Subcontractor Markup computed in accordance with this Section. 3. Contractor’s Allowable Costs, plus Contractor Markup and Subcontractor Markups applicable to such Extra Work computed in accordance with this Section. Contractor Markup and Subcontractor/Sub-subcontractor Markups set forth herein are the full amount of compensation to be added for Extra Work or to be subtracted for Deleted Work that is attributable to overhead (direct and indirect) and profit of Contractor and of its Subcontractors and Sub-subcontractors, of every Tier. When using this payment methodology, Contractor Markup and Subcontractor/Sub-subcontractor Markups, which shall not be compounded, shall be computed as follows: 7.3.1 Markup Self-Performed Work. 10% of the Allowable Costs for that portion of the Extra Work or Deleted Work to be performed by Contractor with its own forces. 7.3.2 Markup for Work Performed by Subcontractors. 15% of the Allowable Costs for that portion of the Extra Work or Deleted Work to be performed by a first Tier Subcontractor. SECTION 8 STANDARD OF CARE. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and all Losses arising directly or indirectly from, or in any manner relating to any of, the following: (i) Performance or nonperformance of the Work by Contractor or its Subcontractors or Sub-subcontractors, of any tier; Rev. August 3, 2010 C11140423.DOC 5 (ii) Performance or nonperformance by Contractor or its Subcontractors or Sub- subcontractors of any tier, of any of the obligations under the Contract Documents; (iii) The construction activities of Contractor or its Subcontractors or Sub-subcontractors, of any tier, either on the Site or on other properties; (iv) The payment or nonpayment by Contractor to any of its employees, Subcontractors or Sub-subcontractors of any tier, for Work performed on or off the Site for the Project; and (v) Any personal injury, property damage or economic loss to third persons associated with the performance or nonperformance by Contractor or its Subcontractors or Sub- subcontractors of any tier, of the Work. However, nothing herein shall obligate Contractor to indemnify any Indemnitee for Losses resulting from the sole or active negligence or willful misconduct of the Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. On or before the Execution Date, Contractor shall provide City with evidence that it has obtained insurance and Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Failure to do so shall be deemed a material breach of this Construction Contract. SECTION 12 PROHIBITION AGAINST TRANSFERS. City is entering into this Construction Contract based upon the stated experience and qualifications of the Contractor and its subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. Rev. August 3, 2010 C11140423.DOC 6 SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (iv) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice Recipients. All notices, demands or requests (including, without limitation, Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Or X City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Jim Pachikara In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Jim Pachikara 13.3 Change of Address. In the event of any change of address, the moving party shall notify the other party of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. Rev. August 3, 2010 C11140423.DOC 7 SECTION 14 DISPUTE RESOLUTION. 14.1 Resolution of Contract Disputes. Contract Disputes shall be resolved by the parties in accordance with the provisions of this Section 14, in lieu of any and all rights under the law that either party have its rights adjudged by a trial court or jury. All Contract Disputes shall be subject to the Contract Dispute Resolution Process set forth in this Section 14, which shall be the exclusive recourse of Contractor and City for such Contract Disputes. 14.2 Resolution of Other Disputes. 14.2.1 Non-Contract Disputes. Contract Disputes shall not include any of the following: (i) Penalties or forfeitures prescribed by statute or regulation imposed by a governmental agency; (ii) Third party tort claims for personal injury, property damage or death relating to any Work performed by Contractor or its Subcontractors or Sub- subcontractors of any tier; (iii) False claims liability under California Government Code Section 12650, et. seq.; (iv) Defects in the Work first discovered by City after Final Payment by City to Contractor; (v) Stop notices; or (vi) The right of City to specific performance or injunctive relief to compel performance of any provision of the Contract Documents. 14.2.2 Litigation, City Election. Matters that do not constitute Contract Disputes shall be resolved by way of an action filed in the Superior Court of the State of California, County of Santa Clara, and shall not be subject to the Contract Dispute Resolution Process. However, the City reserves the right, in its sole and absolute discretion, to treat such disputes as Contract Disputes. Upon written notice by City of its election as provided in the preceding sentence, such dispute shall be submitted by the parties and finally decided pursuant to the Contract Dispute Resolution Process in the manner as required for Contract Disputes, including, without limitation, City’s right under Paragraph 14.4.2 to defer resolution and final determination until after Final Completion of the Work. 14.3 Submission of Contract Dispute. 14.3.1 By Contractor. Contractors may commence the Contract Dispute Resolution Process upon City's written response denying all or part of a Claim pursuant to Paragraph 4.2.9 or 4.2.10 of the General Conditions. Contractor shall submit a written Statement of Contract Dispute (as set forth below) to City within seven (7) Days after City rejects all or a portion of Contractor's Claim. Failure by Contractor to submit its Statement of Contract Dispute in a timely manner shall result in City’s decision by City on the Claim becoming final and binding. Contractor’s Statement of Contract Dispute shall be signed under penalty of perjury and shall state with specificity the events or circumstances giving rise to the Contract Dispute, the dates of their occurrence and the asserted effect on the Contract Sum and the Contract Time. The Statement of Contract Dispute shall include adequate supporting data to substantiate the disputed Claim. Adequate supporting data for a Contract Dispute relating to an adjustment of the Contract Time shall include both of the following: (i) All of the scheduling data required to be submitted by Contractor under the Contract Documents to obtain extensions of time and adjustments to the Contract Time and (ii) A detailed, event-by-event description of the impact of each event on completion of Work. Adequate data to support a Statement of Contract Rev. August 3, 2010 C11140423.DOC 8 Dispute involving an adjustment of the Contract Sum must include both of the following: (a) A detailed cost breakdown and (b) Supporting cost data in such form and including such information and other supporting data as required under the Contract Documents for submission of Change Order Requests and Claims. 14.3.2 By City. City's right to commence the Contract Dispute Resolution Process shall arise at any time following City's actual discovery of the circumstances giving rise to the Contract Dispute. City asserts Contract Disputes in response to a Contract Dispute asserted by Contractor. A Statement of Contract Dispute submitted by City shall state the events or circumstances giving rise to the Contract Dispute, the dates of their occurrence and the damages or other relief claimed by City as a result of such events. 14.4 Contract Dispute Resolution Process. The parties shall utilize each of the following steps in the Contract Dispute Resolution Process in the sequence they appear below. Each party shall participate fully and in good faith in each step in the Contract Dispute Resolution Process, and good faith effort shall be a condition precedent to the right of each party to proceed to the next step in the process. 14.4.1 Direct Negotiations. Designated representatives of City and Contractor shall meet as soon as possible (but not later than ten (10) Days after receipt of the Statement of Contract Dispute) in a good faith effort to negotiate a resolution to the Contract Dispute. Each party shall be represented in such negotiations by an authorized representative with full knowledge of the details of the Claims or defenses being asserted by such party in the negotiations, and with full authority to resolve such Contract Dispute then and there, subject only to City’s obligation to obtain administrative and/or City Council approval of any agreed settlement or resolution. If the Contract Dispute involves the assertion of a right or claim by a Subcontractor or Sub-subcontractor, of any tier, against Contractor that is in turn being asserted by Contractor against City (“Pass-Through Claim”), then the Subcontractor or Sub-Subcontractor shall also have a representative attend the negotiations, with the same authority and knowledge as described above. Upon completion of the meeting, if the Contract Dispute is not resolved, the parties may either continue the negotiations or any party may declare negotiations ended. All discussions that occur during such negotiations and all documents prepared solely for the purpose of such negotiations shall be confidential and privileged pursuant to California Evidence Code Sections 1119 and 1152. 14.4.2 Deferral of Contract Disputes. Following the completion of the negotiations required by Paragraph 14.4.1, all unresolved Contract Disputes shall be deferred pending Final Completion of the Project, subject to City’s right, in its sole and absolute discretion, to require that the Contract Dispute Resolution Process proceed prior to Final Completion. All Contract Disputes that have been deferred until Final Completion shall be consolidated within a reasonable time after Final Completion and thereafter pursued to resolution pursuant to this Contract Dispute Resolution Process. The parties can continue informal negotiations of Contract Disputes; provided, however, that such informal negotiations shall not be alter the provisions of the Agreement deferring final determination and resolution of unresolved Contract Disputes until after Final Completion. 14.4.3 Mediation. If the Contract Dispute remains unresolved after negotiations pursuant to Paragraph 14.4.1, the parties shall submit the Contract Dispute to non-binding mediation before a mutually acceptable third party mediator. Rev. August 3, 2010 C11140423.DOC 9 .1 Qualifications of Mediator. The parties shall endeavor to select a mediator who is a retired judge or an attorney with at least five (5) years of experience in public works construction contract law and in mediating public works construction disputes. In addition, the mediator shall have at least twenty (20) hours of formal training in mediation skills. .2 Submission to Mediation and Selection of Mediator. The party initiating mediation of a Contract Dispute shall provide written notice to the other party of its decision to mediate. In the event the parties are unable to agree upon a mediator within fifteen (15) Days after the receipt of such written notice, then the parties shall submit the matter to the American Arbitration Association (AAA) at its San Francisco Regional Office for selection of a mediator in accordance with the AAA Construction Industry Mediation Rules. .3 Mediation Process. The location of the mediation shall be at the offices of City. The costs of mediation shall be shared equally by both parties. The mediator shall provide an independent assessment on the merits of the Contract Dispute and recommendations for resolution. All discussions that occur during the mediation and all documents prepared solely for the purpose of the mediation shall be confidential and privileged pursuant to California Evidence Code Sections 1119 and 1152. 14.4.4 Binding Arbitration. If the Contract Dispute is not resolved by mediation, then any party may submit the Contract Dispute for final and binding arbitration pursuant to the provisions of California Public Contract Code Sections 10240, et seq. The award of the arbitrator therein shall be final and may be entered as a judgment by any court of competent jurisdiction. Such arbitration shall be conducted in accordance with the following: .1 Arbitration Initiation. The arbitration shall be initiated by filing a complaint in arbitration in accordance with the regulations promulgated pursuant to California Public Contract Code Section 10240.5. .2 Qualifications of the Arbitrator. The arbitrator shall be approved by all parties. The arbitrator shall be a retired judge or an attorney with at least five (5) years of experience in public works construction contract law and in arbitrating public works construction disputes. In addition, the arbitrator shall have at least twenty (20) hours of formal training in arbitration skills. In the event the parties cannot agree upon an arbitrator, the provisions of California Public Contract Code Section 10240.3 shall be followed in selecting an arbitrator possessing the qualifications required herein. .3 Hearing Days and Location. Arbitration hearings shall be held at the offices of City and shall, except for good cause shown to and determined by the arbitrator, be conducted on consecutive business days, without interruption or continuance. .4 Hearing Delays. Arbitration hearings shall not be delayed except upon good cause shown. .5 Recording Hearings. All hearings to receive evidence shall be recorded by a certified stenographic reporter, with the costs thereof borne equally by City and Contractor and allocated by the arbitrator in the final award. Rev. August 3, 2010 C11140423.DOC 10 .6 Limitation of Depositions. The parties may conduct discovery in accordance with the provisions of section 10240.11 of the Public Contract Code; provided, however, that depositions shall be limited to both of the following: (i) Ten (10) percipient witnesses for each party and 5 expert witnesses per party. Upon a showing of good cause, the arbitrator may increase the number of permitted depositions. An individual who is both percipient and expert shall, for purposes of applying the foregoing numerical limitation only, be deemed an expert. Expert reports shall be exchanged prior to receipt of evidence, in accordance with the direction of the arbitrator, and expert reports (including initial and rebuttal reports) not so submitted shall not be admissible as evidence. .7 Authority of the Arbitrator. The arbitrator shall have the authority to hear dispositive motions and issue interim orders and interim or executory awards. .8 Waiver of Jury Trial. Contractor and City each voluntarily waives its right to a jury trial with respect to any Contract Dispute that is subject to binding arbitration in accordance with the provisions of this Paragraph 14.4.4. Contractor shall include this provision in its contracts with its Subcontractors who provide any portion of the Work. 14.5 Non-Waiver. Participation in the Contract Dispute Resolution Process shall not waive, release or compromise any defense of City, including, without limitation, any defense based on the assertion that the rights or Claims of Contractor that are the basis of a Contract Dispute were previously waived by Contractor due to Contractor’s failure to comply with the Contract Documents, including, without limitation, Contractor’s failure to comply with any time periods for providing notice of requests for adjustments of the Contract Sum or Contract Time or for submission of Claims or supporting documentation of Claims. SECTION 15 DEFAULT. 15.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract. 15.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. SECTION 16 CITY'S RIGHTS AND REMEDIES. 16.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 15, then City may pursue any remedies available under law or equity, including, without limitation, the following: Rev. August 3, 2010 C11140423.DOC 11 16.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 16.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 16.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 16.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 15. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 16.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 16.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 16.2 Delays by Sureties. Without limiting to any of City’s other rights or remedies, City has the right to suspend the performance of the Work by Contractor’s sureties in the event of any of the following: (i) The sureties’ failure to begin Work within a reasonable time in such manner as to insure full compliance with the Construction Contract within the Contract Time; (ii) The sureties’ abandonment of the Work; (iii) If at any time City is of the opinion the sureties’ Work is unnecessarily or unreasonably delaying the Work; (iv) The sureties’ violation of any terms of the Construction Contract; (v) The sureties’ failure to perform according to the Contract Documents; or (vi) The sureties’ failure to follow City’s instructions for completion of the Work within the Contract Time. Rev. August 3, 2010 C11140423.DOC 12 16.3 Damages to City. 16.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 16.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to withhold monies otherwise payable to Contractor until Final Completion of the Project. If City incurs Losses due to Contractor’s default, then the amount of Losses shall be deducted from the amounts withheld. Should the amount withheld exceed the amount deducted, the balance will be paid to Contractor or its designee upon Final Completion of the Project. If the Losses incurred by City exceed the amount withheld, Contractor shall be liable to City for the difference and shall promptly remit same to City. 16.4 Suspension by City for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 16.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole by giving thirty (30) Days written notice to Contractor. The compensation allowed under this Paragraph 16.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. 16.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 16.5, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors and Sub-subcontractors for: (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. Rev. August 3, 2010 C11140423.DOC 13 .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. 16.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 16.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description, in writing no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. SECTION 17 CONTRACTOR'S RIGHTS AND REMEDIES. 17.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 17.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 17.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. Rev. August 3, 2010 C11140423.DOC 14 17.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 16.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 18 ACCOUNTING RECORDS. 18.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) final payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. 18.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 18 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 18.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 19 INDEPENDENT PARTIES. Each party is acting in its independent capacity and not as agents, employees, partners, or joint venturers of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 20 NUISANCE. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 21 PERMITS AND LICENSES. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 22 WAIVER. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. Rev. August 3, 2010 C11140423.DOC 15 SECTION 23 GOVERNING LAW. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California. SECTION 24 COMPLETE AGREEMENT. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 25 SURVIVAL OF CONTRACT. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 26 PREVAILING WAGES. This Project is not subject to prevailing wages. The Contractor is not required to pay prevailing wages in the performance and implementation of the Project, because the City, pursuant to its authority as a chartered city, has adopted Resolution No. 5981 exempting the City from prevailing wages. The City invokes the exemption from the state prevailing wage requirement for this Project and declares that the Project is funded one hundred percent (100%) by the City of Palo Alto. SECTION 27 NON APPROPRIATION. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 28 AUTHORITY. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. SECTION 29 ATTORNEY FEES. Each Party shall bear its own costs, including attorney’s fees through the completion of mediation. If the claim or dispute is not resolved through mediation and in any dispute described in Paragraph 14.2, the prevailing party in any action brought to enforce the provision of this Agreement may recover its reasonable costs and attorney’s fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorney’s’ fees paid to third parties. SECTION 30 SEVERABILITY. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. Rev. August 3, 2010 C11140423.DOC 17 IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: ___________________________ Senior Asst. City Attorney PACHECO UTILITY LINE BUILDERS, INC. By:___________________________ Name:_________________________ Title:________________________ BID SUMMARY Invitation For Bid 140423 Title Electric Pole Replacement and Overhead Wire Install Date April 18, 2011 List of Bidders (Company Name)Bid Total 1. Kathy's Lift Truck & Lighting Service 234,887.00$ 2. Pacheco Utility Line Builders 371,411.70$ 3. Cupertino Electric 384,218.00$ Electric Pole Replacement and Overhead Wire Installation Locations 1.196 Walter Hays Drive 2.3337 St. Michael Drive 3.3820 Fabian Way 4.3102 David Avenue 5.329 Iris Way 6.181 Lois Lane 7.1810 Hamilton Avenue 8.300 Block Fulton Street 9.3745 La Selva Drive 10.Bryant and Waverley Intersection 11.2123 Bellview Drive 12.11 & 27 Tulip Lane City of Palo Alto (ID # 1410) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 3 (ID # 1410) Summary Title: Replacement of Gas Receiving Stations 1, 2, 3, & 4 Title: Approval of a Utilities Enterprise Fund Contract with Dresser, Inc. in an Amount of $935,700 for Supplying Regulating Equipment for Rebuilding of Gas Receiving Stations 1, 2, 3, and 4 Capital Improvement Program Projects GS- 09000, GS-08000, GS-10000, and GS-11001 From:City Manager Lead Department: Utilities Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute the attached contract with Dresser, Inc. in an amount not to exceed $935,700.00 for Supplying Regulating Equipment for Rebuilding of Gas Receiving Stations 1, 2, 3, and 4 Capital Improvement Program Projects GS-09000 (Station 1), GS-08000 (Station 2), GS-10000 (Stations 3), and GS-11001 (Station 4). Background The project involves the redesigning and replacement of Gas Receiving Stations 1, 2, 3, and 4. These gas stations provide metering and pressure control functions at the four receipt points from the PG&E transmission system. Rebuilding of the Gas Receiving Stations is required to modernize aging equipment and controls at the Gas Stations. These stations are on average over 44 years old. The work under this contract includes: a comprehensive evaluation of the existing gas receiving stations and site conditions, design of replacement piping and control systems, preparation of design drawings, remote fabrication of proposed facilities, hydro static pressure testing and calibration of each completely assembled station, and disassembly and transportation of the new systems to each designated site. City staff will assemble this equipment on each of the sites. Discussion This Request for Proposals was sent out on 3/23/2011. A summary of the proposal process is in the following table. June 20, 2011 Page 2 of 3 (ID # 1410) Proposal Description/Number Supplying Regulating Equipment for Rebuilding of Gas Receiving Stations 1, 2, 3, and 4 Capital Improvement Program Projects GS-09000 (Station 1), GS-08000 (Station 2), GS-10000 (Stations 3), and GS-11001 (Station 4). Proposed Length of Project 4.5 months Number of Proposals Mailed 7 Total Days to Respond to Proposal 24 Pre-proposal Meeting Date April 6, 2011 Number of Company Attendees at Pre-proposal Meeting 4 Number of Proposals Received:1 Company Name Location (City, State)Selected for oral interview? 1. Dresser, Inc.41 Fisher Ave, Bradford, PA 16701 Yes Range of Proposal Amounts Submitted $935,700.00 Dresser, Inc.’s proposal was the only proposal that was received. Other firms did not submit a proposal due to the complex and highly specialized work, the delivery schedule, and the availability of manufacturing facilities for remote fabrication and testing. An evaluation committee consisting of Utilities Engineering and Operations staff reviewed the proposal. Dresser, Inc was invited to participate in oral interviews on April 18, 2011. The committee carefully reviewed the firm’s qualifications and submittal in response to the following selection criteria identified in the Request for Proposal (RFP): ·Submittal detail and completeness ·Ability of the firm to perform work within stated schedule ·Past experience and capabilities of the proposing company ·Price The Dresser, Inc. proposal is recommended for award because they demonstrated that they had the experience and capability to perform the required work within the stated schedule and allocated budget. The new gas receiving facilities will be fabricated in accordance with the latest requirements of all applicable codes and regulations, increase safety and reliability of the gas distribution system, and minimize costs associated with the stations’ maintenance. The new stations’ overpressure protection systems will be designed to eliminate the venting of gas to the June 20, 2011 Page 3 of 3 (ID # 1410) atmosphere during an overpressure event reducing the City’s contribution to greenhouse gas emissions. The work is being performed by contract because the project requires manufacturing facilities for remote fabrication, assembly and testing of the stations. Resource Impact Funds for this capital project are available in the Gas Capital Improvement Program budgets GS- 09000 (Station 1), GS-08000 (Station 2), GS-10000 (Stations 3), and GS-11001 (Station 4). Policy Implications The approval of this contract is consistent with existing City policies. This recommendation is consistent with the Council-approved Utilities Strategic Plan Key Strategy No. 1, “Operate distribution system in a cost effective manner,” Strategy No. 7, “Implement programs that improve the quality of the environment” and Objective No. 2, “Invest in utility infrastructure to deliver reliable service.” Environmental Review This project is categorically exempt from California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Sections 15301 (b) repair, maintenance of existing facilities and 15302 (c) replacement or reconstruction of existing facilities. Attachments: ·Attachment A: Final Contract (PDF) Prepared By:Aleksandr Pishchik, Sr. Project Engineer Department Head:Valerie Fong, Director City Manager Approval: James Keene, City Manager CITY OF PALO ALTO CONTRACT NO. CII 140)21 AGREEMENT BETWEEN THE CITY OF PAW ALTO AND DRESSER, INC. FOR PROFESSIONAL SERVICES This Agra:menl is enTered into on this 20Tll day ofJune20] I, (HAgreement') by and between the CITY OF PALO ALTO, a Cali fornia clw1ered municipal corporaTion (~CITY"), Bnd DRESSER, INC.,. Delaw.re corporation, 10000ted PI 41 Fisher Avenue, Bradford, Pennsylvania 1670] ("CONSULTANT"). Rf:CITALS The followi n" re(:itals are • substantive portion of this Agreement. A. CITY intends to rtdesign and rebuild Gas Re(:eiving Sta tions 1,2,3 and 4 ("Project'') and desires to engaae a consultant to design. fabricate and assemble the four gas receiving stations in conne<:lion with the Project ("Services"). B. CONSULTANT his represented Ihal it has the necessary professional expertise, qual ifications, and car-bilily, and either has or r.lJall endeavor 10 obtain all required licenses and/or certifications to provide' the Services. C. CITY in re li ance on these representations desires 10 engage CONSULTANT 10 provide the Services as more fully described in Exhibit "A", allachtd to and made a part orthis Agreement. NOW, THEREFORE, in consideration of 'he recitals, covenants, terms, and conditions, contained in tIIis Agreemen t. the part~s agree: AGREEMENT SECTION I. SCOPE OF SERVICES. CONSULT ANT shall perform the Services described in EJchibit "A" in IICcordance with tile terms and conditions contained in this Agreement. TIle performance of.U Services shaU be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreemenl shall be from the date of its full execution throogh completion of tbe Sl'rvices in accordance with the Schedule of Performance attached 15 Exh ibit ~B-unless terminated earliCT p"nualit lO Section 19 of Ihis Agreement. Time is of the es5Cnce in Ihe performance of I ~ml~"~',''''~~"= withill tbe lerm of Ib is Agreement and in aa:ordarK:e with the schedule set forth in. Exhibit "B", altaChed 10 and made a jJIIn of this Agreemellt. Any Servicel for which times fOl' performance art: nOl specified in th is Agreement shall be commenctd .nd eomplettd by CONSULTANT in a reasonably prompt and ,F,' ,_ .... _1.2111. limely manner bascd upon Ihe cireumstances and direction communicated to the CONS ULTANT. CITY 's agreement 10 ederKIlhe term or Ihe schedule for performance shall nol preclude recovery of damages for delay if Ihe e~tension is req uired due to the fault of CONSU LTANT. Liquidated damages shall be CONSULT ANT'S sole obligation for delay claims and CITY'S exclusive remedy for delays in perfonnance of the Servkes, Liquidated damages are lim ited to 0,5% of the va lue of the Agreemenl per week bUI shall in no event exceed 5,0'/. of the total value of the Agreement. In the eve nt thai delivery is delayed at the request of CITY for a maximum time period of ten (10) days aner notification by CONSU LTANT Ihatthe goods andlorcquipment are complete and ready for delivery, CIT Y Igrees 10 accept shi pment of lhe goods andlor equi pment al site or 10 CITY 's desigll8led storage location at CITY's risk and expense and pay CONSUL TANT forall completed goods and/or equipment as of dale of readiness 10 ship. StOr1lge COSI, maintenance of the goods Indlor equipment during 5tOr1lge and delivery after stOr1lge are the responsibility of CITY . Title and risk of las! in the goods andlor equipment shill pass 10CITY at timeofdelivery to site or storage al CITY', op(ion. f.~~~~~~:~::~:!~~~~ The compenSl1ion to be pa id 10 Exhibil M A ", including bolh paymenl i I expenses, shallllOl exceed Nine Hundred Thirty Five Thousand Seven Hurtdred Dollars ($935,100). SECTION 5. INVOICES. CONSULTANT shallliubmit invoices 10 the CITY descn"bing the services perfOl'TTlCd and , or products supplied and the appl icable eharges (iocluding reimbuneable expenses), based upon the CONSULTANT', compensation per lask (set forth in Exhibit MC'). If appl icable, lhe invoice shall liso describe the percentage of completion of each task. The information in CONSULTANT'. invoices shall be subje<:t 10 verification by CITY. CONSULTANT shall send all invoiccs to the City', project manager at the address specified in Secrion 13 below. Invoices shill be paid within ()O) day. of the date oflhe invoice. All of the Services shall be ~2.~~~~:~~~~~~~~~~~~~~~~;~CONSULTANTrepn:senIS perform the Services required Ihatthe personneillave surrlCient skill and e~perience 10 perform the Setvices CONSULTANT represenl$lhat it. its employees and subconsultants, ifpermilled, have and shall maintain during the tcnn of this Agretmenl all licenses, pennils, qualifications, in$\lran~e and approvals of whatever nalure Ihat are legally required to perform the Services, All of the services to be furnished by CONSULTANT under this a&rccment shall meet the professional standard and quality that prevail among professiona ls in Ihe same discipl ine arKI of similar knowledge arKI skill engaged in related work Ihroughou t Cali fomia under the same or similar circumstances. SECTION 7. COMPLIANCE WIT H LAWS. CONSUL TANT shall keep itself informed orand in compliaoce with all federal , Siale and local laws, ordin.oces. regulalions, and orders applicable to CONSULT A!'IT'S performance under this Agreement. CONSU LTANT sha ll procure all pennils and licenses. pay all charges and fees, and give all notices requ ired by law relaled 10 , "' .. ,ioo.lS, ... ~ .. kn._l.lOLO LoC~[IIJ'IJ Ret! .soLICIT" T !ONSICURRENT Bun R.c". I'OI.DUS U'TI unES • c "~OL VI<N' • rl'>1 I oIGlll RdIoild.R ....... ",.nolC_ncll tOO)lt .f ... lC-.<> ..... CONSU LTANT 'S performance under this Agreement. SECTION 8. NOT APPLICABLE. If this Agreement pertains to the design of a public worts :r,:~~:::~:::::: estimates of probabl e constt'\lclion COSIS al each phase of II construction cost at any subminal exceeds ten percent (I (lOA.) CITY's Slated conslruction budget, CONSU LTANT siY.1I make reeommendalions to the CITY for aligning the PROJECT design with the budKet, incorporate CITY approved recommendat ion.!:, and rev ise the design to me<:t the Project budget, al no additional cost to CITY. It is understood and agreed tiY.t in performing -';:';;~~;:~~~.~' ~¥.:~:~t Ind any person employed by or contracted with C<!NSUL TANT to labor and/or material! umkr this Agreement, shall &et as and be an indepen.dent con tractor and not an agent or employee ofthe CITY. ~I i CONSULTAN"Tshall not assignor ~~~~~~~.~Th~:'~"':-;;:i'~~~:!;~;.~'~',,'the exper1ist and experience of transrer Iny interest in Ihis Agreement nor the pcrfOl"TIlalll;.e ofany of CONSUL T ANT's obligations hemuKIer withoutlhe prior wrinen consenl oflhe city manacer. Consent 10 one assignment will not be deemed to be eonsent to any subsequ<:nl assignmenl. Anyassignmenl made wilhoulllle approval of tile city mana~r wi ll be void. ~;;~~~~,d;~::'::: the wort of any suboonsultants and for any 10 ~~ II ( assumes no responsibility wM;tsoever concerning compcn$lltion. CONSU LTANT shall be fully responsible to CITY for all acts and omissions of I 5ubconsulLant CONSULTANT shall change or add sulx:onsultants only with the prior approval of the city manage r or his desicnee. '. prescnl a th~at 10 the pcTsons or property. . , CONSULTANT will assign a ~presenta\i\l(: to work on the Project. If cin:um5tances cause the TANTwillsoadvisc the City. CONSUL TANT,al I i of the Projcel or • to the ,.fety of The City's pro;ecl manager i5 Aleksandr Pishchik, UlililiC1 Depanment , Enginttring Division, 1007 Elwell Coon, Palo Allo, CA 94303, Telephone (650) 566-4 S2 1. The projcet manager will be CONSULTANT's point of contact with respect to pcrfO!Tlllloce, prOgfC$$ and execulion of Ihe Services. The CITY may desi gnate an alternale project manage r from lime to lime. S~:CTIQN 14, OWNERSHIP OF MATERIALS. Upon delivery and full payment therd"ore,.11 PI· =1_ .... _I.lCIO , \\C<o ..... WoatocMSO\I'I}!lCH .sOI.ICIT A TIONS'C\JU EN7 BUY ER-CM fOLOE.O:S'IJT1 LilIES· CA. CIt. YNtr·kFI'I" OOJII _loI.k_ ........ _.C-nc.,'OOJ1I.F ... ~(" __ WOtX product, including .11 writings II1d dn.wings-developcd specifICally for.nd provide 10 CITY under this .... greement shan be and remain the e1;cJusive property of CITY. Upon full payment of all sums due by CITY , CONSULT .... NT grants to the CITY a non-e1;clusive right and license 10 use and copy such wri tinas and drawings in conneclion with the normal and specified use ofthe goods and servie<:s provided hereunder. CONSU LTANT makes no representat ion oftM suitabil ity orthe work product for use in or application to circumstances not contemplated by the seope o{the work. SECTION 15. AU DITS. CONSULTANT will pennil CTTY 10 audit, upon at least five (~)da)'S prior written OOlite and during CONSULTANT'S nonnaI business hours, durin&!he tennofthis AJiu"k!ttl and for three (JJ yeatS therealler. CONSULT ANTh ~ pertaining directly to CONSULTANT'S savices underthis Agreement. CONSU LT ANT fu rther agrccs 10 maintai n and re*,in such records for al least three {3J years aller the upiration or earlier tmnin.alion of th is Agreement SECTION 16, INDEMNITY. 16.1. CONSULTANT shill pmlecl. indetmifY. defend and hold harmlc:$$ CITY. il5 Cou.neil members, officers, emplo)u:s and agents (each an "Indemnifi ed Party") from and 19ainst any and I II demands, claims, or liability. ineluding death or injury 10 lIly penon. properly damage or any Miler loss, including all costs and expenses including reasonable &II\JI,0ey5 fees. expe!tS fees. (:(ll/1 COSISIIlcI disbJn;cments("Claims"), by a non-affiliated third pany, Ihatarise directly out of the negligence, rec klessness, or willfu l mi sconduct of the CONSULTANT, its officers, employees, agents or contrac ton in performing the serv ices under this Agreement. 16.2. Notwithstandi ng Ihe above, nOlhing in this Section 16 sha n be construed to require CONSUL TANT IO indemnifY an Indemnified Party from Claims arising from the negligence, sole negligence or willfu l misconduct of an Indemnified Part)'. SECTION 11, WA IVERS. The waiverbyei therpart)'ofanybrnchor viol.tion o(anycovemonC, term. condition or provision o r this All "'''iCllt, or of the provisions of any ordinance 01' I.w, wil l 001 be demled to be a waiver of any other lenn, covenant, condi tion, provisi0n5, ordinance or law, or of any subsequenc breach or violation of the same 01' of any olher term, covenant. condition, provision, ordinance or law. SECTION 18. INSURANCE. 18.1. CONSU LTANT. at ils sole cost and eltpensc, wI! obtain and mainUlin, in fun force and effect during the term ofthi, Agreement, the insurance coverage desc ribed in Elthibit ~O". CONSULTANT and its con tractors, ifany, shall oblai n a policy endorsement incl uding CITY asan addi tional insured under Iny gener.l liabiliry or automobile policy or policies. IS.2. All insurance coverage required hereundcr shall be provided thTO\Jgh calTien wi th AM Best's Key Rating Guide ratings of A-:VlI or higher which are licensed or authorized to transact insurance business in the Stlte of California. Any and all contracton of CONSUL TANT retained to perform Services under this Agreerr..-.nt will obtain and maintain, in full {orce and effect during the term of this Agreemenl, identica l insurance coverage. , flo ' _ _ ._l.N!1 , \'Cc-..MSlN'\lKIf\SOI.JCIT'" T1OtIS'CU ... flfT IfUYf'.().I fOlDEltS\I1I1l.ITII' CldOl.. Y _ u ... · '.Jl' -.-,·_· .. _.c_rc!!!.CIl21.,. .... C ...... .. I S.3. Certirocates evidencing $UCII insuranl:e sllall be filed willi CITY concurrenlly wilb Ille execulion of this Agreement The in$Urance will no! be CIIncded, or malerially reduced in coverage or limits. by tile insurer eJlceptlfter filin& wilh tile Purtbasing Manager Ihirty (30) days' prior written noti«: of tile canull8tion or modifocation, and CONSULTANT shall be responsible for ensuring thai cu.rn:nt certificates evidencing the il\SW1lnce are provided [0 CITY's Purchasing Manager during tile entire term of this Agreemenl. SECTION 19. TERMINATION OR SUS PEN SION OF ACREEM£NTOR SER\lICr..5. 19.1. The City Manager may suspend tile performance of the Services, in whole or in pan, wilh or withou! CIIU5e, by giving ten (ID) days prior wrinm noIK:e Ihen:ofro CONSULTANT, or terminate this Agreement, wilh or without causc, by givin& thirty (30) days prior wrinen notice thereof 10 CONSULTANT. Upon rettipt ofJUCh notice, CONSULTANT will immediately, or as soon as is praclical, discontinue its performance of the SeIVicn. 19.2. CONSULTANT may terminate this Agn:ernenl or suspend ilS performance of the Services by giving thirty (30) days prior wrillen notice thereof 10 CITY, but only in the event of a subslantial fa ilure ofperfonnance by CITY, including, but not limited to failure 10 pay any invoice when due. 19.3. Upon any such suspension or tenninlltion, CONSULTANT shall be paid forthe SeIVices rendered, goods or products produced for CITY, or ma terials sourced for the Projccl in accordance with the scope ofSelVices and/or $.rope of Work on or before the effective date (i.e., 30 days after giving nOlice) ofsuspension or termination. Upon full payment or all sums owed by CITY, CONSULTANT shall delivcr to the City Manager any and .11 copies of studies, sketches, drawings, computalions. and other data, whether or not completed, prepared speci fically for the CITY by CONSULT ANT or its oontnocloB, if any, or givm 10 CONSULTANT or its oon~ if any, by CITY in C(lJUlCCIioo with this A&,~"lelll Such materials will become tile prope"Y of CITY. 19A. The following &crions will swvivc any e~piration or lenninalion of this Agreemc:nl; 14, I 5, 16, 19.4, 20, and 25 . 19.5. No payment, partia l payment, accepl8r"I(C, or partial K(:eptanee by CITY will operatc as a wliveron tile pan orCITY orany ofilS rigbl$ under this Agreement. SECTION 20. NOTICr..5. All DOtices hereunder will be given in writing and mailed, po$tagc prepaid, by certified mai l, addressed as follows: To CITY: Office or tlle City Clerk Cily of Palo Alto PostOfficc: Box 10250 Palo Alto, CA 94303 With a copy to the Purc hasi ng Manager • 1'1 r.,-,_ • .... 1_1.1010 \"!C ................ SlH'Ul'.CH'\SOI.lCrT "T 1ONSIClI~ .E~ T Huvn.oo fOI.DE.S\UT[LITI ES • t"ROI. ytltUfl't' [OOJI [ ~_Id RnIo<Irlf'-l.C_·C,j ,<OJlj r_c.-....- To CONSULTANT: Attention of the project director at the address of CONSUL TANT recited a~ Sr.CCIO N 21 . CONFLICT OF INTERESI. 21.1. In accepting this Agreement. CONSULTANT covenants Wt, to tbe best ,filS information and belief, it presently has 110 inlefeSl, and will not blowinglyor intentionally acquin: 1liiy interest, direct or indirect, financ ial or OIberwise, which would conflict in any manner or degree with the perfonnance oftbe Services. 21.2. CONSULTANT further covenants that, in the perfonnanee of this Agre.ement, it will not knowingly Of intentionally employ sub-consultBnts, contractom or persons !laving such an intern .. CONSULT ANT, to Ihc best of its infonnation and belief, does not believe that any pen;on who has or wi ll have any fi nancial intcn:SI under this Agreemcnt is an offICer or employee of CITY ; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State ofCalifom ia. 21.3. If the Project Manager determines that CONSULTANT is a ''Consullant''. for purposes of the Political Reform Act or201!, CONSULTANT shall be required and agrees 10 file the appropriate fin ancia l disdowre documenlS requi red by the Palo Alto Municipal Code and the Political Reform Act, '. 1.$ set fonh in the Palo Alto Munic ipal Code section ~~;;;;."'. of this Agreement, will not discriminate in the employment person be<:ause of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing staNS, marilal starus, familial staM , weight (I' htight ofsuch person. CONSULTANT acknowledges that it has read and Wldcrstands the provisions ofSeetion 2.30.5 I 0 of the Palo Alto Municipal Code relaling to Nond iscrimination Requirements and the penalties for violation thereof, and agree5 to meet the requirements of Section 2.30.510 per1aining to nondiscrimination in employment. applicable to CONSULTA NT in the performance of this Agreement. ; , Purchasing Department, incorpornted by reference and may be amended from time to lime. CONSULTANT, while perfonning an y work or services on CITY property, sha ll comply with waste reduction, mISe, ~linS 100 disposal requimnents of the City's Zero Waste Program. Zero Waste best pnlClices include fint minimizing and rMucins waste; second, reusing waste and third, recycling or compostinS waste. In particular, while perfurmilli work or services on CITY property, Consultantshall comply with the following zero waste requiremen ts: • Ir.pplicabk. pntctica l and without disrupting CONSULTANT'S normal business operations, printed materials provided by Consul .. nt toCity Sencrated &om a personal compulCr and printer including butllQ( limited to, proposals, quotes, invoices, rtpOflS, .od public education materials, sllall be doubk-sided and printed on. minimum of3O"..401'greaterposI-«JnSUIDCJ content paper, , r -s...-, ~ .... _z.:MI" , 'C<-oom'.. 4 <.IlN'UltONOLlOTATlOt'$\tIlUlNT 8lIY(Jt.(:" fOlOUWU .. rT1ES· CUOl Y"",UhlIOOll, Ir' "I·_ ..... ..u:~I 'IOOll l,'..u: __ unlessOlherwisc approved by the City's Proje<:t Manager. • If appl icable, practical, commerciall y available, and withoul d isrupling CONSULTANT 'S normal busi nen o~rat ions, Goods purchased by Consullant on bchal f of the City shall be purchued in accordance with the City's Environmental PUKh.asing Policy includin& but not limited to E~tended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing O ffi ce. • If applicable, practical and without disrupling CONSULTANTS normal business opeflltions. reus-ble/returnable pallets sllal1 be taken back by Ihe Consultant, at no addilion.1 C05IIO the City, for mISe or recycling. SECTION 14. NON.APPROPRIATION 24.1. This Agreement is subje<:llo the fiscal provisions of the Charter of the Cily of Palo Alto and the Palo Alto Municipal Code. This A"eement will ierminate wilhoutlny penalty (a) al the end of any fiscal year in the eventwt funds are not appropriated for the following fiscal year, or (b).t any time within a fi scal year in the event that fund s are only appropriat ed for a portion of tile fiscal year and funds for Ihi s Agreement are no longer available. This section 511111 take precedence in the event of I conflicl witll any alher covenant, term, cOfidition, or provision o f this Agreement. SECTION 25. MISq;LLANt:QUS PROVISIONS. 25.1. This Agreement wi ll be governed by the laws or the Stale of California. 25.2. In the evenlthat an action is brought. the panics agree thaI lrial ofsuch action will be vested exclusively in Ihe stale courts of Cali fornia in the County of Sanla Clara, Slate of California. 25.3. The prevaili "" party in any ~ction brought to enforce the provisions of lhis Agreement may recover its reasonable costs and anomeys' fees expended in eonneetio" wi th that aClion. The prevai ling party shall be entitled to recover an Imou"t equal to the fai r market value of legal services provided by attorneys employed by il as well as any attorneys' fees paid to th ird parties. 25 .4. This document represents the entire and integrated agn:ement between the parties and supersedes II! prior negotiations, representations, I nd coniTICIS, either wriTten or oral. This documenl may be amended only by a wrinen instrument, which is signed by the parties. 15.5. The CO\'enanlS, terms, condit ions and provisions oflhis Agreemenl will apply to, and will bind, the heirs, SUCCCS$Of"$, exe<:UlOrs, administraton:, lS5ignees. and consultants of the pan ics. 15.6. If a coun of competenljurisdiction finds or rules lhat any provision oflhis Agreement or any amendmentlhen:to is void or uncnfon:nble, the unaffected provisions of this Agreement and any amendments therelo will remain in fu ll f(Kt"e and e ffecl. • P_(:,01_ ..... _:.:KI,~ I{:< "hoi _ ... 1MiD\I'\J~CR SOUClT A TIOO'o"S'CUUEIlT IlUYU.eM fOLlIf:ItSIUTILIT'E:5 • CoOlOt. y~" UPs'H"m _ • ......,....,C-....;:"'oIOll'F ..... C __ 2S .7. All e~hibits referred to in this Agreement and any addenda, appe ndices, anachments, and schedules to Ihis A~ement which, from time to time, may be refe rred to in any duly executed amend menl hereto are by such referen~ incorporated in thi s Agreement and will be deemed 10 be 8 pan of th is Agreement. 2S.8 If. pursuant to this Contract with CONSULTANT, Cily shares with CONSULTANT personal in formation as defined in Californ ia Civil Code section 1798.81.S(d) about . Californi a resident ("Personal lnformation"), CONSULT ANT shal l mainlain reasonable and appropriate security procedures to protect tlla t Personal Information. and shall inform City immediately upon leaminll that there has been a breach in the security of the system or in the security orthe Personal lnfo rnUl tion. CONSULTANT shall not use Personal Information fordirect markeling pu rposes withou t City's e~press wrinen consent. StOlON 26, LIMITATIONS OF LIABILITY 26.1 The 10181 liabil ity of Co nsul Ian I for all claims of any kind arising from 01 related 10 !be formation, pc1'formance 01 brnch oflhis ContrKl, 01 any ProducT! or Services, shaL! nol exceed the ContrKt Price. 26.2 Consultlnl shall not be liable fOl loss of profil 01 n:venues, loss of use of equipment or systems, inten\lption of business, cost of n:pllccment powa, COSI of capital, downtime costs. incrH$Cd operalin, c:m1J, any special, cOtUCquenlial, incidental, ino:iire.;:t, or pm1itiYe damages, or claims of City'S customers fOlIllY of the foregoinl types ofdamaln. 26.3 All Con$ultant liability shall end upon expiration oftbe applicable WI1T1IIly period, provided that City may continue to enforce a claim fOl which it has liven nOlice prior 10 that dale by commern;inl an action OIlrbitration, u appliaoble under this Corumet, befon: expiI1ltion of Illy statute ofiimitat)onS 01 other legal time limitation but in no event later than one year after expiI1ltion ohuch warT1lnty period. 26.4 Consultant shall not be liable for advice 01 assistance that is not required for the work $OOpI: under this Contract. 26.S For J)IIIllOSC$ o f this An icle, lhe lenn ·'Con$ul tant~ means Consullant, its Imlia tes, subcontr.<.:tors Bnd suppliers of Iny tier, .nd their respective employees. The limitations in this Anic le shall apply regardless of whether I cl.im is based in contr&et, wamnty, indemnity, tortle~tra-contractual liabil ity (including negligence). strict liability or otherwi se, and shall prevail oyer any conflictinl!l terms, e~cepl to the extent that such terms funher res trict Consultant'S liability. SECT(ON 27. WARRANTY Consu ltant wa rrants thai ProducUshall hedelivered free fro mdefe<:ts in material, workmanship and title and that Services sha ll be perfomled in a co mpetent, diligent manner in accordance with any mun"ally agreed spe<:ifi cat ions. The warranty for Produclli and Serv icC$ shall e~pire three (3) years fr om delivery . • . --. kcv ...... l.lOIO \1(' , ... ",\ohoRd\ASo\pu ~Hl$OI.lCrr A TIONSICIJUr:NT eu~ ~R·C'" fOLDERS1lf1'llITI ~s • C MOl ~ NN\J.f ... " tOll I R .... I4.R<oi<>iI·\FiMI.C~llloIOlZI . ..-1OII.C .. _,_ If ProdOCIS or St1'1Ilees do not meet the above wlll1llnties, City sh.all prompt ly notifY Consultant in writing prior 10 expiration of the warranty period. CortSullant shall (i) al its option, rqtair or I"l'p\ace defective ProduclS and (ii) re-perform defective Services. If dc:spilc Consultant's reasonable efforts. a non-confonning ProdIlCl cannot be repa ired Of replaced, or non-conforming Services cannot be re- performed, Consultant shall refund Of credit monies pa id by City for such non-conforming Products and Services. Warranty repair, replacement or re-perfonnance by Coosuhanl shall nOI extend or renew the applicable warnnty period. City sllal1 obtain Consultant's agreement on the spc:cificatiOllS of any lests il plans 10 condUCllO determine whether a non-oonformanee cXiSlS. City shall bear the 00515 ofaccess for Consultant"s remedial warranty efforts (i ncluding removal and repl8(:ement of systems, SlJUClUres or olher pa rts of City's fac ility), dc-installation, decontamillilt ion, re-i nstallalion and transportation of defective ProduelS to Consuhant and hao;:k. 10 City. The warJlnties and remedies are conditioned upon (a) proper storage, installation, use, operation, and mainlena nce ofProduets, which shall be specifi ed by Consultant, (b) City keeping acwrote and complete records of operalion Bnd maintenance during Ihe warranty period and providing Consultan t .ccess 10 those records, .nd (c) modifiClition or repair of Products or Services only as authorized by Consultant in wriling. Failure to meet any such conditions rendcrs the warranty null and void. Consultant is not responsible for nonnal wear and tear. This Article provides Ihe exclusive remedies for all claimli based on fai lure of or defect in Products or Servicel, regardless of when the fa ilu re or defect arises, and whether I claim, however described, is based on COnlTaCl, warranty, indemnity, tortlcxtra -contractual liability (including negligence), striclliability or otherwise. The wamlOtics provided in thi s Article are exclusive and are in lieuof all other warranties, conditi ons and guarantees whether wri tten, oral , impl ied or stalUtory. NO IMPLIED OR STATUTORY WARRANTY , OR WARRANTY OR CONDITION OF MERCHANTAB ILITY OR FITN ESS FOR A PARTICULAR PURPOSE APPLIES. The indi viduals execuling this Allreement represent and warrant that they llave the legal (apa<:ity Ind au thority 10 do so on behal r of thei r respective legal entities. IN WITNESS WHEREOF, Ihe parties hereto 1Ia~ by their duly authorized I"l'presenlativcs elle<:utcd this Agreement onlhe datc fif!lt above written. • f '","""" .... .-1..1 • • IC ..... " I I 'ID\PtIItCII'ISOUOTATIOP<S\CUUa<r lIUytl "", fOI.otlSIlrI .. rra. CAIOL Y ...... FMf .. ll' ._ ..... p',._c-~ll loomT_c_ .... CITY OF PALO ALTO City Manastr APPROVED AS TO fORM : Se nior Asst. City Anomey Altachmcnts: EXHIBIT ~A~: EXHIBIT ~B~: EXHIBIT "C": EX HIBIT "0 ": SCOPE OF WORK SCHEDULE OF PERfORMANCE COMPENSATION INSURANCE REQUIREMEI'(fS • 1'1' '_ R .. _1.1010 \\Cc ... n.-......SIN'U ~CtfISOI.ICIT" T I()JI$'oCURR ~ BU vu'( M ~I)I' .. S\IJT I~ 11 ,,;, • CAROL V I'I~' "'\1.0)1' 1t.bu!Id.RcO.oipM ..... C_,.,,!I("II IOOOll ". ... I.C_, <lOt EXHIBIT "A" SCOPE OF SERVICES Introduction The wor\( is for redesigning end ft'building orGas Rct:eiving Stations I, 2, 3, 800 4. Work must be conduc1ed and complete prior to October 15, 201 L Only one Gale Station ean be 000- operational at any given time. The duration ofwolt at any Station sball not exceed two wa:ks. The Work under this COniract sball inelude a comprebensive evaluation oftbe existing gas receiving stations and sile conditions, design proposal of stations control systems. preparation ortlle drawings, obtaining design approval from the City, remote fabrication of pm posed facilities, ineluding bydro lesling of each completely assembled stalion, in accordance witb approved design and all applicable standards, codes, and regulations. and break down and transportation of new systems 10 Ibe city of Palo Alto', holding yard, su pply 8$ buill drawings, and recommend localions fo r CODCft'le footings. Consultant wi ll nOI eonneet lhe Slations 10 existing piping. SCORe of Work I. Inilial Study a. Gather project data incl uding: • Visit the projct:t sites • Review drawings of the existing Gas Receiving Stalions • Obt.in neeessary dar.. from PG&E • Submit a project schedule for design, fabrication, testing, and assembly phases of lhe Work. 2. Pesign All furnisbed equlpmenlfpiping sh.1I M rlled.1 minimum openling pressun of 400 PSIG and be .ble to fl ow stat ed capacities at the lpetified conditions in compliance with the City of Palo Alto Noise On:Ilunee. •. Parameters for Gu Receiving Stationl: • Stations aft' downstream ofPG&E • The PG&E delivery prt$$Urt approximately 60 PSIG • The flow to the Stations is approximately: o Station I: PG&:E flow 10 the station is 970,000 SCfH@60 PSIG " , ; ;""els..._ a .. _:'191. 'ICc .. "oW " •• $CN'\IAC"tNQI.IC;IT .. T1QNSaIUlJIT I UYU -00 I'Ol.llUSlUilllTlES • CM.Ot. ytltl .J:fl'l I40Jl. _1~"lotJJlr_C"_ o Station 2: PG&E now to the station is 970,000 SCFH@60PSIG o Station 3: PG&E lotaillow to !he station is 650,000 scm @60 PSIG (includes 200,000 SCFH to VA Hospital) o Station 4: PG&E t(){aillow to the ~tation is 120,000 SCFH@60 PS1G • PO&E inlet piping MAOP: o Slation I: 400 PSIG o Station 2: 400 PSIG o Station 1: 375 PSlG o Station 4: 400 PSIG • The City delivery pressure: o Slation I: 25 PSIG o Station 2: 25 PSlG o Station 3: 2S PSIG and 3S PSlG (to VA Hospital) o Slat ion 4: 25 PSIG b. Design Requirement for Gas Receiving Slatiolls: • Class location for III stations 4 • Gas now velocity in the headers shall not exceed 100 fils • Skids fabricated of structural steel. painted gray • Skid mounted headers shall be designed to be positioned approximately 30" above the ground to center line of the pipe and have inlet and outlet va lves sized lS follows: o Station 1: 12" Inlet and 12" Outlet o Station 2: 12" Inleland lO"Oudet o Station 3: 12" Inlet and 10" Outlet for Arastradero, Foothill, and Page MiH lines and 6" for VA Hospital Outlet o Sl.Ition 4: 4" Inlet arnl6" Outlet The inlet valves for Stations 1,2,) and 4 shall have 110V electric actuators with manu.1 override; NEMA 4 explosion proofarnl NEMA 7 waterproof. The consultan t shall perform headen/piping sizing calculations to determine the gas velocities and the noise level in the piping s)'tems, Thc: consultant shall contllin suUestion regaJding the pipes' diameters and schedule(s) to comply with the City ofhlo Alto Noise Ordi nance. • Pipi ng: Iteel pipe AS) schedule 40 Type S (Seamless) Grade B, over primer acrylic COIled (in accordance with coating manufacturer 's recOIlunetldations), grlY, Piping IllUifie.tions' selection and schedule are to be verified and substantiated by the Proposing FilTll, • There shall be. minimum o(two runs per Stillion with four minimum at Station 3, Elch niB musl hlndlf In entire I'ltion flow, Station 3 will require two $Cpllrlte run, with (apacifies of 450,000 and 200,000 sclb. The Contractor is also requim:lto detmnine if. by-pa5$ is nceeuary at each offlle stl1iom, " "F _'S-- R",_:,;t01t OC-~'T"T1OI<$"a.MIOIT auvnoCM I'OUlUS\IJT1UTIE$ ,("lOI.VI<~""F1'I tolO»t .... W.~(_('C"I.,ll "-.1,'-',110< • Upstream Filler. Shall be a narural gas fillucapable of no wing the Slated capacities for each ~tation and intended for mnoval of dry dU$! and pipe scale. The Proposing Finn will suggest the filters type and manufacrun:r, but will nOl supply the filter. • Valves (manually operated): Cameron ball valve, fu ll pIH1300 ANS I wcld end It 300 ANS I I1anged • Valves (actuated): Cameron ball valve, full pIH1, 300 ANSI weld end It 300 ANSI I1ll11ged • Overpressure ProIt(:fion: Standby Monitor System with Mooney Flowgrid Regulators. 300 ANSI, fllll1ged end and Series 20 pilots • Sensing lines: 31g~ stainless steel (304) tubing with iso!atillf; valves, 300 ANS I mm. • l11ue IK Pressure taps on each run: PI upstream offirsl pres~ure regulalor, P2 upstream ofseeood pressure regulator, and P3 downstream of seeond pressure regulator • Insulating flanges al the OIIllel and inlel of the stations • Zum Monolithic Insulating Joint, welded, 300 ANSI installed upstream of an inlet flange c. Tesling • Welding: All weldedjoinlS shall be inspected in accordance with API 1104, 19"' Edi tion, visuallnd NDT 100% x·ray. • Hydro test At U times MAOP for 8 hours Weld inspeclion and hydro ICIIS documentations shall be submined to the City prior to accepta nce lind shipping. 3. Submillllis for Design Approval The consultant shall submil for City's review and approva l the fo llowing Contraci dO(umcnlS for tach stat ion prior 10 fabricat ion: • Complete now and siung calc ulations • Acoustic analysis • Three dimensional diagrams of new piping/cquipmcnt -lIIImillf; equipment and wi th il\dication of pipe and equ ipmen t sizes • Proposed sec tioning (if required) of regulator runs for shipping • Structural drawings of skid frame and ca lculations • Drawings shall be 24" x 36'" sheet size with scale noted. • Final ddivcl")' shall include drawings in AutoCAD 20 10 (DWG) fonnat in addition 10 hard copies " .... ,. "s.,.c.. ~ _l.ltIO W:~~CJ<lSOUCIT"TIOI-IS"C\JUW1 BUVU-Ciol f()LOUSIUTIUT'U· C"~OL V"~'~fl'>"OOlll a_~"""lFioolC_o\C' I 'OOIl '.F .... ,C-... • Complete proj«t management plan induding engineering/design. procuring ITI.I.terials. fabrication. hydro IeSting. Upon subminal. these plans and specifICations will become !he poope.ry or t~ Ciry, 4. fabrication and Deliv«Y to Sites TIo<: new gas receiving stations shall be fabricated at the Contractor's facilities in IICCordance with. approved design and all.pplieable standards. codes, and regulations. ElIch station shall be: pressure tested; all welds I ()()"A, NOT 'Hayed; prior 10 de livery to the City sites. The Contractor shall be responsible for recommending support locations on the skids, The Contractor shall be requirai, after shipment of skids to subm it. comp lete set of records drawings and operating manua ls including manufacturer literalUre IssociJled with installed components. Skids will be shipped freight collect full y assembled . 5. StoraGe FacililV Municipal Service Center will provide the Contractor a location for temporary storage during the stations' assembly. 6. Training ofCjty Personne l The ConlIllCt shall include free on-nil help for the du ration of the walTl\nly period, The contractor shall provide an operating manual for these stations detail ing suggested maintenance, parts lists for components and trouble shooting guideline •. 7. Information Provided by tile City The City mall provide the Fabricator with the available existing Gas Receiving Stati ons schematic drawings, schematic plans indicating Ciry 's vision of the future: raci lities, and access to !he siles. Proposers arc ad vised that public rceord drawings may rIOt be accllrate. 8. Wor!c. Ptrfounes! by City o(Pllo Alto "The City of PIJO Alto will demolish abandoned util ity control buildings It Stations 2 and 3 I nd modify the existing piping to IC(epi the new racilities based on h.e1odcr design .. p,"" 's..-.- ..... _1...10 \IC~IlCIMOI.ICIT .. TIOICSICUItIIEtlT IlUYEI<M fOUIEU IIlTll.rTlU. o.AOI. v_lno.'lotm 1,1 I" .... .,.. .... C_,..fOCUlot.\lIF_I,C-"O' provided by the Contractor. The City, in accordance with furnished dlllwinss and spttiroutions, will install ooncrete fOOlinp, perform site assembly, SW1up, caliintion and testi ng of new fac ilities. The City will also provide weldcr(s)to connect the new gas receiving stations' infl1lS\J1.Idurc to City and PG&:E lines. C. Mrnurrmrnt aad Pax mfD! I. Progress Payments The Fabricator will be paid as follows: • Twenty percent (20"'"') upon submi ttal and approval of Contract dlllw ings • Seventy percent (700/.) upon delivery ofequipmcnt to City • Ten pertenl (IO",",)lfl ercomp1eting City's personnel training and submittal ofr.nal documenlS. SUotion 1 - Comprehensive evaluation of the elCisting Gn Recfivi n& Stl tlon Onr(173S Ernbiuaodoero Road) and site conditiOlU, 6esign p~1 of sbtion's replacement control systems, preparation oftl!e dlllWings, obtaining design approval from the City, remote fabrication of proposed facilities, hydro testing, in accordance with approved design and all applicable standards, codes, and regu lations, recommending locations for concrete footi ngs, furnishi ng recon:! dlllwings Stltion 2 - Comprehensive evalua tion of the existing Gu RfCflvlng Slition Two ( .... Ima Street at CoIOBdo Avenue) and site conditions, design prop<nal ofstation'J control systems, preparation of the drawings. obIaining design approval from tbe City, remote fabrica tion ofproposoed facilities, including hydro testing, in aecon!ancc with approved desian.nd .lIl1ppliolb1e standards, codes. and regulations, recommending locations for concrete footings, furnishing rKOfd drawings Station ) - Comprehensive ev.luation oflhe exisfing GIS Reeeiv ing Station Three (1961 Old Page Mill R~) and site conditions, design proposal of station's control systems, preparation of the dlllwings. obtaining design approval from theCi!)" remote fabrication of proposed facilities, including hydro testing, in eccordaocc with approved design and all applicable standards., codes, and regulations, recommend ing locations for concrete footings , furnishing record drawings SUotion 4 - Comprehensive evaluation of the existing Gil Reeflvin, Slation Four (Oak Road &: Searsville Road) and site conditions, design proposal of 5talion·s repl!lccment control systems, preparation of the dlllwinp. obtaining design approval from the: City, remote rabrication of proposed fac ili ties, including hydro testing, ill accordance with approved design and ail applicable standards, codes, and regulations" n:«Immending locations for concrete footings, furnishing reconI dlllwings.. " \\C, ...... .........",.,S""""~CIl\5OLICIT" T IOf<SlCUUEIfT BUY ao. <.. FOI.D£l5\UTIUTIES · CA ~ V liN" 1lfP>\1 "Om II<boi ... R .... ....,._C-"'=. I ,oon. ,._C __ EXIIIBTT "B" SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to eomplete each milestone within the number of days/weeks specified below. The time to eomplete each milestone may be increased or de(:l"eued by mutua l wriuen agr~ment of the project managers for CONSULTANT and CITY so Ions as all work is completed within the teMn of the Agreement. CONSULTANT shall provH:le I detailed schedule of work co nsistent with the schedule below wi th in 2 weeks ofm:<:ipt of the notice to proceed. Milestones I. Station 2 2. Station 3 3. Station I 4. Station 4 " Completion No. ofDaysIW~ks From NTP AugtlStl ,20 11 August I S, 2011 September 1,2011 September 19, 2011 "'oA ,·,,'Is.mo.. R .. ,_2. X110 ""' ...... ~IN'IJ.CH\SOU(:IT~Tlo .. S"(;I.IJtJla.rr eUYER-l;104 fOLDI;II$IVfILITIts· C-UOI.. Y~'Uf""\I"lll _ OJ .<oI<tlt:nIF" ..... (:_,<: II I "IIlll.fioo'-C-..,.do< EXIIIB IT "-C" COMPENSAT ION 1m CITY agrees to compensate the CONSULT ANT for professionalKrvices performed in koonlaoce wi tlltlle terms and conditions of th is Agreement, and as set forth in tile budget schedule below. The compensation to be paid to CONSULTANT under this Agrn:ment roc all servi~ described in Exllibit "A~ ("Basic Services; and reimbursable expellSCS shall 001 exceed S935,700. CONSULTANT agrees 10 complete all Basic Services. including ~imbursable expenses, wilhin this amount. Any work perfonned or expellSCS incwmi for which paymenl 'NOII1d resuLt in a total exceeding the muimum amount of compensation set fortll herein shall be al no cost 10 the CITY. CONSU LTANT shall perform tile tasks and categories of wort as ou!liDCd.nd budgeled below. The CITY's project manager may approve in writing lhe tntnsfer of budge I amounts betw~n any of tile tasks or categories listed be low provided tile lotal compensation for Basic Servia:s, including ~jmbursable expenses., does not exceed S935,700. BUDGET SC IIEDULE NOT TO EXCEED AMOUNT Task I S261.150 (Gas Receiving Station I) Tlsk 2 S255,000 (Gas Rece iving StBtion 2) Task 3 S301.250 (Gas Receiv ing Station 3) Task 4 SI18,300 (Gas Receiving Station 4) Sub-total Basic Services 5935,700 Maximum Tolal Compen sat ion S93S,700 REIMBURSA BLE EXPENSES The adminisuat ive, overhcad, sec~tarial lime or sec~tarial overtime, word processi ng. photocopyi ng, in-house printing. insurance Ind other ordi nary business expenses are included witllin the scope of payment for services and 8~ not ~imbursablc cxpenses. " ",,*II;"'~ Sen-o.m Il0'l.-1. 20IG \·« ... ~IICH'.$OLICITAlIONS'OJUE/(f 8Uy~~ .. fOI.o(lSI\fl1I.ITIU· CA.Ot. YN ... .u ... 'I<O.\ll _'--...w-',C ...... ...c'II ... JII.' .... ,C __ EXHIBIT"D" INSURANCE REQUIREMENTS COf'TItAoCTOti TO n<E OTY Of ~AU) "LTO fCJTY\ .. , 11tEl~ SOU; ElU'EI<SIl, SH.-u. -. THE TEItN Of TItE COOI1'RI.CT QIIl .. ," ""O ...... NT .. IH IHSL"'-'tlCE III THE"~ I'QIl THeCDVU.ACE5I'£CltlW Ilel OW ... n"QklJt:D IV COMUS'U WITH Alii IUT"S Kl'!Y .... n.~C Of" .. ~ "'l 0-. IDGH~" UClI>I5lD 011 A \ITIIQUZlD TOT ..... '<5.OCT '''S!; UI'IC£ _NESS'S TH($TATt Of"c..URlIV"'" " •• ,IUI L''''TI U1QUIHD ,. YU ~YU·$U ... BIUTY "'1lTOMQ8'.~ U"''''llTY. JNC\.lIlmf(; ... LlO ..... ro.H' .. ED. ~ED " SI.ooo.ooo SI.ooo.ooo SI.OOO.ooo SI.OOO.ooo TH~CtTVfW U LO ..... TO_V H ,~Dt:O...s ... ~ .. OOI'IOI'I ..... _~ CCII<TlIACfOR.. ... T ITS$Ol.ECO$T ANO~ stII.I..L Q8TAI .... 1<0 .... ,NT .. I>:. IN fUU. ~ .. 1<0 [fF(CT lH~QUGoI()IJI" lH~ I;I(1lkE n;1tN Of MY U5Ul.T......,. .. ~U .. T. THl .. ~COYUItOEIlEItElN DI!$O:IIEQ. ... --...N:JfQM.yc;1Qf<T1lM:TOII; ANOITSSI.IKVH5l.l.TAt<TS, IF MY. lIUT ..uo. ... ITH THE UClI'nDI< Of" WOItl(as" C\).toII'9ISA1"1<*. Uoll'\.O"rek'S UAIIIUTY "-"'D 1'tilFfSSIOtI .... INSUltNICE, ,l<CLUO,>'C ...s .. DDlTIOO!AL 'fOSUOUO;"'5 CITY. rn COUlfCIl M Dc HIlS, ornau. A(;U<T5, Ai'o"D DcrLOVUS. I. INSUIlANCE COV€IlACE MUST INCWO£; .... .. PII.OVISION I'OI!. ... WII.JTTEN THIII.TY DAY .. DV .. NCE I'IOTlCE TO CITY OF CH.I.~ IN COVEIlAGE O. Of COVEII.,\GE CANCEl.l.A TION: .. NO B. A CONTRACl\ML lI .. BllITY ENOOII.SEMEm PROVIDING I .. SU .... NCE COVU.AGE FOR CONTRACTOII.'S AGREEMENT TO INOEMNIFY CITY. C. D£OUCTIBLE AMOIJNTS IN EXCESS OF Sl.ooo REQUIRE CITY'S PRIOR APPROVAl.. O. CONTRACTOR'S INSURANCE COVEIlAGE WILL BE PRIM ... RV ONLY TO THE EXTENT OF CONTRACTOR NEGUG ... NCE. E. CONTRACTOR WILL PROVIDE ITS sr ... NO"RD INSURANCECEII.TIFICATE TOCITY. II. CONT .. CTOR MUST SUBMIT CERTlFICATU(S) OF INSUIlAHCE EV10E.'0lCING REQUIR.ED COVEkA(lE. Ill. ENOO..s€MENT PkOYlSIONS. WITH RESPECT 10 THE INSUkANCE "FFO!I.OED 10 -"'OOITIOHAl INSUREDS- A. , .. IMAU COYERA,(lE " ~41; 4 d _ __ 1.IGIO -..;<_ •• _ • UD'I'I,IRC~ICl"'noo."SICUU£HT !IlIYU.oo. >'OWU5VJT1I.ffiU. C .. ItQl.VNPr ... F ... ·'40II' _.~-'.c-"C"'4Ol11 f"-',C_.'" WITH RESPECT TO CLAI ~S ARISII<IQ OUT OF THE OPERATIOI<IS OF THE I<IA~ED II<ISURED, II<ISURAI<ICE AS AFFORDED BY THIS POLICY IS PRI~ARY AND IS tI(lT ADDI110l<lAL TO OR COtITRIBLmNG WITH AI<IY OTHER II<ISURAI-IC£ CARlIED BY 011. FOR TI<I £ BEI<IEFIT OF TlI~ ADDITIOI<IAL II<ISUREDS. B. CROSS LIABILIty THE NA~ING OF ~ORE TlIAI<I OI<lE PERSOI<I, fiRM. OR CORPORATIOI<I AS II<ISUREDS UNDER THE POLICY SHALL I<IOT. FOR THAT REASOI<I AUlI<IE. EXTII<IGUISH ANY klGHTS OF THE II<ISURED AOAII<IST AI<IOTHER. BUT THIS EI<lOORSEMEHT, AND TIlE I<IAI>III<IO OF I>IUL TIPL£ II<ISUREDS. SHALL NOT It<CREASE TIlE TOTAL LlASlllTY OF THE CQ~PAI<IY UI<IDER THIS POLICY. C. I<IDTICEOfCAl<lql! .... TIQN I. IFTHE I'Ot.ICY ISCAI'ICElED B£F()k£ ITS EXPIRATI~ DATE fOR AIiY REASON OTHER THAI<ITHE 1<l0000,PA YI>IEHTOf PREMIUM. THE ISSUING COMPANYSHALL 1'1'C0VIDECrrx AT lEAST A THIRTY UOI OAY WRlTTDIl'IOT1Ce BEFORE THE EFFECTIVE OATE Of CAI<ICULATION. 2. If THE POLICY IS CAI<ICEl.ED BEfOll.£ ITS £XPIRATION DATE FOIl. THE NON·PA YMENT Of PREMIUM. TIiE ISSIJING COMPAI<IY SHAll .. 'ROV[D( CITY AT lEAST A TH[IlTY f)O) DAY Wll/TTEt<Il'IOnct BEFORE THE EffECTIVE DATE Of CANCELLA nON. I<iOTiCUSHALl... KMAILtDTO: I'IJIICIiASlNC ""'D COfoTRACT ADMINISTRATION C'TYOfPAU)ALTO P.o..oJ{ I'~ PAUlALTO,CA _J ..::< ...... """"""SD\l'\l.~1C IT A T IONS'CU •• VIT BUYU.eM ,01. "EU IJTlllTI es . C".OI. Y ......... ,PI' I .oIl I P.bo;1j .""' .... ....-... L"""'....,IC II IOC)1I.F ..... C ....... "'" City of Palo Alto (ID # 1764) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 3 (ID # 1764) Council Priority: {ResProject:ClearLine} Summary Title: SAP Basis Support Title: Approval Of Software Consulting Service Contract Amendment with Sierra Infosys, Inc. in the amount of $84,000 for the SAP Basis Support of SAP Industry- Specific Solution for Utilities, SAP Financials, Customer Relationship Management System, Business Intelligence System and Utilities Customer Electronic Services From:City Manager Lead Department: Administrative Services Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute the amendment of the attached usage-based professional services agreement (Attachment B) with Sierra Infosys Inc. in the amount not to exceed a one-time increase of $84,000 for SAP Basis support in fiscal year 2012. The total contract amount for fiscal year 2012 will not exceed $334,000. Fiscal 2013 amount will remain the same as $250,000. The total contract amount for fiscal 2011, 2012 and 2013 not-to-exceed $834,000 Executive Summary SAP Basis encompass a wide spectrum of tasks, ranging from Oracle data base administration, system security, system monitoring and tuning, user authorization, system backup, system landscape maintenance, support package application, SAP audit support, and project support. These tasks are essential to SAP system health and security so that ongoing business continuity is assured. The two in house Basis staff support five systems, over 1400 SAP users, 17 servers, and 11 oracle databases in the live, 24/7 operating environment. To provide the necessary support resources and skills for the SAP system, Basis together with six other support areas was incorporated into the three-year overall SAP support and maintenance contract agreement, established in 2010 with Sierra Infosys (CMR:291:10). The portion allocated to Basis support, approximately $50K per year, would normally be sufficient with two full time in house Basis staff. Unfortunately, one of the Basis staff has been out on medical leave since February 2011 and the period of absence will be up to twelve months. To minimize business impacts of staff on medical leave, additional SAP Basis support from external vendors is needed. Background June 20, 2011 Page 2 of 3 (ID # 1764) On July 2010, the City Council approved a three-year software consulting services contract with Sierra Infosys Inc. in the amount of $750,000 for the support and maintenance of the following SAP modules: Industry-Specific Solution for Utilities, financials, customer relationship management, business intelligence and utilities customer electronic services, with each year not to exceed $250,000. To address the in house Basis resource and skill gap, a portion of the Sierra Infosys contract, approximately $50K per year was allocated to SAP Basis. The scope of work for Basis support in the original contract was to implement various modules of SAP Solution Manager, a tool to improve system management and monitoring efficiencies. With the three-year contract in place, Sierra Infosys has been working with in house Basis staff and has established a good working relationship through projects such as SAP Solution Manager, QAS environment, and BI QAS/Dev rebuild. To fill in the resource gap while Basis staff on medical leaves, a new list of Basis support scope of work has been established. Discussion Requests for quotation for the following scope of work, approximately equivalent to 5+ months SAP Basis Support were sent to: Group Basis, Sierra Infosys, Inc. Cronus Consulting, and GlobalSource IT. o Perform and document Oracle data base related daily/weekly/monthly/quarterly monitoring and tuning tasks for five SAP systems (UCES, ESS/MSS, ECC, CRM and BI) o Perform and document SAP portal system monitoring tasks (CRM IcWeb, UCES, and ESS/MSS) o Provide assistance to SAP Basis Authorization Admin to implement fixes according to SOSS report for ECC production, CRM production and BI production o Perform Oracle data base patch/release upgrade ( from 10.2.0.20 to 11.2.0) for all systems o Assess and enhance ECC production file system configuration o Perform ECC Support package upgrade to the latest version o Perform CRM Support package upgrade to latest version o Perform BI Support package upgrade to the latest version o Perform UCES Support package upgrade to the latest version o Develop Central User admin (CUA) strategy and implement plan Sierra Infosys was selected because of the following reasons: June 20, 2011 Page 3 of 3 (ID # 1764) a.Lowest hourly rate ( $92/hour remote, $113 on site) b.Efficiency and productivity: Sierra Infosys has been working with City’s Basis team and functional team in the past few months and they are familiar with City’s environment and configurations. c.Dedicated resource : Sierra Infosys has dedicated one resource to support the City Timeline The time period for this request will be from July 2011 to July 2012. Resource Impact This contract will be funded from existing funds in the Information Technology Internal Service Fund. ATTACHMENTS: ·Attachment A: Amendment to Sierra Infosys Contract (PDF) Prepared By:Jennifer Leu, Manager, IT Department Head:Lalo Perez, Director City Manager Approval: James Keene, City Manager City of Palo Alto (ID # 1825) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 4 (ID # 1825) Council Priority: {ResProject:ClearLine} Summary Title: 2nd Reading SUMC Project Ordinances Title: Adoption of a Resolution Approving the Reorganization of an Approximately .65 Acre Territory Designated “Major Institution/University Lands” Located in the County of Santa Clara and Second Reading for the Adoption of Two Ordinances: (1) Amendment of Title 18 of the PAMC to add a new Chapter 18.36 (Hospital District), adding Section 8.10.95 (Tree Removal in HD Zone) to Chapter 8.10 (Tree Preservation and Management Regulations) of Title 8 (Trees and Vegetation) and amending Section 16.20.160(a)(1) (Special Purpose Signs) of Chapter 16.20 (Signs) of Title 16 (Building Regulations) and amending Section 18.08.010 (Designation of General Districts) and Section 18.08.040 to Chapter 18.08 (Designation and Establishment of Districts) and (2) Approval of a Development Agreement Between the City of Palo Alto and Stanford Hospital and Clinics; Lucile Salter Packard Children’s Hospital at Stanford; and the Board of Trustees of the Leland Stanford Junior University From:City Manager Lead Department: Planning and Community Environment RECOMMENDATION Staff recommends that the City Council: 1.Adopt the Resolution approving the Reorganization of an approximately .65 Acre Territory Designated “Major Institution/University Lands” Located in the County of Santa Clara (Attachment A); 2.Conduct a second reading and adopt the Ordinance Amending Title 18 of the PAMC to add a new Chapter 18.36 (Hospital District), adding Section 8.10.95 (Tree Removal in HD Zone) to Chapter 8.10 (Tree Preservation and Management Regulations) of Title 8 (Trees and Vegetation) and amending Section 16.20.160(a)(1) (Special Purpose Signs) of Chapter 16.20 (Signs) of Title 16 (Building Regulations) and amending Section 18.08.010 (Designation of General Districts) and Section 18.08.040 to Chapter 18.08 (Designation and Establishment of Districts) (Attachment B); and 3.Conduct a second reading and adopt the Ordinance Approving a Development Agreement Between the City of Palo Alto and Stanford Hospital and Clinics; Lucile Salter June 20, 2011 Page 2 of 4 (ID # 1825) Packard Children’s Hospital at Stanford; and the Board of Trustees of the Leland Stanford Junior University (Attachment C). BACKGROUND On June 6, 2011 the City Council certified the Final Environmental Impact Report for the Stanford University Medical Center Facilities Renewal and Expansion Project (“project”) and approved a series of land use entitlements related to the project. These entitlements included a Comprehensive Plan Amendment to exempt the Hospital District from the citywide and area specific non-residential development caps and to permit higher buildings in the HD zone; the creation of a new Hospital District Zone; a Conditional Use Permit for the major components of the project and a Development Agreement which would lock in the entitlements for a period of 30 years in exchange for a mutually acceptable package of community benefits. The Council also requested that the Development Agreement be revised to include language consistent with the agreement between the City of Palo Alto, the SUMC project applicants, and the City of East Palo Alto, for payment of specific fees related to traffic improvements at University Avenue in East Palo Alto and a payment if the SUMC project sponsors are unable to achieve the 2025 transportation mode-split target as described in the Mitigation Monitoring and Reporting Program, mitigation number TR-2.3. DISCUSSION Annexation In order to ensure that the site is located entirely in Palo Alto and to ensure compliance with the Tri-Party Agreement between the County, City and Stanford regarding the use of medical center land, an annexation is required. On June 6, Council initiated the annexation proceedings by adopting a resolution setting the date of June 20, 2011 to conduct a meeting on the annexation of a 0.65 acre site from Santa Clara County. The City of Palo Alto is the lead agency for annexation proceedings. The property to be annexed is solely owned by Stanford University. No objections to the annexation have been received by the City. To complete the annexation, the City must adopt a Resolution Making Certain Findings (Attachment A). Zoning Ordinance Given the unique and complex characteristics of the project, a new Hospital District was added to the Zoning Code. No substantive changes were made to the ordinance since Council’s first reading on June 6. For convenience, a copy of the ordinance is included in this Staff Report as Attachment B. The Development Agreement-East Palo Alto Traffic Issue Prior to the June 6, 2011 Council meeting, City of Palo Alto staff, the SUMC project applicants and representatives from the City of East Palo Alto held a series of meetings regarding transportation-related impacts in the City of East Palo Alto. The Final EIR prepared for the SUMC Project concluded that there were no significant traffic related impacts in East Palo Alto. The traffic study prepared for the Final EIR included a level-of-service (LOS) analysis for East Palo Alto intersections, including Woodland/University, University/Bay, and June 20, 2011 Page 3 of 4 (ID # 1825) University/Donohoe. It was determined that with the full build-out of the project in 2025, these intersections would continue to operate in a manner that would not trigger CEQA-impacts. Although East Palo Alto representatives have accepted the Final EIR conclusions, they have argued that there would be perceived impacts from the SUMC Project, in that many East Palo Alto intersections currently operate poorly and that these intersection’s LOS would continue to deteriorate over time, even if the SUMC Project’s contribution does not trigger a CEQA impact. Representatives from East Palo Alto requested payments from the SUMC project applicants and the City of Palo Alto to address the perceived traffic impacts. In response to East Palo Alto’s request, at the June 6, 2011 meeting the City Council directed staff to incorporate the following additional provisions into the Development Agreement: 1.The Hospitals shall make a payment of $200,000 to the City of East Palo Alto for roadway and traffic signal improvements scheduled to be done on the length of University Avenue within the East Palo Alto city limits. This work includes repaving and restriping/bike lanes to improve both vehicular and non-vehicular traffic flow. 2.In the event the SUMC Parties are unable to meet the trip diversion goal set forth in this Agreement such that the $4 Million penalty payment is triggered, the City of Palo Alto shall remit $150,000 of the penalty payment to the City of East Palo Alto. The revisions Council directed are incorporated into Section 5(c)(iii) of the Development Agreement (Exhibit A to Attachment C). Approval of a Development Agreement is a legislative act which becomes final 31 days after the second reading of the Ordinance approving the Development Agreement. (Attachment C.) NEXT STEPS The ordinances would be in-effect 31-days after the second reading, which would be July 21, 2011. The SUMC project applicant is expected to begin minimal site preparation at Hoover Pavilion for the building renovation activities within the next few weeks. This may include installation of protective fencing and minimal tree protection and relocation preparation work. The parties are also negotiating an agreement that would permit Stanford to relocate the major utility infrastructure servicing the project from the SUMC site to underneath Welch Road. This relocation will facilitate better site planning and avoid possible construction impediments. Also as part of this agreement, the City plans to upgrade the capacity of its gas line in this area. Staff will bring this agreement to Council for approval shortly. ENVIRONMENTAL REVIEW The City Council certified the FEIR for the project on June 6, 2011. June 20, 2011 Page 4 of 4 (ID # 1825) ATTACHMENTS: ·Attachment A: Annexation Resolution (PDF) ·Attachment B: HD Zoning Ordinance (PDF) ·Attachment C: Ordinance Adopting Development Agreement (PDF) Prepared By:Steven Turner, Advance Planning Manager Department Head:Curtis Williams, Director City Manager Approval: James Keene, City Manager *NOT YET APPROVED* 110614 jb 0130714 Resolution No. _____ Resolution of the Council of the City of Palo Alto Making Determinations and Approving the Reorganization of an Approximately .65 Acre Territory Designated “Major Institution/ University Lands” Located in the County of Santa Clara on the Northwest Side of the Main SUMC Site Adjacent to Pasteur Drive (APN: 142-05-031) WHEREAS, a petition for the annexation of certain territory to the City of Palo Alto and detachment of said territory from the County of Santa Clara, consisting of 0.65 acres on the northwest side of the Main SUMC site adjacent to Pasteur Drive (APN: 142-05-031) has been filed by the owner of said parcel; and WHEREAS, on June 6, 2011 the City Council adopted Resolution No. 9170 initiating proceedings for annexation of the area designated as “Major Institution/ University Lands ”; and WHEREAS, said territory is inhabited and all owners of land included in the proposal consent to this annexation; and WHEREAS, section 56757 of the California Government Code states that the Local Agency Formation Commission shall not review an annexation proposal to any City in Santa Clara County of unincorporated territory which is within the urban service area of the city if initiated by resolution of the legislative body and therefore the Council of the City of Palo Alto is now the conducting authority for said annexation; and WHEREAS, Government Code section 56663 (a) provides that if a petition for annexation is signed by all owners of land within the affected territory, the City Council may approve or disapprove the annexation without public hearing; and WHEREAS, evidence was presented to the City Council. NOW, THEREFORE, the Council of the City of Palo Alto does hereby resolve as follows: SECTION 1. That it is the conducting authority pursuant to Section 56757 of the Government Code for the annexation of property designated “Major Institution/ University Lands”, more particularly described in Exhibits “A” and “B”; SECTION 2. That the following findings are made by the Council of the City of Palo Alto: *NOT YET APPROVED* 101018 jb 013714 a. That said territory is inhabited and comprises approximately .65 acres; b. That the annexation is consistent with the orderly annexation of territory within the City’s urban service area and is consistent with the City policy of annexing when providing City services; c. On June 6, 2011, the City Council certified the Final Environmental Impact Report for the Stanford University Medical Center Renewal and Expansion Project pursuant to the California Environmental Quality Act; d. The City Council on June 6, 2011, enacted an ordinance pre-zoning the subject territory with the “Hospital District” zoning designation; e. That the territory is within the city urban service area as adopted by the Local Agency Formation Commission of Santa Clara County; f. The City requests the County Surveyor, if necessary, determine the boundaries of the proposed annexation to be definite and certain, and in compliance with the Commission’s road annexation policies. The Applicant shall reimburse the County for the actual cost incurred by the County Surveyor in making this determination; g. That the proposed annexation does not create islands or areas in which it would be difficult to provide municipal services; h. That the proposed annexation does not split lines of assessment or ownership; i. That the proposed annexation is consistent with the City’s General Plan; j. That the territory to be annexed is contiguous to existing City limits; and k. That the City has complied with all conditions imposed by the Commission for inclusion of the territory in the City’s urban service area. SECTION 3. That no subject agency has submitted any written opposition to a waiver of protest proceedings. SECTION 4. That all property owners and registered voters have been provided written notice of this proceeding and no opposition has been received. SECTION 5. That said annexation is hereby ordered without any further protest proceedings pursuant to Government Code section 56663 (d). / / / / *NOT YET APPROVED* 101018 jb 013714 BE IT FURTHER RESOLVED that upon completion of these reorganization proceedings the territory annexed will be detached from the County of Santa Clara. BE IT FURTHER RESOLVED that upon completion of these reorganization proceedings the territory reorganized will be taxed. INTRODUCED and PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Asst. City Attorney City Manager ____________________________ Director of Planning and Community Environment ____________________________ Director of Administrative Services *NOT YET APPROVED* 101018 jb 013714 *NOT YET APPROVED* 101018 jb 013714 ** Not Yet Approved ** Ordinance No. ______ Ordinance of the Council of the City of Palo Alto Adding Section 8.10.95 (Tree Removal in HD Zone) to Chapter 8.10 (Tree Preservation and Management Regulations) of Title 8 (Trees and Vegetation) and Amending Section 16.20.160(a)(1) (Special Purpose Signs) of Chapter 16.20 (Signs) of Title 16 (Building Regulations) and Amending Section 18.08.010 (Designation of General Districts) and Section 18.08.040 to Chapter 18.08 (Designation and Establishment of Districts) and Adding Chapter 18.36 (Hospital (HD) District) to Title 18 (Zoning) of the Palo Alto Municipal Code The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. The City Council finds as follows: (a) Stanford Hospital and Clinics (“SHC”), Lucile Salter Packard Children’s Hospital at Stanford (“LPCH”) and Stanford University School of Medicine (“SoM”) operate existing Stanford University Medical Center (“SUMC”) facilities within the City of Palo Alto on two sites that are collectively approximately 66 acres: the approximately 56-acre Main SUMC Site and the approximately 9.9-acre Hoover Pavilion Site. The two sites collectively are referred to in this zoning ordinance as the SUMC Sites. The Main SUMC Site is primarily bounded by Welch Road, Quarry Road, and Stanford University lands in unincorporated Santa Clara County. The Hoover Pavilion Site is located south and east of the corner of Quarry Road and Palo Road. The boundaries of the SUMC Sites are shown on Exhibit A to this zoning ordinance. (b) SHC, LPCH and SoM have applied for a Zone Change, Comprehensive Plan Amendment, Environmental Assessment, Architectural Review, Annexation and a Development Agreement for the Stanford University Medical Center Facilities Renewal and Replacement Project (“Project” or “SUMC Project”), including the demolition, renovation, and replacement of on-site structures, thereby adding approximately 1.3 million square feet of net new floor area. (c) Following staff review and preparation of the Environmental Impact Report for the SUMC Project, the Planning and Transportation Commission (Commission) reviewed the Project, including this zoning ordinance, and recommended approval on May 11, 2011. The Commission’s recommendations are contained in Attachment L. (d) On June 6, 2011, the City Council certified the Environmental Impact Report for the SUMC Project, adopted the findings required by the California Environmental Quality Act (CEQA) and adopted a Statement of Overriding Considerations. (e) Section 8.80.010 of Chapter 8.80 of Title 18 of the Palo Alto Municipal Code allows the City to amend Title 18 by changing the boundaries of districts, or by changing the regulations applicable within one or more districts, or by changing any other provision of Title 18, whenever the public interest or general welfare may so require. The amendments to Title 18 specified in this ordinance are necessary to carry out the SUMC Project, which will benefit the 110503 jb 0130755 1 ** Not Yet Approved ** 110503 jb 0130755 2 public interest and general welfare. The Stanford University Medical Center is recognized as a global leader in medical care and research, having pioneered advancements in transplantation medicine, cancer care, prenatal diagnosis and treatment, and diabetes and cholesterol treatments. In 2009, the SHC and LPCH served 64 percent of Palo Alto residents who required hospitalization. The Project will enable the SHC, LPCH and SoM to continue this important work, and the addition of more beds for adults and children will alleviate overcrowding and allow the hospitals to serve patients who currently must be turned away. The hospitals also provide the only Level 1 Trauma Center between San Francisco and San Jose. The Trauma Center and the Emergency Department ensure critical community emergency preparedness and response resources for the community in the event of an earthquake, pandemic, or other major disaster. SECTION 2. Section 8.10.95 of Chapter 8.10 of Title 8 of the Palo Alto Municipal Code is hereby added to read as follows: “8.10.95 Tree Removal in HD Zone Tree removal and relocation in the HD shall be subject to the provisions in Section 18.36.070. To the extent Section 18.36.070 is inconsistent with this Chapter, Section 18.36.070 shall control.” SECTION 3. The following amendments are made to Chapter 16.20 of Title 16 of the Palo Alto Municipal Code in order to address maximum sign size and location in the HD. a. Section 16.20.120(a) (Freestanding signs) is hereby amended to read as follows: “(a) Freestanding Signs Over Five Feet. Freestanding signs over five feet in height shall be permitted only on nonresidential properties in the Hospital Zone, GM zones and on El Camino Real in the CN and CS zones and for service stations, restaurants and shopping centers elsewhere.” b. Section 16.20.160(a)(1) is hereby amended to read as follows: “(1) Directory Signs. In all districts where group occupancies in office buildings are permitted, directory signs may be erected displaying the names of the occupants of a building who are engaged in a particular profession, business or the like. Such signs shall be situated at least two feet inside the property line and shall not exceed eight feet in height. Such signs may have an area of four square feet, plus one and one-half square feet per name, in no event to exceed seventy-five square feet. In the HD district, Directory and Directional signs may be up to 12 feet in height, thirty square feet in area, and located no less than two feet from the nearest public right-of-way unless an alternative location is approved by the Planning Director.” c. Section 16.20.270, Table 1, first note, is hereby amended to read as follows: “This Table is to be used in all Zoning Districts except for the GM zones, the Hospital District, and for El Camino frontages of CN and CS zoned properties.” d. Section 16.20.270, Table 2, first note, is hereby amended to add the following: “For requirements in the HD district, see Section 16.20.160(a)(1).” ** Not Yet Approved ** 110503 jb 0130755 3 SECTION 4. Section 18.08.010 (Designation of General Districts) of Chapter 18.08 (Designation and Establishment of Districts) of Title 18 (Zoning) is amended to read as follows: Map Designation Zoning District Name Chapter Number R-E Residential estate district 18.10 R-2 Two-family residence district 18.10 RMD Two unit multiple-family residence district 18.10 R-1 Single-family residence district 18.12 RM-15 Low density multiple-family residence district 18.13 RM-30 Medium density multiple-family residence district 18.13 RM-40 High density multiple-family residence district 18.13 CN Neighborhood commercial district 18.16 CC Community commercial district 18.16 CS Service commercial district 18.16 CD Downtown commercial district 18.18 MOR Medical office and medical research district 18.20 ROLM Research, office and limited manufacturing district 18.20 RP Research park district 18.20 GM General manufacturing district 18.20 PF Public facilities district 18.28 OS Open space district 18.28 AC Agricultural conservation district 18.28 PC Planned community district 18.38 HD Hospital district 18.36 SECTION 5. Section 18.08.040 (Zoning Map and District Boundaries) of Chapter 18.08 (Designation and Establishment of Districts) of Title 18 (Zoning) is amended to include the HD district on the Zoning Map. SECTION 6. The following amendments are made to Chapter 18.28 of Title 18 of the Palo Alto Municipal Code in order to remove references to the Stanford Hoover Pavilion Site from the provisions governing the Public Facilities (PF) District: a. Section 18.28.02(h) (defining the Stanford Hoover Pavilion site) is hereby deleted. b. Section 18.28.050 (Site Development Standards), Table 2, footnote 3 is hereby amended to read: “(3) Provided that, for parking facilities, the maximum floor area ratio and site coverage shall be equal to the floor area ratio and site coverage established by the most restrictive adjacent district, and provided, further, that the maximum floor area ratio for the Stanford Hoover Pavilion Site shall be .25:1.” ** Not Yet Approved ** 110503 jb 0130755 4 SECTION 7. Chapter 18.36 of Title 18 of the Palo Alto Municipal Code is hereby added to read as follows: “Chapter 18.36 HOSPITAL (HD) DISTRICT Sections: 18.36.010 Purposes 18.36.020 Applicable Regulations 18.36.030 Definitions 18.36.040 Land Uses 18.36.050 Development Standards 18.36.060 Parking and Loading 18.36.070 Tree Preservation 18.36.080 Signs 18.36.090 Historical Review 18.36.100 Architectural Review 18.36.110 Grandfathered Uses 18.36.120 Consistency with Development Agreement 18.36.010 Purposes The Hospital (HD) district is designed to accommodate medical and educational uses including the Stanford Hospital and Clinics (SHC), Lucile Packard Children’s Hospital (LPCH), medical, office, research, clinic and administrative facilities at the Stanford Hoover Pavilion Site, and School of Medicine (SoM) buildings in a manner that balances the needs of hospital, clinic, medical office and research uses with the need to minimize impacts to surrounding areas and neighborhoods. 18.36.020 Applicable Regulations The specific regulations of this chapter and the additional regulations and procedures established by this title shall apply to all Hospital Districts. 18.36.030 Definitions For the purposes of this section, the following terms are defined: (a) The “Main SUMC” site is defined as all properties zoned HD bounded by Welch Road, Pasteur Drive and Quarry Road and is comprised of Assessor’s Parcel Numbers 142-23- 003, 142-23-004, 142-08-005, 142-23-006, 142-23-007, 142-23-010, 142-23-012, 142-23- 016, 142-23-017, 142-23-018, 142-23-019, 142-23-024, 142-23-025. (b) The “Stanford Hoover Pavilion” site is defined as all properties zoned HD bounded by Quarry Road and Palo Road and is comprised of Assessor's Parcel numbers, 142-04-011 and 142-04-019. ** Not Yet Approved ** 110503 jb 0130755 5 18.36.040 Land Uses The uses of land allowed by this chapter in the HD district are identified in the following table. Land uses that are not listed on the table are not allowed, except where otherwise noted. Permitted and conditionally permitted land uses for the HD district are shown in Table 1: Table 1: HD Permitted and Conditional Uses LAND USE HD Subject to Regulations in: ACCESSORY AND SUPPORT USES Accessory facilities and activities customarily associated with or essential to permitted uses, and operated incidental to the principal use P Eating and drinking services in conjunction with a permitted use P Retail services in conjunction with a permitted use P Ch. 18.40,18.42 EDUCATIONAL, RELIGIOUS, AND ASSEMBLY USES Churches and religious institutions P Public or private colleges and universities and facilities appurtenant thereto CUP HEALTH CARE SERVICES Ambulance services CUP Convalescent Facilities CUP Hospitals CUP Medical Office CUP Medical Research CUP Medical Support Retail P Medical Support Services P OTHER USES Other uses which, in the opinion of the director, are similar to those listed as permitted or conditionally permitted uses P, CUP PUBLIC/QUASI-PUBLIC FACILITY USES All facilities owned or leased, and operated or used, by the City of Palo Alto, the County of Santa Clara, the State of California, the government of the United States, the Palo Alto Unified School District, or any other governmental agency P Community Centers CUP Utility Facilities essential to provision of utility services but excluding construction/storage yards, maintenance facilities, or corporation yards. CUP SERVICE USES Day Care Centers CUP Hotels providing not more than 10% of rooms with kitchens CUP TRANSPORTATION USES Helipads and Helicopter uses CUP Transit stops and shelters P ** Not Yet Approved ** 110503 jb 0130755 6 LAND USE HD Subject to Regulations in: Parking Facilities CUP TEMPORARY USES Farmers markets P Temporary parking facilities, provided such facilities shall remain no more than five years P 18.36.050 Development Standards (a) Development Standards Table 2 specifies the development standards for structures in the HD district. Table 2: Development Standards HD Subject to regulations in Section (7): Minimum Site Area No standards Minimum Site Width No standards Minimum Site Depth No standards Minimum Street Setbacks 10 ft (1) Maximum Site Coverage 40% (2)(4) 18.04.030(a)(86) Maximum Height (ft) 130 ft (5) 18.04.030(a)(67); 18.40.090 Maximum Floor Area Ratio (FAR) 1.5 to 1 (3)(6) 18.04.030(a)(57) (1) Measured from the right-of-way line of any public street to the base of the buildings and not including any awnings or other projections. This setback requirement does not apply to below-grade parking facilities or portions of buildings that bridge a street. This setback requirement also does not apply to any portion of a lot or site that does not abut a public street. (2) Site coverage is calculated based upon the total contiguous area within this zone (Main SUMC site or the Stanford Hoover Pavilion site), rather than on a parcel-by-parcel basis. (3) FAR is calculated based up on the total contiguous area within this zone (Main SUMC site or the Stanford Hoover Pavilion site), rather than on a parcel-by-parcel basis. (4) The maximum site coverage for the Stanford Hoover Pavilion site shall be 30 percent. (5) The maximum height for new construction at the Stanford Hoover Pavilion site shall be 60 ft. (6) The maximum floor area ratio for the Stanford Hoover Pavilion site shall be 0.5 to 1. (7) The regulations referenced in this table apply except as revised in this chapter. (b) Floor Area Ratio Except as provided in this section, floor area ratio shall be defined in accord with Chapter 18.04 of the Zoning Ordinance. All areas used to enclose service and mechanical equipment, whether on rooftops, basements, interstitial space, or other interior areas, shall be excluded from floor area calculations. All parking facilities also shall be excluded from floor area calculations. ** Not Yet Approved ** 110503 jb 0130755 7 (c) Lot Coverage Except as provided in this section, lot coverage shall be defined in accord with Chapter 18.04 of the Zoning Ordinance. Parking facilities shall be excluded from lot coverage. (d) Height and Grade (1) Except as provided in this section, building height shall be defined in accord with Chapters 18.04 and 18.40.090 of the Zoning Ordinance. Helicopter pads on top of the buildings, rooftop mechanical equipment and associated screens, cryogen vents, grease hoods, wind or solar energy equipment, and elevator shafts/ overruns shall be excluded from building height calculations, but shall be subject to architectural review as required in Chapters 18.76 and 18.77 of the Zoning Ordinance. (2) Grade shall be measured in accord with Chapter 18.04 of the Zoning Ordinance. (e) Street Setbacks Except as provided in this section, setbacks shall be defined in accord with Chapter 18.04 of the Zoning Ordinance. In the HD district, setbacks from public streets shall be defined as the area between the right of way line of any public street to the base of the building, and not including any awnings or other projections. Setback requirements do not apply to any below grade parking facilities or portions of buildings that bridge a street. Setback requirements also do not apply to any portion of a lot or site that does not abut a public street. No setback requirements other than street setback requirements apply in the HD district. (f) Recycling Storage All new development, including approved modifications that add thirty percent or more floor area to existing uses, shall provide adequate and accessible interior areas or exterior enclosures for the storage of recyclable materials in appropriate containers. The design, construction and accessibility of exterior recycling areas and exterior enclosures shall be subject to recommendation by the architectural review board, and approval by the director of planning and community environment, in accordance with Section 18.76.020 of the Zoning Ordinance. (g) Employee Shower Facilities Employee shower facilities shall be provided for any new building constructed or for any addition to or enlargement of any existing building as specified in Table 3. Table 3: Employee Showers Required Uses Gross Floor Area of New Construction (ft2) Showers Required 0 - 9,999 No requirement 10,000 – 19,999 1 20,000 – 49,999 2 All government or special district facilities designed for employee occupancy, colleges and universities, private educational facilities, business and trade schools and similar uses 50,000 and up 4 ** Not Yet Approved ** 110503 jb 0130755 8 18.36.060 Parking and Loading (a) Except as provided in this section, off-street parking and loading facilities shall be required for all permitted and conditional uses in accord with Chapter 18.52 and 18.54 of the Zoning Ordinance. Except as provided in this section, all parking and loading facilities on any site, whether required as minimums or optionally provided in addition to minimum requirements, shall comply with regulations and the design standards established by Chapters 18.52 and 18.54 of the Zoning Ordinance. (b) Parking requirements in the HD district will be performance-based, as established by the applicable conditional use permit. Parking shall be provided to meet projected needs, with consideration given to the potential for reduced parking demand due to the proximity of the Palo Alto Intermodal Transit Station (PAITS) and demonstrated effective transportation demand management (TDM) programs. (c) The following parking improvements shall be exempt from the parking landscape requirements of Section 18.54.040: (1) All structured parking facilities; (2) Restriping of existing surface parking facilities and other improvements to surface parking facilities that do not materially alter the existing conditions; and (3) Parking or loading areas identified for use in the event of emergency or mass population events such as earthquakes, pandemics, or human-made biological/chemical exposure. (d) Valet parking facilities shall be exempt from the requirements of Sections 18.54.030 and 18.54.040(c). (e) For the purposes of calculating shading percentage pursuant to Section 18.54.040(d): (1) Shade structures may be utilized in lieu of trees; (2) The canopies of Protected Trees (as defined by Section 8.10.020(j)) transplanted on the Site will count as double the actual tree canopy; and (3) Valet parking facilities may be designed to achieve 25 percent shading (rather than 50 percent shading). 18.36.070 Tree Preservation (a) Applicability (1) Except as provided in this section, development in the HD district shall comply with Palo Alto Municipal Code Chapter 8.10 (Tree Preservation and Management Regulations), and the City Tree Technical Manual. (2) No Protected tree (as defined by Section 8.10.020 (j)), shall be removed or relocated until the Director of Planning and Community Environment (“Director”), in consultation with the City Arborist, has determined whether the ** Not Yet Approved ** 110503 jb 0130755 9 Protected tree meets the standards of Group 1 or Group 2 Trees, as defined below, and the applicable Protected Tree Removal Permit or Protected Tree Relocation Permit has been obtained. The City’s determination whether a Protected Tree meets the standards of Group 1 or Group 2 Trees shall be valid for a period of ten years following the date of such determination. (3) For the purposes of this Chapter, “Biological tree resources” shall have the same meaning as “Protected trees” as defined in Section 8.10.020 (j). (4) For the purposes of this Chapter, “Biological and Aesthetic tree resources” shall consist of those trees that are both Biological tree resources and that have been designated as Group 1 Trees by the Director in consultation with the City Arborist based on a finding that the tree possesses at least one of the following characteristics: (i) Functions as an important or prominent visual feature relating to the existing area, proposed conditions, pedestrian or vehicular thoroughfares; (ii) Contributes to a larger grove or shared canopy, landscape theme or otherwise provides important visual balance to existing buildings, trees or streetscape; or (iii) Possesses unique character as defined in the designation of Heritage Trees, (Section 8.10.090) such as, an outstanding specimen of a desirable species, distinctive in form, size, age, location or historical significance. (5) Within the HD district, Protected trees fall into one of the following categories: (i) Group 1 Trees: Biological and Aesthetic tree resources which are identified in Table 4. If a Protected tree is not listed in Table 4, or if more than ten years have elapsed since the City’s determination whether the tree is a Group 1 Tree, the Director shall determine whether the tree meets the definition of Section 18.36.070(a)(4), above prior to issuance of any permit to remove or relocate the tree; (ii) Group 2 Trees: Biological tree resources that are identified in Table 4. If a Protected tree is not listed in Table 4, or if more than ten years have elapsed since the City’s determination whether the tree is a Group 2 Tree, the Director shall determine whether the tree meets the definition of Section 18.36.070(a)(3), above prior to issuance of any permit to remove or relocate the tree. ** Not Yet Approved ** 110503 jb 0130755 10 Table 4: Protected Tree Groups Tree Group Tree Tag Number (from SUMC FEIR) Tree Location 33, 34, 35, 36, 37, 38, 39, 40, 41 Kaplan Lawn 317, 318, 319, 320, 322, 323*, 324* FIM 1 1 608, 996* Welch Road 325, 326, 327, 328 FIM 1 333, 373, 374, 375, 383, 387, 388, 410, 425, 428, 433, 436, 438, 439, 440, 441, 448, 450, 478, 479, 538, 544 SHC 887, 960, 961, 966, 967, 968, 969, 970, 1010, 1011, 1016, 1017, 1092, 1096, 1097, 1098, 1102, 1103, 1104, 1107, 1108, 1109, 1111, 1119, 1170, 1172, 1174, 1175, 1176, 1177 LPCH 2 1349, 1350, 1351, 1352, 1365,1366, 1388, 1389, 1390, 1391, 1393, 1399, 1400, 1420, 1435, 1438, 1439, 1442, 1469, 1481, 1483, 1485, 1500, 1503, 1506 Hoover *Trees to be relocated. (b) Preservation. Notwithstanding Chapter 8.10, Group 1 Trees shall not be removed unless they meet the standard in Section 8.10.050(a). Authorized relocation of Group 1 Trees shall not constitute removal. (c) Relocation. Notwithstanding Chapter 8.10, Group 1 and Group 2 Trees may be relocated upon issuance of a Protected Tree Relocation Permit from the Director in consultation with the City Arborist. For purposes of this section, authorized relocation of Group 1 and 2 Trees shall not constitute removal. The requirements for a Protected Tree Relocation Permit shall be as follow: (1) The applicant shall submit a proposed Tree Relocation and Maintenance Plan (TRMP) that (i) evaluates the feasibility of moving the tree to another location on or near the development site; and (ii) identifies the actions to be taken to increase the likelihood that relocation is successful including the following information: pre-relocation irrigation, relocation procedures, monitoring inspections, and post- relocation tree irrigation and maintenance. (2) If the Director determines the proposed relocation is feasible, the Director shall issue a Protected Tree Relocation Permit requiring the following: (i) The Protected Tree Relocation Permit shall specify the actions required to increase the likelihood that relocation is successful. (ii) Location of relocated trees is subject to review and approval by the Director in consultation with the City Arborist. (iii) If the relocated tree does not survive after a period of five years, the relocated tree shall be replaced with a tree or a combination of trees and Tree Value Standards consistent with Section 3.20, ** Not Yet Approved ** 110503 jb 0130755 11 Table 3-1 Tree Canopy Replacement, of the Tree Technical Manual. If, after relocation, a relocated tree is disfigured, leaning with supports needed, or in decline with a dead top or dieback of more then 25 percent, the tree shall be considered a total loss and replaced as described in this subsection. (iv) The applicant shall provide a security guarantee for relocated trees, as determined by the Director of Planning and Community Environment, in consultation with the City Arborist, in an amount consistent with the Tree Technical Manual. (d) Removal of Group 2 Trees. Notwithstanding Chapter 8.10, removal of Group 2 Trees shall be allowed in the HD district, upon issuance of a Protected Tree Removal Permit from the Director in consultation with the City Arborist. The requirements for a Protected Tree Removal Permit shall be as follows: (1) Group 2 Trees that are removed without being relocated shall be replaced in accordance with the ratios set forth in Table 3-1 of the City of Palo Alto Tree Technical Manual in the following way: (i) The Protected Tree Removal Permit issued shall stipulate the tree replacement requirements for the removed tree, including number of trees, size, location, and irrigation. The number and size of trees required for replacement shall be calculated in accordance with Table 3-1 of the Tree Technical Manual. (ii) The difference between the required tree replacement and the number of trees that cannot be feasibly planted on site shall be mitigated through contribution to the City of Palo Alto Forestry Fund as provided in Section 3.15 of the Tree Technical Manual. Payment to the Forestry Fund would be in the amount representing the fair market value, as described in Section 3.25 of the Tree Technical Manual, of the replacement trees that cannot be feasibly planted on site. (2) Location of replacement trees is subject to review and approval by the Director in consultation with the City Arborist. (e) Appeal. Any person seeking the Director's classification of Group 1 or 2 Trees, or seeking the approval to remove or relocate a Protected tree pursuant to this Chapter who is aggrieved by a decision of the Director may appeal such decision in accordance with the procedures set forth in Chapter 18.78 (Appeals). 18.36.080 Signs Signs within the HD district shall comply with Chapter 16.20, except as follows: The requirements for Directory Signs and Directional Signs set forth in Section 16.20.160 are modified to allow such Directory and Directional signs to be up to 12 feet in height, thirty square feet in area, and located no less than two feet from the nearest public right-of-way unless an alternative location is approved by the Planning Director. ** Not Yet Approved ** 110503 jb 0130755 12 18.36.090 Historic Review Any exterior alterations to the Stanford Hoover Pavilion and any new construction on the Stanford Hoover Pavilion site shall be provided to the Historic Resources Commission for comment prior to final review by the Architectural Review Board. In reviewing any new construction on the Stanford Hoover Pavilion site the prime concern of the Historic Review Board shall be to ensure that the new construction is differentiated from the old and is compatible with the massing, size, scale, and architectural features to protect the historic integrity of the Hoover Pavilion building and site. 18.36.100 Architectural Review Architectural review, as required in Chapters 18.76 and 18.77 of the Zoning Ordinance, is required prior to the issuance of any building permit in the HD district. Architectural review for landscape and design features linking building areas within the HD district may be implemented through approval of Design Guidelines, which may be modified in the same manner as other architectural review approvals. Directory Signs, Construction Project Signs, and Directional Signs consistent with the area and location regulations set forth in Section 16.20.160 (as modified by Section 18.36.080) and temporary, unsecured pedestrian amenities such as café seating and furniture are exempt from Architectural review. 18.36.110 Grandfathered Uses (a) Applicability (1) Except as provided in this section, nonconforming uses and noncomplying facilities are governed by Chapter 18.70 of the Zoning Ordinance. (2) Any use allowed as a conditional use but legally existing as a permitted use prior to the effective date of amendments to the Zoning Ordinance modifying the allowable uses in the HD district shall be considered a conforming use, except that a conditional use permit shall be required if the use is expanded as outlined in Section 18.70.020. 18.36.120 Consistency with Development Agreement It is the intent of the City Council that the provisions of this Chapter 18.36 be interpreted consistent with the terms of the Development Agreement between the City of Palo Alto and Stanford University approved and adopted by Ordinance No. _______. SECTION 8. The EIR for this project was certified by the City Council on June 6, 2011. / / / / / / / / ** Not Yet Approved ** 110503 jb 0130755 13 SECTION 9. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Asst. City Attorney City Manager ____________________________ Director of Administrative Services ** Not Yet Approved ** 110503 jb 0130755 14 EXHIBIT “A” * NOT YET APPROVED * 110615 jb 0130722 1 Ordinance No. ________ Ordinance of the Council of the City of Palo Alto Approving a Development Agreement Between the City of Palo Alto and Stanford Hospital and Clinics; Lucile Salter Packard Children’s Hospital at Stanford; and the Board of Trustees of the Leland Stanford Junior University The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Recitals. A. Stanford Hospital and Clinics, a California nonprofit public benefit corporation (“SHC”), Lucile Salter Packard Children’s Hospital at Stanford, a California nonprofit public benefit corporation (“LPCH”), and the Board of Trustees of the Leland Stanford Junior University, a body having corporate powers under the laws of the State of California (“University,” and together with SHC and LPCH, collectively, the “SUMC Parties”) intend to replace, retrofit and enhance their facilities in the City of Palo Alto. In conjunction with certain state-mandated retrofit and replacement work, the SUMC Parties also intend to expand their hospital, clinic and medical office facilities to meet patient demand. To facilitate this, the SUMC Parties have applied to the City of Palo Alto (“City”) for a development agreement pursuant to Sections 65864-65869.5 of the California Government Code and the City’s Resolution No. 6597 (“Agreement”). Pursuant to this Agreement, the SUMC Parties would provide certain community benefits and voluntary mitigation measures. B. In exchange for these community benefits and voluntary mitigation measures, and in recognition of the substantial public benefits provided by the SUMC Parties’ facilities and operations, the City would vest for a period of thirty (30) years the SUMC Parties’ rights to develop and use their facilities in Palo Alto in accordance with the Project Approvals, and would streamline the process for obtaining Subsequent Approvals, as described in the Agreement. C. Under the terms of the Agreement, the parties have the right to unilaterally terminate this Agreement, if this ordinance is subject to a referendum or if litigation is commenced seeking to rescind the Project Approvals or the City’s decision to enter into this Agreement within one year from the date of the filing of the Notice of Determination. SECTION 2. Findings. The City Council finds and determines that: A. Notice of intention to consider the development agreement has been given pursuant to Government Code section 65867. B. The City’s Planning and Transportation Commission and City Council have given notice of intention to consider this Agreement, have conducted public hearings thereon * NOT YET APPROVED * 110615 jb 0130722 2 pursuant to Government Code section 65867 and City’s Resolution No. 6597, and the City Council has found that the provisions of this Agreement are consistent with City’s Comprehensive Plan, as amended. C. The City has prepared and certified an EIR and has imposed mitigation measures as Conditions of Approval prior to the execution of this Agreement. SECTION 3. The City Council hereby approves the Development Agreement between the City of Palo Alto and Stanford Hospital and Clinics, a California nonprofit public benefit corporation (“SHC”), Lucile Salter Packard Children’s Hospital at Stanford, a California nonprofit public benefit corporation (“LPCH”), and the Board of Trustees of the Leland Stanford Junior University, a copy of which is attached hereto as Exhibit "A", and authorizes the Mayor to execute the Agreement on behalf of the City. SECTION 4. The City Clerk is directed to cause a copy of the development agreement to be recorded with the County Recorder not later than ten (10) days after it becomes effective. SECTION 5. The City Council adopts this ordinance in accordance with the California Environmental Quality Act (“CEQA”) findings adopted by Resolution No. 9168. / / / / / / / / / / / / / / / / / / / / / / / / // * NOT YET APPROVED * 110615 jb 0130722 3 SECTION 6. This ordinance shall be effective upon the thirty-first (31st) day after its adoption. INTRODUCED: PASSED: AYES: NOES: ABSTENTIONS: NOT PARTICIPATING: ABSENT: ATTEST: APPROVED: __________________________ __________________________ City Clerk Mayor __________________________ APPROVED AS TO FORM: City Manager __________________________ __________________________ Senior Asst. City Attorney Director of Planning and Community Environment This document is recorded for the benefit of the City of Palo Alto and is entitled to be recorded free of charge in accordance with Section 6103 of the Government Code. After Recordation, mail to: City Clerk City of Palo Alto 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 DEVELOPMENT AGREEMENT Between CITY OF PALO ALTO, a chartered city and STANFORD HOSPITAL AND CLINICS, a California nonprofit public benefit corporation, LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT STANFORD, a California nonprofit public benefit corporation, and BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws of the State of California 110614 sh 0130788 TABLE OF CONTENTS R E C I T A L S ...................................................................................................... 1 A. Definitions................................................................................................... 1 B. Outline of Terms......................................................................................... 1 C. Nature and Purpose of Development Agreements...................................... 2 D. Authority for City Development Agreements............................................. 2 E. Comprehensive Plan................................................................................... 2 F. Property Interests........................................................................................ 2 G. Seismic Safety Requirements ..................................................................... 2 H. Seismic Safety Project Components........................................................... 3 I. Project Purposes.......................................................................................... 3 J. Project Approvals........................................................................................ 3 K. Compliance with City Requirements.......................................................... 3 L. Binding Future Actions............................................................................... 4 M. Elimination of Uncertainty ......................................................................... 4 N. Orderly Development.................................................................................. 4 O. Nature of Recitals ....................................................................................... 5 A G R E E M E N T 1. Definitions................................................................................................... 5 (a) Annual Payment.............................................................................. 5 (b) Applicable Rules............................................................................. 5 (c) Architectural Review Approval...................................................... 5 (d) City.................................................................................................. 5 (e) Comprehensive Plan....................................................................... 5 (f) Conditions of Approval................................................................... 5 (g) Construction Period. ....................................................................... 6 (h) County Property.............................................................................. 6 (i) Days................................................................................................ 6 (j) Design Guidelines........................................................................... 6 (k) Development Agreement Act. ........................................................ 6 (l) Development Impact Fees............................................................... 6 (m) Discretionary Action and Discretionary Approval......................... 6 (n) Effective Date................................................................................. 7 (o) Hospital Foundation Permit............................................................ 7 (p) Hospital Occupancy Permit............................................................ 7 (q) Hospitals. ........................................................................................ 7 (r) Hospital Zoning Ordinance............................................................. 7 (s) HSSA.............................................................................................. 7 (t) Initial Payment Date. ...................................................................... 8 (u) Initial Project Approvals................................................................. 8 (v) Life Of The Project......................................................................... 8 (w) LPCH.............................................................................................. 8 (x) Mortgage......................................................................................... 8 i of v 110614 sh 0130788 (y) Mortgagee....................................................................................... 8 (z) Net New Square Footage................................................................ 8 (aa) Occupancy Permit........................................................................... 9 (bb) OSHPD. .......................................................................................... 9 (cc) Party................................................................................................ 9 (dd) Project............................................................................................. 9 (ee) Project Approvals.......................................................................... 10 (ff) Property......................................................................................... 10 (gg) SB 1953......................................................................................... 10 (hh) SHC............................................................................................... 10 (ii) School of Medicine....................................................................... 10 (jj) Subsequent Applicable Rules. ...................................................... 10 (kk) Subsequent Approvals. ................................................................. 11 (ll) Subsequent Rules.......................................................................... 11 (mm) SUMC........................................................................................... 11 (nn) SUMC Parties............................................................................... 11 (oo) Term.............................................................................................. 11 (pp) University...................................................................................... 11 (qq) Vested Right.................................................................................. 11 (rr) Zoning Ordinance......................................................................... 11 2. Interest of the SUMC Parties.................................................................... 11 3. Binding Effect........................................................................................... 12 4. Negation of Agency.................................................................................. 12 5. SUMC Parties’ Promises.......................................................................... 12 (a) Health Care Benefits..................................................................... 12 (i) Summary of Intrinsic Benefits.......................................... 12 (ii) Fund for Healthcare Services............................................ 13 (iii) Fund for Community Health and Safety Programs........... 13 (b) Palo Alto Fiscal Benefits. ............................................................. 14 (i) Payment of Sales and Use Taxes...................................... 14 (A) Designation of Project Site for Construction Period Sales and Use Tax Purposes. ............................................ 14 (B) Direct Pay Permit for Sales and Use Taxes from Existing Facilities.............................................................. 15 (C) Establishment of Retail Sales and Use Tax Reporting District.............................................................. 15 (ii) Assurance of Construction Use Tax Revenue. ................. 15 (A) Funds To Be Used In The Event Of A Shortfall... 15 (B) Monitoring Construction Use Tax Revenue......... 15 (C) Reconciliation and Payment of Shortage or Surplus.................................................................. 16 (D) Costs of Monitoring and Compliance................... 17 (iii) Funding of Operating Deficit............................................ 17 (iv) Payment of Utility User Tax............................................. 17 (v) School Fees....................................................................... 18 110614 sh 0130788 ii of v (c) Traffic Mitigation and Reduced Vehicle Trips............................. 18 (i) Summary of Existing Programs........................................ 18 (ii) Menlo Park Traffic Mitigation.......................................... 19 (A) Payment...................................................................... 19 (B) Use of Funds............................................................... 19 (iii) East Palo Alto Voluntary Mitigation 20 (iv) Contributions to AC Transit.............................................. 20 (v) Opticom Payments............................................................ 20 (A) Opticom Systems.................................................. 21 (vi) Caltrain Go Passes............................................................ 21 (vii) Marguerite Shuttle Service. .............................................. 21 (viii) Transportation Demand Management Coordinator.......... 22 (ix) Monitoring of TDM programs.......................................... 22 (A) Submission of Reports.......................................... 23 (B) 2025 Mode Split Penalty....................................... 23 (d) Linkages........................................................................................ 24 (i) Improvements to Enhance Pedestrian and Bicycle Connection from Intermodal Transit Center to El Camino Real/Quarry Road Intersection. .................................................... 24 (ii) Public Right-of-Way Improvements to Enhance Pedestrian and Bicycle Connection on Quarry Road..................................... 24 (iii) Stanford Barn Connection................................................. 25 (e) Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing. ..................................................................... 25 (i) Payment............................................................................. 25 (ii) Use of Funds..................................................................... 25 (iii) Use of Housing Credit. ..................................................... 25 (f) Climate Change............................................................................. 26 (i) Sustainability Programs Benefit. ...................................... 26 (g) Administrative Costs..................................................................... 26 (h) Satisfaction of All Conditions of Approval.................................. 26 6. City’s Promises......................................................................................... 27 (a) Vested Rights to Develop and Use the Property........................... 27 (b) Permitted and Conditionally Permitted Uses................................ 27 (c) Maximum Density and Intensity of Uses...................................... 27 (d) Other Development Standards...................................................... 27 (e) Subsequent Rules.......................................................................... 27 (f) Subsequent Approvals. ................................................................. 28 (g) Limitation on Architectural Review Approvals............................ 28 (h) Annexation of County Property.................................................... 28 (i) Utility and Storm Drain Connections. .......................................... 28 (j) Waste Treatment Capacity............................................................ 29 (k) Storm Drain Capacity. .................................................................. 29 (l) OSHPD. ........................................................................................ 29 (m) No Other Dedications. .................................................................. 30 110614 sh 0130788 iii of v (n) No Other Public Improvements or Financial Contributions......... 30 (o) No Obligation to Develop............................................................. 30 (p) Timing for Performance of Conditions of Approval.................... 30 7. Exceptions................................................................................................. 31 8. Exclusions................................................................................................. 31 (a) Sewer Facilities, Storm Drains and Runoff.................................. 31 (b) Limited Effect on Right to Tax, Assess, or Levy Fees or Charges31 (c) No Limit on Right of City to Adopt and Modify Uniform Codes.33 (d) No Limit on Power of City to Adopt and Apply Rules Governing Provision and Use of Utility Services........................................... 33 (e) California Environmental Quality Act Compliance (CEQA)....... 33 (f) No General Limitation on Future Exercise of Police Power........ 33 9. Indemnity.................................................................................................. 33 10. Cooperation and Implementation.............................................................. 34 11. Identification of Applicable Rules............................................................ 34 12. Periodic Review of Compliance............................................................... 35 (a) Periodic Review............................................................................ 35 (b) Special Review.............................................................................. 35 (c) Annual Report............................................................................... 35 (d) Supplement to the Annual Report................................................. 35 (e) Procedure...................................................................................... 36 (f) Default by SUMC Parties............................................................. 36 (g) Proceedings Upon Modification or Termination.......................... 37 (h) Hearings on Modification or Termination.................................... 37 (i) Certificate of Compliance............................................................. 37 13. Default by City.......................................................................................... 38 14. Remedies for Default................................................................................ 38 15. Modification, Amendment or Cancellation by Mutual Agreement.......... 39 16. Superseding State or Federal Law............................................................ 40 17. Notices...................................................................................................... 40 18. Term of Agreement; Force Majeure......................................................... 41 (a) Basic Term.................................................................................... 41 (b) Extension for Referendum, Litigation, Default or Moratorium.... 41 (c) Force Majeure............................................................................... 41 19. Assignment; Right to Assign.................................................................... 42 (a) Assignment. .................................................................................. 42 (i) Right to Assign. ................................................................ 42 (ii) Release of Transferor........................................................ 42 20. Mortgagee Protection................................................................................ 43 (a) No Impairment.............................................................................. 43 (b) Notice of Default by the SUMC Parties. ...................................... 43 (c) Notice............................................................................................ 44 (d) Transfer of Ownership.................................................................. 44 21. Miscellaneous. .......................................................................................... 44 (a) Effect of Recitals........................................................................... 44 110614 sh 0130788 iv of v 110614 sh 0130788 v of v (b) Construction.................................................................................. 44 (c) Severability................................................................................... 45 (d) Time.............................................................................................. 45 (e) Waiver........................................................................................... 45 (f) Governing State Law.................................................................... 45 (g) Determination of Compliance....................................................... 45 (h) Entire Agreement.......................................................................... 45 (i) No Third Party Beneficiaries........................................................ 46 (j) Authority to Execute..................................................................... 46 (k) Administrative Appeal.................................................................. 46 (l) Exhibits......................................................................................... 46 (m) Signature Pages............................................................................. 47 (n) Precedence.................................................................................... 47 (o) Recordation................................................................................... 47 (p) Referendum or Challenge............................................................. 47 (i) City’s Reimbursement Obligation.................................... 48 (ii) Effect of Suspension or Termination of Agreement......... 49 (iii) Limit of City’s Reimbursement Obligations..................... 49 DEVELOPMENT AGREEMENT THIS DEVELOPMENT AGREEMENT (hereinafter “Agreement”) is entered into as of this ___ day of _______, 2011, by and between the CITY OF PALO ALTO, a chartered city of the State of California (“City”), STANFORD HOSPITAL AND CLINICS, a California nonprofit public benefit corporation (“SHC”), LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT STANFORD, a California nonprofit public benefit corporation (“LPCH”), and THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws of the State of California (“University,” and together with SHC and LPCH, collectively, the “SUMC Parties”). R E C I T A L S THIS AGREEMENT is entered into on the basis of the following facts, understandings and intentions of the parties: A. Definitions. These Recitals use certain terms with initial capital letters that are defined in Section 1 of this Agreement. City and the SUMC Parties intend to refer to those definitions when the capitalized terms are used in these Recitals. B. Outline of Terms. Stanford Hospital and Clinics and Lucile Salter Packard Children’s Hospital provide substantial and important public benefits through operation of world-class health care facilities and provision of a Level 1 trauma center located in the City of Palo Alto. The Stanford School of Medicine, which is part of Stanford University, provides substantial and important public benefits through research that will be translated into life-saving and life-enhancing medical treatments and procedures. To comply with the requirements of state law and to provide state-of-the-art medical and research facilities, the SUMC Parties intend to replace, retrofit and enhance their facilities in the City of Palo Alto. In conjunction with certain state-mandated retrofit and replacement work, the SUMC Parties also intend to expand their hospital, clinic and medical office facilities to meet patient demand. To facilitate this, the SUMC Parties have applied to the City for a development agreement pursuant to Sections 65864-65869.5 of the California Government Code and the City’s Resolution No. 6597. Pursuant to this development agreement, the SUMC Parties would provide certain community benefits and voluntary mitigations measures. In exchange for these community benefits and voluntary mitigation measures, and in recognition of the substantial public benefits provided by the SUMC Parties’ facilities and operations, the City would vest for a period of thirty (30) years the SUMC Parties’ rights to develop and use their facilities in Palo Alto in accordance with the Project Approvals, and would streamline the process for obtaining Subsequent Approvals, as described in this Agreement. 1 110614 sh 0130788 C. Nature and Purpose of Development Agreements. Development agreements were authorized by the State of California in 1979, through the adoption of Government Code Sections 65864-65869.5. These statutes authorize the parties to enter into binding agreements for the development of real property within the City. Because California has a “late vesting” rule, landowners usually cannot be certain that they can proceed with a development project until they have actually obtained a building permit and started building. This lack of certainty can discourage long range planning and investment and make it more difficult for cities to provide needed public facilities. A development agreement, in which a city agrees that, for a certain period of time, it will not change the rules applicable to a project, and the property owner agrees to assist with the provision of public facilities or to otherwise provide community benefits, can benefit all parties. D. Authority for City Development Agreements. Pursuant to Government Code Section 65865, the City adopted Resolution No. 6597 establishing procedures and requirements for consideration of development agreements in Palo Alto. E. Comprehensive Plan. In July of 1998, the City of Palo Alto adopted its current Comprehensive Plan, a document containing the City’s official policies on land use and community design, transportation, housing, natural environment, business and economics, and community services. Its policies apply to both public and private properties. The Plan is used by the City Council and Planning and Transportation Commission to evaluate proposed land use changes in the City, including the adoption of this Agreement. It is intended to guide City land use decisions. F. Property Interests. The University is the fee owner of certain Property. SHC leases from the University certain portions of the Property and operates the Stanford Hospital and Clinics, as well as medical offices thereon. LPCH leases from the University certain other portions of the Property, and operates the Lucile Salter Packard Children’s Hospital thereon. A portion of the Property is occupied by the University’s School of Medicine. A portion of the Property consisting of approximately 0.65 acres is in the unincorporated area of Santa Clara County. The balance of the Property is within the City of Palo Alto. G. Seismic Safety Requirements. 110614 sh 0130788 2 SB 1953 requires hospitals to retrofit or replace facilities that do not meet State-designated safety criteria by January 1, 2013. Further requirements must be met by 2030. If a hospital does not comply with these mandates, the State may revoke the hospital’s operating license. On September 30, 2010, Governor Schwarzenegger signed SB 608, which will provide SHC with the ability to apply for up to five additional years for extensions to meet seismic requirements. If the extensions are granted, the legislation sets a new deadline of January 1, 2018. Effective January 1, 2011, SHC may apply for a three-year extension of the structural compliance deadline; from January 1, 2013 to January 1, 2016. SHC may also be eligible for an additional two-year extension of the 2016 deadline, subject to certain patient safety criteria. The Office of Statewide Health Planning and Development is responsible for approving plans for construction work required by SB 1953. H. Seismic Safety Project Components. Several buildings on the Property require structural retrofit or replacement to comply with SB 1953 and other applicable laws. Also, many of the facilities within the Property require nonstructural renovations or replacement to comply with SB 1953. Portions of the School of Medicine that currently occupy space in structures used for hospital purposes must be physically separated from those structures or replaced in order to comply with SB 1953 requirements. In addition, new or replacement hospital structures must meet current standards specified by the California building code for hospitals; compliance with these standards necessitates increased square footage and height to accommodate current seismic structural requirements, patient safety requirements, air handling systems and mechanical duct work. I. Project Purposes. The City and the SUMC Parties desire that the Project is designed and constructed to achieve timely compliance with the requirements of SB 1953 and other applicable laws, to meet existing and projected future demand for patient care, to provide modern, state-of-the-art facilities designed to deliver high quality healthcare services and related teaching and research, and to meet regional needs for emergency and disaster preparedness. J. Project Approvals. The SUMC Parties have applied for, and the City has certified or approved, as applicable, certain environmental documents and land use approvals and entitlements relating to the development of the Project. These actions are identified on Exhibit B. K. Compliance with City Requirements. The City’s Planning and Transportation Commission and City Council have given notice of intention to consider this Agreement, have conducted public hearings thereon pursuant to Government Code section 65867 and City’s Resolution No. 6597, and the City Council has found that the provisions of this Agreement are consistent with City’s Comprehensive Plan, as amended. 110614 sh 0130788 3 L. Binding Future Actions. This Agreement will bind future City Councils to the terms and obligations specified in this Agreement and limit, to the degree specified in this Agreement and as authorized under state law, the future exercise of City’s ability to preclude development on the Property. M. Elimination of Uncertainty. This Agreement will eliminate uncertainty in planning and provide for the orderly development of the Property, eliminate uncertainty about the validity of exactions imposed by City, allow installation of necessary improvements, provide for public services appropriate to the development of the Project, and generally serve the public interest, both within the City of Palo Alto and in the surrounding region. N. Orderly Development. Development of the Project in accordance with this Agreement and the Project Approvals will provide for orderly development consistent with City’s Comprehensive Plan. The terms and conditions of this Agreement have undergone extensive review by City staff, its Planning and Transportation Commission and the City Council, and have been found to be fair, just and reasonable. Specifically, the City Council has found that: 1. The provisions of this Agreement and its purposes are consistent with the goals, policies, programs and standards specified in City’s Comprehensive Plan; 2. This Agreement will help attain important economic, social, environmental and planning goals of City and enhances and protects the public health, safety and welfare of the residents of the City of Palo Alto and the surrounding region. 3. The SUMC Parties will incur substantial costs in providing community benefits, including voluntary mitigation, in excess of that required to address the impacts of the Project; 4. This Agreement will mitigate significant environmental impacts; and 5. This Agreement will otherwise achieve the goals and purposes for which the Development Agreement Act (California Government Code Sections 65864-65869.5) was enacted. 110614 sh 0130788 4 O. Nature of Recitals. These recitals are intended in part to paraphrase and summarize this Agreement, however, the Agreement is expressed below with particularity and the Parties intend that their rights and obligations be determined by those provisions and not by the recitals. AGREEMENT NOW, THEREFORE, the parties do hereby agree as follows: 1. Definitions. In this Agreement, unless the context otherwise requires: (a) Annual Payment. “Annual Payment” means each annual payment subsequent to the first payment and shall be paid no later than August 31 of the year following the year in which the first payment is made. For example, if the Initial Payment Date is June, 2011, the next Annual Payment would be due by August 31, 2012. (b) Applicable Rules. “Applicable Rules” means the City ordinances, resolutions, rules, regulations and official policies in effect on the Effective Date, as amended by the Project Approvals. (c) Architectural Review Approval. “Architectural Review Approval” means the approval of an application for architectural review under the Applicable Rules, including without limitation the Hospital Zoning Ordinance. (d) City. “City” is the City of Palo Alto. (e) Comprehensive Plan. “Comprehensive Plan” is the 1998-2010 Palo Alto Comprehensive Plan, adopted in July 1998 and as amended through the Effective Date. (f) Conditions of Approval. “Conditions of Approval” are the conditions to the Project Approvals or Subsequent Approvals included in or incorporated by reference in an ordinance, resolution or motion granting a Project Approval or Subsequent Approval, and including the environmental mitigations adopted by the City Council. 110614 sh 0130788 5 (g) Construction Period. For purposes of payment, monitoring and reconciling Construction Use Tax payments in Section 5(b), “Construction Period” is the time period between the issuance of the first permit or approval by a public agency with jurisdiction over the Project, whether it be the City, OHSPD, or any other public agency, which allows the SUMC Parties to undertake development and construction activities contemplated by the Project, the issuance of which the Parties currently estimate to occur in 2011, and December 31, 2025. (h) County Property. “County Property” means the portion of the Property in the unincorporated area of Santa Clara County, consisting of approximately 0.65 acres. (i) Days. “Days” shall mean calendar days. (j) Design Guidelines. “Design Guidelines” means the Design Guidelines approved as part of the Project Approvals, as listed on Exhibit B. (k) Development Agreement Act. “Development Agreement Act” means Article 2.5 of Chapter 4, of Division 1 of the California Government Code (Sections 65864 - 65869.5). (l) Development Impact Fees. “Development Impact Fees” means all fees now or in the future collected by the City from applicants for new development (including all forms of approvals and permits necessary for development) for the funding of public services, infrastructure, improvements or facilities, but not including taxes or assessments, or fees for processing applications or permits or for design review. The fees included in this definition include, but are not limited to those fees set forth in Chapters 16.45, 16.47 and 16.58 of the Municipal Code, fees for traffic improvements and mitigation, and fees for other community facilities or related purposes (but not including any school fees imposed by a school district); provided nothing herein shall preclude City from collecting fees lawfully imposed by another entity having jurisdiction which City is required or authorized to collect pursuant to State law. (m) Discretionary Action and Discretionary Approval. “Discretionary Action” includes a “Discretionary Approval” and is an action or decision which requires the exercise of judgment, deliberation, and 110614 sh 0130788 6 which contemplates the imposition of revisions or conditions, by City, including any board, commission or department and any officer or employee thereof, in the process of approving or disapproving a particular activity, as distinguished from an activity which merely requires City, including any board, commission or department and any officer or employee thereof, to determine whether there has been compliance with applicable statutes, ordinances, regulations, or Conditions of Approval. (n) Effective Date. “Effective Date” means June 6, 2011. (o) Hospital Foundation Permit. “Hospital Foundation Permit” means the OSHPD Incremental Project Permit allowing either Hospital to construct the primary load bearing foundation for a new or expanded hospital building. The SUMC Parties’ best estimate of the anticipated date for issuance of the first Hospital Foundation Permit, based on current information, is by January 1, 2012. (p) Hospital Occupancy Permit. “Hospital Occupancy Permit” means issuance of all permits necessary to allow the first Hospital building to be used by members of the public for healthcare services. Issuance of a temporary occupancy permit for purposes of building preparations in advance of opening shall not trigger obligations based upon issuance of the Hospital Occupancy Permit. However, a temporary or partial occupancy permit that allows the Hospital building to be used by the public for healthcare services shall trigger obligations based upon issuance of the Hospital Occupancy Permit. The SUMC Parties’ best estimate of the anticipated date for issuance of the first Hospital Occupancy Permit, based on current information, is by January 1, 2018. (q) Hospitals. “Hospitals” means SHC and LPCH. (r) Hospital Zoning Ordinance. “Hospital Zoning Ordinance” is the ordinance of City, adopted as part of the Project Approvals, amending the Zoning Ordinance to revise and establish the permitted and conditionally permitted uses, intensity, and other standards and specifications applicable to the Property. (s) HSSA. “HSSA” means the Alfred E. Alquist Hospital Facilities Seismic Safety Act of 1973, as amended by the Alfred E. Alquist Hospital Facilities Seismic 110614 sh 0130788 7 Safety Act of 1983, and by SB 1953, as it may be further amended from time to time. (t) Initial Payment Date. “Initial Payment Date” means the date that is 45 days from the filing and posting of the Notice of Determination filed by the City after the second reading of the ordinance approving the Hospital District zoning and the ordinance approving this Development Agreement. (u) Initial Project Approvals. “Initial Project Approvals” means those entitlements, permits and approvals listed on Exhibit B. (v) Life Of The Project. “Life Of The Project” means fifty one years from the Effective Date. (w) LPCH. “LPCH” means Lucile Salter Packard Children’s Hospital at Stanford, a California nonprofit public benefit corporation. (x) Mortgage. “Mortgage” means and refers, singly and collectively, to any mortgages, deeds of trust, security agreements, assignments and other like security instruments encumbering all or any portion of the Property or any of the SUMC Parties’ rights under this Agreement. (y) Mortgagee. “Mortgagee” means and refers to the holder of any Mortgage encumbering all or any portion of the Property or any of the SUMC Parties’ rights under this Agreement, and any successor, assignee or transferee of any such Mortgage holder. (z) Net New Square Footage. “Net New Square Footage” means the amount of new square footage constructed pursuant to the Project Approvals, less the total amount of existing square footage demolished. For purposes of calculating applicable fees, the demolition of square footage of the structure at 1101 Welch Road, the 1973 Core Expansion building, and the 77 square foot hospital entry shall be credited against the fees for the new SHC hospital structure; demolition of the square footage of the structures at 701 and 703 Welch Road shall be credited against the fees for expansion of LPCH; demolition of the square footage of the Nurses’ cottage, 110614 sh 0130788 8 shops and sheds at the Hoover Pavilion Site shall be credited against the fees for the square footage of the new medical office building at the Hoover Pavilion Site; demolition of the Stone Building complex (1959 Hospital Buildings, including East, West, Core, Boswell, Grant, Alway, Lane and Edwards) shall be credited against the fees for new square footage for the University and SHC in the amount corresponding to the new square footage constructed by each entity. To the extent the SUMC Parties construct new buildings to replace the Stone Building complex and/or 1973 Core Expansion building prior to demolishing or vacating all or part of those structures, the SUMC Parties may, in their discretion, elect to take credit for future demolition of the Stone Building complex and/or 1973 Core Expansion building when calculating payment of fees for the new square footage. Construction of School of Medicine improvements for the University is not expected to result in any Net New Square Footage. (aa) Occupancy Permit. “Occupancy Permit” means a permit issued by any agency that allows a new or expanded structure to be used by members of the public for the intended uses of the facility. Issuance of a temporary occupancy permit for purposes of building preparations in advance of opening shall not trigger obligations based upon issuance of the Occupancy Permit. However, a temporary or partial occupancy permit that allows the building or structure to be used by the public for any of the intended uses of the facility shall trigger obligations based upon issuance of the Occupancy Permit. (bb) OSHPD. “OSHPD” means the Office of Statewide Health Planning and Development. (cc) Party. “Party” is a signatory to this Agreement, or a successor or assign of a signatory to this Agreement. (dd) Project. “Project” means development of the Property in accordance with the Applicable Rules, Project Approvals, and this Agreement, which is generally described as follows: (1) construction of the new SHC Hospital (in multiple phases), new SHC Clinic/Medical office buildings, new medical office/clinic building at the Hoover Pavilion site, new LPCH Hospital, new LPCH clinic/medical office space, new buildings for the School of Medicine, new SHC parking structure, new LPCH parking structure, new clinics parking structure at the Main SUMC Site, new parking structure at the Hoover Pavilion Site, Welch Road widening, Durand Way connector road, new driveways and drop-off areas, other roadway improvements, new heliport, and miscellaneous accessory 110614 sh 0130788 9 structures, surface parking, pavement and landscape improvements; (2) renovation and remodeling of existing hospital, clinic and medical office facilities including the Hoover Pavilion; and (3) demolition of the 1959 Stone Building complex (hospital and School of Medicine buildings), 1973 Core Expansion building, 1101 Welch Road medical offices, hospital entry, nurses’ cottage, miscellaneous shops and storage buildings at the Hoover Pavilion Site, 701 and 703 Welch Road medical offices, Parking Structure 3, Falk Lot 5, a portion of the Hoover Pavilion surface parking lot, and other miscellaneous surface parking, pavement and landscaped areas. (ee) Project Approvals. “Project Approvals” means the approvals, certifications or actions listed on Exhibit B and any Subsequent Approvals, including all Conditions of Approval. (ff) Property. “Property” means the real property more particularly described in Exhibit A. (gg) SB 1953. “SB 1953” means Senate Bill 1953 (Chapter 740, 1994), California Health and Safety Code Section 130000 – 130070 (amending the Alfred E. Alquist Hospital Seismic Safety Act of 1983). (hh) SHC. “SHC” means Stanford Hospital and Clinics, a California nonprofit public benefit corporation. (ii) School of Medicine. “School of Medicine” means the Stanford University School of Medicine, which is part of the University. (jj) Subsequent Applicable Rules. “Subsequent Applicable Rules” means the ordinances, resolutions, rules, regulations and official policies of City, as they may be adopted and effective after the Effective Date that do not conflict with the Applicable Rules, or that are expressly made applicable to the subject matter of this Agreement by Sections 7 and 8. 110614 sh 0130788 10 (kk) Subsequent Approvals. “Subsequent Approvals” means any approval relating to the Project issued by the City upon request of any SUMC Party after the Effective Date, including Discretionary Approvals and ministerial approvals. (ll) Subsequent Rules. “Subsequent Rules” means all City ordinances, resolutions, rules, regulations and official policies in effect at the time a City action is to be taken that would apply to the Project had this Agreement not been adopted. (mm) SUMC. “SUMC” means the Stanford University Medical Center. (nn) SUMC Parties. “SUMC Parties” means SHC, LPCH, and the University. (oo) Term. “Term” means the term of this Agreement as set forth in Section 18. (pp) University. “University” means the Board of Trustees of the Leland Stanford Junior University, a body having corporate powers under the laws of the State of California. (qq) Vested Right. “Vested Right” means a property right conferred by this Agreement that may not be rescinded, reduced, revoked or abrogated by the City. (rr) Zoning Ordinance. “Zoning Ordinance” is the zoning ordinance for the City of Palo Alto (Title 18 of the Palo Alto Municipal Code). 2. Interest of the SUMC Parties. Each of the SUMC Parties represent that, as of the Effective Date, it has a legal or equitable interest in all or a portion of the Property as required by Section 65865 of the California Government Code. 110614 sh 0130788 11 3. Binding Effect. Subject to the provisions of Section 19 below, this Agreement, and all of the terms and conditions hereof, shall run with the land and shall be binding upon and inure to the benefit of the parties and their respective assigns, heirs or other successors in interest. 4. Negation of Agency. The parties acknowledge that, in entering into and performing this Agreement, the City, on the one hand, and the SUMC Parties, on the other hand, are each acting as an independent entity and not as an agent of the other in any respect. Nothing contained herein or in any document executed in connection herewith shall be construed as making City the joint venturer or partner of any of the SUMC Parties, or any of the SUMC Parties the joint venturer or partner of the City. 5. SUMC Parties’ Promises. (a) Health Care Benefits. (i) Summary of Intrinsic Benefits. Stanford University Medical Center is recognized as a global leader in medical care and research, having pioneered advancements in transplantation medicine, cancer care, prenatal diagnosis and treatment, and diabetes and cholesterol treatments. In 2009, the SHC and LPCH provided the following benefits and services: 36,559 inpatients admitted 48,744 emergency department visits 4,759 babies delivered $262.6 million in uncompensated medical services, charity care, and community programs. The SUMC Parties served 64 percent of Palo Alto residents who required hospitalization in 2009. The Project will enable the SUMC Project sponsors to continue this important work, and the addition of more beds for adults and children will alleviate overcrowding and allow the hospitals to serve patients who currently must be turned away. The hospitals also provide the only Level 1 Trauma Center between San Francisco and San Jose. The Trauma Center and the Emergency Department ensure critical community emergency preparedness and response resources for the community in the event of an earthquake, pandemic, or other major disaster. 110614 sh 0130788 12 (ii) Fund for Healthcare Services. Not later than the Initial Payment Date, and subject to the provisions in Section 21(p), the Hospitals will designate for Healthcare Services the amount of Three Million Dollars ($3,000,000), which amount shall increase by 4.5% per year through 2025, and thereby will total Five Million Six Hundred Thousand Dollars ($5,600,000) by December 31, 2025. After completing the reconciliation of construction use tax payments described in Section 5(b)(ii)(C), the Hospitals shall use the resulting Fund for Healthcare Services by spending the fund in even increments over a ten-year period from 2026 through 2036 to assist residents of Palo Alto who have self-payment responsibilities beyond their financial means, to pay healthcare services (“Patient Service Program”). If in any year less than one- tenth of the Fund for Healthcare Services is used by the Patient Services Program, the excess shall be used in any one or all subsequent years or added to the Fund for Community Health and Safety Programs described in Section 5(a)(iii) below. The Patient Services Program shall be in addition to the Hospitals’ Financial Assistance/Charity Care Policy dated August 2010, as amended from time to time, and in addition to any coverage afforded by the new federal Health Care and Education Reconciliation Act and subsequent amendments. The Hospitals, in their reasonable discretion, shall develop criteria for determining whether patients are qualified to receive assistance from the Patient Services Program based on Palo Alto residency status and financial need. The Hospitals shall report the criteria used to determine eligibility for assistance from the Patient Services Program, comparative criteria used to determine eligibility for assistance under the Hospitals’ charity policies (in order to verify that the Patient Services Program is in addition to the Hospitals’ charity policies and other federal requirements) and their disbursements under the Patient Services Program annually, as part of the annual report described in Section 12(a). All reporting will comply with applicable privacy laws and policies, as well as the privacy policies of the Hospitals. If at any time the Hospitals and City mutually determine that the Patient Services Program creates undue administrative burdens or is not needed by the Palo Alto community in view of other available programs, the Hospitals shall contribute, in annual installments, the remainder of the funds allocated to the Patient Services Program to the Community Health and Safety Program Fund described in Section 5(a)(iii) below. (iii) Fund for Community Health and Safety Programs. Not later than the Initial Payment Date, and subject to the provisions in Section 21(p), the SUMC Parties shall contribute, in a single lump sum payment, Four Million Dollars ($4,000,000) (the “Community Health and Safety Program Fund”) to the City, to be held in a separate account and to be distributed to selected community health programs that benefit residents of the City, which amount could be spent at the City Council’s discretion in whole or in part on the Project Safety Net Program. The SUMC Parties and the City shall establish a 110614 sh 0130788 13 joint committee to evaluate proposals regarding the other specific programs to receive funding, composed of two representatives selected by the SUMC Parties and two representatives selected by the City. The joint committee may choose to coordinate its efforts with the City’s Human Relations Commission, and the City’s representatives on the committee may be members of the Human Relations Commission. The joint committee shall make annual recommendations to the City Council regarding proposed disbursements from the Community Health and Safety Program Fund, and the City Council shall use its reasonable discretion to decide whether to accept, reject or modify the joint committee recommendations. The City shall keep the funds paid by the SUMC Parties to the Community Health and Safety Program Fund in a separate account, to be used only for the purposes described in this Section 5(a)(iii). The City shall deliver an annual report of disbursements from the Community Health and Safety Program Fund in accordance with Section 12(d) below. (b) Palo Alto Fiscal Benefits. (i) Payment of Sales and Use Taxes. The SUMC Parties shall use their best efforts to maximize the City’s allocation of sales and use taxes associated with Project construction and operation as follows: (A) Designation of Project Site for Construction Period Sales and Use Tax Purposes. The SUMC Parties shall accrue or self report sales and use taxes for the benefit of the City pursuant to the applicable regulations of the State Board of Equalization (the “SBOE”) regulations, and any additional regulations issued or amendments made thereto, for the purpose of maximizing the City’s allocation of construction use tax revenues derived from the Project available under the applicable laws and regulations. To this end, the SUMC Parties shall use their best efforts to the extent allowed by law to: (i) obtain all permits and licenses necessary to maximize the City’s allocation of construction use taxes derived from the Project, including but not limited to California Seller’s Permits, Use Tax Direct Payment Permits, and any other license or permit necessary or desirable to maximize the City’s allocation of sales and use taxes derived from the Project; (ii) designate, and require its contractors and subcontractors to designate, the Property as the place of sale of all “fixtures” furnished and/or installed as part of the Project; (iii) designate, and require all its contractors and subcontractors to designate, the Property as the place of use of all “materials” used in the construction of the Project; and (iv) require all contractors and subcontractors to allocate the local sales and use taxes derived from their contracts directly to the City. The SUMC Parties shall, and shall use their best efforts to require their contractors and subcontractors to, complete and file any forms as the SBOE requires to effect the designations required by this Section pursuant to the applicable regulations of the SBOE. The SUMC Parties shall bear all costs associated with its activities under this Section 5(b)(i)(A). This Section 5(b)(i)(A) 110614 sh 0130788 14 does not require the SUMC Parties to establish a purchasing entity or office in the City of Palo Alto. (B) Direct Pay Permit for Sales and Use Taxes from Existing Facilities. Within thirty (30) days of the Effective Date, the Hospitals shall begin and diligently complete the process necessary to obtain a use tax direct pay permit from the State of California in order to increase, on an ongoing basis, the City tax allocation for the Hospitals’ purchases. The Hospitals shall maintain the use tax direct pay permit for the Life Of The Project, unless the State of California ceases to continue to administer the use tax direct pay permit program or a substantially equivalent program. (C) Establishment of Retail Sales and Use Tax Reporting District. The SUMC Parties shall cooperate in good faith with the City to assist the City in establishing and administering a Retail Sales and Use Tax Reporting District that includes the Property and the Project, to enable the City to track the generation, allocation, reporting and payment of sales and use taxes derived from the Project. Such cooperation shall include providing the City with a list of all SBOE Permit Codes assigned to the SUMC Parties’ operations and activities on the Property and associated with the Project, and the physical locations (e.g., addresses) associated with such SBOE Permit Codes. (ii) Assurance of Construction Use Tax Revenue. The SUMC Parties shall take the following steps to provide reasonable assurance to the City that it will receive no less than Eight Million, One Hundred Thousand Dollars ($8,100,000) in construction use tax revenues resulting from the Project by December 31, 2025: (A) Funds To Be Used In The Event Of A Shortfall. As provided in Section 5(a)(ii), the Hospitals will designate the amount of Three Million Dollars ($3,000,000), which amount shall increase by 4.5% per year through 2025, and thereby will total Five Million Six Hundred Thousand Dollars ($5,600,000) by December 31, 2025. (B) Monitoring Construction Use Tax Revenue. During the Construction Period, the SUMC Parties shall use their best efforts to require Project contractors and subcontractors to report to the SUMC Parties the permits obtained and payments made pursuant to Section 5(b)(i)(A). Within six (6) months of the conclusion of each calendar year during the Construction Period, the SUMC Parties will submit to the City a report to be used by the City to monitor payment of construction use taxes and to determine the 110614 sh 0130788 15 share of such construction use taxes that the City has received as a result of the Project (“Monitoring Report”). The report shall include the following information: (i) a self-accrual report for the year identifying purchases made, purchase prices and taxes pertinent to such purchases for owner supplied items; and (ii) a memorandum for the year identifying contractor, sub-contractor, sub- contractor vendor, supplier and other similarly situated persons from whom purchases were made, where such contractor, sub-contractor, vendor, and/or other similarly situated party may allocate taxes directly to the City rather than through SUMC Parties' self-accrual system. Within sixty (60) days of receiving the SUMC Parties’ Monitoring Report, the City shall provide to the SUMC Parties its determination of the amount of construction use taxes that it has received as a result of the Project during the preceding calendar year, along with documentation of the basis for the City’s determination. In the event that the City’s local share of construction use tax revenues is diminished due to legislative/and or other legal changes, the City shall calculate the amount of construction use tax revenue that it would have received under the local share provisions existing on the Effective Date, based upon the payments actually paid to the State Board of Equalization by the SUMC Parties and their contractors and subcontractors, and the City shall add any diminished amount to the amount it has received to arrive at a total amount of “Construction Use Tax Revenues Received” as a result of the Project. The SUMC Parties shall not be required to make up, or assure, to the City that it receives the difference between the actual amount of construction use taxes that the City has received and the amount that the City would have received under the local share provisions existing on the Effective Date. However, as allowed by law and applicable restrictions, the SUMC Parties will join with the City in opposing any legislative or legal change that would result in diminution of the City’s local share of construction use tax revenues because the SUMC Parties recognize that such diminution could adversely affect City services to the community and to the Project facilities. (C) Reconciliation and Payment of Shortage or Surplus. In August 2026, or as soon thereafter as records are reasonably available, the City shall provide to the SUMC Parties its determination of the total amount of Construction Use Tax Revenues Received as a result of the Project, along with a report documenting the basis for the City’s determination (“Reconciliation Report”). Within thirty (30) days of receiving the Reconciliation Report, the SUMC Parties shall notify the City as to any dispute regarding the Reconciliation Report, and the SUMC Parties shall provide a report to the City documenting the basis for the SUMC Parties’ dispute. The Parties shall act in good faith to resolve any and all disputes regarding the Reconciliation Report within ninety (90) days from the date that the SUMC Parties notify the City of such dispute or disputes. Shortfall. Within thirty (30) days of the date the Parties reach mutual agreement as to the total amount of Construction Use Tax Revenues Received as 110614 sh 0130788 16 a result of the Project, the SUMC Parties shall pay to the City the amount of any shortfall between Eight Million One Hundred Thousand Dollars ($8,100,000) and the amount of the Construction Use Tax Revenues Received as a result of the Project, which amount shall be paid in full regardless of whether it exceeds the amount identified pursuant to Section 5(a)(ii). The amount of the Shortfall Payment then shall be deducted from the Five Million Six Hundred Thousand Dollars ($5,600,000) amount that the SUMC Parties designated pursuant to Section 5(a)(ii), and the remainder of that designated amount, if any, shall be applied to the Patient Service Program as described in Section 5(a)(ii). Surplus. Within thirty (30) days of the date the Parties reach mutual agreement as to the total amount of Construction Use Tax Revenues Received as a result of the Project, the City shall provide to the SUMC Parties the amount of any surplus between Eight Million One Hundred Thousand Dollars ($8,100,000) and the amount of the Construction Use Tax Revenues Received as a result of the Project (“Surplus Payment”). The SUMC Parties then shall reduce the amount designated pursuant to Section 5(a)(ii) in an amount commensurate with the Surplus Payment such that the fund for the Patient Service Program shall total Five Million Six Hundred Thousand Dollars ($5,600,000), comprised of the Surplus Payment paid by the City plus the difference between that payment and Five Million Six Hundred Thousand Dollars ($5,600,000) to be paid by the SUMC Parties. (D) Costs of Monitoring and Compliance. The Parties each shall bear their own costs of compliance with the provisions of Section 5(b)(ii)(A) – (C), including but not limited to monitoring payment and receipt of construction use taxes, preparation and analysis of reports, and reconciliation. (iii) Funding of Operating Deficit. Not later than the Initial Payment Date, and subject to the provisions in Section 21(p), the SUMC Parties shall pay to the City, in a single lump sum payment, the amount of Two Million Four Hundred Seventeen Thousand Dollars ($2,417,000) for the purpose of assuring that City costs associated with the Project do not exceed revenues to the City resulting from construction and operation of the Project. This amount is the discounted net present value of the projected shortfall in revenues over a 30-year period, based upon the inflation, cost and revenue assumptions used by the consultant hired and directed by the City. (iv) Payment of Utility User Tax. All requirements and language in Section 2.35.100(a) of the City’s Municipal Code to the contrary notwithstanding, the SUMC Parties shall pay to the City a utility user tax at a minimum rate of five percent (5%) of all electricity, 110614 sh 0130788 17 gas, and water charges allocable to new construction completed as part of the Project for the Life Of The Project, which rate may be increased by the City as provided by Section 2.35.100(b) of the City’s Municipal Code. (v) School Fees. The SUMC Parties shall pay to the City, who in turn shall forward to the Palo Alto Unified School District, school fees upon issuance of each building permit from the City or OSHPD, in the amount that is generally applicable to non- residential development at the time of payment based upon Net New Square Footage. For buildings subject to OSHPD jurisdiction, the school fees will be paid within Thirty (30) days after issuance of a building permit from OSHPD. (c) Traffic Mitigation and Reduced Vehicle Trips. (i) Summary of Existing Programs. The Hospitals provide a robust program to minimize commuting by drive- alone vehicles, which currently includes the following components: Incentives to forego driving or to carpool, including cash payments or other credit for participating in a carpool program, various parking incentives, online ride matching, pretax payroll deduction for transit passes, emergency rides home, free car rental vouchers, Zipcar car sharing credits, and other gifts and rewards. The free Marguerite Shuttle system, supported in part by payments from the Hospitals, connecting the Hospitals to local transit, Caltrain, and local shopping and dining. The Eco Pass program for hospital employees, allowing free use of VTA buses and light rail, the Dumbarton Express, the Highway 17 Express, and the Monterey-San Jose Express. Free use of the U-Line Stanford Express connecting BART, the ACE train, and Ardenwood Park & Ride to Stanford. Alternative transportation support and information, such as bicycle commuter facilities (clothes lockers, showers, bike lockers), transit pass sales, and various sources of ‘green’ and alternative transportation information including an ‘alternative transportation website. 110614 sh 0130788 18 (ii) Menlo Park Traffic Mitigation. (A) Payment. Subject to the City of Menlo Park’s agreement to be bound by provisions substantially similar to those described in Section 21(p) and subject to the City of Menlo Park’s agreement to use payments received from the SUMC Parties as described in Section 5(c)(ii)(B), below, the SUMC Parties shall contribute to the City of Menlo Park a total of Three Million Six Hundred Ninety Nine Thousand Dollars ($3,699,000) for the City of Menlo Park’s use in connection with traffic mitigation and other measures to enhance City of Menlo Park infrastructure and to promote sustainable neighborhoods and communities and affordable housing. The SUMC Parties shall make this contribution in three equal payments as follows: (1) the first payment shall be made not later than the Initial Payment Date; (2) the second payment shall be made within Thirty (30) days from issuance of the first Hospital Foundation Permit; and (3) the third payment shall be made within Thirty (30) days from issuance of the first Hospital Occupancy Permit. (B) Use of Funds. The amount of Two Hundred Ninety Thousand Dollars ($290,000) shall be used by the City of Menlo Park prior to January 1, 2018 to install Traffic-Adaptive Signal Technology at the following two intersections in the City of Menlo Park: Middlefield Road/Willow Road; and Middlefield Road/Ravenswood Avenue. The amount of One Million Forty Six Thousand Dollars ($1,046,000) shall be allocated by the City of Menlo Park to the City’s Traffic Impact Fee Fund to pay for any improvements for which the Traffic Impact Fee Fund has been established, which amount is in lieu of the SUMC Project's fair share contribution toward the cost of construction of one pedestrian/bike Caltrain undercrossing in Menlo Park; improvements at the Willow Road/Bayfront Expressway intersection; improvements at the Bayfront Expressway/University Avenue intersection; and installation of Opticom systems at the following four (4) intersections: Middlefield Road/Willow Road, Middlefield Road/Ravenswood Avenue, Willow Road/Bayfront Expressway, and Bayfront Expressway/University Avenue. The remainder of the funds shall be used by the City of Menlo Park in its discretion in connection with infrastructure, sustainable neighborhoods and communities, and affordable housing. 110614 sh 0130788 19 (iii) East Palo Alto Voluntary Mitigation. (A) The Hospitals shall make a payment of $200,000 to the City of East Palo Alto for roadway and traffic signal improvements scheduled to be done on the length of University Avenue within the East Palo Alto city limits. This work includes repaving and restriping/bike lanes to improve both vehicular and non-vehicular traffic flow. (B) In the event the SUMC Parties are unable to meet the trip diversion goal set forth in this Agreement such that the $4 Million penalty payment is triggered, the City of Palo Alto shall remit $150,000 of the penalty payment to the City of East Palo Alto. (iv) Contributions to AC Transit. The Hospitals shall offer to contribute the following to AC Transit: (A) Within Thirty (30) days from issuance of the Hospital Occupancy Permit, the Hospitals shall offer to make a one-time payment to the Alameda-Contra Costa Transit District (“AC Transit”) of Two Hundred Fifty Thousand Dollars ($250,000) to be used for capital improvements to the U- Line to increase capacity. (B) Commencing within Thirty (30) days from issuance of the Hospital Occupancy Permit and continuing for the Life Of The Project, the Hospitals shall offer to make Annual Payments to AC Transit in a reasonable annual amount, not to exceed Fifty Thousand Dollars ($50,000), to be used for operating costs of the U-Line to maintain a load factor for bus service to the SUMC of less than 1.0. (C) In order to encourage Hospital employees who commute from the East Bay to use public transit from the East Bay to the Project, the Hospitals shall use best efforts to lease seventy five (75) parking spaces at the Ardenwood Park and Ride lot, or an equivalent location, commencing within Thirty (30) days from issuance of the Hospital Occupancy Permit and continuing for the Life Of The Project, at a cost not to exceed Forty Five Thousand Dollars ($45,000) per year. (v) Opticom Payments. Within Thirty (30) days after issuance of the Hospital Occupancy Permit, the SUMC Parties shall make the following contributions to mitigate traffic in Palo Alto. 110614 sh 0130788 20 (A) Opticom Systems. The SUMC Parties shall pay Eleven Thousand Two Hundred Dollars ($11,200) to the City for installation of Opticom systems at the following seven (7) intersections: El Camino Real/Palm Drive/University Avenue; El Camino Real/Page Mill Road; Middlefield Road/Lytton Road; Junipero Serra/Page Mill Road; Junipero Serra/Campus Drive West, Galvez/Arboretum, Alpine/280 Northbound ramp. The City shall use its best efforts to cause the Opticom system to be installed at the intersections listed in this Section 5(c)(v)(A) that are not located within the City’s jurisdiction. (vi) Caltrain GO Passes. Commencing on September 1, 2015, the Hospitals shall purchase annual Caltrain GO Passes (free train passes) for all existing and new Hospital employees who work more than 20 hours per week, at a cost of up to One Million Eight Hundred Thousand Dollars ($1,800,000) per year, which amount shall be adjusted annually to reflect any change in the San Francisco Bay Area Consumer Price Index (the “GO Pass Amount”). The Hospitals’ obligation to provide GO Passes shall continue for fifty one (51) years, or until such earlier date as: (a) Caltrain discontinues the GO Pass program, or a substantially similar program; (b) Caltrain increases the cost of GO Passes, or a substantially similar program, such that the Hospitals’ annual costs would exceed the GO Pass Amount; or (c) Caltrain service is reduced by such an extent that the Hospitals and the City mutually determine purchase of annual GO Passes, or a substantially similar program, would no longer be effective in substantially reducing Hospital employee peak period trips in order to achieve the Alternative Mode targets specified in Section 5(c)(ix). If the cost of obtaining GO Passes exceeds the GO Pass Amount, the Hospitals shall have the option to elect either to purchase the GO Passes at the then applicable price, or to terminate the obligation to provide GO Passes, or a substantially similar program. If the Hospitals’ obligation to provide GO Passes, or a substantially similar program, terminates for any of the reasons specified in this Section 5(c)(vi), the Hospitals shall contribute the GO Pass Amount to one or more substitute programs to encourage use of transit by Hospital employees or otherwise reduce peak period traffic trips in the intersections impacted by the Project as identified in the Project EIR, including but not limited to regional transportation systems or solutions. The substitute program or programs shall be mutually agreed upon by the SUMC Parties and the City’s Director of Planning and Community Environment. (vii) Marguerite Shuttle Service. The Hospitals shall fund the reasonable costs, in an approximate amount of Two Million Dollars ($2,000,000), for the purchase of additional shuttle vehicles for the Marguerite shuttle service, as and when required to meet increased demand for shuttle service between the Project Sites and the Palo Alto Intermodal Transit Station. In addition, for the Life Of The Project, the Hospitals 110614 sh 0130788 21 shall fund as Annual Payments the reasonable costs, in an approximate amount of Four Hundred Fifty Thousand Dollars ($450,000) per year, to cover the net increase in operating costs for the Marguerite Shuttle. (viii) Transportation Demand Management Coordinator. Commencing on September 1, 2015, and continuing through the Life Of The Project, the Hospitals shall employ an onsite qualified Transportation Demand Management (“TDM”) coordinator for the SUMC. (ix) Monitoring of TDM programs. The City and the SUMC Parties acknowledge that because use of transit by employees of the Hospitals is voluntary, and may be influenced by a number of factors outside of the reasonable control of the Hospitals, such as gasoline prices, costs and availability of alternative transit, housing costs and availability, and personal preferences of employees, the Hospitals cannot guarantee the results of their TDM programs. However, the Hospitals shall monitor the success of their TDM programs from the date of the Initial Project Approvals through the Life of The Project. The following interim targets shall be used to measure the progress toward meeting the desired mode split by 2025. These interim targets assume that in the early phases of implementation, there may be larger shifts to alternative modes than the shifts that may occur in later phases of the TDM program enhancement. For purposes of calculating alternative mode share, any mode that does not constitute driving in a single-occupant vehicle to and from the work site shall be considered an “Alternative Mode,” including working remotely from home. Target Year Alternative Mode Share Percent Change EIR Baseline (2006) 22.9 % NA Project Approval Baseline (2011) TBD TBD 2018 30 % 7.1% 2021 33 % +3 % 2025 35.1 % +2.1 % If the applicable interim target is not met for any two consecutive years prior to 2025, the Hospitals shall provide alternative transportation funding to the City in Annual Payments in the amount of One Hundred Seventy Five Thousand Dollars ($175,000) per year until the earlier of the year 2025 or the year the applicable interim mode split target is achieved, subject to a maximum of five Annual Payments. The alternative transportation funding must be used by the 110614 sh 0130788 22 City for local projects and programs that encourage use of alternative transportation mode uses or otherwise reduce peak period traffic trips in the intersections impacted by the Project as identified in the Project EIR, including but not limited to regional transportation systems and solutions. The City of Palo Alto should consider transportation systems and solutions that also help to reduce traffic in the City of Menlo Park. (A) Submission of Reports. The Hospitals shall submit annual reports showing the current number of employees employed over 20 hours per week; the number of employees using an alternative mode share as documented by a study or survey to be completed by the Hospitals using a method mutually agreeable to the City and Hospitals; and the efforts used by the Hospitals to attempt to achieve the Alternative Mode targets. (B) 2025 Mode Split Penalty. If by 2025, the Hospitals have not demonstrated substantial achievement of the Thirty Five and One-Tenth Percent (35.1%) target modal split for alternative transportation modes, the Hospitals shall make a lump sum payment of Four Million Dollars ($4.0 million) to the City for local projects and programs that encourage and improve use of alternative transportation mode uses or otherwise reduce peak period traffic trips in the intersections impacted by the Project as identified in the Project EIR, including but not limited to regional transportation systems or solutions. The City shall identify capital projects and program enhancements for which the funds may be applied. Sample projects may include contributions towards regional transportation projects of interest to the City and that are identified within the Valley Transportation Authority—Valley Transportation Plan or other local planning documents. The City of Palo Alto should consider transportation systems and solutions that also help to reduce traffic in the City of Menlo Park. If required, said Four Million Dollar ($4,000,000) payment shall constitute funds to be used by the City to offset trips by Hospital employees through citywide trip reduction. The Four Million Dollar ($4,000,000) payment shall not relieve the SUMC Parties of any of their other obligations under this Agreement, including but not limited to their obligations to continue to attempt to achieve the 35.1% target modal split through implementation of the GO Pass or substantially similar program, or a substitute program mutually agreed upon by the SUMC Parties and the City’s Director of Planning and Community Environment, which shall continue pursuant to the terms of this Agreement for fifty-one (51) years from commencement of the GO Pass program. Further, the Hospitals shall continue to implement an enhanced TDM program, monitor modal splits by Hospital employees, and strive to maximize use of alternative commute modes by Hospital employees. In addition, the Hospitals shall continue to meet with the City on a regular basis to identify potential improvements to the enhanced TDM program. The City shall keep all payments received from the Hospitals pursuant to this Section 5(c)(ix) in a separate account (the “TDM Fund”), to be used only for the purposes described in 110614 sh 0130788 23 this Section 5(c)(ix). The City shall deliver an annual report of disbursements from the TDM Fund in accordance with Section 12 below. (d) Linkages. To further encourage use of Caltrain, bus and other transit services, and to enhance and encourage use of pedestrian and bicycle connections between the SUMC and downtown Palo Alto, the SUMC Parties shall fund the following improvements: (i) Improvements to Enhance Pedestrian and Bicycle Connection from Intermodal Transit Center to El Camino Real/Quarry Road Intersection. Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) for improvements to enhance the pedestrian and bicycle connection from the Palo Alto Intermodal Transit Center to the existing intersection at El Camino Real and Quarry Road, with up to Two Million Dollars ($2,000,000) of that amount going to the development of an attractive, landscaped passive park/green space with a clearly marked and lighted pedestrian pathway, benches and flower borders. Not later than the Initial Payment Date, and subject to the provisions in Section 21(p), the SUMC Parties shall pay to the City Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) in one lump sum (the “Intermodal Transit Fund”), and the City shall be responsible for constructing the improvements described in this Section 5(d)(i). The City shall keep the Intermodal Transit Fund in a separate account, to be used only for the purposes described in this Section 5(d)(i). The City shall deliver an annual report of disbursements from the Intermodal Transit Fund in accordance with Section 12(d) below. The City shall construct the improvements described in this Section 5(d)(i) prior to issuance of the Hospital Occupancy Permit. (ii) Public Right-of-Way Improvements to Enhance Pedestrian and Bicycle Connection on Quarry Road. Four Hundred Thousand Dollars ($400,000) for improvements to and within the public right-of-way to enhance the pedestrian and bicycle connection from the west side of El Camino Real to Welch Road along Quarry Road, including urban design elements and way finding, wider bicycle lanes, as necessary, on Quarry Road, enhanced transit nodes for bus and/or shuttle stops, and prominent bicycle facilities. Not later than the Initial Payment Date, and subject to the provisions in Section 21(p), the SUMC Parties shall pay to the City Four Hundred Thousand Dollars ($400,000) in one lump sum (the “Quarry Road Fund”), and the City will be responsible for constructing the improvements. The City shall keep the Quarry Road Fund in a separate account, to be used only for the purposes described in this Section 5(d)(ii). The City shall deliver an annual report of disbursements from the Quarry Road Fund in accordance with Section 110614 sh 0130788 24 12(d) below. The City shall construct the improvements described in this Section 5(d)(ii) prior to issuance of the Hospital Occupancy Permit. (iii) Stanford Barn Connection. Up to Seven Hundred Thousand Dollars ($700,000) for improvements to enhance the pedestrian connection between the SUMC and the Stanford Shopping Center going from Welch Road to Vineyard Lane, in the area adjacent to the Stanford Barn. The SUMC Parties shall be responsible for constructing these improvements prior to issuance of the Hospital Occupancy Permit. (e) Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing. (i) Payment. Subject to the provisions of Section 21(p), the SUMC Parties shall pay to the City a total of Twenty-Three Million Two Hundred Thousand Dollars ($23,200,000) for use in connection with infrastructure, sustainable neighborhoods and communities, and affordable housing. The SUMC Parties shall make this contribution in three equal payments as follows: (A) the first payment shall be made not later than the Initial Payment Date; (B) the second payment shall be made within Thirty (30) days from issuance of the first Hospital Foundation Permit; and (C) the third payment shall be made within Thirty (30) days from issuance of the first Hospital Occupancy Permit. (ii) Use of Funds. The amount of One Million Seven Hundred Twenty Thousand Four Hundred Eighty Eight Dollars ($1,720,488) shall be used in the same manner as funds collected by the City pursuant to its housing fee ordinance. The City shall keep the balance of the payments made pursuant to this Section 5(e) (the “Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund”) in a separate account, to be used only for the purposes described in this Section 5(e). The City shall deliver an annual report of disbursements from the Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund in accordance with Section 12(d) below. (iii) Use of Housing Credit. The housing credit issued to the SUMC Parties in connection with the Alma substation relocation and Quarry Substation Lease may be used to offset the obligations in this Agreement. 110614 sh 0130788 25 (f) Climate Change. (i) Sustainability Programs Benefit. Subject to the provisions in Section 21(p), the SUMC Parties shall contribute Twelve Million Dollars ($12 Million) to the City for use in projects and programs (including carbon credits) for a sustainable community, including programs identified in the City’s Climate Action Plan, as may be amended, and investments in renewable energy and energy conservation. The SUMC Parties’ obligation to make this contribution is conditioned on there being no other non- voluntary requirement applicable to the Project to participate in Palo Alto Utilities’ Palo Alto Green Program. The SUMC Parties shall make this contribution in three equal payments, as follows: (A) the first payment shall be made not later than the Initial Payment Date; (B) the second payment shall be made within Thirty (30) days from issuance of the first Hospital Foundation Permit; and (C) the third payment shall be made within Thirty (30) days from issuance of the first Hospital Occupancy Permit. The City shall keep all payments made pursuant to this Section 5(f) (the “Climate Change Fund”) in a separate account, to be used only for the purposes described in this Section 5(f). The City shall deliver an annual report of disbursements from the Climate Change Fund in accordance with Section 12(d) below. (g) Administrative Costs. In implementing each of the funds described in this Section 5, the funds may be used for the Party’s reasonable costs of administering the funds, including establishing and maintaining the necessary accounts, reporting upon the use and balance of funds, establishing and implementing procedures to allocate funding, and other activities to implement the funds’ purposes. (h) Satisfaction of All Conditions of Approval. The SUMC Parties shall satisfy all Conditions of Approval by the dates and within the time periods required by the Project Approvals, subject to such modifications allowed by this Agreement. 110614 sh 0130788 26 6. City’s Promises. (a) Vested Rights to Develop and Use the Property. City hereby grants to the SUMC Parties the vested right to develop, construct and use the Project on the Property in accordance with the terms and conditions of the Applicable Rules, the Project Approvals and this Agreement, and City hereby finds the Project consistent with the Comprehensive Plan and the Zoning Ordinance as amended by the Project Approvals. City shall not apply to the Project any change in the Applicable Rules adopted or effective after the Effective Date, except as provided in Sections 7 and 8 below. (b) Permitted and Conditionally Permitted Uses. The permitted and conditionally permitted uses of the Property shall be those described in the Hospital Zoning Ordinance. Upon approval by the City, each conditional use permit issued for the Project shall be vested for the Term of this Agreement and the provisions of Section 18.77.090 of the City’s Municipal Code shall not apply to such conditional use permits; provided however, that the rights of the SUMC Parties to continue and maintain permitted and conditionally permitted uses on the Property shall be subject to compliance with the terms and conditions of this Agreement, the other Applicable Rules, and the Project Approvals. (c) Maximum Density and Intensity of Uses. When developed, the density and intensity of use of the Property shall not exceed those densities and intensities of use set forth in the Hospital Zoning Ordinance. (d) Other Development Standards. All design and development standards not set forth in the Project Approvals or this Agreement shall be in accordance with the Applicable Rules and the Subsequent Applicable Rules as applied to the Project; provided such standards shall not conflict with the Project Approvals or this Agreement. (e) Subsequent Rules. Subsequent Rules that conflict with the SUMC Parties’ rights to develop the Property as provided under this Agreement are applicable to the Project only under the circumstances described in Sections 7 and 8 below. This limitation applies to changes made by ordinance, initiative, referendum, resolution, policy, order or moratorium, initiated or instituted for any reason whatsoever and adopted by the Mayor, City Council, Planning and Transportation Commission or any other board, commission or department of City, or any officer or employee thereof, or by the electorate. 110614 sh 0130788 27 (f) Subsequent Approvals. City shall not deny or unreasonably delay any Subsequent Approval that is necessary to the exercise of the rights vested in the SUMC Parties by this Agreement. Any conditions, terms, restrictions, and requirements for subsequent Discretionary Actions imposed or required by City, including those provided for herein, shall not prevent development of the land for the uses and to the density or intensity of development set forth in the Agreement. Except as provided in Sections 7 or 8 below. City shall not interpret any Subsequent Approval or apply any Subsequent Rule in a manner that would conflict with the Applicable Rules or the Project Approvals or reduce the development rights provided by this Agreement. Upon City approval, each Subsequent Approval shall be vested for the Term of the Agreement and the provisions of Sections 6(a) and 6(b) shall apply to each Subsequent Approval. (g) Limitation on Architectural Review Approvals. To the extent that the Project Approvals or Applicable Rules require further decisions, determinations or actions pertaining to architectural review “Architectural Review Approval”), the decision in all cases shall be made by the Director of Planning and Community Environment, after recommendation by the Architectural Review Board, subject only to appeal to the City Council, pursuant to Section 18.77.070 of the Municipal Code as set forth in the Applicable Rules, without review or recommendation by the Planning and Transportation Commission. Further, in each case, Architectural Approval shall be limited to determining consistency with the Design Guidelines, the Hospital Zoning Ordinance, and the findings regarding architectural review set forth in Section 18.76.020(d) of the Municipal Code. City shall process any application for Architectural Review Approval expeditiously. The provisions of this Section 6(g) shall apply to each architectural review process undertaken and Architectural Review Approval granted with regard to any portion of the Project. (h) Annexation of County Property. City shall petition the Local Agency Formation Commission (LAFCO) to annex to City the County Property. The SUMC Parties shall cooperate by executing all necessary documents, by providing all information requested by City acting as the conducting authority for purposes of the annexation proceedings, and by attending annexation hearings and testifying in favor of the annexation. The SUMC Parties shall be responsible for paying all reasonable costs of the annexation. (i) Utility and Storm Drain Connections. Unless prohibited by a moratorium lawfully adopted by another governmental agency, or by action taken by City in accordance with Sections 7 or 8, or by state or federal law, City shall allow the SUMC Parties to connect the 110614 sh 0130788 28 Project to the City’s sanitary sewers, storm drains, water system, gas system and electrical system in accordance with its generally applicable rules in effect at the time of application for service and shall issue all permits and authorizations necessary for such connections and service in accordance with such generally applicable rules. A moratorium shall not prevent the issuance of Discretionary Approvals or ministerial approvals for the Project, provided that City shall not be required to allow any connections or provide any services barred by the moratorium. (j) Waste Treatment Capacity. Subject to any limitation imposed by state or federal law, in the event of a moratorium preventing or limiting sanitary sewer connections, the SUMC Parties shall have priority for sanitary sewer treatment capacity for the Project over other unbuilt residential, commercial or industrial development until December 31, 2025. In addition, the SUMC Parties shall have priority over new commercial space built or approved subsequent to the Effective Date, including but not limited to retail, office and industrial space, until December 31, 2025. These priorities apply to both “domestic waste” and “industrial waste.” (k) Storm Drain Capacity. Subject to any limitation imposed by state or federal law, in the event of a moratorium preventing or limiting discharge or increased runoff to storm drains, the SUMC Parties shall have priority for use of storm drains for the Project over other unbuilt commercial development until December 31, 2025. The SUMC Parties also shall have priority over new commercial space built or approved subsequent to the Effective Date, including but not limited to retail, office, and industrial space, until December 31, 2025. (l) OSHPD. City recognizes that, pursuant to the HSSA, (i) OSHPD has exclusive jurisdiction of certain aspects of design and construction, including construction of associated infrastructure, of hospital buildings, including plan review, issuance of building permits, building inspections, and issuance of certificates of occupancy, and, (ii) certain OSHPD standards and rules apply to non-hospital buildings that provide outpatient clinical services. In the event that any OSHPD requirement conflicts with the Project Approvals, the City shall (a) approve revisions to Project Approvals or, as necessary, grant Subsequent Approvals for modifications that are not inconsistent with the Hospital Zoning Ordinance, or, (b) if necessary modifications would be inconsistent with the Hospital Zoning Ordinance, promptly and in good faith enter into negotiations with the appropriate SUMC Parties for such modifications to the Project Approvals as are necessary to conform to the conflicting OSHPD requirement so that the public benefits and objectives of this Agreement will be achieved at the earliest feasible date. The approval of such revisions or modifications shall be determined in the first 110614 sh 0130788 29 instance by the Director of Planning and Community Environment, subject to review only by expedited appeal to the City Council. (m) No Other Dedications. Except as may be required to provide for the installation and maintenance of City-owned public utilities to the Project, including such easements as may be required to install and maintain utility laterals required to serve the Project buildings, and except as otherwise set forth in this Agreement or the Project Approvals, or as may be agreeable to the SUMC Parties, the SUMC Parties shall not be required to make any dedications or reservations of the Property, or any portion thereof or interest therein, or of any other property in connection with the development, construction, use, or operation of the Project, or any portion thereof. The Parties shall also cooperate to identify the locations for any new necessary easements, and the locations of any existing easements that are no longer necessary and may be relinquished or vacated, to minimize the costs to the Parties of creating, maintaining, or vacating such easements. (n) No Other Public Improvements or Financial Contributions. Except as may be required under the Conditions of Approval, in connection with the relocation of City-owned public utilities under Welch Road, the gas line retrofitting on Welch Road, or restoration of any public improvements impacted by the Project construction, the SUMC Parties shall not be required to construct public improvements or make financial contributions to City in lieu of public improvements as part of the Project, except as expressly set forth in this Agreement, or as may be agreeable to the SUMC Parties, or as provided in the Project Approvals. (o) No Obligation to Develop. The SUMC Parties shall have no obligation to develop the Project, or any component of it. The SUMC Parties may develop the Project in their sole discretion in accordance with their own time schedule, subject to the terms and conditions of this Agreement. The SUMC Parties may develop and construct the Project in any sequence or phases, in their sole discretion. (p) Timing for Performance of Conditions of Approval. The SUMC Parties may request in writing a change in the time of performance of any Condition of Approval. Within a reasonable time of receiving the request, the City Manager or his or her designee (a) shall determine whether additional environmental review is required because of the proposed change; (b) may condition approval of the proposed change upon changes in the timing of related conditions or mitigation measures; and, finally, (c) shall approve, conditionally approve or deny the requested change. Within a reasonable time of receiving the City Manager’s decision on the request, the 110614 sh 0130788 30 SUMC Parties shall give written notice of its acceptance or of its withdrawal of the request. The change shall be effective upon receipt by the City of the notice of acceptance. 7. Exceptions. To the extent Subsequent Rules (including a moratorium otherwise lawfully adopted by City) conflict with the Applicable Rules or Project Approvals, they may be applied to the Project without the consent of the SUMC Parties only (i) if City determines that application of such Subsequent Rules is necessary to protect against conditions that create a substantial and demonstrable risk to the physical health or safety of residents or users of the site to which the Subsequent Rules apply or the affected surrounding region; or (ii) if such Subsequent Rules are mandated or required by supervening federal, state or regional statute or regulation; or (iii) if otherwise provided by this Agreement. 8. Exclusions. (a) Sewer Facilities, Storm Drains and Runoff. This Agreement does not affect the SUMC Parties’ obligations, if any, to pay for or construct improvements in the storm drain system required to implement the Project, nor does it affect the SUMC Parties’ obligations to meet any applicable federal, state and local discharge limits and requirements pertaining to sewer facilities, storm drains or runoff. (b) Limited Effect on Right to Tax, Assess, or Levy Fees or Charges. Except as expressly provided herein, this Agreement does not limit the power and right of the City to impose the same taxes, levy the same assessments, or require the payment of the same permit fees and charges by the SUMC Parties as the City requires for all other nonresidential development or property on a citywide basis. The SUMC Parties shall be required to pay all Development Impact Fees in effect on the Effective Date, as provided in this Section 8(b), subject to the SUMC Parties’ right to protest and/or pursue a challenge in law or equity to the new or increased Development Impact Fee. The SUMC Parties shall not be required to pay any new Development Impact Fees adopted after the Effective Date through December 31, 2019, unless such payment becomes due under the Applicable Rules or this Agreement on or after January 1, 2020. Further, the City shall not require the SUMC Parties to pay any increase in the amount of a Development Impact Fee, except as set forth in this Section 8(b) and the amount of the Development Impact Fees shall be calculated as set forth in this Section 8(b). All fees, charges, taxes and assessments permitted by this Agreement, and as modified from time to time, are Applicable Rules or Subsequent Applicable Rules. For buildings subject to OHSPD jurisdiction, City fees shall be considered due not later than 30 days after issuance of the Hospital 110614 sh 0130788 31 Foundation Permit from OSHPD. In no event may any fees be paid later than the date for payment under the Applicable Rules. (i) All provisions and requirements of this Agreement and the Applicable Rules to the contrary notwithstanding, the SUMC Parties shall have the following options with respect to the timing of payment of Development Impact Fees, and the rates of Development Impact Fees will be calculated as follows: (A) If the SUMC Parties elect to pay or prepay all or any portion of the Development Impact Fees between the Effective Date and December 31, 2011, the SUMC Parties shall pay such fees at the rate in effect on the Effective Date; (B) If the SUMC Parties elect to pay or prepay all or any portion of the Development Impact Fees on or after January 1, 2012 through and including December 31, 2019, the SUMC Parties shall pay such fees at the rate applicable citywide to nonresidential development at the time of payment; except that the City shall not require the SUMC Parties to pay any increase in a Development Impact Fee that exceeds an amount calculated according to the rate in effect on the Effective Date and adjusted to reflect the change in the San Francisco Bay Area Consumer Price Index from January 1, 2012 to the date of payment. (C) If the SUMC Parties elect to pay all or any portion of the Development Impact Fees on or after January 1, 2020, the SUMC Parties shall pay such fees at the rate applicable citywide to nonresidential development at the time of payment, subject to the SUMC Parties’ right to protest and/or pursue a challenge in law or equity to the increased fee. (ii) The SUMC Parties shall not receive any credit against any City Development Impact Fees for any community benefits provided pursuant to this Agreement. (iii) Payment of the city-wide Transportation Impact Fees in accordance with this Agreement shall constitute the Project’s entire fair share contribution to the following transportation mitigation measures: TR 2.1 (contribution to traffic adaptive signal technology in Palo Alto); TR 2.2 (contribution to Everett undercrossing in Palo Alto); and TR 7.2 (contribution to Palo Alto Crosstown Shuttle). (iv) Except as provided in this Section 8(b), the SUMC Parties shall pay Development Impact Fees in accordance with the Applicable Rules, on the basis of Net New Square Footage. (v) Nothing in this Agreement shall preclude the City from collecting fees from the SUMC Parties that are lawfully imposed on the Project 110614 sh 0130788 32 by another entity having jurisdiction over the Project which the City is required or authorized to collect pursuant to applicable laws. (c) No Limit on Right of City to Adopt and Modify Uniform Codes. This Agreement does not limit the right of the City, to the extent permitted by state law, to adopt Building, Plumbing, Electrical, Fire and similar uniform construction codes, and to adopt local modifications of those codes, from time to time. Those codes, as modified from time to time, are Subsequent Applicable Rules. (d) No Limit on Power of City to Adopt and Apply Rules Governing Provision and Use of Utility Services. Except as expressly provided in Section 6, this Agreement does not limit the power and right of the City to adopt and amend from time to time rules and procedures governing the provision and use of utility services provided by the City. These rules, as modified from time to time, are Subsequent Applicable Rules. If there is any conflict between such Rules and Section 6, the latter shall control. (e) California Environmental Quality Act Compliance (CEQA). The City has prepared and certified an EIR and has imposed mitigation measures as Conditions of Approval prior to the execution of this Agreement. This Agreement does not limit the City’s duty to comply with the provisions of CEQA and the associated Guidelines, and to comply with the provisions of its own local CEQA procedures, as they may be amended from time to time, that comply with the provisions of section 21082 of CEQA. However, the City shall not undertake additional environmental review under CEQA unless required to do so by CEQA. In the event that any such further environmental review is required for a Subsequent Approval or other Discretionary Action, it shall be in accordance with Sections 15162-15164 of the CEQA Guidelines, and the scope of analysis and evaluation shall be as required by CEQA. (f) No General Limitation on Future Exercise of Police Power. The City retains its right to exercise its general police power except when such exercise would conflict with the vested rights granted under this Agreement. The police powers so retained and enforceable under this Agreement shall include, but are not limited to, the enactment of regulations concerning the disposition of construction and demolition materials that apply generally to the City. 9. Indemnity. To the maximum extent permitted by law, the SUMC Parties shall defend, indemnify and hold harmless the City, its City Council, its officers, employees 110614 sh 0130788 33 and agents (each an “Indemnified Party” and collectively the “Indemnified Parties”) from and against any claim, action, or proceeding brought by any third party against the Indemnified Parties to attack, set aside, or void any of the Project Approvals, or any Subsequent Approvals. The SUMC Parties shall take the lead role in defending any such claim, action or proceeding, and may, in their sole discretion, elect to be represented by the attorneys of their choice. The City may, in its sole discretion, elect to be represented by the attorneys of its choice in any such action or proceeding, with the reasonable costs of such representation to be paid by the SUMC Parties. The SUMC Parties and the City shall fully coordinate and cooperate in the defense of any such action and shall keep each other fully informed of all developments relevant to such defense, subject only to confidentiality requirements and any privileges or legal doctrines that may prevent the communication of any such information. The SUMC Parties’ obligations set forth in this Section 9 shall survive any suspension or termination of this Agreement, regardless of cause. 10. Cooperation and Implementation. The Parties shall cooperate to implement this Agreement in a manner that ensures that all Parties realize the intended benefits of the Agreement. With respect to the City, such cooperation shall include, but without limitation, diligent processing of applications for approval of development of the Project that comply with the Project Approvals, Applicable Rules and Subsequent Applicable Rules, and the City shall not unreasonably deny or delay any Discretionary Action, Subsequent Approval or OSHPD approval that is necessary to the exercise of the rights vested in the SUMC Parties by this Agreement. Such cooperation shall include, but without limitation, prompt compliance by each Party with all requests by another Party for materials and information necessary to determine the responding Party’s compliance with this Agreement, and the diligent provision and implementation of all community benefits and voluntary mitigation measures to be provided by the SUMC Parties under this Agreement and the City’s expenditures of funds for the purposes described in this Agreement. 11. Identification of Applicable Rules. Prior to the Effective Date, the Parties will use reasonable efforts to identify and assemble four (4) sets of the Applicable Rules, one (1) set for the City and one (1) set for each of the SUMC Parties, so that if it becomes necessary in the future to refer to any of the Applicable Rules, there will be a common set of the Applicable Rules available to each Party. Failure by City to identify or assemble written Applicable Rules shall in no manner limit City’s ability to later identify or use such Applicable Rules. 110614 sh 0130788 34 12. Periodic Review of Compliance. (a) Periodic Review. City shall review this Agreement annually, in accordance with the procedures and standards set forth in this Agreement and City of Palo Alto City Council Resolution No. 6597 in order to ascertain the SUMC Parties’ compliance with the terms of the Agreement. The SUMC Parties shall submit an annual report (the “Annual Report”) to the Director of Planning and Community Environment (the “Planning Director”), in the form and containing the content described in Section 12(c) below, each year within thirty (30) days after the anniversary of the Effective Date. The Annual Report shall be accompanied by an annual review fee sufficient to cover the estimated costs of review of the Annual Report. The amount of the annual review fee shall not exceed the City’s actual, reasonable costs for such review. Within forty-five (45) days of receipt of the SUMC Parties’ Annual Report, the City shall prepare and submit to the SUMC Parties a Supplement to the Annual Report, in the form and containing the content described in Section 12(d) below, to demonstrate the City’s good faith compliance with the terms of this Agreement. (b) Special Review. The City Council may order a special review of compliance with this Agreement any time the City Council determines that the SUMC Parties may be in breach of the Agreement. The Planning Director or City Council, as determined from time to time by the City Council, shall conduct such special reviews, at the City’s expense. (c) Annual Report. The Annual Report to be submitted by the SUMC Parties pursuant to Section 12(a) above shall summarize the SUMC Parties’ progress on the Project, including, at a minimum (i) a list of the net new square footage for which a certificate of occupancy has been received; (ii) a description of the steps the SUMC Parties have taken to comply with the obligations listed in Section 5 of this Agreement; and (iii) any other information the City reasonably requires to determine the SUMC Parties’ compliance with this Agreement. (d) Supplement to the Annual Report. The Supplement to the Annual Report to be submitted by the City pursuant to Section 12(a) above shall include an accounting of the funds received by the City, including a description of the account balances for each of the funds that the City is required to maintain under Section 5 of this Agreement (“City Funds”), the City’s expenditures from each of the City Funds, and the purposes for which the expenditures were used. The City’s descriptions of the expenditures shall be at the level of detail the SUMC Parties reasonably determine is necessary 110614 sh 0130788 35 to confirm that the City’s expenditures from the City Funds are consistent with the terms of Section 5 of this Agreement. The City’s report shall be included in any hearings held by the City pursuant to Section 12(e) of this Agreement. The City shall bear the burden of proof that the City has complied with the requirements of Section 5 for use of funds paid by the SUMC parties. (e) Procedure. During either a periodic review or a special review, the SUMC Parties shall be required to demonstrate good faith compliance with the terms of the Agreement. The burden of proof on this issue shall be on the SUMC Parties. During the periodic or special review, the City may rely on information in addition to that provided in the Annual Report prepared by the SUMC Parties pursuant to Section 12(a) above. The Parties acknowledge that failure by the SUMC Parties to demonstrate good faith compliance shall constitute grounds for termination or modification of this Agreement in accordance with the provisions of this Section 12. (i) Upon the SUMC Parties’ submission of the Annual Report to the Planning Director, the Planning Director shall review the Annual Report and, based on the Annual Report and any other information available to the Planning Director relating to the SUMC Parties’ compliance with the Agreement, prepare and submit a report (the “Planning Director’s Report”) to the City Council setting forth the evidence concerning good faith compliance by the SUMC Parties with the terms of this Agreement and the recommended finding on that issue. (ii) The City Council shall review the Planning Director’s report, the Annual Report submitted by the SUMC Parties, and any other information available to the City Council relating to the SUMC Parties’ compliance with the Agreement. (iii) If, upon completing its review, the City Council finds that the SUMC Parties have complied in good faith with the terms and conditions of this Agreement, the review shall be concluded. (f) Default by SUMC Parties. If, upon completing its review described in Section 12(e), the City Council makes a finding, on the basis of substantial evidence, that the SUMC Parties have not complied in good faith with the terms and conditions of this Agreement, the City shall provide written notice to the SUMC Parties describing: (i) such failure to comply with the terms and conditions of this Agreement (referred to herein as a “Default”), (ii) whether the Default can be cured, (iii) the actions, if any, required by the SUMC Parties to cure such Default, and (iv) the time period within which such Default must be cured. If the Default can be cured, the SUMC Parties shall have at a minimum 90 days after the date of such notice to cure such Default, or in the event that such Default cannot be cured within such 90-day period but can 110614 sh 0130788 36 be cured within one (1) year, the SUMC Parties shall have commenced the actions necessary to cure such Default and shall be diligently proceeding to complete such actions necessary to cure such Default within 90 days from the date of the notice. If the Default cannot be cured or cannot be cured within one (1) year, as determined by City during the periodic or special review, the City Council may modify or terminate this Agreement as provided in Section 12(g) and Section 12(h). (g) Proceedings Upon Modification or Termination. If, upon a finding under Section 12(f) and the expiration of the cure period specified in Section 12(f) above, City determines to proceed with modification or termination of this Agreement, City shall give written notice to the SUMC Parties of its intention so to do. The notice shall be given at least ten calendar days before the scheduled hearing and shall contain: (i) The time and place of the hearing; (ii) A statement as to whether or not the City proposes to terminate or to modify the Agreement; and (iii) Such other information as is reasonably necessary to inform the SUMC Parties of the nature of the proceeding. (h) Hearings on Modification or Termination. At the time and place set for the hearing on modification or termination, the SUMC Parties shall be given an opportunity to be heard and shall be required to demonstrate good faith compliance with the terms and conditions of this Agreement. The burden of proof on the issue shall be on the SUMC Parties. If the City Council finds, based upon substantial evidence, that the SUMC Parties has not complied in good faith with the terms or conditions of the Agreement, the City Council may terminate this Agreement or modify this Agreement in a manner mutually acceptable to the Parties to address the Default. The decision of the City Council shall be final and subject to judicial review as provided in Section 14, below. (i) Certificate of Compliance. 110614 sh 0130788 37 If, at the conclusion of a periodic or special review, the SUMC Parties are found or deemed to be in compliance with this Agreement, City shall, upon request by the SUMC Parties, issue a Certificate of Compliance (“Certificate”) to the SUMC Parties stating that after the most recent periodic or special review and based upon the information known or made known to the Planning Director and City Council that: (1) this Agreement remains in effect, and (2) the SUMC Parties are not in Default. The Certificate shall be in recordable form, shall contain information necessary to communicate constructive record notice of the finding of compliance, shall state whether the Certificate is issued after a periodic or special review and shall state the anticipated date of commencement of the next periodic review. The SUMC Parties may record the Certificate without cost or expense to City. 13. Default by City. If the SUMC Parties determine that City has failed to comply with any of the City’s obligations under this Agreement, the SUMC Parties may provide written notice to the City describing its contentions regarding (i) such failure to comply with the terms and conditions of this Agreement (referred to herein as a “City Default”), (ii) whether the City Default can be cured, (iii) the actions, if any, required of City to cure such City Default, and (iv) the time period within which such City Default must be cured. If the City Default can be cured, City shall have at least 90 days after the date of such notice to cure such Default, or in the event that such City Default cannot be cured within such 90 days period but can be cured within one year, City shall have commenced all actions necessary to cure such Default and shall be diligently proceeding to complete all such actions necessary to cure such Default within 90 days from the date of notice. If the SUMC Parties contend that the City Default cannot be cured or cannot be cured within one year, or if City fails to cure within the applicable cure period as provided in this Section 13, the SUMC Parties shall give notice to City of its contentions before pursuing the remedies described in Section 14. 14. Remedies for Default. It is acknowledged by the Parties that City would not have entered into this Agreement if doing so would subject it to the risk of incurring liability in damages, either for breach of this Agreement, anticipatory breach, repudiation of the Agreement, or for any actions with respect to its implementation or application. The Parties intend by the provisions of this Section 14 that none of the Parties shall have any liability for money damages arising out of a breach of this Agreement, and no liability in money damages for any claims arising out of the application process, negotiation, execution and adoption, or the implementation or application of this Agreement. Each of the Parties hereto may pursue any remedy at law or equity available for the breach of any provision of this Agreement, including but not limited to temporary or permanent injunctive relief or restraining orders, except that the Parties shall have no liability in damages for any acts which are alleged to have arisen out of or relate to this Agreement, under any circumstances. The Parties further acknowledge that money damages and remedies at law generally are inadequate, and specific performance is the most appropriate remedy for the enforcement of this Agreement and should be available to all Parties for the following reasons: (a) Money damages are excluded as provided above. 110614 sh 0130788 38 (b) Due to the size, nature, and scope of the Project, it may not be practical or possible to restore the Property to its original condition once implementation of this Agreement has begun. After such implementation, the SUMC Parties may be foreclosed from other choices they may have had to utilize the Property or portions thereof. The SUMC Parties have invested significant time and resources and performed extensive planning and processing of the Project in agreeing to the terms of this Agreement and will be investing even more significant time and resources in implementing the Project in reliance upon the terms of this Agreement, and it is not possible to determine the sum of money which would adequately compensate the SUMC Parties for such efforts. Except for non-damages remedies, including the remedy of specific performance, the SUMC Parties, on the one hand, and the City, on the other hand, for themselves, their successors and assignees, hereby release one another’s officers, trustees, directors, agents and employees from any and all claims, demands, actions, or suits of any kind or nature arising out of any liability, known or unknown, present or future, including, but not limited to, any claim or liability, based or asserted, pursuant to Article I, Section 19 of the California Constitution, the Fifth and Fourteenth Amendments of the United States Constitution, or any other law or ordinance which seeks to impose any money damages, whatsoever, upon the Parties because the Parties entered into this Agreement, because of the terms of this Agreement, or because of the manner of implementation or performance of this Agreement. All legal actions shall be heard by a reference from the Santa Clara County Superior Court pursuant to Code of Civil Procedure Section 638, et seq. The parties to the action shall agree upon a single referee who shall then try all issues, whether of fact or law, and report a finding and judgment thereon and issue all legal and equitable relief appropriate under the circumstances of the controversy before the referee. If the parties to the action are unable to agree on a referee within ten (10) days of a written request to do so by any Party, any Party may seek to have one appointed pursuant to Code of Civil Procedure section 640. The cost of such proceeding shall initially be borne equally by the parties to the action. Any referee selected pursuant to this Section 13 shall be considered a temporary judge appointed pursuant to Article 6, Section 21 of the California Constitution. 15. Modification, Amendment or Cancellation by Mutual Agreement. Subject to meeting the notice and hearing requirements of Section 65867 of the Development Agreement Act, this Agreement may be modified, amended, or cancelled at any time by mutual consent of the Parties in accordance with the provisions of Section 65868 of the Development Agreement Act and City’s Resolution No. 6597. 110614 sh 0130788 39 16. Superseding State or Federal Law. In the event that any state or federal law or regulation enacted or adopted after the date of this Agreement shall prevent or preclude compliance with any of the provisions hereof, such provisions shall be modified or suspended only to the extent and for the time necessary to achieve compliance with said law or regulation and the remaining provisions of this Agreement shall be in full force and effect. Upon repeal of said law or regulation or occurrence of other circumstances removing the effect thereof upon this Agreement, the provisions hereof shall be restored to their full original effect. 17. Notices. All notices required or provided for under this Agreement shall be in writing and shall be delivered personally or by overnight courier service or sent by certified or registered mail, return receipt requested. Any notice shall be deemed to have been duly given and received upon receipt. Notices to the parties shall be addressed as follows: City: City Manager City of Palo Alto 250 Hamilton Avenue Palo Alto, California 94301 with copies to: City Attorney City of Palo Alto, 8th Floor 250 Hamilton Avenue Palo Alto, California 94301 Director of Planning and Community Environment City of Palo Alto, 5th Floor 250 Hamilton Avenue Palo Alto, California 94301 SHC/LPCH: Mark J. Tortorich, Vice President Planning, Design & Construction 384 Stanford Shopping Center Stanford, CA 94304 with a copy to: Sarah Diboise, Esq. Office of General Counsel Building 170, 3rd Floor, Main Quad P.O. Box 20386 Stanford, CA 94305-2038 110614 sh 0130788 40 Stanford University: Vice President, Land Buildings and Real Estate Stanford University 3145 Porter Drive, Building F Palo Alto, CA 94304 with a copy to: Vice President and General Counsel Stanford University P.O. Box 20386 Stanford, CA 94305 Any Party may change its address for notice by giving ten (10) days’ notice of such change in the manner provided for in this paragraph. 18. Term of Agreement; Force Majeure. (a) Basic Term. Except as to those obligations that expressly extend for the Life Of The Project, or otherwise expressly extend beyond the stated Term of the Agreement, the Term of this Agreement shall commence as of the Effective Date, and shall continue for thirty (30) years from the adoption of the Ordinance authorizing this Agreement or until earlier terminated by mutual consent of the Parties or as otherwise provided by this Agreement. Upon the termination of this Agreement, no Party shall have any further right or obligation hereunder except with respect to any obligation to have been performed prior to such termination, or with respect to any default in the performance of the provisions of this Agreement which has occurred prior to such termination, or with respect to any obligations which are specifically set forth as surviving this Agreement. (b) Extension for Referendum, Litigation, Default or Moratorium. If a Party is deprived of a benefit under this Agreement as a result of referendum of one or more of the Project Approvals, litigation challenging one or more of the Project Approvals or one or more Subsequent Approvals, a moratorium, or a default by the other Party, then the Party so deprived may elect to extend the Term of this Agreement with respect to that benefit for the duration of the moratorium or default. (c) Force Majeure. Performance by either the SUMC Parties, on the one hand, or the City, on the other hand, of an obligation hereunder shall be excused during any period of “Permitted Delay.” Permitted Delay shall mean delay beyond the reasonable control of a Party including, without limitation, an inability to perform caused by (a) acts of God, including without limitation earthquakes, floods, fire, and other natural calamities, (b) civil commotion; (c) riots or terrorist acts; (d) strikes or other forms of material labor disputes; (e) shortages of materials or supplies; and 110614 sh 0130788 41 (f) vandalism. A Party’s financial inability to perform shall not be a ground for claiming a Permitted Delay. The Party claiming the Permitted Delay shall notify the other Party of its intent to claim a Permitted Delay, the specific grounds of the same and the anticipated period of the Permitted Delay within 10 business days after the occurrence of the conditions which establish the grounds for the claim. The period of Permitted Delay shall last not longer than the conditions preventing performance. 19. Assignment; Right to Assign. (a) Assignment. (i) Right to Assign. Each of the SUMC Parties shall have the right to sell, transfer or assign its interest in the Property, in whole or in part (provided that no such partial transfer shall be permitted to cause a violation of the Subdivision Map Act, Government Code section 66410, et seq.), to any person or entity at any time during the term of this Agreement; provided: (A) Concurrently with any such sale, transfer or assignment, or within ten (10) business days thereafter, the transferor shall notify City, in writing, of such sale, transfer or assignment and shall provide City with an executed agreement, in a form reasonably acceptable to the City, by the purchaser, transferee or assignee and providing therein that the purchaser, transferee or assignee expressly and unconditionally assumes all the duties and obligations of the transferor under this Agreement. (B) No sale, transfer or assignment of any right or interest under this Agreement shall be made without the prior written consent of the City Council, which consent may not be unreasonably withheld. Notwithstanding the failure of any purchaser, transferee or assignee to execute the agreement required by subparagraph (i) above, the burdens of this Agreement shall be binding upon such purchaser, transferee or assignee, but the benefits of this Agreement shall not inure to such purchaser, transferee or assignee until and unless such agreement is executed. (ii) Release of Transferor. Notwithstanding any sale, transfer or assignment, the transferring Party shall continue to be obligated under this Agreement unless such Party is given a release in writing by City, which release will be provided by City upon the full satisfaction by the transferring Party of all the following conditions: (A) The transferring Party no longer has a legal or equitable interest in the portion of the Property being transferred. 110614 sh 0130788 42 (B) The transferring Party is not then in default and default proceedings have not been commenced by City under this Agreement. (C) The transferring Party has provided City with the notice and executed agreement required under Section 19(a) (i) above. (D) The purchaser, transferee or assignee provides City with security reasonably satisfactory to City to secure performance of its obligations under this Agreement. Nothing contained in this Section 19 shall prevent a transfer of the Property, or any portion thereof, to an institutional lender or Mortgagee as a result of a foreclosure of a Mortgage or deed in lieu of foreclosure, and any lender or Mortgagee acquiring the Property, or any portion thereof, as a result of foreclosure of a Mortgage or a deed in lieu of foreclosure shall take such Property subject to the terms of this Agreement; provided, however, in no event shall such lender or Mortgagee be liable for any defaults or monetary obligations of the SUMC Parties arising prior to acquisition of title to the Property by such lender or Mortgagee; and provided further in no event shall any such lender or Mortgagee or its successors or assigns be entitled to a building permit or occupancy certificate for any portion of the Project until all fees due under this Agreement have been paid to City, until all outstanding obligations of the SUMC Parties have been performed, and until any and all outstanding Defaults have been cured. 20. Mortgagee Protection. The Parties hereto agree that this Agreement shall not prevent or limit any of the SUMC Parties in any manner, at their sole discretion, from encumbering the Property or any portion thereof or any improvement thereon by any Mortgage securing financing with respect to the Property or development of the Property. City acknowledges that the lenders providing such financing may require certain Agreement interpretations and shall upon request, from time to time, meet with any of the SUMC Parties and representatives of such lenders to consider any such request for interpretation. City will not unreasonably withhold its consent to any such requested interpretation provided such interpretation is consistent with the intent and purposes of this Agreement. Any Mortgagee of the Property shall be entitled to the following rights and privileges: (a) No Impairment. Neither entering into this Agreement nor a breach of this Agreement shall defeat, render invalid, diminish or impair the lien of any mortgage or deed of trust on the Property made in good faith and for value. (b) Notice of Default by the SUMC Parties. 110614 sh 0130788 43 The Mortgagee of any mortgage or deed of trust encumbering the Property, or any part thereof, which Mortgagee, has submitted a request in writing to the City in the manner specified herein for giving notices, shall be entitled to receive written notification from City of any Default by the SUMC Parties in the performance of the SUMC Parties’ obligations under this Agreement. (c) Notice. If City timely receives a request from a Mortgagee requesting a copy of any notice of default given to any of the SUMC Parties under the terms of this Agreement, City shall provide a copy of that notice to the Mortgagee within twenty (20) days of sending the notice of default to the SUMC Parties. The Mortgagee shall have the right, but not the obligation, to cure the default during the remaining cure period allowed such Party under this Agreement. (d) Transfer of Ownership. Mortgagee shall have the rights set forth in the last paragraph of Section 19 above. 21. Miscellaneous. (a) Effect of Recitals. The Recitals are intended in part to paraphrase and summarize this Agreement, however, the terms, covenants and conditions of this Agreement are expressed with particularity in Section 1, et seq. and the rights and obligations of the Parties are to be determined by the terms of the Agreement and not by the Recitals. To the extent the Recitals provide factual context for the Agreement, they may be considered when interpreting the terms and provisions of the Agreement. (b) Construction. As used in this Agreement, and as the context may require, the singular includes the plural and vice versa, and the masculine gender includes the feminine and neuter and vice versa. This Agreement shall be construed as a whole according to its fair language and common meaning to achieve the objectives and purposes of the Parties. This Agreement has been reviewed and revised by legal counsel for each Signatory Party, and no presumption or rule that ambiguities shall be construed against the drafting Party shall apply to the interpretation or enforcement of this Agreement. Each Signatory Party has consulted with counsel and determined that this Agreement accurately and completely reflects the agreement of the Parties. The captions of the sections and subsections of this Agreement are solely for the convenience of reference and shall be disregarded in the construction and interpretation of this Agreement. 110614 sh 0130788 44 (c) Severability. If any terms of this Agreement are determined to be invalid, void, or unenforceable, the remainder of this Agreement shall not be affected to the extent the remaining terms are not rendered impractical or impossible to perform taking into consideration the purposes of this Agreement. (d) Time. Time is of the essence of this Agreement and of each and every term and condition hereof. (e) Waiver. No waiver of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the Party against whom enforcement of a waiver is sought. No waiver of any right or remedy in respect of any occurrence or event shall be deemed a waiver of any other right or remedy or in respect of any other occurrence or event. (f) Governing State Law. This Agreement shall be construed in accordance with the laws of the state of California. (g) Determination of Compliance. At any time during the Term of this Agreement, any Party or its lender, may request any Party to this Agreement to confirm that to the best of such Party’s knowledge, no defaults exist under this Agreement or if defaults do exist, to describe the nature of such defaults. Each Party shall provide such a determination to such lender or other Party within forty-five (45) days of the request therefor. The failure of any Party to provide the requested determination within such forty-five (45) day period shall constitute a confirmation that to the best of such Party’s knowledge, no defaults exist under this Agreement. Requests for such determinations shall be made in writing and as required by Section 17 above. (h) Entire Agreement. This Agreement contains the entire understanding and agreement of the Parties. There are no oral or written representations, understandings, undertakings, or agreements that are not contained or expressly referred to herein, and any such representations, understandings, or agreements are superseded by this Agreement. No evidence of any such representations, understandings, or agreements shall be admissible in any proceeding of any kind or nature relating to the terms or conditions of this Agreement, its interpretation, or breach. 110614 sh 0130788 45 (i) No Third Party Beneficiaries. This Agreement is made and entered into for the sole protection and benefit of the signatory Parties and their successors and assigns, including Mortgagees. No other person shall have any right of action based upon any provision of this Agreement. (j) Authority to Execute. Each person executing this Agreement warrants and represents that he or she has the authority to bind the signatory Party for which he or she is signing to the performance of its obligations hereunder. (k) Administrative Appeal. Whenever in the Applicable Rules or Subsequent Applicable Rules any requirement or action by the SUMC Parties is conditioned upon the approval or satisfaction, however expressed, of any entity other than City, such condition shall not be interpreted as providing the third party the right to make any final decision other than as may be authorized by law other than the Applicable Rules or Subsequent Applicable Rules. Where a third party has no right authorized by law other than the Applicable Rules or Subsequent Applicable Rules to make a final decision, a condition requiring approval or satisfaction of such third party, however expressed, shall mean that the third party shall provide, as appropriate, advice, consultation, a recommendation and/or an initial decision regarding the condition. The actual determination in such case will be made by the official or entity of City required or authorized to make such determination in accordance with the applicable provisions of the Palo Alto Municipal Code as set forth in the Applicable Rules. Appeals from determinations made by City officials or entities shall be made in accordance with applicable provisions of the Palo Alto Municipal Code as set forth in the Applicable Rules. (l) Exhibits. The following exhibits to which reference is made in this Agreement are deemed incorporated herein in their entirety: Exhibit A – Property Description Exhibit B – Initial Project Approvals If the recorder refuses to record any exhibit, the City Clerk may replace it with a single sheet bearing the exhibit identification letter, stating the title of the exhibit, the reason it is not being recorded, and that the original, certified by the City Clerk, is in the possession of the City Clerk and will be reattached to the original when it is returned by the recorder to the City Clerk. 110614 sh 0130788 46 (m) Signature Pages. For convenience, the signatory Parties may execute and acknowledge this Agreement on separate signature pages, which, when attached hereto, shall constitute one complete agreement. (n) Precedence. If any conflict or inconsistency arises between this Agreement and the Applicable Rules or the Subsequent Rules, the provisions of this Agreement shall have precedence and shall control over the conflicting or inconsistent provisions of the Applicable Rules or Subsequent Rules. (o) Recordation. Whenever recordation is required or may be required by either Party, City shall be responsible for recordation. If City fails to record a document when required, the SUMC Parties may, but are not obligated to, record the document and by doing so the SUMC Parties do not assume the duties or obligations of City established by this Section or the Development Agreement Act nor does it waive any right it may have to compel City to properly perform its duties and obligations. The failure of City to record or to properly record this Agreement or any other document as provided herein shall not affect or limit in any way the SUMC Parties’ rights to enforce this Agreement and to rely upon it. (p) Referendum or Challenge. In the absence of a referendum petition, City shall not unilaterally submit the Project Approvals or the ordinance approving this Agreement to a referendum by action of the City Council on its own motion without the SUMC Parties’ consent. In addition to the remedies set forth in Section 18(b), if the Project Approvals or the ordinance approving this Agreement is the subject of a referendum, or if litigation is commenced seeking to rescind the Project Approvals or the City’s decision to enter into this Agreement or to declare this Agreement void (“Legal Action”), less than one year from the filing with the County Clerk by the City of the Notice of Determination following the second reading of the ordinance approving the Hospital District zoning and the ordinance approving this Agreement (the “NOD”), each Party shall have the right to terminate this Agreement by written notice to the other Parties no later than thirty (30) days after the event that gives a Party the right to terminate, or such later time allowed in writing by the non-terminating Party or Parties. Each Party’s right to unilaterally terminate this Agreement as set forth in this Section 21(p) shall expire one year from the date of the filing of the NOD. The Parties may also, at any time by mutual agreement, suspend performance of all or part of the obligations in this Agreement pending the outcome of any such referendum or litigation. 110614 sh 0130788 47 (i) City’s Reimbursement Obligation. If the Project Approvals or the Ordinance approving this Agreement is challenged by a Legal Action as described above in Section 21(p), the City shall return payments made by the SUMC Parties to the City according to the following requirements: (A) If the Legal Action is filed with the court before 90 days have elapsed from the filing of the NOD, then the City shall return all payments made by the SUMC Parties pursuant to Section 5 of this Agreement, within 30 days of the City’s receipt of a written request by the SUMC Parties. (B) If the Legal Action is filed with the court more than 90 days but less than one year after the filing of the NOD, then the City shall return payments made by the SUMC Parties pursuant to Section 5 of this Agreement, within 30 days of the City’s receipt of a written request by the SUMC Parties, as follows: (1) Section 5(a)(iii) (Fund for Community Health and Safety Programs) Payments. The City shall return to the SUMC Parties such portions of payments made by the SUMC Parties pursuant to Section 5(a)(iii) that have not been disbursed through the City’s Human Relations Committee or otherwise, or contractually committed to a third party community health care program by the City. (2) Section 5(b)(iii) (Fund for Operating Deficit) Payments. The City shall return to the SUMC Parties such portions of payments made by the SUMC Parties pursuant to Section 5(b)(iii) that have not been contractually committed by the City to a third party. (3) Section 5(e)(i) (Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund) Payments. The City shall return to the SUMC Parties such portions of payments made by the SUMC Parties pursuant to Section 5(e)(i) that have not been contractually committed by the City to a third party. 110614 sh 0130788 48 (4) Section 5(f)(i) (Sustainability Programs) Payments. The City shall return to the SUMC Parties such portions of payments made by the SUMC Parties pursuant to Section 5(f)(i) that have not been contractually committed by the City to a third party. (C) If the Legal Action is filed with the court one year or more after the filing of the NOD, and results in a final judgment that materially impairs the SUMC Parties’ vested rights under this Agreement, then the City shall have no obligation to return any payments already made by the SUMC Parties to the City pursuant to this Agreement, and all of the Parties’ outstanding obligations under this Agreement shall be suspended until the Parties have mutually agreed to either reinstate or terminate this Agreement. (ii) Effect of Suspension or Termination of Agreement. If the Parties mutually agree to suspend performance of all or part of the obligations in this Agreement pending the outcome of the Legal Action pursuant to Section 21(p) above, the agreement to suspend performance shall address the terms under which the SUMC Parties’ payment obligations under Section 5 shall be reinstated. In the event that the SUMC Parties unilaterally terminate this Development Agreement pursuant to Section 21(p), the City may elect at its reasonable discretion to revoke the conditional use permit for the Project in whole or in part, and the SUMC Parties will not contend that commencement of construction elsewhere on the Property has vested the SUMC Parties’ rights to construct structures for which construction has not yet commenced. The Parties’ rights and obligations set forth in this Section 21(p)(ii) shall survive the SUMC Parties’ unilateral termination of this Agreement pursuant to the provisions of Section 21(p). (iii) Limit of City’s Reimbursement Obligations. Except as specifically set forth in this Section 21(p), the City shall have no obligation to return any payments made by the SUMC Parties pursuant to this Agreement. 110614 sh 0130788 49 IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the day and year first above written. ATTEST: CITY OF PALO ALTO ______________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: ______________________________ City Attorney APPROVED: ______________________________ City Manager APPROVED AS TO CONTENT: _____________________________ Director of Planning and Community Environment STANFORD HOSPITAL AND CLINICS By: _________________________ Name: _______________________ Title: ________________________ LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT STANFORD By: __________________________ Name: ________________________ Title: _________________________ THE BOARD OF TRUSTEES OF THE LELAND STANFORD UNIVERSITY By: ___________________________ Name: _________________________ 110614 sh 0130788 50 Title: __________________________ EXHIBIT A Legal Description 110614 sh 0130788 51 110614 sh 0130788 52 Exhibit B Initial Project Approvals A. Approval of the resolution adopting changes to the Comprehensive Plan to recognize taller building heights at SUMC, to exclude hospital, clinic and medical school use areas from the citywide and area specific non- residential growth limits, and changes to the Comprehensive Plan Land Use Map; B. Adoption of an ordinance amending the municipal code to establish a new “Hospital” zone district and amending the sign code and tree code to be consistent with the Hospital Zone regulations; C. Adoption of an ordinance approving a thirty–year development agreement between the City of Palo Alto and the Applicants that would grant certain development rights in exchange for certain public benefits; D. Adoption of a Record of Land Use Action approving a conditional use permit that would allow specific hospital, medical office, and related uses in the Hospital Zone; E. Architectural Review Board Approval of the following: 1. Stanford Hospital; 2. Lucile Packard Children’s Hospital expansion; 3. School of Medicine, Foundations in Medicine 1 building (FIM1); 4. Renovation of the existing Hoover Pavilion; 5. Medical Office Building and Parking Garage; 6. Surface Improvements along Welch Road, and Durand Way; and 7. SUMC Design Guidelines. F. Adoption of a Resolution annexing an approximate 0.65 acre site from Santa Clara County; and G. Acceptance of SUMC Area Plan Update. City of Palo Alto (ID # 1813) City Council Staff Report Report Type: Consent Calendar Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 3 (ID # 1813) Summary Title: Investment Policy Update Title: Annual Adoption of the City’s Investment Policy From:City Manager Lead Department: Administrative Services Recommendation Staff recommends that Council approve the City’s Investment Policy with the following changes: 1.Delete references to the Deputy Director of Administrative Services and replace with Assistant Director of Administrative Services. 2.Increase the callable U.S. Government Agency Securities limit from 20 percent to 25 percent of the par value of the portfolio. 3.Increase the Senior Financial Analyst’s authority to transfer funds from the City’s general (checking) account to an authorized financial institution from $5 million per day to $8 million per day. 4.Eliminate a redundant clause requiring Broker and Dealers to “have a minimum one year of experience operating with California municipalities”. 5.Update Appendix A and C to reflect the Federal Deposit Insurance Corporation (FDIC) deposit insurance being permanently increased to $250,000. Discussion During the annual budget process, staff submits the Investment Policy to Council for review and approval (Attachment A). For Fiscal Year (FY) 2012, staff is proposing to update the investment policy to reflect the following changes: 1. The current Deputy Director oversees the Treasury Division which includes responsibility for the City’s investment portfolio. In order to properly align the job classification with the duties currently needed and performed within the Administrative Services Department, the FY 2012 proposed budget includes reclassifying the Deputy to an Assistant Director. This change has been tentatively approved by the Finance Committee and, assuming the City Council approves this change as well, the title in the Investment Policy would be changed accordingly. 2. Callable agency securities pay a higher interest rate than non-callable securities. The higher interest rate is paid by an agency because there is uncertainty (for the purchaser) over whether a security will reach maturity or will be called (repurchased) by the agency prior to maturity. June 20, 2011 Page 2 of 3 (ID # 1813) Recently, the premium or spread the City receives for a callable security compared to a 1 year to 10 year non-callable security is estimated at between 2 to 34 basis points. On a $2.0 million security with a maturity of 5 years, the City would realize an additional $3,400 annually in interest compared to purchasing a non-callable security. Given the duration of a low interest rate environment due to the Federal Reserve Board’s policies, staff is requesting that the current 20 percent limitation on purchasing callable agency securities be increased to 25 percent of the portfolio. This will allow additional flexibility in investing idle cash and enhancing portfolio yield. Should interest rates move steadily upward, the purchase of callable securities will be re-evaluated. 3. The request to increase the Senior Financial Analyst’s authority to transfer funds is primarily a consequence of higher payments to Northern California Power Agency (NCPA) and counterparties for electric and gas commodities. Utility wire payments have increased from $42 million (annually) in FY 2001 to over $106 million (annually) in FY 2010. The current limit on the Senior Financial Analyst to transfer no more than a total amount of $5 million a day from the City’s general (checking) account to an authorized financial institution has proven inadequate. It’s recommended that this limit be raised to $8 million to reflect the growth in commodity payments. It should be noted that any transfer of funds to pay commodity or other high value invoices is subject to approvals by the department head requesting payment. In addition, wire transfers have strict controls in that they require two ASD staff members to process. 4. One section of the City’s current Investment Policy requires that brokers and dealers have “at least three years of experience operating with California Municipalities” while another states that they “must have a minimum of one year of experience operating with California municipalities.” The latter and lesser requirement is redundant and is recommended for elimination. 5. The Federal Deposit Insurance Corporation insures all types of deposits received at an insured bank including time deposits such as a certificate of deposit (CD). In July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law which implemented a permanent insurance limit of $250,000 per depositor, per insured bank. Staff recommends updating the Certificate of Deposit definition in Appendix A and the FDIC definition in Appendix C to reflect this change. Resource Impact Except for the potential increase in yield due to holding a higher percentage of callable securities in the City’s portfolio, there is no budget impact associated with this report. Policy Implications This recommendation contains changes to the City’s Investment Policy. Environmental Review The actions requested in this report do not constitute a project for the purposes of the June 20, 2011 Page 3 of 3 (ID # 1813) California Environmental Quality Act (CEQA). Attachments: ·Atttachment A: Adopted Investment Policy 2011-12 (DOC) Prepared By:Tarun Narayan, Senior Financial Analyst Department Head:Lalo Perez, Director City Manager Approval: James Keene, City Manager 1 CITY OF PALO ALTO Investment Policy Fiscal Year 2011-12 (Adopted June 20, 2011) INTRODUCTION The City of Palo Alto invests its pooled idle cash according to State of California law and the charter of the City of Palo Alto. In particular, the City follows “The Prudent Investor Standard” cited in the State Government Code (Section 53600.3). Under this standard, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. INVESTMENT PHILOSOPHY The basic principles underlying Palo Alto's investment philosophy is to ensure the safety of public funds; provide that sufficient money is always available to meet current expenditures; and achieve a reasonable rate of return on its investments. The City's preferred and chief practice is to buy securities and to hold them to their date of maturity rather than to trade or sell securities prior to maturity. The Citymay, however, elect to sell a security prior to its maturity should there be a significant financial need. If securities are purchased and held to their maturity date, then any changes in the market value of those securities during their life will have no effect on their principal value. Under a buy and hold philosophy, the City is able to protect its invested principal. The economy, the money markets, and various financial institutions (such as the Federal Reserve System) are monitored carefully to make prudent investments and to assess the condition of the City’s portfolio. 2 INVESTMENT OBJECTIVES The primary objectives, in priority order, of investment activities shall be safety, liquidity, and yield: 1.Safety:Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. a)Credit risk is the risk that an obligation will not be paid and a loss will result. The City will seek to minimize this risk by: ·Limiting investment to the safest types of securities as listed in the “Authorized Investment” section. ·Diversifying its investments among the types of securities that are authorized under this investment policy. b)Interest rate risk is the risk that changes in interest rates will adverselyaffect the value of an investor’s portfolio. For example, an investor with large holdings in long-term bonds has assumed significant interest rate risk because the value of the bonds will fall if interest rates rise. The City can minimize this risk by: ·Buying and holding its securities until maturity. ·Structuring the investment portfolio so that securities mature to meet cash flow requirements. To further achieve the objective of safety, the amount that can be invested in all investment categories, excluding obligations of the U.S. Government and its agencies, is limited either as a percentage of the portfolio or by a specific dollar amount. These limits are defined under the “Authorized Investments” section. 2. Liquidity:Liquidity is the second most important objective of the investment program. The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished bymaintaining a portion of the portfolio in liquid money market mutual funds or local government investment pools. In addition, the City will maintain one month’s cash needs in short term investments and at least $50 million shall be maintained in securities maturing in less than two years. Since all possible cash demands cannot be anticipated, however, the portfolio will consist of securities with active secondaryor resale markets should the need to sell a security prior to maturity arises. 3 3. Yield:Yield on the City’s portfolio is last in priority among investment objectives. The investment portfolio shall be designed to obtain a market rate of return that reflects the authorized investments, risk constraints, and liquidity needs outlined in the City’s investment policy. Compared to similar sized cities, the City of Palo Alto should be able to take advantage of its relatively large reserve balances to achieve higher yields through long-term investments. In addition, the City will strive to maintain the level of investment of idle funds as close to 100 percent as possible. SCOPE A. This investment policy shall apply to all financial assets of the City of Palo Alto as accounted for in the Comprehensive Annual Financial Report (CAFR), including but not limited to the following funds: 1.General Fund 2.Special Revenue Funds 3.Debt Service Funds 4.Capital Project Fund 5.Enterprise Funds 6.Internal Service Funds 7.Trust and Agency Funds B.The policy does not cover funds held by the Public Employees Retirement System or funds of the Deferred Compensation program. C.Investments of bond proceeds shall be governed by the provisions of the related bond indentures. GENERAL INVESTMENT GUIDELINES 1.The maximum stated final maturity of individual securities in the portfolio should be ten years. 2.A maximum of 30 percent of the par value of the portfolio shall be invested in securities with maturities beyond five years. 3.The City shall maintain a minimum of one month’s cash needs in short term investments. 4.At least $50 million shall be maintained in securities maturing in less than 2 years. 5.Should the ratio of the market value of the portfolio to the book value of the portfolio fall below 95 percent, the Administrative Services Department will report this fact to the City Council within a reasonable time frame and evaluate whether there is any risk of 4 holding any of the securities to maturity. 6.Commitments to purchase securities newly introduced on the market shall be made no more than three (3) working days before pricing. 7.Whenever possible, the City will obtain three or more quotations on the purchase or sale of comparable securities and take the higher yield on purchase or higher price on sale. This rule will not apply to new issues, which are purchased at market no more than three (3) working days before pricing, as well as to LAIF, City of Palo Alto bonds, money market accounts and mutual funds, all of which shall be evaluated separately. 8.Where the Investment Policy specifies a percentage limitation for a particular category of investment, that percentage is applicable only at the date of purchase. A later increase or decrease in a percentage resulting from a change in the portfolio’s assets or values shall not constitute a violation of that restriction. As soon as possible, percentage limitations will be restored as investments mature in each category. AUTHORIZED INVESTMENTS The California Government Code( Sections 53600 et seq.) governs investment of City funds. The following investments are authorized: 1.U.S. Government Securities (e.g. Treasury notes, bonds and bills)Securities that are backed by the full faith and credit of the United States a)There is no limit on purchase of these securities. b)Securities will not exceed 10 years maturity. c)All purchased securities must have an explicit or a de facto backing of the full faith and credit of the U.S. Government. 2.U.S. Government Agency Securities –Obligations issued by the Federal Government agencies (e.g. Federal National Mortgage Association). a)There is no limit on purchase of these securities except for: ·Callable and Multi-step-up securities provided that: -The potential call dates are known at the time of purchase; -the interest rates at which they “step-up” are known at the time of purchase; and -the entire face value of the security is redeemed at the call date. -No more than 25 percent of the par value of the portfolio. 5 b)Securities will not exceed 10 years maturity. 3.Bonds of State of California Municipal Agencies a)Having at time of investment a minimum Double A (AA/AA2) rating as provided by a nationally recognized rating service (e.g. Moody’s and/or Standard and Poor’s). b)May not exceed 10 percent of the par value of the portfolio. 4.Certificates of Deposit (CD)-A debt instrument issued by a bank for a specified period of time at a specified rate of interest. a)May not exceed 20 percent of the par value of the portfolio. b)No more than 10 percent of the par value of the portfolio in collateralized CDs in any institution. c)Purchase collateralized deposits only from federally insured large banks that are rated by a nationally recognized rating service (e.g. Moody’s and/or Standard and Poor’s). d)For non-rated banks, deposit should be limited to amounts federally insured (FDIC).–See Appendix C e)Rollovers are not permitted without specific instruction from authorized City staff. 5.Banker's Acceptance Notes (BA)–Bills of exchange or time drafts drawn on and accepted by commercial banks. Purchase of banker’s acceptances are limited to: a)No more than 30 percent of the par value of the portfolio. b)Not to exceed 180 days maturity. c)No more than $5 million with any one institution. 6.Commercial Paper -Short-term unsecured obligations issued by banks, corporations, and other borrowers. Purchases of commercial paper are limited to: a)Having highest letter or numerical rating as provided for by a nationally recognized rating service (e.g. Moody’s and/or Standard and Poor’s). 6 b)No more than 15 percent of the par value of the portfolio. c)Not to exceed 270 days maturity. d)No more than $3 million or 10 percent of the outstanding commercial paper of any one institution, whichever is lesser. 7.Local Agency Investment Fund (LAIF)–A State of California managed investment pool may be used up to the maximum permitted by California State Law. The current maximum is $40.0 million. 8.Short-Term Repurchase Agreements (REPO)–A contractual agreement between a seller and a buyer, usually of U.S. government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, usually, at a stated time. a)Not to exceed 1 year. b)Market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities. c)A Master Repurchase agreement must be signed with the bank or dealer. 9.Money Market Deposit Accounts –Liquid bank accounts which seek to maintain a net asset value of $1.00. 10.Mutual Funds which seek to maintain a net asset value of $1.00 and which are limited essentially to the above investments and further defined in note 9 of Appendix A a)No more than 20 percent of the par value of the portfolio. b)No more than 10 percent of the par value with any one institution. 11.Negotiable Certificates of Deposit (NCD) issued by nationally or state chartered banks and state or federal savings institutions and further defined in note 11 of Appendix A. Purchases of negotiable certificates of deposit: a)May not exceed 10 percent of the par value of the portfolio. b)No more than $5 million in any one institution. 12.Medium-Term Corporate Notes –Issued by corporation organized and operating within the United States or bydepository institutions licensed by the United States or any state and operating with the United States. 7 a)Not to exceed 5 years maturity. b)Securities eligible for investment shall have a minimum rating of AA from a nationally recognized rating service (e.g. Moody’s and/or Standard & Poor’s). c)No more than 10 percent of the par value of the portfolio. d)No more than $5 million of the par value may be invested in securities of any single issuer, other than the U.S. Government, its agencies and instrumentality. e)If securities owned by the City are downgraded by either Moody’s or Standard & Poors to a level below AA,it shall be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. Appendix A provides a more detailed description of each investment vehicle and its security and liquidity features. Most of the City's short-term investments will be in securities which pay principal upon maturity, while long-term investments may be in securities that periodicallyrepay principal, as well as interest. Most of the City's investments will be at a fixed rate. However, some of the investments may be at a variable rate, so long as that rate changes on specified dates in pre- determined increments. PROHIBITED INVESTMENTS: Includes all investments not specified above, and in particular: 1.Reverse repurchase agreements 2.Derivatives, as defined in Appendix B Appendix B provides a more detailed description of each investment, which is prohibited, for City investment. AUTHORIZED INVESTMENT PERSONNEL Idle cash management and investment transactions are the responsibility of the Administrative Services Department. The Administrative Services Department is under the control of the Director of Administrative Services (Director), as treasurer, who is subject to the direction and supervision of the City Manager. The Assistant Directors of Administrative Services, who reports to the Director, are authorized to make all investment transactions allowed by the Statement of Investment Policy. He or she may authorize the Senior Financial Analyst/Investments (Analyst) to enter into investments within clearly 8 specified parameters. The Investment function is under the supervision of the Assistant Director of Administrative Services (Assistant). The Assistant is charged with the responsibility to manage the investment program (portfolio), which includes developing and monitoring the City's cash flow model and developing long-term revenue and financing strategies and forecasts. The Analyst is subject to the direction and supervision of the Assistant. The Analyst assists the Assistant, in the purchase and sale of securities. The Analyst also prepares the quarterly report, and records daily all investment transactions as to the type of investment,amount, yield, and maturity. Cash flow projections are prepared as needed. In all circumstances, approval from the Director of Administrative Services is required before selling securities from the City's portfolio. The Analyst may also transfer no more than a total of $8 million a day from the City's general account to any one financial institution, without the prior approval of the Assistant Director of Administrative Services. No other person has authority to make investment transactions without the written authority of the Assistant Director of Administrative Services. USE OF BROKERS AND DEALERS The Administrative Services Department maintains a list of acceptable dealers. A dealer acts as a principal in security transactions, selling securities from and buying securities for their own position. A dealer must have a)At least three years experience operating with California municipalities; b)Maintain an inventory of trading securities of at least $10 million; and c)Be approved by the Assistant Administrative Services Director before being added to the City's list of approved dealers. In addition, individual traders or agents representing a dealer: A dealer will be removed from the list should there develop a history of problems to include: failure to deliver securities as promised, failure to honor transactions as quoted, or failure to provide accurate information. SAFEKEEPING AND CUSTODY All securities shall be delivered to the City's safekeeping custodian and held in the name of the City of Palo Alto, with the exception of the following investments: a)Certificates of deposit, which may be held by the City itself. 9 b)City shares in pooled investment funds, under contract. c)Mutual funds d)Local Agency Investment Fund (LAIF) POLICY REVIEW AND REPORTING ON INVESTMENTS Monthly, the Administrative Services Department will review performance in relation to Council- adopted Policy. Quarterly, the Department will report to Council on: its performance in comparison to policy, explain any variances from policy, provide any recommendations for policy changes, and discuss overall compliance with the City’s Investment Policy. In addition, the Department will provide Council with: a)A detailed list of all securities, investments and monies held by the City, and b)Report on the City’s ability to meet expenditure requirements over the next six months. Annually, the Administrative Services Department will present a Proposed Statement of Investment Policy, to include the delegation of investment authority, to the City Council for review during the annual budget process. All proposed changes in policy must be approved by the Council prior to implementation. Adopted by City Council October 22, 1984 Amended by City Council June 23, 1997 Monthly reporting effective January 1985 Amended by City Council January 26, 1998 Amended and Adopted by City Council June 24, 1985 Amended by City Council June 22, 1998 Amended by City Council December 2, 1985 Amended by City Council June 28, 1999 Amended by City Council June 23, 1986 Amended by City Council June 19, 2000 Amended by City Council June 22, 1987 Amended by City Council June 11, 2001 Amended by City Council August 8, 1988 Amended by City Council June 17, 2002 Amended by City Council November 28, 1988 Amended by City Council June 17, 2003 Amended by City Council June 26, 1989 Amended by City Council June 28, 2004 Amended by City Council May 14, 1990 Amended by City Council June 20, 2005 Amended by City Council June 24, 1991 Amended by City Council June 12, 2006 Amended by City Council June 22, 1992 Amended by City Council June 11, 2007 Amended by City Council June 23, 1993 Amended by City Council June 09, 2008 Amended by City Council June 20, 1994 Amended by City Council June 15, 2009 Amended by City Council June 19, 1995 Amended by City Council June 28, 2010 Amended by City Council June 24, 1996 10 APPENDIX A EXPLANATION OF PERMITTED INVESTMENTS 1.U.S. Government Securities –United States Treasury notes, bonds, bills, or certificates of indebtedness or those for which the faith and credit of the United States are pledged for the payment of principal and interest. 2.U.S. Government Agency Securities -U.S. Government Agency Obligations include the securities of the Federal National Mortgage Association (FNMA), Federal Land Banks (FLB), Federal Intermediate Credit Banks (FICB), banks for cooperatives, Federal Home Loan Banks (FHLB), Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Student Loan Marketing Association (SLMA), Small Business Administration (SBA), Federal Farm Credit (FFC), Federal Agricultural Mortgage Corporation (FAMC or FMAC), and Tennessee Valley Authority (TVA). Federal Agency securities are debt obligations that essentially result from lending programs of the Government. Federal agency securities differ from other types of securities, as well as among themselves. Their characteristics depend on the issuing agency. It is possible to distinguish three types of issues: (A) participation certificates (pooled securities), (B) Certificates of interest (pooled loans), (C) notes, bonds, and debentures. The securities of a few agencies are explicitly backed by the full faith and credit of the U.S. Government. All other issues purchased by the City have the de facto backing from the federal government, and it is highly unlikely that the government would let any agency default on its obligations. 3.Certificates of Deposit -A certificate of deposit (CDs) is a receipt for funds deposited in a bank, savings bank, or savings and loan association for a specified period of time at a specified rate of interest. Denominations are $250,000 and up. The first $250,000 of a certificate of deposit is guaranteed by the Federal Deposit Insurance Corporation (FDIC), if the deposit is with a bank or savings bank, or the Savings Association Insurance Fund (SAIF), if the deposit is with a savings and loan. CDs with a face value in excess of $250,000 can be collateralized by U.S. Government Agency and Treasury Department securities or first mortgage loans. Government securities must be at least 110 percent of the face value of the CD collateralized in excess of the first $250,000. The value of first mortgages must be at least 150 percent of the face value of the CD balance insured in excess of the first $250,000. Generally, CDs are issued for more than 30 days and the maturity can be selected by the purchaser. 4.Bankers' Acceptance -A Banker's acceptance (BA) is a negotiable time draft or bill of exchange drawn on and accepted by a commercial bank. Acceptance of the draft irrevocably obligates the bank to pay the bearer the face amount of the draft at maturity. BAs are usually created to finance the import and export of goods, the shipment of goods within the United States and storage of readily marketable staple commodities. In over 70 years of usage in the United States, there has been no known instance of principal loss to any investor in BAs. In addition to the guarantee by the accepting bank, the transaction is identified with a specific commodity. Warehouse receipts verify that the pledged commodities exist, and, by 11 definition, these commodities are readily marketable. The sale of the underlying goods generates the necessary funds to liquidate the indebtedness. BAs enjoy marketability since the Federal Reserve Bank is authorized to buy and sell prime BAs with maturities of up to nine months. The Federal Reserve Bank enters into repurchase agreements in the normal course of open market operations with BA dealers. As are sold at a discount from par. An acceptance is tied to a specific loan transaction; therefore, the amount and maturity of the acceptance is fixed. 5.Commercial Paper -Commercial paper notes are unsecured promissory notes of industrial corporations, utilities, and bank holding companies. Interest is discounted from par and calculated using actual number of days on a 360-day year. The notes are in bearer form, with maturities up to 270 days selected by the purchaser, and denominations generally start at $100,000. There is a small secondary market for commercial paper notes and an investor may sell a note prior to maturity. Commercial paper notes are backed by unused lines of credit from major banks. Some issuer's notes are insured, while some are backed by irrevocable letters of credit from major banks. State law limits a City to investments in United States corporations having assets in excess of five hundred million dollars with an "A" or higher rating bya nationally recognized rating service for the issuer's debentures. Cities may not invest more than 25 percent of idle cash in commercial paper. 6.Local Agency Investment Fund Demand Deposit -The Local Agency Investment Fund LAIF) was established by the State to enable treasurers to place funds in a pool for investments. The City is limited to an investment of the amount allowed byLAIF (currently $40 million). LAIF has been particularly beneficial to those jurisdictions with small portfolios. Palo Alto uses this fund for short-term investment, liquidity, and yield. 7.Repurchase Agreements -A Repurchase Agreement (REPOS) is not a security, but a contractual arrangement between a financial institution or dealer and an investor.The agreement normally can run for one or more days. The investor puts up funds for a certain number of days at a stated yield. In return, the investor takes title to a given block of securities as collateral. At maturity, the securities are repurchased and the funds repaid, plus interest. Usually, amounts are $500,000 or more, but some REPOS can be smaller. 8.Money Market Deposit Accounts -Money Market Deposit Accounts are market-sensitive bank accounts, which are available to depositors at any time,without penalty. The interest rate is generally comparable to rates on money market mutual funds, though any individual bank's rate may be higher or lower. These accounts are insured by the Federal Deposit Insurance Corporation or the Savings Association Insurance Fund. 12 9.Mutual Funds -Mutual funds are shares of beneficial interest issued by diversified management companies, as defined by section 23701 M of the Revenue and Taxation Code. To be eligible for investment, these funds must: a)Attain the highest ranking in the highest letter and numerical rating provided by not less than two of the three largest nationally recognized rating services; or b)Have an investment advisor registered with the Securities and Exchange Commission with not less than five years experience investing in the securities and obligations, as authorized by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code, and with assets under management in excess of five hundred million dollars; and c)Invest solely in those securities and obligations authorized by Sections 53601 and 53635 of the California Government Code. Where the Investment Policy of the City of Palo Alto may be more restrictive than the State Code, the Policy authorizes investments in mutual funds that shall have minimal investment in securities otherwise restricted by the City's Policy. Minimal investment is defined as less than 5 percent of the mutual fund portfolio; and d)The purchase price of shares of beneficial interest purchased shall not include any commission that these companies may charge. e)Have a net asset value of $1.00. 10.Callable Securities and Multi-Step-ups:Callable securities are defined as fixed interest rate government agency securities that give the issuing agency the option of returning the invested funds at a specific point in time to the purchaser. Multi-step-ups are government agency securities in which the interest rate increases ("steps-up") at preset intervals, and which also have a callable option that allows the issuing agency to return the invested funds at a preset interval. Callable and multi-step-ups are permitted, provided that: ·the potential call dates are known at the time of purchase; ·the interest rates at which they “step-up” are known at the time of purchase; and ·the entire face value of the security is redeemed at the call date. 13 11.Negotiable Certificates of Deposit (NCD). NCDs are large-dollar-amount, short-term certificate of deposit. Such certificates are issued by large banks and bought mainly by corporations and institutional investors. They are payable either to the bearer or to the order of the depositor, and, being negotiable, they enjoy an active secondary market, where they trade in round lots of $5 million. Although they can be issued in any denomination from $100,000 up, the typical amount is $1 million. They have a minimum original maturity of 14 days; most original maturities are under six months. Also called a Jumbo Certificate of Deposit. State law prohibits the investment of local agency funds in negotiable certificates of deposit issued by a state or federal credit union if a member of the legislative body of the local agency, or any person with investment decision making authority in the administrative, manager’s, budget, auditor-controller’s, or treasurer’s offices of the local agency also serves on the board of directors, other credit committee or the supervisory committee of the state or federal credit union issuing the negotiable certificate of deposit. 12.Medium-Term Corporate Notes:Notes of a maximum of five years maturity issued by corporations organized and operating with the United States or by depository institutions licensed by the United States or any state and operating with the United States. According to California Code Section 53601, “Notes eligible for investment under this subdivision shall be rated in the rating category of “Double A” or its equivalent or better by a nationally recognized rating service. Purchase of medium-term notes may not exceed 30 percent of the agency’s surplus money which may be invested pursuant to this section.” 14 APPENDIX B EXPLANATION OF PROHIBITED INVESTMENTS 1.Reverse Repurchase Agreements:A Reverse Repurchase Agreement (Reverse REPO) is a contractual agreement by the investor (e.g. local agency) to post a security it owns as collateral, and a bank or dealer temporarily exchanges cash for this collateral, for a specific period of time, at an agreed-upon interest rate. During the period of the agreement, the local agency may use this cash for any purpose. At maturity, the securities are repurchased from the bank or dealer, plus interest. California law contains a number of restrictions on the use of Reverse REPOS by local agencies. 2.Derivatives:A derivative is a financial instrument created from, or whose value depends on (is derived from), the value of one or more underlying assets or indices. The term "derivative" refers to instruments or features, such as collateralized mortgage obligations, forwards, futures, currency and interest rate swaps, options, caps and floors. Except for those callable and multi-step-up securities as described under Permitted Investments, derivatives are prohibited. Certain derivative products have characteristics which could include high price volatility, liquid markets, products that are not market-tested, products that are highly leveraged, products requiring a high degree of sophistication to manage, and products that are difficult to value. According to California law, a local agency shall not invest any funds in inverse floaters, range notes, or interest-only strips that are derived from a pool of mortgages. 15 APPENDIX C GLOSSARY OF INVESTMENT TERMS AGENCIES:Federal agency and instrumentality securities. ASKED:The price at which securities are offered. BID: The price offered by a buyer of securities (when one sells securities, one asks for a bid). See “Offer”. BROKER: A broker brings buyers and sellers together so that he can earn a commission. COLLATERAL:Securities, evidence of deposit, or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMPREHENSIVE ANNUAL FINANCIAL REPORT (“CAFR”):The official annual report for the City of Palo Alto. It includes combined financial statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules that are necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed statistical section. COUPON:(a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE:A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT:There are two methods of delivery of securities: (1) delivery versus payment (DVP); and (2) delivery versus receipt (DVR). DVP is delivery of securities with an exchange of money for the securities. DVR is delivery of securities with an exchange of a signed receipt for the securities. DISCOUNT:The difference between the acquisition cost of a security and its value at maturity when quoted at lower than face value. A security that sells below original offering price shortlyafter sale, is also is considered to be at a discount. DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued a discount and that are redeemed at maturity for full face value (e.g., U.S. Treasury Bills). DIVERSIFICATION:Dividing investment funds among a variety of securities that offer 16 independent returns. FEDERAL AGRICULTURAL MORTGAGE CORPORATION (“FAMC” or “FMAC”):A federal agency established in 1988 to provide a secondary market for farm mortgage loans. Informally called Farmer Mac. FEDERAL CREDIT AGENCIES:Agencies of the Federal Government that were established to supply credit to various classes of institutions and individuals (e.g., S&Ls, small business firms, students, farmers, farm cooperatives, and exporters). FEDERAL DEPOSIT INSURANCE CORPORATION (“FDIC”): A federal agency that insures all types of deposits received at an insured bank, including deposits in a checking account, negotiable order of withdrawal (NOW) account, savings account, money market deposit account (MMDA) or time deposit such as a certificate of deposit (CD). FDIC insurance covers depositors' accounts at each insured bank, dollar-for-dollar, including principal and any accrued interest through the date of the insured bank's closing, up to the insurance limit. The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investments are purchased at an insured bank. The FDIC does not insure U.S. Treasury bills, bonds or notes,but these investments are backed by the full faith and credit of the United States government. The standard maximum FDIC deposit insurance amount is $250,000 per depositor, per insured bank.. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations. FEDERAL HOME LOAN BANKS (“FHLB”): Government-sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions, and insurance companies. The mission of the FHLBs is to liquefy the housing-related assets of its members, who must purchase stock in their District Bank. FEDERAL NATIONAL MORTGAGE ASSOCIATION (“FNMA”):FNMA, like GNMA, was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FEDERAL OPEN MARKET COMMITTEE (“FOMC”):The FOMC consists of seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank Presidents. The 17 President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of government securities in the open market, as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM:The central bank of the United States created byCongress and consisting of a seven-member Board of Governors in Washington, D.C., 12 regional banks, and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (“GNMA” or “Ginnie Mae”): Securities that influence the volume of bank credit that is guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. A security holder is protected by the full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA, or FMHM mortgages. The term “pass-throughs” is often used to describe Ginnie Maes. LIQUIDITY:A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow, and reasonable amount can be done at those quotes. LOCAL GOVERNMENT INVESTMENT FUND (“LAIF”):Monies from local governmental units may be remitted to the California State Treasurer for deposit in this special fund for the purpose of investment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT:A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements, that establishes each party’s rights in the transactions. A master agreement will often specify, among other things, the right of the buyer (lender) to liquidate the underlying securities in the event of default by the seller (borrower). MATURITY:The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET:The market in which short-term debt instruments (e.g., bills, commercial paper, and bankers’ acceptances) are issued and traded. OFFER:The price asked by a seller of securities (when one buys securities, one asks for an offer). See “Asked”and “Bid”. OPEN MARKET OPERATIONS:Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank, as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market 18 operations are the Federal Reserve’s most important and most flexible monetary policy tool. PORTFOLIO: A collection of securities that an investor holds. PRIMARY DEALER: A group of government securities dealers that submit daily reports of market activity and positions, and monthly financial statements to the Federal Reserve Bank of New York, and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) --registered securities broker-dealers, banks, and a few unregulated firms. PRUDENT INVESTOR RULE:An investment standard cited in the California Government Code (CGC) Section 53600 et seq. Under this standard, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. QUALIFIED PUBLIC DEPOSITORIES:A financial institution that: (1) does not claim exemption from the payment of any sales, compensating use, or ad valorem taxes under the laws of this state; (2) has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability; and (3) has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank‘s vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES AND EXCHANGE COMMISSION: An agency created by Congress to administer securities legislation for the purpose of protecting investors in securities transactions. STRUCTURED NOTES:Notes issued by instrumentalities (e.g., FHLB, FNMA, SLMA) and by corporations, that have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) in their debt structure. The market performance of structured notes is affected by fluctuating interest rates; the volatility of imbedded options; and shifts in the yield curve. TIME CERTIFICATE OF DEPOSIT:A non-negotiable certificate of deposit, which cannot be sold prior to maturity. 19 TREASURY BILLS: A non-interest bearing discount security that is issued by the U.S. Treasuryto finance the national debt. Most T-bills are issued to mature in three months, six months, or one year. TREASURY BONDS: Long-term, coupon-bearing U.S. Treasurysecurities that are issued as direct obligations of the U.S. Government, and having initial maturities of more than 10 years. TREASURY NOTES:Medium-term, coupon-bearing U.S. Treasury securities that are issued as direct obligations of the U.S. Government, and having initial maturities of two to 10 years. YIELD:The rate of annual income return on an investment, expressed as a percentage. YIELD-TO-CALL (YTC): The rate of return an investor earns from a bond assuming the bond is redeemed (called) prior to its nominal maturity date. YIELD-TO-MATURITY: The current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity. ZERO-COUPON SECURITIES: Security that is issued at a discount and makes no periodic interest payments. The rate of return consists of a gradual accretion of the principal of the security and is payable at par upon maturity. City of Palo Alto (ID # 1842) City Council Staff Report Report Type:Meeting Date: 6/20/2011 June 20, 2011 Page 1 of 1 (ID # 1842) Council Priority: City Finances Summary Title: Approval of FY 2012 Budget Title: PUBLIC HEARING: Approval of an Ordinance Adopting the Fiscal Year 2012 Budget, including the Fiscal Year 2012 Capital Improvement Program, and Changes to the Municipal Fee Schedule; Adoption of Five Resolutions: (1) Amending Utility Rate Schedules for a Storm Drain Rate Increase; (2) Amending Utility Rate Schedules for Fiber Optic Rate Increases; (3) Amending Utility Rate Schedules for Wastewater Rate Increases pursuant to Proposition 218; (4) Amending Utility Rate Schedules for Water Rate Increases; (5) Amending the 2010-2011 Compensation Plan for the Management and Professional Personnel and Council Appointees; and Adoption of an Ordinance Amending Chapter 2.08 to Create a New Department of Information Technology (Continued from June 13, 2011) From:City Manager Lead Department: Administrative Services This item was continued from June 13, 2011. Prepared By:Julia Pollard, Administrative Assistant Department Head:Lalo Perez, Director City Manager Approval: James Keene, City Manager City of Palo Alto (ID # 1812) City Council Staff Report Report Type: Action ItemsMeeting Date: 6/20/2011 June 20, 2011 Page 1 of 5 (ID # 1812) Summary Title: Staffing Flexibility Title: Policy & Services Committee Recommends the City Council Increase the Number of Flex Positions in the Table of Organization in the Fiscal Year 2012 Proposed Budget From:City Manager Lead Department: Human Resources Recommendation Staff and the Policy & Services Committee recommend that the Council increase the number of flex positions (over-strength positions) in the Table of Organization in the Fiscal Year 2012 Proposed Budget, from seven to twenty positions. Background At its meeting on May 10, the Policy and Services Committee reviewed and discussed the staff presentation and voted to recommend that Council approve the staff recommendation to increase the number of “flex” positions in the Fiscal Year 2012 Proposed Budget. At that meeting, the City also considered an Ordinance amending Chapter 2.28 of the Palo Alto Municipal Code, however staff has since identified other potential changes for Chapter 2.28 and therefore plans to bring forward a comprehensive amendment to that section at a future date. Due to the increase in retirements and other operational impacts occurring over the last two years, there is an increased need to have flexibility in assigning staffing resources to accomplish key projects and priorities. Under the Charter and the Code, the City Manager already has the authority to assign or reassign June 20, 2011 Page 2 of 5 (ID # 1812) employees to departments as he deems appropriate. However, additional budgetary requirements significantly restrict the Manager’s ability to actually make such changes because the code requires that staffing comply with the budgeted positions listed in the table of organization in the budget. The City currently has had two methods to add temporary staffing at the management level: first, it can hire an hourly Management Specialist under the provisions in the Hourly Compensation Plan limited to 1000 hours. The second method was approved on April 4, 2011, when the City Council approved the management compensation plan which included a revision to add terms for “provisional employment.” A provisional employee hired under this section would be any management position filled on an “at will” basis for up to two years. This change gives staff the flexibility to hire positions to assist with special projects, and/or cover responsibilities while a department considers organizational structure changes and develops plans to more effectively meet the City’s needs. The changes discussed in this report are needed to address the process and funding necessary to hire a provisional employee when the need arises. Discussion Open Flex Positions At the present time, the City has seven budgeted “flex” positions that may be filled on a temporary basis to facilitate organizational transitions and succession planning. They are commonly used in cases of long-term disabilities or temporarily filling critical vacancies created by retirements or other employee departures. The existing seven flex positions are regularly fully utilized limiting the City’s ability to hire provisional employees when needed, and therefore staff recommends increasing the number of flex positions by thirteen, for a total of twenty flex positions. These thirteen additional flex positions would be used to accommodate the newly approved provisional employment program and would June 20, 2011 Page 3 of 5 (ID # 1812) comply with the City’s procedural rules because the positions would be identified in the Table of Organization. The salary will be determined in accordance with an appropriate classification as provided in the Council-approved management compensation plan which will comply with Article III, section 12 of the Charter which requires that the Council set all salary scales. Staff plans to utilize existing position titles in the Table of Organization or another “working title” when needed, that closely matches the job description when filling these provisional employment positions. This will allow the City to more effectively recruit talent that matches the City’s needs. If it is determined that there is a need to fill a flex position on a permanent basis beyond the term of the temporary contract appointment, City Council approval would be necessary for the permanent addition of a full time equivalent position (FTE). Available Funding The funding process for the flex positions is currently somewhat cumbersome. At the present time, when staff transfers a position between departments, the expenditures are not properly booked (the costs continue to accumulate in the department in which the position was originally budgeted). As an example, suppose a position is transferred from the Administrative Services Department (ASD) to the City Manager’s Office to work on environmental sustainability initiatives. The expenditures for this effort will continue to accrue in ASD, even though the employee is working on a City Manager assignment, and will not be accurately recorded in the City Manager’s Office towards this Council Priority. Although it is possible under the current rules to make changes, the process of obtaining Council approval each time a change is made can limit staff’s ability to act swiftly to initiate a new program, address shifting priorities, enhance service delivery, or address a pressing community need that was not anticipated at the time the annual budget was prepared. To help streamline the process, staff will implement an administrative policy of holding the formal budget changes until the mid-year and annual budgets are brought to council. This approach will save June 20, 2011 Page 4 of 5 (ID # 1812) staff time by consolidating approval of the changes to one report to Council, while ensuring that staff continues to be accountable for tracking and reporting all fund transfers between departments. As mentioned above, staff did discuss potential changes to PAMC Chapter 2.28 at the Policy and Services committee meeting to further address this issue. However, several additional potential changes to Chapter 2.28 were identified following that meeting. Therefore, in lieu of making piecemeal changes, a proposal for comprehensive amendments to Chapter 2.28 will be brought forward at a future meeting. In the meantime the mid-year reporting policy will be a sufficient approach for handling funding for staffing flexibility. In all of these scenarios, the total General Fund budget authority and the total number of authorized positions approved with the adoption of the budget would remain the same. The benefits associated with the recommended changes include: ·Ability to effectively match staff positions to needs of the organization ·Ability to expeditiously line-up needed resources to effectively manage workload ·Ability to enable those with the most expert knowledge of the City’s current needs and requirements to get ordinary and extraordinary work done ·Ability to allocate funding to those departments that need the funding and associated staffing to do the work ·Ability to align resources (both staff and funding) with the services to be provided; better alignment of resources with the City’s dynamic workload requirements ·Ability to match funding and staffing levels in departments to comply with generally accepted accounting standards and reimbursements from partners or other governmental agencies. June 20, 2011 Page 5 of 5 (ID # 1812) ·Ability to leverage existing financial resources; ability to use savings generated in one department for another department where there is a need In this demanding economic environment, the ability to efficiently respond to shifting priorities and workloads is critical. The proposed changes give staff the flexibility to improve its responsiveness to the community. RESOURCE IMPACT While staff has requested increase from 7 flex positions to 20 to be added to Table of Organization in Fiscal Year 12 budget there is no budget impact. Funding for flex positions will be allocated from any, existing vacant positions (FTEs). Staff will report use of these positions during mid-year budget and regular budget processes. If there is a need to create a permanent, regular position, staff will return to Council for approval. Policy Implications These changes are being implemented consistent with City policy. Attachments: ·Staffing Flexibility, provisional employee description (PDF) Prepared By:Michele Dallara, Human Resources Assistant Department Head:Sandra Blanch, Interim Director, Human Resources Department City Manager Approval: James Keene, City Manager City of Palo Alto (ID # 1854) City Council Staff Report Report Type: Action ItemsMeeting Date:6/20/2011 June 20, 2011 Page 1 of 9 (ID # 1854) Summary Title: Binding Interest Arbitration Title: Recommendation from Policy and Services Committee for Full Council to Make Policy Decision Regarding Removal or Modification of City Charter Provision on Binding Interest Arbitration From:City Manager Lead Department: Human Resources The Policy & Services Committee reviewed the City’s Charter provision on binding interest arbitration for public safety on June 7, 2011, and voted to refer to the full Council the following policy questions regarding a potential ballot measure on the subject: ·Should the City ask voters to (a) repeal the binding arbitration requirement or (b) substantially modify the binding arbitration process? ·If the Council opts to substantially modify the process, the Policy and Services Committee recommended that options for modification should be referred back to the Committee. ·When should the matter be put on the ballot? Background The Meyers-Milias Brown Act (“MMBA,” Cal. Gov’t Code s. 3500 et seq) governs relationships between public agencies and labor representatives in California. The MMBA requires public agencies to meet and confer with recognized employee representatives in good faith over matters affecting the City regarding wages, benefits and terms and conditions of employment. Meet and confer continues June 20, 2011 Page 2 of 9 (ID # 1854) until agreement or “impasse,” which either party may declare when there is a deadlock in bargaining so that further meetings will be fruitless. Following a declaration of impasse, the MMBA allows agencies to unilaterally implement terms and conditions of employment. However, the MMBA also allows agencies to develop their own impasse resolution procedures. While Palo Alto does not have specific local impasse resolution procedures for most groups, Article V of the City Charter does establish a procedure for public safety employees. In 1978 the voters approved Binding Interest Arbitration as the process by which impasses with public safety officers (sworn police and fire personnel) would be resolved. When impasse is declared for these groups, the City cannot unilaterally implement but rather must move all issues in dispute to Binding Interest Arbitration, when a professional arbitrator selected by the parties will conduct a hearing and make a final, binding decision on each issue in dispute. Further detail on the MMBA and the City’s binding arbitration process can be found in the materials attached to this report. Binding Interest Arbitration is relatively rare among cities in California; 22 of 120 charter cities in the state currently have such provisions. In recent years, several cities that had interest arbitration have repealed or modified it. Several others are considering whether to do so. Specifically, in 2010, the residents of Vallejo and Stockton voted to remove their binding interest arbitration provisions, and San Jose voters chose to modify their provision. In August 2011 voters in the City of San Luis Obispo will decide whether to eliminate binding interest arbitration in that City. In Palo Alto, the Council initially considered placing a measure on the ballot to repeal Charter Article V in the summer of 2010, following a Santa Clara County Civil Grand Jury report that recommended elimination of binding interest arbitration. At that time (August 2, 2010)the Council directed staff to return with more analysis to the Policy & Services Committee for further consideration. June 20, 2011 Page 3 of 9 (ID # 1854) Staff collected articles, interviewed subject matter experts and researched other public agency rules and approaches to impasse resolution. On May 10 and June 7, 2011, the Committee received written information and heard staff presentations about various elements of the binding interest arbitration issue. Information presented to the Committee, as well as to the Council in 2010, has been incorporated into the attached report. Some new information is included as well. The attached binder includes the following information: ·Election Information: Potential Dates, Costs ·Prior City Manager Reports on Binding Interest Arbitration: Policy & Services, June 7, 2011; Policy & Services, May 10, 2011; Council, August 2, 2010; July 26, 2010 ·Arbitration Format Options ·Mediation/Arbitration Interaction ·Arbitrator Selection ·Scope of Arbitration/ Exclusions from Arbitration ·Factors for Arbitrator ·Other Possible Modifications: Timelines, Public Access, Judicial Review ·Sample Arbitration Provisions: California Cities, Other States ·Academic Literature ·Palo Alto Arbitration History Discussion The main question for the Council is whether to ask voters to (a) entirely repeal binding arbitration or (b) substantially modify the binding arbitration process. In addition to deciding the question that should be posed to the voters, the Council must determine an appropriate election date. (a)Election Date The Council must determine an election date, whether it decides to propose repeal or modification. The first tab in the packet lists all available election June 20, 2011 Page 4 of 9 (ID # 1854) options in 2011 and 2012, and their estimated costs. Note the deadline for each election to submit final ballot language is several months before the election. The earliest election date is November 2011, with a measure deadline of August 1, 2011. (b)Potential Repeal of Binding Arbitration The Council may decide that it is appropriate to eliminate the binding arbitration requirement altogether. If the Council pursues repeal of interest arbitration, it could substitute another impasse resolution procedure, such as mandatory non-binding mediation. Mandatory mediation works best when it is subject to specific time parameters. If issues remained in dispute after mediation, or at initial impasse if there is no requirement to mediate, sworn police and fire units would follow the same collective bargaining process as all other employee groups: the City would be authorized to unilaterally implement terms and conditions of employment. If the Council places a measure on the ballot•whether it is a repeal or modification of interest arbitration•the Committee expressed interest in also adopting reasonable timelines to govern the inception and conclusion of labor negotiations. Timelines would more closely align contract negotiations with the City’s budget process, which allows for more accurate planning. Timelines would apply to all bargaining units, not just public safety. They could be placed in the Charter at the same time that the voters make changes to the impasse procedure for public safety. (c)Potential Modification of Binding Arbitration The second option the Council could choose is a ballot measure amending Article V to substantially modify the Binding Interest Arbitration provision. There are many ways the arbitration provision could be changed. If the Council decides to proceed with modification, the Committee recommended that the Council define June 20, 2011 Page 5 of 9 (ID # 1854) the general guidelines for modification and assign the Policy & Services Committee to work with staff to develop language for modification and return to the full Council for review and approval. At Policy and Services, staff directed the Committee’s attention to several trends and proposals that appear worthy of particular consideration. We repeat them here for the full Council’s benefit. Detailed information regarding each of these items may be found in the attached binder. 1.Limit Arbitration to Certain Topics and Circumstances.Because arbitration is an optional impasse-resolution procedure, the City can tailor its use to circumstances where policymakers determine it is most appropriate and useful. Several jurisdictions limit interest arbitration, for example by allowing it only for mandatory subjects of bargaining, and/or only to resolve impasses during negotiation of labor contracts. Other matters, such as management rights and mid-contract negotiations, can be excluded from interest arbitration. 2.Adjust the Factors that Guide the Arbitrator’s Decision Making•Focus on Financials and Service Levels.Because arbitration is optional, the City can establish appropriate criteria to guide the arbitrator’s decision making. A number of jurisdictions either have refined or are considering refining the evidence and factors on which arbitrators must base their decisions. Some jurisdictions are also specifying the relative priority or weight that should be given to those factors. Jurisdictions are trending towards focusing the decision process on specific financial data, such as requiring arbitrators to compare the City’s cost to provide the total compensation package with the rate of increase or decrease in City revenues available to meet labor costs. Jurisdictions are also requiring arbitrators to consider the impact of contractual proposals on services to the public. June 20, 2011 Page 6 of 9 (ID # 1854) 3.Retain the Issue-by-Issue Format.While there are other options, the issue- by-issue format appears to be a reasonable way to balance fairness and predictability for both parties. 4.Continue to Use Conventional Labor Arbitrators.Most experts and practitioners favor the use of traditional labor arbitrators. The Council may want to require certification through the National Academy of Arbitrators. 5.Consider Incorporating Mediation into the Arbitration Process.Experts emphasize that the best outcome for all parties is a voluntary agreement. To that end, most experts value mediation and favor incorporating it where possible. One possibility is to authorize the use of mediation in conjunction with arbitration, which is often called “med-arb.” 6.Consider Opening Interest Arbitration to the Public.Several jurisdictions that have amended their interest arbitration procedures have opened arbitration to the public. 8.Establish Reasonable Timelines for Contract Negotiations.As discussed above, the Council may wish to establish reasonable timelines in the Charter to more closely align contract negotiations with the budget process. This could be done whether or not interest arbitration is retained. (d)Consultations with Labor Several labor representatives have asked the City to meet and confer over any proposed Charter amendment before the Council votes to place the matter on the ballot. Meet and confer over a charter change on binding interest arbitration is not required. Interest arbitration is a permissive, not mandatory subject of bargaining. DiQuisto v. County of Santa Clara (2010) 181 Cal.App.4th 236. June 20, 2011 Page 7 of 9 (ID # 1854) Although staff would not meet and confer with bargaining groups, staff could discuss proposed changes with the labor groups on an informal basis, subject to the applicable time frame for Council action. Informal conversations may be desirable in the interest of promoting open communications with labor groups. If the Council so directs, staff will pursue informational discussions with labor regarding the proposed changes. Conclusion The Policy & Services Committee has asked the full Council to decide whether to eliminate or substantially modify the Binding Interest Arbitration provision in the City’s Charter applying to sworn police and fire employees; and to determine the timing for the ballot measure. Staff therefore recommends that the Council: ·Direct staff to draft ballot language to either (a) repeal binding interest arbitration or (b) significantly modify binding arbitration. ·If the Council determines that it wants to propose significant modifications to binding arbitration, provide general parameters on the modifications it wishes to see, direct the Policy and Services Committee to work with staff to develop modifications that meet those parameters prior to returning to the full council for approval. ·Direct staff to include recommendations in draft ballot language to establish timelines to align negotiations more closely with the budget process. ·Determine the election at which the measure will be submitted to voters. ·Provide direction to staff on whether to engage in informal discussions with labor regarding proposed changes. Attachments: ·Election Information (PDF) ·Staff Report 6-7-11 (PDF) June 20, 2011 Page 8 of 9 (ID # 1854) ·At Places Staff Report 6-7-11 (PDF) ·Staff Report 5-10-11 (PDF) ·Staff Report 8-2-10 (PDF) ·Staff Report 7-26-10 (PDF) ·Report from City Attorney 7-14-10 (PDF) ·News Articles (PDF) ·Arbitration Format Options (PDF) ·Overview of Arbitration Forms (PDF) ·Mediation and Arbitration (PDF) ·Arbitrator Selection (PDF) ·Scope of Arbitration-Exclusions (PDF) ·Factors (PDF) ·Other-Timelines, Public Access, Judicial Review (PDF) ·Santa Clara County Grand Jury 09-10(PDF) ·Binding Arbitration in CA (PDF) ·Palo Alto Charter Provision (PDF) ·San Jose Charter Provision (PDF) ·Other City Charter Provisions (PDF) ·SF Muni Arbitration (PDF) ·State Provisions (PDF) ·Scholary Articles 1 (PDF) ·Scholary Articles 2 (PDF) ·Scholary Articles 3 (PDF) ·PA Fire Arbitration History (PDF) ·PA Police Arbitration History (PDF) ·PS Excerpt Minutes 06-07-2011 (PDF) ·Public Letter to Council (PDF) June 20, 2011 Page 9 of 9 (ID # 1854) Prepared By:Elizabeth Egli, Administrative Assistant Department Head:Sandra Blanch, Interim Director, Human Resources Department City Manager Approval: James Keene, City Manager COUNTY OF SANTA CLARA REGISTRAR OF VOTERS ATTACHMENT G ESTIMATED COST OF ELECTIONS FOR THE CITY OF PALO ALTO c/o Donna Grider; donna.grider@cityofpaloalto.org (650) 329-2571 Registration as of 5/12/11 35,699 Projected Registration (110% of actual registration) 39,269 GENERAL ELECTION November 8, 2011 City Council Measure Grand Unit Cost Total Cost Unit Cost Total Cost Unit Cost Total Cost Unit Cost Total Cost Total Cost Total (a) Base Charge City Council 1.25$ 49,086$ 49,086$ Measure 7.50$ 294,517$ 12.50$ 490,861$ 1.25$ 49,086$ 0.45$ 17,671$ 17,671$ (b) Absentee Charge City Council 0.30$ 11,781$ 11,781$ Measure included included 0.30$ 11,781$ 0.10$ 3,927$ 3,927$ © Shared Printing Costs City Council 0.50$ 19,634$ 19,634$ Measure included included 0.75$ 29,452$ 0.25$ 9,817$ 9,817$ Total Est Cost of Election 294,517$ 490,861$ 90,318$ 80,501$ 31,415$ 111,916$ (d) Est Cost of Cand Statements 2,107$ 16,855$ 16,855$ (e) Est Cost of Measure Pages 6,524$ 71,761$ 6,524$ 71,761$ 6,524$ 71,761$ 6,524$ 71,761$ 71,761$ -$ 71,800$ 366,278$ 562,622$ 162,080$ 97,356$ 103,176$ 200,532$ $ 50,000 50,000$ 50,000$ 50,000$ 50,000$ $ 121,800 416,278$ 612,622$ 212,080$ 97,356$ 153,176$ 250,532$ Language Deadline Election Date 8/1/11 5/16/11 8/30/11 12/5/11 3/6/12 2/6/12 5/8/12 5/21/12 8/28/12 PreparCarolina Gomez Accountant III (408) 282-3012 ALL-MAIL BALLOT (avail. dates below) Pursuant to Elections Code section 10002, the jurisdiction is required to reimburse the County in full costs of the elections services for which it is inquiring. The full costs of the election will be available 60 days after the election. The costs reflected above are ESTIMATES ONLY and may change following the final calculation of the cost of the election. STAND-ALONE PRIMARY ELECTION April 10, 2012 June 5, 2012 GENERAL ELECTION Nov 6, 2012 ELECTION TIMELINES Add City costs for Legal Noticing Total Estimated Costs DATA COMPUTATION Est Costs of Election and Measure Pages due to County Language Deadline 8/10/12 Language Deadline Language Deadline 1/13/12 Language Deadline 3/9/12 2011_2012 City of Palo Alto - Comp Est Costs All Elect.xls 6/14/2011 10:42 AM \ ! P2 City of Palo Alto (10 # 1771) Policy and Services Committee Staff Report Report Type: Meeting Date: 6/7/2011 Summary Title: Follow-up Binding Interest Arbitration Title: Further Review and Discussion regarding Binding Interest Arbitration Provision in City Charter for Public Safety From: City Manager Lead Department: Human Resources Further Review and Discussion regarding Binding Interest Arbitration Provision in City Charter for Public Safety Background On May 10, 2011, the Policy & Services Committee reviewed and discussed a variety of issues surrounding binding interest arbitration and requested staff to follow up on a number of subject areas. This report supplements the May 10th report with additional information that the Committee requested. The primary question for the Committee, and ultimately the Council, is whether binding interest arbitration remains an acceptable process to resolve labor disputes that reach impasse . with the public safety employee units. If the Committee and the Council determine that it is not, the alternatives are to eliminate the existing arbitration provision or modify it. A Charter amendment to eliminate or modify interest arbitration would need to be submitted to the voters for a majority approval. To prepare this report, Human Resources and City Attorney staff researched written materials and interviewed subject matter experts-including labor relations profeSSionals, attorneys and academics-with a particular focus on practitioners who have worked with jurisdictions that have made or are considering making changes to traditional interest arbitration provisions. The attached binder includes the following sections: A. Arbitration Format B. Mediation and Arbitration: Possible Uses and Interactions C. Arbitrator Selection D. Scope of Arbitration/ Exclusions from Arbitration E. Factors for Arbitrator F. Other Possible Modifications: Timelines, Public Access, Judicial Review June 07, 2011 (lD # 1771) Page 1 of4 G. Election Information: Potential Dates, Costs H. Sample Arbitration Provisions: California Cities, Other States I. Academic literature Discussion and Analysis This issue presents a number of decision points for the Committee. Staff recommends the Committee consider the threshold questions in the following order: 1. The Committee may first wish to determine if there is consensus on whether to retain the status quo. 2. If the Committee determines not to maintain status quo, the Committee could next consider whether there is consensus to repeal the charter provision for binding interest arbitration. Ifthe Committee determines this is the appropriate recommendation, then consider which election and timeline would be appropriate for this ballot measure. 3. If the Committee does not find consensus with either of the options above, the next option for consideration is modification of the existing provision. If consensus is reached for this option, staff recommends the Committee identify the general subject areas for modification (as opposed to writing detailed charter amendment language at this time) and the appropriate election date. Secondly, to help facilitate discussion at the full council meeting, staff could schedule a Study Session on interest arbitration, which could include expert testimony from practitioners and/or academics with a variety of viewpoints. If consensus is reached by the full council to modify the City's charter provision, the Council could return the item to Committee with an instruction to provide policy direction. The Committee would work with staff regarding the issues it wishes to see ' ' addressed in a modified arbitration procedure. The amendment would then be taken back to Council for final approval. Election Options Should the Committee, and then Council, determine to put a measure before the voters, there are several options for an election on this issue. The least costly elections would occur in November 2011 or November 2012 due to local elections already scheduled. The June 2012 election includes the preSidential primary which spreads out the costs over all of the ballot items. There are also options for all mail elections on a different schedule than the local initiatives and political seats. Please see the chart attached for further detail on election options. June 07, 2011 (ID # 1771) Page 2 of4 Recommendations Based on staffs research, several trends and proposals emerge as worthy of particular consideration if the Committee and Council decide to retain interest arbitration in a modified form. Detailed information regarding each of these items may be found in the attached binder. 1. Establish Mandatory Timelines for Contract Negotiations. A local agency may impose time requirements on the inception and conclusion of labor negotiations, as well as intermediate stel?s in the process. Several jurisdictions-including several that use interest arbitration and on,;,that does not-have time requirements that align the I~!lor contracts with the annual budget and help staff manage the negotiation process. Whether the Council favors retention. repeal or modification of interest arbitration, consideration should be given to establishing timelines in the Charter. 2. Limit Arbitration to Certain Topics and Circumstances. Because arbitration is an optional impasse-resolution procedure, the City can tailor its use to circumstances where policymakers determine it is most appropriate and useful. Several jurisdictions limit interest arbitration, for example, by allowing it only for mandatory subjects of bargaining, and/or only to resolve impasses during negotiation of labor contracts. Other matters, such as management rights and mid-contract negotiations, can be excluded from interest arbitration. 3. Adjust the Factors that Guide the Arbitrator's Decision Making-Focus on Financials and Service Levels. Because arbitration is optional, the City can establish appropriate criteria to guide the arbitrator's decision making. A number of jurisdictions either have refined or are considering refining the evidence and factors on which arbitrators must base their decisions. Some jurisdictions are also specifying the relative priority or weight that should be given to those factors. Jurisdictions are trending towards focusing the decision process on specific financial data, such as requiring arbitrators to compare the City's cost to provide the total compensation package with the rate of increase or decrease in City revenues available to meet labor costs. Jurisdictions are also requiring arbitrators to consider the impact of contractual proposals on services to the public. 4. Retain the Issue-by-Issue Format. Staff found a rough consensus among our sources in favor of the issue-by-issue format. 5. Continue to Use Conventional Labor Arbitrators. Staff also found the weight of opinion favoring use of traditional labor arbitrators, although there is one significant exception. San Jose recently revised its arbitration procedure to require use of a retired judge. 6. Encourage Voluntary Mediation Wherever Appropriate. Most sources staff consulted favored use of voluntary mediation where the parties agree that it is a'ppropriate and June 07,2011 (10 # 1771) Page 3 of4 useful under the particular circumstances. Mediation of this type does not require any particular Charter authorization. 7. Consider Opening Interest Arbitration to the Public. Finally, several jurisdictions that have amended their interest arbitration procedures have opened arbitration to the public. cc; Tony Spitaieri, Firefighters' Union local 1319 and Fire Chiefs' Association Ron Watson, Police Managers' A~Eociation Wayne Benitez, Police Officers' Association Attachments: • A TT A: Potential Options for Modifying Style of Arbitration (PDF) • ATT B: Mediation and Arbitration POSSible Uses and Interactions (DOC) • ATT C: Arbitrator Selection (PDF) • ATT 0: Scope of Arbitration (DOC) • ATT E: Factors, Including Weight, Priority and Burdens of Proof(DOC) • ATT F: Other Possible Modifications (DOC) • ATT G: Election Options (XlS) • ATT H: Sample Arbitration Provisions pdf (PDF) • ATT I: Academic Articles (PDF) Prepared By; Elizabeth Egli, Administrative Assistant Department Head: Sandra Blanch, Interim Director, Human Resources Department City Manager Approval: June 07, 2011 (ID# 1771) James Keene, City Manager' Page 4 of4 ) CityC?f Palo Alt<? Department of Human Resources TO: Policy & Services Commi«eeMembers City Council Members FROM; City Attorney Office Human Resources Department DATE: June 7, 2011 SUBJECT: At-Places Memorandum -Supplemental Information on Binding Interest Arbitration Staff has continued gathering information and discussing various components of Binding Interest Arbitration, even since publication of the Policy & Services packet posted Friday, June 3m. Again, the staff objective is not to provide a recommendation, but rather provide information regarding all options and leave the policy decision for the Committee and the City Council. Recent changes to binding interest arbitration in other citles: In the last year, a number of agencies have taken up discussion of their binding interest arbitration provisions. The chart below summarizes action taken or not taken; City Date Action Taken/Status Gilroy May20lO Council discussed potential ballot options for November 2010 but took no action; interest arbitration remains for police and fire Vallejo June 2010 Citizens voted to remove interest arbitration for all employees Stockton November 2010 Citizens voted to remove interest arbitration for fire (did not apply to police) . City/C:9unty of San November 2010 Citizens voted to. rePeal salary FranciSco formula providing .second bighest pay in the nation for transit workers, and replace with interest arbitration. (Measure G) . City of San Jose November 2010 Citizens voted to modifY binding interest arbitration for police and fire. San Luis Obispo ' August 2011 All mail ballot measure for repeal of interest arbitration for police i and fire P.O. Box 10250 Palo Alto, CA 94303 Printed wIth soy-bru;ed inks on 100% reeydcd paper proces.sed without chlorine i ! i , , 1 .: , i l Policy & Services Committee June 7, 2011 Please find attached the following documents for your binders: (1) (2) (3) Brief Overview -Common Forms of Interest Arbitration Public Emplovment: Mediation. Fact Finding and Arbitration by William B. Gould; American Bar Asseciation Journal; September 1969 Final Offer Arbitration: "Sudden Death" in Eugene by Gary Long and Peter Feuille; Industrial and Labor Relations Review, Vol 27, No 2, January 1974 Page2of2 City of Palo Alto (ID # 1704) Policy and Services Committee Staff Report Report Type: Meeting Date: 5/10/2011 Summary Title: Binding Interest Arbitration Provision Title: Review of Binding Interest Arbitration Provision in City Charter for Public Safety From: City Manager Lead Department: Human Resources Recommendation Staff recommends the Committee review the City's Binding Interest Arbitration (BIA) provision in the City Charter for public safety and consider making a recommendation to the Council. If the Committee decides the existing provision does not meet the City's needs, there are 2 options: 1) modify the Charter language or 2) eliminate the Charter language. Any Charter changes, of course, must be submitted to the voters. 1!xecutive Summary At the Council meetings of July 26, 2010 and August 2, 2010, the City Council discussed and considered whether to place a measure on the ballot proposing repeal of Charter Article V, Compulsory Arbitration for Fire and Police Department Employee Disputes (see Attachment p). At that time the Council determined not to move forward with a measure, but directed staff to return with further analysis and information on this issue. This report provides background information on impasse resolution procedures, the City's experience with binding interest arbitration, and analysis of options for the Council to consider if it decides May 10, 2011 (ID # 1704) Pagelof9 i J to propose modifying or repealing the binding interest arbitration provision in the City's charter. Background 1. Labor Relations Rules Require Pames to Meet and Confer in Good Faith to the Point ofImpasse The Meyers-Milias-Brown Act ("MMBA") and Chapter 12 of the City's Merit System Rules and Regulations ("local rules") govern labor-management relationships between recognized employee organizations and the City. Generally, the MMBA sets forth basic obligations and standards of conduct for labor relations and requires public agencies to bargain in good faith over matters pertaining to wages, hours, and worldng: conditions. The City's local rules were adopted pursuant to section 3507 of the MMBA, which allows agencies to develop additional procedures for administration of employee -employer relations under the MMBA. If the City and a union negotiate in good faith but cannot reach agreement on issues pertaining to wages, hours, and working conditions either party may declare an impasse. 2. Impasse Resolutioo Procedures in the City are Different for Safety and Non- Safety Groups A declaration of impasse triggers resolution procedures. The City's local rules do not have mandatory impasse resolution procedures. Therefore, section 3505,4 of the MMBA allows the City to unilaterally implement its last, best and final offer after impasse has been declared in negotiations with must units. For publlc safety groups, however, Article V of the City's Charter establishes binding interest arbitration as the required impasse resolution procedure. That procedure requires a three member board of arbitrators, one selected by each side May 10. 2011 aD # 1704) Page 20f9 i -1 I j I ! i and a neutral joIntly selected by both parties. Following a hearing, the arbitration panel must decide each disputed issue by majority vote. Following receipt of the decision, the City and the union have ten days (or mutually agreed upon time) to meet to attempt to resolve their differences. If the parties do not reach agreement, the decision of the arbitrators is binding at the end of the resolution period and must be implemented. 3. Background on Binding Interest Arbitration tbr Public Safety Article V was added into the Charter in 1978 by Initiative after a 1975 strike by public safety employees in San Francisco prompted some cities in the state to pass binding interest arbitration measures as a method that was perceived to be more peaceful and equitable in resolving disputes that might otherwise lead to strikes. California Labor Code section 1962 has contained an explicit prohibition on strikes by firefighters since it was enacted in 1959, but the law prohibiting general public safety strikes has been clarified since 1985. California Courts have repeatedly held that employees providing essential public services may not strike when such an action would create a substantial and imminent threat to the health and safety of the public. (See, e.g. County Sanitation Dis!. No.2 v. Los Angeles County Employees' Ass'n. (1985) 38 Cal.3d 564; City of Santa Ana v. Santa Ana Police Benevolent Ass'n. (1989) 207 Cal.App.3d 1568; County of Sonoma v. Sup. Court (2009) 173 Cal.AppAth 322. Thus, the rationale that binding interest arbitration protects the City from work actions by public safety employees is weaker now than it was when the initiative passed in 1978 because the law prolnbiting public safety strikes is settled. 4. Binding Interest Arbitration Decisions in Palo Alto The binding interest arbitration procedure has been used approximately six times total by police and fire since the· City Charter provision was approved in 1978. Generally, the decisions have provided mixed results for the City. For example, in May 10, 2011 (ID # 1704) Page 3 of9 -1 I I -i I a 1980 arbitration with three issues in dispute, an arbitrator selected the City's proposal on salary (awarding increases for the first two years of a contract instead of all three years as proposed by the fire fighters), rejected the City's proposal to reduce the retirement formula for new city employees by establishing a second tier, and accepted the fire fighters' proposal to change the retirement allowance formula from an average of three years to the highest single year. The attached charts (Attachment C and Attachment D) summarize the issues and results in each of the six arbitrations. At the same time, we are in an· era where significant organizational changes and transfonnation of how services are provided is required, and where concessions from labor may be fundamental to the fiscal health and effectiveness of a city. Discussion of maintenance of binding arbitration in its current form is truly warranted. 5. In the Absence of Cha.rter Requirements to Proceed to Interest Arbitration, Loca.1 Impasse Rules and MMBA. Provisions for Implementation Apply In cities that have repealed or do not have binding interest arbitration, irnpaBse procedures are govemed by local rules and the MMBA provisions related to unilateral implementation. Thus, if voters approved a repeal of Article V, the City would remain subject to the provisions of the MMBA; if impasse Were reached after meeting and conferring in good faith with a public safety unit the City would follow its local rules related to impasse (as it did in the 2009 SEIU negotiations). Those rules simply allow, but do not require, the parties to mutually agree on a method of resolving the dispute. If they do not agree on a method of resolution, the impasse procedures are deemed emausted and the City can then implement its last, best and final offer pursuant to section 3505.4 of the MMBA. Within Santa Clara County, only 3 of lS cities provide binding interest arbitration: Gilroy, Palo Alto and San Jose. There is a recent trend toward eliminating interest arbitration as a method for resolving impasse. with public safety units among clties that currently have arbitration as a requirement. On May 10, 2011 (ID # 1704) Page4of9 l I 1 June 8, 2010 voters in the City of Vallejo repealed that city's charter provisions mandating binding interest arbitration as the last step of the impasse procedure. Voters in the City of San Jose modified their binding interest arbitration provisions in November 2010. The City of San Luis Obispo is currently considering elimination. In addition, the May 2010 Santa Clara County Civil Grand Jury Report also recommended repealing binding interest arbitration provisions to provide cities with greater control over employee costs. Discussion and Analysis The Charter provision on binding arbitration is over 30 years old, and recent discussion by the Council and residents have raised questions about whether it continues to adequately serve the needs and best interests of the City. Whether this process continues to be an effective and efficient way to settle labor disputes is a policy decision for the council. Any provision for addressing and resolving disputes will have trade ofts. The question is whether the existing arbitration process for resolving disputes is structurally sound and if the citizens and City are comfortable with the resulting trade offs. If the Council determines that the existing process no longer meets the needs of the City, there are two primary options for change: eliminate binding interest arbitration or modify the provisions to require the arbitrator to consider the factors that are important to the City. Tables 1 and 2 (Attachment A and Attachment B) provide a summary and analysis of these options and the different factors to consider in evaluating the options. One of the primary criticisms of binding arbitration is that it delegates decision- making authority on pay levels, benefits, and work rules to a third party, unelected person (the arbitrator) w1!.o has no accountability to the citizens. Elected council members are typically responsible fur determining appropriate service levels for the entire range of services provided to the community, while an arbitrator is generally focused only on the service of the particular public safety department at issue in arbitration. This narrower scope for an arbitrator has the May 10, 2011 Page 5 of 9 OD# 1704) J 1 , I j I I ! , ) I 1 , 1 I j j potential to create an imbalance in the Council's service level decisions for the City as a whole. If arbitration results in a decision that is not consistent with the adopted budget, the Council may have to adjust other already established service levels to compensate because arbitration is binding and there is no procedure for challenging a decision. Moreover, under the existing rules, the detennination of whether an individual has sufficient knowledge, skill and experience to serve as the arbitrator is left to the State Mediation and Conc:iliation Service ("SMCS'J and its screening criteria. The criteria for arbitrators are very broad and general. For example, SMCS criteria for qualified arbitrators are: 1) graduation from college (or may substitute qua1i.fy:ing ~rience for required education on a year-fur-year basis); and 2) four (4) years experience in addressing labor disputes or in negotiation, administration, interpretation of MOAs (as the primary job function) with at least one year experience in CA and at least one year experience within the last 5 years. The issue of appropriate decision-makers is particularly highlighted now given the difficult budget envirolll1lent and the challenging decisions on resource allocation and service levels facing the City Council. Another potential criticism is that arbitration can be seen as a conservative inSJ:itution insofar as it may prove difficult to persuade an arbitrator to make an important and arguably needed change or group of changes when the parties themselves have not agreed to such changes. The City's experience in the 6 prior arbitration cases show that in one case Fire prevailed,' in one case the City prevailed, and in the others the issues were split between the Union (police or Fire) and City. The City's own results indicate that the conservative nature of the existing process is not conducive to making substantial change. In addition to the format of arbitration, another key element to consider is whether the criteria the arbitrator must apply when formulating his or her May 10, 2011 (ID # 1704) Page 6 of9 decision remain appropriate. The City's Article V lists the following factors for~e arbitratOr to consider when making his or her decision: • Changes in average Consumer Price Index for goods and services • Wages, hours. terms and conditions of employment of other employees performing similar services (surveys of the affected classifications in other agencies) • Financial conditions of the City and ability to meet cost of the award In comparison, in San Jose's newly modified interest arbitration language these are the primary factors in decisions regarding compensation: "The City's finandill condition> Bnd in addition> its ability to pay for employee compensation from on-going revenues without reducing City services. No arbitration award may be issued unless a m~orJty of the Arbitration Board determines, based upon a fair and thorough review of the City's financial condition and a cost analysis of the parties' last offers, that the City can meet the cost of the award from on-going revenues wlthout reducing City services. The arbitrators shall also consider and give substantial weight to the rate of increase or decrease of compensation approved by the City Council for other bargaining units," (for full amendment to San Jose City Charter, see Attachment E) The new factors in the San Jose ordinance more closely match the current concerns expressed by local policy makers. For further analysis of Palo Alto's existing factors and a comparison to the San Jose amendments, refer to Table 2 (Attachment B). Timeline May 10, 2011 (lD # 1704) Page 7 of9 i 1 I i j 1 There is no set timeline for Council action. Dates of future elections and rough cost estimates are listed below: Election Deadline for Rough Estimate of I Date Council Approval Election Costs ! I of Ballot Language I I 11/8/11 8/1111 $ 50,000* i j 4/10/12 I 119/12 $550,000 I I 6/5/12 3/5/12 1$550,000 I . L 11/6/12 I 8/6/12 1$250,000 ----'-~,-.. ----~-- * Green Energy Initiative measure has qualified for November S, 2011 ballot. Conclusion In conclusion, the issue before 'the Committee is whether the existing binding interest arbitration provision in the City Charter is the appropriate method for resolving labor disputes with the City's police and fire employee units. If the Committee decides this provision does not meet the City's and community's needs, the Committee may recommend modification or elimination of binding interest arbitration to the City Council for further discussion and action. Ultimately, any change to the City's Charter would have to be submitted to the voters. cc: Tony Spitaleri, Firefightets Union Local 1319 and Fire Chiefs' Association Ron Watson, Police Managers' Association Wayne Benitez, Police Officers' Association MayIO,2011 (ID # 1704) Page a of9 I , I -1 I ~ 1 -i J AttachmentS: • Attachment A Table l-General Options (DOC) • Attachment B Table 2-Factors to Consider (DOC) • Attachment C Fire -JAFF Binding Interest Arb Cases (XLS) • Attachment D PAPOA Binding Interest Arb Cases (PDF) • Attachment E San Jose Modifications Approved by Voters 2010 (PDF) • Attachment F CPA Charter Provision On Binding Arbit (PDF) • Attachment G Grand Jury Report On Pensions (PDF) Prepared By: Elizabeth Egli, Administrative Assistant Department Head: Sandra Blanch, Interim Director, Human Resources Department City Manager Approval: May 10, 2011 OP # 1704) James Keene, City Manager Page 9 of9 TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: CITY MANAGER DATE: AUGUST 2, 2010 CMR: 3441:10 REPORT TYPE: ACTION SUBJECT: Adoption of a Resolution of the Council of the City of Palo Alto Calling a Special Election for November 2, 2010 Submitting to the Electorate· for Special Election a Measure to Eliminate Binding Interest Arbitration Requirements for Disputes with Public Safety Employees by Repealing Article V of the City Charter Recommendation Consider adoption ofthe attached Resolution of the City Council of the City of Palo Alto Calling a Special Election for November 2, 20 I 0 Submitting to the Electorate for Special Election a Measure to Eliminate Binding Interest Arbitration Requirements fur Disputes with Public Safety Employees by Repealing Article V of the City Charter. Background At the July 19, 2010 City Council. meeting, the City Attorney was directed to bring back appropriate ballot language to call a special election in November 2010 to eliminate binding interest arbitration from the City's public safety (police and fire) bargaining (union) agreements should the Council ultimately decide to pursue the measure after their policy deliberations on the SUbject .. Today marks the final Council action date to place this matter on the November 2010 . ballot. The draft Resolution calling for a special election is attached as Attacinnent "A." Information that has been previously provided to Council is attached to this item as Attacinnent "B." Additional information related to the legal and other costs associated with previous City arbitration cases through the years is still being researched at the time of the v.Titing of this report and will provided to Council separately when completed by the Human Resources Department CMR:340:10 Page 1 of2 Discussion The decision to call a special election for the purpose of considering the removal of binding arbitration from the City Charter is clearly a policy decision by the Council not to be taken lightly. Previous information submitted to the City Council indicates that most cities in Santa Clara County do not currently include binding arbitration in their union (public safety or otherwise) agreements .. see attachment B. However, each city is unique and should consider· such policy questions independently. Resource Impact Recommended action could result in the need for a sepaFate budget amendment item to come back to Council for approval to pay for the costs assOciated "lith adding this measure to the November 2010 ballot as funds were not previously budgeted for such a ballot measure. The Santa Clara COl.Ulty Registrar of Voters estimated the cost to be approximately $\00,000. Attachment A: Draft Resolution Attachment B: Previous Staff Report and Information related to the topic PREPARED BY: CITY MANAGER APPROVAL: CMR:340:10 ~LrJ~ PAMELA W. ANTIL Assistant City Manager ~~/.~~ ·~KEENE City Manager Page 2 of2 ff7TlJr;f!..HfYI Ei'J T /lA!' * * * NOT YET APPROVED * * * Resolution No. Resolution of the Council of the City of Palo Alto calling a Special Election for November 2, 2010 Submitting to the Electorate for Special Election a Measure to Eliminate Binding Inte(est Arbitration Requirements for Disputes with Public Safety Employees by Repealing Article V of the City Charter WHEREAS, Article IX , section 1 of the Charter of the City of Palo Alto authorizes the City Council to propose and submit Charter amendments to the voters of the City for approval at arty established municipal election date; and WHEREAS, Article V of the Charter requil;es compulsory arbitration, commonly referred to as binding interest arbitration, as the sole method for resolving disputes with Fire and Police Department employees over matters involving wages, houts and working conditions; and WHEREAS,the Santa Clara County Civil Grand Jury issued a report in May 2010 concluding that cities must rein in unsustainable employee costs, and finding that binding arbitration limits the ability of city leaders to craft solutions that work for the City's budget, . resulting in wage and benefit decisions that have been greater than the growth in basic revenue sources; and ., WHEREAS, in order to have more flexibility to craft solutions for managing employee costs, the City Council wishes to propose a Charter Amendment to repeal the binding arbitration requirements for public safety employee groups contained in Article V of the Charter; and WHEREAS, elections will be held on November 2, 2010, in certaln school districts and certain special districts in Santa Clara County; and WHEREAS, pursuant to Education Code section 5342 and Part 3 of Division 10 of the Elections Code commencing at section 10400, such elections may be partially or completely . consoli dated. NOW, THEREFORE, the City Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. Special Election. Pursuant to Elections Code sections 1405 and 9255 there is called and ordered to be held in the City of Palo Alto, Califumia,.on Tuesday, November 2, 2010 a special municipal election. Pursuant to Article IX of lhe Charter of the City of Palo Alto, this Council orders the following question to be submitted to the voters at lhe Election: Ii II 100728 sb 8261378 1 * * * NOT YET APPROVED * * * CITY OF PALO ALTO MEASURE __ _ To allow the City to use the d,ispute resolution methods set forth in State law to resolve disputes over all matters related to employee wages, hours and working conditions, shall Article V of the Paio Alto City Charter be repealed to remove the requirement for compulsory arbitmtion of public safety employee disputes ("binding interest arbitration"), wbichallows an arbitration board to make a fmal ' and binding decision on such matters without City Council approval? For the Amendment Against the Amendment SECTION 2. Adoption of Measure. If a majority of qualified electors voting on such measure shall vote in favor of City of Palo Alto Measure "_", it shall be deemed ratified and the following provisions shown in strikethrough shall be repealed and deleted from the City Charter: A-tis!e V. Gemjlwse., l\,r!lill'alieli fer ¥He aR<I Paliee ];)SJl-t B9Ijl!eyee J)i<ljlilles S ... 1. D.&lamli ..... ef"eli"l'. It is 1Ierel!~' aeal_ale e. tl!. !lei;.,. af tl!e .ily ef Pale Alte'tl!at 5Ifil;.s by lkef!ghlefs aR<I flali ••• fIle ... are Rei ill tl!e jlllbli. im ... est aR<I sheufd eeprallillit.<I; aR<I tl!at a HIetl!ed sh.alEl h. ailejllea fer poaeelliR;, aR<I "'!"ilablr ",sal."iRg diqlaIes tl!at mig!lt ellwwise lesE! Ie sash S!l:ikes. gee. 2. Pl'a~itiMi agaiRll! 5Ifil;es. If",,;, lkel"'gbtlif or "ea.e e!1liolif 99Ijlleyed I!y tile sity "{Pale .'dIe wilfully ... gages ill a 5Ifil;e agaifls! tile sily, said e9ljl!oyoe shall b. dismissed H.emI"s Sf her e!ll!'1";'flleat aR<I may nat h. FeiBslaloEl or Fe_a Ie ally ere"I.)'", ... t I'l£sepl as aRe'" e!ll!'1E»'oe. }Ie eHiGer, llelll'Ei; e.lIMii •• aSiamk9slen sileR ha'le tl!. !'awe. Ie gl'ai!! amnesty Ie "'*' erelll.rs. 6hEll'gea. with eagaging iI; a strilie agaiRot the ally. Se •. 3. OllligaliOft Ie aegallatela ge.d llIitl!. '!'he ail)., Ihfeagll liB EIaly aa1il!el'ii!ed ""l'reosl'ltali'.<.s, shall ... gallata HI gaaa feith with the ,e.ag!li;!.Ellke and "aliae 8e,,"_ erel'W;<ee ergaai~alieliS en all reett .... e_g to tl!e wages, ft ..... , ana otl!s. I_S aR<I earuiill.1llI ef olly eml'l.;'flleRt, iIlalaEliRg tl!e o9!Qblishreellt of jlfe.eElare, fer the ressilltien sf grieWllaes sahmilled by either e9ljl1e)'ee erganil!atien avo. tile illtel'jl.etalisn Sf I!jljllieation sf lIllY' flagellated agreement iII.lHEliBg a JlfIl'lisien fer hillEliBg areill'allon of Illes. gl'i'l'laftOOS, thlIeoo aRe. lIIllii oj!!'ee",e!l! i<; rea<ihedtl!r""gII .. egelilllions b.tv.~ ... th. ail)' aft<i tl!a reeegaiRlld "replay •• 8fgaBi;lalion far tl!. life at psH.e dOJ!-or a <leletminalien i<; maGe lhfo1lgli tile alti!rellaa J!f.eedlll's hereiBefter I'f • .,,;Eleol, liS e1Ii&!iI!g b_lit er eenElitieft sf emplE»'me!l! fer tl!e Blareb... of tl!e lifo 8SJl_t ar psliea ElSJlaltmeRt bargeilliBg !!Bit shaR he olimiftateEi ar eh!Illged. ge •. 4. !mil"" •• fasaimiaa pra.ed_. All <liajmtes Sf esal",,,,emies !,lilJteiBiRg to wages, hears, or t_. aR<I eaR<liliens sf , 99Ijl19)'iliOll! whleh.I'emQiII _seMe. geed faltl! RegelialleBS hetween tile oily aR<I.ither tile lko Of !,eliee a"l'Gi tment e"'l'loyeo ergeBimlioll shall ho sahmittea Ie a tl!ree m_er lleard eli arBitraiofS "I''''' lIie Eleoleraliea .f sa impasse IJr tl!e oil)'; Sf or tho .o.egai"aa 3mjlloye. argani%!alioB "",shed iB. tl!e diSJlule. R"!'FeSO!!tal¥fOS ElesigBaIed I!y tl!. eity aBd fOJ'feselltat,j<,'os of the reesgaffio. O9Ijlleyee OI'gaBil!aliOB "",elvoe ill lIie diSi'u!e, .e~o',ersy or gri."anee shall eaab seleat eftS altitralor to . tl!e geGi'e of arBitraters l"ithlB thr4ie """,,s atter oither ~aJ'ly ft •• Rotiaee tl!e otl!er, ill WFltillg, tl!at it desire. Ie I'fBeeee Ie OI'Ililflllioa, The Il!ire ",_or of tl!. ar!litrallon GOOF<! eIlall be sel.eted by llj!!'eOlBeat Between tl!e two OI'Illll'olefs seleeleElI!y the oity aBd tl!. e9ljlleyee rrgeni.oti911, sad l1Xl728 sh 826137g 2 * * * NOT YET APPROVED * * * shell S.I'W aa !he ... 1IIFal lIf8itfater aruI eltiHPmaR of llie llaS!'4. IIIl1;e _I Ilia! 11;. afIlitmlel'S se!e.ted by iii •• I~' IIftG !lie """,ie5'o. aFgani;!aaoo __ at atlI'se up ... llie se!eetiOR sf the thWtl afIlitfat •• ulitlHa tet! d!i;'o ~m Ill. olale !Bat eitherllarty i>as aealie<l the e!lier Ilia! it baa Eleelafed Bill iIIlj!allllo, Illen either ~arIy may •• "".st the Slate efGalifomiaGtmeiamoo 8,,,,>4.e t. ~.,<ide 8 list ef seVeR pePB9flS was are tfliEllifieel &Btl eupePie:aeea as label' areilMt9fS. If ite a:fh:Mat.afS oe!eetea by the sllY aruI!he """,loye. "'gaali!aae .. a_at agree vlitlHa lllfes days after ' ••• iIlI of 5!i6li list eft eae she'le .. Ie oet as the thWtlllf8itffitor, they shall alt .... ately 9mb names Rem Ilia li<lt afHomiRees ""at .eIy aBe _. _iRs IIftd the! po.s ... shall Illoe ••• ""'. llie 1lliR! afIlilroiar aa4 ehaimiaa af1ile ari:litfaH8fl e8QfEL sabjeeU9, aruI ge"emeil by Titl. 9 ofPaH ~ af the Califomla Goa •• Wi"'l Pro .......... ... .1 the eoaelaoiOR. of the arbiil>atioft l>elll'iagfi, tho al'lliil>eao ... 0 .. <1 !!hell M.t .ash of !lie pam •• Ie 5lIhmi!, Vi<lll!iB ,ush tilllo limit as llie llaartlmay es!elllish, a last o1l'er af settlemellt OR oiash ofllie ..... 0 iR diSflllte. Tho arIliil>aa ... b ... d shJ>l1 olasia •• ash wsae Ill' ml\Joril)' ¥ele hy •• l;ostiBg whishe> •• er last o1l'er sr settlemORt 9!1 the! ISSIie it fulds mest!lellfly •• aiel'lllS \'1M llie •• metors trodiaooaU,' I"lie!> iIlt9 eoftSideraaaa iR Ille determiRatio .. of wages, ho""" alia ether terms and e9!!Elitiool; of flUSlie aBEl ~ale eraploym&llt, iRelaamg, ent .. at limited Ie, eIHmg •• ill llie a'"erago 60flSWltor )lao. iHdet. fer goods a!1d sor'l'i ••• , die wages, hears, BillE! oilier _ lUIa .oodia.... of l!I1lpleymallt of e!lior _play.os perfolmiHg .itsHal' s." ..... 9, Oftil 11;. fHlOftOi!>! e ... diaoR of iii. elli}' a!1d its al9i1i1j'1e BISel; !he eost of the ft'I'IaI'<i. Allor reiiohiBg a a.aieie&; !lie arbitraasn1geartl shell mail or o!8ervlise deli';er a ll'tIe sew ofits e •• i.iOfl to the pames, The deeision of Ill. lIf8itraaoa hoard !!haY !let be flUSli"f;' dia.les.<I aruI shalf net 98 ldtdirg until ten days after it is aei'lM6 te the flames, ~ that tea day }lepiea th:e Jlartisa :B:lay meet pflViBely, attem,t te Pesek!, their ai:tIeF8Bees, aati 19Y !&\ikla! agF6emeBt emesEi er "",tlifj' my ofilia deai.;;iolls or th. arllitroa." "eard, At iii. a.llolas;o!! of the tOIl da3' perioa, "'iH<l1l RIft)' he o*tolidea lly _aI agreeraOllt betvl •• a lIie llEll'lies, the tie.;;'""" of ill. arllitmlioo llaard legellier ",ith any amarulmetlts or "",aifieaaellJ! agreed to By the p..aes shell b. publiely alesl ••• d Ofta !!hall e. lliRd;ng lIj!'" the p..aes. The eilj' aruI the .eeoglliasd """,10), •• efgani_< shaH take wheieVef aetlefl is Haseasa£)' tEl SaITY aut aael effeetuate fhe a'ivara. The .I!!!s!lee of Ofty 1If8iil>.liiel1 eeffi_iI purSUIlft! t. !IiW ..aole, ineluding the res for the gef11iee. of llie ehaimlan af llie erbmatiol! beard; ,hall be ~eme .~ual~' by ike pam,s. All ethor el!!!e""as wlilsh llie pames may iReur il'l,ji?,'idaal~' are Ie he h_a ~, the parly iBe_iBg _ll "I!!!ORSes. SECTION 3, Notice of Election. Notice of the time and place of holding the election is hereby given, and the City Clerk is authorized, instructed and directed to give further or additional notice of the election in time, form, and manner as required by law. SECTION 4. Impartial Analysis. Pursuant to California Elections Code section 9280, the City Council hereby directs the City Clerk to transmit a copy of the measure to the City Attomey. The City attorney shall prepare an impartial analysis of the measure, not to exceed 500 words in length, showing the effect of the measure on the existing law and the operation of the measure, and transmit such impartial analysis to the City Clerk on or before August 17,2010. SECTION 5, Ballot Arguments. Pursuant to EJections Code section 9286 et seq., August 10, 2010 at 5:30 p.m. shall be the deadline for submission of arguments in favor of, and arguments against, any local measures on the ballot. If more than one argument for and/or against is received, the priorities established by Elections Code section 9287 shall control. 100728 sh 8261378 3 j ;. ;. ;. NOT YET APPROVED * ;. ;. SECTION 6. Rebuttal Arguments. The provisions of Elections Code section 9285 shall control the submission of any rebuttal arguments. The deadline for filing rebuttal arguments shall be August 17, 2010. SECTION 7. Consolidation Request. The' Council of the City of Palo Alto requests the Governing Body of any such other political subdivision, or any officers otherwise authorized by law, to partially or completely consolidate such elections and to further provide that the canvass be made by any body or official authorized by law to canvass the returns of the election, except that in accordance with Article III, section 4, of the Pa10 Alto Charter, the City Council must meet and declare the results of said elections; arid that this City Counci1.consents to such consolidation. SECTION 8. Request for Countv Services. Pursuant to section 10002 of the California Elections Code, the Council of the City of Palo Alto hereby requests the Board of Supervisors of Santa Clara County to pennit the Registrar of Voters to render services to the City of Palo Alto relating to the conduct of Palo Alto's General Municipal and Special Elections which are Called to be held on Tuesday, November 2, 2010, The services shall be of the type nonnally performed by the Registrar of Voters in . assisting the clerks of municipalities in the conduct of elections including, but not limited to, checking registrations, mailing ballots, hiring election officers and arranging for polling places, receiving absent voter ballot applications, mailing and receiving absent voter ballots and opening and counting same, providing and distributing election supplies, and furnishing voting machines. Subject to approval of the Board of Supervisors of Santa Clara County of the foregoing request, the City Clerk is hereby authorized to engage the services of the Registrar of Voters of the County of Santa Clara to aid in the conduct of said elections including canvassing the returns of said election. Further, the Director of Administrative Services is authorized and directed to pay the cost of said services provided that no payment shall be made for services which the Registrar of Voters is otherwise required by law to perform. SECTION 9. Transmittal of Resolution. The City Clerk is directed to submit a certified copy of this resolution to the Board of Super.visors of the County of Santa Clara and to the Registrar of Voters. 1/ II II II II II 100728 &h 8261378 4 * * * NOT YET APPROVED * * * SECTION 10. Exemption from CEOA. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Senior Deputy City Attorney City Manager Director of Administrative Services 100728 sh 8261378 5 I I I I I I I I 20 City of Palo Alto City Manager's Report TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: HUMAN RESOURCES DATE: July 26, 2010 REPORT TYPE: CONSENT CMR:332:10 SUBJECT: Direction Regarding Content of Charter Amendment to Repeal Binding Arbitration for Public Safety RECOMMENDATION This meeting is to continue discussion and provide direction regarding the content of the charter amendment to repeal binding arbitration for Public Safety. On July 19, 2010, the Council directed staff to return with a resolution placing repeal of the City's binding arbitration provisions on the November 20 I 0 ballot. BACKGROUND Council requested at the regular City Council meeting on July 19, 2010 that this item be brought back for further discussion. Staff has attached some information about this issue including some news articles on the subject. Also, attached is a communication from the City Attorney and a summary table outlining the status of other local jurisdictions. POLICY IMPLICATIONS This recommendation is consistent with existing City policies . . ATTACHMENT A. Table of Binding Arbitration Information from Other Agencies B. Communication from City Attorney C. Infonnation Regardmg Other Agency Binding Arbitration ~ n r" FOR DEPARTMENT HEAD: ~L~"""-- Russell Carlsen Dinf of.Human Reso~es I __ CITYMANAGERAPPROVAC~W~ c,r James Keene \. /' City Manager CMR:332:1O Page Iofl ATTACHMENT "B" REPORT TYPE: INFORMATIOl\AL REPORT THE HOl\ORABLE CITY COUNCIL Palo Alto, California Re: Informational Report on Public Safety Strikes Dear Members ofthe Council: FROM CITY ATTORNEY Council Date: July 19, 2010 July 14, 201 0 We recently received questions regarding the. rights of public safety employees to strike in the absence of binding interest arbitration provisions, The Labor Code expressly prohibits strikes by firefighters. Although there is no specific legislation addressing strikes by police officers,a 1989 court decision held that strikes by police officers are per sc illegaL 1. The Labor Code Prohibits Firefighter Strikes The Meyers Milias Brown Act, which governs employer·employee relations in the public sector in California, does not directly address the right to strike. However, California Labor Code section 1962, expressly states that firefighters "shall not have the right to strike, or to recognize a picket line of a labor organization while in the course of the performance of their official duties." Although Labor Code section 1962 passed in 1959, in 1975 San Francisco firefighters called an illegal strike in which other employee groups, including police officers, joined. See San Francisco Fire Fighters, Local 798, 1nt'l. Ass 'n. of Fire Fighters AFL-CIO v. Bd. of Supervisors of the City and County of San Francisco (1977) 72 Cal.App.3d 820. That illegal strike subsequently prompted San Francisco to propose several charter amendments related to public safety employees. See id. Palo Alto passed its binding arbitration provision shortly thereafter, in 197&. It is possible that the issues San Francisco issue may have been a consideration in passing binding arbitration in Palo Alto. Section I of Article V of the Policy Declaration in Palo Alto's Charter provides: 100714 shOl1l483 THE HONORABLE CITY COUNCIL July 14, 2010 Page 3 Re: Infonnational Report on Public Safety Strikes 4. Conclusion Since the City'S charter provision (Article V) on binding arbitration for public safety was passed in 1978 the courts have settled the law on strikes by public safety employees in favor of public agencies to expressly prohibit firefighters and police officers from striking. As a result, protecting the City from work actions by public safety employees is no longer one of the clear rationales for binding interest arbitration. GMB:sh cc: James Kecne, City Manager Pamela Antil, Assistant City Manager Dennis Burns, Interim Fire Chief Donna J. Grider, City Clerk lOO7}4 sh 0111483 Respectfully submitted, ~. A. ~'-<>-~ GaryM.Baum City Attorney Val1ejo.s experience with bankruptcy, arbitration reform may spur action in San Jose -Sa... Page 1 of 4 mlJtJttftur,g News ATTACHMENT "co. MercuryNews.com Vallejo's experience with bankruptcy, arbitration reform may spur action in San Jose By John Woolfolk jwoolfofk@mercurynews.com Posted: 07/03/2010 10:13:45 PM PDT Updated: 07/04/2010 04:54:56 AM PDT Forty years ago, after a strike by police and firefighters, Vallejo became the first Califomia city to let arbitrators -private judges tor hire -salUe pay and benefit disputes with Hs unionized work force. In June, voters made the baystde city of 120,000 the state's first to repeal that provision as H struggles to emerge from bankruptcy driven by runaway employee costs. That vote -and the experience in Vallejo, once known for Its busUing naval shipyard -has been closely watched in San Jose and other cities where costs for police, firefighters and other unionized employees are outpacing revenues and devouring funds for roads, libraries and other public services. Vallejo's successful repeal has emboldened San Jose city, business and neighborhood leaders to consider a similar ballot measure. And if they succeed, San Jose's labor leaders will be bracing for a similar fight. ·Something has got to change," said Jenry Mungai, president of San Jose's Almaden Valley Community Association, whose board this month will consider Help people in need. Donate your car, boat Dr RV asking the City Council for a November ballot measure repealing the arbitration rights city police and firefighters won in 1980. ·tt was sold on the idea that we'd have labor peace, and what it's done is given us something more than maybe we bargained tor: Public safety unions that kept a wary eye on VallejO'S measure are girding for more battles. 'It affects pOlice offICers around the state," said George Beattie, president of the San Jose Pollee Officers' Association. "Repealing this would be bad for the citizens, bad for the police officers and bad for the city: Spending by unions The San Jose officers association contributed $5,000 toward the campaign against VallejO'S arbitration repeallnmative, Measure A, which narrowly passed with about 51 percent of the vote June 8 deSpite heavy opposltton from police and firefighter groups around the state. The Coalition for a Safer California, sponsored by public safety organizations, spent more than $40,000 fighting the measure. The measure's backers -mostly city officials and citizen activists -said they were outspent by a ratio of about 10 to 1. Aller Vallejo voters approved arbitration in 1970, city officials made two failed attempts in that decade to get It repealed, said San Francisco labor lawyer Alan C. DaviS, who represents city workers. But measure backers said VallejO'S 2008 bankruptcy filing, which made It the largest Califomia city to declare insolvency, and public scrutiny of city Free Towing • Tax Deductible FIIIII ,J • ., ___ IO .. -...... http://www.mercurynews.comlbay-area-newslci 15438127?nclick check= 1 --7/1212010 Vallejo's experience with bankruptcy, arbitration reform may spur action in San Jose -Sa... Page 2 of 4 lI)eJtereur,g News MemllyNews,com employee pay and benefits made repeal an easier sell. City records showed that a dozen police and fire employees were paid more than $200,000 last year, ranking from chief down to captain and engineer. Nearly half the city's employees are paid six-figure salaries. ''This Just needed to be done," said Carlyle P. Johnson, 73, a photographer who voted for the repeal measure. "The unions are too powerful." The dispute resolution process officially called "binding interest arbitration" has seldom aroused such interest beyond bureaucrats, lawyers and labor leaders. Unlike "rights" arbitration that settles contract Interpretation fights, Interest arnitration decides disagreements over compensation. The way it typically works wfth government unions is when contract talks reach an Impasse, the union and employer choose the arnitrator, often a retired judge, from a dispute-resolution firm. The arb~rator considers the opponents' positions on the disputed points and picks the winner for each. There's no attempt at middle-ground compromises: if the union wanted a 4 percent raise, and the city offered 2 percent, the decision is either one or the other. Once made, irs final. Does arbitration work? Though arbitration is often sought as a less cosdy altemative to the courts, it ian' cheap. San Jose Employee Relations Director Alex Gurza said that with stenographers and expert witnesses, the city bill can reach $500,000. Advocates say the process offers a fair and efficient way to resolve compensation disputes through a neutral observer having no stake in the outcome. It can prevent strikes from disrupting public services. Or In the case of police and firefighters -who thanks to law changes since the 1970s are effectively barred from striking -restore balance to the negotiating table. Beattie said that otherwise, 'We're really resorting to collective begging.· 'We'd just have to take what they offered us," Beattie said. "We believe we should have some recourse to negotiate a fair contract or have somebody come In and take a look at it.· Critics argue that the process takes budget decisions out of the hands of elected officials. Vallejo City Councilwoman Marti Brown, who helped lead the measure campaign, said that with three- quarters of the city's budget spent on employee pay ( and benefits, arbitration effectively left her deciding just the remaining fraction. A senior planner for the Sacramento Housing and Redevelopment Agency who has negotiated for her own union, Brown found a very different dynamic with binding arnitration in Vallejo. Unions had no incentive to bargain, and city officials felt pressured . to make generous offers to avoid a more coady arbitration award. ''They'd really have us over a barrel,' Brown said. Twenty-two other Calnomia cities and one county- all In Northern California except for Anaheim - followed Vallejo in adopting binding interest arbitration, said Davis, who said he has "been involved in almost all" of those efforts. Vallejo's arbitration covered all c~ workers, but most jurisdictions limit it to police and firefighters, as San Jose does. Santa Clara County voters in 2004 rejected Measure C, which would have given binding arbitration to county nurses, jailers and http://www.mercurynews.comlbay-area-news/ci_15438127?nclick_check=1 7/12/2010 Vallejo's experience with bankruptcy, arbitration reform may spur action in San Jose -Sa... Page 3 of 4 m,eJtmUfY News MercuryNews,com lawyers. Vallejo setting a trend? Davis thinks city officials In Vallejo and elsewhere unfalrty blame arbttration for money woes. Vallejo's bankruptcy had much to do with the city's Ineptitude In attracting development, he said, and most employee psy and benefit decisions were agreed upon rather than arbitrated. Beattie and San Jose Firefighters President Randy Sekany agree, saying their unions have Invoked arbitration just a couple oftlmes each. They say the arbitrator takes the city's financial health Into account. and they don' see the process skewed In their favor -Sekany notes that the city prevailed on wages In the fireflghters' 2007 arbitration. But San Jose Mayor Chuck Reed said binding arbitration has directly or Indlrectiy driven the city's nine-year run of red ink. Average employee costs have risen more than three times faster than revenues, and police and firelighter expenses almost doubled in a decade. The 2007 arbitration gave firefighters a richer pension that cost the city $5 million more a year. While the city has reached agreements for 10 percent pay cuts wfth most other unions to help close a record $118.5 mllJlon deficR, it will likely get less than half that from police and firefighters because of arbitration, Reed said. He called H the "biggest impediment we have to good-faith negotiations" and said he Is weighing whether to put a repeal or modlflcatlon measure on the ballot, possibly in November. A county civil grand jury this year recommended such a move. Councilman Plerlulgl Oliverio said more than 83 percent of those responding to his online survey on the budget this year favored modifying arbitration. Vallejo, nesUed along the olive waters of San Pablo Bay on the north end of Interstate 80's Carqulnez Bridge, has seen Its ups and downs. Briefly the state's capital, the city's fortunes rose as the 148- year home of tha Mare Island Naval Shipyard. After that fell victim to defense downsizing in 1996, a hOUSing boom helpsd take up the slack. Six Flags Discovery Kingdom still attracts visitors. But the city has suffered unfavorable headlines, from the 1999 kidnapping and murder of 7-year-old Xlana Fairchild to its recent bankruptcy. But longtime resident Keith Vincent, 85, a retired pediatrician, said VallejO'S repeal of binding arbitration may show the city on the leeding edge of government reform. "Several other cities are all going through this problem; Vincent said. "We're just the beginning of everything; Contact John Woolfolk at 408-975-9346. cities with bin4iing arbitration California cities that have adopted binding interest arbitration for employees: Vallejo: 1970 for all employees. Repealed 2010. Oakland: 1973 for police and fIrefIghters. Hayward: 1975 for firefIghteIll. Palo Alto: 1978 for police and fIrefIghters. San Jose: 1980 for police and fIrefIghters. Alameda: 1980 for firefIghters. Redwood City: 1987 for fIrefIghters. Gilroy: 1988 for police and fIrefighters. San Fl1IIlcisco: 1990 for police and fIrefIghters, later other workers. Petalul1UI: 1990 for firefIghters. San Leandro: 1992 for police and fITefIghters. Call 1-888-378-3151 and get a FREE week of meals plus a BONUS $25 gift! "'C'T-'-""-~""""~""" • Print Powered By ~~ i F(2C0'';ltl?l'D~.mic.!;.:j http://www.mercurynews.comlbay-area-newslci.:..15438127?nclick_check=1 7/12/2010 Vallejo's experience with bankruptcy, arbitration reform may spur action in San Jose -Sa... Page 4 of 4 Stockton: 1992 for firefighters. Santa Rosa: 1996 for police and firefighters. Napa: 1996 for police and firefighters. Santa Cruz: 1996 for fIrefighters. Sacramento: 1997 for police, 1998 for firefighters. Sacramento County: 1998 for deputy sheriffs. Anaheful: 1998 for firefighters. Modesto: 1998 fur police and firefighters. Salinas: 1998 for fIrefighters. Watsooville: 1998 for firefighters. San Luis Obispo: 2000 for police and firefighters. Monterey: 2002 for police and fIrefighters. Oroville: 2004 for ftreflghters. Source: Alan C. Davis, attorney at law Advertisement http://www.mercurynews.comlbay-area-news/ci_15438127?nclick_check=1 7/1212010 City of V allejo -Questions & Answers ATTACHMENT"C" . Page 1 of2 Date: 0/ f===::::J SearCh: -. Measure A: Charter Amendment to Remove Binding Interest Arbitration from the Vallejo City Charter Frequently Asked Questions Q: What is binding interest arbitration? A: Binding Interest arbitration Is a process that requires the final decision on the wages, hours and working conditions for City employees to be made by a:-: outside'arbitrator and not by voters or the City Council, The decision by the outside arbitrator is final and the City Council cannot overrule it. Q: Wily does Vallejo cu ..... ntly use binding Interest arbitration? A: The current binding interest arbitration process was added to the City Charter more than three decades ago' after a strike by Vallejo public safety unions, The City Charter section requiring binding interest arbitration was seen as a tool to ensure contract disputes with the Ctty's public safety unrons did not end in strikes. California law now prohibits firefighters and police officers from strUdng. Other City employees are not subject to this prohib[tion. Q: Is binding Interest arbitration used In other California cities? A: 25 of California's 479 Cities use binding Interest arbItratIon to resolve contract disputes with public employee unions, More than 94 percent of aU california dties rely on existing state law (known as the Meyers~Milias~Brown Act or MMBA) to ensure employees have a right to be represented fairly in negotiatlons with the City. Q. WIJat Is being proposed? A: Since binding interest arbitration was adopted by the voters as part of the Vallejo City Charter It can only be repealed by another vote of the people. The aty Council voted on February 91 2010 to place Measure At which asks voters to decIde if they would like to remove bindIng interest arbitration from the aty Charter~ on the June B, 2010 b.llot. Q: What would Measure A do? A: Measure A allows Vallejo voters to dedde If the City Councll -and not an outside arbitrator -should have the authority to make dedsions on the wages, hours and working conditions for City employees, Q: How will repealing binding interest arbitration affed City spending? A: Spending, on public employee wages !=Ind benefits accounts for approximately 75 percent of Vallejo's current year general fund budget. By removing binding Interest arbitration from the City Charter, the City CounclJ will gain the final authority to set spending for pubJic employee salaries and benefits and therefore have greater control over how to allocate Vallejo's tax dollars. Q' Is Measure A related to the City's bankruptcy filing? A: No. Measure A is not related to the bankruptcy fUing, which is still on~golng. Q' How did the City Council decide to put Measure A on tite ballot? A: In 2009, the City Council appointed a fourteen member citizens' committee charged to rev!ew ti'le City Charter. The committee held several public hearings on binding interest arbitration and its effects on the Cfty of Vallejo. The hearings included an educational sesston on bInding Interest arbitration by two disinterested labor ~aw attorneysj advocacy presentattons from a citizen committee and union groups; and comments from the public. After review of an of the information provldedl the Committee voted to reCOmmend that the City Council place a measure on the ballot to repeal blnding interest arbitration. The aty Council voted on February 91 2010 to place Measure AE which asks voters to decide !fthey would like to remove binding interest arbitration from the City Charter, on the June 8, 2010 ballot. Q: How can I find out more about binding Interest arbitration and Measure A., At Additional information an binding interest arbitration and Measure A may be found on the atyls webSite www cl.yalleio,ca.ys. If you have additional questions please email Measurefo.@cl.vallejo.ca.us: or call707~551~ 4422. http://www.ci.vailejo.ca.us/GovSite/ default.asp?serviceID 1 =7 64&F rame=L 1 3/J 8/2010 City of ValleJo -Measure A: Charter Amendment to Remove Binding Interest Arbitration... Page 1 ofl Contact Us: -- Official Documents Date: 3/1Bj20HI Searth:! I~ WM"·IIIIAII •• Measure A: Charter Amendment to Remove BindIng Interest Arbitration from the Vallejo City Charter Questions Ii AnSwers The VallejO City Council voled on F$btvary 9. 2010 10 piece Measure A on the June 8, 2010 benDt, which would remove Binding \. ) in\eresi Artlilralkm (Section 809, entitled "Empioyet-Employee Relalions, Mediation Arbitration) from the City Charter, -------' Maasure A a110ws Vabejo vo{er& to decide If the City Coonci! -and no! an outside erbltratot -should have itle auttlOtily 10 make dar;jslon$ on the wages, hou($ end workillg conditions tor efty emplOyeea. By remoWig binding Interest arbitration from the City Charter, the City Couneil wm gain Ule frnel authority to set spending for pubHe employee salaria$ and benefJts and tnerefOre heve greeter COn_rei >lifer hOw 10 alloeate Vaoola's tal! dollars. This webpage was Cleated as an informational too! to help \101M uodemand wtly MeasiJre A was placed on the ballot by the City CounciL we urge you 10 check bacJc rrequentlyfor updalea and announcements. If you have addJl1ona! quest!oo$ please email MeasumA@clyij!k!jo ce us or eatl707..s51-4422. Far addhlooal voler Informaiion, please kl~ 555 Santa Clara 5tfMt. Vallejo, Calltorn!a 94590 Home) flu!)ut WiII"J!) ! OeplIrt>m'lItts ! Clt¥ CDU1,><:!I I f"Go~ml!l1t I CantA~t I Slll!:.Map 1 CQ!enoitr I O:sr13hner Copyright 201)2-21)10, City cfVall$ CalifornIa h«p:llwww.cLvallejo.ca.us/GovSite/default.asp?serviceIDl =763&Frame=Ll 3/18/2010 ADMIN D Agenda No. cotrNCIL COMMUNICATION Date: February 9, 2010 ' TO: FROM: SUBJECT: Honorable Mayor and Members of the City Council Robert F. D. Adams, Interim City Manageav~ ~ Craig Whittom, Assistant City Manager ICommunity DevelopmenttZtJ John Nagel, Assistant City Attorney 4) CONSIDERATION OF RESOLUTIONS RELATED TO CALLING AND ORDERING AN ELECTION TO SUBMIT TO THE VOTERS A PROPOSED CHARTER AMENDMENT MEASURE TO REPEAL SECTION 809, ENTITLED "EMPLOYER~EMPLOYEE RELATIONS, MEDIATION ARBITRATION" (BINDING INTEREST ARBITRATION), TO BE PLACED ON THE JUNE 8,2010 BALLOT PROPOSED ACTION It is recommended that the City Council adopt three resolutions related to a City of Vallejo Charter amendment measure to repeal Section 809, entitled "Employer- Employee Relations, Mediation Arbitration" (Binding Interest Arbitration), to be placed on the June 8, 2010 ballot. ' BACKGROUND AND DISCUSSION On March 10,2009, the City Council appointed a fourteen member committee charged to review the City Charter. The Committee first considered how to prioritize what the City Council had asked them to review. The Committee determined that Section 809 of the City Charter (Employer-Employee Relations, Mediation Arbitration, also referred to as "Binding Interest Arbitration'') should be its first priority and woulci be considered by the Committee as a whole. The Committee reviewed Section 809 during their scheduled and publicized meetings. Over a period of approximately two months. the Committee held nine (9) meetings, including the required published public hearing. prior to voting , on their recommendation regarding Section 809. The process included the following: '1. An overview of Section 809 of the City Charter by the City Attorney and staff. 2. An educational session on Binding Interest Arbitration by two disinterested attorneys, Attorney Art Hartinger representing a management perspective and Attorney Ronald Yank representing a labor perspective. J:\JNIChorter SeClion 809 6·1 0102·09-1 0 Binding Intere,tArbltnltion Staff Report (FlnaMoex j ADMIN D Page 2 3. Advocacy presentations from: a. The Citizen Committee that had attempted to place a measure repealing Section 809 on the ballot. b. The City Union· groups: Confidential, Administretive, Managerial and Professional Group -(CAMP); Attomey Alan Davis ~nl'l the International Brotherhood of Electrical Workers -(IBEW}: Vallejo Police Officers Association -(VPOA); and the International Association of Fire fighters - (IAFF). c. The City staff with Attorney Jeffrey Sloan from Renne, Sloan, Holtzman and Sakai, LLP presented management perspective. 4. Rebuttals from: a. The Union groups along with Attorney Alan Davis (CAMP did not pa rticipate). b. Former City of Vallejo Human Resources Director Mark Gregersen, Attorney Jeffrey Sloan and City staff, 5. Received public input during each meeting. 6. Presentation on the Impasse Resolution Procedures relating to the Meyers- Milias-Brown Act by Attorney Art Hartinger and Attorney Ronald Yank. On June 17, 2009, after review of all of the information provided, the Committee voted to recommend to the City Council that measure to repeal City Charter Section 809 be placed on the ballot for the November 3, 2009 election, by a 9-5 vote. On June 24, 2009, the Committee adopted its report on this recommendation, On June 30, 2009, the Committee's report and findings supporting its recommendation to repeal Section 809 and a Minority Report were provided to City Council for its consideration. The City Council adopted Council Resolution No. 09-156 N.C., which accepted the Committee's Report and directed staff to: 1) prepare and bring back to City Council for its consideration a ballot measure to be placed on the June 2010 ballot for the public to decide whether or not to remove Section 809 from the Charter, 2) prepare a process for dispute resolution that goes with that measure to be placed on the ballot at the same time, and 3) to commence the meet and consult process with recognized employee organizations. On. July 23, 2009, City representatives sent a letter notifying the VPOA, IAFF, and IBEW of Ihe City Council's direction, and inviting the Unions to meet and consult over the City Council's resolution. The letter included the City's initial proposal to repeal Section 809. Representatives of the City and thethree labor Unions met on September 21, 2009, and again on November 10, 2009, al which time Ihe Unions provided a proposal modifying J:\JN\chaner Section 8098·10\02.09-10 Binding InterestArbltralJon Staff Report (Finall.doex ADMIN D Page 3 the provisions of Section 809, but maintaining binding interest arbitration as the ultimate conclusion of the City's impasse procedure. The Unions indicated that binding interest arbitration was the essential element of their proposaL Given the distance between the parties, the City sent a letter declaring impasse on November 19, 2009. The Unions have not responded to that letter and the City has advised the Unions in writing that the meet and consult proceSG has concluded. City representatives also met with representatives of CAMP on November 19, 2009 and indicated that the City intended to present a ballot measure repealing Section 809. CAMP representatives indicated that they would notify the City if they were interested in consulting over this proposal. As the City has received no response from CAMP the City has advised CAMP in writing that the meet and consult process has concluded. As tihe meet and consult process had been completed, Staff prepared a draft measure title, ballot question and additional recommendations for City Council's consideration. On January 26, 2010, Staff presented a report to the City Council, including a draft measure title and ballot question, recommending that the City Council not put a companion alternate dispute resolution measure on the June 8, 2010 ballot(because the Meyers-Milias-Brown Act provides for the adoption of impasse procedures by ordinance}, and recommending the retention of elections consultants to assist the City in placing a measure on the June 8, 2010 ballot. The City Council adopted a resolution authorizing tihe City Manager to execute elections consultant contracts, discussed whether an alternative impasse resolution procedure needed to be placed on the June 8,2010 ballot and asked if staff could simplify the draft ballot question while maintaining the inlent of the measure. ELECTlON~ RESOLUTIONS In order to submit a measure to the voters for approval, the City Council must adopt three resolutions. RESOLUTION, ON THE VALLEJO CITY COUNCIL'S OWN MOTION, CALLING AND ORDERING A SPECIAL MUNICIPAL ELECTION TO BE CONSOLIDATED WITH THE· STATEWIDE DIRECT PRIMARY ELECTION TO BE HELD ON TUESDAY, JUNE 8, 2010 TO SUBMIT TO THE VOTERS A PROPOSED CHARTER AMENDMENT, ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER" Attachment A is the proposed resolution calling and ordering an election. The resolution must include the measure title and ballot question. Attachment A includes the following revised draft measure title and ballot question. subject to consideration and approval by J:\JN\Charter Section 609 6-10\O2-O9~10 ~jnd!ng lnterestArbltraUon Staff Report (Finat).docx ADMIN D . Page 4 the City Council: PROPOSED MEASURE TITLE AND BALLOT QUESTION - CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER Shall Section 809 of the Charter of the City of Vallejo be repealed to YES remove the mediation/arbitration process, commonly referred to as I binding interest arbitration, that permits an arbitrator, without City • Council approval, to make the final decision to resolve disputes between the City and its recognized employee organizations on all matters relating to wages, hours, and working conditions and NO instead to use the method of resolving such disputes set forth in state law? RESOLUTION SETTING PRIORITIES FOR THE FILING OF WRITTEN ARGUMENTS WITH RESPECT TO A PROPOSED CHARTER AMENDMENT. ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER" AND DIRECTING THE CITY ATTORNEY TO PREPARE AN IMPARTIAL ANALYSIS The second resolution (Attachment B) is drafted so that the City Council could authorize an individual City Council member or more than one City Council member to write an argument for or against the proposed Charter Amendment. The City Council may authorize up to five (5) members to write an argument for or against the Charter Amendment. The City Council is not obligated to name any of its members. If the Council chooses not to authorize any member(s) to write arguments, then any indMdual voter who is eligible to vote on the measure, or bona fide associations of citizens, or any combination of voters and associations, may file a written argument for or against the Charter Amendment pursuant to Elections Code Section 9282. Assuming that the City Coun.cil desires an impartial analysis to accompany the measure, the City Council would have to adopt the portion of the Resolution directing the City Attorney to draft an impartial analysis. During the meeting of February 9, 2010 staff is requesting that the City Council decide upon the members or decide to not authorize any members to write arguments. If the J:UMCharter Section 809 6-10\02-09-10 BfndlnglnlefestAroitraUon Staff Report (Final).docx ADMIN D PageS City Council decides not to tile a written argument in favor of the measure, the City Clerk will select an argument in favor of the measure for the ballot pamphlet in accordance with the priority order set forth in Elections Code Section 9287, which states:. If more than one argument fer or more than one argument against any city measure is submitted to the city elections official within the time presCribed, he or she shall select one of the arguments in favor and one of the arguments against the measure for printing and distribution to the voters. In selecting the argument the city elections official shall give preference and priOrity. in the order named, to the arguments of the following: (a) The legislative body, or member or members of the legislative body authorized by that body. (b) The individual voter, or bona fide association of citizens, or combination of voters and associations, who are the bona fide sponsors or proponents of the measure. (c) Bona fide associations of citizens . . (d) Individual voters who are eligible to vote on the measure. RESOLUTION PROVIDING FOR THE FILING OF REBUTTAL ARGUMENTS WITH RESPECT TO A PROPOSED CHARTER AMENDMENT, ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER" TO BE SUBMITTED TO THE VOTERS AT THE SPECIAL MUNICIPAL ELECTION TO BE HELD ON TUESDAY, JUNE 8,2010 The City Council also has the authority to determine if rebuttal arguments will be permitted. If rebuttal arguments are pennitted, the author or a majority of the authors of an argument relating to a City measure may prepare and submit a rebuttal argument not exceeding 250 words or may authorize in writing any other person or persons to prepare, submit, or sign the rebuttal argument. Staff recommends that the City Council adopt a resolution authorizing rebuttal arguments on the measure (see Attachment C). Rebuttal arguments provide additional information to the voters, and staff recommends that the additional expense is warranted to assist the voters in understanding' the measure. Pursuant to Elections Code Section 9285 (b) this Resolution must be adopted no later than the day on which J:\JN\Charter SEreUon 809 6~10\02..Q9~10 Binding InterestArbltration Staff Report {Flnal).dpcx ADMIN D Page 6 the City Council calls the election, and if the Resolution is adopted then it applies "at the next ensuing municipal election and at each municipal election thereafter, unless it is later repealed" by the City Council. RECOMMENDATION In order to proceed with the placement of the proposed charter amendment measure on . the June 8, 2010 ballot, it is recommended that the City Council adopt the three proposed resolutions. ALTERNATIVES CONSIDERED In order for the City Council to submit this proposed charter amendment measure to the voters, there is no other alternative.· ENVIRONMENTAL REVIEW The submittal of a Charter Amendment to the volers is not a project as defined by the California Environmental Quality Act r'CEQAO) pursuant to section 15378 (b) (3) of Title 14 of the California Code of Regulations as it concerns the submittal of proposals to the voters of the City and is not subject to environmental review. A Notice of Exemption will be filed with the Solano County Clerk. FISCAL IMPACT The cost estimate from the Solano County Registrar of Voters regarding placing a charter amendment on the June 8. 2010 ballot is approximately $378,000. The cost of consultant assistance for project management and educational materials is estimated at $80,000. The approved FY 2009-10 budget includes an appropriation for the June 8, 2010 measure. No further action to amend the budget is required at this time. CITY COUNCIL AREAS OF FOCUS The Charter Review Committee was initiated by the City Council in early 2009, and as such its scope and recommendations are a component of the Areas of Focus developed by the City Council in 2008. J:\JN\Ch:arter Section 809 6-10\02~09~10 Slnding InterestArbiuation Staff Report (FlnaO.doc): I ADMIN D 7 DOCUMENTS ATTACHED ATTACHMENT A -RESOLUTION, ON THE VALLEJO CITY COUNCIL'S OWN MOTION, CALLING AND ORDERING A SPECIAL MUNICIPAL ELECTION TO BE CONSOLIDATED WITH THE STATEWIDE DIRECT PRIMARY ELECTION TO BE . HELD ON TUESDAY, JUNE 6, 2010 TO SUBMIT TO THE VOTERS A PROPOSED CHARTER AMENDMENT, ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER". ATTACHMENT B -RESOLUTION SETTING PRIORITIES FOR THE FILING OF WRITTEN ARGUMENTS WITH RESPECT TO A PROPOSED CHARTER AMENDMENT, ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER" AND DIRECTING THE CITY ATTORNEY TO PREPARE AN IMPARTIAL ANALYSIS ATTACHMENT C -RESOLUTION PROVIDING FOR THE FILING OF REBUTTAL ARGUMENTS WITH RESPECT TO A PROPOSED CHARTER AMENDMENT, ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER" TO BE SUBMITTED TO THE VOTERS AT THE SPECIAL MUNICIPAL ELECTION TO BE HELD ON TUESDAY, JUNE 8, 2010 CONTACT PERSONS Craig Whittam, Assistant City Manager/Community Development (707) 646-4579 cwhittom@ci.vallejo.ca.us or John Nagel. Assistant City Attorney (707) 648-4545 nagel@ci.vallejo.ca.us J:lJNICharter Section 809 6-10102-09-10 Binding Intere.fAro'ralion 5ta" Report {Final).docx , RESOLUTION NO. 10-_ N.C. ADMIN D ATTACHMENT A RESOLUTION, ON THE VALLEJO CITY COUNCIL'S OWN MOTION, CALLING AND ORDERING A SPECIAL MUNICIPAL ELECTION TO BE CONSOLIDATED WITH THE STATEWIDE DIRECT PRIMARY ELECTION TO BE HELD ON TUESDAY, JUNE S, 2010 TO SUBMIT TO THE VOTERS A PROPOSED CHARTER AMENDMENT, ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING· INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER". WHEREAS, on March 10, 2009, the City Council adopted Resolution No. 09-043 N.C. establishing the Charter Review Committee, and WHEREAS, on June 30, 2009, tha Charter Review Committee recommended to the City Council that a measure to repeal Section 809 (Employer-Employee Relations, Mediation Arbitration) of the Charter of the City of Vallejo be submitted to the voters at the General Municipal Election to be held on November 3, 2009; and. WHEREAS, the City Council desires, on its own motion, to submit to the voters a question relating to the repeal of Section B09 (Employer-Employee Relations, Mediation Arbitration) from the Charter of the City of Vallejo at a Special Municipal Election to be consolidated with the Statewide Direct Primary Election to be held on June 8, 2010. NOW, THEREFORE, THE COUNCIL OF THE CITY OF VALLEJO DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS, THAT: SECTION 1. The City Council pursuant to its right and authority under Article XI, section 3(b) of the California Constitution and Govemment Code section 3445B, doeS order to be submitted to the voters at a Special Municipal election the following question: -1- J:\JN\Charter Section 809 6-10\Bindillg Interest Arbitration Resolution Call Election (Final}.doc ADMIN D II CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRAl10N !! FROM THE VALLEJO CITY CHARTER Shall Section 809 of the Charter of the City of Vallejo be repealed to YES remove the mediation/arbitration process, commonly referred to as binding interest arbitration, that permits an arbitrator, without City Council approval, to make the final decision to resolve disputes between the City and its recognized employee organizations on all matters relating to wages, hours, and working conditions and NO instead to use the method of resolving such disputes set forth in slate law? _ ... SECTION 2. The proposed complete text, with additions indicated by underscoring and deletions indicated by strike tAF91ol!lh type, of the proposed Charter Amendment submitted to the voters is as attached in Exhibit 1 to this Resolution, which is incorporated herein by this reference. SECTION 3, In aI/ particulars not recited in this Resolution, the election shall be held and conducted as provided by law for holding municipal elections. SECTION 4. Notice of the time and place of holding the election is given and the City Clerk is authorized, instructed and directed to give further or additional notice of the election, in time, form and manner as required by law . . SECTION 5. The City Clerk is hereby directed to file a certified copy of this Resolution with the Solano County Board of Supervisors and the Solano County Registrar of Voters, SECTION 6. The City Manager and the City Clerk are hereby authorized and directed to take any and all actions necessary under law to prepare for and oonduct the June 8, 2010 election and appropriate all monies necessary for the City Manager and the City Clerk to prepare and conduct the June 8, 2010 election consistent with law. J:\JN\charter SectIon B09 5",10\6100109 Intereat Albltmtion Resolution Call El&etion (Fi"a~,doc ADMIN D SECTION 7. Pursuant to Section 15378 (b) (3) of TItle 14 of the Califomia Code of Regulations, this Resolution is exempt from the requirements of the Califomia Environmental Quality Act ("CEQA") in that it is not a Project as it concems the submittal of a proposal to the voters of the City and is not subject to environmental review. The City Clerk is hereby directed to file a Notice of Exemption with the Solano County Cieri<. J:\JN\Charter Section 809 6-10\Binding Interest Arbitration Resolution Call Election {Ffnal).doc ADMIND EXHIBIT 1 CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VAllEJO CITY CHARTER Article VIII of the Charter of the City of Vallejo is amended to repeal Section 809 as follows: Section 809 implerer empleyee RelatioRs, MediatieR ArbitratieR. GonsisteAt with apf3lisable law, the Gil?/,.(;OI,Jnsil shall by oroiRanoe proviae a system of ooIIectivo Regotiotinli! to incl\,;de; a. It shall be tAe R§Rt of Gitj' employees inElividually or aoileetively to negQtiate OR mattersof' .... ali!es. Ao\,;FS. aRa '.voFkinfj oonditioAs, bl,;\ not OR A'lalteFS inwlving IAe merits. nesassity, or ol'fjanil!ation of any sOIVisa or amivHy JlfOvided by law. or on any rnattef-arisiR~ out of Samions Sgg(n}-Gr 803(0} ef this CRarter. b. TRO City Manager andler Rislhor desifjRatod ropresontativo(s) shall negotiale in flood faitA ...... ith IRO resognizod employee orfjani2!otions. TAe Cily Counoilmoy appoint a committee VlRisR sRall be somposed solely of Counsil members to assist the Cit;' . Manafjer anElffir RislReF designated roprosentative(s) in said negotiations if IRe Cot/Rcil in its jUB!lmeRt deems SUOR in tRe best l'1uBlio interest. o. 80th pames sR·all oxohange tAeir wFitten deA1andsat least 180 oalendar days Before the 9l<piFatiOR of tho thon GUFFOm a€lreemem or aFbitration awarEl. Colleetive negotiations shall sommense at least 15Q saleRdar Gays before the ffiijlirelion of the tAen surreAl agreement Ell' arbilratioll a','Jaro. d. AfjreomoAts reaoRed belwoeR Gitj' represoAtatf\'OS authorized ill (13) above aAI:! tt;e representati'IOS of the reaognized employee ergaRi2mions shall be sl,lBmitted in ' .... Fitiflg to the City Council for its approval. medifisalian, aF rejeotioA. All sush agroemeAts shall pravide for expiratioll at the end of a fl60al year. /\11 phasos of negatiatioAs;-mediaiicm and arBitralian including tRe final biAding deoision afiRe mediatOl;iaFbitratGFShall be completed at least 25 calendar days before lhe eml of the fiscal year. J;\JMChartet Sectroo 509 6-to\BiJ'ldlJ'lg Interest Arbitration Resotulion Calf Electron CFlnal).doC! ADMIN D e. Both parties shall select and schedule a rneEiiatorlarbitrator at least 200 calendar days before tAe expiration of the tl=Jon slIrrent agreornont or arbitration a' .... ard.lf tl=Jey are lInablo to agree upon a rnediatorlarbitrator, they shall select sllch person frern a list of . seven narnesto be fJro'lided by an impartial third party mediationlarbitration service rnutually asceptablo to tAo fJartios. The partios sl=Jall fJro'lide the rnodiationiarbitration service witA suffisiont notise to insure receipt of tho list at least 190 calendar says before the e*fJiration of the then current agreernent cr arbitration award. If at least 180 salondar says before the e*piration of tl=Je tl=Jen current agreernent or arbitralion a' .... ard the fJarties still sannot agree lIfJon a mesialorlarbilrator, they shall immediately alternately strike narnes frern the list, Il=Je shoice of the first strilm to be deteFFAined Ily 101. Tl=Je lact rernaining lInstfllck narne sAall be selected and sshesuled as mediatorlarbitrator. f. If, 90 calendar days before lhe Olfpiration of the current agreernent or arbitralion a' .... ard, no agFeernent can be reached, OF if the City Council refuses to ratify the agreornent arrived at or rnoaifies such agreernent in any manner lInacceptable to the ernployeo organization, the parties shall cornrnence rnediation. g. If no agreernent between tl=Je parties has been shed within 14 calendar days after the start of mediation. the mediatorlarbitrator sl=Jall therellpon cornrnence arbitration precoedings to deal' .... ith the isslles still in aispllte. Eash party shall put in '.wiling its last best offer on each of the issues still in dispute witl=Jin 14 calendar days after the start of arbitration pFOceeaings, ana tl=Jese offers shall irnrnediately be rnaae publio. The mediatorlarbitrator sl=Jall ohoose one of tho parties' last best offer far easl=J issue still in . dispule ana shall Aave no power to modif)' or oornpFOmisotl=Je last best offers of eilher party. Tl=Je rnediatorlarbitrator shall hear tl=Je evidenoe !'lresented and sonsider all factors relevant to tl=Je issues frorn tl=Je stand!'loinl of boll=J ornployor and affeGtod employees, including the interests and welfare of Il=Je publis and the finanoial ability of the City to rnoet tl=Jose sosts. If one of tl=Je !'larties fails to subrnit its lasl best offer within the al3o\'e allotted tirne. then tl=Je rnediatorlarbitrator shall be obligatea to rnake an a' .... ard insor!'lorating tho teFFAS and oonailions of the last best offer rnado by the !'laFty that has submitted its offer within Il=Je above allotted tirne. To the el!lent !'lermitted by la' ..... lho decision of tl=Jo rnediatorlarbitrator shall be final and binding on all!'larties. Any arbitration award issued shall j:)Fovide for Olc!'liralion at the end of a fiscal year. I=J. nie costs of rneaiation and arbitration. inoludinglhe sohedulin!l of tl=Je rnediatorlarbitrator, shall be Ilome eEjual1y by all parties. Arbitration l=Jearings shall be sondlloled within tl=Je City of Vallejo and slosed to the pub lis. unless otherwise rnuillally agreef! lI!'lon by the parties 'Nitl=J tl=Je concurrence of lhe medialorlarbilrator. i. Notl=Jing in tl=Jis seotion shall rnodif)' tl=Je allthority of 11=J0 Civil Servise Commission to e*ersise tl=Je pm\lers e*!'lressly sonfirmed upon il by Il=Jis Charter. J:\JN\Charter Section 809 6-1 O\Blnding Inlerest Arbitration Resolution Call Election (Final).doc ADMIN D j. The pro>/isions Elf til is Semion sllall n91 be construed as making any Elf the pro>Jisions lilf Seotion 923 of the Labor Code Elf tile State of Califemia applioable to City employees. The proYisions af til is SeGlion pertaining to arbitration shall ee oonstrued as on "arbitration a!!lFeement" for tlla purpose of making applioable to tile extent not in Gonflict herowith the provisions of Chef/tor I (GommenGin!ij with.seolion 1281), Title g, Part:l of the Cade af Ci'Jil PreGeduFe of the State af CaJifoRAia. I>.ny employee Who at any lime partioipates in a strike or other work stoppage OF olher soncertes '/.'Om rolatea aGlisn against Ihe City of Vallejo 'tlill be oonsideFes 10 ha'.<e tenminalea histAer employment with the City ana neitheF-the-Gounoil nor the Civil Service Commission shall Rave any power to previae by reinstatement or o!ReJwiso fur the rmum or Fe ent!'}' sf saia employee into tRe City-serviGe ol(Gept as a new employee vlho is employed in aooordanse with the regylar employment promises af Ihe City then in effem for the partisylar position af emplo~lment. The !juemion of whether an empleyee ohargea ,MIt! partisipating in a strike or 'NOrk stoppa!ije OF oUler oonoerted wmk related esti9R aia, in fact, enllage in sysh GOnaum shall be aelermiRed tArolJgh Ihe disciplinary proooalJFOS appliGable 19 employees !leneral!}'. (AmendmeRt aaoptod by the eleGlors af the city, 11/4.'80: amemlmont aaepted by lAo elesters afiRe sity. 1117100.) J:iJN\Charter Section 809 6-10\BincJlng Interest Arbitration Resolution Calf Election (Final).doo ADMIN D ATTACHMENTB RESOLUTION NO. 10-_ N.C. RESOLUTION SETTING PRIORITIES FOR THE FILING OF WRITTEN ARGUMENTS . WITH RESPECT TO A PROPOSED CHARTER AMENDMENT, ENTlTI.ED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER" AND DIRECTING THE CITY ATTORNEY TO PREPARE AN IMPARTIAL ANALYSIS , WHEREAS, a Special Municipal Election is to be held in the City of Vallejo on Tuesday, June 8, 2010, at which there will be submitted to the voters of said City a measure in substantially the following form: CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE VALLEJO CITY CHARTER Shall Section 809 of the Charter of the City ofVal/ejo be repealed to YES remove the mediation/arbitration process, commonly referred to as binding interest arbitration, that permits an arbitrator. without City Council approval. to make the final decision to resolve disputes between the City and its recognized employee organizations on all matters relating to wages. hours, and working conditions and NO instead to use the method of resolving such disputes set forth in state law? NOW, THEREFORE. THE CITY COUNCIL OF THE CITY OF VALLEJO DOES RESOLVE, DECLARE. DETERMINE AND ORDER AS FOLLOWS, THAT: SECTION 1. The City Council hereby authorizes _____ (Council Member in Favor) ____ -C(Council Member in Favor) _____ (,Council Member in Favor) ____ (Council Member Against) ____ (Council Member Against) ____ (Council Member Against) ____ (Council Member Against) _____ .(Council Member in Favor) _____ (,Council Member in Favor} 1 ____ (Council Member Against) J:\JN\Charter Section BOO 6-10\Binding lliterest Arbllration Resolution Argument (Final),Qoc ADMIN 0 members of that body to file a written argument(s) with the City Clerk regarding the City Measure (Charter Amendment) as specified above, accompanied by the printed names(s) and signature(s) of the author(s), not exceeding 300 words, and in accordance with the Elections Code of the State of California, Section 9280, et seq., and may be changed until and including the date fixed by the City Clerk, atler which no arguments for or against the measure may be submitted to t~e City Clerk. SECTION 2. The City Council hereby directs the City Clerk to transmit a copy of the City Measure to the City Attorney. The City Attorney shall cause to be prepared an impartial analysis of the measure showing the effect of the measure on the existing law and the operation of the measure. The impartial analysis shall be filed by the date set by the City Clerk for the filing of primary arguments. 2 J:\JN\Charter Section 809 6-10\Blnding Interest Arbitration Resolution A.rgument (Final).doc ADMIN D ATTACHMENT C RESOLUTION NO. 10-_ N.C. RESOLUTION PROVIDING FOR THE FILING OF REBUTTAL ARGUMENTS WITH RESPECT TO A PROPOSED CHARTER AMENDMENT, ENTITLED "CHARTER AMENDMENT TO REMOVE BINDING INTEREST ARBITRATION FROM THE . VALLEJO CITY CHARTER" TO BE SUBMITTED to THE VOTERS AT THE SPECIAL MUNICIPAL ELECTION TO BE HELD ON TUESDAY, JUNE 8, 2010 WHEREAS, Section 9285 of the California Elections Code authorizes the City Council, by majority vote, to adopt provisions for the filing of rebuttal arguments for city measures submitted at municipal elections; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF VALLEJO DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS. SECTION 1. Pursuant to Section 9285 of the California Elections Code, when the elections official has selected the arguments for and against the measure which will be printed and distributed 10 the voters, the elections official shall send a copy of an argument in favor of the measure to the authors of any argument against the measure, and a copy of an argument against the measure to the authors of any argument in favor of the measure immediately upon receiving the arguments. The author or a majority of the authors of an argument relating to a City measure may prepare and submif a rebuttal argument not exceeding 250 words or may authorize in writing any other person or persons to prepare, submit, or sign the rebuttal argument. A rebuttal argument may not be signed by more than five persons, The rebuttal arguments shall be filed with the City Clerk, signed, with the printed name(s} and signature(s} of the author(s) submitting it, or if submitted on behalf 1 J:\JN\Charter Section 809 &-10\Bindlng Interest Arbitration Resolution Rebuttal Argument (Final).doc ADMIN 0 of an organization, the name of the organization, and the printed name and signature of at least one of its principal officers, not more than 10 days after the final date for filing direct arguments. The rebuttal arguments shall be accompanied by the Declaration by Author(s) form to be supplied by the City Clerk. Rebuttal arguments shall be printed in the same manner as . the direct arguments. Each rebuttal argument shall immediately follow the direct argument which it seeks to rebut. SECTION 2. All previous resolutions providing for the filling of rebuttal arguments for City measures, if any, are repealed. SECTION 3. The provisions of Section 1 shall apply only to the Special Municipal Election to be held on Tuesday, June 8, 2010, and shall then be of no further fo rce and effect. 2 J:\JN\Charter Section 809 5~ 10\Blndlng Interest Arbilration Resolution Rebuttal Argument {Flnai).doc i I 1 Number of issues likely to be on November ballot I Reeordnet.com By Daniel Thigpen July 14, 2010 Record Staff Writer ATTACHMENT "C" News NUMBER OF ISSUES LIKELY TO BE ON NOVEMBER BALLOT VOTERS TO HAVE LOUDER VOICE STOCKTON -Expect a heavier ballot this November. Page lof2 Voters this fall could change how Stockton's fire chief is hired, how labor disputes with firefighters are handled and whether medical marijuana is taxed. The City Council on Tuesday asked city staff to draft ballot language for all of those items and indicated it is likely to place them on the ballot at its next meeting, on July 27. Already deep into a bitter labor dispute with the city's fire union. a push to change long-held Fire Department provisions In Stockton's City Charter would create a new. months-long battle. As for marijuana, the cash-strapped city is hoping to create some extra revenue as it is poised to allow and regulate medical marijuana dispensaries in the coming weeks. "We certainly WOUldn't want that to go up in smoke," Councilwoman Leslie Baranco Martin said of a proposed marijuana tax. Mayor Ann Johnston called changes to the Fire Department provisions of the City Charter a top priority. City leaders want to remove a charter section that requires labor disputes with the fire union to go to a third-party arbitrator whose decisions are final and can be enforced In court. Another target is a charter provision that dates back to the 1970s and requires that the fire chief be hired from within the department's ranks. Also, the city may ask voters to repeal another charter section that allows firefighters to earn and use no less than 15 days of vacation a year. "This is something that just doesn't seem necessary," Deputy City Manager Laurie Montes said. Critics say charter mandates and union contracts have stifled the city's ability to control staffing and employee costs. Stockton Professional Firefighters Local 456 opposes the proposed changes. The marijuana tax originally was part of a broader proposed business tax overhaul that requires voter approval to make changes. But Chief Financial Officer Mark Moses cautioned that to propose the changes this year, there would be little time for input from the business community. The City Council decided to put off those changes until a future election but made clear it wanted to continue to pursue a separate marijuana tax measure. Also expected on the November ballot is a measure to allow Stockton to develop publicly assisted low-income housing. The city can go to voters every 10 years for the authority. Voters last approved such a measure in 2000. The council chose not to pursue a revision to a conflict-of-interest section of the City Chartar that came under http://www.recordnet.eorniapps/pbcs.dlllartic1e?AID=/20]00714/A _ NEWS/] 00719950/-1/... 7/14/2010 Number of issues likely to be on November ballot I Recordnet.com Page 2 of2 scrutiny after last year's controversial firing of Deputy City Manager Johnny Ford. Instead, the council opted to Include the item In a possible long·term charter revision process that could include a citizens committee. Ford was accused of using his influence to get free tickets to city entertainment venues. A council investigation found Ford did not violate a city ticket policy and said the applicable conflict-of·interest charter provision was vague. Contact reporter Daniel Thigpen at (209) 546-8254 or dthigpen@recordnet.com. Visit his blog at recordnet.com/thigpenblog. http://www.recordnet.com/apps/pbcs.dl1!artic1e?AID=/20100714/ A _NEWS/I00719950/-1I... 7/14/2010 City weighs charter changes I Recordnet.com By Daniel Thigpen July 03, 2010 Record Staff Writer ATTACHMENT "C" News CITY WEIGHS CHARTER CHANGES STOCKTON COULD TARGET FIREFIGHTER LAWS WITH BALLOT Page 1 of2 STOCKTON -Already Stockton's elected leaders are trying to break their contract with the city's fire union. Now they may go for more, seeking changes in municipal laws written specifically for firefighters. Later this month, the City Council will discuss several proposals for November ballot measures. Foremost in city leaders' sights are charter provisions that govern labor disputes with firefighters and dictate how the department's chief is hired. Expect another fight. The fire union's leader said he will oppose any efforts to alter the department's sections of the City Charter. The move comes at a time when firefighters have taken City Hall to court for its attempts to suspend pay increases and to close a truck company -which the fire union's contract prohibits -to help close a multimillion-dollar budget deficit. And the ballot debate won't just be about firefighters. Also in the works are a proposed overhaul of the city's decades-old business tax rules, including the possibility of taxing marijuana sales, and a review of a much- scrutinized conflict of interest City Charter section. The City Council will discuss what, if anything, to put on the November ballot at its next meeting July 13, just two weeks before the deadline to qualify for the fall election, officials said. "Yes, we understand it's a short window of time," Mayor Ann Johnston said. Fire provisions targeted City leaders want to repeal a section in the City Charter, enacted by a public vote in 1992, that requires labor disputes with the fire union to go to a third-party arbitrator, whose decisions are final and can be enforced in court. City governments frequently criticize binding arbitration for often siding with unions. Fire Capt. Dave Macedo, president of Stockton Professional Firefighters Local 456, said those concerns are exaggerated. For city leaders, the issue centers on their ability to get out from under the union's contract, which mandates minimum daily staffing and other directives that critics say have eroded the city's power to manage fire personnel and limit employee costs. Binding arbitration, Johnston said, "ties our hands, and takes away some control that rightfully should be in the hands of the council." http://www.recordnet.comJapps/pbcs.dll/article?AID=/20100703/A_NEWS/7030335/-lIa_... 7/14/2010 City weighs charter changes I Recordnet.com Page 2 of2 Another potential target is a charter provision that dates back to the 1970s and requires that the fire chief be hired from wHhin the department ranks. Outgoing interim City Manager Kevin O'Rourke said he has been pushing council members for months to consider the changes. He said the fire chief provision doesn't make sense. "What it breeds is just the internalization of the existing culture" in the Fire Department, he said. Macedo said he will never support repealin9 the law. ''You want somebody who has moved up through the ranks and are Invested in the city," he said, cautioning against ·career chiefs" who bounce between cities. Other Items mulled Outside of fire matters, the City Council may also discuss rewriting a conflict-of-interest charter section at the center of last year's controversial firing of Deputy City Manger Johnny Ford. Former CHy Manager Gordon Palmer, who retired in September, fired Ford, saying Ford used his influence to get free tickets to city entertafnment venues. Hundreds of people protested, some saying Ford was fired because he is black, a claim Palmer denied. A City Council investigation found Ford was unethical in appearance to take tickets from promoters but that Ford did not violate a city ticket policy. The council committee also called the applicable charter provision concerning gifts "nebulous and amblguous:and recommended it be rewritten. Meanwhile, city officials also are proposing a citywide business tax ordinance overhaul, changes that also would require a public vote. Fees for some businesses could increase, while others may drop. The ordinance changes include a proposal to levy a 2.5 percent tax on gross revenues at pot dispensaries. That annual tax could apply to marijuana sold for medical purposes or otherwise, depending on whether state voters legalize marijuana for recreational uses. Contact reporter Daniel Thigpen at (209) 546-8254 or dthigpen@recordnel.com, Visit his blog at recordne\.com/thigpenblog. http://www.recordnet.com/appsipbcs.dlllarticle?AID=/20100703/A_NEWSI70303351-lIa_". 7114/2010 Measure B: Binding Arbitration -Santa Clara County, CA Page I of8 ATTACHMENT "c" This is an archive of a past election. See pti:;p_:j/WivW. sJ11£r:t:}lc-:"'£,Qrg!caL~~li for current information. tim: \ ,_ League of'Women Voters of California Education Fund Santa Clara County, CA November 7, 2006 Election Measure B Binding Arbitration City of Santa Clara Majority Approval Required Q Fail: 9,853! 43.86% Yes votes ...... 12,612! 56.14% No votes See Also: Im:l!!~Qf aILMe"s_ur~!> Results as of Dec 41:58pm, 100.0% of Precincts Reporting (53/53) Information shown below: Yes/N--21Y1eaning I )!l1jl'!!1ial A@Jysis I ArgY!!Lents I D!1l Text Shall a section be added to the City Charter which would require binding arbitration before a three person arbitration panel of all unresolved disputes between the City and certain personnel of the Police and Fire Departments on all matters relating to wages, hours, and other terms and conditions of City employment, including the interpretation and application of any existing labor agreements? YES NO Meaning of Voting YeslNo A YES vote on this measure means: A "yes" vote would establish binding arbitration. A NO vote on this measure means: A "no" vote would retain existing City procedures. Impartial Analysis from the City Attorney [There may be errors in the retyping. Contact the Registrar of Voters for the official version.] This measure, if approved, would add a new City Charter section requiring binding arbitration on unresolved labor issues between the City of Santa Clara ["City"] and the Santa Clara Police Officers' Association and the Santa Clara Firefighters' Association [collectively "Public Safety Employees" or "PSE"]. Under existing law, the City is required to negotiate in good faith with its employee organizations about wages, hours, and other terms and conditions of employment ["labor issues"]' In the event http://www.smartvoter.org/2006/11/07/ca1scl/measIBl Official Information Proponents Committ~e.1Q.PLQtect FiIeJlllQ ~QlkeJ)l.'!ryi~jLY es On M<;as1J!S1 8 FPPC: 1265036 Opponents At this time there are no known opponent webpages News and Analysis This election is archived. Any links to sources outside of Smart Voter may no longer be active. No further links will be added to this page. Links to sOurces outside of Smart Voter are provided for infonnation only and do not imply endorsement. 7/2012010 Measure B: Binding Arbitration -SantaClara County, CA that the parties cannot agree, an impasse exists. Currently, the City Council has discretion on how to respond to impasse situations. Past practice has included directing further negotiations, voluntary mediation andlor City Council imposition of terms and conditions discussed during negotiations. After an agreement has been reached between the City and its employee organizations, the current process authorizes the City Manager to ultimately resolve disputes regarding the interpretation or application of existing labor agreements ["grievances"]. This measure would eliminate the City Manager's grievance resolution authority. If the measure is approved, instead of the City Council resolving impasses with PSE, the labor issue dispute would be submitted to binding arbitration ["interest arbitration"]. This measures also requires establishment of binding arbitration for grievances ["grievance arbitration"]. This measure would also prohibit the City from eliminating or changing any existing benefits or conditions of employment for PSE unless the change was either (1) the result of a negotiated agreement or (2) a decision resulting from the arbitration procedure. The measure would provide for a three-member Board of Arbitrators ("Board") to hear interest arbitration or grievance arbitration. City and PSE would each select one arbitrator. The . third arbitrator would be selected pursuant to the procedures set forth in the measure. The third arbitrator would serve as the neutral arbitrator and as the chairperson of the Board. The arbitration provisions of the Califumia Code of Civil Procedure would apply. At the conclusion of the arbitration hearings, the Board would direct each of the parties to submit a last offer of settlement on each issue in dispute. The Board would decide each disputed issue by selecting whichever party's last offer of settlement on that issue the Board fmds most nearly conforms with (1) the salary and benefits of the other designated public agencies for its public safety employees and (2) those fuctors traditionally considered in the determination of labor issues including, but not limited to, consideration of inflation, the fmaneial condition of the City and the City'S ability to meet the cost of the binding arbitration award. The parties would have ten days after the Board's decision to . mutually agree upon any modifications to the award. At the end of the tencday period, the award, including any modifications agreed upon, would be publiely disclosed and become binding on the parties. No voter or City Council approval would be required. A "yes" vote would establish binding arbitration. A "no" vote http://www.smartvoter .org/20061 1 I/07/ca/sel/meas/BI Page 2 of8 7120/2010 Measure B: Binding Arbitration -Santa Clara County , CA Page 3 of8 would retain existing City procedures. Prepared by Michael R. Downey, City Attorney Arguments For Measure B [There may be errors in the retyping. Contact the Registrar of Voters for the official version.] Measure B is about one thing and one thing only; a fair decision making process for our police officers and fIrefighters. It's not about wages, hours or working conditions .. .it's about fairness for our public safety officers. Public safety officers need binding interest arbitration because it's the right thing to do. Currently when there is an unresolved dispute during negotiations, and the issue cannot be resolved, the City's fInal decision will be imposed on the police offieers and firefIghters. The City's decision cannot be appealed. All other Santa Clara City employee bargaining units have the right to exercise one last step ... the strike. Police officers and fIrefighters are prohibited by law from going on strike, and rightly so. Santa Clara's citizen's safety is too important to jeopardize with a strike. Police and firefighters cannot strike; therefore there is no recourse to resolve disputes fairly. Our police officers and firefighters deserve to have a fair process that provides a level playing field. Measure B will provide that fair and impartial process to resolve disputes. The arbitration process provided by Measure B does not guarantee that our public safety officers will win every time. But it gives them a fair charice, a chance they don't have now. Vote to give our police officers and firefighters a fair system to settle disputes, they deserve it for putting their lives on the line for us every day. We ask for your YES vote on Measure B. Give Arguments Against Measure B [There may be errors in the retyping. Contact the Registrar of Voters for the official version.] Don't put your City services and ta:x dollars at risk! Passage of Measure B will take away final authority from your Elected City Council, Elected Police Chief and Fire Chief to control wages, benefits, and day-to-day operating procedures for Police Officers and Firefighters. AN OUTSIDE ARBITRATOR SHOULD NOT DECIDE: • How to spend your tax dollars. • How to staff the Police and Fire Departments. • What hours and days of the week employees work. • How much the City should pay its public safety employees. '. How City services are delivered to resideots and businesses. • Employee grievances. Basic democratic philosophy of city goverrunent puts control in your hands and those of your elected officials. An arbitrator accountable to no one removes that controL Keep these decisions in your hands. Don't give away your democratic right. Those in favor of binding arbitration say this is a matter of fairness. Saota Clara taxpayers through their elected officials have always been fair to these employees. Santa Clara Police Officers and Firefighters rank among the highest paid publie http://www.smartvotcr.org/2006111107/caiscl/mcaslBl 7120/2010 Measure B: Binding Arbitration -Santa Clara County, CA Page 4 of8 our dedicated police officers and fuefighters a fair safety employees in the Bay Area After four sYstem to settle disputes. years on the job police officers earn $} 07,076 and Firefighters eam $100,452 annually plus lsi Elaine Alquist generous benefits and retirement. State Senator lsi Gary Niblock President Santa Clars Firefighters IAFF Local 1171 lsi Edward C. Rose Assistant Fire Chief SCFD (ret.) lsi Lisa M. Gillmor BusinesswomanlFormer Santa Clara City Council Member lsi Patrick Nikolai President, Santa Clars Police Officers Assoc. Rebuttal to Arguments For [There may be errors in the retyping. Contact the Registrar of Voters for the official version.] Firefighters and police officers are well paid in Santa Clara because we value their service and commitment. They are among the highest paid in their professions, have great benefits and can retire after thirty years at 90% of their salaries for life. The fue and poliee departments already use more than 50% ofthe city's operating budget. More money allocated by an arbitrator will cut into other services such as the senior center, parks and recreation, street maintenance and library. Fairness in the negotiation process is mandated by state law. In the last quarter century Santa Clara has never imposed a contract on the police and fire departments. Under the current system, fire and police employees have AL WAYS been treated fairly. When asked, fIre and police cannot identifY a single current issue on which they have been treated unfairly. So why are they paying for this measure? To tilt an already fair negotiations process in their favor. . Binding arbitration is costly. Highly paid arbitrators will decide issues. The elected City Council and voters having NO say in the spending of your tax dollars. An arbitrator's award can reduce the money currently available for senior and youth programs, care of your parks, maintenance of your streets and your City library. Your NO vote will retain loeal control of these ISSueS. • Don't change the City Charter and take control away from your City Council ..... . ...... VOTENOonB • Don't let three outside Arbitrators control your Police and Fire .............. . VOTENOonB • Don't jeopardize City Services .... VOTE NOonB lsi Will Kennedy Council Member, City of Santa Clara lsi Steve Lodge Police Chief, City of Santa Clara lsi Bill Gissler Former Mayor, City of Santa Clara lsi Don Von Raesfeld Fonner City Manager & Council Member, City of Santa Clara lsi Robert Ricks Chair, Board of Directors, Santa Clara Chamber of Commerce Rebuttal to Arguments Against [There may be errors in the retyping. Contact tlie Registrar of Voters for the official version.] Measure B is about providing a fair decision making process for police and firefighters. http://www.smartvoter.org/2006111/07/ca/sd/meas/B/ 712012010 Measure B: Binding Arbitration -Santa Clara County, CA Is! Patrick Kolstad City Councilmember lsi Edward C. Rose Assistant Fire ChiefSCFD (ret.) lsi Patrick Nikolai Page6of8 President Santa Clara Peace Officers Association lsi Gary Niblock President Santa Clara Firefighters lAPP Local 1171 Full Text of Measure B [There may be errors in the retyping. Contact the Registrar of Voters for the official version.] Article XI, Sec. 1109. BindinRArbitration Jor Fire and Police Department EmJ!loyee Disputes (a) BINDING ARBITRATION + DECLARATION OF POLICY. It is hereby declared to be the policy of the City of Santa Clara that strikes by fire fighters and police officers are not in the public interest and should be prohibited, and that a method should be adopted for peacefully and equitably resolving disputes that might otherwise lead to such strikes. (b) PROIDBITION AGAINST STRIKES. No City of Santa Clara fire fighter or police officer shall willfully engage in a strike against the City. Any such employee against whom the City brings charges of failing to report for work as part of a strike shall be subject to dismissal from his or her employment in the event the eharges are sustained upon conclusion of the proceedings that are required by law for the imposition of disciplinary . action upon said employee. (c) OBLIGATION TO NEGOTIATE IN GOOD FAITII. The City of Santa Clara through its duly authorized representatives, shall negotiate in good faith with reeogrrized employee organi7.ations of the City of Santa Clara Fire Department and the City of Santa Clara Police Department on all matters relating to the wages, hours, and other terms and conditions of City employment, including the establishment of procedures for the resolution of disputes concerning the interpretation or application of any negotiated agreement. Unless and until agreement is reached through negotiations between the City of Santa Clara and a recognized employee organization representing Bargaining Umt 1, which includes, but may not necessarily be limited to, the classifications of Firefighter, DriverlEngineer, Fire Captain, Fire Paramedic, Deputy Fire Marshal and Assistant Training Officer, or between the City of Santa Clara and a recognized employee organization representing Bargaining Unit 2, which includes, but may not necessarily be limited to, the classifications of Police Officer; Police Sergeant, Police Licutenant and Police Recruit, or determinations are made through the arbitration procedure hereinafter provided, no existing benefits or conditions of employment for said fire department or police department employees shall be eliminated or changed. (d) IMPASSE RESOLUTION PROCEDURES. Notwithstanding any other provision in this Charter, all disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the City of Santa Clara and a recogrrized fire department employee organization or police department employee organization whieh represents the bargaining unit classifications set http://www.srnartvoter.orgI2006/11/07/ealscl/measlBl 7120/2010 Measure B: Binding Arbitration -Santa Clara County, CA Page 7 of8 forth in subsection II 09(c) above, shall be submitted to a three-member Board of Arbitrators upon the conclusion ofimpasse proceedings (utilizing the impasse procedures in place on June 6, 2006) by the City and the recognized employee organization. Representatives designated by the City of Santa Clara and representatives of the recognized employce organization involved in the dispute shall each appoint one arpitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in "'Titing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City and employee organization, and shall serve as the neutral arbitrator and Chairperson of the Board~ In the event that the arbitrators selected by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that either party bas notified the other that it bas declared an impasse, then either party may request the State of California Mediation and Conciliation Service to provide a list of seven (7) persons who are qualified and experienced as labor arbitrators. If the arbitrators selected by the City and the employee organization cannot agree within three (3) days after receipt of such list on one of the seven (7) to act as the third arbitrator, they shall alternately strike names from the list of nominees until one name remains and that person shall then become the third arbitrator and chairperson of the Arbitration Board. Any arbitration proceeding convened pursuant to this Artiele shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. The Arbitration Board shall hold public hearings, receive evidence from the parties and cause a transcript of the proceedings to be prepared. The Arbitration Board, in the exercise of its discretion, may meet privately with the parties and mediate or mede-arb issues in dispute. The Arbitration Board may also adopt such other procedures that arc designed to encourage an agreement between the parties, expedite the arbitration hearing process, or reduce the costs of the arbitration process. At the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Arbitration Board may establish, a last offer of settlement on each of the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms with those fuctors traditionally taken into consideration in the determination of wagcs, hours, and other terms and conditions of public and private employment, including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, and the fmancial condition of the City of Santa Clara and its ability to meet the cost of the award. After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten day period the parties may meet privately, attempt to resolve their differences, and by mutuaJ agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion of the ten (10) day period, which may be extended by mutual agreement between the parties, the decision of the Arbitration Board, incorporating any amendments or modifications agreed to by the parties, shall be publicly disclosed and shall be binding upon the parties. The City of Santa Clara and the recognized employee organization shall take whatever action is necessary to carry out and effectuate the final Arbitration Board award and incorporate any amendments or modifications agreed to by the parties as provided above. The expenses of any arbitration convened pursuant to this article, including the fee for the services of the Chairperson of the Arbitration Board, shaJl be borne equally by the parties. All other expenses http://www.smartvoter.org/2006/11/07/ca/scl/meas/B/ 712012010 Measure B: Binding Arbitration -Santa Clara County, CA Page 80f8 which the parties may incur individually are to be borne by the party incurring such expenses, Created: January 4, 2007 09:39 PST Smart Voter <http://www.smartvoler.orgi> Copyright Cl League of Women Voters of Califurnia Education Fund http;!(}i'ww.iwvc.org The League qf Women Voters neither supports nor opposes candidotes for public office or political parties. http://www ,smartvoter .org/2006/11 /07/eafsellmeas/B/ 7120/2010 Measure T: Failed negotiations subject to binding arbitration -Santa Clara County, CA ATTACHMENT "C" Page 1 of6 Santa Clara Connty, CA November 3, 1998 General Measure T Failed negotiations subject to binding arbitration City of Sunnyvale Charter Amendment 15,009/49.6% Yes votes ...... 15,276/50.4% No votes lnfomation shown below: Impl!l1l:liAn1!lYJli'l I ArgMm~nl!; I fl!!lT~xt Shall the Sunnyvale City Charter be amended to provide that disputes about wages, hours and other terms and conditions of employment that cannot be resolved by negotiation.v between the City and the Public Safety Officers Association and the Communications OffICers Association be subject to binding arbitration which is final without City Councilor voter approval? Impartial Analysis from the City Attorney Measure T would add a sectiqn to the Sunnyvale City Charter to create a sy!>1em of binding interest arbitration to resolve labor disputes between the City and the Poblic Safety Officers Association and Communication Officers Association. Under existing statutory law, firefighters are prohibited from striking or recognizing a picket line while performing their official duties, and police officers are similarly limited under case law. Also under existing law, the City is required to negotiate in good faith with the employee organi7.Jltion representing the public safety-officers about wages, hours, and other terms and conditions of employment. Under existing law, when agreement is reached between the negotiating representatives, the agreement is put in writing and presented to the City C..ounciLIf matters remain in dispute and impasse is declared, the employee organization may request conciliation, and if conciliation does not resolve the impasse, advisory arbitration may be requested. If no agreement is - reached and impasse procedures have been exhausted, the Council may adopt and implement the City's last best offer. Measure T alters the process for resolving labor http://www.smartvoter.org/1998nov/ca/scl/meas/T/ s.qgg.~taJink relat~d tj) this co_nt~;;t Links to sources outside of Smart Voter are provided for infonnation only and do not imply endorsement. 7/20/2010 Measure T: Failed negotiations subject to binding arbitration -Santa Clara County, CA disputes. It provides that following good faith negotiation by the City and the labor organization, either party may declare an impasse, thereby requiring the unresolved issues to be decided through binding interest arbitration. The arbitration procedures would apply to all disputes or controversies over issues pertaining to wages, hours, terms or conditions of employment or grievances concerning the interpretation or application of a negotiated agreement. If approved, this measure would require that the arbitration be conducted by a single, neutral arbitrator and conform to the California Arbitration Act (Code of Civil Procedure 1280 et seq.) If the parties don't reach agreement before arbitration hearings are concluded, the arbitrator would direct each party to submit a final settlement offer on each disputed issue. The arbitrator would take each issue and select one ofthe parties' last offer on that issue. Selection would be based on factors traditionally considered to determine wages, hours, benefits and other terms and conditions of employment. Factors include, but are not limited to, changes in the average consumer price index for goods and services; wages, hours, benefits and terms and conditions of employment of employees performing similar services in comparable cities; and the City'S fmancial condition and its ability to meet the costs of the decision. Measure T provides that the arbitration decision in its final form would be publicly disclosed and binding on the parties. Prior to release of the decision, the parties would be able to meet privately to attempt to resolve their differences and would be allowed to jointly amend or moduy the arbitration decision. Costs of the arbitration proceeding would be split betwecn the City and the labor organization. The Measure states that neither the City Council nor the electorate are permitted or required to affirm or approve the decision of the arbitrator. A "yes" vote would establish binding interest arbitration. A "no" vote would retain the existing procedures. VALERIE J. ARMENTO City Attorney http://www.smartvoter.org/1998nov/calscVmeaslT/ Page20f6 7120/2010 Measure T: Failed negotiations subject to binding arbitration -Santa Clara County, CA Page 3 of6 ArgliJnents For Measure T Measure T is proposed by Sunnyvale police and firefighters as a fair, efficient method to settle labor disputes with the city. Currently there is no fair or equitable process toresolve such differences. Occasionally police and firefighters disagree with the city regarding safety procedures,use of equipment, work rules, or compensation. Presently our public safety officers are forced to accept whatever the city proposes. Unlike other workers, public, safetypersonnel carmot and don't want to strike, so city bureaucrats have no incentive to negotiate. If passed, Measnre T will establish "binding arbitration" to resolve disagreements between public safety and the city before they become major disputes. • Measnre T requires the city, police and firefighters to negotiate in good faith on work rules, grievances, wages, hours and other conditions of employment; • Measnre T allows an impartial, independent arbitrator, if necessary, to study the facts and resolve disputes between the city, police and firefighters; • Measnre T requires that the arbitrator's decision be based on the "interest and welfare of the public and the financial ability of the city to mect costs." The arbitrator's decision is binding on the city, police and the firefighters. • Measnre T will save tax dollars. Protracted, expensive labor disputes are avoided. Voters in Santa Cruz, San Jose, Gilroy, Palo Alto, Hayward, Vallejo, Napa, San http://www.smartvoter.orglI998nov/caJscl/measIT/ Arguments Against Measure T Don't be fooled by the Union's claim that this is about fairness and respect. This is a battle for control of our tax dollars. This measure is a power grab by the Union which is unnecessary, undemocratic, and puts our quality oflife at risk. It's unnecessary because Sunnyvale public safety officers are among the best treated and most highly compensated officers in the entire nation. In fact, the average Sunnyvale offieer receives more than $100,000 per year in total compensation and works in one of the safest cities in America. It's undemocratic because it takes decision making authority away from the City Council and gives the citizens of Sunnyvale no say in how their tax dollars are spent. Final decision making authority would be placed in the hands of non- elected third party arbiters accoUIitable to no one. If the City Council makes poor fiscal decisions, we can vote them out of office. If a non-elected arbiter does, we're stuck with it. It puts our quality of life at risk because we lose control over how our tax dollars are spent. If public safety costs go up because of the decision of a non-elected arbiter, we will be forced to make up the deficit by eutting other services. These services are parks and recreation, libraries, and street maintenance. The Union says this is about fairness and respect. It's really about money and power. Right now that power is held by elected officials accountable to the voters. If this measure passes, public accountability will be lost and citizens of Sunnyvale will no longer have a say in how their money is spent. Protect our award winning city services and our democratic right to choose. Vote 7/2012010 Measure T: Failed negotiations subject to binding arbitration -Santa Clara County, CA Leandro, Santa Rosa and Petaluma have no on measure T. amended their city charters to provide similar provisions to avoid public safety disputes and to establish a fair and JIM ROBERTS equitable way to resolve labor differences. Mayor of Sunnyvale More than 13,000 Sunnyvale citizens signed petitions to place Measure T on the ANN HINES ballot. Measure T is supported by Former Director, Leadership Sunnyvale neighborhood leaders and organizations throughout our city. If Measure T is approved it would replace an unfair system THOMAS F. LEWCOCK with a much fairer one. Please vote YES Former Sunnyvale City Manager on Measure T JAMES W. DAVIS Sunnyvale Public Safety Officers Association RONSWEGLES Chair Parks & Recreation HELEN M. DeWOLF Page 4 of6 Advisory Committee for a New Sunnyvale JOSEPH F. CALA Business Owner TONY SPIT ALERI Firefighter SUSAN CAROL CALDWELL Homemaker Sr Center Text for Measure T If Measure T carries, the Charter shall be amended by adding Section 1110 to read as follows: Section 1110. Impartial And Binding Arbitration For Public Safety Department Employee Disputes. A. Declaration of Policy. It is hereby declared to be the policy of the City of Sunnyvale that strikes by public safety employees (employees in the Sunnyvale Public Safety Department assigned to fire suppression and law enforcement duties, including those dispatching them to assigned calls and other emergency situations) are not in the public interest and should be prohibited, and that a method should be adopted for peacefully and equitably resolving disputes that might otherwise lead to such strikes. B. Prohibition Against Strikes. No City public safety employee as defmed above, or employee union, association, or organization representing same, shall strike, slow down, http://www.smartvoter.org/I998nov/ca/scl/meas/T/ 7/20/2010 Measure T: Failed negotiations subject to binding arbitration -Santa Clara County, CA Page 5 of6 sick out or engage in such concerted economic activity against the City. Disputes unresolved by negotiations shall be resolved by the procedure set forth herein. Any such employee who fails to report to work without good cause or who aids, abets or encourages strikes, slow downs or sickouts against. the city shall be subject to disciplinary action, including, but not limited to, tennination from City employment, subject to the provisions of this Charter, the City's Personnel Rules and Regulations and lawful procedures. C. Obligations to Negotiate in Good Faith. '!be City, through its duly authorized representatives, shall negotiate in good faith with any employee organization that is recognized by the City as the representative of a representation unit or representation units comprised solely of public safety employees as defined above, as such units are currently constituted or as they may be amended through negotiation or arbitration as provided in this section, on all matters relating to the wages, hours, and other terms and conditions of City employment, including the establishment of procedures for the resolution of grievances concerning the interpretation or application of any negotiated agreement that includes a provision for binding arbitration of those grievances. Unless and until agreement is reached through negotiations between authorized representatives of the city and said employee organization or a determination is made through the impartial procedure hereinafter provided, no existing benefit, term or condition of employment for the public safety employment employces represented by said employee organization shall be altered, eliminated or changed. D. Impasse Resolution Procedures. I. All disputes or controversies pertaining to wages, hours or terms and conditions of employment which remain unresolved after good faith negotiations between the City and said employee organization shall be submitted to an independent, neutral Arbitrator upon the declaration of an impasse by the City or by said employee organization. 2. The City and employee organization will attempt to reach agreement as to the neutral Arbitrator. In the event that the City and the employee organization cannot agree upon the selection of the neutral arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, either party may then request the State Mediation and Conciliation Service of the State of California-Department ofIndustrial Relations (or a neutral replacement if same ceases to exist) to provide a list of seven (7) persons to act as the neutral arbitrator. If they still cannot agree as to the neutral arbitrator, they shall alternately strike names from the list of nominees until one name remains, and that person shall then become the neutral Arbitrator. The first party to strike shall he determined by lot. 3. Any arbitration proceeding convened pursuant to this Article shall be conducted in conformance with, subject to, and governed by Title 9 ofPart 3 of the California Code of Civil Procedure (CCP 1280 et seq.), as the same exists as ofJanuary I, 1998. The Arbitrator shall hold hearings, receive evidence from the parties, and cause a transeript of the proceedings to be prepared. The Arbitrator, in the exercise of his/her diseretion, may meet privately with the parties and mediate the issues in dispute. The Arbitrator may also adopt such other procedures that are designated to encourage an agreement between the parties, expedite the arbitration hearing http://www.smartvoter.org/1998nov/ca!scllmeas/T/ 7/2012010 Measure T: Failed negotiations subject to binding arbitration -Santa Clara County, CA Page 60f6 process, or reduee the costs of the arbitration process. 4. In the event no agreement is reached prior to the conclusion of the arbitration hearings, the Arbitrator shall direct each of the parties to submit, withIn such time limit as he/she may establish, a last offer of settlement on each of the remaining issues in dispute. The Arbitrator shall then decide each issue by selecting whichever last best offer of settlement on that issue he/she [mds most nearly conforms to those factors traditionally taken into consideration in the determination of wages, hours, benefits and terms and conditions of public and private employment, including, but noUimited to the following: changes in the average consumer price index for goods and services; the wages, hours, benefits and terms and conditions of employment of employees performing similar services in comparable cities of similar population; and the financial condition of the City of Sunnyvale and its ability to meet the costs of the decision of the Arbitrator. 5. After reaching a decision, the Arbitrator shall mail or otherwise deliver a true copy of his/her decision to the parties. The decision of the Arbitrator shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten (10) day period, the parties shall meet privately, attempt to resolve their differences, and by mutual agreement amend or modifY the decision of the Arbitrator. At the conclusion of the ten (10) period, which may be extended by mutual agreement between the parties, the decision of the Arbitrator, as it may be modified or amended by the parties, shall be publicly disclosed and shall be binding on the parties. The City and the employee organization shall take whatever action is necessary to carry out and effectuate the arbitration award. No other actions by the City Councilor by the electorate to confirm or approve the decision of the Arbitrator shall be permitted or required. 6. The expense of any arbitration proceeding convened pursuant to this Article, including the fee for the services of the Arbitrator and the costs of preparation of the transcript of the proceedings, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the partyincurring such expenses. 7. The provisions of this Section shall not be construed as making any of the provisions of Section 923 of the Labor Code of the State of California applicable to City public safety employees. The provisions of this Section pertaining to arbitration shall be. construed as an "arbitration agreement" for the purpose of making applicable to the extent not in conflict herewith the provisions of California Code of Civil Procedure Sections 1280, et seq., described above. Created: February 16, 1999 18:55 Smart Voter '98 <http://www.smartvoter.orgl> Copyright © 1998 League of Women Voters of Cali fomi a Education Fund The League of Women Voters neither supports nor opposes candidates for public office or political parties. http://www.smartvoter.org/1998nov/ca/scl/measIT/ 712012010 I I " ,-",,/! ~~~. ------- p "~~~ IJ . Attachment A Potential Options for Modifying the Style of Arbitration option Analy8is1IslJues to consider ---------- Qption A: Modify arbitration -"Allor nothing" approach may encourage parties to reach negotiated settlement provisions to "package jilluJ qffer" -"AU or nothing" approach could create high risk for bath parties, especially where parties take an extreme position or [ormat, choosing entire final offer of one propose a large number of contract changes . party or the ather -May reward small or incremental change and preclude significant sbifts -Risk that even small errors in a proposal would result in arbitrator choosing ather package, even if flawed package is otherwise superior Option B: Modil)r arbitration -May ~low creative sQlutions that meet the interests of bath parties provisions to allow the arbitrator to -Loss of control and potential for unpredictable outcomes exercise discretion, issue by issue, to -May discourage parties !rom moving toward comprolliise sel~ct the proposal of either party or to C11lft an arbitrator's alternstive. Qption C: Modil)r arbitration . :Each party has opportuulty to subutit a package that is more or less aggressive in seeking changes to terms and provisions to allow "dual final ojfrr" in conditions· ! which each party suluults 2 final package -Choice of 4 packages may give arbitrator greater flexibility to address real problems offers and arbitrator picks one of four. -Party may bave the opportooity to send "sigoals" indicating importance of an issue between the 2 offers -Multiple options/packages may filcilitate mediation -May increases uncertainty about likely outoome ·Arbitrator will still end up picking entire proposal of one side Ex· Eu2eneOR \ -~- • I i ! I I I , () ., 1 -, j j I \ " " IEDA-City of Palo Alto JlUle 2011 Brief Overview -Common Fonns of Interest Arbitration Interest arbitration is commonly recognized by its decision-making fannat? Some of the more common formats include: 1. "Conventional" arbitration. Under tbis fonnat the interest arbitratoy.2 is allowed to create new MOU tenus, drawing as the arbitrator deems appropriate from the proposals of either or both parties or from the pre-existing M.O.U. In arriving at that ,OJ , decision the arbitrator typically justifies the outcome based on the decision-making criteria that the arbitrator is obligated to consider in arriving at the decision. Conventional arbitration is often referred to as "split the difference" arbitration insofur as its fonn may foster a result that consists of part of what each party proposed. However, that is not necessarily the result. Conventional arbitration may result in a decision that neither party contemplated or prefers. It is a form of arbitration that places a premium on the experience and skill of the arbitrator, and on the skill the parties bring to bear at hearing to educate the arbitrator. It is also a form that involves little penalty , for "shooting for the moon"; i.e. taking many issues to arbitration. To the extent that is true, it may undermine the incentive to negotiate a resolution of differences without resort to arbitration. 2. "Issue by issue final offer" arbitration. In tbis format, the arbitrator decides each issue separately, choosing the final offer of either the employer or union without varying its tenus. As in "split the difference" arbitration, the arbitrator's decision reflects 1 However, when collSidering funnat. it is essential that thought is also given to the interaction between the arbitrlllion ibnnat and the other subsllUltive and procedural facets of the arbitrlllion system (e.g. decision-making criteria, the effect of pre-arbitrati(lll surfa£e bargalning and unfair labor practices (lIl timing of arbitration, timing fur the submission of offers to the interest arbitrator, whether an offer can be changed in arbitration, etc.). 2 For purposes of this 'llll11lllIl'Y, reference is huwe to the "i~ter""t arbitrator" regardless of whether that individual sits as a sole arbitrator or as the neutral ehair of a panel of arbitrators. 1 IEDA-City of Palo Alto June 2011 (or should reflect) the criteria that applicable law requires the arbitrator to coDSider in reaching a decision. However, this form of arbitration leaves to the arbitrator the choice of which issues fall in each party's column. Like conventional arbitration, there is little penalty for taking many issues to arbitration rather than negotiating a resolution. The larger the number of issues, the more likely each party will come through the process with at least some "win." However, this form of arbitration ensures that the resulting ~ ~. arbitration award is what at least one party proposed, having implications known in advance by both parties. 3. "Package Final Offer" arbitration. The key characteristic of this form of arbitration is that each party submits a total package final offer on all of the issues in dispute, and the arbitrator must select the employer's or union's total package without variation. Package final offer arbitration creates risk for a party that takes an extreme position or proposes a large number of contract changes. Although dependent on the legal framework in place, the burden of proving that a proposed change in the terms of employment should be granted is most commonly placed on the proponent of the change. A danger of this fonn of arbitration is that a party may make a fatal technical or legal error in the construction of the party's finaJ offer. lfthis occurs, the arbitrator may have no choice but to award the other party's package even if the flawed package is otherwise superior. The party with a flawed offer may be able to negotiate a settlement, but if the other party is cognizant of the flaw there will be little incentive to negotiate. On the other hand, because of the risk that the arbitrator may award an entire contract written by the other party, package finaJ offer arbitration tends to encourage bargaining rather than resort to arbitration, 2 \ / lEDA-City of Palo Alto June 2011 4. Hybrid/arms. Two hybrid forms of interest arbitration are sometimes used. a. "Med-arb." This form of interest arbitration gives the arbitrator the authority to make a decision that binds the parties, as in other forms of arbitration. However, the arbitrator is also granted express authority to attempt to voluntarily reconcile the dispute as in a traditional mediation. The difference is that in ''med-arb'' the ,.-- parties know that the individual mediating their dispute also possesses the authority to make a binding decision with which the parties have not mutually agreed. It is a super- charged form of mediation, backed by the arbitrator's unilateral decision-making power. The effectiveness of mediation in this form of arbitration obviously depends on the negotiation skills of the med-arbitrator. b. "Dual final offer" arbitration. This is a fonn of package final offer arbitration. However, in dual final offer arbitration each party submits two total package offers to the arbitrator and the other party. The arbitrator must select and award one of the four packages thus submitted. This form of arbitration allows each party to submit a package that is more aggressive in seeking changes in the terms of employment, and one that is less aggressive in seeking change. The choice of four rather than two packages gives the arbitrator greater flexibility to address genuine problems that a party has shown should be addressed. It also allows the parties to send "signals" concerning their priorities by use of variations in their two packages. This can facilitate a mediation effort by an arbitrator. Dual final offer arbitration also reduces the riak of a process skewed by a fatal flaw. At the same time, it encourages bargaining because of the risk of having to live with an agreement written by the other party. 3 lEDA-City of Palo Alto June 2011 c. Limited Scope arbitration. It is possible to design an arbitration system that limits the affiitrator's authority (jurisdiction) to hear and decide certain issues, thus excluding those subjects from the arbitration process? For example, under SB 402, the Califomia legislature attempted to mandate a binding arbitration process whereby only "economic" issues could be submitted to interest arbitration. (This law was ultimately deemed unconstitutional.) 4 This raised a number of puzzling questions. "" ,,~. First, what precisely is an "economic issue?" Are work schedules that may affect productivity or the intake of employer revenues an economic issue? Is a proposed change in work assignment pattern that requires an employee to report to a location each day that is 20 miles further from his or her home an economic issue? Second, how would non-economic issues be resolved? SB 402 was silent on this subject. Third, in traditional bargaining it is common to pair a concession on economics with a concession on non-economics. Could such pairing even occor under the bifurcated system represented by SB 402? In limited scope arbitration, the same general issues arise that accompaaied SB 402 regardless of the particular subjects that are included or excluded from the arbitration process. Should the rules governing arbitration provide ''bright line" definitious with respect to the issues included within and excluded from the affiitration process? Who is respousible for applying those definitions, and are those decisions reviewable? If so, what entity would review those applications? What standards would apply? Finally, what method would apply to resolve impasse on subjects excluded from the arbitration process. 3 While mis is not truly a separate axbitrationfonn, the description is included here to illustrate the interaction between the arbitration fonn and other substantive and pro<edural aspects of the arbitration system, in this case the scope of arbitral jurisdiction. The decision to grant broad arbitral jurisdiction could suggest a different arbitration fonn than a decision that provides a mor.limited scope of issues for arbitral decision. • See County orR/verside v. Superior Court orR/venlde Co!!l!ty (RIverside Sheriff. Association), 132 Cal. Rptr 2d 713 ( 2003) 4 Mediation and Arbitration: Possible Uses and Interactions Type Description Jurisdictions Formal Arbitration Arbitration through a formal trial-type proceeding. The arbitrator acts like a judge – taking evidence, deliberating away from the parties and issuing a formal written decision. Private or separate consultations with the parties are generally not allowed. Anaheim, Gilroy, Napa, Palo Alto, Petaluma, Redwood City, Sacramento County, San Jose, Santa Cruz Med/Arb The arbitrator may act simultaneously as a mediator, including meeting privately with the parties to discuss and attempt to settle any or all issues. Mediation may occur any time before a final written decision is issued, including before, during or after the taking of evidence, or at all three phases. San Francisco, Sacramento, Salinas Arbitration with Mandatory Mediation Mandatory mediation before formal interest arbitration begins. In contrast to Med/Arb, where a single person serves as both the mediator and arbitrator, here the 2 processes are completely separate. The mediator may not serve as the arbitrator. The parties are not bound to accept the results of the mediation. Ideally, the mediation phase either is time-limited (for example 14 days) or either party is authorized to conclude the mediation and invoke arbitration. San Leandro Arbitration with Voluntary Mediation Parties mutually agree to mediate before moving into formal arbitration. The parties may design the mediation to suit their mutual wishes in the given situation. Specific Charter authorization is not typically required. The MMBA authorizes voluntary agreements to mediate and most local provisions do not preclude it. Oakland j , 1 , n ) -~-- ATl'ACHMENT C Arbitrator Selection By far the standard selection process is to request a list of professional arbitrators from either a state or national agency, and the parties strike names until one name is left. In California, most pubic agencies use the State Mediation and Conciliation Service. Another well-knoWn source is the American Arbitration Association. San Francisco has the same process for arbitration selection as Palo Alto, but their experience differs in that the parties have been able to agree on the third, neutral arbitrator and have not had to strike names. saD. Jose introduced a new approach in the California public ;i:ctor by modifying their language to request the Santa Clara Superior Court appoint a retired judge. Another option is to use a private firm offering arbitration services. The Judicial AIbitration and Mediation Services (JAMS) provides retired judges and attorneys for hire for alternative dispute resolution. .~--.- SMCS -How to apply for a position as a state mediator Page 1 ofl Wlllc:bll'UI' to ~!J.I!Califo.nr!ll DEPA'R.tM.SNT ~F·INQUEiTR~l-RELA TIO.N$ How to apply for a position as a state mediator Eligible oandidates must have four years of experience, one year of which must have been wi1f1in the last five years, in the oonoillatlon of labor disputes or work stoppages resulting from labor disputes, or in the negotiation. administration! and interpretation of collective bargaining agreements whare the .. dulies conslitutad the major element of tho job. This experience shall have been oomprehenslve and shall have included mlllor problems of management-labor relations ..,00 a6 wagelevals, worl< hours, job security, health and welfare, worning oondHions, and reI.tad provisions of collective bargaining agreements. At leas! one year of this experience must have been in CaIHbmla. (One year of expelienoe wi1f1in the iest live yea ... performing the duties of an apprenticeship oonsul!an~ deputy labor commiesioner, Fair Employment and Housing consultant, or an equivalent pOsition in the Department of Industrial Relations involving comparable labor-manegament reletlonshlp duliae may be subslitulad for one yasr of ths required e."eriance) and equlvalentll> graduation from collega, (Additional qualifying experiance may be substituted 1m the required education on a year-for-year basis). The pey range for ".tale mediators Is $6267 -$7619 par month, with a comp",hensive benefit and retirement package. For more Infonnation, ~r'to b. placed on a list of Individuals to be notified of the n •• t examlnaHbr, ";'ritact SMCS at (510) B73-6465 orfax (510) 873.e475. The Califomla Stete Mediation and Conciliation Service, Department of Indusllial Relation., I. an affirmative aotian emplayer-equal opportunity to all regardless of reca, calor, oread, national origin, anoastry, .ex, marital ""'tus, disability, religious or palllicalaffiliatlon, age or sexual orienfatiOn. C!.lndillons of Use I f'riva<q< Poljcy Copyrlght@2011 Slal$ of CalKamia http://www.dir.ca.gov/csmcs/CSMCSExaml.html 6/112011 C) ) ! 1 /\ TO OBTAIN AN APPLICATION FOR MEMBERSHIP, PLEASE CONTACT THE MEMBERSHIP COMMITTEE CHAIR AT THE ADDRESS BELOW / . ! t' NAA Membership Guidelines In considering applications for membership, the National Academy of Arbitrators will apply the following standards: (1) The applicant should be of good moral character, as demonstrated by adherence to sound ethical standards in professional activities, (2) The applicant should have substantial and current experience as an impartial arbitrator of labor-management disputes, so as to reflect general acceptability by the parties. (3) As an alternative to (2), the applicant with limited but current experience in arbitration should have attained general recognition through scholarly publication or other activities as an important authority on labor-management relations. This Alternative Standard has been utilized by the Board of Governors only under exceptional circumstances, It only applies to an individual who is a recognized, prominent authority in the field of labor-management relations. Individuals may not self- nominate themselves under this Alternative Standard. The Board of Governors considers the standard of "SUbstantial and current experience so as to reflect general acceptability" in the Statement of Membership Policy to mean that, as a threshold requirement for consideration of the application, the applicant must demonstrate at least five years of arbitration experience and a minimum of 60 written decisions in a time period not to exceed six years, at least 40 of which must be "countable labor- management arbitration awards." Up to 20 decisions in the field of workplace disputes resolution (including, for example, advisory arbitration, fact-finding, and teacher tenure and civil service cases under statutes or rules closely analogous to traditional arbitration) shall be countable in accordance with the standards established by the Board of Governors. No more than 10 countable workplace disputes resolution decisions shall involve employment arbitration pursuant to an individual contract, handbook, or other 1 1 1 1 , . . . ,. (') J , l ! -I -I CSMCS arbilratorpanel requirements Page 1 of2 WelleOmfto the ,Oalifornla ' . DEPAfltTMENT Q,FINDOSTRlAI,.,R,ELA 110M! CSMCS arbitrator panel requirements CSMCS arbitrator panal requirements Section 001. Definitions. a. Sarvice, Tha Califomia SlIItIl Mediaifon and Concilletion Service, b, Party, An employer.lsbor union. individual employe •• or other bon. fide party willlin the meaning of Labor Code seotion 6$, c. Panel. A lis! of names, mailing addre .... and tIllephone numbers maintained by !he Service, from which the Service provides lIal, of arbitl'll"''' upon request by partl .. , . d. Advocate. Any person who represents one or more empioyersl labor organizations, or [ndividuafs 8S an employee, attomey or consultant In matters of labor relations, inCluding but not limited to Iha subjects 01 union mpnesantalion and recognition, collective, .!!argaining, arbitration, unfair labor practices, aqualamploymenl opportunHy,·~rsonn.! or civil service commisaion matte"" and o!her areas generally mcognized as constilUtlng labor relations, This includee any Individual ",p",.enting employsrs or employees In Individual cas .. or controversl •• Involving wolke,.' compensation, retirement benefits. occupational heat!l1 and .afety. or labor standards matters. This alao InClUdes. person who Is dlreelly a .. ociated with an advocate In a bu.in ... or profesalonal relstionshlp .. , for example, partne,. or employe .. of a law firm. Consullants engaged only In jolnleducation or !rBinlng or other non.adveraarialactivitles wiR not be deemed advocetas; nor will neutral. hired byemployerB solely to conduct investigations and make findings offact in employment di.putas. ' Section 002. Arblbrstor PaneL e, As ••• rvice to the public, Ih. service shall mainfBin a penel or panels of arbitrators pos .... ing demonstrated expertise in labor relations end breed ""parlence in lebor relaHona, collective bargaining, and dispute resolution. Such arbitrators shall not be emploY"e •• agents or contraotor. ¢ Ill. Service. The panel or panel •• hall not Includ. any person who i. curranlly an advocate as definad In •• ction 001, ' b, The Service may maintain one or more apecialized panels of arbllrators po ..... 1ng high levels of experience and expertise in particular I¥p., of cases. such as Interest arbitration. Co Lists 01 arbHr.tors from til. panel or pan.l. shall be available upon request to pam., aaaklng arbitrators to he.r 'abor and employment disputes, and such oiher types afdlsputes as may be determined by the Sarvice, Panel arbllretors will be selecled for placement on lists In a fair and aquit.ble manner. Nothing In these regulations shall be construed a. mandating tIlat any party or partie. select an arbltrstorlrom such panel, or as prohibiting a p.rty or parties from _¥>II arbllrators from any other .ouroe. Section 003, Updated Panel, •. The Sarvlce may update its arbllrator panel or panels as the need ari •• s. b. The Service may add qualffled arbitratore to a pan.', and may in Its discretion defer 8uch additions until it find •• need for addltionelliatings, To be edded to a pan.'. an arbltrstormust have. minimum often (10) years' responSible, profaaslonal experience in labor relations. SeetiOll 004, Removal from Panel. The Service may remove from a panel any arbllrator who submits a written requaet for romoval, orwho Is disqualified from further listing on the panel. Ground. for disqualification shall Include: e. rap.ated delinquency In submitting awards; b. failure to provlda requested Information to the Service; c, failure to comply with the Service's requirements and procedure., including but not limited to !he Responsibilities of Panel Arbltl'lltors (aeotlon 008); d. a determination pursuant \0 a complaint Invastlgslion that the arbllrator engaged In unprofaasional or unethical conduct or other misconduct in the role of arbitrator. ... a determination !het the arbltre"'r la not accaptable to !he parties requesting lists, .slndlcaled by records of listings by and selections malntsined by the Service. SecUon 005. Procedures for Removal from Panel, An arbitrator shall be given thirty (30) days' writtsn notics prior to propoaed removal from a pan.I, Said notice shall specify the grounds for the proposad removal, and shall advi,e the arbitrator tIlal he orshe 'may, within the thirty (30) day period, file a written raspon.e disputing the grounda for removal and may submit Information supporting continued listing. Upon the expiration 01 the thirty (30) day pariod, Ihe Service shall Issue and serve a written decision, and such decision shall be final. Sactlon OOS. Parllcular Qualifications. Partla. may mak& joint requeats for !he Service to provide lists of arbitrato,. po ..... lng experience in partlcula,lndustrle. or sedOrs. pos .... lng particular qualilicalions, or residing In the ragion of 111. dispute. The Service ,hall comply with such requests to !he extent prectlcable • . ' ···Sectlon 007. Publication on Web Site http;//wwW.dir.ca.gov/csmcs/arb/ArbRequirementsDraft.htm 6/1/2011 l I l , I J CSMCS arbitrator panel requirements Page2of2 a. The Service may publish on its web site the names, mailing addresses and telephone numbers of panel arbitrators, and may publish suet'! other public information as it deems beneficial to parties seeking such information. b. The Service may publish on its web site any arbitration awards submitted to it, unless a party-in-interest requests otherwise. Section 008. Responsibilities of Panel Arbitrators. B, Panel arbitrators must conform to the ethical standards and procedures set forth in the Gode Of Professional Responsibility for Arbitrators of labQr~Management Disputes. b. An arbitrator selected from a Service lis~ and notified of such selection by a party other than the Service, shall be responsible for notifying the Service of the selection. c. An arbitrator selected from a Service list shall submit to the Service a copy of the arbitration award for that case. Except in the case of a public sector interest arbitration award, the arbitrator may redact inforrnatiort as to the identity of the participan~ in the dispute. d. No person shall serve as an arbitrator in any proceeding in which he or she has any financial or personal staka in the outcome. e. Prior to accepting any appointment, an arbitrator must disclose any circumstances likely to creata an appearance of bias or which might disqualify him or her as an impartial arbitrator for that case. f. Tha Service shall establish three regions within the state (Northern, Central and Southern), and shall maintain a aeparate parte I of arbitrators for each region. Arbitrators may elect to be listed on one or more of these regional panels. If the arbitrator elects to be listed in a region other than the ona in which he or she resides, and is chosen from a S"rvice list for a case in that regjon~ he or she may cn-arge travel expenses only from an address in that region. In the event the ah::litrator has no address in that region, the addrefil,s of the State office building in San Francisco, Fresno or los Angeles may be usad to calculate travel billing for Northern, Central and Southern region caees, respectively. However, in the event the arbitrator's office outside the regiort is closer than the state office building within the region of the dispute, the arbitrator should bill from his or her office. g. An award must be issued within sixty (60) days after the close of the heartng, or sixty (60) days after receipt of banscripts and submission of brtefs, if applicable, unless an eartier deadline is raquired by the applicable collective bargaining ag",amen~ or an extension is agreed to by the parties. Seclion 009: Beginning July 1, 2010, each arbitrator will pay one hundred and fifty dollars ($150.00) por fiscal yoar (July 1 to June 30) to join and to remain listed Ort SMCS's statewide panel of private arbitrators. An arbitrator will be removed from the panel if payment 01 the annual1ee is not made within thirty (30) days 01 notice that it is past due . .. » Click here to make a payment to SMCS Conditions pf Use I Privacy policy Copyright <tl2011 State of California ;.,..'~ --. http://www.dir.ca.gov/csmcs/arb/AIbReQuirementsDraft.htm 6/1/2011 C) ) ( ) Qualification Crlteria for Admittance to the AAA National ROllter of Arbltratol'l! Tbe American Arbitration Association (AAA) is the nation's leading provider of alternative dispute resolution services. Openings on our Regional Roster of Neutrals are extremely limited, based primarily on caseload needs and user preferences. Consequently, even candidates with strong credentials may not be added to our roster. Applicants for membership on the AAA National Roster of Arbitrators must meet or exceed the following requirements: '" 1. QUALIFICATIONS a. Minimum of 1 0 years of senior-level business or professional experience or legal practice. b. Educational degree(s) and/or professionallicense(s) appropriate to yoUr field of expertise. c. Honors, awards and citations indicating leadership in your field. d. Training or experience In arbitration and/or other forms of dispute resolution. e. Membership in a professional association(s). f. Other relevant experience or accomplishments (e.g. pUblished articles). 2. NEUTRALITY a. Freedom from bias and prejudice. b. Ability to evaluate and apply legal, business or trade principles. 3. JUDICIAL CAPACITY a. Ability to manage the hearing process. b. Thorough and impartial evaluation of testimony and other evidence. 4. REPUTATION a. Held in the highest regard by peers for integrity, fairness and goodjudgment b. Dedicated to upholding the AAA Code of EthiCs for Arbitrators and/or Standanis ofCondootfor Mediators. 5. COMMITMENT TO ADR PROCESS a. Willingness to devote time and effort when selected to serve. b. . Willingness to support efforts of the AAA. c. Willingness to successfully complete training under the guidelines of the Commercial Arbitration Development Program. NEUTRALS ECENTER I 6. LETTERS OF RECOMMENDATION* When requested by the AAA to do so, furnish letters from at least three active professionals in your field, but outside of any firms or professional associations in which you are employed or on which you currently serve as an officer, director or trustee. Each letter must address 1;I1e following: a. Nature and duration of the relationship b. Why the applicant would be qualified to serve Recommended sources for letters: I. Current AAA Panel member 2. Current or former state or federal judge" . 3. An attorney who served as your opposing counsel" 4. Former employer or client • Letters of recommendation must be sent directly to the AAA ViCe President from the writers, in sealed envelopes . •• Suggested for attorney applicants. 7. PERSONAL LETTER Submit a letter to your local AAA office explaining why you feel you would like to be included on AAA's Roster of Arbitrators along with a current copy of your personal resume or CV. Your letter should provide a detailed description of your willingness to commit yourself to servrng and representing the Association. Also indicate in the letter whether or not you are currently a neutral with any other ADR agencies. Please feel free to contact your local AAA office should you have any questions. NEUTRALS ECENTER 2 i , , J ---~ ( ) JAMS Arbitration, Mediation, and ADR Services I About JAMS I Overview I About-JAMS Page I of 2 ·a· About JAMS About JAMS FaBtFacta JAMS is the largest privale a~.rnatlve dispute resolution (ADR) provider In the world, With its 'prestigious pane' of nsulrats, JAMS specializes In me<:iiating and arbUrating complex. muIH-party. businessioommercial cases -those in which the choice of neutral is crucial, Founded 1979 The Experts More than 260 full-lime neutrals. Including retired judges and attorneys w~ proven track records. 195 employee associates. ADR Options Facllnatlve and evaluative mediation, binding arb"ralion. neutral case evaluation. settlement conference. mini trial, summary jury trial. neutral expert fact finding. special master. discovery referee. class aelion , seltlement adjudication. project neutral and dispute review board services. Cases Handled JAMS panelists primarily resolve multi-party. complex cases In virtually all areas oflhe law. JAMS handles an average of more than 10.000 cases per year in hearing locations throughout the woljd, Resolution Rate Based on past results. JAMS takes pride that almost all of the cases mediated. even the most complex ones. are successfutly ",solved, Case Types Antitrllll!. Bankruptcy. Business, Class Action. Commercial. Constructon, Constructon Defect. E-Discovery. Educa6on. Employment. En9ineering and Construction. Environment. Family. Financial Markels, Franchise, GClvemment. Heallhcare, Insurance/Reinsurance. Intellectual Property. LandlordiTenant. Lender Liability. Profe$sional Malpl'llClloe. Marital Dlssolullon. Mass Tort, Partnership. Personal Injury. Probate, Product liability. Public Policy, Real Estate, Securities. Toxic tort. Trusts and Estates, Educational PrOgrams and MeLEe JAMS offers selact seminars. workshops and external educational programs that aid organizations and individuals in resolving their own disputes. JAMS also provides training in conflict prevention and dispute resolution, JAMS conducts hundreds of compUmenlary ADR wor!<shopa and MCLE programs each year. Each program is tailored to meet the needs and experience level of the specifio audience. and MCLE credit is provided where applicabta International Alilancea In May 2000. JAMS and ADR Center in Italy announced an agreement to brrn what Is now known as JAMS International to provide mediation and arbitration of cross- border disputes and training services worldwide, JAMS-'International is headquartered , http://www.jrunsadr.comlaboutus~overview/ 6/112011 JAMS Arbitration, Mediation, and ADR Services I About JAMS I Overview I About-JAMS Page 2 of2 in New York and Milan with additional hearing locations in Geneva, London, Rome and Brussels. JAMS plans to establish a network of international centers to provide f'\", ,_ the same high quality services for which JAMS has become known. ' '. ) In March 2007, JAMS announced a strategic alliance with the Hong,Kong International Arbitration Centre (HKIAC). The mission of the alliance Is to promote more effective resolution of international business disputes through arbitration and mediation in the United States and Asia, JAMS and HKIAC coordinate on the administration of arbitration and mediation cases and both organizations are jointly promoting ADR. Community Service In 2002, JAMS established the JAMS Foundation and the JAMS Society as a way of giving back to the local, national, and international communijies, whose goodwill and loyalty have been instrumental in our success. The JAMS Foundation, funded entirely by generous contributions' from JAMS neutrals and associates, provides grants for oonflict resolution initiatives with national and international impact. The ·..JAMS Foundation has provided more than $3.3 million in grant fundin;;· since its inception. The JAMS Foundation established the Weinstein International Fellowship Program in 2008 to provide opportunijies for individuals from outside the United States to visij the U.S. to learn more about dispute resolution processes and practices and io pursue a project of their own design that serves to advance the resolution of disputes in their home countries. The Foundation also established the annual Warren Knight Award and provides a $25,000 grant to an organization that promotes dispute prevention and oonflict resolution. The JAMS Society was created to recognize and support volunteer opportunities and oommunlty involvement for JAMS Associates at a local, 'hands-on" level. All associates are encouraged to beoome members of their local Society to oollaborate on outreach programs or to woO< individually on a project of their choice. Headquarters 1920 Main Street· Suite 300 • Irvine, CA 92614' Telephone 949.224.1810 Locations Resolution Centers nationwide including Atlanta, Boston, Chicago, Dallas, Denver, Inland Empire, Las Vegas, Los Angeles, Minneapolis, New York, Orange, Philadelphia, Sacramento, San Diego, San FranCisco, San Jose, Santa Monica, Santa Rosa, Seattle, Walnut Creek and Washington, DC. ~ http://www..iamsadr.com/aboutus overviewl 6/112011 \ ) \ ) Scope of ArbitrationlExclusions A local agency may provide for interest arbitration only with respect to particular bargaining impasses. A local agency may also exclude certain topics or matters from interest arbitration. Staff research identified the following limitations or exclusions that have been either used or discussed by practitioners and academics: • MOUs Only. Limit interest arbitration to impasses in the negotiation of collective bargaining agreements. Duri'iig the pendency of a closed contract, proposed changes are handled through the standard MMBA process: meet and confer, and where impasse occurs, the employer may unilaterally implement its proposal. • Mandatory Subjects Only. Limit interest arbitration to mandatory subjects of bargaining. Exclude from interest arbitration all management rights and all permissive subjects of bargaining. Exclude these subjects even where the employer agrees to negotiate and enter into a contract provision covering a permissive subject. For example, this would make explicit that topics such as layoffs and citywide staffing levels may not be submitted to interest arbitration or ruled on by an arbitrator. • No Charter Amendments. ClarifY that interest arbitration may never be used to resolve an impasse associated with the City Council's decision to place a Charter amendment before the voters. • No Vested Benefits. Exclude any benefit that either vests or is capable of becoming vested. • Economic Provisions Only. Tailor interest arbitration to apply only to economic provisions. Work rules would be handled through the standard MMBA process. • Other Potential Exclusions. Exclude particular topics, such as: I. managerial, operational or staffmg decisions 2. rules or policies 3. use of part-time employees 4. scheduling 5. retroactivity -r .. _ J J J 1 i , \ , ) Factors, Including Weight, Priority and Burdens of Proof Several jurisdictions require arbitrators to base their decisions on specific enumerated factors. Enumeration of factors---and priority or weight to be given to those factors- permits the electorate to guide the process in light of its overall policy goals. Language specifying burdens of proof can also be used to guide decision making in light of the jurisdiction's policy goals. The following is a list of potential decision factors eitber in use or in discussion as possible guidance for erbitrators, grouped by subject matter. One strong trend is to require arbitrators to consider and base tbeir decisions on specific factors reflecting tne jurisdiction's ability to pay. A. Factors relating to the City's financial condition I. Financial condition as measured by specific official accounting/financial reports 2. 3. 4. 5. 6. The fmancial resources of the City and ability to meet the costs of the contract and each individual modified/new economic item Revenue projections Limitations on the amount and use of revenues and expenditures The power of the City to levy taxes, impose fees and raise revenues The City'S budget reserves, provided that any award shall not use one-time funding for ongoing expenditures and shall maintain levels of reserves provided by City policy 7. Actuarial analysis of long-term costs of any proposal involving an unfunded liability as well as of the City's existing long-term debt 8. Other demands on the City's resources B. Factors relating to the public's interest and welfare I. Impact on service levels within the particular service area 2. Impact on the city's ability to provide services in other functional areas C. Factors making appropriate comparisons to other employee groups L Cost of Living Increases measured by tbe appropriate Consumer Price Index in the San Francisco-Oakland-San Jose area or other authoritative source(s) 2. Internal comparable&-wages, hours, benefits and terms and conditions of employment of other employees working for the city 3. External comparable:r-wages, hours, benefits and terms and conditions of employment of other employees performing similar services in other public agencies . 4. Private sector comparables D. Factors requiring consideration of total compensation, including increases in the employer's cost of maintaining existing benefit levels 1. The overall compensation presently received by the employees -including direct wage compensation, vacations, holidays, and other excused time, insurance and pensions, medical and hospitalization benefits, the continuity and stability of employment, and all other benefits received - and including any increase or decrease in the employer's cost to maintain and provide those benefits, regardless of whether such increases/decreases are specifically bargained for 2, Immediate and ongoing costs associated with each individual modified/new item within the contract E. Other factors 1. Adherence to the City'S total compensation policies 2. Extent to which award effectuates the City'S stated goals and priorities 3. Impact on the city's ability to efficiently provide public services 4. Best practices in the provision of services to the public \ ) Other Possible Modifications A. Timelines. Staff reviewed a number of arbitration or bargaining provisions that contain specific time lines for action by the parties and progression through the steps of contract negotiation and impasse resolution. Staff also discussed time requirements with several practitioners. Timelines may be used in conjunction with interest arbitration or, in jurisdictions without interest arbitration, timelines may be used to mandate inception and conclusion of contract negotiations. A local agency may set time requirements for any or all of the following: • notice of intent to negotiate successor contract • exchange of initial proposals • selection of arbitrator • impasse declaration • final pre-arbitration offurs • fmal post-arbitration offers • arbitration award • fmal adoption of an MOA Typically, timelines require negotiations to begin in the middle of the fiscal year and conclude before or concurrently with consideration of the annual budget. Time requirements may have a number of positive impacts on the negotiation and arbitration process. Timelines prevent the negotiation and impasse resolution process from expanding over a significant period of time, such as months or even years. They allow both the employer and labor representatives to plan for both the inception and conclusion of negotiations on a predictable schedule. If adopted in conjunction with language requiring consideration ofthe agency's fiscal circumstances, time lines can be used to focus the parties and the arbitrator on current fiscal data. In addition, by requiring the contracts to be approved prior to or during the budget, time lines enhance the employer's ability to accurately identifY and budget for future labor costs. Finally, by channeling all bargaining units into a common negotiation schedule, timelines may assist the local agency to pursue common provisions across units. This is sometimes called "pattern bargaining," and can be beneficial to a local agency in areas where equity or uniformity is a desirable goal of the labor program. Time requirements may also have disadvantages. Chief among them is the drain on resources when multiple bargaining tables must be staffed simultaneously. Jurisdictions that use timelines typically assemble bargaining teams from a broad group of staff, and then use a strategy of coordinating efforts through regular all-team meetings and communications. B. Public Access Several jurisdictions that have modified interest arbitration have mandated that arbitration proceedings be open to the public. A local agency could open the entire arbitration process to the public or require particular parts oflhe proceedings to be public. For example, in a Medl Arb system, the agency may require public access to the formal arbitration proceedings, including taking of evidence and submission of final offers. The agency may allow mediation to be closed to the public. C. Standards of Judicial Review i;- If the Council modifies interest arbitration, an amended Charter provision should provide for judicial review by Writ of Mandate (Code of Civ. Proc. sections 1085, 1094.5), rather than review under the California Arbitration Act (Code ofCiv. Proc. Section 1290 et seg.) The writ standard allows for court review to correct an abuse of discretion, which could include failure to consider required evidence or to properly apply the factors and priority or weight as mandated in the arbitration provision. The Arbitration Act, by contrast, provides for extremely narrow review to correct for corruption, fraud or undue influence. \ ATTACHMENT -'G ,tt. 2009-2010 SANTA CLARA COUNTY CIVIL GRAND JURY REPORT F rNr~!) D Issue MAY 262010 DAVID H. YAMASAKI Ohio! flIDcIItMo OfIlo8fJCIerk :-'1j;1fHHr:oI~~ CITIES MUST REIN IN UNSUSTAINABLE EMPLOYEE COSTS ~mployee costs are escalating in the cities of Santa·Clara County (County), revenues are not keeping pace with these increases and cities are cutting services. How do cities contain these escalating employee costs? Summary In this report, the 2009-2010 Santa Clara County Civil Grand Jury (Grand Jury) takes a broad look at employee costs in the County's fifteen cities and recommends solutions to control costs so that cities 'over time can achieve fiscal and organizational stability and ' eliminate budget deficits. 'There is widespread concern that the cost of employee total compensation continues to increase while revenues and services decrease. Wages and salaries climb, even as the economy struggles. Pension and health Cllre benefits have risen substantially since 2000. Vacation, holiday and sick leave policies are overly generous and exceed those of private industry. The overall costs to cities are not sustainable. C ilies need to negotiate, approve and implement considerable cost containment measures so that employee financial obligations do not continue to escalate. Cities should expand,the comparison of salaries and benefits beyond other nearby cities to include the private sector. Options for additional cost savings include: outsourcing some activities to private industry; consolidating services with other cities or the County; optimizing job functions; and introducing lower cost penSion and health care plans for new employees. It is important for the cities to solicit community input so that taxpayer money is spent prudently and fairly, while maintaining the obligations of local governmel')t to jts citizens, and ensuring that services and infrastructure improvements are not neglected. ~ . Background During the last decade, cities significantly increased the total compensation that employees receive, but city leaders did not adequately forecast and plan, nor allocate enough money to pay for these long-term obligations. In order to attract qualified workers during the dot-com boom, the cities, flush with revenue, increased wages and benefits, especially pension benefits, with unr~plistic expectations that the economy and 1 1 the stock market would continue to expand. These increases are largely guaranteed by > [I union collective bargaining agreements. Binding arbitration in public safety has /1 compounded the situation in the City of San Jose. Two recessions later, most cities are experiencing chrQnic budget deficits. The economic downtum that started in December 2007 is exacerbating the cities' poor financial health. The following major factors are contributing to the cities' problems; • Increased wage and salary costs • Increased retirement and health care costs • Reduced property tax revenues • Reduced sales tax, occupancy tax, and construction tax revenues • Reduced revenue from the state In order to balance budgets, cities are dipping into "rainy day" funds and reserve funds. shifting funds, and reassigning redevelopment money. Many of the cities are facing looming general fund deficits ranging !forn $3 million to more than $100 million. Overall, the cities are taking a multi-pronged approach in tackling these projected deficitS by generating new revenue, reducing operating expenses, and curbing employee compensation costs. The opportunity for generating revenue is primarily limited to increasing taxes and fees, or in some cities, selling surplus property. Voter approval of a ballot measure is necessary to increase taxes and few cities are considering this option. To achieve cost recovery for all programs, cities have raised or are raising fees-business license fees, parking lot and meter fees, parks and recreation fees, building fees. sewer connection fees, etc. Cities are reducing operating expenses by streamlining operations, implementing technology Improvements, delaying infrastructure projects, cutting support to nonprofits, and reducing or eliminating services. Service reductions are across all departments, such as code enforcement, arson investigation, customer service, tree trimming. landscape maintenance, graffiti abatement, canine units, street repairs, fleet services, and hours of operation in parks, libraries and community centers. long-term, cities have few options to control employee costs. Among these are: • Renegotiate contracts for existing employees with the unions. • Change pension and retiree health benefits for new hires. • Alter personnel policies and workplace practices. • Recommend ballot measures that could mandate changes. 2 S"ort-term, cities can control employee costs by: • Ordering furloughs • Imposing temporary wage freezes • Enforcing a hiring freeze • Eliminating vacant positions • L ayi ng-off staff Methodology The Grand Jury took the following actions: REtviewed the 2008-2009 San Mateo County Civil Grand Jury report "Reversing the Upward Trajectory of Employee Costs in the Cities of San Mateo County". Requested from each city in the County: • 2009-2010 City Budget • latest Certified Annual Financial Report • Any amended agreements or Memoranda of Understanding (MOUs} of union contracts that were negotiated, imposed and/or implemented in 2009 Surveyed the cities for information on number of employees, employee benefits, employee salary/wages, total reveniJes, retirement formulas, and contributions to pension plans and other post-employment benefits (OPES). (Survey Forms; Appendix A-C) Interviewe~ the city manager or financelbudget director in each city and gathered information on the city's financial health, deficits, labor negotiation practices, strategies to balance the budget, and specific actions to increase revenue and reduce employee . costs. . Interviewed the president of Santa Clara County/Cities Managers' Association and the former president of the Santa Clara County Cities AssoCiation (comprised of elected officials} and discussed pension reform and how the cities can work together on issues of mutual concern. Interviewed the president of the San Jose Police Officers' Association and talked about the contract negotiation process and the role of labor in a city's financial health. Discussion Without detiberate, collaborative action, employee wages and benefits will continue to increase substantially year-over-year. The percentage of general fund money spent on employee costs is escalating. During Grand Jury interviews, most of the city managers and finance directors indicated that their current percentages are unsustainable and additional increases would lead to drastic changes to city services. San Jose Mayor Chuck Reed in his·State of the City Address on Feb.iB, 2010 stated that employee costs shot up 64% in the last nine years~while revenues dimbed just 18%. I Table'1: Comparison of OVerall Employee Costs In Selected FuU-Service CIties 1 (With PoUce .nd • Fire Departments) as Percenmge of General Fund_ ,.-~ Los Ga,los, :~~~:in $anr.;-Gilro.y Milpita!t ' Sunnyvale ,Clara IWeraijll . ~fOO-2001 51% 61% 73% .71% 76% .67.6% 64% 2009-2010 72% 79"A. 83% 17$% . 77"1. 77% 177.6% , These cite proVided data for both fiScal years. As lhil> table shows, controlHng employee costs is Imperative for the ongoing financial OOallh of our cities. For all cities, the Grand Jury investigated the main components of total compensation, work force practices, labor negotiations, and public involvement. ToTAL COMPENSATION The cities' median total compensation cost per full-time equivalent (FTE) for: • Regular employees (non-safety) increased 37% from an average median of $71,379 in fiscal year 2000-2001 to an average median of $113,704 for fiscal year 2009-2010. • :;latety employees (police and fire) increased 41% from an average median of $102,646 to $173,714. Table 2: Changes In Median Total compensation, Includes Wage!'; and Bel'leflts , NoIe: Contradldislfid means Ihat servicfils !II\I providfild Via a cooIract with the eoum:v Of vhi .. special dIstric\. The cumulative increase in the total compensation is the result of increases to base payroll, health/dental benefits, retirement benefits, and other benefits. The rate of increase in total compensation for city employees has been higher than growth in the local economy, and employee costs are escalating at a higher rate than the growth in the cities' general fund revenues, For1he 10 years from 2000-2009, the Consumer Price Index for lhe Bay Area increased by a total of 26.8%, or an allerage of 2.7% a /--year~ /'..-~ 4 , $130,000 $120,000 $11(),OOO $100,000 $00,000 .... ~,~,~----------------- $8(),OOO $70,000 $60.00() GrapIJ 1: Average San Jose FIE CO$b VeI'IIUS CPI Changes over :nme 2000-2001-2002-2OOlI-2004-2()()5.. 2006-2007-200B-200lf- 2001 2002 2003 20()4 2005 200B 2007 2008 2009 2010 r: FlEcj i--.CPI 1. SalarylWages At present, the cities utilize a traditional public sector salary schedule with five 5% salary steps for most job classificaUons_ Step increases occur automatically unless action is taken to withhold the 5% increase based on poor performance_ The typical time it takes an' employee to reach the top step of the salary range is three and Ii half years_ . During the time employees are mOVing from the first to the top step, they also receive any general salary increases negotia1ed by bargaining units_ After they reach the top, step, they continue to receive annual negotiated cost-of-living adjustment (COLA) increases_ In the three years starting July 1, 2008, and ending June 30, 2011, the COLA increase in typical contracts is scheduled to rise by 6% to 9_5%_ In this scenario, an employee in step progression could receive a salary increase of 26% to 29.5% in those three years. During Grand Jury interviews, city managers indicated that automatic step Increases cause undue hardship on the cities' finances. 2. Health Benefits Employees in each city receive a generous contribution from the city toward numerous health care benefits: medical insurance, vision insurance, dental insurance, employee assistance programs, and cash-in-Iieu of m~icaI coverage_ Medical expenses oontiflue to rise, and the cities have been pressured into identifying new strategies 10 minimize the impact of rising medical insurance costs. Medical insurance expenses are lncreasing at rates that exceed public employers' revenue growth. /--/,...- 5 Table 3: Cities' Monthly Contributions to Healtb Care Benefits .-..... 2~-2001 2f!Il9 -2li1(! -Indlvi~1 " Family Indlvldll_ . Parrill)! Campbell $295 $493 $668 $1,224 . Cupertino $634 $634 $792 $869 • Gilroy Average was $453 Average was $1024 lQSAltos $669 $569 $550 $1400 Los Altos Hills $228 $594 $592 $1540 . losGatos $262 $586 $629 $1,442 Milpitas $318 $6g1 ,$71)0 $1,622 • Monte Sereno $490 $800 ' $600 $1300 I Morgan Hill $475 $475 $600 $1250. Mountain View $303 $739 $777 $1,824 PatoAIto $296 NA NA NA • San Jose $289 $545 $540 $1,139 Santa Clara Average was $498 $720 $720' Saratoga $201 ' $523. $611 $1,1)09 Sunnyvale Average was $534 $635 $1866 In the table above, the monthly premiums increased significantly from 2000 to the present. To reduce costs while preserving essential medical benefits, the cities have implemented or are conSidering various cost.sharing initiatives. Among these are: • Cost sharing of monthly premiums; some cities set a certain dollar amount that employees contribute, others se~ a percent, e.g. San Jose has a 90/10% split (employee share is 10) .. Co-pays for doctor visits, hospital stays and prescription drugs: co-pays currently are relatively low, usually $5.00 .. High deductible plans .. Health savings plans for new employees 3. Retirement Pension Benefits Dtfined·Benefit Plan Employees in a defined-benefit retirement system !;Ire guaranteed a specific, annual pension at retirement. The annual benefit is distributed in monthly payments. Monthly benefits are calculated using a formUla based on the employees' years of service and the salary they received at the time of retirement. In addition, after retirement. retirees are eligible for cost-of-living increases. Most pension plans also provide benefits for disablfity and death, and in Some cases, provide benefits to surVivors or beneficiaries. In the cities of Santa Clara County. similar to most public sector organizations, full·time and many part-time employees are enrolled in a defined-benefit retirement system, 6 a. CaJPERS California Public Employees' Retirement System (CaIPERS) is the defined-benefit plan in which employees in the majority of the cities of the County are enrolled. The cities and employees make contributions for retirement benefits to CaIPERS. CaiPERS invests, manages, and distributes money to employees when they retire. Cities are required to increase their contributions when the costs of benefits increase and/or when investment returns decline. . Examples of How the CafPERS Formula Works for Regular Employees Each city chooses among legislatively-approved formulas that determine the amount of lifelong pensions. The most common fcrmula for regular employees is 2.7% at age 55. ~. To apply this formula: 1) take 2.7% of the employee's last year's salary: and 2) multiply it by the number of years of service to determine the amount received upon retiring at 55. • Regular city employees with 30 years of service will receive 81% of their last year's salary for life. • Regular city employees with 20 years of service will receive 54% of their last year's salary for life. • Regular retirees will receive an annual COLA of up to 2% a year. Examples of How the CalPERS Formula Works for Safety Employees The typical formula for safety employees is 3% at <396 50. Upon retirement. an employee will annually receive 3% of their last year's salary, multiplied by the number of years of service. • Safety 'employees with 30 years will receive 90% of their last year's salary. .. Safety employees with 20 years will receive 60% of their last year's salary. • Safety retirees wHi receive an annual COLA of up to 2%. a year. b, San Jose Pension Plan San Jose does not participate in CalPERS, but instead has two retirement plans: the Police and Fire Department R~tirement Plan and the Federat€K! City Employees' Retirement System. Both the City and its employees make contributions for retirement benefits. The formulas used to calculate pensions for San Jose employees are similar to those used for. CaIPERS. • Regular employee formUla: 2.5% at 55; maximum base benefit of 75% of final average salary • Police formula: 2.5% for first 20 years; 4% starting at 21st year; maximum base benefit of 90% of final average salary . • Fire formula; 2.5% for first 20 years; 3% starting 21st year: maximum base benefit of 90% of final average salary . • All retirees receive annual COLA Increases of 3%, 7 , i Calculating Pension Benefits Employee pensions are based on general formulas that are agreed on be1ween the City and the labor unions. A typical pension formula takes into account salary, number of years selVed, age eligibility for retirement. and a percentage rate of ,an employee's retent salary level. Table 4 provides some examples. Table 4: Exampkls of Lifellme Retirement Pensions (Does Not IncludIJ-Health Care Benefits or Annual COLAs) ". : " ' ' , IEXamPle No. Yea", '. l'~'ltIlge 0,1 Empkiyee and, Fonnula Salary' Worke4 ' flnllrm: ' . . '. .. aM Age I1lgjrtJ,t V.., :~.-:'--. . :saiary, Regular employee 2.5%@55 $74,005 (1) 30year5, 75% I age 55 . ,. Regular emploYeEl2.0%@55 $76,956 (2) 30 years, 60% age55 , 25 years, ' Safely emplnyee 3%@50 $114,004 (3) age 50 75% ------ I 25 years, I Safety employee 3%@55 $103,003 (4) age 55 75% [-' '" .safety employee 2.5% plUS ! $116,210(5) 25 years, 70% (police get 4% after 20 years) age 50 Safety employee 2.5% plus I '$120,206 (6) 25 years, 65"1. (fire gel 3% after 20 years) age 50 "Depending on t~e city, employ •• retIrement po .. lo. is ba.ed O~ frnal or ~ighS$l years' salory. " AnJiual Retirement PensIon $55,504 . .. _- '$46,174 $85,503 $77,320 $81,347 .~ I $78,134 (1) This example salary is \he median 2010 $alary for regular employees in San Jose (2) This example salary is the median 2010 salary for regUlar employees in Saratoga (3) This example salary is the median 2010 salary for police officers in Los Galo$ (4) This example salaly is the meoJan 2010 salary for firefigl'lters in Gilroy (5) This example salary is the median 2010 salary for police1>fficers in San Jose (6) This example salary is the median 2010 salary for firefighters in San .lQse I : • The cities use retirement formulas thaI vary somewhat from one city,to another. The table below shows the retirement formulas used by the cities for the 2009 -2010 fISCal. year. In the past decade, these pension formulas have been modified substantially .. Most Cities increased their formulas from 2% at age 55 to the current 2.7% at age 55 for regular employees, and changed their formulas for safety employees to the more generous 3% at age 50. The cities also vary on the base salary on which retirement benefits are calculated. The highest or final year of salary is now most commonly used as the base salary; earlier, more cities calculated employee penSion amounts based on an average of the last three years' ·sala!'f..-/- 8 •... Table 5: Retirenumt Formulas for Cities I. caY Retirement Formula -Percentage Gainod for Pension Based on last I . Year'&SalaryortM Each Y~r Worked & Age Needed to~ire Average of TIlree Yea"" Safety ~,~~ular All Employee$ I Campbell 3%@50 I 2.5%@55 3·Year Average(Regular) i . HighestYear(PoIice) ! Cupertlflo Nooe; contracted out 2.7'%@55 Fioa/Vear ! Gilroy 3% @SO (police) 2.5%@55 Highest Vear ! ,3% '@. 55 !Fire)' losAl\Os. 3%@50 2.7%@55 Final Year los Altos HillI! None; cootrn<;led out 2o/.@S5 3 Year Average Los Gatos 3%@50 2.5%@55 HighllSt Vear Milpitas 3%@50 2.7%@55 Highest Year -~ ... - Monte Sereno None; contracted out 2%@5S HighestYear Morgan'HUI 3%@50 2.5%@55 Highest Year Mountain VIfYW 3%@50 2.7%@SS Highest Year "'_ ....... , Palo Alto 3%@50 2.7%@SS Final Vear 2.5% 1" 20 yr&;3% Final Year; starting 21" yr (Fire) San Jose 2.5% ," 20 yl"$; 4% 2.5%@55 75% maximum regular; starting 21" yi (Police) goo,6 maximum safety ,._----- • Saraloga None; contracted out . 2%@55 Highest Year Sarna Clara 3%@50 2.75%@55 FinalVeaf SUon)/W1e 3%@SO 2.7%@55 Highest Year I n Grand Jury interviews, some city managers reported that these formula changes are causing a systemic problem for their cities. The changes in the ·formulas provide for a generous but costly increase to the monthly benefits. Estimates project that annual pension benefrts will inc~se approximately 25% to 50% from the previous formulas, 4. other Post-Employment Benefits (OPEB) Most of the cities in the County provide OPEBs in addition to pension benefits to their retirees. OPEBs typically include health, dental, vision, or prescription drug care to eligible retirees, their families, and in some cases, their beneficiaries. However, benefits vary widely from no additional contributions after retlremen~ to full retiree and dependent collerage for life, after a vesting period. These benefits are tax free. Retiree health insurance premiums have been escalating. The increased number of baby boomers reaching retirement age and employees retiring at a younger age are affecting this cost Cities are required by the federal Governmental Accounting Standards Board (GASB) to calculate their long-term retiree health obligations by June 2010. depending upon the annual amount of city revenue. Therefore, complete information is not yet available. However. the magnitude of the obligations reported to the Grand Jury for the next several years shows a dramatic increase in projected yearly expenditures and future liabilities. 9 Funding Pensions and QPEBs To cover pension obligations city employees pay fixed rates into CarPERS, while the' rate the citles pay is adjusted every three years. Rates are determined by the performance of CalPERS investments and the anticipated pension obligations for each city. The payment is made as a percentage of employee salaries. Similarly, in San Jose, city employees contribute a fixed rate as a percentage of salaiy into the applicable pension plan. The City's contributions are established by it.s retirement boards and are based on many factors, including the cost-sharing arrangement with the employees and the level of benefits provided. Rates can increase if there is a decline in 'the assets of the [etirement fund, whit~hJ1E!!! _ogCt.lll'tl('-re_~etltly with the steep decline in the stock mar'ket. .. The cities are responsible for the mounting unfunded pension liability. Unfunded pension "ability is an estimate of the cost of future retirement payments for which the city does not have funds already set aside. This is one of the reasons that the cities' contribution rates are notably higher than employees' contribution rates, as set forth in the table below. Table 6: Employer Contributions as a Percentage of Salary to PensiOil Plans and OPEB ~1ro.-"D-,--y __ +35.25%' 35.25%* 12.64%. 0.02% 0.02% • 0.02% J..osAIIOS 2B.99%' None' 22.69%; ! CALPERS M~mum Health 9_fils ~L!,!o~$l.Ai~to!!!S!..!:!l~l-~None'!9!!!4_-1N~o~ne~·+-_2~1~.6~9~%~' + None" None' I 14.2% Los Gatos I . 33.84% NOlIe' 14.58% 2.21% None' 5,19% i MIlpitas ! 21.68%+_::::.21.::;.6",8:..:%=+ __ 1.:...:4",.5:.:::8.:.:%+_7:..:.9::::,%",-+ __ ",1.,.::9%9 __ '_7.:.::.::::.9%~ U:!onte Sereno None' None' 19.66%' NIA None' None' ...!.Ma=rglt:a~I1~H,!;;il!...1 _-"",,213.05% ~ ___ N:..:o;:::n-,=e' .. +~---,1"-9,-,,.6,,-9'. 0.00% _""N""on""e',-+ __ 0,00% I • MounlainView 25 .. 66% 25.56% 15.59% 7.34% 7.34% 7.34% . 9.9% 9.9% 9.9% I-'P""s""lo",Ai,,,,,to"--_t-,,,,3,,,,3."-7'11::::.o'-t-.. --,=3,,,,3,,,,,7,,,,%c...' t---",23.::::5""5""%,-1+",(IO",8",/O,,,,9),+_.>.::{(08.'~09,,,~)+_-, {(O",S""'O,,,,9,-!l j-S:::::a",n",Jo=SE!,--_+-,,2:.:,1 "".S..:..1.",}'h+-_:2:,c4.12",%",+_-"18::::.3::.:1:.:.%=+...::5",.2:,::8.:.:%+ __ 4::..i:.,:9,,,,%+1 __ :c5.Z~_ I-'S::!a:::.:n""ta'-'C:::la:o:.ra=----+ ... .=26"':.~r :.2",e.,:c12:"%"-t-1 __ 1:.-..7;,::..0.:::,2'11""... 2.29% ..... 2.24%_._2_.3~10/?.. Saratoga I None' None> I 18.65%' i None' None' N/A t-==='---i--, ~='-+ ... --""=~, _....:.:c:'::'::':":""'i--, -=:.:.=.-t, ---'-'=~----""'-'-I ~;O% • 8.0% Suo!)yvale • 41.Ci9%' 41.09%:;;',-'-. -.:=;;;;22".25%' i Source. Data from FIScal Year 2009-2010, except as otherwille noted Notes: 1 Includes percentage of employee contribution thai the city pays 2 Service provitled by County or speeial district 10 8.0% Employee Contributions to Pensions and OPEB Employee contribution rates as a percentage of salaries are as follows: • Regular employees: 8% to CalPERS when the formula is 2.7% at 55, and 7% if ' the formula is less ' • Safety employees: 9% to CalPERS when the formula is 3% at 50, and 8% if the formula is less ' • San Jose Regular employees: 4.28% to The Federated City Employees' Retirement System • San Jose Police empfbyees: 8.18%, Fire employees 8.62% to Po/ice and" Fire Department Retirement Plan ' • Cupertino Regular employees: 2.4% for OPES .' San Jose Regular employees: 5_7% for OPEB • San Jose PO/ice employees 5.28%, Fire employees 4.19% for OPEB • Employees in the other cities contribute nothing for OPEB Nine of the 15 cities -Cupertino, Gilroy, Los Altos, Los Altos Hills, Monte Sereno, Morgan Hill, Palo Alto, Saratoga, and Sunnyvale':'" pay all or a portion of the employees' pension contributions. For example, Gilroy pays 100% of safety employees' contributions; Morgan Hills pays 100% of regular employees' contributions. This means those employees do not make any contributions to their own penSions. Social Security Contributions Of the 15 cities, only Monte Sereno and Santa Clara contribu,te to Social Security for regular employees. Such partiCipation requires both the city and the employee to contribute 6.2% of the employee's salary to the Social Security system. The employees of most cities will not be able to ~eceive Social Security uniess they haVe worked and contributed for 40 quarters at another employer. Pension Refonni TWo-Tier System The pension benefit is Ihe most expensive benefit provided to employees and has significant cost implications, which is why cities fl,lust ensure that the costs of pension benefits are sustainable in the long term. During Grand Jury interviews, many city managers and finance directors stated that pension costs are skyrocketing and diverting limited resources from community services. For example, in Mountain View, CalPERS costs have increased over the past decade from $2.8 million to $7.7 million. San Jose will contribute approximately $138 million into its two retirement plans for 2009 -2010; more than double that of just 10 years ago. Pension costs are increasing due to benefit enhancements and losses in investment returns. 11 City managers recognize the challenge they are facing and are working together' , through the Santa Clara County/Cities Managers' Association to investigate ways to reduce penaion costs, Since pension benefits are considered vested, there are limitations on what can be changed. Recently the city managers of Santa Clara County and San Mateo County agreed on a joint policy statement that recommends, that all cities adopt a two-tier pension system. (APpendix D) In the two-tier system, cities would implement a reduced level of retirement benefits for all new employees in all agencies in the region, This solution would take detailed planning and communication to implement. The Santa Clara County Ci,res AssoCiation has asked the city managers to present the proposal to their respective city councils and start preliminary discussIons with the unions, Among other cities statewide, San Callos and Brisbane have already inltiatecJ a lower, second tier for new hires. Palo Alto is in the process of implementing a second tier for new SeNice Employees Intemational Union workers. Sunnyvale completed a preliminary analysiS of a second tier and estimated it could save approximately $45 million over 20 years. The goal of two-tier system would be to provide a competitive pension at a more sustainable long-term cost by increasing the age of retirement and lOWering the retirement payout, Other suggested options to reduce pension costs are 1) convert to defined contribution plans for new hires, which are common in private industry and 2) eliminate "double dipping", which occurs when a public employee retires and subsequently enrolls in a new public retiremerit fund while continuing to collect from the earlier one. Retiree Health Care Reform Retiree health care costs continue to increase and cites are faCing signifICant unfunded liability for their retirees' health care benefits. San Jo.se is working on a plan that provides for the costs of retirees' medical benefItS to be split 50/SO by the city and the employees, which overtime would reduce the ~'s unfunded liability. Other cities are looking at modified health care plans for their new employees. In some of these plans, the obligations of the city end when the employee retires. One example is establishing a health savings account for each employee hired after a certain date; the city contributes to the account each month, which after vesting the employee can take into retirement Health savings plans ,are tax sheltered and the employee can contribute to them. 5. Days Off Employees receive paid time off fo~ holidays. vacations, personal leave days and sick days; the number of days granted each employee vary by city and by union. The number of vacation days increase based on length of employment with an allotted number of hours or days granted each year. In some cities vacation days can be accumulated year after year and converted to cash at termination or retirement, or added to the number of yeal<> of service and calculated into the retirement benefit. Other cities have imposed lirr;l!s_on accrual time, and require cash out at that tlme> __ _ 12 Employees receive approximately 12 days of sickleave each year. Disability insurance is available for extended sick leaves. Depending on union affiliation, employees are eligible to receIve accrued sick leave as a cash payment or added into their number of' years of service and calculated into their retirement benefit. Some are eligible to receive up to 100% of their sick leave paid out at retirement, with no cap on the number Of hours. Other employees are eligible to receive up to 75% of their sick leave paid out to a maximum of 1200 hours at retirement. Although payouts of acCrued sick Ii:lave are common in government agencies, these benefits are not'common in the private sector and could be reduced and capped to save costs. Table 7: Days Off Per Year by City 301075 12 .San Jose 10 to 25 20 to 50 12 Santa Clara Notes: 1 Number of days varies by length of service. 2 In most cities vacation and sick leave days, above the allowed retall'lable number can be cashed out annually; 1he retalnal1le amoul'll$ can be cashed out at retirement or resignatlon. 3 Mountain VIew fira and pollee !'&Geivs 0.65 days 10 lieu of holidays; San Jose lire and police receive 5.6 days In llau of hplidays. 4 Employees may annually cash out up to 50% of their baiallC6 of sick <Jays and 80 hours of vacation: !he rest is retainabla. , In the past year. a few cities have imposed furlough days; although this reduces costs, it also impactS services provided to the community. Some cities are considering substituflng certain paid days off for unpaid days, instead of imposing furloughs to reduce the imp9~..J)Il services., . /._ 13 WORK FORCE PRACTICES 1. Determining Wage and Benefits Packages The Grand Jury learned from interviews that most cities set their compensation packages by surveying the wages paid to public employees in a handful of nke cities in the general area, rather than wages for the employment market a! large. In union negotiations, cities will often negotiate to a place' on the comparable wage index rather than negotiating what they think are reasonable salaries by job classification. If the wages in a salary range increase due to negotiations, all negotiated salaries increase. . . Limiting comparisons to other cities in the same geographic area results in "a follow tlie leader" or "keeping up with the Jones' mentality in the cities, rather than real market- based compensation. Neither cities nor the labor unions appear to see a value in comparing private and public sector wages and benefits, or in tracking compensation trends in general. Recently, the Bureau of tabor Statistics reported that high-tech wages in the Bay Area (54% were in Santa Clara County) dropped 12% in the past nine years following the collapse of the dot-com bubble. During this time period, wages in city government increased substantially. Private lnd uslry has wrestled with the same benefit issues as the public sector, and has been quicker to implement solutions that have reduced or contained employer-paid costs, especially pension and health care costs. A report published by the Employee Benefit Research Institute (EBRI) noted that, "State and local governments have sharply higher costs for health and retirement benefits than private-sector employers. since their workers participate In these benefits at far higher rates and public-sector workers are far more likely to have defined benefit retirement benefits than are private-sector workers: The EBRI stated that govemment employers' overall total compensation costs were 51.4% higher than private-sector employers' costs; the costs were 42.6% higher for wages and salaries and 72.8% higher for benefits. 2. Consolidating Services with Other Cities or the County All cities provide core services for their residents and perform operational activities to keep the city running properly. With 15 cities performing similar functions, there are opportunities to reduce duplication, decrease costs and improve efficiency by sharing or consoijdating services among cities or the County. . Currently, four cities obtain police services from the County Office of the Sheriff; others utiliz:e the County's fire services or have special fire districts. Several cities have consolidated their animal control functions. The Grand Jury learned through interviews that these arrangements are successful and provide a sizeable cost savings. Additional merging of services, such as trash collecting. library functions,' payroll activities. and parks and recreation work, could be pursued to reduce employee costs whil.e providing effective and efficient services to the community. 14 3: Outsourcing to Private Industry Outsourcing to private industry is anolher avenue for cities to pursue to decrease employee costs while maintaining services. Through interviews, the Grand Jury learned Ihat Saratoga and Monte Sereno utilize this service delivery model extensively. Saratoga identifies itself as a ·contract city." Several cities have limited contracts with private firms and other cities are beginning to examine the option. . Functions currently being contracted out include landscaping, street sweeping, tree trimming. recreation services, road surfacing, janitorial services, fleet maintenance, trash collection, and traffic engineering. Santa Clara has butsourced the bulk of its information techno!!lgy functions. " Outsourcing services traditionally performed by employees requires proper planning, effective communical[on, reliable cost comparisons, and performance-based contracts. And for many cities, it means negotiating with and working with their unions to accomplish this transition. 4. Optimizing Staff Organizationally, the cities should ensure that their staffing models are efficient, effective and are operating at the optimum level. to decrease employee ·costs. It is important to analyze the functions performed by all job classifications anq make adjustmentS in the work.iorce. As appropriate. cities should reassign functions to lower paid job titles, consolidate functions with Similar jobs in the same or similar work group. and trim unnecessa(ry functions. In 2009, Sunnyvale retained a consulting group to conduct an optimal staffing study of seven departments. Many of the staffing and operational improvements recommended by the group have been adopted and other changes will be implemented in the future. The Office of the City Auditor in San Jose recently completed a study that identified 88 positions being performed by public safety employees that could be' performed by civilian employees at a lower cost. These positions are in Administration, Investigations. Technical Services, and the Office of the Police Chief. Some examples of the positions that could be switched to civilians are: Public. Information Officer, Police Artist. Watch Bulletin Police Officer and Main Lobby Police Officers. The estimated annual savings would.be $5,077,500. LABOR NEGOTIATIONS 1. Collective Bargaining Agreements In the cities, with the exception at Los Altos Hills and Monte Sereno, the majority of the work force is represented by labor unions and operates under collective bargaining agreements. Salaries, health care benefits, retirement pension plans, other post" employment benefits plans, and workplace rules are negotiated by the unions on behalf of their members. 15 Each city negotiates with from three to 11 unions. For instance, Los Gatos has three ' unions; San Jose has 11 bargaining units, representing approximately 96% of the work force. The cities and each bargaining unit negotiate legally-binding contracts. which are known as either a Memorandum of Agreement (MOA) or a Memorandum of Understanding (MOU), and they are effective for a designated period of lime, usually two or three years. . Pursuant to the Meyers-Miliag.;Srown Act (MMBA), the cities have a right to insist that contract negotiations take place at the bargaining table between the designated representatives of each city and the designated representatives of the various bargaining unit employees. Both the cities and the unions have an obligation under applicable law to negotiat~ in good faith. It is the goal of both parties to I<ilach a negotiated collective bargaining agreement 2. Mediation and Arbitration Under the MMBA, if negotiations do not result in a tentative agreement, impasse procedures allow either party to invoke mediation. If there is still no agreement after impasse procedures are exhausted, the MMBA states that the public agency may implement its last, best and fmal offer. Additionally, after mediation the bargaining units have the right to strike, except for police officers or firefighters who do not have the right to strike. For San Jose police and firefighters, ~f parties fail to reach agreement after mediation, City Charter Section 1111, approved by voters in 1980, allows the parties 10 submit the dispute to binding arbitration. A three-member panel comprised of a city representative, a union representative, and a neutral arbitrator selected by the city representative and the union representative, decides each issue by majority vote. The arbitration is not ~n to the pubfic. 3. Negotiating Team Each city delegates the authority to negotiate labor contracts on behalf of the city to the city manager or the city manager's designee. The city manager generally delegates the lead negotiating responsibility to one (# these job titles: assistant city manager, human resources director, employee relations director, or administrative services director. Other key members of the city negotiating team may i.nciude the city attorney or an outside labor attorney, the department head or a high.level manager of the applicable work group, the finance director. and occasionally an outside consultant. The negotiating team members do not belong to unions, and they do no~ operate under a financial incentive. But as employees of the city, their compensation is proportional with union employees; when salaries and benefits increase for union members, they are generally awarded similar increases, In some cities, members of negotiating teams have worked for the cities for a number of years, and many have come 'up through the ranks" and have strong connections to the union employees. Some of the city managers told the'Grand Jury that this can be problematic, as these negotiators may experience peer pressure and concede to the unions. For this reason, among others. a few cities are cons~ring adding outside consultants to their teams. /_ 16 4. 'Role of the City Manager Prior to labor negotiations, the city manager provides to the mayor and city council a detailed fiscal analysis of current and projected economic conditions, and the current and projected budget. The city manager also meets with the mayor and council in closed session to recommend the city's position on contract renewal, itemize issues, and receive direction about the intended outcome of negotiations. In upcoming negotiations, it is anticipated that cities will ask for concessions for both current wages and current and future benefits. Prior to negotiationS, some of the city managers conduct informal meetings with union leadership, as well as the rank and file members, to provide data on the city's financial health and employee costs. ,<;.:. <;<,:, The city manager is integral to negotiations and is responsible for setting strategy. direction, and parameters for the negotiating team. The city manager is closely engaged with the team prior to negotiations to determine the areas the city would like to negotiate and those it would not like to negotiate; The MMBA, however, defines and controls the areas that are subject to negotiation. Throughout negotiations, the city manager is briefed regularly on progress and issues. The negotiating team will consider the union proposals during the length of the negotiations, and discuss and counter the proposals within the confines .of the council's guidance. 5, Role ot the City Council and Mayor The mayor and council are responsible for setting policy 'direction and guidelines for labor negotiations, overseeing the city manager, and approving labor contracts. The mayor is the public spokesperson. Although the mayor and council are supposed to represent the best interests of the city ·and ultimately the taxpayers during negotiations, it is difficult to separate politics from . bargaining sessions. If the council approves a package that is favorable to labor, some council members could benefit if they keep or earn union support. Throughout the County, many city councils are dominated by labor-endorsed candidates, and unions play an active role in elections. Unions often support their candidates' campaigns with endorsements and contributions. They print and distribute literature, manage phone banks, make personal appearances at campaign events, and canvass neighborhoods. Conversely, unions will sometimes negatively campaign against a candidate they oppose. During its investigation, the Grand Jury learned that labor representatives sometimes go directly to council members white negotiations are occurring to solicit their support for various proposals. For this reason, the Santa Clara City Council and the city manager developed and approved "Employer Notification Principles" for the negotiating team and the council to observe during negotiations. These principles govern the commitment, responsibility and behavior of the city manager and the council and have improved the city's negotiations. These principles discourage council and labor discussions during the negotiation process. San Jose has a sim~ar policy that sets guidelines for the council to ensure labor negotiations are conducted in good faith and to avoid actions that would circumvent·the city's deSignated bargaining team. ".'-,'- 17 PUBLIC INVOLVEMENT In the past year, many articles have appeared in newspapers and other publications about the dire fiscal straits of our cities. The public is becoming aware of the growing cost of employee obligations. Until recently most residents were relatively uninfo'rmed about long-term financial costs and how they came .about. During Grand Jury InteNiews, four of the cities indicated that they did not hold public discussions before the start of their last contract negotiations; other cities stated that they did encourage pubUc comment in regard to the salaries or benefits being negotiated, but that these sessions did not garner a lot of public attention. Some of the city managerS acknoWledged that the taxpayer is often unaware of ttle .long-term financial impact of negotiations, especially conceming pel"lSions, The negotiated MOAs and MOUs are either on a council's consent calendar for approval or appear as a separate agenda item. In either case, there is seldom lengthy discussion around this approval. Approved contracts are posted to a city's web site. Many city leaders are currently engaged in' a variety of activities to better inform the public about the cities' finanCial health and to solicit input These activities include publishing quarterly newsletters, posting reports on city web sites. conducting budget sessions, sending out SUNeys. and creating task forces. Ballot Measures Escalating public employee costs are a problem oe<:urring throughout Califomia. In some cities and counties, recent ballot initiatives have given citizens an opportunity to vote on retirement and health care benefits. Orange County, San Francisco, and San Diego voters passed ballot measures as follows: • In November 2008, Orange County voters decided that future retirement increases must be voter approved. • In June 2008, San Francisco approved two measures increasing· pension benefits for existing employees, but limiting the future costs of retiree health care benefits: o New employees will contribute 2% of salary and the employing agency will contribute 1% to a new retiree health care fund. o New employees must work ten years to receive half of their health care costs upon' retirement and 20 years for full coverage; previously employees. were 100% vested after five years. • In November 2006, San Diego required voter approval of any increase in retiree benefits. 18 Conclusion . In the past decade, reasonable, intelligent people -city and labor . representatives - negotiated' generous employee wage and benefit packages through collective bargaining agreements under which the ,cities are currently operating. As these expire, both groups must recognize the financ.ial impact of these agreements, coupled with the economic downtum, and negotiate contracts that will: • Assist the cities in retuming to fiscal health. • Preserve the services the taxpayers deserve and expect. • Pri:lvide competitive·and affordable compensation for em"ployees. For many years, there was a common beliefthat public sector employees eamed lower wages than the private sector, but this was balanced by more generous public benefits. Current data shows wages have increased in the cities and are at least on par with private sector jobs, while benefits in the cities have escalated dramatically, thus increasing total compensation to a point that it is out of sync with private industry and is unsustainable for the cities. Unfortunately the taxpayers, who come from· both pub lic and private sectors, are funding this inequity. The cities' leadership must look beyond political barriers and focus on total compensation and on workplace practices to contain escalating employee costs. All .parties -city administrators and labor unions -need to negotiate in good faith to implement tasting, vigorous, sustainable change fQr our cities. Findings and Recommendations Finding 1 The costs of total compensation for employees have grown substantially in the past decade and now threaten the cities' fiscal stability. Recommendaticm 1 All of the cities in the County need to implement measures that will control employee costs. Asa starting point, each city should determine the percentage. of savings required from the total compensation package to reach budget stability, and provide choices of wages and benefits in collective bargaining sessions for the unions to choose to ach leve that percentage goal. 19 1 j ! 1.: I 1 Finding 2 Salary and wage increases do rlOt reflect changes in economic conditions; e.g. even with minimal inflation, yearly COLAs are granted with little bearing on the actual increase in cost of living or market conditions. Recommendation 2 Cities should not increase salaries and wages. that are not supported by planned revenue increases. Cities shoula tie COLA increases to clear indicators and retain the ability to adjust or withhold based on current economic data. ~ , Finding 3 Step increases are arbitrary and do not adequately represent an employee's added value to a city. Combined with COLAs, new employees' wages increase quickly and are not necessarily reflective of improved knowledge and skills. Recommendation 3 Cities should negotiate step progressions from the current three and a half years 10 seven years. Employees should not receive COLA increases while in step progression. Finding 4 Medical insurance costs for active employees are growing year after year at rates that exceed most cities' revenue growth, while the employee contribution to medical care is minimal .. Recommendation 4 Cities should negotiate that employees assume some of these increased costs for their medical benefits. To contain medical costs cities should conslder the following: . A. Split monthly premiums between the city and the employee and increase the employee's share, if already cost splitting, and remove any employee caps. B. Establish reasonable co-pays for doctors' visits, prescription drugs, and in- patient and out-patient hospital care. C. Prohibit an employee. from being covered by both City-provided medical benefits and as a dependent of another city employee. D. Reduce cash-in-lieu payments. E. Introduce ~ new lower premium. high-deductible medical plan. 20 FInding 5 Pension fonnula changes instituted in the past decade, stock market losses, the aging "baby boomer" work force, and the growing unfunded pension .and OPEB liability all contribute to making retiree pension and health care costs the most problematic and 'unsustainable expense the cities are facing. The city contribution to pension plans and OPEBs far exceeds the employee contribution. Recommendation Sa Citie." should: 1) Renegotiate and make provisions for increasing the employees' contribution for current pension plans. 2) Renegotiate to stop paying the employees' contribution amount to pension plans. 3) Renegotiate to implement a contribution amount for employees to OPEB; this contribution should provide for a reasonable split of costs between a city and the employee for retiree medical and dental benefits. Recommendation 5b Cities should thoroughly investigate reverting to prior pension formulas that were less costly. ' Recommendation 5c To provide a meaningful, long-term solution, the cities should negotiate agreements to: 1) Institute a two-tier system for pension and retiree health care for new hires. 2) Increase the retirement age from 50 or 55 to 60 or 65. 3) Calculate pensions on the last three to five years of salary. 4) Replace current post-employment health care plans with health savings plans. Finding 6 ! Public sector employees are granted a generous number of holidays, personal days, vacation days and sick leave annually. Rules and limits on accrual vary by city and union, but vacation days and sick leave can be accumulated and converted to cash or calculated into the pension benefit within those limits. 21 Recommendation 6a Cities should renegotiate with the bargaining units to 1) reduce vacation time; 2) reduce the number of holidays and/or personal days; 3) cap sick leave and eliminate the practlce of converting accumulated sick leave to cash or adding into their years of seNiee for inclusion in their retirement benefit Recommendation 6b Cities should negotiate to substitute paid days off for unpaid days instead of imposing . furloughs. F(lf,. example, reduce paid holidays to major holidays.,only, consistent with private industry; and convert minor holidays to unpaid, Therefore. the public is not impacted by fewer services caused by furloughs, and the city saves the employee cost. Finding 7 Cities traditionally determine their compensation packages by surveying the wages and benefits of other public sector employees in the same geographic area. ,There is major resistance to comparing themselves or mirrOring trends with the private sector. This has allowed wages and benefits to become artifICially high and out of sync with market trends. Recommendation 7a Cities should research competitive hiring practices and alter the approach to determine fair wages and benefits for each city by using public and private sector data. Recommendation 7b Cities should renegotiate salaries and wages using vaYd market comparisons and not only the current wage Index. Cities should utilize more market-oriented compensation practices so that salaries can adjust as competition for labor changes. Cities shou Id reduce entry-level compeosation for positions for which there are many qualified applicants. . Finding 8 All cities perform certain core functions to run smoothly and provide services to their residents. To reduce employee costs and. streamline ·operations. the cities are in various stages of contracting services to private industry or partnering with other cities, special districts or the County to deliver services, 22 • I • R&commendation 8a Cities should explore outsourcing some functions and services to private industry. Cities should discuss the prospect with cities that are successfully doing this to determine best practices and areas for succeSs. Cities should develop contracts with measurable objectives, performanoe goals, and timelines. Recommendation 8b Cities should create partnerships with other cities, special districts and/or the County for }.!eNioes, such as payroll, human resources, anim.~1 control, police and fire, Cities should investigate Sharing the cost of new information technology systems. Finding 9' Cities can gain operational efficiencies and effectiveness with lower employee costs by mal<ing sure they are staffed with the correct numbers of people in the appropriate job classification in all departments and work groups. Recommendation 9 Cities should analyze the functions performed by all job classifications and make adjustr]1ents in the work force. ~Consolidate funciions within the same group or a similar group. Reassign appropriate work to lower paid' job classifications. Eliminate unnecessary functions. ',Flnding 10 The San Jose City Auditor identified 88 positions currently being performed by public safety employees that can be performed by civilian employees at lower costs. The safety employees could be moved to pOSitions that require their expertise and training. The auditor estimated this could be accomplished in isss than 90 days and save approximately $5 mDlion annually. Recommendation 10 San Jose shourd negotiate this sugfJElSted transfer with the San Jose Police Officers' Association and set realistio timeframes to move these safety positions to civUian positions. 23 Finding 11 In many cities, the contract negotiation process is completed by plactng the negotiated collective bargaining agreements on the consent calendar for approval, which is acted on quickly at the start of council meetings by a single motion and vote of the council. Recommendation 11 Cities should consider holding well-publicized public hearings about the cities' goals of negotiations before negotiations begin, and again at the end of negotiations to report to citizens clearly what changes h"Ye been made in contracts. ~ ~ Finding 12 Current contracts were negotiated in good faith by representatives of the cities and the bargaining units; they Were approved by the city councils. Promises made to employees were made by elected officials, past and present. Responsibility for formulating and . approving solutions to restore the ciUes' financial stability' resides squarely with our elected officials. The economic downturn has placed additional pressure on the situation. Recommendation 12a City council members and mayors should become better informed about the fiscal realities in their cities, long-term costs and commitments, and be cognizant of potential issues in labor agreements. , Recommendation 12b City councils and mayors should direct city administrators to (re)negotiate collective bargaining agreements that reverse the escalation of employee costs through concessions, cost sharing. and a second tier for new employees. Recommendation 12c City councils and mayors should meet with the bargaining units to clearly outline the cities' financial health and show how employee costs are impacting the budget. Recommendation 12d city councils and mayors should inform citizens of their plans for controlling unsustainable employee costs and remove porllies from the equation. 24 • · . Fihding 13 Binding arbitration is no~ open to the pubflC and results in an adversarial process between the city and employee groups. Binding arbitration limits the abifity of city leaders to craft solutions that work for the city's budget The process has resulted in wage and benefit decisions that have been greater than the growth in basic revenue sources. Recommendation 138 San Jose City Council should make binding arbitration open to the public •. "". Recommendation 13b San Jose City Council should prepare a ballot measure asking )loters to repeal Section 1111 of the City Charter that addresses binding arbitration. 25 Appendix A Retirement Information Form Sent to Cities -~~:------------- I Union Name Union Name I Onion Name Union Name Union Name Union Name ' , I I, Current Pension ?Ian (formula) , Future Pension Plan based on MOU Year Future , Plan is effective , --, -_.- Current COLA I I Furure COLA , I ! based on ! MOU Current Pension calculated based Oft final year salary. 3 year average, ()t o!l1~r I I Future , Pension oalculated based on final year salary, .3 year average, or other , ,,- 26 -1 Appendix B City Contribution Fonn Sent to Cities _Cily; ___ _ A a C o E F 'G H %of Current Current Employee's Amount Amount City Erilployee Pension City Employee of of Contribution Contribution· Contribution Contribution Contribution Pension Pension I to Pension to Pension paid by'¢" 100PEBa$ toOPEBas !haUs I that is i as%ofoav as % ofPllv City" % ofPIlY %ofpav Funded i Unfunded Non-Public Safety Employees .. '----. 2009 ., -2010 2011 • \ . 2012 2013 ,.~, I 2014 i I " -' ..... ~ ,."""~~ Police 1_._. 2009 I 2010 I _. .~" 2011 2012 I 2013 I 2014 I Fire I i 2009 I 2010 2011 , , 2012 i 2013 . i I 2014 I I I I Question: Do$S City/Employee contribute 10 Social Security? Yes/No __ _ 'Does the city pay a pprtiO(l of the employee's required share of retirement contrlbotion? If $0 whal is that percent? ' 27 AppendixC City Information Form Sent to Cities City of CITY INFORMATION 1. Whet is the papulation of your city based on the 2000 census1 ___ _ 2. What is the 'estimated CUm!l1t populallon? ___ _ '" 3. How many total FiE's (Full Time Equivalents) did yow city have In 20001011 ___ _ 4. How many total FTE's does your City have n(YoN (2009110)7 ___ _ 5. 6. How many FTE were in the PoUee department in 2000/01.? __ .,... Now __ _ How many FTE were in the Fire department in 2000/011 N(YoN __ _ 7. What was your Total Revenue in fiscal year 2000/01 ___ _ 8. What is your Total Budgeted Revenue for 2009110? ___ _ 9. What per cent of the General Fund were employee costs with benefits in 200011)17 -:-__ 10. What per cent are employee costs of the. 2009/10 budget? ' Employee costS include payroll, retirement benefits, health/dental benefits and other benefits. 11. How much did the city con\fibu1l!! to non-safety Retirements benefits in 2000/01? __ _ How much did the city contribu1l!! to PolieelFire in 20oo/01? __ -'--, 12. What is,the non-safety Retirement cost for 20091101 What is the Police/Fire Retirement cost for 2009/107 ----- 13. How much did the City pay fo~ Healtli/Oental Benefits in 2Ooo/01? ___ _ 14. What is the 2009110 City cost for He$llh/Oental Benefits? ____ _ 15. What was the average monthly premium the City paid for emplOyee Health/Dental Care in 20001 Individual 'Family 16, What are the current averageprem·-:-:-:-iu-m-s'foC-r7':HC-ealthiDental Carel Individual Famlly ___ _ 17. What was the median sa1l!!ry for non-safety employees wiIIlout benefds in 2ooo? ___ _ With benefits 18. 200912010 med-::-la-n-sal-:ary without benefits With benefits ___ _ 19. What wa$llle median salary for pollee emp!oyeljs without benefits in 2ooo101? ___ _ With benefits _-,._--,:: 20. Currel'll median salary Without benefits • Wilh benefits ____ _ 21. What was the median salary for fire employees wlthciut benefits in 20007 --.-__ _ With benefits 22. Current medla:-n:-s-a"'la-=-ry without benefits With benefits ____ _ 28 • Appendix C -continued City Information -continued 23. What is the average number of years for your non-safety employees? __ _ What is the average number of years for police? -,---0-- What is the average number of years for fire employees? ___ _ 24. How many vacation days, floatIng days, holidays, personnel leave days and sick days are employees entitled to annuaUy? 25. What are tile vacation and sick leave accrual and buyout policies? 26, Did you impose any furlough days this year? Y N If yes, whlch work groups? How many people are affected? How often? 27. Prior to entering into each of your current agreements with organized labor, did your city Council, as part of regular business, encourage pubRc comment in regard to the salaries or benefits being negotiated? Y N 28. Are the MOU's resulting from contract negotiations typically on the consent calendar when coming to the City Council for approval? Y N 29 '",-- Appendix 0 Santa Clara County/Cities Managers' AssoCiation Policy Statement on Retirement Benefits $"1>1. Matte C"..Dltlll>tti CLttl M."""!W" A;sodtll"", Policy Statement on Looaf Government "etlrement a,~eIIts Background for more than 7Q years, the Slate of California and local govemmenlll have offered '3 "defined benelit" ref.ement plan \0 employe ... , This system provides a guaranteed annual penSion based upan retireMent age, salary, and yeats of salVioe. Mas\. but nat 811, municipalities in Callfornia are part 01 the Public Employees' Retirement S)IIliem (PERSI. OVer the yeal'$, local government reliramen! coots have risen and !BIlen based OIl two key faelol'll; investment !elums and the level of benefit P'lYmeoIs provided to employees, In the lale 1990's !he California IEI!llsla!ure enacted significant beneflt enha_mllfl\S lor public employe"" In lila PIl.'RS system lost were optional lor participating local govsmments. At lI1at ti"'e, some relireme!1l pians _" deemed 10. be 'super funded' and many Iotal governments. adopted benefit enhanGM1ellt plans. For ex:ampJe, most pubfic .afety personnel'!lII'I on lIle "a% @ SO' plan. whid! provide. a peTIllIon benefrt of up to 90% of .aIa"! after 30 yeats or seMe .. as earty as age 50. When the retirement syilem suffered ... !iOu. investmenllosses in the early part ofllli. decade, the •• losse>;, combined wnh nswIy approved ben~ enhancemenls, caused dmmalic incre ... e. in emp/over contribution rates. em ... in our two counties have .esn the pen:errtage of thoir General Fund budget dedicated to PERS costs Increase while . their retirement liabaity lunding had decreued from over the paS! decade. Fot example, in Mounfain V_, General Fund PERS costs have gone from $2.8 million in FYOO to $7.7 million in FYl(l; in San Bruno, It has 90ne frem $240,000 to $4 millie" Daly City's percent of lhe Gene.al Fund budget spent on retirement benall!$ hao increaSed from 4.3% to 10.4% between FYOO and FY10: in Belmonl. it has\JOne from .5% '" 1U%. And ~pbell has seen its public safisty !eIi""""nl system fall from 122% funded to 70% lunded ~r ten years. In the pas! fill. yea"" a number of proposals have been inlltJdUOed '" reform or dramatically reYi ... the public pension system in California. In 2004, a IHk force of the I..I1II9110 of California CIt ... began an extensive .!udy of Ihe defined benefit system and propOsed reforms, In 2005, 111. Lsague boat<! 01 dlreelors accepted e rnport on pension reform from 1M 1ask force as an initial assessment and for coMideratlon in the ongoing debale of this Issue, The repo~ ino/uded a number 01 '90nel1ll principl",,· and specffic reform recommendaiions. To date. no concrete action has be.n lallen by 1M legi$1eture. 30 I j I f . ~ \ • , " Appendix 0 -continued Recenlly, ibe city m .... agers 01 San Diego County nave prepared a _ paper on 1Ii!. ''''.6 calling ler • new and lOWer ''''':011<1 bar _ benefit for new hires. Other manager groups acmes Ihe state have begun a similar diala!JU" in recognilion !hat Ih6 cost. 01 the current system are not su$lBinable: Add_y. Governor SChwarzeoegger has proposed relumlng ·pension Iormula. !o 1999 levels for new haas -a move hE! says ... 1 save the state $74 billion thll)lJyh 2040. The City of SUnnyvale has done a preliminary analysis of • lower tier and has estimated ~ CQIIld s""". total of $44 mgfion ""'" 29 years. The ciIIes of San Carkls and Brisbane have already initiatad a lower, second tier for new hires (amor1!l othercl!les staleWide). DiscusSion While 1he debate Is Ong;ling, no Clear consensus has been schlevlXl on addressing tho high cost of pension benefits and no aciran appears imminent TM city msnagers of Santa Cia .. and San Mateo counties believe It Is Important to take a proactive sta_ on this issue wIllch has Iong.term implications for thE> fl<caf 51.bUlIy cf our cities. This Issue Is even mona important now, given the lremendous losses SlJffeN>d in the stock m_ in !he past year. At flscal lI"ar end In June 2009, PERS annual nalUr"" we", down 23.4% from the pI6lllous year. This is on top of losS€<; of $.1% in Fl.",,12008. PERS assUIl'1aS a 7.75% gain annually to maintain itS pensk:>n obl~.tIon., but clearty there is no guarantee this rala can be achieved. Based 00 this YG,," neg~tIve nalums. employer rates are expected 10 jump signllicattUy as 01 July 1, 2011. . Therefore. as a maHer of pubNc porlCY. we endoF$e the following p~ncfple.lpr a revloed pension system. Guiding Principles » Our residents des6IVe flSCa! policles lI1at presetve iocaIgoveinment's I1bmty 10 moot community nelXis. While attrac:ting competent and moIivaled employees Ia pUbl'IO .service. ,. Provld'mg adequate refirement benefits Is an Important part 01 altrllc:ting and retaining public employee~; lIlis O1ntlnues-lo be an issue as, demOgraphk;aIly, there are fewer young people to enter the publk: sector. p Current retirement benefit Iormul.s ere not fiscally suslalnabla. The CA:llIIS are escarating beyond our ability to fund them and dlverifng IImftad resouroes from direct service delivery to our oomrnu~il1e.. In addition, .current pension benelils ""_ what privata sector employees receive and whet 10 ", •• onabiy n&IXIed 10 attrad: public ,,",ployee •. ~ Id ... l1y, this situafjon would be eddr.,.se<j at a $laleWlde level and th"'" "",uld be consistant standerds for all We cannot, h_, afford to wait for. statewide solution. Therefore, the cities of Santa Clara and San Mateo counties SUPPQrt 2 31 APPENDIX D -continued Implementaaon 01 a reduced and suslalnablillevel 01 ri!IJ"'ltI\lnl beneftlll for all new employees of agencle$ in the region. ,. Each city has dlfl",ent hlstorias, p"",peollve., aM 1l!oea1 conditions; • "one .,,," fits aU' appr_h may not he reeftstic, but all cities in the ",gOO compete fur !he same employees aM !herefore shooid tn01/IIln!he same directlOll kl a Iower·CQ$I. benefit » eaell city has the legal duty 10 mast and comer ill goad hllIh .,ill1 iIs recognized bargaining unit rapres.nta~v .. COntelt1ing changes kl <ll<istIng Ililrm. and rond'lIions of employment. ,. EvelY c;w is committed 10 mOlllng lowal(! a !wo tier $)'$tem lor aU MW contracts. " Any new a)llilem or tie, should be rair 10 employees, suslalnable for IilXpoyets and employers. and based onohjeclive acluarial d.lll. Ac!Jon Steps Tht! city manager "soda!;on. of Santa Clara County and San Mateo County $upport the •• ments in Ihis document and 1I1eir rnemilers pledge fo work wl1l1 their elected official* and labor groups to Implement Its plinclple.. We furthli)( pledge to work willl other city manag.", acrc.s the state aM tho League 01 California Ciltes 1(1 advocate for eIl.nges consistent wilh this document - ~~ I:kN6 Aode/liOn, SCCCMA Connie Jackson. SMCCMA 3 32 . . • I I I I I i I ,-I 1 I I I c. 1 I ! f , THis report was PASSED and ADOPTED with a concurrence of at least 12 grand jurors on this 13th day of May. 2010. ~4_C:;;dr Angie M. Cardoza Foreperson '~~ -Ma,yNu Secretary 33 Cbarter City C 1-····· C C C C : l ~ote: Status of Binding Interest Arbitration in Incorporated Cities in Santa Clara County and CA (updated 617/11) * 8 agencies contract with Santa Clara County for fire service. Santa Clara County does not have binding interest arbitration. *General Law cities do not have binding interest arbitration; legislation to impose such process has been found unconstitutional 2 times. City Police Fire Binding i Comments Status of Minimum Staffing Name Interest Standards Arbitration? Campbell X ~o SC County Fire KIA • Cupertino • No SC County Fire • N/A • Gilroy X X Yes Reduced Fire minimum I staffing from 4 per truck to 3; added 1 FIE Increase minimum staffing from 8-9 Los Altos X No N/A Sc: County Fire -Los Altos No SC County Fire ~/A • Hills • SC County Sheriff • Los Gatos X No · SC COUlJ.tYllire N/A I Milpitas !X X No 3 per engine 15 minimum staffing per shift In FY 2011 Union agrees to allow I up to 12 vacancies (in both Suppression and Prevention) for budget savings. Monte No SC County Fire N/A Sereno Los Gatos-Monte Sereno PD Morgan X No i SC County Fire N/A I Hill I ---_ ..... I I Mountain X X No 21 minimum staffing per shift View ! (includes Battalion Chief) 3 per engine Palo Alto X X Yes 1978 -In Charter for Police 31 minimum staffing per shift I d F' (incl Station 8) • an Ire 3 per engine San Jose X X Yes 1980 -In Charter for Police 4 per engine, no shift minimum and Fire staffing. Fire Chief has discretion not to meet minimums for partial day absences. I Santa X X No 2006 Measure B Jailed -No written Min Staffing Clara would have added binding standard. Practice is 3 per arbitration/or Police and engine. Target is 39 per shift, Fire but must have at least 31 when keeping all 10 stations open. I , Currently running with 34 per shift Saratoga i No SC County Fire NIA SC County Sheriff C Sunnyvale X X No 1998 Measure Tfailed-No written Min Staffing would have added binding standard. Practice of 28 per arbitration to City Charter shift. Typically 2 per engine , ! for Public Safety and police also respond to I : make 4 on scene. (Police and fire are eross trained. Public Safety Dept rather than separate Police and Fire Depts) Other California Agencies I Charter ' City ! Police Fire I Binding , Comments Status of Minimum Staffing City Name i : Interest Standards Arbitration? C San X X Yes 1990 interest arbitration for N/A Francisco , ! Police, Fire; later for other ! employee groups C Alameda X X Yes ! 1980 Firefighters No min staffing in MOA Berkeley X X No 1993 -PolicelFire No min staifmg in MOA sponsored charter C amendment, voted down Fremont X X No No min staffing in MOA C Hayward .X X Yes 1975 Firefighters • NIA Menlo X No No min staffing in MOA Park Fire District , Milpitas X X No Min staffmg is 3 per vehicle C Redwood X X Yes 1987 Firefighters No min staffing in MOA City San Mateo I X X No Per vehicle staffing, not shift -I City wide Santa X X No 2004 City and Union ballot No min staffing in MOA ! Clara measures, citizens voted County down binding interest arb c Santa X X Yes 1996 for Firefighters No min staffing in MOA Cruz South San X X No "Min staffing is 20, however at Francisco I the sole discretion of Fire Chief' included in MOA I I Charter City Police Fire Binding Comments Status of Minimum Staffing aty Name Interest Standards Arbitration? ----_ ... C Stockton X X Repealed 1992 for Firefighters Per vehicle standard 4 per November Binding Interest engIne 2010 Arbitration eliminated by 5 per Truck Company ! election Nov 2010 Suppression minimum staffing I =75 * Note -5123/2011 San Joaquin County 2010- 2011 Civil Grand Jury report investigating minimum staffing levels for Stockton Fire Dept recommends reducing per vehicle staffing by 1 for each type of vehicle. j j j ! ! ) City of Palo Alto Charter Provision on Binding Interest Arbitration (palo Alto Municipal Cqde) Article V. Compulsory Arbitration for Fire and Police Department Employee Disputes Sec. 1. Declaration of policy. It is hereby declared to be the policy of the city of Palo Alto that strikes by firefighters and police officers are not in the public interest and should be prohibited, and that a method should be adopted for peacefully and equitably resolving disputes that might otherwise lead to such strikes. Sec. 2. Prohibition against strikes: If any firefighter or peace officer employed by the city of Palo Alto wilfully engages in a strike against the city, said employee shall be dismissed from his or her employment and may not be reinstated or returned to city employment except as a new employee. No officer, board, council or commission shall have the power to grant amnesty to any employee charged with engaging in a strike against the city. Sec.. 3. Obligation to negotiate in. good faith. The city, through its duly authorized representatives, shall negotiate in good faith with the recognized fire and police department employee organizations on all matters relating to the wages, hours, and other terms and conditions of city employment, including the establishment of procedures for the resolution of grievances submitted by either employee organization over the interpretation or application of any negotiated agreement . including a provision for binding arbitration of those grievances. Unless and until agreement is reached through negotiations between the city and the recognized employee organization for the fire or police department or a determination is made through the . arbitration procedure hereinafter Provided, no existing benefit or condition of employment for the members of the fire department or police department bargaining unit shall be eliminated or changed. Sec. 4. ImJlasse resolution pro~edures. All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the city and either the fire or police department employee organization shall be submitted to a three- member board of arbitrators upon the declaration of an impasse by the city or by the recognized employee organjzatjon involved in the dispute. Representatives designated by the city and rC}l!esentatives of the recognized employee organization involved in the dispute, controversy or grievance shall each select one arbitrator to the board of arbitrators within three days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the .--- j I City of Palo Alto Charter Provision on Binding Interest Arbitration (palo Alto Municipal Code) arbitration board shall be selected by agreement between the two arbitrators selected by the city and the employee organization, and shall serve as the neutral arbitrator and chairman of the board, In the event that the arbitrators selected by the city and the employee organization cannot agree upon the selection of the third arbitrator within ten days from the date that either party has notified the other that it has declared an impasse, then either party may request the State of California Conciliation Service to provide a list of seven persons who are qualified and experienced as labor arbitrators. If the arbitrators selected by the city and the employee organization cannot agree within three days after receipt of such list on one of seven to act as thc third arbitrator, they shaH alternately !J"aike names from the list ofnominees until only one name'remains and that person shall then become the third arbitrator and cheinnan of the arbitration board. Any arbitration convened pursuant to this article shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. . " At the conclusion of the arbitration hearings, the arbitration board shall direct each of the parties to submit, within such time limit as the board1Illl.Y establish, a last offer of settiement on each of the issues in dispute. The arbitration boardshall decide each issue by majority vote by selecting whichever last offer of sett1ement on that issue it finds mQst nearly conforms with those fuCtors traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of pUblic and private employment, including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, and the financial condition of the city and its ability to meet the cost of the award After reaching a decision, the arbitration board shall mail or otherwise deliver a true copy ofits decision to 1I).e parties. The decision of the arbitration board shall not be publicly disclosed and shall not be bloding until ten days after it is delivered to the parties. During that ten-day period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the arbitration board, At the conclusion of the ten-day period, which may be. extended by mutual agreement between the parties, the decision of the arbitration board together with any amendments or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties. The city and the recognized employee organization shall take whatever action is necessary to carry out and effectuate the award. The expense of any arbitration convened pursuant to this article, including the fee for the services of the chairman of the arbitration board, shall be borne equaHy by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. (Added by amendment filed with the city clerk, July 17, ]978) (CC~C) \. / . j ) 1 I RD:SH;ERD 8/4/10 EXHIBIT A TO RESOLUTION NO; OF THE CITY OF SAN JOSE That Section 1111 of the City Charter be amended to read as follows: SECTION 1111. Compulsory Arbitration for Fire and Police Departmeot Employee Disputes. . {gl· It is hereby declared to be the policY.!'lf the City of San Jose that strikes by fire fighting and peace officers are. unlawful in the state of California and not in the public interest and should be prohibited, and that a method should be adopted for peacefully and eql,litably resolving di~putes that might otherwise lead to such strikes. If any firefighter or peace officer employed by the City of San Jose willfully engages in a strike against the City, said employee shall be dismissed from his or her employment and may not be reinstated or returned to City employment except as a new employee. No officer, board; councilor commission shall have the power to grant amnesty to any employee charged with eng.aging in a strike against the City . .il!J. The City, through its duly authorized representatives, shall negotiate in good faith with the recognized fire and police department employee organizations on all matters relating to the wages, hours, and other terms and conditions of City employment, including tlie establishment of procedures for the resolution of grievances submitted by either employee organization over the interpretation or application of any negotiated agreement including a provision for binding arbitration ofthose grievances. Unless and until agreement is reached through negotiations between the City and tile recognized employee organization for the fire or police department or a determination Is made through the arbitration procedure hereinafter provided, no existing benefit or condition of employment for the members of the fire department or police department bargaining unit shall be eliminated or changed. tfL All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the City and either the fire or police department employee organization shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. All issues concerning the scope ofthe Arbitration Board's authority, jurisdiction or powers shall. upon the request of either partv. be resolved by petition to the Superior Court. @ Representatives designated by the City and representatives of the recognized employee organization involved in the dispute, controversy or grievance shall each select one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third T·20844\ 679992_3 . Council AQenda. 8-3·10 119m No.: 3.3d 1 RO:SH:ERO 8/4/10 member of the Arbitration Board shall be Selected by agreement between the two arbitrators selected by the City and the employee organization, and shall serve as the neutral arbitrator and Chairman of the Board. In the event that the arbitrators selecled by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that eHher party has notified the other that it has declared an impasse, then either party may request the Stete efCaJife1·.'1ia GIJ/f8iliatief'l &rfflee Ie pl'fwllie tl Jist sf-(7) pe'l'!H:lnti lffle ere rpiiIlijled fJffli e:II~ IiI9 label'i11'lJitl'atera: Kthe tl.-bilffltGrs seleetedlly the City fJfflithe empleyee fH'gtJlfisslief'llHlifli8l agI-ee within Ihffle (3) da}'IJ 'fftor 1'888ipt I1faueh Utlt e1I6ne Qf'seven (7) t8 set IiI9 the thilW .",. wbiiNllfH', theyehs/J .1'71«#1;'111}' slFike ,'Ilil»I6tIjI'8m the li,oj;,f)/nemillees UHtii only fine name. . f'e/f'IeiHe rmtilhetpe."DtJllshall then bee61118 the thil-tl 61'biIFiJte1' rmd eh6i1'Hiall Qfthe "fl'bili¥I#(in ~ the Superior Court oUhe Countv of Santa Clara to arwoint an arbitrator who shall be a retired tudie oOhe S1!JlB"ior Court. Any arbitration convened pursuant to this section shall be conducted in conformance with, subject!Q, and governed by Title 9 of Part 3 of the Califomia Code of Civil Procedure to the extent that such procedures do not conflict with this Charter Section. Unless otherwise mandated kY state or federal/aw. all arbitration hearing,Y shall be open to the public and all documents submitted In arbitration shall be public records. Notwithstanding any other promion oUhis Chorter to the contrary. the authority, jurisdiction and powers oUhe Board of Arbitrators are limited by the wav/slons aUhls Section. fill Ai the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Board may establish, a last offer of settlement on each of the Issues in dispute. The Arbitration Board shall decide each issue by majoritY vote by selecting whichever last offer of settlement on that Issue it finds bv the prewnderance oUhe evidence submitted to the Arbitration Board satisfies section (f) below, is in the best interest and promotes the welfare of the mWlic. and most nearly con forms with those factors traditionally taken into consideration In the determination of wages, hours, and other terms and conditions of public and private.employment, including, but not limited 10, changes in the average consumer price Index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, tlIitl thefintllleie/ e6/lliitien efthe City tlIitl its abliity til meet the efifJt efthe filVtlI'Ii. . (f) In all arbitration proceeding,Y conducted pursuant to this section. the wlmarv factors in decisions regarding compensation shall be the City's financial condition and In addition. its obilltv to pay for employee comgensation trom on-going 7eJ1enues without reducing City services. No arbitration award mqv be issued unless a majority Wthe Arbitration Board determines. based upon a fair and thorough review ofthe City's (manetal condition and a cost analYsis of the parties' last offers. that the City can meet/he cost of the award from on-f!()ing revenues without reducing City services. The arbitrators shall also consider and give substantial weight to the rate ofincrease or decrease of compensation aqproved by the Ctty Council for other bargaining units. . T~4\679992_3 Co~IAgenda:a~10 KemN •• : 3.3d { RD:SH:ERD 8/4/10 "Compensation" sbgll mean all costs to the City. whether new or ongoing. for salary paid and benefits provided to emplqyees. including but not limited to wages. special pay. premium pay. incentive pay. pension. retiree medical coverage. employee medical and dental coverall6. other insurance provided by the City. vacation: holidays. and other paid time off. (g-) Additionallv. the Board of Arbitrators shall not render a decision. or issue an award that: I. increases the projected cost of compensation for the bargaining units at a raie that exceeds the rate of/ncrease in revenues from the sales tax. vroperty tax. utility tax and telephone tax averaged over the prior five fiscal vears; or 2. . .. m retroactively increases wcJet:reases compensation. including. but not limited to. enhancements to pension and retiree health benefit (or service alreadY rendered. but excluding base wages: or 3. creates a new or additional untimded liability (or which the City would be obligated to uav: or 4, deprives or interferes with the discretion oUke Police Chiefor Fire Chief to make manageria(, operational or staffing decisions. rules. orders and policjes in the interest of the etJective and emdent provision ofpolice and fire services to the public. (hI Compliance with the provisions oUhis SectiOn shall be mandatory and enforceable pursuant to section 1085 of the Code ofCivilProcedurei (ailure to comply with these provisions shall also constitute an act in excess ofiurlsdiction. ill After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten-day. period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion ofthe ten-day period, which may be extended by mutual agreement between .the parties, the decision oftha Arbitration Board together with any amendment$ or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties. The City and the recognized employee . organization shall take whatevt;r action is necessary to carry out and effectuate the award. ill The expenses of any arbitration convened pursuant to this section, including the fee for the services of the Chairman of the Arbitration Board, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. fJeJ This SectiOn shall be effective immediately Upon pass@! bv the voters, and shall apply to any arbitration in which hearings commence atter November 2,2010. T-20844\679992_3 Council Agenda: 8-3·10 Item No.: 3.3d 3 i ; RD:SH:ERD 614110 m The voters declare that the provisions ofthis Section are not severable. and ru;me would have been enllcted without the others. Should any portion o(this Section 1111 be entoined or declared invalid all-provisions shall be deemed invalid and inoperative and there shall be no compulsory arbitration for fire and police department employee disputes. T·201l441679992_3 Council J>jjenda: 8·3-10 Item No.: 3.3d () CITY OF SAN FRANCISCO A8.409-4 -IMPASSE RESOLUTION PROCEDURES (a) Subject to Section A8.409-4(g), disputes pertaining to wages, hours, benefits or other terms and conditions of employment which remain unresolved after good faith bargaining between the City and County of San Francisco, on behalf of its departments, boards and commissions, and a recognized employee organization representing classifications of employees covered under this part shall be submitted to a three-member Mediation! Arbitration Board ("the Board") upon the declaration of an impasse either by the a'l,thorized representative of the City and County of San Rrancisco or by the authorized representative of the recognized employee organization involved in the dispute; provided, however, that the arbitration procedures set forth in this part shall not be available to any employee organization that engages in a strike unless the parties mutually agree to engage in arbitration under this Section. Should any employee organization engage in a strike either during or after the completion of negotiations and impasse procedures, the arbitration procedure shall cease immediately and no further impasse resolution procedures shall be required. (b) Not later than January 20 of any year in which bargaining on an MOU takes place, representatives designated by the City and County of San Francisco and representatives of the recognized employee organization involved in bargaining pursuant to this part shall each select and appoint one person to the Board. The third member of the Board shall be selected by agreement between the City and County of San Francisco and the recognized employee organization, and shall serve as the neutral chairperson ofthe Board. In the event that the City and County of San Francisco and the recognized employee organization involved in bargaining carmot agree upon the selection of the chairperson within ten (10) days after the selection of the City and County and employee organization members of the Board, either party may then request the American Arbitration Association or California State Mediation Service to provide a list of the seven (7) persons who are qualified and experienced as labor interest arbitrators. If the City and County and the employee organization carmot agree within three (3) days after receipt of such list on one of the seven (7) persons to act as the chairperson, they shall randomly determine which party strikes first, and shall alternately strike names from the list of nominees until one name remains and that person shall then become the chairperson of the Board. (c) Any proceeding convened pursuant to this Section shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. The Board may hold public hearings, receive evidence from the parties and, at the request of either party, cause a transcript of the proceedings to be prepared. The Board, in the exercise of its discretion, may meet privately with the parties to mediate or 1< mediate/arbitrate the dispute. The Board may also a~opt other procedures designed to encourage an agreement between the parties, expedite the arbitration hearing process, or reduce the cost of the arbitration process. (d) In the event no agreement is reached prior to the conclusion of the arbitration hearings, the Board shall direct each of the parties to submit, within such time limit as the Board may establish, a last offer of settlement on each of the remaining issues in dispute. The Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds by a preponderance ofthe evidence presented during the arbitration most nearly conforms to those factors traditionally taken into consideration in the determination of wages, hours, benefits and terms and conditions of public and private emp19yment, including, but not limited to; changes in the aVllrage consumer priee index for goods and services; the wages, hours, benefits and terms and conditions of employment of employees performing similar services; the wages, hours, benefits and terms and conditions of employment of other employees in the City and County of San Francisco; health and safety of employees; the financial resources of the City and County of San Francisco, including a joint report to be issued annually on the City's financial condition for the next three fiscal years from the Controller, the Mayor's budget analyst and the budget analyst for the Board of Supervisors; other demands on the City and County's resources including limitations on the amount and use of revenues and expenditures; revenue projections; the power to levy taxes and raise revenue by enhancements or other means; budgetary reserves; and the City'S ability to meet the eosts of the decision of the Arbitration Board. In addition, the Board shall issue >,Thlen fmdings on eaeh and every one of the above factors as they may be applicable to each and every issue determined in the award. Compliance with the above provisions shall be mandatory. (e) After teaching a decision, the Board shall serve by certified mail or by hand delivery a true copy of its decision to the parties. The decision and fmdings of the Arbitration Board shall not be publicly disclosed until ten (10) days after it is delivered to the parties. During that ten (10) day period the parties shall meet privately, attempt to resolve their differences, and by mutual agreement amend or modifY the decision and findings of the Arbitration Board. At the conclusion of the ten (10) day period, which may be extended by mutual agreement between the parties, the decision and findings of the Arbitration Board, as it may be modified or amended by the parties, shall be publically disclosed for a period of fourteen (14) days after which time the decision shall be final and binding. Except as otherwise provided by this part, the arbitration decision shall supersede any and all other relevant formulae, procedures and provisions of this Charter relating to wages, hours, benefits and terms and conditions of employment, and it shall be fmal and binding on the parties to the dispute. However, the decision of the Board may be judicially challenged by either party. Thereafter, the City and County of San Francisco, its designated officers, employees and representatives and the recognized employee organization involved in the dispute shall take whatever action necessary to carry out and effectuate the final decision. '. (f) The expenses of any proceedings convened pursuant to this part, including the fee for the services of the Chairperson of the Board, the costs of preparation of the transcript of the proceedings and other costs related to the conduct of the proceedings, as determined by the Board, shall be borne equally by the parties. All other expenses which the parties may incur are to be borne by the party incurring such expenses. (g) The impasse resolution procedures set forth in Section AS.409-4, or in any other provision of the Charter, ordinance or state law shall not apply to any rule, policy, procedure, order or practice which relates or pertains to the purpose, goals or 'tequirements of a consent decree, or which is necessary<t,O ensure compliance vvith Federal, State or local laws, ordinances or regulations. In the event the City acts on a matter it has determined relates to or pertains to a consent decree, or in the event the City acts to ensure compliance with Federal, State, or local laws, ordinances or regulations, and the affected employee organization disputes said determiuation, that determination or action shall not be subject to arbitration, but may be challenged in a court of competent jurisdiction. (h) The impasse resolution procedures set forth in Section A8.409-4, or in any other section of the Charter, shall not apply to any proposal pertaining to the right to strike. (i) Charter Sections A8.590-l through A8.590-7 shall remain in full force and effect; provided, however, that the wages and other economic benefits and compensation of all classifications of employees covered by these sections shall be frozen for fiscal year 1995-96 at the rates in effect on June 30, 1995, except that wages and other economic benefits and compensation of all classifications of Airport Police shall be frozen for the fiscal year following expiration of the Memorandum ofUnderstsnding covering those classifications in effect on the effective date of this amendment. G) Subject to the election provisions of Section A8.409-1, Charter Sections A8.403 and A8.404 shall remain in full force and effect; provided, however, that the wages and other economic benefits and compensation of all classifications of employees covered by section A8.404 shall be frozen for fiscal year 1995-96 at the rates in effect on June 30, 1995. (k) An agreement reached between the designated representatives for the City and the representatives of a recoguized employee organization that is submitted to the Board of Supervisors on or before May 15, or a decision of the ArbitrationlMediation Board that is submitted to the Board of Supervisors on or before May 10, or May 15 if the parties waive the 1 O-day period between the Board's decision and public disclosure of the L decision, shall be effective on July 1 of the s~e calendar year upon adoption by the Board of Supervisors. An agreement submitted to the Board of Supervisors after May 15, or a decision of the ArbitrationIMediati.on B.oard that is submitted to the B.oard of Supervis.ors after May 10, .or May 15 if the parties waive the lO-day period between the Board's decision and public discl.osure of the decisi.on, shall bec.ome effective n.o earlier than July I of the next calendar year upon appr.oval of the Board of Supervis.ors. But an agreement reached during the term of an existing memorandum of understanding that results in a net reduction, or results in no net increase, in the c.ost t.o the City, during the current fiscal year, of existing economic provisi.ons in the existing memorandum.of understanding may become effective at any time up.on approval by the Board .of Supervis.ors. Economic pr.ovisions include, but are n.ot limited t.o, wages, premium pay rates, overtime, any empl.oyer pickup of the empl.oyees' retirement contributi.on, paid time .off, anc·.other c.ompensati.on. ~. (Amended March 2004; Amended by Propositi.on A, Approved ) CITY OF SAN LEANDRO Section 450: BINDING ARBITRATION. (e) Agreements reached between City representatives and the representatives ofthe recognized employee organizations shall be submitted in writing to the City Council for its approval, modification, or rejection. All phases of negotiations, mediation and arbitration including the final binding decision of the mediator/arbitrator shall be completed at least 25 calendar days before the expiration ofthe then current agreement or arbitration award. . .. (f). Both partieR,shall select and schedule a person to act as both mediator and arbitrator (hereafter "arbitrator") at least 200 calendar days before the expiration of the then current agreement or arbitration award. If they are unable to agree upon an arbitrator, they shall select such person from a list of seven names to be provided by an impartial third-party arbitration service mutually acceptable to the parties. The parties shall provide the arbitration service with sufficient notice to insure receipt of the list at least 190 calendar days before the expiration of the then current agreement or arbitration award. If at least 180 calendar days before the expiration of the then current agreement or arbitration award the parties still cannot agree upon an arbitrator, they shall immediately alternately strike names from the list, the choice of the first strike to be determined by lot. The last remaining unstruck name shall be selected and scheduled as arbitrator. (g) If 90 calendar days before the expiration of the current agreement or arbitration award no agreement can be reached, or if the City Council refuses to ratify the agreement arrived at or modifies such agreement in any manner unacceptable to the employee organization, the parties shall commence mediation. (h) If no agreement between the parties has been reached within 14 calendar days after the start of mediation, the arbitrator shall thereupon commence arbitration proceedings to deal with the issues still in dispute. Each party shall put in writing its last best offer on each of the issues still in dispute within 14 calendar days after the start of arbitration proceedings, and these offers shall immediately be made public. The arbitrator shall choose one of the parties' last best offer for each such issue still in dispute and shall have no power to modify or compromise the last best offers of either party. The arbitrator shall hear the evidence presented and consider all factors relevant to the issues from the standpoint of both employer and effected employees, including the interests and welfare of the public and the financial ability of the City to meet those costs. If one of the parties fails to submit its last best offer within the above allotted time, then the arbitrator shall be obligated to make an award incorporating the terms and conditions of the last best offer made by the party that has submitted its offer within the above allotted times. The decision of the arbitrator shall be final and binding on all parties. (i) The costs of mediation and arbitration, including the scheduling of the arbitrator, shall be borne equally by all parties. Mediation and arbitration hearings shall be conducted within the City and closed to ihe public, unless oiherwise mutually agreed upon by ihe parties wiih ihe concurrence of the arbitrator. Q) The provisions of ihis Section shall not be construed as making any of ihe provisions of Section 923 of the Labor Code of ihe State of California applicable to City employees. The provisions of this Section pertaining to arbitration shall be construed as an "arbitration agreement" for ihe purpose of making applicable to ihe extent not in conflict herewiih ihe provisions of Chapter 1 (commencing wiih Section 1280), Title IX, Part 3 of ihe ~ode of Civil Procedure of ihe State of California. (k) The time limits set forth above may be waived by the mutual, written agreement of the psties and the arbitrator. ." .... -, ) CITY OF SANTA CRUZ SECTION 1119. COMPULSORY ARBITRATION FOR FIRE DEPARTMENT EMPLOYEE DISPUTES. The City, through its duly authorized representatives, shall negotiate in good faith with the recognized fire department employee organization on all matters relating to the wages, hours, and other terms and conditions of City employment, including the establishment of procedures for the resolution of grievances submitted by either employee organization over the interpretation or application of any negotiated agreement including a provision for binding arbitration of those grievances. Unless and until agreement is rl'.'lched through negotiations between the City and the recognized employee organization for the fire department or a determination is made through the arbitration procedure hereinafter provided, no existing benefit or condition of employment for the members of the fire department bargaining unit shall be eliminated or changed. All disputes or controversies pertaining to wages, hours, or terms and conditions of employment Which remain unresolved after good faith negotiations between the City and the fire department employee organization shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. Representatives designated by the City and representatives of the recognized employee organization involved in the dispute, controversy or grievance shall each select one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City and the employee organization, and shall serve as the neutral arbitrator and Chairman of the Board. In the event that the arbitrators selected by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, then either party may request the State of California Conciliation Service to provide a list of seven (7) persons who are qualified and experienced as labor arbitrators. If the arbitrators selected by the City and the employee organization cannot agree within three (3) days after receipt of such lists on one of seven (7) to act as the third arbitrator, they shall alternatively strike names from the list of nominees until only one name remains and that person shall then become the third arbitrator and chairman of the Arbitration Board. Any arbitration convened pursuant to this Section shall be conducted in conformance with, subject, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. At the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as ~he Board may establish, a last offer of settlement on each 0:. i i ~ 1 the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms with those factors traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of public and private employment, including, but not limited to, changes in average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing Similar services, and the financial condition of the City and its ability to meet the cost of the award. After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be disclosed and shall not be binding until ten (10) days after it is delivered to liTe parties. During that ten-day period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion of the ten-day period, which may be extended by mutual agreement between parties, the decision of the Arlbitration Board together with any amendments or modifications agreed to by the parties shall be disclosed and shall be binding upon the parties. The City and the recognized employee organization shall . take whatever action is necessary to carry out and effectuate the award. The expenses of any arbitration convened pursuant to this Section, including the fee for the services of the Chairman of the Arlbitration Board, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expense. This section does not apply to members of the Fire Department's Fire Management bargaining unit. (Added 3-26-96) J ,.",'- CITY OF ANAHEIM Section 1053. IMPASSE RESOLUTION PROCEDURES All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the City and the recognized employee organization involved in the dispute shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization. Representatives designated by the City and representatives of the recognized employee organization involved in the dispute shall each appoint one ".. arbitrator to the Board of Arbitrators within thrce (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City and the employee organization, and shall serve as the neutral arbitrator and Chairperson of the Board. In the event that the arbitrators selected by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, then either party may request the State of California Mediation and Conciliation Service to provide a list of seven (7) persons who are qualified and ex.perienced as labor arbitrators. If the arbitrators selected by the City and the employee organization cannot agree within three (3) days after receipt of such list on one of the seven (7) to act as the third arbitrator, they shall alternately strike names from the list of nominees until one name remains and that person shall then become the third arbitrator and chairperson of the Arbitration Board. Any arbitration convened pursuant to this article shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. The Arbitration Board shall hold public hearings, receive evidence from the parties and cause a transcript of the proceedings to be prepared. The Arbitration Board, in the exercise of its discretion, may meet privately with the parties and mediate or mede-arb issues in dispute. The Arbitration Board may also adopt such other procedures that are designed to encourage an agreement between the parties, expedite the arbitration hearing process, or reduce the costs of the arbitration process. At the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Board may establish, a last offer of settlement on each of the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms ",ith those factors traditionally taken into consideration in the determination of wages, hours and other terms and conditions of public and private employment, including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, and the financial condition of the City and its ability to meet the cost of the award. After reaching a decision, the Arbitration Board shall mail or otherwise deliver a fn!e .CJlPY of its decision to the parties. The "". '- "' 1 i I decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten day period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion of the ten (10) day period, which may be extended by mutual agreement between the parties, the decision of the Arbitration Board, incorporating any amendments or modifications agreed to by the parties, shall be publicly disclosed and shall be binding upon the parties. The City and the recognized employee organization shall take whatever action is necessary to carry out and effeetuate the final Arbitration Board award (incorporating any amendments or modifications agreed to by the parties as provided above). The expenses of any arbitration convened pursuant to this article, including the fee for the services of thlil"Chairperson of the Arbitration Board, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. ) ) CITY OF GILROY Section 1004. Prohibitions. Sec. 4. Impasse Resolution Procedure. All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the City and either the fire or police department employee organization shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. Representatives designat~d by the City and representatives of the recognized employ\e organization involved in the dispute, controversy or grievance shall each select one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City and the employee organization, and shall serve as the neutral arbitrator and Chairman of the Board. In the event that the arbitrators selected by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, then either party may request the State of California Conciliation Service to provide a list of seven (7) persons who are qualified and experienced as labor arbitrators. If the arbitrators selected by the City and the employee organization cannot agree within three (3) days after receipt of such list on one of seven (7) to act as the third arbitrator, they shall alternately strike names from the list of nominees until only one name remains and that person shall then become the third arbitrator and Chairman of the Arbitration Board. Any arbitration convened pursuant to this article shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. At the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time as the Board may establish, a last offer of settlement on each of the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms with those factors traditionally taken into consideration in the determination of wages,hours, and other terms and conditions of public and private employment including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, and the financial condition of the City and its ability to meet the cost of the award. After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be bindi!19 until ten (10) days after it is delivered to the parties. Durin£! til at ten day period, the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board, At the conclusion of the ten day period, which may be extended by mutual agreement between the parties, the decision of the Arbitration Board together with any amendments or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties, The City and the recognized employee organization shall take whatever action is necessary to carry out and effectuate the award, The expense of any arbitration convened pursuant to this article, including the fee for the services of the Chairman of the Arbitration Board, shall be borne equally by the parties, All other expenses which the parties'rrlay incur individually are to be borne by the party incurring Such expenses, (Section (C) Charter Amendment November 8,1988,) ) CITY OF SAN LUIS OBISPO (D) Impasse Resolution Procedures. (1) All disputes, controversies and grievances pertaining to wages, hours or terms and conditions of City employment which remain unresolved after good faith negotiations between the City and said employee organization shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City or by said employee organization. Upon declaration of impasse by either party, the City and employee organization shall each eXChange a written last offer of settlement on each of the issues remaining in dispute. Written last offer of settlement shall be exchanged between parties within two days of the declaration of"lrnpasse. (2) Representatives designated by the City and representetives of the employee organization shall each select and appoint one arbitrator to the Board of Arbitrators within three (3) business days after either party has notified the other, in writing, of the declaration of impasse and the desire to proceed to arbitration. The third member of the Board of Arbitrators shall be selected by agreement between the City's and the employee's organization representetive within ten (10) business days of the declaration of impasse. This third member shall serve as the neutral arbitrator and Chairperson of the Board. In the event that the City and the employee organization cannot agree upon the selection of the neutral arbitrator within ten (10) business days from the date that either party has notified the other that it has declared an impasse, either party may then request the State Mediation and Conciliation Service of the State of California Department of Industrial Relations to provide a list of seven (7) persons who are qualified and experienced as labor arbitrators. If the arbitrators selected by the City and the employee organization cannot agree within three (3) days after receipt of such list on one of the seven (7) to act as the third arbitrator, they shall have five (5) business days to alternately strike names, with the City's arbitrator striking first, from the list of nominees until one name remains and that person shall then become the neutral arbitrator and Chairperson of the Board of Arbitrators. (3) Any arbitration proceeding convened pursuant to this Article shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. The Board of Arbitrators shall hold public hearings, receive evidence from the parties and cause a transcript of the proceedings to be prepared. The Board of Arbitrators may adopt by unanimous consent such other procedures that are designed to encourage an agreement between the parties, expedite the arbitration hearing process, or reduce the costs of the arbitration process. (4) In the event no agreement is reached prior to the conclusion of the arbitration hearings, the Board of Arbitrators shall direct each of the parties to submit, within such time limit as the Board of Arbitrators may establish, but not to exceed thirty (30) business days, a last offer of settlement on each"OOnl1e remaining issues in dispute. The Board of Arbitrators Y"" r '- shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms to those factors traditionally taken into consideration in the determination of wages, hours, benefits and terms and conditions of public and private employment, including, but not limited to the following: changes in the average consumer price index for goods and services using the San Francisco-Oakland- San Jose index, as reported at the time impasse is declared for the preceding twelve (12) months, the wages, hours, benefits and terms and conditions of employment of employees performing similar services in comparable cities; and the financial condition of the City of San Luis Obispo and its ability to meet the costs of the deciSion of the Board of Arbitrators, (5) After reaching a decision, the Board of Arbitraturs shall mail or otherwise deliver a true copy of its decision to the parties, The decision of the Board of Arbitrators shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties, During that ten (10) day period the parties shall meet privately, attempt to resolve their differences, and by mutual agreement amend or modify the decision of the Board of Arbitrators, At the conclusion of the ten (10) day period, which may be extended by mutual agreement between the parties, the decision of Board of Arbitrators, as it may be modified or amended by the parties, shall be publicly disclosed and shall be binding on the perties, The City and the employee organization shall take whatever action is necessary to carry out and effectuate the arbitration award, No other actions by the City Councilor by the electorate to conform or approve the decision of the Board of Arbitrators shall be permitted or required, (6) The expenses of any arbitration proceeding convened pursuant to this Article, including the fee for the services of the chairperson of the Board of Arbitrators and the costs of preparation of the transcript of the proceedings shall be borne equally by the parties, The expenses of the arbitration, which the parties may incur individually, are to be borne by the party incurring such expenses, Such expenses include, but are not limited to, the expense of calling a party's witnesses, the costs incurred in gathering data and compiling reports, and any expenses incurred by the party's arbitrator The parties may mutually agree to divide the costs in another manner, (7) The proceedings described herein shall supersede the dispute resolution process for the San Luis Obispo Police Officers Association and the San Luis Obispo Firefighters ASSOCiation which is set forth in Sections 132 and 14,1 of City of San Luis Obispo Resolution No, 6620, to the extent that such language is in conflict with this amendment Furthermore, the proceedings described herein shall supersede any language within the Employer-Employee Resolution, the Personnel Rules and Regulations, any Memorandum of Agreement with the employee associations or any written policy or procedure relating to wages, hours or other terms and conditions of City employment, to the extent that such language is in conflict with this amendment However, nothing in this section shall preclude the parties from mutually agreeing to useit"ispute resolution processes other than the ) binding arbitration process herein set forth. Nor, does it preclude the parties from negotiating, and submitting to the arbitration process set forth herein, a grievance process, which includes a form of binding arbitration that differs from the one, set forth herein. ) CITY OF PETALUMA Article XII-. Arbitration Sec. 82 Police and Fire Binding Arbitration, D. Impasse Resolution Procedures. All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after gooo faith negotiations between the city and either the fire or police department employee organization shall be submitted to a three-member board of arbitrators upon the declaration of an impasse by the city or by the recognized employee organiz<\tion involved in the dispute, Representatives designated by the city and representatives of the recognized employee organization involved in the dispute, controversy or grievance shall each select one arbitrator to the board of arbitrators within three days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the arbitration board shall be selected by agreement between the two arbitrators selected by the city and the employee organization, and shall serve as the neutral arbitrator and chairman of the board. In the event that the arbitrators selected by the city and the employee organization cannot agree upon the selection of the third arbitrator within ten days from the date that either party has notified the other that it has declared an impasse, then either party may request the State of California Conciliation Service to provide a list of seven persons who are qualified and experienced as labor arbitrators If the arbitrators selected by the city and the employee organization cannot agree within three days after receipt of such list on one of seven to act as the third arbitrator, they shall alternately strike names from the list of nominees until only one name remains and that person shall then become the third arbitrator and chairnran of the arbitration board. Any arbitration convened pursuant to this article shall be conducted in confornrance with, subject to, and governed by Title 9 of Part 3 of the California Cooe of Civil Procedure. At the conclusion of the arbitration hearings, the arbitration board shall direct each of the parties to submit, within such time as the board may establish, a last offer of settlement on each of the issues in dispute. The arbitration board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms with those factors traditionally taken into consideration in the determination of wages, hours, and other ternrs and conditions of public and private employmen~ including, but not limited to, changes in the average consumer price index for gooos and serviCes, the wages, hours, and other terms and conditions of employment of other employees perfornring similar services, and the financial condition of the city and its ability to meet the cost of the award. After reaching a decision, the arbitration board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the arbitration board shall not be publicly disclosed and shall not be binding until ten aays after it is delivered to the parties. During that ten-day penod~the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the arbitration board, At the conclusion of the ten-day period, which may be extended by mutual agreement between the parties, the decision of the arbitration board together with any amendments or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties, The city and the recognized employee organizalion shall take whatever action is necessary to carry out and effectuate the award, The expense of any arbitration convened pursuant to this article, including the fee for the services of the chairman of the arbitration board, shall be borne equally by the parties, All other expenses which the parties may incur individually are to be borne by the party incurring such expenses, (11-6-90) "", . - J CITY OF OAKLAND Seetlon 910. Arbitration for Uniformed Members of the Police and partments. (sic) (a) (b) (e) (d) It IS hereby declared to be the policy of the voters of the City to endeavor to establish and maintain, without labor strife and dissension, wages, hours, and other terms and condllions 01 employment for the uniformed members of the Police and Fire Departments which are lair and comparable to similar private and public employment. To such purpose, the voters of the City hereby recognize the efficiency of and adopt the principle of binding arbitration as an equitable alternative means to arrive at a fair resolution of terms of wages, hours, and other terms and conditions of employment for such employees when the parties have been unable to resolve these questions through negotiations, Pursuant to the public policy hereinabove declared, the City or the recognized employee organization for the uniformed members of the Police and Fire Departments may, as the result of an Impasse after meeting and conferring In good faith on matters within the scope of representation as required by applicable State law, refer any such matters which are unresolved to binding arbitration under the provisions of this Section; except that the Chartar provisions concerning the Pollee and Fire Retirement System and such other provisions of this Charter which specifically govern wages, hours and other terms and conditions of employment of uniformed members of the Police and Fire Departments shall not be subject to change by arbitration, In any such arbitration, the arbitrator Is directed to take into consideration the City's purpose and policy to create and maintain wages, hours and other terms and conditions of employment which are fair and comparable to similar private and public employment and which are responsive to changing conditions and changing costs and standards of living, The arbitrator shall also consider; the Interest and welfare of the public; the availability and sources of funds to defray the cost of any changes In wages; hours and condHions of employment; and all existing benefits and prOVisions relating to wages, hours and terms and condllions of employment of the uniformed members of the Police and Fire Departments, whether contained in this Charter or elsewhere. Any unresolved dispute or controversy ariSing under the provisions of this Section, or any unresolved dispute or controversy pertaining to the interpretation' or application of any negotiated agreement covering uniformed members of the Police and Fire Departments shall be submitted to an Impartial arbitrator, Representatives deSignated by the City and representatives of the recognized employee organization affected by the dispute or controversy shall select the arbitrator, In the event that said parties cannot agree upon the selection of the arbitrator within five days from the date of any impasse, then the California State Conciliation Service shall be requested to nominate five (5) persons, all of whom shall be qualified and experienced as labor arbitrators. If the representatives of the recognized employee organization and the City cannot agree on one of the five to act as arbitrator, they shall strike names from the list of said nominees alternately until the name of one nominee remains who shall thereupon become the arbitrator. The first party to strike a name from the list shall be chosen by lot Every effort shall be made to secure an award from the Impartial arbitrator within thirty (30) calendar days after submission of all Issues to him. The arbitration proceedings herein provided shall be governed by Sections 1280, et seq., of the California Code of Civil Procedure. The arbitrator's award shall be submitted In writing and shall be final and binding on all parties, The City and the affected employee organization shall take whatever action Is necessary to carry out and effectuate the award. The expenses of arbitration, Including the fee for ,-the arbitrators services, shall be borne equally by parties, All oth<;r_expenses (e) which the parties may incur individually are to be bome by the party incurring such expenses. Nothing herein shall be construed to prevent the parties from submitting controversies or disputes to mediation, fact-finding or other reasonable method to finally resolve the dispute should the City and the recognized employee organization in the controversy or dispute so agree. An impasse may be declared by either the City or the recognized employee organization in the event the parties fail to reach an agreement on matters within the scope of representation after meeting and conferring in good faith as required by applicable State law, or after other mutually agreed-upon settlement methods fail to result in agreement between the parties. ) CITY OF SACRAMENTO § 503 Impasse Resolution Procedures. (a) All disputes or controversies pertaining to wages, hours or terms and conditions of employment which remain unresolved after good faith negotiations between the City and a police department employee organization shall be submitted to a three- member Board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. (b) Representatives designated by the City and representatives of the . recognized employee organization involved in the dispute shall each select and appoint ,', one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the City and the employee organization, and shall serve as the neutral arbitrator and Chairperson of the Board. In the event that the City and the recognized employee organization involved in the dispute cannot agree upon the selection of the neutral arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, either party may then request the State Mediation and Conciliation Service of the State of California Department ofIndustrial Relations to provide a list of seven (7) persons who are qualified and experienced as labor arbitrators. If the City and the employee organization cannot agree within three (3) days after receipt of such list on one of seven (7) persons to act as ) the neutral arbitrator, they shall alternately strike names from the list of nominees until one name remains and that person shall then become the neutral arbitrator and Chairperson of the Arbitration Board. (c) Any arbitration proceeding convened pursuant to this Article shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. The Arbitration Board shall hold public hearings, receive evidence from the parties and cause a transcript of the proceedings to be prepared. The Arbitration Board, in the exercise of its discretion, may meet privately with the parties and mediate or mede-arb issues in dispute. The Arbitration Board may also adopt such other procedures that are designed to encourage an agreement between the parties, expedite the arbitration hearing process, or reduce the costs of the arbitration process. (d) In the event no agreement is reached prior to the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Arbitration Board may establish, a last offer of settlement on each of the remaining issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it frods most nearly conforms to those factors traditionally taken into consideration in the determination of wages, hours, benefits and terms and conditions of public and private employment, including, but not limited to the following: changes in the average consumer price index for goods. and services; the wages, hours, benefits and terms and . < -< conditions of employment of employees perfonning similar services to the extent that such can be reasonably done, including comparable classifications in public employment in the Sacramento metropolitan area, and in the three California cities next larger and the three California cities next smaller in population than Sacramento; and the financial condition of the City of Sacramento its ability to meet the costs of the decision of the Arbitration Board. (e) After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten (10) day period the parties shall meet privately, attempt to resolve their differences, and by mutual agreement acend or modify the decision of the Arbitration Board. At the conclusion of the ten (10) day period, which may be extended by mutual agreement between the parties, the decision of the Arbitration Board as it may be modified or amended by the parties, shall be publicly disclosed and shall be binding on the parties, The City and the employee organization shall take whatever action is necessary to carry out and effectuate the arbitration award. No other actions by the City Council or by the electorate to confinn or approve the decision of the Arbitration Board shall be pennitted or required. (f) The expenses of any arbitration proceeding convened pursuant to this Article, including the fee for the services of the chairperson of the Arbitration Board and the costs of preparation of the transcript of the proceedings shall be borne equally by the parties, All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. ) COUNTY OF SACRAMENTO Sec. 94. Impasse Resolution Procedures. (a) All disputes or controversies pertaining to wages, hours or terms and conditions of employment which remain unresolved after good faith negotiations between the County and the organization recognized as representing the (003) Non-Supervisory Law Enforcement Unit employees shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the County or by the (003) Non- Supervisory Law Enforcement Unit employee organization involved in the dispute. (b) Representatives designated by the-. County and representatives of the organization recognized as representing the (003) Non-Supervisory Law Enforcement Unit and employees shall each select and appoint one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in ""riting, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the County and the organization recognized as representing the (003) Non-Supervisory Law Enforcement Unit employees, and shall serve as the neutral arbitrator and Chairperson of the Board. In the event that the County and the organization recognized as representing the (003) Non-Supervisory Law Enforcement Unit employees cannot agree upon the selection of the neutral arbitrator within ten (10) days from the date that either party has notificd the other that is has declared an impasse, either party may then request the State Mediation and Conciliation Service for the State of California Department of Industrial Relations to provide a list of seven (7) persons who are qualified and experieneed as labor arbitrators. If the County and the organization recognized as representing the (003) Non-Supervisory Law Enforcement Unit employees cannot agree within three (3) days after receipt of such list on one of seven (7) persons to act as the neutral arbitrator, they shall alternately strike names from the list of nominees until one name remains and that person shall then become the neutral arbitrator and Chairperson of the Arbitration Board. (e) Any arbitration proeeeding convened pnrsuant to this Article shall be conducted in conformance with, subjeet to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. 'The Arbitration Board shall hold public hearings, receive evidence from the parties and cause a transcript of the proceedings to be prepared. The Arbitration Board, in the exercise of its discretion, may met privately with the parties and mediate or "mede-arb" issucs in dispute. The Arbitration Board may also adopt such other procedures that are designed to encourage an agreement between the parties, expedite the arbitration hearing process, or reduce the costs of the arbitration process. (d) In the event no agreement is reached prior to the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Arbitration Board may establish, a last offer of settlement on eaeh of the remaining issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever las!s!f[er of settlement on that issue it finds most j 1 nearly conforms to those factors traditionally taken into consideration in the determination of wages, hours, benefits and terms and conditions of public and private employment, including but not limited to the following: changes in the average consumer price index for goods and services; the wages, hours, benefits and terms and conditions of employment of employees performing similar services to the extent that such can be reasonably done; and the financial condition of the County of Sacramento and its ability to meet the costs of the decision of the Arbitration Board. ( e) After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy ofits decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is c..elivered to the parties. During that ten (10) day period ~e parties shall meet privately, attempt to resolve their differences, and by mutual agreement amend or modify the decision of the Arbitration Board. At the conclusion of the ten (10) day period, which may be extended by mutual agreement between the parnes, the decision of the Arbitration Board, as it may be modified or amended by the parties, shall be publicly disclosed and shall be binding on the parties. The County and the organization recognized as representing the (003) Non-Supervisory Law Enforcement Unit employees shall take whatever action is necessary to carry out and effectuate the arbitration award. No other actions by the County Board of Supervisors or by the electorate to confirm or approve the decision of the Arbitration Board shall be required or permitted. (f) The expenses of any arbitration proceeding convened pursuant to thc Article, including the fee for the services of the chairperson of the Arbitration Board and the costs of preparation of the transcript of the proceedings, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. ) CITY OF STOCKTON 2.74.180 Impasse procedures. SECTION 1607. Impartial Mediation for Employee Disputes. (d) hnpasse Resolution Procedures. (1) All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain umesolved after good faith negotiations regarding a memorandum of understanding (MOV) between the City and a Fire Department employee organization should be submitted to impartial mediation ",pon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. (2) Within three (3) days after either party has notified the other, in writing, that it desires to proceed to mediation, representatives designated by the City and representatives of the recognized employee organization involved in the dispute shall request cost free mediation through the California State Mediation and Conciliation or other mutually agreeable organization. The parties may mutually agree on a private mediator or other impasse resolution process. (3) Any mediation proceeding convened pursuant to this Article shall be conducted in conformance with State law. The parties may also adopt such other procedures that are designed to encourage an agreement between the parties, expedite the mediation process, or reduce the costs of the mediation. (4) The cost of any mediation convened pursuant to this Article, including the fee for the services of the mediator, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. 1 j j 1 I 1 I i 1 j 1 / ) " . REDWOOD CITY Section 96. IMPARTIAL AND BINDING ARBITRATION FOR FIRE DEPARTMENT EMPLOYEE DISPUTES. d. Impasse Resolution Procedures. All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the City and the fire department employee organization shall be submitted to a three-member board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. Representatives designated by the City and representatives of the recognized employee organization involved in the dispute, shall each select one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City and the employee organization, and shall serve as the neutral arbitrator and Chairman of the Board. In the event that the arbitrators selected by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, then either party may request the State of California Conciliation Service to provide a list of seven (7) persons who are qualified and experienced as labor arbitrators. If the arbitrator selected by the City and the employee organization cannot agree within three (3) days after receipt of such list on one of seven (7) to act as the third arbitrator, they shall alternately strike names from the list of nominees until one name remains and that person shall then become the third arbitrator and chairman of the Arbitration Board. Any arbitration convened pursuant to this article shall be conducted in conformance with, subject, and governed by Title 9 of Part 3 of the California Code of Civil Procedure. At the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Board may establish, a last offer of settlement on each of the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms with those factors traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of public and private employment, including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, and the financial condition of the City and its ability to meet the cost of the award. After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten day period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion of the ten (10) day period, which may be extended by mutual agreement between the parties, the decision of the Arbitration Board together with any amendments or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties. The City and the recognized employee organization shall take whatever action is necessary to carry out and effectuate the award. The expenses of any arbitration convened pursuant to this article, including the fee for the services of the Chairman of the Arbitration Board, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. (As amended by legislative initiative November 3, 1987, certified by Secretary of State December 23, 1987) ) ) CITY OF NAPA Section 80. Resolution of disputes regarding wages, salary or benefits between the City of Napa and Public Safety Employees. D. Impasse Resolution Procedures. All disputes or controversies pertaining to wages, hours or terms and conditions of employment which remain unresolved after good faith negotiations between the City of Napa and any recognized employee organization for Public Safety Employees shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City of Napa or by the recognized employee organization involved in the dispute. Represen1>ltives designated by the City of Napa and representatives of:he recognized employee organization involved in the dispute, controversy or grievance shall each select one arbitrator to the Board of Arbitrators within three days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City of Napa and the employee organization, and shall serve as the neutral arbitrator and Chairman of the Board. In the event that the arbitrators selected by the City of Napa and the employee organization cannot agree upon the selection of the third arbitrator within 10 days from the date that either party has notified the other that it has declared an impasse, then either party may request the State of California Conciliation Service to provide a list of seven persons who are qualified and experienced as labor arbitrators. If the arbitrators selected by the City of Napa and the employee organization cannot agree within three days after the receipt of such list on one of seven to act as the third arbitrator, they shall alternatively strike names from the list of nominees until only one name remains and that person shall then become the third arbitrator and chairman of the Arbitration Board. Any arbitration convened pursuant to this section shall be conducted in conformance with, subject to and governed by Title 9 of Part 3 of the California Code of Civil Procedure. At .the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Board may establish, a last offer of settlement on each of the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds most nearly conforms to those factors traditionally taken into consideration in the determination of wages, hours and other terms and conditions of public and private employment, including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours and other terms and conditions of employment of other employees performing similar services, and the financial condition of the City of Napa and its ability to meet the cost of the award. After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until 10 days after it is delivered to the parties. During that ten-day period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion of the ten-day period, which may be extended by mutual agreement between the J,'l'alties, the decision of the Arbitration Board together with arrY"amendments or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties. The City of Napa and the recognized employee organization shall take whatever action is necessary to carry oot and effectuate the award. The expenses of any arbitration convened pursuant to this section, including the fee for the services of the Chamnan of the Arbitration Board, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses. Printable version: Arbitrator imposes contract rejected by Muni workers SFGata...,m Arbitrator imposes contract rejected by Muni workers Michael Cabanatuan,Rachel Gordon, Chronicle Staff Writers Tuesday, June 14, 2011 Page 1 of3 San Francisco --Muni operators must work under the contract they overwhelmingly rejected last week, an independent arbitrator ruled Monday night. The decision, announced during a union membership meeting, infuriated many Muni operators. Under the City Charter, if the Municipal Transportation Agency and Transport Workers Union Local 250-A fail to reach an agreement, an arbitrator determines the terms of the contract the 2,200 operators will work under for the next three years. "It is the opinion of the mediator/arbitrator that the terms of the (proposed contract) on the disputed issues represent the best resolution of these protracted labor negotiations and are in the best interests of both the parties and the riding public," wrote arbitrator Carol Vendrillo, who also helped with the negotiations that led to the tentative agreement. Earlier Monday, it appeared the decision might spur at least some of the 2,200 Muni operators to engage in a shutdown to protest the imposition of a contract. In a press release Monday morning, a group calling itself the union's Strike Education Committee said that "an arbitrator's decision to remove the outside, neutral process for evaluation of accidents, mechanical safety of the fleet, and health and safety of the schedules may cause a shutdown." But after the two-hour meeting, operators said that no job actions were planned and that they had yet to determine their next steps. The new contract prohibits strikes -as did the previous one -and City Attorney Dennis Herrera has said he would take "appropriate legal recourse" in the event of a work disruption. Tom Nolan, chairman of the MTA's governing board, said he hopes anger doesn't lead to a work disruption. "There is a great distance between voting a secret ballot and doing something that could jeopardize your job," he said. At a committee press conference before the union meeting, about a dozen operators expressed anger -at Muni management, at the media and at their own union leadership. After the meeting, visibly irritated operators shouted "You don't represent us" at local president Rafael Cabrera. 'It's about respect' "We're not crying about a pay cut it's about respect," said Victor Grayson, an operator and http:/Avww.sfgate.com/cgi-biniarticle.cgi?f=/c/al2011/06ll4IMNRDIJTCEI.DTL&type=p... 6/15/2011 Printable version: Arbitrator imposes contract rejected by Muni workers Page 2 of3 committee spokesman. "We want to be in the position to do our job without people looking over our shoulders and treating us like children. This isn't 'Romper Room.' We are adults, and we have lots of peoples' lives in our hands." In a statement from the union, Cabrera echoed comments the union leadership made when it campaigned for ratification of the tentative pact, and acknowledged its sound defeat. "We view this decision as a win for our members on wages, benefits and pension issues," he said. "However, many of our members will be very wary of changes in work rules and the grievance procedure ." Nolan said the lopsided vote against the tentative agreement opened his eyes to the level of discontent among Muni operators. "We need to restart here with as clean a slate as we possibly can," he said. "We need to look in the mirror, starting with the board of directors and the top managers. " Like the tentative agreement union members voted down 994-488, the new contract calls for a three-year wage freeze, allows the use of part-time operators and other measures to cut overtime costs, and gives management more control over discipline and day-to-day operations. MTA officials have estimated the contract will save the agency $38 million over the next three years. Agency officials declined to comment immediately, but Supervisor Sean Elsbernd, an architect of the Proposition G initiative that changed the way Muni contracts are negotiated, applauded the arbitrator's decision. Proposition 9 "The voters' will has now been implemented, and it's time for Muni's management and labor partners to move forward," he said. "I very much hope that everyone will respect the voter- mandated process and accept the results." City voters approved Proposition G in November, giving agency management considerably more clout in negotiations by eliminating the City Charter provision that guaranteed Muni operators the second-highest pay in the country, which is now $29.52 an hour. The pay formula was adopted four decades ago with the aim of maintaining labor peace with Muni operators. Prop. G backers said they wanted to give Muni management the tools to run a more efficient system. The initiative landed on the ballot after operators twice rebuffed their union leaders and voted down cost -saving concessions requested by city officials. Cabrera said the operators' sound rejection of the proposed contract reflected a growing resentment of Muni management. http://www.sfgate.com/cgi-binlarticie.cgi?f=/ c/ aJ20 II /06/ 14IMNRD I ITCEI.DTL&type=p... 6/15/20 II i 1 1 Printable version: Arbitrator imposes contract rejected by Mum workers Page 3 of3 "I believe that the (proposed contract) was rejected last week by large numbers of TWU members because of a lack of trust in management's ability to ... fairly enforce discipline and to ensure safety for both passengers and workers," Cabrera said. "Working on a bus or train is not like a desk job. Mistakes can lead to injury or death." Union officials vowed to continue fighting. "The battle is just beginning over grievance procedures, work and safety rules," Cabrera said. "Our union will have to watch these managers like hawks." E-mail thewritersatmcabanatuan@sfchromcle.comandrgordon@sfchronicle.com. http://sfgate.com/cgi-bin/ article. cg i?f= 1 C/ a/2 0 11/06/14/MNRD lJTCEI. DTL This article appeared on page A -1 of the.5an FranCisco Chronicle http://v.ww.sfgate.com/cgi-biniartic1e.cgi?f=/c/al2011106/14/MNRD IJTCELDTL&type=p... 6/15/2011 I '\ , j I ~ CI1Y AND COUNlY OF SAN FRANCISCO DEN NIS J. HERREf", C\1y Atiomey OFFICE OF THE aTY A1TORNEY JON GiVNER Depuly C1iy Atiomey O1RiCTIlIA1: (41&)_ ,"",AJ~ 100._"".011/ !;Prill. 2010 Attachedis the City Attomey's .ummary and title for a proposed local in!tia!.ive m....".,. In preparing this title, the City AtI:fiIrJay makes no _ntadon regarding the _ or legality of the proposed legislation. Nor d_lhe CIty AtlDrney verify 0< confirm any faotuaI or legal asse:rtIon made In the propo$aI. Tho title js p_1ed as a "!roe and lmpartial-.wnt of the putp<lse of the proposed measore." ElecUons Code § 9203. Very troly:\'Wl3. DBNNlS J. Bl'1.IUU!l.<A CIty Attorney "-\~G~ }dGivner Depnty City Attorney u-s: ! C; ... ", :;,-~ .." f!~ I "" • ~ J> , crrVHAI.I.. 1 0 .. CAAl.TON a etx>oo;rr I'LAC< • !1m AIANcoco, ~'" 941 02 ~ON:(415)584>41O()· FACS1Ml~: (416)5544745 rr.\_\aI1IJJl\07Q046S\~ ... :;; ., as % '" ~ !TI", U!""; ii ~ "" '" r: 0 SE1TING TRANSlT OPERATOR WAGES THROUGH COLLECTIVE BARGAINING The San Francisco MllIlicipol Txansportation Agtmcy (MfA) 0_ operation of the City's MllIliclpal Rallway transit system (Mum) and other ttallSportation functions. The MTA employs 1l'anSit employee<! such lIS Muni opexatolll and mechanics. and no .... lralIsit employees such lIS pmkiDg control oJ'ficers and traffic en~. Under the City Charter, the MTA Boar.:! ofDiIectors \Boam) sets wages fQr Muni operato", eoch year by ",viewing the wages paid to comparable omployees wmkiDg for simllar transit sysl6ms in the United S_,. The MTA Boar.:! must set Muni opexator wages at a!atll at least as hiJ<h as the average wage!'l!le of th. two blghest.paylnj! COl1I!JlUObIo tran&itsystll;mSlilthe country. Also, lithe value of the vacation, rotirement and lieaIth b.....tlts provided by the two !Jighost paying COlllpaIabIe lmlBit sysooms oxceeds the value of the benefits provided toMuni operatOl:S, the City pays thediffllre<lce into a trust fund. Thellll.! fUnd!lllllr.e$ annual peytnellts to Muni operators. The CIwter aIoo requires that oontl;.,tg with the MTA Db:ectm and MTA III8IllI/!OJ6 and omployees whose positions "'" "serrice crltlcal" provide iDcentive bonuses based on Muni's ~t of certaln service standards. Other thOllIhese roquiIeme!lts, the wms of employment for MfA omp~ are set thronih collectivo bargoining. It the City and employee llIlioDl! are unable to ogree m collwtive bargaioIng. dispures mvolving so.m.e employees -butnotMuni oper_-are subject to biDdIng .roltr,lion befOre a ... u.traI arbitration panel. l'n some mstancas. MI'A', past pmctices and "side letters' with OIIlPloyee uniOllll have affecood _ of emplojllXlOlll wilbout being approved by the MT A D_ or Boam or imiluded In any collective bargaining agreeoMll!. The proposed Charter omeadment would: • .AJ1ow the City to set Muni operator wages and benefits ihrough eollective bargaiIli:n& and elimjnate the ~nt that Mum operator wages be at least as high .. the averllf' wage rsle for trlUlSi! opexators in the two highest paying . COlllparalJle _ systems. • Sliminat/lthe _ op"J8lor trust fUnd and any Citypeyments lnlo it. • Malre inoentive bonus .. forthe MI'A Direc1nr and .. .....,;0. cti.tieal" MTA IIlAll8I!m IlIld omployees opliODJ!! instead of "..llirod. • Req1l.ir& bioding orbitration whon the MI'A and employee llIlions representior MImi operato!II __ ble to agree in coUective bllrgainlng. • Set rules for arbitration proceedings "'gaming MI'A omployees. The'tubitIOtors would C¢nsider the imp""! of dispeted proposals on Mum fareo and semce and on the shility ofMTA man~ ro schedule and assign _ omployees • =rding to Iider,' ,emoe needs. And employee IlmOllS repro,. sit ~e would bave to j1ll!tify any proposal that _ restric.t.t\l!l.. 1~'MI' fIexi~cl. In deciding scbedules, staffing. assignrrumts or ~~ pstt>tlm .... peISOIlII • o'z ,Hid H!<!V m •• 031\.:1.,,.< :1:,~I,~;~r"(f~.~ ~. '<" .. ' ) , 1 , , I j \ J • Provide (bat past practices and 'sidelet!el!" would nol bind the City regarding _ of emplo}'ll1ont for MfA employ .... unless 111. MTA Board or Director bas approved them in writing and incIlliled thom in the o£fected employees' collective 1iOi:gaining agreoments, ~ , ) Proposition G: Transit Operator Wages -San Francisco County, CA Page 1 of5 This is an archive of a past election. See h~i:p: /lwww.smartvoter.org/ca/sf/ for currentinfonnatioll. • Leallue of Women voters of california Education Fu"d ... ~Tall ~BRI:,,,.~.~J San Francisco County, CA November 2, 2010 Election Proposition G Transit Operator Wages County of San Francisco Charter Amendment -Majority Approval Required ~pass: 164234/64.94% Yes votes ...... 88671/35.060/0 No votes See Also: Index of alLProposltlons Information shown below: Summary I Fiscallmpsct I Atllyments I Shall the City eliminaJe the formula for $etting minimum MllN1 operaJor wage$ and instead $et MUNI operator wage$ through collective bargaining and binding arbitraJion; add rules for arbiiration proceedings regarding MTA'$ tromit employee$; and 1III1ke other change$ to term$ of employment for MTA empluyeet>? . Summary Prepared by The Ballot Simplification Committee: The Way It Is Now: The San Francisco Murricipal Transportation Agency (MfA) oversees the City's Municipal Railway transit system (MUNI) and other City transportation functions. The MfA employs transit employees such as MUNI operators and mechanics, and non-transit employees such as parking control officers and traffic engineers. The Charter requires the MTA to pay MUNI operators at least as much as the average salary of transit operators at the two highest paying similar transit systems in the country. When benefits paid to MUNI operators are worth less than the benefits provided to operators at similar transit systems, the differenee is placed in a trnstfund and paid to MUNI operators. The Charter also requires the MfA to pay most managers and employees incentive bonuses ifMUNI achieVes certain service standards. For most City employees, if the City and employee unions are unable to agree in conective bargaining, disputes are 8U~ect to binding arbitration. The MfA's negotiations with MUNI operators are not subject to binding arbitration. In some instances, the MfA has follow;5d-informal agreements about http://www.smartvoter.org/201 0/11/02/Cllfsf/prop/GI This election is archived. Any links to sourees outside of Smart Voter may no longer be active. No further links will be added to this page. . Links ro wurces outside of Smart Voter are provided for information only and do not imply endorsement. 6/112011 ~ I I I ~ ! Proposition G: Transit Operator Wages -San Francisco County, CA terms of employment even when tb.ey have not been approved by the MTA Executive Director or Board or included in any collective bargaining agreement. These informal agreements may be reflected in "side-letters" or past practices. The Proposal: Proposition G would eliminate tb.e formula for setting minimum MUNI operator wages. Instead, it would allow the MTA to set MUNI operator wages and benefits tb.rough collective bargaining and binding arbitration. It would also establish rules for arbitration proceedings regarding MT A's transit employees, and make other changes to terms of ,employment. In particular, Proposition G would: • eliminate the requirement that MUNI operator wages be at least as high as the average for transit operators in the two highest paying similar transit systems; • eliminate tb.e trust fund that provides additional payments or benefits to MUNI operators; • require the MT A contribution for MUNI operators' health coverage to be at least equivalent to the City contribution for the majority of other City employees. This requirement applies only to the first collective bargaining agreement approved after adoption of this measure; • require binding arbitration when the MT A and MUNI operator unions are unable to agree in collective bargaining. It also requires arbitrators considering disputes between the MT A and its transit employees to consider the impact of disputed proposals on MUNI fares and service; ., make incentive bonnses for MTA managers and . employees optional instead of required; and • provide that informal agreements reflected in past practices or "side-letters" be binding only if approved in writing by the MT A Executive Director or Board and included in tb.e affected employees' collective bargaining agreements. Fiscal Impact from The Controller of San Francisco: City Contruller Ben Rosenfield has issued thefollowing statement on the fiseal impact of Proposition G: Should the proposed Charter amendment be approved by the voters, in my opinion, it could either increase or decrease the cost of government depending on the outcome of eollective bargaining and labor arbitration processes. >'- http://www.smartvoter .org/20 1 O/11/02/ca/sf/prop/GI Page 2 of5 ) 6/112011 -. '\ ) Proposition G: Transit Operator Wages -San Francisco County, CA The amendment provides for changes to the method by which wages are set for Municipal Transportation Agency (M:TA) transit operators. Currently, these wages are set through a national survey of the hourly wage in comparable transit agencies, averaging the two highest wage levels and setting that amount as a minimum. In addition, if fringe benefits for the comparable agencies surveyed exceed the value of those provided by the City, a payment is made to a transit ope!ptors benefit trust fund. Using the survey method, as of July 2010, MTA transit operators' highest wage rate is $27.92 per hour, and for the last five years the City has been required to make deposits averaging $5.0 to $7.0 million annually to the transit operators bel!efit trust fund. FinalJy, the amendment makes incentive pay optional that is now mandated for certain MT A employees--as of fiscal year 2009-2010, the amount of such incentive pay that would be made optional is approximately $3.0 million. The proposed charter amendment would provide that transit operator wage levels be set through collective bargaining and labor arbitration processes as are used with other City employee unions. The amendment would eliminate the benefits trust fund and provide instead for health benefits at the same levels as are provided for the niajority of other City employees. . Overall, collective bargaining and labor arbitration processes could result in either it decrease or an increase to drivers' wage and benefit levels. Page 3 of5 Arguments For Proposition G MUNI is a critical part of San Francisco's infrastructure. San Franciscans depend on Muni for transportstion to work, doctor appointments, school, and recreation. Arguments Against Proposition G PROP G TARGETS WORKERS INSTEAD OF Unfortunately, route cuts and decreased service have made Muniinefficient and unreliable. Real Muni reform is needed to improve service and increase reliability. PROP G WILL IMPROVE MUNI SERVICE Prop G will allow the MTA to allocate limited resources to services for riders rather than automatic, annual raises for drivers. Currently, the Charter gua:ral!tees Muni drivers /---. http://www.smartvoter.orgl2010/1l/02Ica/sflprop/G/ WASTE+VOTENOONG . For more than 40 years, Muni driver salaries have been determined by a formula that has made San Francisco one of the only cities in America not to experience a transit strike during that time, and a model for worker-management relations in transit. Currently, salaries for transit operators are set by a formula approved by voters instead of leaving union contracts up to politicians to cut backroom deals. The principle of workers and City Hall bargaining across a table to find resolution has }"..~ 6/112011 Proposition G: Transit Operator Wages -San Francisco County, CA Page 4 of5 the second highest salary in the country. This year, Muni drivers received a $9 million raise while the MTA balanced a $50 million deficit on the backs of riders. All other city workers offered concessions to help balance the City budget, but Muni drivers refused. The result was reduced services and increased fares for Muni riders. Prop G will eliminate the salary guarantee, so that drivers' salaries do not automatically increase. Prop G will allow drivers to negotiate salaries through collective bargaining + just like all other city employees. PROP G WILL MAKE MUNI MORE RELIABLE Prop G will allow the MT A to negotiate new work rules, so that service is more reliable and more responsive to riders' needs. Current work rules restrict the ability of the MT A to schedule, deploy, and assign Muni drivers. Proposition G would "press the reset button" on existing work rules, which create inefficient and unreliable service for riders. For example, Muni operators are allowed to be absent without notice, missing runs and contributing to poor service. The MT A should operate based on best practices, not past practices. PROP G IS REAL REFORM San Francisco is a world class City that deserves a world class transit agency. Join Me in Voting YES on Prop G. Supervisor Sean Elsbemd . http://www.fixmuninow.com Rebuttal to Arguments For If Prop G Wins ... Riders Lose! Prop G doesn't fix MUNI now ... or later. Nothing in this ballot proposal will restore si;lMce cuts, worked well for our City for decades. Proposition G destroys that collaboration by changing a structure that has been in the charter for 40 years. While our Muni system has its problems, Proposition G unfairly targets drivers as the only problem at the multi-mIllion-dollar agency that runs our transit system. Like Muni riders, drivers tolerate a system that has been neglected for decades. Drivers work hard to improve the system and get San Franciscans where they're going on time, bnt City Hall has consistently cut funds for transit while raising salaries for Muni executives. As budget deficits forced 10% service cuts this year, the head of the agency took home a paycheck of more than $300,000. Proposition G does nothing to address the bloated bureaucracy that has siphoned funding from our bus and.rail system for decades, it unfairly targets drivers and changes a voter-approved process that has worked for decades. Muni drivers share riders' frustration and we are committed to improving the system for all San Francisans that rely on it to get to school and work every day. Propostion G unfairly targets drivers while neglecting the real challenges facing Muni. PLEASE VOTE NO ON G Transport Workers Union Local 250-A Rebuttal to Arguments Against Muni needs this change. . There are many thirigs that need fixing at Muni, but we can no1onger avoid the central issue of workplace, culture. Imagine trying to run a transit agency when you don't know who will show up to work each day. Imagine trying to provide rush-hour service when you can't hire extra drivers to cover the busiest shifts. Everyone wants drivers to be paid welJ, http://www.smartvoter.org/201 O/IIlO'))ca/sf/pro-p/GI 6/112011 ) n ~. : .. / Proposition G: Transit Operator Wages -San Francisco County, CA Page 50fS improve on-time perfonnance, or make MUNI busses cleaner. The issues that matter to MUNI riders are NOT covered by this proposal. Prop G is confusing, costly and will lead to serious labor problems. Muni has a record of more than a quarter century without a major labor dispute. Unlike most other transit systems, including BART and AC Transit, MUNl has enjoyed labor peace. If Prop G passes, labor issues will regularly be in dispute or arbitration. That means uncertainty aud instability --the last thing we need for a critical sen:lce like MUNI. What does Proposition G accomplish? Good question --Prop G's supporters, big business interests and career-politicians, have never answered it. What is clear, Prop G seeks to punish MUNl's frontline workers by making -. wages .and other labor issues subject to dispute rather than the current formula that has served -MUNI well for 40 years. Prop G also will do nothing to restore the $62 million in MI,NI funds siphoned by other city departments this year on top of $60 million in state cuts to MUNl in each of the last three years. Vote NO on G. MUNI is our public transportation system -what MUNI needs is accountability stsrting at the top, not attacks on its workforce Transport Workers Local 250 + A and they will continue to be paid well after this reform. But we need to change the work rules. There is no reason that bus drivers, unlike the rest of organized labor, should not bargain for pay, benefits, and working conditions. This is a modest, common-sense reform that will help improve the workplace culture and management ofMuni. It will save tens of millions of dollars each year that can be put ba<ck into improved service. FIX MUNI NOW --VOTE YES ON G San Francisco Planning aud Urban Research Association (SPUR) http://www.spur.org San Francisco Home Page II Statewide Links II About Sma!! Voter II Feedback Created: January 6, 201115:00 PST Smart ¥.oter <http://www.s1IU1l.tvoter.org/> CopyrightC League of Women Voters of Califomia Education Fl.llId http://c£!llQ/es,Ol'g The League a/Women Voters neither supports /'lor opposes candidates for public office Or poUtlcaJ parlies. http://www,smartvoter.orgI2010/11/02Ica/sf/prop/G/ 6/112011 1 I . \ () \ / CHARTER AMENDMENT Note: Additions are italics. TImes New Roman, single lInderlined, Deletions are atl'flfethpelAgh lffI#ee, riffleD Nell' RI1m(61 Section 1; FINDINGS , Whereas, an effective, efficient, and reliable public tranaH system IS essential to the ll!-lallty of life, public health, socIal justice, economic groyYth, and the environment of the City and County of San Francisco; and Whereas, effective, efficient. and reliable public transit depends on having labor agreements that are supportive of providing high quaUty, efficient service to riders; and Whereas, labor costs are the most significant portion of the Municipal Transportation Agency's (Agency) budget; and Whereas, the present system for establishing wages for Municipal Railway (MUNI) operators is based on a "formula" that guarantees transit operator wages are at least the second-highest in the country, without requiring that operators bargain for this high level of compensation; and Whereas, higher labor costs ineVitably undercut the Agency's ability to preserve and enhance services; and Whereas, the voters find that the most appropriate way to establish wages, benefits, and working conditions is through collective bargaining between labor and management: and Pagelof1? II.!; !Id 62 :Wl! VIOl (J3'1I~ OOSIOHY.lU N'v'S , i , ; Whereas, the City relies upon collective bargaining to achieve labor agreements with other City employees, with bargaining disputes resolved by a neutral arbitrator; and Whereas, that system is fair to both the public and employees, and bars strikes by public employees; and Whereas, the current system for setting transit operator wages prevents" effective collective bargaining; and Whereas, the voters find that transit operator wages should be set by a collective bargaining process that is similar to the process generally' used to determine wages for other City employees and other transit systems nationwide; and Whereas, the voters find and declare that some provisions of existing labor agreements also restrict the abiUty of the Agency to schedule, deploy, and assign employees in a manner that reflects service and ridership needs, and are therefore an Impediment to effective, efficient, and reliable transit operations; and Whereas, antiquated and Inflexible rules contained In labor agreements undercut the City's "Transit First" Policy set forth in Charter section SA.115 by failing 10 ensure that employees have their primary work hours scheduled at the times when their services are moslneeded; and Whereas, so called 'past practices" and side-letters that are not spelled out in a Memorandum of Understanding ("MOUj preserve antiquated and Inflexible practices that impair transit operations; and Page 2 of17 (J ) I , , ) Whereas, some past practices and side-letters have not been subjected to public scrutiny because they have not been approved by the Agency; and Whereas, .the voters of San Francisco believe the Agency should operate based on best pract/ces, not past practices; and Whereas, the taxpayers of San Francisco and those who rely on the Agency for..$ervlce require a system of labor relations that is transl1'11rent, and enables them to understand the terms of labor agreements with the pullilc sector workforce; and Whereas, the voters reiterate the "T ransR First" policy and further find that to achieve this policy, labor relations at the Agency must be guided by the principle of "Servioe First,· giving first priority to the needs of the people of San Frl!lncisco who rely on the Agency; and Whereas, the voters find that a broad overhaul of the compensation structure and labor rules and practices Is necessary to preserve and expand transit services to the public; Now, therefore, the qualified electors of the City and County of San Francisco amend their charter as set forth below. Section 2. The San Franoisoo Charter Is hereby amended by amending Sections SA. 104 and A6.404, relating to the wageS, hours, benefits, and terms and conditions of employment of employees of the Municipal Transportation Agency, to read as follows: SEC. BA.104. PERSONNEL AND MERIT SYSTEM. Page 3 ofl? (a) The Agency shall establish its own personnel/labor relations office. The Director ofTransportatlon shall appoint a personnel/labor relations manager, who shall serve at the pleasure of the Director of Transportation and shall establish regular meetings with labor to discuss Issues within the scope of representation on terms to be determined through collective bargaining. (b) Except a: otherwise provided in this Section, the Agency shall bIil governed by !he rules of the civil service system administered by the CHy and appeals provided in civil service rules shall be heard by the CIty's Civil Service Commission. Unless otherwise agreed by the Agency and affected employee organizations, appeals to the Civil Service Commission shall include only those matters within the jurtsdiction of the Civil Service Commission which establish, Implement, and regulate the civil service merit system as listed In Section AB.400-3. (c) Effective July 1,2000, except for the administration of health services, the Agency shall' assume all powers and duties vested in the Department of Human Resources and the Director of Human Resources under Articles X and XI of this Charter in connection with job classifications within the Agency performing "service-critical" functions. Except for the matters set forth in SUbsection (t), the Department of Human Resources and the Director of Human Resources shall maintain all powers and d'uties under Articles X and XI as to all other Agency employees. (d) On or before April 15, 2000, the Agency shall designate "service- critical" classifications and functions for all existing classifications used by the Page 4 of 17 , \ ) Municipal Railway; provided, however, that employees in classifications designated as "service-crlncal" shall continue to be covered by any CitYwide collective bargaining agreement covering their classifications until the expiration of that ag reement. (e) For purposes of this Article, "service-criticaf' functions are: ,~1. Operating a transit vehicle, whether or not in revenulil service; 2. Controlling dispatch of, or movement of, or access to, a transit vehicle; 3. Maintaining a transit vehicle or equipment used In transit service, including both preventive maintenance and overhaul of equipment and systems, including system-related infrastructure; 4. Regularly providing information services to the public or handling complaints; and 5. Supervising or managing employees performing functions enumerated above. The Agency shall consult with affected employee organizations before designating partiCUlar Job classifications as performing "service-critical", functions. If an employeaorganlzation disagrees with the Agency's designation of a particular lob classification as "service-criticar' pursuant to the above standards, the organization may, within seven days of the Agency's decision, request Immediate arbitration, The arbitrator shall be chosen pursuant to the procedures for the selection of arbitrators contained in the memorandum of understanding of the affected employee organization. The arbitrator shall determine only whether PageS of 17 the Agency's designation Is reasonable based on the above standards. The arbitrator's deolslon shall be flnal and binding. The Agency may designate functions other than those listed above, and the Job classifications performing those additional functions, as "service-critical," subjeot to the consultation and arbitration provlslom! of this Seotlon. In deciding a dispute over !l!lch a designation, the arbitrator shall decide whether tbj;) job funotions oftha designated classes raiate directly to achievement of the goals and milestones adopted pursuant to Section 8A.103 and are comparable to the above categories In the extent to which they are critical to service. (1) In addition. the Agenoy shall. with respect to all Agency employees, succeed to !he powers and dUties of the Director of Human Resources under Artlole X to review and resolve allegations of discrimination, as defined in Article XVII. against employees or job applicants, or allegations of nepotism or other prohibited forrm! offavoritism. To the extent resolution of a discrimination complaint or request for accommodation Involves matters or employees beyond the Agency's Jurisdiction, the Agency shall coordinate with and be subject to applicable determinations of the Director of Human Resources. (g) The Agency shall be responsible for creating and, as appropriate, modifying Agency bargaining units for classifications designated by the Agency as "service-oritlcal" and shall establish policies and procedures pursuant to Government Code sections 3507 and 3507.1 for creation and modification of such bargaining units. When the Agency creates or modlfles a bargaining unit, ;---- Page 6 of17 F~ F~, __ •.. .J \ I 1 I i ..! , < ( \ \ ) employees in existing classifications placed in such bargaining unit shall continue to be represented by their current employee organizations. (h) The Agency may oreate new classifications of Agency employees. Such classifications shall be subject to the civil service provisions of the Charter . unless exempted pursuant to Section 10.104, or subsection (I). (I) The Agency may create new classifications and_positions in those classifications exempt from the civil service system for managerial employees in MTA bargaining units M and EM In addition to those exempt positions provided In Section 10.104; provided, however, that the total number of such exempt managerial positions within the Agency shall not exceed 2.75 percent of the Agency's total workforce, eXClusive of the exempt posltfons provided in Section 10.104. This provision shall not be utilized to eliminate personnel holding existing permanent civil service managerial positions on November 2, 1999. Persons serving In exempt managerial positions shall serve at the pleasure of the Director of Transportation. Such exempt management employees, to the extent they request placement in a bargaining unit, shall not be placed in the same bargaining units as non-exempl employees of the Agency. 0) The CMI Service Commission shall annually review both exempt and noil-exempt classifications of the Agency 10 ensure compliance with the provisions of subsections (h) and (I) . (k) Upon the expiration of labOr contracts negoliated by the Department of Human Resouroes and approved by the Board of Supervisors, and except for retirement benefits, the wages, hours, working conditions, and benefits of the Page 7 of 17 employees In claesifications within the MUnicipal Railway designated by the Agency as "servlce-critical" shall be fixed by the Agency after meeting and conferring as required by the laws of the state of California and this Charter, including Sections AS.34e, A8.404 and AB.40S. These agreements shall utilize, and shall not alter or interfere with, the health plans established by the City's Health Se.rvice Board; provided, however, that the Agency may Qontribute toward defraying the cost of employees' health premiums. For any job classification that exists both as a "servlce-critlcar' classification in the Agency and elsewhere In City service, the base wage rate negotiated by the Agency for that classification shall not be less than the wage rate satin the Citywide memorandum of understanding for that olasslfication. (I) Notwithstanding subsection (k), the Agency may, In Its sole discretion, utilize the City's collective bargaining agreements with any employee organization representing less than 10 percent of the Agency's workforce . . (m) NSFlI'ilhtJlfmilng tllIJI Um#tJtienlllm ee/~ eenfolHledin SeetHJ/i .48.1(1'.1, u/ltliln addition to the base pay established In oollectlve bargaining agreements, «1/ agreements negotiated by the Agency relating to compensation for Agency managers and employees in classifications designated by the Agency • as "servioe-criticar' tiIHdlll!{£l! provide Incentive bonuses based upon the aohievement of the service standards in SectiollSA.103(c) and other standards and milestones adopted pursuant to Seotlon SA.103. Such agreements may also provide ·for additlonalln06ntlves based on other standards esteblished by the Board of Directors, inoludlng Incentives to Improve attendance. The Board of ---- PageS of17 ) i I . ~ ,. J \ , I I ) • Directors IIhriIl ~ also establish a program under which a component of the compensation paid to the Director of Transportation and fill exempt managers shull he is based upon the achievement of service standard~ adopted by the Board of Directors. Notwithstanding gill' other prm<lsfon afArtle/e 8A. gil slich incentive vrogr(!1lW shall be qI tlw, sole dfsq-efian «flhe Agmiw,Boani olj)irectors, '". sl/bject to any bqrffQining obligation Imposed kY state ire!!, (n) For employees whose wages, hours and terms and conditions of employment are set by the AgencY.[lfll'llll(illtte BeGti81ls,48. W4 orAS: ~ etlJ8f/., the Agency shall exercise all powers of the City and County. the Board of Supervisors, the Mayor, and the Director of Human Resources under Ih8I'!e oeGti_ $ecfions/J8.404 andA8.409. FIiH' 6/1tpleyeeS 8elllWdby See#61'l AS. {(J9 efli6(j., IIhe mediation/arbitration board set forth in Section A8A09-4 shall consldar tha following additional factors when making a determination In any impasse proceeding Involving the Agency: the Interests and welfare of transit rlders, residents, and other members of the public; _ the Agency's ability to meet the costs of the decision of tha arbllration board without materially reducing service W requiring that the Agew raiae fares in a mqnner inconsistent with Sect/on 84,1 Q8(k1: and the AgenCY's «bmW fo efflcienlly and qf(ectively tailor work hours and schedules fOr transit mlem employees to the pllblic demand (pr trqnsit service, Notwithstanding the timellnes described In Section A8.409-4, to be effective the beginning of the next succeeding fiscal year, all collective bargaining agreements must be submitted to the Board of Directors no later than June 15 for flnal adoption on or before June Page 90f17 to) The YaWs find that fOl' transIt system employees whose wages, hours. and tern'!' and conditions o(employmenr are let by the Agem;y, the A-zem;:v 's dlscretlon/n estqblishing and ad lusting scheduling, deployment, assigomenr. staffing. sign ups. and . the use and number ofpart-tfme transit system personnel based upon servIce need§ 1.1: essential to the effective, efficient. and reliable operation orrhe transit ItJ'Srem. In allli mediation/arbitration proceeding under Section 8.409-4 with an emplqyee organization rrpresentfng transit ""stem emplOYees. the emplOYee organ&!:!tion shall have the lJ..urden orproylne that any restrictions proposed on the Agency's abilitv to exercise broad discretion with respect to these matters are justified. To meet this blll'den. rhe employee QqJqnlzation /IIust prove ky clear and com/ncing evidence that the /ystiflcatlon for such restrictions outweighs the public's interest in effective. efficient andreI/able transit Mrvlee and Is consistent with best practices. The /IIed/afion/arbltrallon bgarddwll not Mlat rhe provisions o(MOUs fOl' lI'ansltsystem emplqyees adopted prior to the effective date oaMs Wovlslon as ptecedentialln establishing the terms ora .sliccf!8t10r agreemenr. The mediatlon/qrbitrgtion board's fur/tldiet/on shall be limited to matters w/thln rhe mandqtory scope ofbal'gqinlng Nr state law. (e}bi) The voters find that unschedull;ld employee absences adversely affect customer service. Accordingly, not Jater than January 1, 2001, the agency shall create a comprehensive plan for the reduction of unscheduled absences. In Page 10 oil7 ) I I l '''-, ( ) additlon, !he Agency shall take all legally permitted steps to eliminate unexcused absences, Nelthel' to1he Agency nor an al·bttra/or shall have fffl authority to approve I}r award any memorandum of understanding or other binding agreement which restricts the authority of the Agency to administer appropriate discipUne for . unexcused absences. (q) In addition, the voters tlndthqtAgeoo fJlCYige has been im]lQired by the existence orstde-Ietters and reliance on "past practices" that have been treated as binding O/' IJIYicedenllal but hqve nol been expresslv authOrized by the Board ofD/rectors or the Director ofTrf/lll.l2Orlation, and have not been and mYi not subject to public scrutiny, ACCQrtitnllly, (01' l!1JI.l)lQJ&es whose wages, hourI and terms and conditlOl'lll of employment are set by the Agency: no side-letter or practice within the scope Q,f bargaining may be deemed binding or precedent/a! kY the Agency or any arbitrator unless the side-letter or practice has been approved In wl'lllngbv the Director of Tral13J1ortqtion or, where appropriate, bv the Board of Directors upon Ihe recommendation oOhe Director o(TranSpI}l'tlltion (lI!d appended to the MOUQ,(the affected employee ol'flqnlzatlon 01' organ/zqtionssubiect to the procedures set out In this. chqrte)~ No MOU or arbitration award aflWl}ved or Issued atter the November 2010 ~eneral election shall rzrovlde or reqllire that work I'lIleS 01' 1JOSt practices remain unchanged dlll'jng the life of the MOU, unless the :mecttlc work rules or past rzractlces (Ire explicitly let forth in the MOU, All siele-leffers shall exPire 110 19ter than the expiration date oOhe MOU, .-(p){d Before adopting any eeUO(lf~}'e hal'gcilning tentative agreement with an emplW6 orr:an1zaflon covering mqltlmr within the scope ohewgental/on, the Agency Pagflll ofl7 ".-;-- shall, /18 [(iI/eI' thEm JII1II! 15, at a duly noticed publlo meeting, disclose in writing the contents of suoh f1811eeflye 8(i/1'gmnil'lg tentative agreement, a delalled analysis of the proposed agreement, a comparison of the differences between the agreement reached and the prior agreement, IfflII an analysis of all costs for each year of the term of such agreement. and whether Wds are available to cover these ~l!.!23Ji.. Such tentative agreement between the Agency aO,d employee organization shall not be approved by the Agency until 15 cqlendar days after the above disclosures have been made, A8.404 SALARIES AND BENEFITS OF CARMEN (g) The wages, conditions and benefits of employment (il8fJ1'fWWedfol' .'11 (hie aeetffln of the various classIficatIons of employment of platfonm employees and coach or bus operators of the municipal railway as compensation; shall be delermined tII'I6iflJlIHi~' sa/eiknl'61 pursuant to Charter section AB. 409 et seq. as modif/edby ChaNeI' sect/on &A. 1M. fb) In the first MOU neggtlgted PI' awarded tbrOUZh arbi/rptlcn pertqinlng to transit Qpel'qIors covered by this section alter the November 201Q general elect/on, fhe Agency's contribution !OJ' active employee health coverage shall not be less than the City contributlcn for the mgjarlty of other lilrljllQ,Wes covered bv sectlOl1 AB.409 ef seq, far the !jmplo;ye!! only, and at ea .. h level of depend en I coverage pruvlded under the Health Service Sl'Stem, This subsection mqy be wqived upon the mllillgl C01lse!ll ofthe Agencv gnd the employee Ql'gal1izatlo1l1'epreselltlng transit operators. ~ On e," hefm'e :hefo'st ,~, efAugt/I1t fit eaeh yeE/l', the eMI BeI .... iee _ililii91'1 iIhfIIl ell/'tljj' /8 the ~ fjf&/pefl>ille."tifo.· eaeh eltllltii~ £If Page12of17 l , 1 I , .. -- ) 8mpJeyme1'llllte al'iWlge £Illite 11118 higheslll'{{ge ~ in ejfee/ ell "TUIY 1-5/ oflllal ~'fol' etmIJ'-"1e frlatjifflll empleyeee IlIId INJReh 81' bH5 ~9 e/e/hei' -foee SIa.'etl, (fflli lH.1eh tllo'eh. HJI9tom .'lel'l1lfJily emplflJ"/1g Iff!( ICNNil/filn 4(j()plfillfol'm Omp/6Y8W fb) The B61J/:lie/Suj>tJl"li99Iw shellllt~tlJl6HjiN tI wage 6tJJ!edut/ejel' 8tIeh el-'fieatien £If ~I emplsyew enll eOtteh IlIId bNfl 8pCFl'ittfllW of (lie Hlli1'IieipfJl eeP#jicli by the er.# _'viee _J1IHiIffliel~f~" eReh -" ekfeei/flH.1#fm, (it) Wh61f, .'H fflld.'tie/l to Ikei!' 11911ff1 dillies, sueh 61flpi8yeea tll'e a5tJigne« du#es (HI they (l,"(J etheFwi8e eif#tled ItIIU/8I' #Ie lMge 88hclhlle (HI heFelff pI'eWded, (d) Tho ffiteII e/PflYfo;etf/eFpimjifflll empIeyeea ami f!8«eh IlIId bH5 8pC1'flteI'lJ fiIIJ hl!l'einpl'6WliedshJ1!l be efj'ee(M'ojfem.ll1ly 1-5/ IJ;/'tke)'e&l' in which eueh 1'flfw oflfflY S/'e ae6fiel11H'6 hereby defined and inleHried te ;neh«Je eni}' the m$/mum rate fJ"l'flfIY f1I'6vilied iff caeh stleh Wflge ~, Page 13 of17 tli8n mlgeH 6/9 eell~fol']iIsIfeI'm e.'i!pl~ IiIrW eeseh 9/' 9!i6 6pf!l'6fflWl of the IIIUn.'e/p«I''fmway, eemililene lilmi beneflte 1'I9t 18 cireeod thelfe eefflililene IiInd benejlta gI'fll'llfid by eellee:il'e btfl'g6IiI'Iil'lg IiIgi'6omeniB t8 the ee1'/lpliI?ubie p18ljerm Blllpl9yeeo find 66«eh IJF 8HfJ epm,.te!',y Illthe Rile H;'Illeme _d/6I' eet'lifle«tJen sf the fi¥UI'lilf{6 011110 111'9 higmflt:111ffgfl !J(7,'1edulee by .. he e#v#eervie6 eemmieeJe;!;, The lJefi(Jl8~r91m1Y ."'-c 6/JtffbUsh _It eemlltl6:m {flit! benej/tfJ 1ff!A;llthBtfil~elh/ll']Jl'e;~lffsl!O 8/'liII,ittl/iem ft' thle Chfi/'tel'l with the e;wep1ieH thfif 1Jl.'Ilh eend#ti_ eml benejf.'e lihalllff!t im;elW! 1iI1'" eh«nge in the fidmini!ht,''(:!ieJf I)j, 61' b6i!Ofite fifthe '&tI."ffflIent 8yiJ.<em, health eerY/ee H;'IIt8/11 81' l'se!ftJen alIeIJIQ/I08116l1j1."9l'ide.{erlJewh6i'6 in thie Chtfl'feI', Fer allplIrj!HHHH1 o.{ /he Retirement SysteM IilIII'6lIiIte6i ttl thIe lIliefitlfl, 1118 wfi "llenlj1(in9fi1tten"1il1J lilieS ill 8eetien fH(}9 efthle Ch~INSI' IMlI mBfH'l the 1~II",ge lIehedlilee" lilII;,'btied iH filOIiI8I'fJenIfe wi(hpffl'l/g.uaphII (6) filltri (-h) «hel'8, inehtdil'lg :!<I9Il1J tilf/fe1;entklle eeI(IMllhed tfndpahl fie J9tf7f e}'.1l1ffgfllJ 16 plafjOl'IlI e"'ljJl~ tiIIul elltfeh tiIIullnl8 upe1'fI.'8/'1i efths mllnielpal I'tI1I1I'ay, but s/'I6lllff!t ine/!Mle the l'tihre eft!<leee b_flts p«id ints thefonr/ 1HJ1rlb!-Is!ted IilII he1'8ilf]J1'llvhkid P_~ed lhat when iH the til'S H;'IIt8/11S 1IlIcr1fiiI' tft!I<tIjleodlen 6S]J1'Il'Vidcr1 fitbe'le, -;Flet#fslf, I'6tiFement mrrJ heal.'h lNlI'i'iee "ene./hri _ gI'6O/feI' !han fNeh mml1fio" benefltlJJ1/'e\~ul!/ by thle Chlfll'i6F jeppiaiflJRlI IIH1fA!e}'IIee, _ok or hl(91ifJ~'{lIe/W sft!ie mllnfeip«l reilway, then ilIf 6/n'fJffllf net 18 _lied the diffo-efQlilih be'flR;/iffl may be uenl'6>"fM t8 Ael!O/I' w,1u65 fllid the £/IntJlW SfNiYalent Ie 1heee d9Nel' WIl_ ehalt bep«fd !me ejimd. 'RHIjkrW fA'mIl he eet«blillheri.'6 l'8e8iW! and t8edmlnlahw said «mo!1nf8 I'eJJl'esenling the iijfol'e_ In 1'tthte6 of the 'Wfe«lien, PGt#elllent £/lid health N(f/,!'/ee be'<'efitfJ, lilmi ,'6 pay eelt b81Wj#s th«t II.\«.'/ be}eiHtly detel'l1Iinuri by l'ep,"eeenr«tiYee of the eily tiIIul CellT./jI g.!I1'6I'ffl/fU/lf a.wi .\"'8 repl'eeenfflt/iw efthe 61'gf1nizcr1pkltfoim emp19yo66 Page 14 of17 ) 1 l j 1 i ) i . " IIll1f11e/jHl! railw(lY' Sueh I'U/ee 11~ fH'6vlik IlfH'8eothH'e fe/'ft/lft! lifllti hinilng (I/oOftl'lllien £(dIlIputes whleh may tl."ige 86Al'fHln "ep:'~t(i8 8fHw CIty ani CeI/lI6' gewmmllHif _ the l'epl'eR8Jlt-afi.vee elthe 81'ganhetlplstfmm 6mpl«yeetl entl 68ee/t (111/ bile qpel'fitfJ/W e;4.'uJ m~mletpell'{ffhMy. &tell 1'Iilea e!wl]1l'IJvhJe /';011111 im'e8fment& tt,-4he fo."IfI!JhslllJe tt,f'fhe 0.'1£1>"116181' leg(l/1M /1wur«/loeee11ljJtmles tI! Gelifomle, Sueh ru1eG &/peI'vllll»'s by 61'1ifflf1.'t80. (g) N~fw#heto/'IJii/1g tmJ'pl'fJvl8l6/IIJ £(thie Cl1£1111f1\ InehHlillg eMIJI.9pa."I6 tt,1' Immlelpai1'(11f. 1\'6" .(lpeJ'at8I'tI, fo lI'sg.ee slldbollcj#8 eife>'1lpJeymel'lt 6(hlill' th8lf wsg.eefor pWljt:H'ln empleyees (fllti eeseh end 81t1l epe1'8l(J/'IJ (If the 1III1nie/pl¥lffllf.I'IIY ui1de1' this (JJI1p~flsthel' thIm Wtlg.ee tuieptstiJpw<tmSlIf f8 Ill/a Neeilen/ol' IifJlel'i9d e/'III(li'8 :.'1811 (Ins yeSI' shaI.' eentailtlllwwl8iel! t8 the ejfeeI thm thH'ing 8aiiperl6tl ~lHtlIO it /lhsll be Page 15 ofl7 net In ffflJ'ye<II' e1teHdthe Nfl/lis es:@/i1;hedlt1'HW~ (b) and (f) eflhia eselie1I. fh) Net 1ste1' thffflihe :J§#I My efAIlgue/; the Bea,uJ ef&ipel'l'Mel¥1 {ihal! have the al'<#nellee «lid the Cilllll.'(.1 II{hWI'Y (miilffl1'lH (l/J n;$6fMCtI')I If) fnelude the j1Nnis/fil1sfo!' JHI)>/ng the ,YdeIJ ej'HmpellG(lf/elf fffli ~ and benefits ethel' thffflllwgeflfi,led by Section 3: Severability. this Charter Amendment shall be interpreted so as 10 be consistent with all federal and state laws, rules. and regulations. If any seclion. sub-sectlon. sentence. or clause ("porlion") of this Amendment Is held to . be invalid or unconstitutional by a final Judgment of a court, s!Jch decision shall nol affect the valldily of the remaining portions of this Amendment. The voters hereby declare that this Amendment. and each porlion, would have been adopted irrespective of whether anyone or more portions of the Amendment are found invalid. If any portion of this Amendment is held invalid as applied to any person or Circumstance, such invalidity shall not affect any applicallon of thls Amendment which can be given effect. This Amendment shall be broadly ,,.....-- Page 16 ofl7 : I ~ construed 10 achieve fts staled purposes. It Is the Intent of the voters that the provisions of this Amendment be Interpreted or Implemented by the City and , County. Agency. COl.lrts. and others in a manner that facilitates the purposes set forth herein. Section 4: Effective date. This Charter Amendment shall be effective upon Its acceptance and filing by the California Secretary of State under California , Governmenl Code secllons 34450. ". r', ... ." = <f> r· e; .;.l.c .".. ., :x z ., ::\' :... ~, "" ,,-" d-;-N -;>tf -I "" (-.".. 0 ~. " "'z '" on r-::J!: PI VI .., Cri' ("') -< c-o ;II( '" Page 17 of17 ~ ,)--_ ...... -~, ... ~.c~_ " ______ . \, """.,,/ .," ....... Cities on the Cutting Edge: Public Sector Labor Law Interest Arbitration: Comparison of Selected State Statutes Table 1: Mandatory Arbitration Statutes Alaska: AS 23.40.200 (2000) Mandatory interest ai:Jitmtion for all public employees; di:fferem trigger fur arbitration fur each of3 classes of .2d 1080 (Alas. 1992). Municipal charter provisions for binding interest arbitration fur limited nnmber of public sector emp~ was valid delegation of legislative authority, where ordinance contained sufficient standards to limit arbitrator's discretion. ~~ __ ~~~~~~--4em ID ~ I Colorado: C.R.S. 8-3-112, I Mimda:tory interest FOP v. City o/Commerce City, 996 P. 2d 133 (Colo.2000). City charter 8-3-113 (2000) arbiiration for employees provision creating peI1lllllleIlt panel of arbitJ:Htorn fur binding interest of govemmem arbilration 10 resolve impasses in collective baIgaining wi1h police officers "authorities" if collective con1l$led the political acoowttability required by constitntiooal prohibition bargaining reaches an against delegation of legislative power, where the elected city council impaSse and the Director appointed the panel and relained continuing authority 10 add or remove of Colorado Department arbitralors. .' of Labor denies the employee group a right to strike S I 20.19 arbitratiim fur public 1 ~loyees Iowa: Iowa Washington: Rev. Code Mandatory interestSpala:tne v. Spokane Police Guild, 87 Wash 2d 457, 553 P. 2d 1316 (1976). Wash. (AReW) S arbitration furunifunned Statute providing fur compulsory arbilration ofijmblic employee labor 41.56.450 (2000) lJ'Ublic employees upon an disputes, including wage increase demalids, dOes not coristitute . in negotiations unconstitutiomddelegalion oflegis!ative pOWlll: and does not violate state ,.. P.."...., by Jeny Hernb. UC HaStin .. Closs of 2002 1 , \, '~ 1,", •• ., § 34: I3A-16 (2000) _.". _ ... " , .... --.,~---. .. L "" L firefighters and police officers upon request by one party to the negotiatioos " department disputes as amended did not impermissibly usurp constitotiona1ly vested home role powers. Statote providing fur compulsory interest arbitmfion of municipal police and fire depatlment dispotes did not represent unconstitutional delegation of power where statute provided reasonably precise standards to guide exercise of delegated authority. Metropolitan Council No, 23 & Local 1277 v. Center Line, 414 Mieb. 642 (1982). The statute, which provides fur compulsory arbitration in lahor disputes involving municipal poJice and fire deps.;tments, is clearly constitutional. The standards pl;Qvided are as reasooably precise as the subject matter :requires or permits, and there is adequate provision fur poJitica1 accountability. However, the Legislature did not iolend to give an arbitration panel unbridled authority to compel agreemetII: on perntissive subjects ofbargaining fur which parties have no duty to bargain uncle< PERA. The compulsory arbitration panel eoo:eeded its aulhority in awarding the inclusion of a layoff clause. A n:mniclpal emplayeJ's initial decision to layoff employees is not a mandatory sIlbject of bargaining, __ __ ___ __ ~the effect of such a decision is a man ·ect. Mandatory binding Hillsdt7le PEA Local 207 v. Hillsdale, 263 NJ Super 163 (1993). Unlike interest arbitmfion for arbitmfion as nonnally'understood, so called "inmrest arbitmfion" is not firefighters and police consensual arbitmfion, but Is mandated by statute in public sector for officers when initialed by impasse disputes between municipal public employers and police and fire one of the negotiating fighters, and is essentially reStric1ed to last final offer (unless all parties parties and approved by otherwise agree). . the labor cortllllis<iion Amalgamated Transit Union v. Mercer County Improvement AuthOrity, 386 A.2d 1290 (NJ. S.Ct.1978). Statute providing:(brcompull1ory grievance and. Interest arbitration oflabor dlsP1ltes in public sector is constitutional, .~ _____ -,L. ______ . _ I given explicit s!atutoty. standards including arbitrable procedures and ~ Prepared IIy reny H"",h. Uc Ilasa"". C1 ... of 2002 4 ,- '. .~ /') J , , ~~ 4., . _, , ._._.~ ..... J ". New § 209(2000) Oregon: (1999) etseq _1. .. _ ..• _ .. '""_,.~ ,_~"",,-,_, ______ ~. ___ " ~_~_M __ _.;~........ .... ""imw + ", .. J . .. ---~--•. -.----'-----~ --. ~,","---.-~-..... '_ I 1 interest arbitration afthe requ~of~partyor the public employee relations board arbilIation -,~~"/ of employment, and given inherent standards ificlOOing requirement that arbitrator considerpubJic interest and impact of decision on public welfilre; $ince arbitration is compulsory, judicial review islttvailable ifaward is atbilrary or if arbitrator abuses powers deIe~ to him, and judicial review should extend to considerntion of whether arbitration award is supported by substantial credible evidence, ',' , , statote requiring binding arbitration of disputes between cities and their organized tire and police fi:nws was held not to be an unconstitutional delegation of legislative discretion or lawmaking authority, WIIhout engaging in extensive discussion, the court pointed out that there was no constitutional prohibition against the legislative delegation of power, with reaoonablec safuguards and standards, to an agency or commission established to adminl:!ifi an enactment. In:(hjs case, the court said, the legislature had dele~ to,a public employtrumt relations board, and through it to ad hoc arbi1m!ion panels, its CQDSIitu1ional authority to regulate the COOJP!'IISIIIion and working conditions ofpoblic safety employees, in the limited siruati(,lIi where lin impasse occurs, and also established specific standards which sOOh a panel mUllt fullow, Such delegation was beth proper and reasonable, the court concluded. Blflfalo v. New York State Public Employment Relations Board; 363 NYS 2d 896 (1975). A statute requiring binding arbilralion of disputes between cities and lheir organized tire and police fuI'Ces ;!id nC!! vio.late the city's due The statute·js valid,and constitl.itional in all OrApp providing fur compulsory interest-arbitration in public so::ctor does not violate ''home role" ]JI'l)visions of state constilution, given predominance of state /' '1\ , )'1' , " '~ PrepaRld'by le:tl'Y H~ uc Hastings CI8i~s of2002 5 , '" ~ " •. .1 _ ........ __ ~~ __ . ___ . _ ....•. l_ 211.4 (1999) 111.70 et seq. (1999) arbifmtioo fuf firefigbtecs and police o'l'licets upon request by either offua DegrilialJng parties am/ttatioo fur firefighters and police officers upon request of either offue negotiating parties ",,,,,if .b!-=- prohibitiOn of SiriJoos by firetrum; nar does statute constitute uncoDStitutional delegation of legislative power to arbibator, since statute provides adequaIe staturory guidellne. fuf precluding arbiInIrY or discrimill!!!ory action by arbitmtlJr, and since arbilmtor in Carrying out acts Counry,41 299(1965), Where a statute provided for arbitration of labor disputes between a 1tansit authority and its~ employees in tl,le event ofa fililure to reach agreement on con1ract issnes by collectivebargalning, fue wording of ~ fue statute being that in fue event of llillure to 'lgIee, fue authority "shall" oirer to submit such dispute to arbittation, it was held lilat fue word "shall" in the statutory provision was ~lmperative, and required fue authority to submit to arhittation. _ ~ ~ 2d requiring binding interest amitration fur police and f;lremen in "cities offue I st class" did not constitute violation of equal prutection, even fuougb City of Milwaukee was only city in Wisconsin in tbat cIass. where it was wilbin legislature's power to classify cities Into classes and enact legislatioo appJic8b\e only to 'Various offuose classes, and particularlY where statutory scheme fur cities suCh as Milwaukie was not significantly ditierent ftom . that applicable to IIl1lI1icipaJities not of first class. La Crosse Professional Police ASlJoc. v. Ciry e/La Crosse, 212 Wis. 2d 90 (1997). In interest arbitration, arl:iitmtlJr exceeded bis statutory authority to . select final oirer of one of parties and then.issue award lncorporeting ofrer Wilhout modification, by accepting ci1y employer's final oirer but awarding beaIIh insutance provisions tllat c.1early diffiored ftom wording of final oirer, I " ~ ~ ~_~ __ ~ _ I ~ Lsuch tllatrnodifications went beyond ~ intetpIetatioo of of'rer. Prepared by lerry Hersh. UC Hamngs ~ 012002 6 , .... -.. , -'- , "'~ • d '.--./ ~ __ .~_.~J..J...--'-'--~ •• ___ ~_~ •. i .. • I ........ ,"_._. __ ., __ .• _ .. _._ .... 1 ,I, """"""""'''''-'' ".-I"") -! '7 *" ~ ')' .," (r \.. .. "-/ , . .;'" '~ " . Table 3: Permissive Interest Arbitration Statntes '~ § 89-11 (2000) Laws ch, lS0E, § 9 (2000) interest arbitration fur public employees upon procedure agreed to by the parties or by requested decision of the bow int.:rest arbitration fur public employees upon mutual ~ of the parties' , ( Pr_d by 'my Honh, uc !fasti,1gs Class oflOO2 Hawaii Pub. Employment Relations Rd., 56 Haw. 85, 528 P 2d 809 (1974). The board, on its own motion, can declare that an impasse exists only afu:r it reaches a determination that the party conlending that an impasse exists has been bargaining in good fuiIh. . Town of Arlington 11. Board afConciliation andArbitration, 370 Mass 769, 352 NE 2d 914 (l976). Statute providing fur binding arbitration of police aud firelighter job demands does not constitute unconstitutional delegation oflegislative power, does not violate borne rule provisions of state constitution respecting powt:rS of municipalities, and does not contta:vene "one-ImlIl, one-vote" principle applicable to unit; ofloca1 government with general resjJ01lsibility and power fur local affilirs; arbillation awards relating to wages and benefits may be enfbrted through.mandatOJY ~ial appropriations by municipal finance cornmi1tees aud town meetings to meet arbitration aWllLds. ? 7 ~ '. ,- I 1 , 1 j I 1 I () I ) , .. ~ ATTACHMENT I Binding Interest Arbitration Review-Scholarly Articles The three articles attached represent the most comprehensive discussions of binding interest arbitration of the scholarly artieles reviewed by staff. Although. the articles are somewhat old and it should be noted that laws discussed may not be current, the analysis and conceptual ideas discussed in the articles may be useful to Council members as they begin to evaluate key issues related to binding arbitration. 1. Brian J. Malloy, Note, Binding Interest Arbitration in the Public Sector: A "New" Proposal for California and Beyond, 55 Hastings Law Journal 245 (2003) .... 2: Arvid Anderson & Loren A. Krause, Interest Arbitrathm: The Alternative to the Strike. 56 Fordham Law Review 153 (1987) 3, Raymond C. Holger & Curt CriksciUll, Impasse Resolution in Public Sector Collective Negotiations: A Proposed Procedure, 6 Industrial Relations Law Joumal481 (1984) .. -, ~ ! i WeStlaw S5HS1U245 55 Hastings LJ. 245 c Hastings Law Journal November,2003 Notes Page I "245 BINi:lING INTEREST ARBITRATION IN THE PUBLIC SECTOR: A 'mw" PROPOSAL FOR CALI- FORNIA AND BEYOND Brian J. Malloy Copyright (c) 2003 Hastings College oftbe Law; Brian J. Malloy Introduction Binding interest arbitration bas provided a sensible solution to public employee strikes, particularly by police and firefighters, for states aDd loe.lities over the past thirty-five years. In April 2003, the California Supreme Court reopened the debate on the wisdom of binding interest arbitration for public employees. In County of Riverside v, ." .. , '. Superior CoW't, LElli.1 the court reversed a twenty-year trend and struck down a binding interest lIrbitration statute. ) Interest arbitration "refers to the arbitration of disputes arising from negotiations for new contract terms." [FN2] This is different from grievance arbitration, whieh "arise[s] from the interpretation or application of an existing agreement." [FN3] "Binding" designates that the arbitrator'S decision results in a legally binding contract. J:l"Ni!l Most binding interest arbitration statutes require "final offer" arbilration, whereby the arbilratol' must select the last offer' submitted by one of the parties, usually on an issue-by-issue basis, LE!:!,iI Thus, binding interest amitration takes the fmal policy decisions out of the hands of tho elected representatives and gives them to a neutral third party, "246 Currently, about thirty states (or localities therein) have some sort of interest lIrbitration statute, [FN6] There are several rationales for allowing interest arbitration in the public sector. For example, it can protect the pnb- Iic against hannful strikes, while at the same time provide bargaining leverage to unions incapable of striking effOO. tively. [FN71 However, cities and counties have argued against binding interest arbilration. l.Elial The public em- ployers' argument is that, .. opposed to grievance arbitration in which the lIrbitrator performs a judicial function by merely interpreting and applying an existing agreement, In Interest arbitration the arbitrator is setting the renns, working conditions, and wages of public employees, thereby making a policy determination usually entrusted to politically accountable representatives . .l.EH2l Public employers also argue that binding interest arbilration inevitably leads to inflationary wages that'have a harmful impact on their budgets. Ll"t'J.ill Althuugh many state courts have treditionally upheld binding interest amitration, a notable minority has held it to be an unconstitutional delegation ofJegisJative authority to a private lhird party. J:!:lliJJ In the past twenty years, there has been a trend toward endorsing binding interest amitration wholeheartedly. [FN121 The County or Rivel'- side v. Superior Court decision was the flfSt decision since 1981 to strike down • binding interest arbitration statute, thus ending this trend of total acceptance. Provided that certsiit safeguards are in place, the trend of npholding binding interest amitratiOil statutes was appropriate. Part I of this Note will compare cases from the 19908 and 20008 to cases from the 19608 and '247 © 2011 TholllllOll Reuters. No Claim to Orig. US Gov. Wolks. 55 HSTLJ 245 Page 2 55 Hastings L.J. 245 1970s and propose a constitutionally acceptable statutory framework that addresses tbe political accountability con- cerns. Part n will provi&> background on tb. more relevant states' constitutional provisions, statutes, and cases, ex- amining tbe early split and analyzing the trend toward acceptance. Part III will provide an analysis of the current stale of the law, critiquing some of tb. decisions both upholding and invalidating tbe different statutory schemes. Part N will offer a proposal for California and other jurisdictions that addresses tbe political acocuntabllity con- cerns, &>rived in large part from the more recent ClISOS. This Part will also propose tbat direct accountability through voter approval of an arbitration award is the soundest way tu ensure political accountability. This Part I, an espe- cially important mo&>l fur California cities and counties, because, absent a state constitutional amendment, state- wide binding arbitration is no longer constitutionally permissibl. in Califoroia. I. State Courts' Interpretation of the Non-Delegstion DOI'~ine as Applied to Binding Arbitration A. Constitutional Provisions The most successful challenges to tbe constitutioDllIIty of binding intorest arbitration statutes have been under the non-delegstion doctrine of many state constitutions. u::tllIl The states that have eddressed tbis issue generally have a similar provision in their constitution, that the state legislature "shall not delegate to any special commission, private corporation or association, any power to make, supervise or interfere with any municipal improvement, mOlleY, property or effucts, whether held in trust or otherwise, or to levy taxes or perfurm any municipal function whatever." IE!i!!I There are also other constitutional provisions that courts have relied upon. LEl'!lil While tbe text of the particular constitutional provisions are important, the overriding COIlcer!l, regardless oftbe text, is that *248 any binding arbitration framework allows a private party to make what is in reality a legislative policy decision. f.Elil[l Regardless oftha coostitutional provision, it is the &>tails oftbo statute that have tended to play the &>terml- \ native role ofwhetber a court will uphold or strike down binding interest arbitration under a non-&>Iegation theory. B. The Early Cases In the late 1960s and 1970., slate courts routinely upheld constitutional challenges to binding interest arbitra-' tion. Two early and Often-cited cases are State ex reI. Fire Fighters Local No. 946 v. Ci~ ofLammie I!'Ji!1l and Warwick Regular Firemen's Ass'n, fFNI8] which bOtb upheld binding arbitration statutes. in Fire Fighters Local, the firefighter'S union sought to compel Laramie to comply witb the procedure. of a binding interest arbitration statute. JJ::M12l The cIty defended on the gronnd that tbe statute was unconstitutional. ~ The Wyoming Supreme Court, while not even discus.sing the specifics of the statute, upheld it, reasoning that performance of arbitration is not "perfOlDlance of a municipal function" within the meaning oftbe state constitution. fFN21] In Warwick Regular Fireman's Ass'n, tbe Rhode Island Supreme Court upheld the Firefighters' Arbitration Act, a binding arbitration statute. fFN22J The city challenged the statute on non-delegation grounds. J:fl!nl The court discussed the provisions of the statule, including !be eppointment of a three-person' arbitration panel. ~ One arbitrator is to be appointed by the firefighters' union, one arbitrator is to be eppointed by the municipality, and lfthe parties cannot agree on the tbird arbitrator !ben the chief juatice of tbe Rhode Island Supreme Court wili appoim the fmal member of the panel. IENlli While not discussed in tbls early case, who appoints the arbitrators will, and should, have an impact on the constitutionality of tbese provisions. Here, however, !be court did not address*24!J this aspect. Instead, !be court simply declared that "an ai6iir.tor appointed under the pertinent provisions of the ,tat- ute is a public officer and that collectively tbe three constitute a public board or agency,» ~ Declaring iIle board to be a ''public agency" led the court to conclude that there was not a delegation to a private persall, and there- fore no constitutional non-delegation problems. J:J:l!nJ. This circular reasoning hes received severe criticism, even by proponents of binding arbitration. ~ Otber courts around tbis era also routinely upheld binding arbitration stetutes. fFN29] While many,courts upheld these statutes, there were several courts tbal invalidated binding arbitration schemes 102011 Thomson Reuters. No Claim to Olig. US Gov. Works. 55 HS1U245 Page 3 55 Hastings L.1. 245 based entirely on non-delegation grounds. I.ENlQlln 1962, the Pennsylvania Supreme Court held that a binding ar- bitration act ("the Act of June 30, 1947") involving police and firefighters was not binding on the public, and alter- natively, that if it was binding, it would violate the Pennsylvania Constitution. Ill!lli In Greeley Police Union v. City Council of Greeley, the Colorado Supreme Court invalidated a binding arbitration provision in a city charter amendment tbat applied to police officers. L!:N:lll The court noted that the charter amendment provided tbat the American Arbitration' Association select a 'single person who is granted authority to resolve all dispoted issues. [1'N331 The court held that the Colorado Constitution prohibited "delegating legislative power to politically unac· countable persons." !f"N34! The court concluded that the cbarter amendment unconstitutionally delegated this legis. lative power. ~ t250 The South Dakota Supreme Court, in City of Sioux Falls v. SiOI~ Falls Firefighters, Local 814, held that the South Dakota Firemen's and Policemen's Arbitration Act, a state stalate providing for binding arbitration for police and'firefighters, was a "clearly unconstitutional" delegation of legislative authority. [FN36] The court specifi· cally rejacted the reasoning provided by the Wyoming and Rhode Island Supreme Courts, IE!:!lll The Utab Suo preme Court also invalidated the Firefighter Negotiation Act that applied only to fU"efigbters. IEl:ru!l The court was eoneemed that no statutory stfllldards were in place to control the arbitrator: "Although it is not dispositive of the delegation issue, in this case the legislature failed to provide any statutory standards in the act or any protection against arbitrariness, such as, hearings with procedural safeguards, legislative supervision, and judicial review." fFN391 Finally, ill 1981 the Supreme Court of Kentucky, in a brief opinion, struck down a city's binding arbitration ordinance on non.delegation grounds in City of Covington v. Covington Lodge No. I, Fmternal Order of Police. lEN@} These early cases provide a good preview of what was to happen in the next two decades. While the majority of the courts were upholding binding arbitration statutes, there was a significant minority that took a hard look at the . statute and invalidated those statutes that simply gave 100 much unfettered power 10 the arbitrator. The concerns over political accountability and especially lack of standards would not dissipate. As more and more states and 10· calities experimented with binding interest arbitration, more courts faced·the politieal accountability and standards issues. Unnl recently, state courts had unanimously upheld binding arbitration l!!atutes over the put twenty years. However, the opinions suggest that the political accountability and standards concerns did not get lost on either the courts or on the legislatures who were drafting the statotes. C. A Trend Towards Acceptance While roost recent alate court decisiOOl! have overwhelmingly upheld binding arbitration statutes, this section will begin with an examination ·151 of three state conrts that bad previously fuund binding arbitration unconstitu- tiona! but, in a subsequent decision, upheld the rewritten provisions, Each of tbase state courts took a different ap- proach. In the late I 980s, the Ohio Supreme Court flip-flopped nn the constitutionality of binding interest arbitration. In 1988, in City of Rocky River v. State Employment Relations Board (Rocky River 1), the court struck down portions of Ohio's Pnblic Employees' Collective Bargaining Act as unlawfully delege.ting legislative authority to an arbitra- tor. [FN41 1 After several motions for reconsideration, a year later in City of Rocky River v. State Employment Rela- tions Board (Rocky River IV) the court upheld the same statute as a constitutional delegation of legislative power. l12:!!!ll The Ohio Supreme Court noted that the statute provides "the conciliator with detailed guidelines under which to proceed," and that these standards were sufficient for delegation purposes. ~ These standards in· cluded consideration of past collectively bargained agreements, 1l:te interests and welfure of the public, and the abil· ity of the public employer to fioance and administer the agreement. ~ This case has "at leaatternpomrily, set· tled a constitutional debate among the jusiices of the Obio Supreme Court." lEt:!.!l2.J It is interesting to note that this decision, while making mention of the non·delegation issue, did not really address it in full detail, and has been criticized for that important omission. !FN46) But the court did address another important mctor; standards to con- trol the arbitrator. © 20 II Thomson Reulers. No Claim to Orig. US Gov. Worl<ll. I J i I \ ) 55 HSTIJ 245 Page 4 55 Hastings L.J. 245 Pennsylvania, whose Supreme Court had Invalidated a binding interest arbitration statute in Erie Firefighters, approsehad the non-delegation problem another way. Rather than a change of justices or re-drafting the statute, the state adopted a constitutional atnendment [FN471 thai "'252 permitted binding interest arbitration. The amendment immediately followed the constitutional delegation article thet the Pennsylvania Supreme Court relied upon in in- validating the statute in Erie Firefighters. Nonetheless, a city eomtcil challenged the Act of June 24, 1968, which provided fur compulsory arbitration to resolve disputes bet\!(een police and firefighters JIDd the public employers. ~ The city argued that the statute did not contain sufficient standards required by the court in other instances of delegated authority. [FN491 The Pennsylvania Supreme Court rejected this argument, reasoning that "[t]o hold that the statute before us is invalid because it does not contain the standerds necessary under our decisions interpreting Article II [section] I would be to directly contradict the language of the Amendment to Article III [section] 31, and would violate its obvious intendment as weD." J:EIi1lll ThUS; the placement of authorization for binding arbitration directly into a state.constitution virtually eliminalllS any successful challenges to tha statute. Colorado, whose Supreme Court rejected a binding arbitration statute in Greeley Police Union, was once again :illced with the issue in Fraternal Order of Police, Colorado Lodge No. 19 v. City ofCammerce City. [FNSllThis case exemplifies the modern trend with a well-reasoned and analyzed opinion that addressed the political account- ability issue. Commerce City challenged a charter amendment that established a detailed binding arbitration frame- work. ~ The amendment required the City Council to create a permanent panel of at least three arbitrators. [FN53J The Council was allowed to add and remove arbitrators from the panel at any time. [FN54J In addition, the amendment required the arbitrator to consider seven enumerated fuctors .and issue a written decision. [FN55! The seven factors, which are typical of tha standards set out by many state and local legislatures and demanded by some courts, are: (1) the interesta and welfare of the public and the financial ability of the City to bear the costs involved; (2) the lawful authority of the City; (3) stipulations ofthe parties; (4) comparison of the compensation, benefits, bours, and other terms or conditions of employment of the members of Ibe police department involved*253 with other police department members perfonning similar services in public employment in comparable communities; (5) the cost of living; (6) any claims offuilure ·of a party to bargain in good fuith pursuant to section 21.7(c); and (J) other similar standards recognized in the resolution of interest disputes.1D:lm Finally, tha amendment provided for limited judicial review of the arbitrator's award. ~ The Colorado Supreme Court upheld the charter amendment, stating tba! the Case was consistent with Greeley Police Union. [FN591 The court reasoned that in Greeley Police Union, the court made clear that the Colorado Con- stitution prohibited delegation of legislative power to "politicaDy unaccountable" persons.lE!:i9.Ql Here, the court held that, by requiring the City Council to create the arbitration panel and by allowing the City Council to remove persons from the arbitration panel, the panel was politi<Jally accountable. LEM2ll Furthermore, the court held that the amendment provided sufficient standards and safegUards to guide the arbitraror's decision. ~ Over the past decade, other states have also dealt with constitutional non-delegation challenges to binding inter- est arbitration statutes. The cases of Oklahoma and Alaska are illustrative of the new approach legislatures are tak- ing. Instead of unaccountable arbitrators with absolute discretion, these statutes address political accountability con- cerns and constrain arbitrator discretion. In 1971, the Oklahoma Legislature passed the Fire and Police Arbitration Act (the "Act"), where the right of police and f'u'e:fighters to strilce was withheld. [FN63J However, the A<;t only provided for non-binding interest arbi- tration. JENM\ The Act was amended in 1985 and 1995 to provide for binding interest arbitration. Lfl!Qil The 1995 amendment also provided a unlque process: If the arbitrators did not choose the city connoil's best offer, the city council could call a special election and submit the two proposals to a vote oftbe people.lfl!.§Ql The citizens of the affected municipality*254 could, in essence, have the final say as to whether to ratity or reject the collective bar- gaining agreement.lE!::!21.l in 1996, the Oklaboma Supreme Court upheld the Act despite numerous constitutional challenges, including © 2011 ThOlllllon Reuters. No Claim to Orig. US Gov_ Worl<s. ! j S5 HSTLJ 245 Page 5 55 Hastings L.J. 245 non-delegation, in Fraternal Order of Police, Lodge No. 165 v. City of Choctaw. ~ The court compared the Oklahoma statute to other state binding arbitration sllltntes that were held cotlStitutional. The Oklahoma court found the reasoning of the other state courts persuasive that the "delegation of authority to an arbitrator was permissible because there were sufficient guidelines and standards set forth in the legislation." J:ENii[J The court pointedout that . here, the Act "requires that the arbitrators give weight to factors such as a comparison of wages and benefits with prevailing wage rates, interest and welfare of the public and revcnues available to the municipality." [FN701 The court reasoned that similar "guidelines were noted by the Alaska Court in approving their stalnte for binding interest arbitration." !FN71] (This case is discussed immediately below.) Therefore, the Oklahoma Supreme Court upheld the Act against the. political accountability challenge because the "delegation of power is accompanied by sufficient guidelines." lflfI1l .... Surprisingly, the Oklaboma Supreme Court did not analyze the ;Jlllical accountability aspect of the municipal- ity allowing the submission of fioal offers to the voters if the municipality's offer is not c!losen. The court merely stated that "the ultimate decision resides with either the city council or the people themselves." [FN731 This lack of analysis may be because direct voter approval of the offer makes the arbitration offer per se politically accountable; but it is more likely because the court never reached this issue, since it held that the stalnte contained sufficient stan· dards and guidelines. In met. the municipalities in Fraternal Order of Police, Lodge No. 165 v. City of Choctaw ar· gued against the direct vote provision, stating that it took away the city's power to tax and that it was an illegal use of the initiative and rererendwn process. [FN74) The court rejected all of these contentions. FFN75) In' 1975, Anchorage, Alaska enacted a comprehensive labor ordinance that included a binding arbitration provi· sion for police, fire personnel, "255 and emergency medical service workers. JIl:':!W In 1989, Anchorage, while in cootract talk. with local police and firefIghters, filed suit c1alming that the binding arbitration proVision was uncon- stitutional. [FN77) Three years later, the Supreme Court of Alaska in Anchorage Police Department beard tha case ' and addressed both the issues of political accountability and sufficient standards. I.EliZ21 The court upheld the ordi· ) nance under both challenges. l.EllilQJ Unlike Colorado's case in Fraternal Order of Police, Colorado Lodge No. 19 v. City of Commerce City, where the City Council chose the list of arbitrators, 'here the American Arbitration Association supplied the list IFN81] That was not detenninative for the Alaska high court. First, the court, citing language used by the Supreme Judicial Court of Massachusetts stated thet "we are less concerned with the labels placed on arbitrators as public or private, as politically accountable or independent, than we are with the tutality of the protection against arbitrarlness pro. vided in the statotory scheme," ~ Unlike the South Dakota and Utah courts, the Alaska Supreme Court held that the delegation oflegislative power to an arbitrator was not per sa uncol1lititotional. !FN83) Here, the court held that the statote contained s)lfficient protections against arbitrarlness, First, the court pointed out that tha arbitration must be conducted according to published rules by the American Arbitration Association: [1'N&4] Second, while the American Arbitration Association provides the list of arbitrators, the choice of the arbitra· tor must be mutnally agreed to by the parties. ~ ThInI, the arbitrator must conduct a hearing and produce a written decision with findings of met concerning the specific issues in question. ~ Finally, the written decision is "subject to "256 judicial review for abuse of discretion, fraud, or misconduct on the pan of the arbitrator." IFN87) Another important factor was the list of standards that has become common in modem binding interest arbitra· tion statutes. The stalnte provided that the fact-finder is to consider "workload, productivity, economic feasibility, cost of living, the parties' bargaining history, relevant market comparisons in the public sector, and relevant market comparisODB in the private sector." !FN881 After an exhaustive analysis of the statute, the court concluded that "[i]n . Ilght of the elaborate and detailed s!metnre which guides the arbitrator's decisions and guards against arbitrary action we conclude that the Code's delegation ofiegislative authority is constitutional." ~ D. The Trend Ends in California © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. , j , 55 HSTU 245 Page 6 55 Hastings L.J. 245 o , - The trend of courts upholding binding arbitration statutes involving public employees and public entities ended in April 2003, when !he California Supreme Court invalidated the state's binding interest arbitration statute. [FN90] Until 2001 , Califumia had been wi!hout • state·wide binding interest arbitration statute. Twenty-one California lo- calities, however, had implemented various forms of binding arbitration. !FN9IJ During the 1999·2000 session, the California Legis1llture enacted into law Senate Bill 402, entitled "Arbitration of Firefighter I!Ild Law Enforclnnent Officer Labor Disputes," which added sections 1299 et seq. to the CaJifol'1lia Code of Civil Procedure. !n:!2l! Un- der Senate Bm 402, a labor union representing public safety employees can declare an Impasse in the negolirrtions and require a local agency to submit unresclved economic Issues to binding arbitration. IFN931 Each party then chooses an arbitrator, who togelher choose a lhird arbitrator. ~ The arbitration panel then chooses between each side's last best offer, based on an enumerated list of fuctoIS. ~ Interestingly, "257 Senate Bill 402 only applied to any local agency or any entity acting as an agent of a local agency, but did not apply to the State of Cali· fornia even acting as such an agent. fFN96J Therefore. ·!he California Highway Patrol, among others, were not cov- ered by this statute. The California Supreme Court invalidated Selll!!e Bill 402 as violating the Califomia Constitution. The court, however, invalidated the law on "home rule" grounds, not under the non-delegation doctrine. fFN9D The court held that the legislature did not have power to legislate in this area because compensstion of county public employees is not a statewide concern, and therefore the power to compensate county employees is within the sole powers of COWl- ties (and presumably cities fur city employees). Illli281 The court specifically did not address whether a county (or city or !he state for its own employees) could enact a binding arbitration statute on matters it controlled: At the outset, we emphasize that the issue is not whelher a county may voluntarily submit compensrrtion \ issues to arbitration, i.e., whether the county may delegate its own authority, but whether the Legislature may ./ compel a county to submit to arbitration involuntarily. The issues involves the division of authority hetween the state and eounty, not what the county may itself do. [FN991 Tbis is an important distinction, because it leaves open the possibility that cities, counties, and the state may enact binding arbitration procedures involving public employees whose compensation they control. For Ol<lUJlple, cities, counties, and even the state could enact the proposal below for the workers they eacb employ. . Although the court's opinion can be read as forbIdding any state legishltive requirement of binding arbitrrrtion onto localities as an impennissible infringement on "home rule," the State could attempt a state-wide system based on a direct accountability system, where the locality has the "258 ultimate choice of sending the decision to the vot- ers. The court stated that the reasOn Senate Bill 402 fails to pass constitutional muster was because "the county's governing body does not retain ultimate power." IFNIOOJ The State could argue that an arbitration statute (as pro- posed below) that allows the locality to take to the voters any adverse arbitration award does provide that locality's governing body with the "ultimate power" overthe decision. Drafting a statute with more political accountability on the local level may be a way to overcome County of Rlverside v. Superior Court's concerns. As this section demonstrates, for aimost twenty years state courts routinely upheld binding interest arbitrrrtion statutes as an appropriate constitutional means for resolving public labor disputes. However, legislatures have also been drefting more careful statutes, which may be the reason wby the trend has been towards complete acceptance. The next Purt will addreas whether this trend is appropriate in light of the still lingering constitutional issues. n. Analysfs of the Current State oftbe Lew The prior trend in favor of binding interest arbitration in certain parts of the public ,ector was appropriate, pro- vided that certain requirements are met. First, there are several positive aspects that should corrtinue to playa role in future binding interest arbitrrrtion statutes. The most. important aspects are the acknowledgment of the unique "no strike" rules that apply to police and firefighters, the provisiollB that address pootical accountability, and the demand \0 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. · . 55 HSTLI245 Page 7 SS Hastings L.J. 245 for sufficient standards. However, the trend was not without faults. Some state courts have upheld binding arbItra- tion statules with insuffICient protections, while others have struck down adequale sllltu1eS. This Part will eXllllline the current state of the law, looking at both the positive aspects of the last thirty-five years and the flaws in some statutes and court decisions. A. Positive Aspects of the Trend As Ill! inltial matter, many of the state and local statutes apply only to police and fire services. This is because most states outlaw strikes by police and firefighters, [FN 10 I] otherwise koown as essential services, because of the detrimental impact a strike of that nature would have on the communities. fEN 1021 On the other hand, the right of .... public employees to collectively-l59 bargain has increased s\;;;stautially over the past forty years. fPNI03].Some commentaturs have suggesled that "[tlhe right to bargain collectively has been so connected with the right to strike in this country that legitimale questions arise as to whether genuine collective bargainlng can occur without the right to strike.» [EN 1M] This orestas a problem fur police and frrefighler unlons: WithoUl bindiog interest arbitration, they have the right to bargain collectively, but do not have direct striking pressure to place on the pnblic employer. The courts bave not been oblivious to this problem. The Oklahoma Supreme Court in Fraternal Order of Police, Lodge No. 165 v. City of Choctaw noled this dilemma in quoting the Oregon Supreme Court, which staled that "bindiog arbitration is essentially a quid pro quo for the prohibition of strikes by firemen. Together, these statutes protect the public from interruption of essential health and safety services while recognizing the employees' right to engage in melll!ingful collective bargaining." [FNI051 Indead, in the absence of the right to strike, interest arbitration is a strong substittJle to make collective bargain- !~. " ) ing effective. [PN 1 061 The courts are correct to note this unique feature of binding inlerest arbitration. It provides 'j the police and firefighters uniOl1l! with a pressure similar to that of a strike on the public employer, while at the same time protecting the health and safety of the community. [EN 1071 Another positive aspect has been the discussion of the need for political accountability. [PN 108] What separa1es interest arbitration with other privs1e furms of arbitration ill the fact that the arbitrator, never an elected representa- tive, is maklng legislative policY decillions. (FN109] In order to be truly accountable to the cltlzens, arbitrators who are making these legisladve decillions need to have some connection to the elected representatives. However, having an arbitrator who is politically accountable raises certain issues if the arbitrstrJr is accountable to the local entity and other issues if the arbitrator is accountable to the state. For example, an arbitratur may be made "politically accountable" to the local city or county "260 by appointment by the city council, as was the case in Fraternal Order of Police, Colorado Lodge No. 19 v. City of Commerce City. rfan arbitrator is made politically accountable to tbo local eltll'torate, which can be considerect a "party" in the arbitration proceeding, then the arbitra- tor may not be seen as neutral. [EN 11 0] In addition, "to the extent that the arbitrator's constituencY i. the same as tbat of the legislative body thai would otherwise exercise authority over the policy questions posad, the process be- comes redllndant." IFNI III Ou the othat hand, the state legislature may form a statewide arbitration panel, 80 that the arbitrators are politi- cally accouutable to elected representatives, albeit at the stale level. This poses a problem of the state infringing on local autonomy. (FNlI2] The state is in esacnce indirectly dictating to the localities how !() set police and firefighter w!lges. This is what doomad the California statute, as there wore specific constitutional provisions that protectad cities and counties "home rulen in this area. [EN 1 131 Statewide legislation, therefure, may run into two problems. First, lha state constitution may not pelTllit it Second, even if statewide bindiog ioterest arbitration that applies to cities and couoties is constitutionally acceptable, It ultimately removes the decisions from the citizens of the locali- ties and places those decisions with the representatives of the state. ·This couid anger citizens who would in effect be told by the state how much the locality needs to budget for its police and fire protection. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. () 55 HSTU245 PageS 55 Hastings L.1. 245 Legislatures have begun to recognize the concerns raised by scholars and the courts about polllical accountabil- ity. It is important to point out that not every court that has upheld a binding interest arbitration statute has done so on political accountability grounds. For example, the statute upheld in Anchorage Police Department ca.\Ied for the American Arbitration Association to provide a list of.arbitrators. [FN1141 The Colorado Supreme Court in Fraternal Order of Police, Colorado Lodge No. 19 v. City of Commerce City, 'on the other band. stated that. previous statute that had been struck dOwn suffi>red. from a lack of political accountability due to "2.61 the fuct that the American Arbitration Association, "an independentorgenization with no pOlitical accountability," submitted the list. []'N115] One state cOlll'lmay see a political accountability problem where another court does not. The point is, however, that courts are properly considering this aspe~.ofthe non-delegation doctrine, instead of the bright-line rules ofoe. Sioux Falls Firefighters, where no delegation to an arbitrator is proper, no matter the form, today there is Fraternal Order of Police, Colorado Lodge No. 19 v. City of Commerce City, where the court will examine the statute in ac- tUal application to determine jf there are sufficient legislative safeguards. The legislatores and courts are addressing the need for some political accountability, in two distinct ways. The first way is. to make the arbitrator politically accountable, while the other alternative is to make the arbitrator's award politically accountable. Legislative bodies in Colorado and Nebraska, for example, seek political accountability through the arbitrator. In Colorad9, the city charter amendment sought to have the a:lbitrator directly accouotable to the city council. The city council creates a permanent panel of arbitrators, and has the authority to add 8lld remove arbitrators from the panel at any tim •. [EN 1161 This is to ensure that the a:lbitrators themselves are subject to direct control from elected representatives. Nebraska, on the other hand, has a "politicaUy accounteble" administrative agency to resolve bar- gaining impasses. fFNII7] Tbis is similar to other states whose arbitrators, rather than supplied by a list from the American Arbitration Association, are supplied by an administrative agency. []'NilS] These statutes, have direct political control over the arbitrator, but not necesaarily the award. If the award is upsetting to ilia elected body, ilien it will be the arbitrator who is subject to. dismissal. On the other hand, Oklehoma's Fire and Police Arbitration Act represents an attempt to get political account- ability over the award itself. The·concern is not who is actually arbitrating, but what is the end result. If the city's offer Is not selected, the city can request a direct voter approval of the award. IFN1l91 In this way, the legislature seeks to give control over the policy decision to the citi=s. While this new type of political accountability has not been extensively addresaed by commentators, in '2.62 Part IV tbis Note wlll argue that this is a more effi>ctive n>- oponse to the political accountability issue. The third positive aspect has been the demand of COll!\'S to require enumerated standards on which the arbitrator is to base his or her deci,ion. To begin with, even some of public employer. acknowledge that binding interest arbi- tration is not per se unconstitutional. fFN120! Rather, iliey argue tbat without standards and guidelines binding in- terest arbitration is an invalid delegation of authority. For example, in Anchorsge Police Department, the city argued that "our problem is not with binding interest arbitration as a concept. ... Our problem is with the way it has been done with this ordinance. The ordinance simply does not provide the necessary standards and safeguards to make that delegation of authority valid." 1FN12lJ An excellent example of the courts requiring standards was the decision by the Supreme 1udicial Court of Maine in City of Biddefurd v, Biddeford Teacher's Ass'D. fFNl221 The case involved the validity of the binding arbitration provision of the Municipal Employees Labor Relations Law, which applied to all public employees, but in this case was being invoked by !eachers. fFNI231 The court first held that binding interest arbitration was not Ii per se violation of the non·delegation doctrine of the state constitution. [FN 1241 However, the court closely ,eruti- nized the statute and fOund that adequate standards did not exist. fFN125] The court noted that "[t]his Act--unlike 02011 Thomson Reuters. No Claim to Orig. US Gov. Works. 55 HSTLJ245 Page 9 55 Hastings L.J. 245 those In some other states--does not provide that the arbltratorl!' award is to be suhject to existiag statotOlY restric- tions. n [fN 1261 Although an earlier case, Biddeford Teacher's Ass'n provides an excellent analysis of the need for standards. Standards pllmllel political accountability, as the Maine court noted that the "arbitrators are not public officials and are not required to answer to the electorate or to the elected representatives of the electorate." [FN1271 In the last decade, the necessity of standards have been an important factor for courts in upholding these statutes. "263 B. Critique ofDecisiOlis While the more recent decisions have demonstrated'" positiye step taken by legislatotes and the courts in draft- ing and interpreting binding interest arbitration statutes, there have been problematic decisions OVer the years. The purpose of this analysis is to show that the means are important in achieving the end of a constitutionally acceptable statutory framework. My first critique is addressed to state legislatures. Generally, binding interest arbitration statutes are tailored to a narrow sector of public employees, usually police and firefighters. rEN1281 However, some states )lave provided binding interest arbitration to all public employees, regardless of whether they perform "essential services" or not. [FN1291 This is a mistake, for it broadens the use of this unique procedure to public employees who have other re- courses. As discussed aheve, courts and commentators view binding Interest arbitration as a replacement for the right to strike and to make collective barga!nJng rights effective. [EN DO) While strikes are certainly disruptive, the bargain- ing is still between public employees and the politically accountable public employer. Binding interest arbitration, which involves a private individual making legislative decisions, should only be used for those service providers, such as police and firefighters, that the community simply cannot afford to go on strike. It should not be used to en- able the public employer to abdicate completely its role determining the compensation of most of its employees. fFN 1311 Although it is tempting to use binding interest arbitration fur all public employae labor dispJrtes, it should not be a substitute for groups of employees who have the option to strike. My second critique is addressed to state judiciaries. It is imperative that courts analy:re the statutes to make sure tha arbitrators are politically*264 accountable and are guided by enumerated standards. The Rhode Island Supreme Court's decision in Warwick Regular Fireman's Ass'n, is an example of an opinion thet lacks proper analysis. Rather than critique thi' opinion, which has been done by many commentators, [FN1321 I will point out the danger in this type of decision. The court held that arbitrators when acting in their binding interest capacity were in reality public officials. [EN 1331 This type of semantic manipulation does not justify the end result of a constitutionally acceptable statotory framework. Courts tbat engage in this type of ends-justifying reasoning simply do not examine the statute at all, nor do they determine if the arbitrators are constrained by any political accountability or enumerated standards. Thls type of poor judicial review allows legislatures to draft broad proposals that could leave arbitrators unchecked. Fol'- tunately, Warwick Regular Fireman's ASB'n is an aberration, rather than a trend. It is important that courts engage in meanlngfuljudicial review, so not as to let wholly unaccountable private parties make legislative polley decisions. ilL "Model Statute" Proposal While a binding interest arbitration statute may seem Uke a complex way to resolve labor dispotes, it is the best solution for dealing with police and firefighter labor impasses. The State @f CaUmmia and its cities and counties should do likewise. The alternatives are not desirable. Public employers will argue that binding interest arbitration is not necessary, thaI police and firefighters already bave been given a "fuir shake" by the public employer and that © 2011 Thomson Reuters. No Claim to Ong. US Gov. Works. ) I i I .I , , () ) 55 HSTLJ245 Page to 55 Hastings LJ. 245 they do not need this unnecessary weapon. [FN134] However, considering that so many states and localities have op1l)d to create such a system, clearly there is a meting that pollce IlIld firefighters are not given a "fair shake.» Withoot tbis system, police and firefighters would have to accept whatever the public employer offered. California now atarids at a crossroads. For Over thirty-five years, public entities have experimented with binding , interest arbittation. California attempted to Join this group, but a statewide attempt to impose binding interest arbi- tration on cities and counties has fulled. The easiest solution would be to follow PenMYlvania's lead and enact a COD- stitutional amendment tbat allows for binding interest arbitration. [fNI35! However, that would not address the fun- damental problems and concerns about the role of the arbitrator. California and its· cities and counties "Z65 have a great opportunity to pass statutes that are not Just constitutionally acceptable but that also address political account- abUhy and arbitration ~tandards in an id~,al manner. Having exarninad the positive and negative aspects ofbiJlding interest arbitration, I propose a statute that the State, cities, and counties of Callfumla can adopt toward employees whom they control that includes the best practlces ofthe last thirty-five years. The statute r propose shOUld only ap- ply to essential service. such as police and firefighters, should include direct political accountability, and should contain sufficient standards to constrain the arbittator. This proposal could be adopted statewide or on a local basis. A. Only for "Essential Employees" The binding Interest arbitration staMe or ordinanc<l should only be for essential employees, which are typically police and firefighter personnel. All discussed above, this is because of the unique nature of their work: they perform services that are absolutely essential to health and safety, but at the same lime they are not allowed to strike. other employees may bo fOlllld ro be essential also. rFN1361 Whatever the c1asslficatioll, it should not be a blanket right to binding interest arbitration for every public employee. B. D~ Political Accountability The mtute or ordinance sbould address the political accountability problem through a direct voter approval of the arbitration awards. If direct voter approval is not desired, then other political accountability measures must be enacted. The arbitra- tors themselves could be made accountable to elected representatives. On the political accountability side, statutes such as that involved in Fraternal Order of Police, Colorado Lodge No. 165 v. City ofCammerce City [FNI37! are mucb more appealing than the statute involved in Anchorage Police Department. [ENI3S! It is important tIlat the elected representatives playa role in who will be on the arbitration board. Therefore. if a mte or locality does not adopt the direct elections approach, there are • number of alternatives to place political accountability on the arbitra- tor. For example, a state or locality can devise a public arbitration agency similar to Nebraska. [FNI39J Or, a state "266 or locality can allow the legislature or chy council to playa direct oversight roie, such as the city charter in Fraternal Order ofPoHc", Colorado Lodge No. 19 v. City of Commerce City. Either way, the elected body is placing some political restraints on the arbitrators themselves. The real issue that concerns citizens iB what the arbitrator is actually awarding. It is the award of wmpensation that will directly affect the citizens, possibly either through cuts in other services, decrease in overali spending, or increased taxes. Cities and counties of California should look to Oklahoma'S unique solution to this problem. lfthe 'city's final ofter is not chosen by the arbitrator, the city council can request the arbitration award ro be voted on bY , the citizens. fFN J4~l In that way, direct political secouniability is realized. All discussed above, commentators have pointed out some of the problems with political accountabilhy of the arbitrator. [EN 1411 'The arbitrator, if responsive to the elected officials, is in effect responsive to one of the parties who oannot resolve the lahor dispute. ConceptuaUy, the same argument can be applied to the citizens who vote, wIlo are supposed to be represented by the elected officials. C 201 I Thomson Reuters. No Claim to Orig. US Gov. Works. i • 55 HSTLJ 245 Page 11 55 Hastings LJ. 245 On the other hand, when the citizens get to directly vote on the arbitration award, that provides direct political accountability. There may be metors that are skewing the bargaining process, such as elected representatives holding a grudge against the bargaining agents or other fuctors that may come into play during negotiations. But it is the citizens' checkbook that the parties are negotiating over. If the citizens W1IIll to give the police and firefighters a sub- stantial raise, then they can voice themselves at the polls. Therefure, California and its cities and counties should adopt a statutory scheme similar to OklahomIL [fN1421 C. Sufficient Standards The statute or ordinance should contain sufGvient standards to regulate arbitrator discretion. The legislatures .... and the courtB have handled these safeguards convincingly and thoroughly. Many courts that have upheld binding interest arbitration statutes have discussed the standards *267 that are in place to constrain the arbitrator's discretion. fFN1431 "Standsrds" encompasses three distinct areas: requirement of a written decision by the arbitrator, ennmer- atad criteria in the:sterete, and judicial review oftha award. FirSt, the cities, counties, or State of Califurnia should require the arbitrstor to issue a written opinion addressing each issue. fFNI441 It is hnportant to note that this is related to judicial review in that, for the court to have mean- ingful judicial revlew, it needs to have some evldence of what and how the arbitrator Came to his or her decision. This written decision will be just as hnportant in areas that have a referendunt on the award as those that do not. Where there is a referaudunt, the written decision will provide voters with reasons why the award was made. Where there is no refurendum, a written decision is an essential part" of tha restraint on arbitrator discretion (see judicial (~) review discussion below). Therefore, a written deeision on each issue needs to be a part of any statote. [EN 1451 ) Second. the statute or ordinance neads to contain a list of standards that the arbitrator must consider. fFN1461 There are a variety of standards that legislatures have drafted, [FN 14 7J but California should adopt the cOtuPrehen- sive list of filctors providad by the Michigan statute: . (a) The lawful authority of the employer. (b) Stipulations of the patties. (c) The interest and wellilre of the public and the financial abillty of tha unit of government to meet those costs. «(I) Comparison of the wages, hours and conditions of employment of the employees involvad in the ar- bitration proceeding with the wages, "268 hours and conditions of employment of other employees perform- ing shnilar services and with other employees generally: (i) In public employment in comparable communities. (Ii) In private employment in comparable communities. (e) The average consumer prices fur goods and services, commonly known as the cost of living. (f) The overall compensation presently receivad by the employees, including.direct wage compensation, vacations, holideys and other excused time, insurance and pensions, medical and hospitalization benefits; the continuity and stability of employment, and all other benefits reeeivad. (g) Changes in any ofthe foregoing circumstances during the pendency ofthe arbitration proceadings. (b) Such other mctors, not confinad to the furegoing, which are normally or traditionally taken into con- sideration in the determination of wages, hours and conditions of employment through voluntary collective bargaining, mediation, fact-finding, arbitration or otherwise between the parties, in the public service or in private employment. fFN 148J By following these statotory criteria, courts have held that this comprehensive list of factors "provides the necessary standards" required "forthe exercise oflegislative power." fFNl491 . Finally, the last required safeguard is judicial review of the arbitration award. If California's cities and counties adopt the proposad voter approval system, then judicial review will not be required. The voters, not the arbitrator,' © 20l] Thomson ReUlers. No Clahn to Orig. US Gov. Works. \ ') I ~ 1 j J I 1 55 HSTIJ 245 Page 12 55 Hastings L.I. 245 will have the ultimate review. However, in other forms of binding arbitration statutes, where voters do not "review" the decision. judicial review is essential Typically, the arbitrator's award, which should be in writing, is subject to judicial review for "abuse of discretion, fraud, or misconduct on the part of the arbitrator." [FN 150] Thls judicial review, while limited, ensures that the arbitrator is acting in accordance with the law and in accordance with the enumerated criteria. fFN 1511 The standard of judicial review of interest arbitration awards is much stricter than most arbitration awards. including grievance arbitration. [F'N 152] ·269 As stated earlier, written decisions. enumerated standards, and judicial review are important, bu~ with direct politica1.ccountability, they become less so. That i. because the citizens of the community h.ve the final "re- view." Therefore, while these standards are important in constraining arbitrator discretion, direct political account- ability provides an additional safegLIjIrd against any troublesome delegation problem. ",. Conclusion Binding interest arbitration h •• become a popUlar tool in many stat.s and kx:.lities for resolving potentially debilitating strikes. fFN153] Although california's statewide venture into binding interest arbitration b1!s tidied, there remaln several avenues by which California public entities can enact binding interest arbitration legislation. Many legislatures On the stete and local level have drafted comprehensive staMes not only to resolve the labor dis- pute problem, but to ensure thafthe delegation oflhi. legislative authority is constitutionally permissible. Until re- cently, state courts had unanirnoQSly upheld these statutes. The upholding of these provillions was a positive trend, In light of the carefoUy crafted statutes. The' State of California and its cities end counties should adopt a statute or ordinance that ilie limits binding ar- bitration to "essential" employees and provides a list of enumerated statutory standards that an arbitrator is to con- sider. The best way to obtain political accountability is through a direct election by the voters on whether to approve or reject the arbitration award. That way, the arbitration award i.truly politically accountable and is ilie message of the citizens who will have to pay, directly or indirectly, for the new labor contracm. [FN lJ. 66 P.3d 71 g (Cal. 2003). fFN2J. Joseph R Grodin, Political Aspeclll of Public Sector Interest Arbitration, 64 Cal. L. Rev. 678, 678 n.1 {I 976). [FN4l. Id. IIIfa. See Senator Robert J. Martin, Fixing the Fiscal Police and Ftretrap: A Critique of New Jersey's Compulsory Interest Arbitration Act 18 Seton Hall Legis. J. 59. 6Q (J 993). Because it is beyond this Note's scope, I will not be discussing the benefits and disadvantages of final offer arbitration to othar more discretionary forms. fFN6J. See Jemey Sloan. New Developments in Municipal Law Practice: Municipal Employee Unions in Califor- nia, at 581, 594 (PLI Crim. Law & Practice Course, Handbook Series No. CO-OOIl, 20(1) (listing state and local interest arbitration statutes). ID:/l1. See Oro.din, supra note 2, at 679·80. [FN8J. Cities and counties have also argued against grievance arbitration procederes as well, but courtS have been more concerned over interest arbitration and more likely to hold interest arbitration unconstitutional. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. i ! j 55 HSTU245 Page 13 55 Hastings L.J. 245 fFN91. See Anthony Modd, Fraternal Order of Police, Colorado Lodge No. 19 v. City of Commerce City. 16 Ohio St. J. on Disp. Resol. 425, 430 (200!). IFN 1 01. See Sloan, supra note 6, at 620. IFN Ill. For early state high courts striking down binding interest arbitration statutory framework, see Salt Lake City v. [nt'l Ass'n of Firefighters. Locals 1645.593. 1654. & 2064. 563 P.2d 786 (Utah 1977); City of Sioux Falls v. Sioux Falls Firefighters. Local 814. 234 N.W.2d 35 (S.D. 1975). For early state high courts upholding binding inter- est arbitration, see City of Warwick v. Warwick Regular Firemen's Ass'n, 256 A.2d 206 (RJ. 1969); State ex rel. Fire' Fighters Local No. 946 v. City of Laratl';;", 437 P.2d 295 (Wyo. 1968). IFN 121. See, e.g., Fraternal Order of Police, Colorado Lodge No. 19 v. City of Commerce City, 996 P.2d 133. 138- 39 (Colo. 2000); Fraternal Order of Police, Lodge No. 165 v. City of Choctaw, 933 P.2d 261 271 (Okl •. 1996); Municipality of Anchorage v. Anchorage Police Dep't Employees Ass'n, 839 P.2d 1080. 1090 (Alaska 1992). Contra County of Riverside v. SupeJior Court, 66 P.3d 718. 730-31 (Cal. 2003). IFNI3l.·See Salt Lake City v. In!'1 Ass'n of Firefighters, 563 P.2d at 791; Sioux Falls Firefighters. 234 N.W.2d at 38. IFNI4l. Sioux Falls Firefighters 234 N.W.2d at 36 n.l (quoting Pa. Const. art. Ill, §3]) See, e.g., Salt Lake City v. M'I Ass'n of Firefigbters. 563 P.2d at 788 n.l; Harney v. Russo, 255 A.2d 560, 562 CPa. 1969); Fire Fighters Local 437 P .2d at 299. Importantly, the California Supreme Court in County of Riverside v: Superior Court based Its deci- sion in large part on home rule, rather than simply non-delegation grounds. While both involve delegation, home rule refers to the power of the state to compel a locality to delegate the locality's power, while non-delegation refers to the power of a public entity to delegate its power. Most of the .successful challenges have been on strictly non- delegation, rather than home rule, grounds. Seecases cited supra note 12. IFN 151. See, e.g., Fraternal O"det of Police, Colorado Lodge No. 19 v. City of Commerce City, 996 P.2d at 135. "Every person having authority to exercise or exercising any public or government duty, power or function, shall be an elective officer, or one appointed, drawn or designated in accordance with law by an elective officer or offi- cers ...... ) Id. (quoting Colo. Const. art. XXI. §4). . rFNl6l. Louis S. Cataland, Binding Arbitration and the Nondeleoation Doc~'ine; Does Ohio's Collective Bargaining Act Unconstitutionally Delegate Legislative Authority to Administratively Appointed Arbitrators?, 6 Ohio St. J. on Disp. Resol. 83. 88 (] 990). JI!I!lll. 437 P.2d at 301 (Wyo. 1968). IFN 181. 256 A.2d at 212. IE!'il2l. Fire Fighters Local 437 P.2d at 298. IFN20J.Id. lflIlli. Id. at 300. iEl'Im. Warwick Regular Fireman's Ass'n, 256 A.2d at212. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. CJ \ ) 55 HSTLJ245 Page 14 55 Hastings L.J. 245 1l'Nlli. The constitutional provision at issue in Warwick Regular Fireman's Ass'n WIIll Article YL Section 2 of the Rhode Isl,rnd Constitution. which read: "The legislative power, under this Constitution, shan be vested in twO houses, the one to be called the senate, the other the house of representatives; and both together the general assem· bly. The concurrence ofth. two houses shall be necessary to the enactment of laws." Rt Const. art. VI, §2. [FN241. Warwick Regular Fireman's Ass'n, 256 A.2dat 208. [FN25]. Id. [FN27J.ld. [PN28J. See, e.g., Charles B. Craver, The Judicial Enfurcement of Public Sector Interest Arbitration, 21 B.C. L. Rev. 557,565 (1980). [FN291. See Milwaukee County Y. Milwaukee Dis!. Council 48. 325 N.W.2d 350 (Wis. Ct. App. 191m: ~ Richfield Y, Local No. 12IS.lnt'1 Ass'n of FirefigbtM. 276 N,W,Ad 42 (Mjnn. 1979); Medford Firefighters Ass'll. Local No. 1431 v. City of Medfurd. 595 P.2d 1268. (Or. Ct. APIl. 1979); City of Spokane v. Spukane Pojjce Gulld. 553 P.2d 1316 (Wash. 1976); Town of Arlin!!lon y. ad. of Conciliation & Arbitration, 352 N.E.2d 914 (Mass . .!21§); City of Amstercimn v. Helsby, 332 N.E,2d 290 /N.Y. 1975). J:ENJ.l!l. See .Salt Lake City Y. In!'1 Ass'n ofEir"figbters, Locals 1645.593. 1654. &; 2064, 563 P,2d 786, 789-90 (Utah 1977); Greeley Police Union v. City Council of Greeley, 553 P.2d 790. 792 (Colo. 1976); City of Sioux Falls v. Sioux Falls Firefighters, Local 814,234 N,W.2d 35. 38 (S.D. 1975); Erie firefighters Local No, 293 Y. Gardner, 178 A.2d 691 695·96 (Pa. 1962l. [1'N3J]. Erie Firefigh!!lfS Local No, 293. 17S.A.2d at 695. The COIlStitutional provision at issue here was typical: "The General Assembly shal! not delegate to any special eom:tni8sion, private corporation or association, any power to !!luke, supervise or interfure with any municipal improvement. money, property or effecll!, whether beld in trust or otherwise, to levy taxes or perfonn any municipal function whatever." Pa. Cons!. art Ill. &31 (1994). [FN321. 553 P.2d al792-93. J:l.':NHI. Id. at 792. f1'N361. City of Sioux Fal!s y. Sioux Falls Firefigilters. Local 814 234 N.W.2rl35, 38 (S.D. 19751. L!:NlZl. Id, at 36-38. [FN38j. Salt Luke City v. Int'l AiIs'n' of Firefightels, Loesls 1645.593, 1654. & 2064,563 P,2d 786, 789·90 CUtl!b 1 977). . IFN3911d. at 789. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. j , 55 HSTIJ245 Page 15 55 Hastings L.I. 245 fFN40J. §.nS.W.2d 221. 2231Ky. 1981). In this case, tn. previous employment contract between the police and the city stated that when this contract expired, in !be event of a bargaining impasse, binding arbitration would take place. Id. at 221. The city had passed this previous contract as part of an ordinance. Id. This case was unique in that unlike a blanket city ordinance that applied across the board to all police andlor firefighter negotiations, this ordi- nance applied only to this particular situation. ' [FN41 1. ld!LQfRocky River v. State Employment Relations Bd .. 530 N.E.ld I. 9 (Ohio 1988) (Rocky River I). [PN42]. City of Rocky River v. State Employment Relations ad" 539 N.E.2d ]()3, 119 (Ohio 1989) (Rocky River IV). One commentator ,has noted !bet'ln this intervening year, one jnsrlce had replaced another justice, andtde court agreed to reconsider the motion for rehearing. See Cataland, supra nnte 16, at 33 n.3. [PN431. Rocky River IV. 539 N.E.2d at I 12. [FN44]' Id. ~.ld.at83. [FN461. See Catafand, supm note 16, at 83-84. [FN47J. The constitutional amendment reads: Notwithstanding the foregoing limitation or any other provision of the Constitution, the General Assembly may enact laws which provide that the fmdings of panels or comrnissi(ms, selected and acting in accordance with law fur the adJustroent or settlement of grievances or disputes or for collective bargaining between policemen and firemen and their public employerS shall be binding upon all parties and sbell constitute a mandate to the head of the political subdivision which is the employer, or to the appropriate officer of the Commonwealth if the Common- wealth is the employer, with respect to matters which can be remedied by administrative action, and to the lawmak-. ing body of such political subdivisions or of the Commonwealth, with respect to matters which require legislative action, to take the action necessary to carry out such findings. Pa. Canst art. Ill, 83 L L!'N4il:SalDev v, Russo, 255 A.2d 560, 561 IFa. 1969'1. [FN49J.ld. at 562-63. ~. Id. at 563, [PN5IJ. fmternal Qrder ofPoIjce, Colorado Lod~e No. [9 v. City of CommerCe City, 996 P.2d 133, 133-34 (Colo. ~(enbanc). [fN52J. Id. at 135. fFN53J. rd. at 134. ~. Id at 134·35. <C 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. ) 1 ~~ i ~~ j , i j . ( ~" " ) ! ; 55 HSTLJ245 Page 16 55 Hastings LJ. 245 fEN51!' Id. at 135 n.5. lnlill. Id. at 135. J.E.!':Ii2:l. Id. at 136. fFN60J.ld. LEN611 Id. at 137. .~", #'" J::EN@. Id. at 138,39. 1I.tlill, Fraternal Order ofPi)J;ce. Lodge No. 165 y. City of Choctaw, 933 P.2d 261, 265 (Okla. 19961. If1:lM1Id, [FN651. !d. JE!'!QIl. 1d. at 269. JE::IQ.U Id. at 263. fFN69j. Id. at 267. [FN7lJ. Id. at 268. IfN1;!l. Id. &268,69. fFN76]. Municipality of Anchorage v. Anchorage Dep't of Employees Ass'n. 839 P.2d 1080. 1081,82 ~ lm}. [FN77]. Id. at 1083. [FN791. The court framed the challenges this way: "The Municipality argues that the Code's binding interest arbitra, tion provisions, delegating legislative authority to a politically unaccountable arbitrator, violate the Alaska Constitu, tion. Alternatively, tbe Municipelity contends that the Code is unconstitutional becauSe its provisions fiUI to provide C 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. ! I J 1 j 55 HSru 245 Page 17 55 Hastings L.J. 245 standards to guide the arbitrator." Id. fFN801.ld. at 1085, 1089. [FN8lJ. rd. at 1082 n.5. [FNS2).!d. at 1084 (quoting Town of Arlington v. ad. ofConclliation & Arbitration, 352 N.E.2d 914.920 (Mass. 1976). [FN83J. Id. at 1085. [FN841.ld. at 108S. fl:l!Ml. Id. at 1086. [FN87). Id. at 10S8. [FN88J.ld. at 10S2 n.5. [FN891. Id. at IOS9. J:EWlQl. Countv of Riverside v. Superior Court, 66 P.3d 718, 721 (Cal. 2003). JE::I2ll. Sloan, supra note 6, at 605. I.ENl11l. County of Riverside v.' Sgpedor Court. 66 P.3d at 721. J:!:1!.2:illd. at 722. For a discussion on the distinction between economic and noneconomic issues, see infra note 143. [FN94J. Id. {citing Cal. Civ. Proc. Code §§1299.4 to.6 (West 1982». ~. Id. The factors included: the interest and welfare of the public; the financial condition of the employer end its ability to meet the costs of the award; ilie availability and sourees of thnds to defray the cost ohny changes in matters within the scope of arbitration; comparison of wages, hours, and other terms and condition of employment of other employees performing similar serviceS in similar employment; ilie average consumer prices for goods and services; particular requirements of employment, including, bnt not limited to, mental; physical, and educational qualifications, job training and skills, and bazards of employment; and changes in any of the furegoing that are tradi- tionally taken into consideration in the determination of wages, hours, and other tenns and conditlons of employ- ment. SoeCaI. Civ. Proq. Code. llI299.6(c). ~. County of Riverside v. Sgperjor Court, 66 P.3d at 722 (citing Cal. Civ. Proc. Code §1299.3(c) (West 1982». 1EN2ll. See id. at 723-27, See also cas .. cited supra note 14 for distinction between home mle and non-delegation. Q 20 I 1 Thomson Renters. No Claim to Orig. US Gov. Works. ) .~ lr-) \ 55 HSTU245 Page 18 55 Hastings L.J. 245 [FN981. See id. at 725-26. It is interesting to note that in Salt Lake City v. Int'J Assn of Firefighters, the Utah Su- preme Court, which inVolved a similar constitutional provision at issue in County of Riverside v. Snperior Court. held that binding arbitration was not an infringement on home rule; it did not impenn.i!lsibly interfere with a munici- pal function because police and firefighter compensation was a statewide concern. Salt Lake City y. Inti Ass'n of Firefighters. Locals 1654, 5.93. ) 654 & 2064. 563 P,2d at 782, Rather, the Utah Supreme Court held that the statute, as written, violated the non·delegation doctrine. rd. at 789-90. [FN9'!J. County of Riverside v. Superior COlll1, 66 P.3d at 722. See .Iso jd. at 726 ("Whethar the county may dele- gate its own anthorily is irrelevant here .... As noted, the issue involves the distribution of authority between county and state, not what the county itself may do."). [FN 1001. !d. at 725. WJOlJ. See, e.g., Frnwnai Order of Police, Lodge No. 165 y. City ofChoc;taw, 933 Pold 261. 265 (Okl!!' 1996>' [FN I 021. See Arvid Anderson & Loren A. Krause, Interest Arbitratjon; The AI1"rnative to the Strike, 56 Fordham L. Rev. 153, 155 (1987), . IEWo:Jl. See Marcus R. Widenor, Public Sector l!argaioing in Oregon: The Enactment of the PECaA, 8· LERC Monograph Sec. 1. 6 C1989l. IFNID4). Anderson & Kraus., supra note 10.0., at 153. rFNIO~l. Eratemal Order anoUee, Lodge No. 165 v. City of Choctaw, 933 P.2d at 267 (quoting Medford Firefight- mAss'll v, Cjty of Medford, 595 P.2d 1268,1271 (Or. 19791). [l'NIO§]. Anderson & Krause, supra note 10.0, al155. [FNI07), Id. at 156. IFNlO~l. See, e,g" Fraternal Order ofPQ!ice, Colo.rado Lodge NQ. J9 v, City ofCo:mmerce City, 996 P,2d 133..ll2: 38 (Colo. 20.00.) (en bane). LFlli.l!21, See Grodin, sl\Pra note 2, at 681. IEWJQi, Id. at 693. IFNlll],ld. IJ'N..lill,Id. at 694. IFN 113]. In County of Riverside v. Superior Court, the California Supreme Court held that the binding interest arbi· tration statute violated two home rule provisions of the Calif9pJja Constitution, 66 P.3d 718, 730.:31 (Cal. 20.0.3). Article Xl, Section I(b) stated thai a conoly's "governing body shall provide for the ... compensation .. ,o[ employees." Col. Const. arl. Xl, §J(b). Article Xl. Section 1 Ha) provides: "The Legislarure may not delegete to a private person or body power to make, control, appropriate, supervise, or interfere with county or municipal corporation improve. ments, money. or property, 9r to levy taxes or assessments, or perform municipal functiolJ.S." Id at 11(a). [FN114J. Municipality of Anchorage v, Anchorage Dept Employees Ass'n, 839 P.2d 1080., ]0.82 n.5 (Alaska 1992), .020.11 ThoIDsonReuters. No Claim to Ong. US Gov, Works. 55 HSTLJ 245 Page 19 55 Hastings L.J. 245 [FN 1151. Fraternal Order ofPotice. Colorado Lodge No. 19 v. City of Commerce City. 996 P.2d at 135-36. [FNI161.ld.at 134. IFNI17J. Craver, su~ra note 28, at 565. [FN 1181. See Cataland, supra note 16, at 99 n.87. [FN119J. Fraternal Order of Po tic., Lodge No .. 165 v. City of Choctaw. 933 P.2d 261. 264 (Okla. 1996) . . --, .-.. IFN 1201. Municipality of Anchorage Y. Anchorage Dep~ Employees Ass'n, 839 P.2d 1080, 1085 11.9 (Alaska 1992). [FNJ21J.Id. [FN 1221.304 A.2d 387, 403 (Me. 1973) . . [FNI23J.ld.at389-90. [FNJ24J. Id. at 398. fFN1251. Id. at 402-03. [FN126], Id. at 402, [EN 1271. Id. fFN1281. See, e.g., Okla. Stat. Ann. tit. II §51-101 (West 1994) (appIyingto police and ["efighters); Fraternal Or- der of Police, ColoradQ LQdge NQ. 19 v. City QfCQnnnerce City. 996 P.2d 133. 135 (CQlo. 2000) (citing city charter amendment applying to PQlice Qfficers). [FNI291. See Me. Rev. Stat. Ann. tit 26, §§961-974 (West 1964 & Supp. 2002) (applying tQ all public employees); Minn. Stat. Ann. §§179A.0 I -A.30 (applying to all public empIQyees). [FN 1301. See supra notes 99-08 and accompanying text [FN 1311. Conceivably, the arbitrator under an "all pubtic employee" scheme could end up setting mQst Qfthe public employees' salaries. For example, if bargaining units of police, firefighters, administrative workers, parks and rec- reation workers, etc., all cannot come tQ an agreement, then the arbitrator WQuld have to decide the cQmpensatiQn for each of the employee groups. While this may be considered a "wQrse case scenariQ," underan all employee system, the possibility grows that an arbitrator will have to decide a disproportionate amount of compensation levels. While binding interest arbitratiQn laws are positive when drafted in a particular manner, they should nQt become a substi- tute for the elected representatives in every case. [FN I 321. See, e.g., Craver, supra note 28, at 565. [FNI331. City of Warwick y, Warwick Regular Firemen's Ass'n, 256 A.2d 206. 209 (R.!. 1969), © 201 I ThQmson Reuters. No Claim to Orig. US Gov. Works. ) () 55 HSTI..J 245 Page 20 55 Hastings L.J. 245 [FN 1341. See Sloan, supra note 6. [FN 1351. See PA. Const. al'l. Ill, §31. [PNI36J. See Grodin, supra note 2. at 679 n.4 (noting that some states have classlfied prison guards, hospital em- ployees, public transportation workers. and pol'laulhority employees as under ill. umbrella). [FN 1371. Fraternal Orde!' of PoHce. Colorado Lodge No. 19 v. City of Corome";,, City, 996 P.2d 133. 133-35 (Colo. 2000) (en bane). [FNI381.Muniei.l!ality of Anchorage v. Ancho!'age DepHml'loyees Ass.:". 83~~f.2d 1080.1081-8.3 (Alaska 19921. [FN139J. See CataJIlIld, supra note 16; at 99 n.87. [FN1401. Okla. Stat. Ann; tit. 11. §51-108 ewest Supp. 2003); see also Fraternal Order ofPoHce. Lodge No. 165 v. City of Choctaw. 933 F.2d 261. 263 (Ok! .. 1996). IfN 141]. See supra notes 107-13 and accompanying text. 1fN1421. Oklahoma Statutes. tille 11. section 51.-108 reads in pertinent part: . Each arbitration stslement shall also include a final offer On each unresolved issue .... Within seven (7) days after the conclusion of the hearing, a majority of the arbitration board members shall select one of the two last best offilrs as tbe contract of fue parties .... If the city's !allt best offer is not selected by fue arbitration board, that party may submit the offers which the parties submitted to the arbitralion board to the voters of the municipality for their selection by requesting Ii special.lection for that purpose. Okla. Stat. tit II, 651-IQ8 (1994). [FN1431. See Anderson & Krause, supra note 100, at 158-59. IlliH41. See, e.g., Fraternal Order ofl'ollce. Colorado Lodge No, 19 y, City ofCommen::e City, 996 P.2d 133.135 0:;010.2000) (en bane). . [FNI45J. "Issue'" refers to the bargaining issues being decided by the arbitrator. These fall into two categories: eoo- nomic and non-economic issues. For example. wage increases is an economic "issu";" wbile working conditions would be a "non-economic" issue. See Sloan, supra note 6. at 603-04. Therefore, under my proposal, and under many CUlTent state statntes. the arbitrator would make a separate written finding on his or her award of wages, a separate written decision on his or her decision on working conditions, and thereon. [FNI461. This Note will not address the debate on what filctors should be considered and what fllctors should nol be considered. For eXllmple. one critique is that factors such as the public employer's abillty to pay should be given more weight than others. See Martin. supra nole 5, at 63. Even though there is an agreement on stsudarde, there Is disagreement and a lot of commentary on what should be included and ""at weight these filctors should be given. 1<1. [FN 1471. The most sIgnificant and controversial factor is "comparability," which requires a "comparison of the overall compensation of tbe employees involved in the dJspute wifu the overall compensation of comparable em- ployees performing similar work in both private and public employment in a particular community or like conununi- ties.» See Anderson &; Krause, supra note 100, at 161. 02011 Thomson Reutet'1!. No Claim to Orig. US Gov. Works. l I I j 55 HSTLJ245 Page 21 55 Hastings L.J. 245 [FN1481. Mich. Compo Laws Ann. &423.239 (West 2001); see also City ofDetroi! v. Delroit Police Qfficers MS'D, 294 N.W.2g68, 81·82 (Mich.1980}. [FN 1491. Fraternal Order ofPolioe. Colorado Lodge No. 19 V. City of Commerce City. 996 P.2d at 139. fEN 1501. Municipality of Anchorage v. Anchoraee Dep1 of Emplovees Ass'n. 839 P.2d 1080. 1088 (Alaska 1992). [PN15lJ. For an exceneDt analysis of the role of judicial review in both pre-and post-interest arbitration award en- furcement, see Craver, supra note 28, at 568·77. See also Grodin, supra note 2, at 697-700. fFN152J. See C~r, supra note 28, at 57!. /-. [FN 1531. Stuart S. Mukamal, Unilateral Employer Action Under Publio-Sector Binding Interest Arl>itration. 6 J.L. & Com. 107, 107 (1986). 5S Hastings L.J. 245 END OF DOCliMENT f © 2011 Thomson Reuters. No Clahn to Orig. US Gov. Works. ) \ I -- Westlbw 56FDMLR 153 56.Fordham L. Rev. 153 c Fordham Law Review November, 1987 "153 INTEREST ARBITRATION: THEALTERNATl'i!?TO THE STRlKE (FNp] Arvid AndersoJ! fJ'lI!ill Loren A. Krause (FNaalJ Copyright 1987 by the Fordham Law Review; Arvid Anderson and Loren A. Krause INTRODUCTION Page I TIm right to brugain collectively bas been so connected with the right to strike in !bis country that legitimate questions arise as to whether genuine collective bergainlng can occur without the right to strike. The thesis of this Article is that an alternative to the right to strike exists and that that alternative is final and binding interest arbitra- tion. This Article will demonstrate the viability of interest arbitration as an alternative to the strike by examining its implementation in the public sector. lnterest arbitration is a process in which the terms and conditions of the employment contract are established by a fina! and binding decision of the arbitration panel. r:EN!l It differs from grievance arbitration, which involves the interpretation of the empioymem contract to determine whether the conditions of employment have been breached. [FN21 Thus, interest arbitration essentially is a legislative process, while grievance arbitration essentially is a judi- . cia! process. The following anecdote is a useful starting point for understanding the significance of interest arbitra-tion. . The Transport Workers Union ('TWU') of New York City used to cry 'no contract, no work.' J11lill The TWU strack effectively in 1966 and again in 1980, imposing great financial hardship on the city.11"!H1 The 1980 strike resulted in the imposition ofa $1,000,000 fine on the Union and cost each worker two days' pay for each day of the eleven day strike. [FNSO] The atrike hurt all of the parties involved, including the eleven day strike. [FN5] . "154 As a result oflhese experiences, the Metropoliten Transportation Authority ('MTA') and the TWU jointly requested that the state legislature emwt short-tenn legislation authori1.ing the state Public Employment Relations Board (,PERB') to appoint an arbitration panel to resolve any impasses thlll might arise in the 1982 contract negotia- lion.s. [FN61 The enacted legislation provided that PERB, upon the joint request of the MTA, the Manhattan and' Bron~ Surfilce Transit Operating Authority, and the Union represeuting their employees, would appoint a panel con- sisting of the three impartial members of the New York City Office of Colleclive Bargaining's Board of CoUective Bargaining, with the Chairman of the Board serving as the panel'sChairman.llliZl The Act further provided that the determination of the panel would be final and binding, e~cept !hat any provision thereof that would require the enactment of a law for its implementation would not be binding until such law were enacted. [FN3] Pursuant to its statutory authority, !he panel connnenced hearings when the 1982 new contract negotiations reached an impasse-only three days after the statute was enacted.1!l:!2l The dispute, therefore, was settled without © 2011 Thomson Reuters. No Claim toOrig. US Gov. Works. 56FDMLR 153 Page 2 56 Fordham L. Rev, 153 resorting to another burdensome strike. In 1985 the legislation was l'enewed in anticipation of the next round of TWU contract negotiations, fFNIOJ but on that occasion the parties reached agreement and avoided the need to in- vokearbnraaon.~ In 1986, the New York legislature amended the Taylor Law, IIlil6l which regulates labor disputes between state and local government employers and employees, IFN I 31 to require that the MT A and the unions representing its employees who are subject to the Taylor Law submit collective bargaining impasses to final and binding arbitra- tion, J.1'N.!£ The arneudment applies to approximately 45,000 employee. who operate subways and "155 buses. ~ Th.is statutoI)' interest arbitration provision aDeviates the threat of further crippling strikes by the TWU. It is OIlI"Iiew that either the right to strike or interest arbitration is needed to'make collective bargaining work. The success of collective bargaining require. only one of these alternatives. The fact that the right to strike i. banned Jl'N.l.q} in all cases where interest arbitration is required by statute IFN 171 bears out this point. In those states that have adopted interest arbitration, illegal strikes are virtually nonexistent, ·156 Undeniably, in some cases the strike weepon can be extremely elfective in obtaining bargaining rights for employees as well as in achieving contract gains. Unfortunately, however, a strike can result in the self-immolation of those employees without the power to strike effectively. [FNIS] Moreover, even states that have sanctioned the right to strike fur some public employees have not done so for police. firefighters and other categories of employees who have the power to threaten seriously the health and safety of the community if they strike. IFNI9J We submit that interest arbitration enables all employees to achieve favorable employment contract terms fFN201 by offering an alternative to the strike that similarly samulates bargaining. '157 This Article demonstrates the effectiveness of interest arbitration as an alternative to the strike. Part I dis- cusses the various types of interest arbitration procedures adopted by states and the statutoI)' standards that guide arbitrators in reaching decisions. Drawing on our experience as arbitrators, we then propose guidelines for an effee- . tive presentation to an interest arbitration panel. Part II examines judicial treatment of interest arbitration awards and statutes, including the general fitiIure of constitutional chaUenges to the statutes and the limited judicial review of . interest arbitration awards. Finally. New York City's experience with interest arbitration, discussed in Part Ill, clinches our view favoring interest arbitration. I. INTEREST ARBITRATION DEFINED A. Types of Interest Arbitration Procedures: State Laws At least twenty states have enacted laws providing for interest arbitration to resolve disputes over the terms of new collective bargaining agreements with therr·public employees. IEl'll.U Most of the statutes apply to essential service employees, particularly police and firefighters, bnt some are more general. [""22] The type of interest arbi- tration procedure adopted, however, varies from state to state. Some state statutes Provide fur conventional arbitratiml, whicb gives the arbitrator the discretion to decide the issues in dispute based upon the parties' evidence and arguments as:measured against the relevant statutoi)' criteria. [FN23] Other state statutes ntUize final offer arbitration, which requires that the mitrator pick either the employer's or the employee organization's, fInnl offer on the issues in dispute. fFN24J In some instances the statutes include provisions that pennit the parties to agree voluntarily on the type of interest arbitration procedure to be used. ~ Some statutes adopt a comblnationof.conventional arhitration and final offer arbitration, treating economic and non-economic issues differently. Michigan's poliCe and Ilrefighters statnte, for eXlUllple, provides fur final offer arbi- tration on an issue-by-issue basis on economic issues and for conventional arbitration on nOll"oconomic issues. [FN261 WiSCODllin'S municipal arbitration law adopts a variation that allows the arbitrator to choose between the 02011 Thomson Reuters. No Claim to Orig. US Gov. Works. ) j I' i , 56FDMLR1S3 Page 3 S6 Fordham L. Rev. 153 lou.! package, both economic and non-economic, of ·158 the employer's 01 union's final offer. [FN271 New Jersey's law embodies yet another variation, requiring the arbitrator to choose either the employer's or the union's last offer as a tou.! economic package, but allowing the arbibutor to resolve non .. conomic issues on a final offer, issue-by- issue basis. fFN281 Finally, Iowa provides for final offer determination of both economic and non-economic issues on an issue-by-is,ue basis. ~l Utilizing a unique tri-option procedure 111e Iowa framework permits the arbitrator to select either the employers last offer, the union's last offer, Or the fuct finder', recommendations On each issue. fFN301 Observers credit this procedure with encouraging voluntary settlements.lll!.llI As a result, Iowa has re- ported a comparatively low percentage of collective bargaining negotiations requiring use of its interest arbitration procedures. ~ '-, Each of the above noted procedures bas strengths and weakne_!lSes. Only one state, however, that has adopted a particular type of interest arbitration procedure has subsequently altered its approach. rENW This seems to indicate that parties have accommodated to the available scheme of intereM arbitration. Our preference is for conventional arbitration, fFN34] because it gives the arbitrator the greatest latitude in deciding 1he issues in dispute. B. Statuto/,)! Standards Virtually all interest arbitration statnles either expressly or hnplicitly provide standards to guide the arbitrator's evaluation of the evidence and arguments presented.!lili1il They do so by requiring the arbitrator to focus ·159 on particular facts in reaching his decision. Statutory standards that arbitrators mUllt address usually include ' t he law- ful authority of the employer,' , t he interests and welfare of the public,' the comparability of·16O the wages, hours and working conditions of similarly situated employees, and the cost of living. l.ENl!il In eddition, arbitrators may be required to consider the peculiarities of a particular trade or profession, Illilll past agreements of the parties, ~ the ~bility of the employer to finance economic adjuatments, ~21 and the effect of an award on the stan- dard of services provided [FN40] The type of interest arbitration procedure mandated by the statute, or agreed to by the parties, will have an im- pact on the arbitrator's application of the statutory criteria and the rationale for his decisions. When, fur example, lbe statute requires arbitrators ttl use final offer arbitration. IFN411 arbitrators exercise much more limited discretion than they do when the statute or agreement .provides for conventional arbitration of both economic and non- economic issues. Indeed, in a final offer, total package scheme, ~ the arbitrators must choose one or the other offer regardless· 1 Ii 1 of their views on the merits of individual ecooomic and non-economic issues. The most siguificant statutory standard for arbitration in the public sector is comparability. Because the profit motive is absent in the public sector, and therefore the full \'IlIIge of market forces generally governing the value of jobs is lacking, comparability provides an acceptable substitute measure of job worth. Comparability establish,es the market value of public sector labor by analyzing, among other things, the effects of inflation and cost of living in- creases on compensation of comparable employees. ~ The arbitrators therefore must answer the question of with which employers and employees the comparison should be made. Typically, the statute requires a comparison of the overall compensation of the employees involved in the dis- pnte with the overall compensation of comparable employees parfurmiog similar work in both private and public employment in a particular community or Ilke communities. fFN44] The overaU compensation of employees in- cludes not only the basic wages and benefits, but overtime and premIum pay, health insurance, life insurance, pen- sion programs and other benefits, such as food, clothing and tmnsportation allowances. ~ But what constitutes 'like work' and what is a 'comparable employee?' Exact public sector and private sector parallels often exist. For example, a comparison of the compensation of private hospital employees with their public counterparts seems ap- propriate. The same is true of many other occupations. But, the comparison fails when applied to, for exemple, po- lice and firefighters with private employees. [FN46] . © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. • 56FDMLR 153 Page 4 56 Fordham L. Rev. ! 53 The general term • interest and welfllre of the public,' included in a number of sllIte laws, is subject to different interpretations because it is nnt self-defming. In New York City, for example, the term 'intere.s! and welfare oftbe public' requires consideration, of the employer's 'ability to pay: Il:J:IM1l a separate criterion in most sllItotes.11'I'!4lU The same phrase also has "162 been used in New York City to refer to bargaining pattern&-the practice whereby once an agreement has been entered into by the employer and a union, the sllIudards of the first agreement will affect the contracts of an other similar sitoated unions. fFN49! ' Bargaining patterns assume particular importance in the'public sector, where the employer is required to bargain wifu a number of different labor organizations. The economic settlements for uniformed employee., for example, influence sattlemenm for non-unifomaed employees and vice versa. The wages paid by the 8lllte also may be relevant in det<:!;!nining fue wages that should be paid by a county or a city for pers(l!<S performing similar work, such as law enfolCement or clerical duties. In addition, historic parity relatiollShips may exist, particularly among unifomaed forces, poUce off!cers and firefighters. ~ Such patterns are considered under the general standard of interest IIlId weliBre of the public . The criterion of the interest and weliBre of the public determines, in part, the priority 10 be given to the wages and economic benefits of public sector employees. Obviously, fue decision to increase wages and improve economic benefIts will affect the overall allocation of the employer's resoulCes. Should more money be spent to raise tbe sale- ries of tbe existing workforce, to increase the number of workers, or for captiar improvements and inereased ser- vices? One commentator has suggested that arbitrators should be prepared to justifY their choice of priorities, [FN51J and some statutes require arbitrators to set forth the specffic bases fur their decisions. ~ The employer's ability to pay constitutes another major factor in collective bargaining negotiations and interest arbitration. [FN53! Indeed, the *163 economic circumstances ofa given jurisdiction may make it the decisive factor in negotiations or in arbitration. [FN54! . Factors other than the size of the municipal fisc, however, often impact the ability to pay. Iowa's statute, for example, limits the authority of an arbitration panel by imposing budgetary constraints that narrow the scope of the employer's ability to pay. ~ In some juridictions, such as New York City, the statute imposes a generallimita- lion on the authority of arbitration panels by providing that any par! of an awar<! that requires the enactment of a law in order to implement the award cannot be implemented until such law is enacted. !FN561 Finally, the question of ability to pay becomes particularly complex when the n,mding of a specific service, such as welfare, health care 'or education, requires substantial fundin.g from various levels of government-local, state IIlId rederaJ. fFN57! In additionto explicit stetotory standards, a number of jurisdictions use a catch-all standard that refers to '[sJuch other factors ... whicb are normally or traditionally taken into consideration in the dutermination of wages, hours and conditions of employment.' fFNS8! A provision like this enables the arbitrator to choose those criteria that he deems most important in a particular case as long as he discusses the other statutory factors that were also consid- ered in the opinion. . In considering and applying any of the listed criteria of a particular slSla, the arbitrator must consider whether the issues submitted to him for decision full within the employer's lawful scope of bargaining. fFN591 The scope of bargaining generally encompasses wages, hours, IIlId working conditions, bnt the laws of a particular jurisdiction may require a more limited scope of bargaining once interest arbitration proceedings commence. In Maine and Rhode Island, for example, the award is merely edvisory on economic matters, while it is finllI and binding on non- eoonomic*164 matters.ll'I'!2Ql Consideration of pensions as a subject for collective bargaining is forbidden in some 8llltes and, consequently, may not be subjected to interest arbilmtion. Ifl:!2l1 In eddition, the determinations of ap- plicable public employment relations boards and courts may estshlish other limitations on the seope of bargaining. Ir'N@ C 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. '\ J , " 1.-___ - 56FDMLR153 Page 5 56 Fordham L. Rev. 153 Last, the stipulations of the parties as to the scope of the amitration and the standards to be applied in a particu- lar case must be considered by the arbitrator and may affect the outcome oflbe amitration. For example, in 1985, the New'York City Board of Education, the City of New York, and the United Federation ofTeacbers entered into a voluntary agreement providing for total package, last offer binding arbitration of a conl1'al:1 dispute involving New York City teachers. IFN63! The parties included in their agreement tbe statutory stIlndards applicable to other New York City employees.ll'l::!2.4l C. Presentation o/Interesl Arbitration Cases Traditional trial procedures are less than efficient in an interest arbitration proceeding because, unlike a trial, ~,. interest arbitration is.essentially a legislative process. Based.")n our experience as interest arbitrators and as adminis- trators of an interest arbitrstion statute. we propose the fullowing guidelines for successful presentation before an interest arbitration panel. It is our view that the most satisfuctory procedure for presenting an interest arbitration case is to address the issue or issues initially by prehearing statements of position. Tbe submission of pre-hearing statements enables the arbitrator to fOcus clearly on the positio,", of the parties and on the questions to be decided. This method also per- mits consideration of complex issues in a relatively short period of thne. lB'!§il '165 The parties should use narration rather than the question and answer method of presentation at the bear- ing. The interest arbitration process is also mcilitated by using the principal witne .... to explain the parties' propos- als and contract demands and eliminating cross-examination except for the lintited purpose of clarification. The par- ties are thus able to create a clear record of their positions in a relatively short Period ofthne. ~ The parties can then rely on rebuttal to refute or to answer the oppnsing side's position.!El'l@ The parties sbould also agree in ad- vance how they will allot the time available for the presentation of their respective cases and the time available for rebuttal. L!'J'lQj!J In making their presentation, the parties need not be overly concerned about rules of evidence. Some attorneys excel in their ability to conduct voir dire and in the making of objeciio,", to the admission of documents based upon either tbe best evidence rule or the manner in which. document was prepared. Such Objections can be signifieant, but they are not nearly as important as arguing or explaining the relevance, or Jack thereof, of a particular document submitted in support of a party's position. n. INTEREST ARBITRATION AND TIlE COURTS A. Judicial Review a/Interest Arbitration Awards The inclusion of statutory stsndards in interest arbitration stIltutes provides the arbitration panel with guidelines fur fashioning its award. To facilitate judicial revieW of interest arbimrtion awards, some statutes explicitly require that the arbitration panel specify the basis for illl award. f.EN!i2] Moreover, some courts have held that it is not enough for the arbitration panel to stele that it considered the stIltutory standards. *]66 Rather. the arbitration panel must make detailed llndings of:fuct that support its conclusions.11'lfZQl Because the New Yorl< Cnarls have had an opportunity to construe interest arbitration statutes and awards, New York caseJaw is the focal point of the follOWing discussion of such judicial treatment The grounds for vacating interest arbitration award in New York state are broader than the grounds for vacating grievance arbitration awards. A party to a grievance arbitration can successfully challenge an award if the award was procured by fraud or undue means, if there was a lack of due process, or if the award was in excess of the authority of the arbitration panel. IEN1l1 In contrast. interest amitratlon awards can be vacated if the award is not based on objective und impartial consideration of the entire record. if the statutory criteria were not considered in good Ihlth, C 2011 Thomson Renters. No Claim to Orig. US Gov. Works. S6FDMLR IS3 Page 6 S6 Fordham L. Rev. 153 or if there is no plausible basis rorthe award. [FNn) When the New York Court of Appeals was confronted with the need to formulate a standard of review for inter- est arbitration awards, it sought guidance from the standard used fur grievance arbitration awards. A reviewing court will not vacate a grievance arbitration award even if there has been a patant error of fact or law. [FN73] Similarly, the standard for interest arbitration review, first enunciated by the Court of Appeals in Caso v. Coffey, [FN14] meas- ures interest arbitration awards 'according to whether they are rational or arbitrary and capricious.' ~ At the New York City .level, the Board of Collective Bargaining '167 adopted standards of review for impasse panel determinations comparable to those applied by the courts in reviewing an administrative agency decision un-- '<ler Article 78 of the Civil Practice Law and Rule •. [FN76] Courts ha~' the statutory authority to review admi1ristra- live agency decisions essentially fur ahoses of discretion and lack of sohstantial evidence. JIH11l Similarly, the Board's policy is to defer to the impasse p8Ilel's determination unless the appellant can show that the arbitration was un:fuir or biased, or,that the determination is patently lacking in fuctual support. [FN781 Although the substantial evidence test applied to impasse panel reports under the New York City Collective Bargaining Law differs from the standard of review adopted in Coffey, experience with the two s!anderds of review revelas very little substantive difference between them. Both the courts and the Board of Collective Bargaining fo- cus on procedural fairness and the existence of record evidence to support the conclusions of.the interest arbitration panel. Neither reviewing forum will subsutate its judgment for that of the panel if it appears that the p,,!,el consid- ered the statutory criteria. To facilitate review, New York amended its Taylor Law in 1977 to require that 'the public arbitration panel shall ... specify the basis for its findings, taking into consideration, in eddition to any other relevant factors, the [enumerated statutory shmdards].' IlNZ.2l Prior to this amendment, the statute required only that the arbitration panel consider the statutory standards 'so far as it deem ed them applicable.' fFN801 The amendment came in re- sponse to criticism that this was an overly broad delegation of municipal authority to the arbitration panels. lEli!l.ll The state legislature intended the newly required specificity and thorougimess to facilitate stringent*168 judicial review of interest arbitration awards.11'!'!lW. Three New York State Supreme Court decisions, which bave set aside or remanded awards because of their failure to specify the basis of the it decision, have given meaning to the 1977 amendment. IFN83]In Buffalo Police Benevolent Association v. Ctty of Buffalo, lfl!Ml the court held that • statement in the award tbat "all economic issues were considered' fails to'meet the explicit s!atatory requirement of a specific basis ror findings.' [FN851 The court in City of Yonkers v. Mutual Aid Association of Paid Fire Department, [FN86] explained that factual specifi ... ity with regard to two of the four factors listed in the amended section was inadequate. J:l'Nlll. Most recently, in City of Batavia v. Local 896, Batavia Firefighters Association, ~ the court opined that 'boiler plate statutory lan- guage recited in the background portion of the award alone failS, to meet the explicit statutory requirement fur a 8pe- < cinc basis for the fIDdings.' J:t1lill It added that the 'arbitration panel has some obligation to explore each criterion, , not simply as an arbiter, but also as a quasi-legislative body delegsted with a similar :fuctlinding mission, and that the results ofthat analysis must be clearly and completely specified in its award.' I.l:N22l Furthermore, the court beld that '.to the extent the criterion are not controverted, i.e., 'put in issue,' the panel should nevertheless elicit the position of the porti .. llIId10r pertinent fuets and consider the significance of such in its decision.' fFN91) The New York City Collective Bargaining Law requires similar speCificity by the impasse panel, the city's equivalent to an interest arbitration panel, in its application of the statutory standerds. [FN92] To facilitate review by the Board of Collective Bargaining, the statute further provides that Ibe party appealing to the Board from the rec- ommendations of IlII impasse panel must specify the recommendations from which it is appealing and the reasons therefor. ifJ'l21I . , , II:> 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. j I I ~1 J , \ .i 56FDMLR 153 Page 7 56 Fordham L. Rev. 153 '169 The limited nubmer of appeals from interest arbitration awards, We suggest, serves as evidence that care- fuUy drafted statutory standards are faithfully adhered to by arbitration panels in their determination of the matters in dispute and that misgivings about delegating legislative authority to 'unaccountable' arbitrators [FN941 are largely unfounded. B. Constitutional Challenges to Interest ArbItration Staf:ules The oonstitutionality of public sector interest arbitration has been chanenged in many of the jurisdictions that have adopted interest arbitration statutes. Constitutional chaUonge. to interest arbitration statutes generally fall within one of two categories: (I) unlawful delegation of legislative authority; IFN951 or (2) unlawful intrusion into . and divestment of the local government's autonomy t'"ld control which includes claims that interest arbitration stat- utes impair the local government's home rule powers, IFN961 interfere with the local governments power Ie tax, J1'N21l and deny equal protection by violating the one-man, one-vote principle. IFN981 Although most of the chal- lenges have eithar failed on the merits 1l.'N221 or been dismissed on procedural grounds, fFNlOOl a few have suc- ceeded [FNIOJ] Interest arbitration statutes have been challenged most often on the *170 ground that they unconstitutionally delegate legislative authority to unaccountable arbitrators. [FN 1021 Courts generaUy have rejected this argument when the interest arbitration statute sets forth critoria to govern the arbitration proceeding and linalts the scope of .rbitratinn. IFNI031 In those instances, interest arbitration panels are a reasonable method fortha legislature to deal with the wide variety of issues that may arne in • labor dispute. IFN I 041 This avenue of attack, however, hes met witli some success "111 where the statutes were lacking tha necessary standards to guide the arbitrators. rFNJ051 Interest arbitration atatutes also have been challenged on tlie ground that the powers given to interest arbitrators infringe upon the home mie powers reserved 10 local governments. fFN I 061 Horne rule provisions permit local gov- ernments to adopt charters or ordinances partalning to issues oflocal concem IfNl071 The courts, however, have held that the local governments power to act applies only if its action is not inconsistant with the state constiimion or any general law. fFNI081 Since interest arbitration statutes constitute general laws, the courts have determined that they do not violate the home rule provision. IFNI 091 Another basis upon which the constitutionality of interest arbitration statutes has been challenged concerns tha power to tax. fFN II 01 Opponents of interest arbitration argue that, since an arbitration panel may issue an award which raises the cost of municipal services, tha enabling statute is an inappropriate delegation of taxing power. fFN 1111 Courts have rejected this argument, finding tbat • tax does not derive from an act merely because it 'may result in the need fur ... taxation.' fFNI III Judge Fuchaberg of the New York Court of Appeals clarified this dis- tinction by observing that, "In although arbitration awards may impact on tha cost of muniCipal services, the mu- nicipality remains free to choose the method ofmeeling these costs. fFNI13] This observation accords with the obvioua fact that, in the public seclor, neither arbitration awards nor collective bargaining agreements are self-implementing. If legislative authorization to finance a contract or an arbitration award does not already exist, the executive must secure funding from the legislature, reduce services, decline to fill vacancies, or take other managament action to implement tha agreement The important point remains that the legis- lature 1llI1'!t, either before or after contract negotiations, determine the appropriate level fur government operations and provide the required funding. Last, interest arbitration statutes have been challenged on the ground that arbitrators are not selected in a manner consistent with the one-man, ODe-vote prinCiple, fFNI141 thereby denying equal protection of the law. fFNl15J The courts consistently have rejected this argument;finding that beClUlJ!O the power oftha arbitration panel is administra- tive, not legislative, tha ooe-I1I1II1, one-vote principle does not apply. [FNll§l \0 2011 Thomson Reuters. No Qaim to Orig. US Gov. Works. 56FDMLRI53 56 Fordham L. Rev. 153 Page g In sum, constitutional challenges to interest arbitration statutes largely bave baen unsuccessful. A claim that the statute is an impermissible delegation of legislative authority is the only assertion that has met with any success. Where, however, the statute limits the arbitrator's discretion and authority, the coUl'ls uniformly deem the statute constitutional. II!. EXPERIENCE WITH THE LAW; NEW YORK CITY Interest arbitration has proven an effective method of avoiding and molvil1g employment disputes. The follow- ing discussion considers the operation of interest arbitration in New York City, one jurisdiction in which it has heen success fully utilized. Two st!\tutes regulate labor disputes between the City of New York and its employees: the New York State Tay- lor Law [FNI17J and its local *173 complement, the New York City CoUective Bargaining Law ('NYCCBL'). fFNJ Ill] Where local law is silent, or contrary, the Taylor Law governs. [FNl191 For example, the NYCCBL con- tains no strike probibition per Be, but the Taylor Law, which applies to New York City, bans strikes by public em- ployees. [FN 1201 . Tbe NYCCBL is administered by the Board of CoUective Bargaining; a body composed ofthree neutral mem- bers, two labor members, and two City of New York members. [FN12l] The two labor members and the two city members choose the chaitman of the Board from among the neutral members. [FN 1221 The Chairman, who must he elected by unanimousvote, also functions as the director of the Office of Collective Bargaining. [FNI231 The NYCCBL provide. procedures, including mediation and the issuance of a final and binding report by an impasse panel for the resolution of bargaining impasses. [FN 1241 Impasse panels are endowed with the broad power to resolve collective bargaining negotiation disputes. [FNI251 Impasse panel determinations are equivalent to com- pul.my interest arbitration awards. [FNI261 The NYCCBL also specifies certain standards that 8n··174 passe panel is to 'consider wherever relevant in making its recommendations fur terms of settlement: [FN1271 These standards are similar to those set forth in the Taylor Law. [FN128] The report of the impasse panel must be publisbed within seven days of its submi""iOll to the partie,. [FN1291 The time may be eJ<tended, to DO more then thirty dsys, to permit the parties to conclude a negotiated agree- ment·175 prior to publication. [FN130] If a contract is uegotiated during this time, the panel will not release the report, except upon consent of the parties. [FNB II If the parties fail to negotiate a contract during this time, they must indicate acceptance or rejection ofthe panel recommendatiOns. [FN 1321 A party that rejects the recommenda- tion. may appeal to the Board of Collective Bargaining for review. [EN 1J31 The stetute provides strict time limits for llling an appeal of the panel's teport and for issuance of the Board's decision. [FN 1341 The Board normally decides appeals upon the papera llled by the parties, but it occasionally will hear oral argumen~ The Board will issue a decision within thirty days after the notice of appeal has been llled. [FN135! The Board bases its review on the record and evidence before the impasse panel and is guided by the statu- lory criteria that the panel must consider. [FN 136] The Board of Collective Bargaining may 'affirm or modify the panel recommendations in whole or in part.' [FNB?1 It may also set aside the recommendations if it finds that the rights of a party have been prejudiced. [FN 1381 If the Board takes no action within the statutory time periods', the recommeudations are decmed adopted. [EN 139J The NYCCBL provides that a final determination of the Board of CoUective Bargaining 'shall be binding upon the parties' and 'shall constitute an award within tbe meaning of article seventy-five of the civil practice law and rules.' [EN 14Ql The binding effect of a Board determination is qualified by the proviso that it is subject to legis- lative action when a law m1l.!ltbe amended or enacted. [FNJ411 02011 Thom.on Reuters. No Claim to Orig. US Gov. Works. l j 1 ) / 56FDMLR 153 Pllge9 56 Fordham L. Rev. 153 Ifboth parties accept the panel's rerommendations or if neither party petitions the Board of Collective Bargain- ing for review, the recommendations 'shall be final and binding.' iJ,'N142J The recommendations of an ltnpasse panel, like the Board's determinations, are subject to legislative '176 approval, however, in those instances where they require the enactment ofa law. [fN143J The preceding desc,ription of finality under the NY CCBL reveals that the procedure and substance of impasse resolution in New Yorl<: City differs in certain respects from the binding finality procedures provided by the Taylor Law. Although impasse panels h.ve the authority to medi.te and are strongly encouraged by the statute to do so, iFNl441 the appointment of a mediator is not mandatory under the NYCCBL and mediation is undertaken only when circumstances indicate th.t it might be prodoctlve. fFNI451 Under the Taylor Law, interest arbitration .wards are directly appealable to the courts by an arti~le 75 proceeding, [FN1461 whereas, under the NYCCBL, ltnpasse,. panel recommendations are appealable first to the Board of Collective Bargaining. [FN 1471 Last, unless the parties . stipulate otherwise, New Yorl< City ltnpasse panels llJ"e composed of neutrals, fFN 148] whereas the Taylor Law pan- els have a tripartite structure. [FN149] . When New York City's final and binding impasse procedures were first introduced, critics claimed that the pro- cedures would encourage the use of third parties in fashioning contract settlements to the detriment of concertold efforts at the bargaining tlIble. [FN150] The experience to date, however, refutes this contentiolL fFN15!l In the fifteen years since the adoption of fmality in impasse procedures, only 63 of the 761 reported contract settlements-- . or 8.3% percent-used the process, fFN152] Ofth .. e 63 impasse *177 cases, the parties ae<:epted the panel's rec- ommendations in 49. [FNI53] In the remaining 14 cases, a party appealed to the Board fur final derennination. [FN 1541 In 12 of those cases, the Board affirmed the report and recommendations of the impasse pene~ wbile the Board acted in the remaining two 'cases to reduce the award to conform the recommendations to the city's fiscal plan. fFN155] Another indicator of success of a public sector blU'gaining law, like New York's Taylor Law, which provides for arbitration and outlaws the strike, is whether strikes have occurred. Since the enactment of the New York City inter- est arbitration previsions in 1972, only three strikes have occurred over new contract terms in the course ofnegotia- tions of over 750 seplll'ilte municipal contracts. fFN J 561 In contrast, in the four years prior to the amendment there were ten strikes in the course of negotiations of over 517 separate municipal contracts. fFN J 57] These figures sup- port the viability of interest arbitration as an effective alternative to the strike. Comparison of arbitration awards with engotiated settlements also demonstrates the effectiveness of the process. The New York State Public Employment Relations Board 1986-87 Annual Report [fNI58] states lhatthe arbitrated salary increases statewide for police averaged 6.45%, just slightly below that of negotiated salary increas .. which averaged 6.52%. [FN159] For firefighters, the arbitrated awards averaged 5.78%, while negotiated increases aver- aged 5.81%. [fNI60] This report indicates that the negotiated settlements and awards closely parallel each other. [FN161l As '178 noted previously, doring the fifteen-year history offinal and hinding arbitration in New Yorl<: City, there have been only two cases where the Board found awards to be inconsistent wi1h negotiated settlements. [FN162] On appeal, the tripartite BOllJ"d of Collective Bargaining, by unanimous decision, redoced those awards to con- fonD to the city's liasic wage patterns. [F~163] CONCLUSION After nearly two decades of interest arbitration, it is clear thet the '179 practice ofimere,t arbitration is here to stay. It has become a significant adjunct to the pubUc sector collective bargaining process where the parties reach an ltnpasse in their negotiations. The acceptance of the constitutionality of interest arbitration by the courts and the ac- ceptance of the process by the parties demonstrates thet this important means of dispute settlement has been devel- ;.-- o 20 J 1 Thomson Reuters. No Claim to Orig. US Gov. Wods. . ....., , '- 56FDMLR 153 Page 10 56 Fordham L. Rev. 153 oped in accordance with our democratic principles. The task of interest arbitration is analogous to that of legislation-fu establish the conditions of employment. Each pafty must try to persuade the arbitrator why a particular position is, or is not, supported by the evidence pre:>- duced under the governing statutory standards. Because the task is to legislate the tenns of employment, not to prove or disprove a particular set of fucts, an interest arbitration should not be presented to an arbitrator as a trial lawyer would present a civil case to ajudge or jury. Interest arbitration enables the labor participants to retain the leverage necessary to bargain effectively in enge· tiating a contract. At the some time, the harmful effects of a strike ore .voided. Experience shows that the ends achieved with interest arbitration are analogous to thosf;'lchieved in jurisdictions that do not prohibit the strike. In short, the experiences during the past two decades of the various jurisdictions thet have adopted interest arbitration demonstrate that interest arbitration is a better way to surmount collective baragaining impasses than the trial by combat method of the strike. llliIil This Article Is based on an Address delivered at the Pacific Coast Labor Law Conference, Seattle. Washing. tOll, May 7, 1987. Portions of this Article will appear in substantially similar furm in a forthcoming treatise to be published by Matthew Bender & Company Inc. fflill.lJ. President, National Academy of Arbitrators; Former Chairman, New York City Office of Collective Bar· gaining (retired as ofJan. i, 1988); B.A. 1946; L.L.B. 1948, University of Wisconsin. [ENaal 1. Trial Examiner, New York City Office of Collective Bargaining; B.S. 1977, Cornell University, New York State School of Industrial and Labor Relations; J.D. 1983, Yeshiva University-Cardozo School of Law. l..E!ill See F. Elkouri & EA Eikouri, How Arbitration Walks 104 (4th ed. 1985). Interest arbitration, mediation and fuet finding comprise the full panoply of procedures avallable to resolve collective bargaining impasses. ~. Sei id at 110-11 (Grievance arbitration Is synonymous for what Blkourl and Eikouri refer to as 'rigins arbi· tration'). J:E1:W. see 23 G'1v1 EmpL ReI. Rep. (aNA) 521 (Apr. 8, 1985) ('Local 100, which represents workers in tbe New Yark City bus and subway system, has never worked without a contract since being organized in 1948. '). I.EtMJ. 858 Gov't Empt ReJ. Rep. (aNA) 26 (Apr. 21, 1980). [FN51. 862 Gov't BmpJ. ReI. Rep. (aNA) 34 (May 19, 1980). l.I:.li2l. See New York City Transit Auth. v. Transport Workers Union of Am., Local 100, .t2 (pBRB Apr. 29. 1982) (AndersOll, Collins & FriedmSll, Arbs.) (available in the files of tile Fordham Law Review); Barbane!, Tran.!itArbl· /ration Bill Signed by Carey, N.Y. Times, Mar. 17, 1982, at B2, col. 4. LEt:J1]. Act of Mar. 29, 1982, th. 19, § 2(a), 1982 N.Y. Laws 28, 29. 1.EI:ill. Act of Mar. 29,1982, ch. 19. § 2(g), 1982 N.Y. Laws 28, 30. ~. See New York City Transit Auth. v. Transit Workers Union of Am., Local 100 (pBRB Apr. 29, 1982) (Anderson, Collins & Friedman, Arbs.) (available in the files of the Fordham Law Review). 1!D2011 Thomson Reuters. No Claim to Orig. US Gov. Works. ) j ! 1 , ) 56 FOMLR 153 Page 11 56 Fordham L. Rev, 153 1E!::ilQl. Act of Mar. 31, 1985, ch. 15,1985 N.Y. Laws 18; see 23 Gov~ Emp!. Rei. Rep. (BNA) 521 (Apr. 8, 1985). IFN Ill. see 23 Gov'1 Eropl. ReI. Rep. (BNA) 995 (July 15, 1985). fFNI1J. N.Y. Clv. Sery. Law §§ 200-214 (McKinney 1983 & Supp. 1988). IDillJ.ld. J..EN!il. Act of Dec. 3 I, 1986, ch. 929, § 33.5(a), 1986 N.Y. Laws 2339, 2369-70. fumaking the award, the law re- quires the arbitration panel to consider the impact of the award on the MTA's f1lll!.nCial condition and on commuter fares; the wages, benefits, and condltionS"1lf other New York City employees; changes in the Consumer Price llillex; and other conditions. Id. at § 33.5(d). The law WIl!l modeled after provisions of lb. Taylor Law that apply to police and firefighters-the only olber public eroployees under PERB's jurisdiction whose contract negotiations are subject to binding interest arbitration. see N.Y. Clv .. Serv. Law§ 209(5) (McKinney Supp. 1988) . .I:!'NllJ. Act ofOec. 31, 1986, ch. 929, § 33.5(a), 1986 N.Y. Laws 2339, 2369-70. lEN1Ql. All states that mandate interest arbitration ban the strike. fur those employees covered by the statute. Alaska-AlasKa Stat. § 23.40.200(b) (1984). Connecllcut-Conn. Gen. Stat. §§ 5-279, 1--475. IO-153~a) (1983). District qfColumbitr-D.C. Code Ann. § 1-618.5 !l987l. Hawait-Haw. Rev. Stat. § 89-12 (1985). illinois-Ill. Ann. Stat. ch. 48, pera. 1614 (Sntith-Hurd 1986). Iowa-Iowa Code Ann. § 20.12 (West 1978). Maine-Me. Rev. Stat. Ann. tit. 26. §§ 979-C:2.C, 1027.2.C, 1284.2.C (1964 & Supp. 1987). M'u:higan-Mich. Comp. Laws Ann. § 423.202 (West 1978). Milln_I<>-Mim!. Stat. A!m. § 179A,19(West Supp. 1988). Montana-Mont. Code Ann. § 39-34-105 (1987). Nevada-Nev. Rev. Stat. § 288,230 (1985). New Jersey-N.J. Stat. Ann. § 34:13A-14 (West S!lllP. 1987). New York-·N,Y. Civ. Sexv, Law § 210 (McKinney 1983 & Supp. 1988); N.Y.C. Admin. Code § 12- 312(e) (1986). Ohia--Ohio Rev. Code Ann. § 4117.15 (Anderson Supp. 1986). Oregon-Qr. Rev. Stat. § 243.726(1) (1985). Pennsylvania-Pa. Stat Ann. tit;!3. § 215.2 (purdon 1964 & Supp. 1987). Rhode lsland--R-.J, Gen. Laws § 36-11-6 (]984); &:1. Gen. Laws §§ 28-9.1·2, 28-9,2-2. 28-9.5-2 (j986). Vermont-VI. Sial. Ann. tit. 21. § 1730(2) (1978). Washington-Wash. Rev. Code Ann. § 41.56.490 (Supp. 1987). WIsCCill.!lif>-Wisc. Stat. Ann. §§ 111.10(4)(1),.l.lL11 (West 1978 & Supp. 1987). JEl::!l1l. The following states hove adopted interest arbitration procedures for the indicated employees: Alaska- Alaska Stat. § 23.40.200(b) (1984) (poli~e, firefighters, jail, prison and other correctional institution employees, hospital employees). Connectlcut-Conn. GeI1. Stat. Ann. §§ 5-276(a),. 7-473c, 10-153[c)(4) (West Supp. 1988) (state employees, municipal employees, and teachers, respectively). District a/Columbia-D.C. Code Ann. § I· 618.2(d) (1987) (aU public eruployees). Hawaii Haw. Rev. Stat. § 89-11 (1985) (all public employees). IllIno~ Ill. Ann. Slat. ch. 48, para. 1614 (SmIth-Hurd 1986) (security employees, peace officers, firefighters and paramed- ics). Iowa-Iowa Code Ann. § 20.22 (West 1978) (all public employees). M~ine-Me. Rev, Stat. Ann. tit 26, § 979-DA (1964) (state eruployees); Me. Rev. Stat. Ann. tit 26, §§ 1026.4 (Supp. 1987) (univerSity employees); Me. Rev. Slat. Ann. tit. 26, § 1285.4 (Supp. 1987) Gndicial employees). Michigan-Mich. Compo Laws Ann. §§ 423.273 (West Suoo. 1987) (state police troopers and sergeants); Mich.,..l&lll!l. La~. Ann. § 423.233 (West 1978) (munici· pal police and firefighters). Minnesota-Minn. stat. Ann, § l79A.16 (West Snoo,)988) (all public eruployees), MontlIlU:f-Mont. Code Ann. § 39-34-101 (19811 (firefighters). Nevada-Nev. Rev. SM, § 288215 (1985) (fire.. fighters). New Jers'!Y-N.J. Stat. Ann. § 34:13A·16 (West SUIlP. 1987) (police and firefighters). New York-N.Y. Clv. Sorv.Law § 209 (McKinney 1983 & Supp. 1988) (police, firefighters and transit workers); N.Y,C. Admin. Code § J2-311(c)(3)(b) (1986) (all public eroployees). Ohia--Ohio Rev. Code Ann. § 4117.14D (Anderson Supp. 1986) (police. firefighters, highway patrol, emergency medical perSOIllle~ employees of state lIChool. for dear and blind, corrections officers and guards). Oregon-Or. Rev. Slat § 243.742 (1985) (all public eruployees). Pennsyl- "«niHean. Stat. Ann. til. 43, §§ 217.4,1101.805 (Purdon Snpp. 1987) (prison and mental hospital guards, court employees, police and firefighters). Rhode lslcmd-RJ. Gen, Laws § 36-11·9 (984) (slate employees); R.I. Gen. © 2011 Thomson Reuters. :-10 Claim to Orlg. US Gov. Works. 56 FDMLR 153 Page 12 56 Fordham L. Rev. 153 Laws §§ 28-9.5-1 to 28-9.5-16. 28-9.2-1 to 28-9.2-16. 28-9.1-1 to 28-9.1-17 (1986) (rtate police, municipal police, end municipal flIefighters respectively). Vermont-VI. Stat. Ann. til 21. § 1733 (1978 & Supp. 1986) (municipal employees). Washington-Wash. Rey. Code Ann. os 41.56:450,41.56.950 (Supp. 1987) (uniform personnel). Wis- c<main-Wisc. Stat. Ann. §§ 111.7Q(4)(jm), l.lL11(4) (West 1974 & Supp. 1987) (city police, firefighters, and county police respectively). Wyoming--Wyo, Stat. § 27-10-105 (I 987)(firefighters), fENl..[l. The experience of the Professional Air Traffic Controllers Organization (p ATCO) provides a vivid re- minder of the ineffectiveness of the strike weapon. See generally Meltzer & Suoste1n, Public Emplol'ee Strikes, Ex- ec.utiJi .•... Discl'etlon, tmd the Air TrqjJ/c Controllers, 50 U. Chi. L. Rev, 731 09831; 924 Gov~ Bropl, ReI. Rep. (l1NA) 5, 12,45 (Aug. 10, 1981); 923 Gov~ Empl. ReI. Rep. (aNA) 6 (Aug. 3, 1981). On August 3, 1981, PATCO went on strike in an attempt to gain new contracu-9JlOOSSions from the government see 923 Gov~ Bropl. ReI. Rep. (BNA) 6 (Aug. 3, 1981). The Federal Aviation Administration discharged all of the approximately 12,000 air traffic controllers who participated in the strike. See 924 Gov't Empl. ReI. Rep, (BNA) 5 (Aug. 10, 1981). The strike vio- lated the federal labor-management relations provisions of the Civil Service Refurm Act of 1978 w:hich prohibits strikes by feder.1 employees. see 5 U.S.C. 61311 (1982). J..l:l:l12l. Several states grant some or all of their public employees who are not required to submit their impasses to interest arbitration, but who may opt to,. limited right to strike. See, e.g., Alaska Slat. § 23.40.(c)-(d) (1986); Haw. Rev. Stat. § 89·12 (1985); m. Ann. Stat. ch. 48, para. 1617 (Smith-Hurd 1984); Minn. Stat. Ann. § 179A.18 (Wes! Supp. 1988): Ohio Rev, Code Ann. §4117.14(D)(2)(Anderson Supp. 1986); Or, Ray. Slat § 243.726 (1985); Pa Slat. Ann, tit. 43. § 1l01,2201 (Purdon Supp. 1987);Vt Stat Ann, tit. 21, § 173Q (1978). Where the statute is silent as to the right to strike, it is unclear whether or not the right exists at aU. Compare, e.g., County Sanitation Disl. No.2 v. Los Angeles County Employeea Assn. 1&cal660. 38 Cal. 3d 564. 586·92, 699 P,2d 835. 850-54, 214 Cal. Rptr. 424, 439-43 (in the absence or. St!ltute prohibiting strikes hy public employees, such as in the case of police and firefighters, legislative grant of the right to organize ana engage in concerted activi· ties impliedly conferred the right to strike but empowered the courts to enjoin strikes that threatened community safety and health), cerl. denied, 106 S. Ct. 408 ()985) with, e.g., Compton Unified Scbool Dirt. v. Compton Educ. Ass'n, Case No. LACO-396, PERB Order No. IR·50 (Calif. Mar, 17, 1987) (available in the flies of the Fordham Law Review) (California PUblic Employment Relations Board reversed earlier decision and ruled a series of strikes by Compton Education Association illegal WIder State's Educatiolllil Employment Relations Act because law does not explicitly or implicitly grant teachers right to strike). For a general discussion of the public employee's right to strike, see O. Sterrett & A. Abond, The Right to Strike in Public Employment (New York Slate School of Industrial & Labor Relations Key Issues Series No. 15, 1982). ~. For example, New York police and firefighters have acbieved arbitrated salary increases that compare fa- vorably with negotiated increases. See infra notes 158-63 and accompanying text But see Feuille, Delaney & Hendricks, The Impact olInterelit Arbitration on Pollee Contracts, 24 Ind. Ret 161 (985) (stody suggests that al· though availability of interest arbitration is related to favorable police contracts, there is 'almost no support for the belief that actually using arbitration will yield better contracts fur the unions'). l.ElSlll. See supra note 17. IFN231. See, e.g., Me. Rev. Stat. Ann. § 979-0.4 (1964); N.Y. Slat. Ann. 34;13A-16.C (West Stipp. 1987); N.Y. Civ. Serv. Law § 209 (McKinney 1983 & Supp. J 988); N.Y.C. Admin. Code § 12-311(c)(3) (1986); Or. Rev. Stat. § 243.756(1985). [FN241, See, e.g., Conn. Gen. Stat. Ann. § 5-276!!(eX3) (West Snpp. 1988); Mich. Compo Laws Ann. §§ 423.238, 423.239 (West 1978): NJ. Stat. Ann. § 34: 13A-16(c)(2) (West Snpp. 1987); Wise, Stal. Ann. § 111.77 (West 1974 © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. () \ ) \ ! 56FDMLR 153 56 Fordham L. Rev. 153 & Supp. 1987). [FN25). See, e.g., N.Y.C. Admin. Code § 12-311(1) (1986). fFN26)' Mich. Compo Laws Ann. § 423.238 (We't 1978). [FN27J. Wise Stat, Ann. § Ill.77(4)(West Supp. 1987). fFl\'28).N.I. Stat. Ann. § 34: 13A-16(d)(2)(West Supp. 1987). lI.!im.1owa Code Ann. § 20.22(ii) (West 1978). fFN30).1d. fFN311. R. A. Lester, Labor Arbitration in State and Local Government 171 (1984). fFN32].Id. at 156. Page 13 [FN33]. The exception is WiscollBin, which has deleted the mediation-lII'bitration filature from its municipal employ- ees law. Compare Wjse. Stat. Ann .. § 111.70(4)(c) (West 1974) with 2ijsc, Stat. Ann. § 111.70(4)(cm) (West Supp, . 1987). For a discussion of the medialion-lII'bitmtion feature, see R. A. Lester, supra note 31, 8175-78. l'l:N:!£. See supra note 23 and accompanying text. fFN35). The fullowing jurlsdictioJJli have enacted interest arbitration StaIotes that require the arbitrator to consider the indicated statutory standlll'ds in his determination ofth. matiers in dispute: Conneclicut-Colln Gen. Stat, Ann. § 5-276a(e )(5) (West Supp. 1987) (hlstOI}' of negotiations between the parties; conditions of similar groups of em- ployees; prevailing wages; and the employer's ability to pay); Conn. Gen. Stat. Ann, §§ 7-4730. 10-153«.)(4) (West 1986 & Supp. 1987) (prior negotiations between the parties; public interest and financial capebility of the municipal employer; interest and welfare of employee group; cbanges in the cost of living; conditions of employment of em- ployee group and simib;r groups; the salaries, fringe benefi1>o; and other conditions of employment in the state labor mlll'ket). District ofColumbltr-P.c' Code Ann. § 1-618.2(d) (I 987nall relevant laws, rules and regulations; the District's ability tn comply; the public health, safety and welfare; md the need for reasonable and consistent person- nel policies). Hawaii Hawaii Rey. Stat. § 89-11(d) (1985) (lawful authority of the employer; stipUlations of the parties; public welfare; fIScal condition of the state, county and employer; prevailing wages of similar groups of em- ployees; cost of living; and employee's current compensation package). Illinois-III. Ann. Stat. ch. 28, para, 1614(h) (Smith-Hurd 1984) (lawful authority of the employer; stipulations of the jlIII'ties; interest and welfure of the public; financial ability of the employer; cost of living; conditions of employment of comparnble employees in the publ!c and privata sectors; and cumml overall compensation). Iawtr-Ipwa Code Ann. 20.22(9) (West 1978) (past collec- tive bargaining contmcts between the parties; prevailing compensation of comparable employees; interest and weI- fur. of the public; employer's ability to pay). Maine-Me. Rev. Stat. Ann, tit 26, §§ 97-9DA.C, 1026(4)(C). 128S{ 4)(B) (] 964 & SUI!Il. 1987) (interest and welfure of the public; the financial ability of the government; working conditions of other employees in the same labor market; overall compensation employees presently receive and other filctors normally taken Into account). Michigan-Mich. Compo Laws Ann. §§ 423.29, 423.280 (West 1978 & Supp. 1987) (lawful authority of employer; stipulati()D$ ofthe plll'ties; interest and weIfilre of the publ!,,; employer's ability to pay; comparison of similar groups of both public and private employees; and cost of living and current compensation of the employees). Minnesota Minn. Stal. Ann. § 179A,16(7) (West Supp. 1988) ('statutoI}' rights and obligations of pu\>lic employers tn manage efficiently and conduct their operations within the legallimitatiollB surrounding the financing of these operations'). MontanQ--Mont. Code Ann, § 39·34-103(5) (1987) (compensation and working conditions of employees performing similar services; interest and welfare of the public; employer's © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. i I 1 j 56FDMLRI53 Page 14 56 Fordham L. Rev. 153 ability to pay; cost of living; and any other reJevant circumstances). Nevada-Ney. Rev. Stat. § 288.200(7)(b) (1985) (fmanciaJ ability of the local government and 'normal criteria for interest disputes'). New Jersey-N.J. Stat. Ann. § 34: 13A-I2(g) (West Supp. 1987) (interest and wel:fure of the public; conditions of employees performing similar services; current compensation of the employees; stipulations of the parties; Jawfu.l authority of the em- ployer; financial impact on the employer; and cost of living). New York-N.Y. Civ. Servo Law § 209.4(c)(v), 209.5(d) (McKinney 1983 & Supp. 1988) (wages and conditions of pUblic employees performing similar work; cur- rent compensation of the employees; cost of living; and the interest and welfnre of the public); N.Y.C. Admin. Code § l2-3Ilc.(3)(b)(iHv) (1986) (wages and conditions of employment of public and private employees perfonnfug similar work; current compensation of employees; cost of living; interest and welfare ofllie public; and other factors normally taken into consideration). Ohio--Ohio Rev. Code Ann; § 4117.14(0)(7) (Anderson Supp. 1986) (past agreements between the parties; conditions .~.f other public and private employees doing comparable work; int~.1!f and wel:fure of the public; financial ability of the employer; authority ofth. public employer; stipulations of the par- ties; and other factors normally taken into consideration). Oregon--Or. Rev. Stat. § 243.746(4) (1985) (employer's lawful ""thOOty; stipulations of the parties; public welfare; employer's ability to pay; comparisoIl of wages of public and private employees providing similar .ervice; cost of living; present compensation; and other normal considera- tions). Rhode Island-R.I. Gen. Laws §§ 28-9.1-1 Q, 28-9.2-J 0 09861 (wages and working conditions of employees performing similar services; interest and welfare of the public; peculiarities of the job; and employer's ability to pay); j1"L Oen. L;iws § 36-1I-\Q (1984) (same). Vermonl-Vt. Stat. Ann. tit. 21. §§ 1732(d), 1733(c) (1978) (au- thority of the employer; stipulatiollll of the parties; interest and welfare of the public; financial ability. of the munici- pal employer; conditions of employees perfonning similar work; cost of living; and overall compellBl!tion presently received by the employees). Washlngton-Y;'!!Ilh. Rev,C.ocle Ann. § 41.56.460 (Supp. 1987) (employer's authority; stipuImlons of the parties; comparison of wages of employees providing similar services; cost of living; and other tntditionaJ factors). Wisconsin-Wisc. Stat. Ann, § 111.7(6) (West 1974) (employer's lawful authority and ability to meet costs; stipulations of the parties; public welfare; comparison of wages of public and private employees provid- ing similar services; cost ofliving; overall present compensatioIl; and other traditional factors). J:Em.Q}. See, e.g., Mich. Compo Laws AIm, § 423239(a) to (h) (West 1978). The statutory criteria listed in the Michigan statute comprise perhaps the most comprehensive list of the statutory standnrds. They are as follows: (a) The lawful authcrity of the employer. (b) Stipulations of the parties. (c) The interests and welfare of the public and the financial ability of the unit of government to meet those costs. (d) Comparison of the wages, hours and conditions of employment of the employees involved in the ar- bitration proCeeding with the wages, hours and conditions of employment of other employees perfonning similnr services and with other employees generally: (i) In public employment in comparable communities. (ii) in private employment in comparable communities. (e) The average 'consumer prices for good. and services, commonly known as the cost ofJiving. (f) The overall compensation presently received by the employees, including direct wage compensation, vacations, holidays and other excused time, insurance and pensions, medical and hospitalization benefits, the continuity and stability of nroployment, and aU other benefits receiVed. . (g) Changes in any ofthe foregoing circutnstances during the pendency of the arbitration proceedings. (h) Such other factors, not confined to the furegoing, which are normaIiy or traditionally iaken into can- C 2011 Thomson Reuters. No Claim to Orig. US Oov. Works. () ) I l J ; (; 56FDMLR 153 PllIl" 15 56 Fordham L. Rev. 153 sideration in the determination of wages, hoors and conditions of employment through voluntary collective bargaining, mediation, filet-finding, arbitration or otherwise between the parties, in the public service or in private employment. Id [FN37l New YOrk's Taylor Law, for example, requires the arbitration panel to consider: (l) hazards of employment; (2) physical qualifications; . (3) educatioual q~dlifications; (4) mental qualifications; and (5) job training and skills. N.Y. Civ. Serv. Law § 209A(c)(v)c (McKinney 1983). IFN381. Iowa Code Ann. § 20.22(9)a (West 1978). fFN391.Id at § 20.22(9)c. IFN40J.Id at § 20.22(9)b .. [FN41l. See supra note 24 and accompanying text. [FN42l. Se. supra note 27 and accompanying text. ~. See fox, Criteria for Public Sector Interest Arbitrat/Oil in New York City: The Triumph of Ability to Pay and the End ofinterestArbllration, 46. Alb. L. Rev. 97, 101-02 (1981). IFN44J. New York's Taylor Law, for example, directs the arbitrator to consider the following criteria: 'comparison of ... the wages, hOllIS, and conditions of employment of other employe •• perfonning similar services or requiring similar skills under similar working conditions and with other employees generally in public and private employ- ment in comparabJecommunities.' N.Y. Clv. Serv. Law § 209.4(c)(v)a(McKinney 1983). JI!:!'!iJ. See, e.g., N.Y.C. Admin. Code § 12·3I1b(3)(b)(ii)(1986). [FN46J. One arbitration panel capsuled the problem of ambiguity by stating: '[clo,nparability, like beauty, quite obviously, is in the eye of the beholder.' United States Postal Serv. v. National Ass'o of Letter Carriers, at 21 (Dec. 24, 1984) (Kerr, Simon, Kheel, Nash and Mabon, Arbs.) (ava,ilable in the files of the Fordham Law Review). LEN41J. See Fox, SIlpra note 43, at 114. On September 15, 1976, the City Council Committee on Civil Service and Labor turned down a proposal to amend the New York City Collective Bargaining Law to add the ability to pay cri- terion on the ground that such action would be superfluous. See, N.Y. Times, Sept. 16, 1976, !ll24, col. 2. Nonethe- less, a 1978 amendment to the Fio!!llcial Emergency Act, in effect through 1986, expressly required the Board to consider the employer's ability to pay. see N.Y. Unconsol. Laws § 5408.3 (McKinney 1979 & Supp. 1988). [FN481. See infra notes 53-57 and accompanying text. C2011 Thomson Reuters. No Claim to Orig. US Gov. Works. 56FDMLR 153 Page 16 56 Fordham L. Rev. 153 1I!i42J. For example, in United Federation of Teachers, Local 2 v. Board of Educucation, Case No. IA·I·85 (OCB Sept 16, 1985) (Gmett, Gill and Schienman, Arb.) (available in the files of the Fordham Law Review) the arbitra- tion panel stated: ' Each Jabor organizatiOIl and each negotiation has its own issues and problems which need to be ad- dressed. Dilen the .. concerns may require deviating from the general pattern. On tbe other band, we are per- sueded that the relationship or linkage between the major municipal union, is an important factor which can- not be ignored or minimized. The Union bas long been compared to and bas in fact been a participant in the municipal coalition. This relationship surely represents one of the important factors 'normally and customar- ily considered in the determination of wages, hours, fringe benefits ... ' and is an important component in considering the 'interest and w"lfare of the public.' '"'-, Jd at 33 (footnote omitted). IllisPI. See generally C. R. Morris, The Cost of Good intemions 97-106, 120-24 (1980) (discussing the hisli;)rical inrerrelationship of economic and non·economic contract gains among police, firefighters and uniformed forces in New York City). [FNS ll. See Howlett, Interest Arbitration In the Public Sector. 60 Coi.-Kent L. Rev, 815. 832 (] 984). [FN521. See infra noteS 69-93 and accompanying text. [FN531. See generally Fox, supra note 43"at 102·04 (ability to pay criterion analyzes the effects of inflation and cost of living increases on the employer's ability to ttlee! compensation gains). The ability Ii;) pay criterion also ana- lyzes the competing needs for increased services and capital improvements versus the need for reasonable and re- sponsible compensation of employees. [FN541. During the New York City fiscal crisis, ability to pay was statutorily defiried as wbether or not the requested wage increase could be paid without increasing the level of city taxes over and above that which prevailed when the dispute arose. N.Y. Unconsol. Laws, § 5408.3(h) (McKinney 1979). This defmition, which the parties and arbitra. li;)rs were required to eonsider during the fiscal crisis, had an inhibiting eftect on the size of the municipal unions' wage demands. See generally Fox, supra note 43, at 120·25. ~. see JOWl! Code Ann, §§ 20.22(13), 20.17(6) (West 1978). ~. see N.Y.C. Admin. Code § 12-311c(3Xe) (1986). fFN57!. For example, in the most recent round of negotiations between the United' Federation of Teachers, Local 2 and the New York City Bpard of EducatiOll, the employer was able to gnmt teachers a significant increase in WIlgeS because of money available ftom the stllIe under its Excellence in Teaching program. The New York City Board of Educa!ion's share of the state money was $31 million in the first year and $42 million in the second year of the three year contract. See 25 Go\"! Empl. ReJ. Rep, (BNA) 1285 (Sept. 14, 1987). [FN58]. Mich. Comp. Laws Ann. § 423.239(h) (West 1978). ~. See generally 2 B. Worne, The Law and Practice of Public Employment Labor Relations § )5.2(1974). [l'NQl!l. see Me. Rey. Stat. Ann. tit. 26 § 965(4) (1964 & Supp. 1987); R.!. Gen. Laws § 36-) )·9 (]984l. [FN61!. See, e.g., N.Y. Clv. Servo Law § 201.4 (McKinney 1983). 1"- © 2011 Thollll!On Reuters. No Claim to Orig. US Gov. Works. () ) 1 J , I C) \ ) 56FDMLR 153 Page 17 56 Fordham L. Rev. 153 ~. For example, the New York City Collective Bargaining Law provides: 'The report of an impasse panel shall be confined to matters within the scope of collective bargaining. Unless the mayor agrees othenvise, an impasse panel shall make no report concerning the basic salary and increment structure and pay plan rules of the city's career and salaryplHll.' N.Y.C. Admin. Code § 12-311c(3)(c) (1986). CFN63l. see United Fed'n of Teachers, Local 2 v. Board ofEdoo., Case No. lA-I-85 111 2 (OCB Sept. 16, 1985) (Garrett, Gill and Schienman, Arbs.) (avail.ble in the Illes of the Fordham Law·Review); see also, NYC TeachErs Get Three-Year Pact Through Binding Arbltrallan, 23 OoVt Bmpl. Rei. Rep. (BNA) 1358 (Sept. 23, 1985). J:Elliill. see United H;;j'n of Teacilers, Local 2 v. Boatd of Ednc., Case No. lA-I-85 at 7{OCB Sept. 16, 1985) (Garrett, Gill and SchielllllllIl, Arbs.) (available in ilie files ofilie Fordham Law Review). . fPN65J. The 1982 New York City Transit case, the Postal Arbitration of 19S4 and the New York City Board of EducationlUnited Federation of Teachers Arbitration of 1985 demonstrate !bat complex issues 'can be presented and resolved in a compressed time .period wheo pre-hearing statemeots ate used. See New York City Transit Auth. v. Transit Workers Union of Am., Local 100, at 3 (N.Y. PBRB Apr. 29, 1982) (Anderson, Collins and Friedman, Arbs.) (avallable in tbe flies of the Fordham Law Review); United States Postal Serv. v. National Ass'n of Letter· Carriers, at 4 (FMeS Dec. 24, 1984) (Kerr, Kheel. Simon, Mahon and Nash, Arbs.) (available in the files of the Fordham Law Review); United Ped'n of Teachers, Local 2 v. Board ofEduc., Case No. lA-I·85 at 34 (OCB Sept. 16, 1985) (Garrett, Gill and Scheinman, Arbs.) (available in the flies of the Fordham Law Review); see a/so, NYC Teachers Gel Three-Year Pact Through Binding Arbitration, 23 Gov't Empl. ReI. Rep. (BNA) 1358 (Sept. 23, 1985); Arbitrators Settle Postal Impasse with Three Annual Pay Hikes, 22 Gov~ Ernpl. ReI. Rep. (BNA) 2329 (Dec. 31, 19S4). lEl:!.QQl. These procedures enabled presentation of tIln witnesses' testimony in four days in the UFT arbitration, United Fed'n of Teachers, at 4-5, and sixteen witnesses' testimony in five days in the transit workers arbitration. New York City Tral1lliJ AU/h., at 3. The postal arbitration produced 'over 2,000 pages of expert testimony, ... just under 300 exhibits and over 4,000 pages of documentation' in only seven days of public bearings. United States Postal Service, at 16. fFN67J. For exemp\e, in the UFT arbitration one day was allotted for rebuttal. United Fed'n of TeachErs, at 5. LEliQU The arbitration panel typically will determine ilie duration of the arbitration after meeting with the parties at a prl>-hearing conference. The Patties must then divide the time amongst themselves. It has been our experience thet the parties usually will construct a plan themselves rather than be subject to a plan set by tbe panel. . I.EI::Ili21 See; e.g., N.Y. Clv. Servo Law § 209.4(c)(v) (McKinney 1983) ('panel shall specify the basis for its futd- ings~; Contl, Gen. Stat. Ann. § 5-27OO(e)(4)(B) (West Supp. 1988) ('arbitrator ... shalt state with particularity the basis for sucb decision as to each disputed issue' and the manner in which the factors eoumerated ••. were consid- ered in arriving at sucb decision'). LEN1Q1. See, e.g., Duffulo Police Benevolent Ass'n v. City of Buffalo. 82 A.D.2!l 635. 638. 443 RY,$,2d 107, 109 U2lll (arbitration panel must set forth with specificity the comparisons used in reaching their decision); Detroit v. Detroit Police Otlicers Ass'n, 408 Mich. 410,482,294 N.W.2d 68. 96 (980) (arbitration panel must consider only the applicable slatotory standards and ilE opinion must disclose the reasons for considering the various standatds and explain its result). W1!J. N.Y. Cjy. Pmc. L. & R. 7511 iMcKlane~ provides: (h) Grounds for vacating. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. ! j I 56FDMLR 153 Page 18 56 Fordham L. Rev. 153 I. The award shall be vacated on the application of a party who eitlJer participated in the I!1'bitration or was served with a notice of intention to arbitrate if the court finds that the rights of that party were prejudiced by: (i) corruption, fraud or misconduct in procuring the award: or (ii) partiality ofan arbitrator appointed as a neutral, except where the award was by confession; or (iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a rmal and definite award upon the subject matter submitted was not made; or (Iv) Iililure to follow the procadure of this article, unless the party applying to vacate the award continued with the arbitration with notice. of the defect and without objection. J:J::N:m. see caso v. Coffey. 41 N.Y.2d 153. 158.359 N.B,2d 683. 686. 391 N,Y.S,2d 88.91 (1976). fFN73i. see Temporary Comm'n oflnvestigation v. French. 68 AD.2d 681, 690. 418 N.Y.S.2d 774.779 (]979). IFN741. 41 N.Y.2d 153. 359N.E.2d 683. 391 N.Y.S.2d 88 (1976). IENIU Id. at 158. 359 N.E.U~<i86. 391 N.Y.S.U at 91. ~. N.Y. Ciy. Pmc. L. & R. 7803 (McKinney 1981) provides lhat an article 78 proceeding may determine only whether there has been a fui1ure to parfbnn a legal duty, the official body is acting or is preparad to act beyond its jurisdiction, .. decision is the result of procedural violations or an abuse of discretion, or a decision reacbed after a legally prescribed hearing is supported by substential evidence. lJ.'N1ll.Id IEtilU See City of New York v. Podiatry Soc'y, No. BCB 1-1-72, Decision No. B-23·72, slip. op. at 8-9 (Board of Collective Bargaining Dec, II, 1972) (available in lhe files of the Fordham Law Review). The Board has stated its policy as follows: ld If the impasse panel has afforded !be parties full and fair opportunity to submit testimony and evidence relevant to lhe matter in controversy; unless it can be shown lhal the Report and Recommendations were not based upon objective and impartial consideration of lhe entire record; end unless clear evidence is presented on appeal either 1hat the proceedings have been tainted by fraud or bias or 1hat lhe Report end Recommenda- tioos'are patently inconsistent wilh the evidence or lhat On its face it is flawed by material end essential errors offact andlor law, !be Report and !be Recommendations must be upheld Il'NlJ1l. Act of June 7, 1977, ch. 216, § 4(cXv), 1977 N,Y. Laws 276, 280. See If/I'l'anotes 117-120 &. 144-149 and accompanying text for discussion oflhe Taylor Law. ~. Act of May 31,1974, vh. 725, § 4(cXv), 1974 N.Y. Laws 1125, 1127. JIl'!ill. See Gov. Memorandum, reprinted In 1977 N.Y. Laws 2489-90 .. 1B'!m. City of Batavia v. Local 896, Batavia Firefighters Ass'n, 19 PERB ~ 7510,7520 (Sup. CI. 1986). fFN83J. see Buffalo Police BMevolent Ass'n v, City of Buffalo, 13 PERB 117539 (Sup. Ct. 1980), afJ'd and modified, 82 A.D.2d 635. 443N, Y,S,;2d 107(981); City of Yonkers v. Mutual Aid A,s'n of Paid Fire Dep't. Local 628, 80 A.D.2d 597, 436 N,Y.S.2d 1009 (I981); City of Balavia v. Local 896, Batavia Firefighters Ass'll, 19 PERB 1[7510 (Sup. Ct. 1986), -- C 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. \ ! 56FDMLR 153 56 Fordham L Rev. 153 fFN841. 82 A,D,2ciJi35. 443 N.Y.S.2d 107 ()9~1l. fFN851.14 at 639. 443 N. Y.S.2d at 110. fFN861. 80 A.D.2d 5n~ N.y.s.2d 1009 ad Dep'! 1981). iEl'Jrn. 1<1, at 597, 436 N.Y.S,2d at 1010. fFN88J. 19 PERB 111510 (Sup. Ct. 1986), ~. CltyojiJatavla, 19 PERB at 7520. [FN90J.ld at 7522, [FN91!.Irl at 7521·22. [FN921. See generally N.Y.C. Admin. Code § 12·311c (1986), , fFN93]. N,Y.C. Admin, Code § 12·3lIc(4)(1986) provides: Page 19 (4) Review of impasse panel recommendations: (a) A part)' who rejects in whole or in part the recom· mendation of an imposse panel, .. may appeal to the board of collactive bargaining fur review of the recom· mendations of the implLSse pl!lltlby iiJing a notice of appeal with said hoard within ten days of such rejection. . , . (b) The notice of appeal shall specify the grounds upen which the appeal is taken, the alleged etTors of the panel, and the modifications requested. Irl rFN941. See Il'Ifta notes 102·05 and accompanying text, rFN95J. See Infra notes I02.(J5 and accompanying text. [FN96]. See il'lfta notes 106-09 and accompanying text. JE-lm. See Il'Ifta notes 110·13 and accompanying text, [FN98J. See /tifra notes 114·16 and accompanying text The one'lJllIII, one-vote principle seeks to ensure thet each person has an equal voice in government SiJ/J generally L, Tribe, American Constitutional Law §§ 13·1 to 13·7 (1978). L!'1l22:l, See, e.g., Town of Arlin!!ton y. Board of Conciliation & Arbitration. 370 M.s •. 769, 352 N.E.2d 914 (1976); Dearborn Fire Fighters Union, Lo,cal No. 412 y. City of Dearbom. 394 Mich, 229, 231 N.W.2d 226 (I97S); School Disl. pfSewal'd Educ. Ass'n y. Sobool Dist. or Seward, 188 Neb. m. 199 N.W.2d 752 (972); City or Am· .!c.-dam v. Helsby, 37 N.Y.2d 19. 332 N.E.2d 290, 371 N,Y.S.2d 404 (975); Medford Firefighters AG'g Local #1431 y. City of Medford. 40 Or. App. 519. 595 P.2d 1268 (979); Harney v, Russo, 435 Pa. 183.255 A,2d 560 (1969); City pfWarwlck v. Warwick Regular Flremeo's ASS'll, 1Jl611,,J. 109.256 A.2d 206 (1969); City of Spokane v. Spokane PoliceGuild. 87 Wash. 2d 457, 553 P,zd 1316_0 976)(en bane); State eHeL Fire Fighters Local 946 v. City of Laramie. 437 P.2d 295 (Wvo, 1968). [EN 1001. See, e,g., Qmoecticut Ass'n of Eelue .. Inc. y. Shedd. 197 COlID, 554,499 A.2d 797 (1985); Town ofB.rlio v. Santaguida, 181 Conn.421. 435 A.2d 980 0(80), 02011 Thomson Reuters. No Claim to Orig. US Gov. Works. 56 FDMLR 153 ~age 20 56 Fordham L. Rev. 153 . fENIQlJ. See, e.g., City ofBiddeford v. Biddeford Teacbers Ass'n, 304 A.2d 387. 400 (Me. 1973) (statute failed to provide standards necessary to protect parties from arbitrator's 'possible arbitrary and irresponsible exercise of this delegated power'); Maryland Classified Employces Ass'n, Inc. v. Anderson, 2 Pub. Bargaining Cas. (CCH) 1120,414 at 21,384-85 (Md. Cir. Ct. 1976) (because statule failed to include standards to guide arbitrators, it constituted an unlawful delegation of power); City of Sioux ·Falls v. Sioux Falls Firefighters Local 814. 89 S.D. 455, 460: 234 N.W.2d 39. 37·38 (975) (court perceived compulsory arbitration to be =nstitutional interfurence with municipal functions); S.lt Lake Clty v. International Ass'll of Firefighters. Loc.II615. 95 LRRM (BNA) 2383, 2385 (Utah .!.211i (act ftllied to provide any protection against arbitrariness nor did it provide for the aCC01llltabillty necessary fur constitutional exercise of political power in a representative democracy). In Pennsylvania, afl!!j: the state's highest court had found a previous arbitration statute unCfll1stitutional, see Erie Firefighters Local No. 293 y. Garduer, 406 Pa. 395. 178 A,2d 691 (1962)(per curiam), it was necessary to amend the constitution tu allow compulsory arbitration. gee Pa. Const. art. III. § 31. fFNI021. Howlett, Intere8t Arbitration In the Public Sectof, 60 Cbi.-KentL. Rev. 815. 821·22 C19841; Wellington & Winter, Structufing Collectiye Bargaining in Public Employment, 79 Yale L. J. 805, 834 (1970). [FNH)31. see Town of Arlington v. Board of Conciliation & ArbilrntioQ, 370 Mass. 769, 352 N.E.2d 914 (1976); School Dis!. of Seward Ed"C; Ass'n v, Sclloo] Dist. of Seward. 188 Neb. n2. 199 N.W.2d 752 (1972): City of Am- sterdam v. Helsby, 37 N.Y.2d 19, 332 N.E.2d 290, 371 N.Y.S.2d 404 (1975); Medford Firefigln"!:s Ass'n Local #1431 v. City of Medford. 40 Or. API" 519_ 595 P.2d 1268 (]979); Harney v. Russo, 435 Pa, 183,255 A.2d 560 ~; City of Warwick y. Warwick Regular Firemen', Ass'n. IQ6 R.1. 109,256 A.2d 206 (1969); City of Spokane v. Spokane Police Gulld, 87 Wash, 2d 457,553 p,2d 1316 (1976)(en banc); State ex f.l. Fire Fighters Local 946 v. City of Laramie, 437 P.2d 295 (Wyo. 1968). In City of Amsterdam v. Hal.by, 37 N.Y.2d 19,332 N.E.2d 290. 371 N.Y.s.2d 404 (19751 tbe leading New Yolk caSe, the Court of Appeals held that: there is no constitutional prohibition against the legislative delegation. of power, witb reasonable ",,:fu- guards and stlnderds, ro an agency or commission established to adlIJinister an enactment .... Here, tbe Leg· islature bas delegated ro PERB [lbe Public Employment Relations Board], and through PERB to ad hoc aibi- tration panels" its constitutional autbority to regulate the hours of work, compensation, and so on, for police- men and firemen in the limited situation where an impasse occurs. II has also established specific standards which IIJust be followed by suCh a pancL ..• We conclude that the delegation here is both proper and reason- able. . Jd. at 27, 332 N.E.2d at 293, 371 N,v,S,2d at 408 (citations omitted). Also relevant are the comments of Judge Pucbsberg in a concurring opinion: It is settled law that a delegation ofpower by the Legislature to a subordinate body is constitutional, pro· vided it is accompanied by sufficiently specific standards for its use and provided that the delegation is of power to carry out law, not power to make law. In severn! ..• cases, the courts have heJd that the delegation is of legislative power but tIust it ls, never- theless, permisSible because the arbitratioll panel, in performing a public function, becomes a public body. , .. I do not find it useful to try to determine with precision whether the particular delegation ofpower made here is most accurately classified as legislative,judlcial, or administrative .... [WJhen courts in the past have upheld or invalidated delegations of power, they bave most frequently done so by first determining whether the delegation hed a rational purpose and adequate safeguards, and only then bave they applied the labels 'legislative' or 'administrative' _d we might add 'judicial' -to the results of their assessments. © 2011 Tbomson Reuters. No Claim to Orig. US Gov. Works. (~) ) f'~) \ ." J j .~ 1 J i 56FDMLR 153 . 56 Fordham L. Rev. 153 Page 21 ld. at 34-3~. N.E.2d at 227-98. 371 N.Y.S.2d at 414-15 (Fuchsberg, J., concurring) (emphasis and citations omitted). . II'NI041. One judge bas explained the l'lItiooale succinctly: Disputes between cities and their unifonned services generate en infinity of special circumstances and filets. No Legislature could devise a law which would deal fairly with every issue which could arise in a spe- cific dispute. Instead, the Legislature bas chosen to cream a new way to handle such disputes by delegating powers which may be partly legislative, partly jUdicial, and partly administrative; they may even be described as sui gonn. /d. at 35,332 N.B.2d at 298, 371 N.Y.S,2d at 415 (FUchsberg, J., concurring). fFNI05)..~ee cases cited supra nute 101. fFNl06J. See. e.g., Carolimo y. City ofBridgepoJt. 196 Conn. 623. 629. 495 A.2d 1911, 1014 (1985); Town of AI-. ling/on v. Board of Conciliation & AIbitratioll..J70 Mass. 769. 770-71. 352 N.E.2d 914. 916 (976): Dearborn Fire Fighters Ullio!!, LocaJ No. 412 v. City ofDearl)orn. 394 Mich. 229. 243. 231 N.W.2d 226,229, (1975); City of Am- sterdam v. Helsl1y, 37 N.Y.2d 19.26 ... 332 N.E.2d 2.211.292,371 N.V.S.ld 404. 407 (1975): City of Roseburg v. Rosebwg Firefighters 1,ocol1489, 292 Or. 266,268, 632P.2d 20. 91-92 098 n. rFNlOn Se. generally 1 C. D. Sands & M. B. Libonatt~ Local Gov'! Law §§ 4.01 to 4:15 (1987) (sections authored by D. L. Callies). rfNI08]. See, e.g., Crp·Qfimo. 196 Conn. at 629·31. 495 A.2d at 1014-15: Town ofArl1!'!ZI.OII. 370 Mass. at 773·74, 352 N;B,2d at 918: fd!1grborn n·. Fl.mters Union, 394 Mich. at 044-45, 231 N. W.2d at 229-30: City o(Amsterdam, 37 N.Y.2d at 26-27. 332 N,B.2d at 292-93, 371 N.V.S.2d at 407-08: CIfv ofRosebW'g, 292 Or. at 274-78. 639 P.2d ot95-97. . fFNI09]. S~ .. e.g., Caro(ano. 196 Conn. at 629-31, 495 A.2d at 1014-15; Town "fArling/on, 370 Mass. at 773-74. 352N.E.2d at 918·19; Dearborn F/r..e Fighters Uniol1 394 Mich.at243-46. 231 N.W.2d at 229-30; City o(Ams!",... dam, 37 N.Y.2d al.26-27, 332 N.E.2d at 292-93, 371 N.Y.S.2d at 407=08: Ci(Y qfRoselmrrr., 292 Or. at 274-78, 639 P,2d at 95-97, . fI'NIIO]. See, e.g., Dearborn Pire Fighters Unjon, Local No, 412 v. City ofD<l!!rbom, 394 Mica 229,245,231 N.W,2d 226. 230 (]975); City of Amsrerdam v. Helsby, 37 N,Y..2lU2, 27-28,332 N.E.2d 290,293,371 N.Y.S.2d 4Q4, 408 (975); City of Spokane v. Spokane 'police Guild. 87 Wash. 2d 4~7, 461-63, 553 P.2d 1316. 13l8-!9 (1976). . [I'N II Jl, See, e.g., Dearborn Fire Fighters Union, 394 Mich, at 245-46, 231 N.W.2d at 230; CiIV of Amsterdam, 37 N.y.2d 8127, 332 N.E.2d at 293.371 N.Y.S.2d at 408; City o(&O'.o"e. 87 Wash. 2d at 461, 553 P,2d at 1318. [FNI 121. Cif)' Qf$pokane, 87 WllSh. 2d at 461. 553 P,2<l at 1319: accord Dearborn Fire Fighters Union, 394 Mich, at 24J::46, 23J N,W.2d at 230: ('jOt DrAms/orOOm, 37 N.Y.2d at 41,332 N.E.2d at 302, 371 N'y's.2d at 420 (Futhsberg, J., concurring). !FN1131. See City QfAmsterdam. 37 N.Y.2d at 41. 332 N.B.2d at 307. 371 N.Y's.2d at 420 (Futbsberg, J.; concur- ring); see also Dearborn Fite Fighters Union, 394 Mich. at 245-46, 23 [ N.W,2d at 230 (arbitration awards may be implemented by an increase in taxes or a decrease in municipal expenditures); Cay q[$pokane. 87 Wash. 2d at 461. 553 P.2d atIill (that an award 'may result in the need for local taxation, does not itself impose any 'barden or charge~). fFNI14]. Sell supra nore 98. © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. • i I ! 56PDMLR 153 Fagen 56 Fordham L. Rev. 153 rfNl J51. See. e.g.. Town of Arlington v. Board ofConclliation & Arbitration. 370 Mass. 769. 777. 352 N.E.2d 914. 92011976); City of Amsterdam v. Helsby. 37 N.Y.2d 19. 27-28. 332 N.E.U 290. 293. 371 N.Y.S.2d 404, 408 (I 975); Harnev y. Russo. 435 Pa. 183. 190-91, 255 A.2d 560, 563-64 {I969l. rfNI161. See. e.g .• Town ofArlinfltOll, 370 Mass, at 777-78, 352 N.E,2d at 920-21; accord Citl' of Amsterdam, 37 N.V.2d .142. 332 N.Il.2d at 303,)71 N.V.S.U at 421 (Fucbsberg, J., concurring). fFN) 171. N.V. elv. Servo Law §§ 200-214 (McKinney 1983 & Supp. 1983). fFNl181. N.Y.C. Admin. Code §§ 12-301 to 12-316 (1986). fFN119J. see N.Y. Ciy. Servo Law § 212 (McKinney 1983). The Taylor Law permits local governments to enact 'provisions and procedures' for the regulation of public employees relations which.are 'substantially equivalent' to the Taylor Law.Id fFNI201. N.Y. Cly. Servo Law § 210(1) (McKinney 1983). fFN121J. N.Y. City Charter Ch. 54, § 1171 (1986) states: The mayor shall have the power to appoint the city members of the board to serve at his pleasure, and the labor members of the board from designations by the municipal labor committee. Each labor and city member shall have an alternate, who shan be appointed and removed in the same manner as the member for whom he is the alternate. The chairman and other impartial members shall be elected by the unanimous vote of the city and labor members, and shall serve for three year terms .... fFNI22J.ld at §§ 1170-1171. fFN123J.ld ff'N124J. N.V.C. Admin. Code §§ 12-301 to 12·m (1986). fFN125J. The NYCCBL grants impasse panels power to: mediate, hold hearings, c~mpel the attendance of witnesses and the production of docUments, review date, and take "11atever action it considers neceasory to resolve the impasse. If an impasse panel is unable to resolve an impasse within a reasonable period of time, as determined by the director, it shall. within such pe- riod of time as the director prescribes, render a written report containing findings of fac~ conclusions. and recommendations for terms of settlement N.Y.C. Admin. Code § 12-3 I lc(3)(a) (1986). The hmguage of this section indicates that impasse panels are encour- aged to settle harpJiliUng disputes through mediation. Experience has shown that even if the parties do not reach furmal agreement threugh the panel's mediatory eifom, and a report and reoommendetions are issued, very often the report reflects what the parties infurmed the panel regarding certain infurmal agreemenm existing between them. See Ande!1lOD. The Impact of Public Sector Bargaining: An Essay Dedicated to Na/han P. Feins/nger, 1973 Wis, L. Rev. 986, lOll-IS. See also Grodin, Political A.spects <lPabiicSee/or Interest A.rbitration, I Indus. ReI. L.J. I, 14 (1976) (the arbl!rel process as viewed as an extension of the negotiating process). fFN 1261. As originally enacted in 1967, the NYCCBL contained provisions fur factfinding. but the recommenda- tions that resulted were only advisory and there was no ststutory fmality procedure. See 1967 N.Y. Local Laws 449 (amending N.Y.C.C.B.L. Ch. 54, § J I 73·7.O(c». Nonetheless, the City of New York maintained a policy ofvolWl- tory compliance with impasse panel recommendations. In 1969, the Taylor Law VIlIS amended to require the Mayor C 20 11 Thomaon Reuters. No Claim to Orig. US Gov. Works. ) ~ I j \ / 56FDMLR 153 Page 23 ,56 Fordham L. Rev. 153 of the City of New York to submit a plan dealing with the need for a specified final step in 'the impasse procedures. 1969 N.Y. Laws Ch. 24, § 1 1,79-80. To develop proposed finality procedures for submission to the state legislature, representatives of New York City, the Municipal Labor Committee, and the Office of Collective Bargaining conducted a series of meetings. Rep- resentatives of the mayor's office, the Municipal Labor Committee, and the City Council rejected proposals to con- form New York City procedures to the Taylor Law as it then stood-that is, to require legislative action in bargoin- ing impasses. The city council leedership did not wish to play the part of referee in labor disputes between the Mayor and the public employee unions. The union., so long as they were denied the right to strike, preferred a final· ity method where the ultimate decision would be made by neutral third partie •. See Lindsay, Report Submitted Pur- suant to Chapter 24, LtlWS of 1969, Designed to Bring New York City's Labor Relations Practices Into Substantial Equ,i",ilence With the Public Employees' Fair Employment Act 6. "The report also sought a consolidation of jurisdiction over New YoriC City public employment relations. It sug· gested giving the Office of CoDective Bargaining mandatory jurisdiction over non-mayoral as well as mayoral agen- . oies. Iii. at 3-5. in eddition, it urged a continuation of the policy excluding the city from the Taylor Law requirement that coDective bargaining agreements be concluded prior to budget submission detes. tli. at 7-8. A discu,sion of other minor probl~m areas a1so.was included. tli. at 8-/0. A form of compulsory interest arbitration, therefure, was agreed upon and enacted by the New York City Council in 1972. 1972 N,Y. Looo Laws 158-60 (codified at N.Y.C. Admin. Code §§ 12-3093(8), 12-311;:(3)(e), 12-31Ic(4), 12-31If(1986». (FN127]. N.Y.C. Admin. Code § 12-31Ic(3)(b) (1986) provides: . (b) An lmpasse panel ... shall consider wherever relevlllll the following standards in making its recom- mendations fur terms of settlement: (I) comparison of the wages, hours, fringe benefits, conditions and characteristics of employment of the public employees involved in the impasse proceeding with the wages, hours, fringe benefits, conditions and charaereristics of employment of other employees performing simJlar work and other employees ·generally in public or prjvllIe em· ployment in New Yorl< City or comp!U1lble communities; (il) the overall compensation paid to the employees involved in the impasse proceeding, including direct wage compensation, overtime and premium pay, vacations, holidays and other eJ<CllSed time, insurance, pensions, medical . and hospitalization benefits, fund and apperel furnished, and all other benefits received; (ill) changes in the average consumer prices for goods and services, commonly known as the cost of living; (iv) the interest and welfare of the public; (v) such other factors as are normally and custommily considered in the determination of wages, hours, fringe ,benefits, and other working conditions in coDective bargaining or in impasse panel proceedings. £FN128]. see N.Y. Cly. Servo Law § 209(4)(c)(V) (McKinney 1983). £FNI291. see N.Y.C. Admin. Code § 12-311c(.3)(d) (1986). £FNI301.Id. !BillU. See Iii. fFN I 32J. Se. id. at § 12-3 I 1c(3)(0). (FN1331. Se. Id. at § 12-3110(4)(a). fFNJ341.See id. fFN135]. See iii. at § 12-311 c(4)(d). Notice of appeal must be filed and served upon the other partywitbin ten days after receipt oftbe impasse panel's recommendll1ions. See iii. at § 12-311 c( 4)( a). If there is no final determination by © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. • 56FDMLRl53 Page 24 56 FordhaniL. Rev.l53 the Board within thirty days of fue filing of the notice of appeal or within forty da}'l! of a rejection notice which the board reviews upon its own initiative, fue panel's recommendation is deemed adoptad. See /d. at § 12-31Ic(4Xd). The director may extend lhese periods fur an additional period not to exceed thirty da}'l!. pee iii. fFNI36]. See iii. at § 12-3Ilc(4Xb). [FNI37]. See id. at§ 12-311c(4Xc). [FN138J. See id. 1FN139J. See id. at§ 12-3110(4)(d). [FN I 40]. Iii. at § 12-311c(4)(f). 1FN141J. See Id at § 12-311c(4)(e). 1FN142J. Id. at § 12-311c(4)(a). This section also provides that the Board of Collective Bargainlag 'may review recommendations which bave been rejected' but not appealed It!. This action has never been taken. [FN143]. See It!. !It § 12·3Ilc(3Xe). IE..N114l. Seeid. at § 12·311c(3Xa). fFN 145]. Se. 111. at § 12-3Jlb(2). fFNI46J. see N.Y. Civ. Serv. Law § 209.4{c)(vii) (McKinney 1983); N.Y. Clv. Pmc. L. & R. 7511 (McKinney 1980). 1FN147].seeN.Y.C. Admin. Code § 12-3I1c(4Xa) (1986). IFNI48J. '/leN.Y.C. Admin Code §§ 12-301 to 12-311 (1986). [FN149J. see N.Y. Clv. Servo Law § 209.4(c)(ii) (McKinney 1983). [FN1501. Generally, critics of interest arbitration have claimed fuel its use will have a 'chilling' or deterrent effect on tbe parties' incentive to bargain in good fillth. See, e.g., McAVOY, BinciingArbitration alCOY/tract Terms: A New Approach to the &8011itloo o(Diseute.'l in I/u; Public Sector, 72 Colum, L, Rev. 1192, 1209-10 (1972), IFNI 511. The experience of other states, such a. New Jersey, similarly rebut this contention, The Chairman of the New Jersey Public Employment Relations Commission recently reported on that state's ten year experience with an interest arbitration statote fuet combines final offer package arbitration for economic issues and final offer, issue·by- issue arbitration for non-economic issues. See J. Mastriani.lnterest Arbitration in State and Local Government, Re- marks at Arbitration Day Meeting of the American Arbitration Association (May 7, 1987). First, he reported that strikes and job actions were virmally non-existent, whereas they had been commonplace prior to the act. 111. at 2-3. He also reported that the arbitration deadline-the employer's budget submission date-had been a lIll!ior stimulus to bargained results aided by madiation. 111. at 4. The Chairman, bowever. was more critical of the quality of arbltra· tion awards and called attention to the need fur arbitrBtors to address the statutory criteria. 111. at 5-6. Lastly, he ob-' served that arbitration bas been a stabilizing and moderating factor in 8al8l')l determinations.ld. at 6, .10 201 I Thomson Reuters. No Claim to Orig. US Gov. Works. () I ! i) , j 56 FDMLR 153 Page 25 56 Fordham 1. Rev. 153 [fN152J. Finality Report of Office of Collective Bargaining 1972-1986 (available in the files of the .Fordham Law Review) [FNI53J.Id [FN154J.fd [FNI55J. ld: see infra note 162. [fNISH In 1973, New Yorl<: City firefighters went on strike fur t/ve and one·halfweeKs over the issue of wages. See generally 540 Gov~ Bmp!. Ret. Rep. (BNA) B-2 I (Fob. 4, 1974); 638 Oov~ Emp\. ReI. Rep. (BNA) B-5 (Jan. 5, 1976). In 1979, employees of the New Yorl< City Off-Track Betting Corporation went on strike for twenty days, again over the issue of wages. See 913 Gov't Empt. ReI. Rep. (BNA) 33 (May 18, 1981). Last, in 1981, resident physicians in municipal hospitals went on strike for several days over a demand for guaranteed minimum staff levels for physicians, ourses and technicians. Id. A. a result of the illegal strike the Union was held in contempt and fined $175,000 for staging the strike_ New York City Health and Hosp. Corp. v. Committee oflntems and Residents of the City of NeW York, N.Y.L.S. May 8, 1981, at 7, col. I (Sup. Ct. N.Y. County). [FNI57J. The source of this data is the Division of Research and Statistics, New York State Department of Labor (as reported in fue 1973 OCB Annual Report at 27) (available in the files of the Fordham Law Review). fFN15l!J.20 PERB News 4 (1987) (Annual ReportEdition). [FN159J. ld at 9. The report also revealed that, out ofa universe of219 coatracts, only 39 WIlfe submlttedto interest arbitration in the period 1986-87, of that number, 21 were settled by interest arbitration. ld [FNI601. fd IFNI6!l. The report is alan consistent with non-PERB studies. Peter Feuille and Joim T. Delaney conducted a de- tailed study of collective bargaining interest arbitration and police salaries. P. Feu/lie & J. Delaney, Collective Bar- gaining, Interesi Arbitration and Folia. Salaries, 39 Indus. &. Lab. ReI. Rev. 228 (Jan. 1986). They surveyed 900 cities duringthe 1971-81 perJod and, based upon their survey, concluded that 'bargaining and arbitration'S avallahil- ity have VeI)' strong associations with high police salaries, but our results also indicate that, in general, arbitration's availability has done reiatively little to cause these high salaries.' ld. at 238 (footnote omitted). The anthors added that 'availability of arbitration has had a positive but modest impact on police salaries.' Id at 238. [FNI62J. see Local No.3, lnt'l Bd. of Elec. Workers v. City of New York, No. BCBJ-Il-76, Decision No. B-8-76, slip. op. at 8 (Board of Collective Bargaining Aug. 11, 1976) (available in the files of the Fordham Law Review); City of New York v. Patrolmen's Benevolent Ass'n of the Distrk:t Attorneys' Offices, City of New York, lnc., No. BCBI-13-77, Decision No. B-3-77, slip. op. at 19-20 (Board of Collective Bargaining Apr. 20, 1977) (available in • the files of the Fordham ,Law Review). ajJ'd sub nom. Higgins v. Anderson, 97 LRRM 2481 !NYC .. Sp, Tenn. Pt. I 1977). [FN163J. see Local No.3, lnt'l Bd. ofEle<>. Workers v. City of New York, No. BCBI-II-76, Decision No. B-8-76, slip. op. at 7·8 (Board of Collective BlIIgaining Aug. II, 19761 (available in the files of the Fon:lhrun Law Review); City of New Yorl< v. Patrolmen's Benevolent Ass'n of the District Attorneys' Offices, City of New York, Inc., No. BCBr-13-77, Decision No. B-3-77, slip. op. at 20 (Board of Collective Bargaining Apr. 20, 1977) (available in the files of the Fordham Law Review), afJ'd sub nom. Higgins v. Anderson, 97 LRRM 2481 rN_Y.C .. /W. Term. Pt. 1 ©201l Thomson Reuters. No Claim to Orig. US Gov. Works. I I .; , 56FDMLR 153 Page 26 56 Fordham L. Rev. 153 1977). Interest arbitration awards have not been used primarily to determine the basic wage pattern of the city and its major unions. Of course, wage disputes can go to interest arbitration and some awards concern attempts to increase the basic wage pattern of the city because of special conditions of employment. See, e.g., United Fed'n of Teachers, Local 2 v. Board of Educ., Case No. JA-I-85 at 3-4 (OCB Sept. 16, 1985) (Garrett, Gill and Scheimnan, Arbs.) (available in the files of the Fordham Law Review) (award determined what the minimum and maximum salary rate should be fur teachers in the New York City school system, which was plagued by recruitment and retention prob- lems). The award of the arbitrators in determining what the proper rate of compensation should be for two-men sani- tation crews assigned to do the work previously performed by three-men crews is a good example. See City of New York v. Uniformed Sanitationmen's Ass'n, Local 831; Case No. 1-157-80 (OCB Dec. 10, 1980) (Kelley, Arb.) (availablc in the files of the Fordham Law Review). A dispute arose over I\le city's decision to utilize side loading collectiOn trucks operated by two-men crews in some sanitation districts inStead of rear loading trucks operated by three-men crews. Id at 5. The Union argued that since 'the City would save $13,000 per man operating the side loading trucks; that they 'expected a fifty-fifty split ... a differential of $6,500' per annum per man working on the side loaders.' Id at 9. Thc Union claimed that the employees 'are entitled to their just due and should be compen- sated and paid a differentiai for their extra effort, added responsibilities and improved productivity.' Id. The City, on the other hand, believed no differential vias due. Id The arbitrator carefully examined the evidence which showed that 'cities operating sueh equipment have without exception provided a salary differential to the DriverlLoaders of the side loader when reducing crew size. None, however, provide a differential of the magnitude proposed by the Union in these proceedings ... .' Id at 10. Taking into consideration the estimated increases in productivity resulting from the implementation of the side loaders and the differentials awarded in other jurisdictions under similar eir- cumslances, the arbitratior awarded a salary differential of$l1 per shift per employee. Id 56 Fordham L. Rev. 153 END OF DOCUMENT © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. n , •••• t,. Westlaw 6 INDRELLJ 48J . 6 Indus. ReI. LJ. 481 Industrial Relations Law Journal 1984 Page 1 *481 IMPASSE RESOLUTION IN PUBUC SECTOR COLLECTIVE NEGOTIATIONS: A PROPOSED PRO- CED1J"RE Raymond L Hogler [FNct'il Curt Kriksciun t:rntll Copyright 1984 by the Industrial Relatioll8 Law Journal; Raymond L. Hagler, Curt Krikseiun I INTRODUCTION This Article argues that existing techniques for resolving publi<Nlector collective bargaining imp~ses such as medial/on. fact.jind/ng, arbitration and strikes all have substantial weaknl1$ses After examining the policy problems inherent in each of these methods, the authors propose a new model for resolution of impasses. Their proposed molkl combines mediation,jactflnding, strikes and ptlbllc referendums to avoid the deficiencies inherent in any one technique, The growth of public-sector unionism·in the pest two decades has been a ~ignificant feature of public employ- ment. fFNlJ As public employees have sought and obtained rights to bargain at the federal, state; and loca1levels. f.!::!QJ numerous issues have arisen In connection with the bargaining process. While the National Labor Relations Act (NLRA). which covers employees in the. private sector [FN3) provide, a frequent analogy for public-sector leg· islation, Jlll'.!I dif'fetences between public and private-sector employment prevent the NLRA from serving as a complete model for public employment. One of the most important diffilrences *482 involves the right to strike. [FNSJ Historically, common law bas not afforded workers in the United States an absolute right to withhold their ser- vices from their employer. Such action may be subject to judicial restriction. I.I:1l2.l The NLRA. however, expressly protects this right, [FN71 and prohibits an employer from diSCriminating against private employees engaged in strike activity, l.E!:Dl1n contrast, the majority of public employee, do not have a statutory right to undertake economic sanctioIlll as a means of resolving bargaining impasses, ~ and constitutional protectiOllll do not extend to legiti-mize such conduct [Ellill) Various legislative schemes other then the strike method have been adopted to resolve disputes arising out of public negotiations. None of these procedures, however, bas been universally aocepted as a satisfactory method of impasse resolution. lllillI In each instance, the permitting of intervention by a thini person not a party to the agreement impedes the original parties' resolution of the labor contract, lEI:IJl1 Further, several jurisdictions have declared one common method of impasse ·483 resolution unconstitutional as a matter of state law, [fl!lll The strike model utilized in private-sector bargaining has the primary advantage of imposing significant hard- ship on recalcitrant pariies. A strike is an undertaking of such roagnitode that it is moly employed as a melJllll of settling disputes in negotiations; the threat of a strike itself is usually !Ill adequate incentive to settle differences. © 2011 Thomson Renters, No Claim to Orig. US Gov, Wolks. C) \ , I ~ 6 lNDRELLJ 481 Page 2 6 Indus. ReI. LJ. 481 IfNl4l Common methods of public:sector impasse resolution are, in contrast, relatively inexpensive and readily available. J:llilli Both reatlD'es detract substantially from the effectiveness of the methods. [FN16] This article proposes a new procedure fur dispute resolution. The suggested procedure combines legislative ap- proaches currently in effect, including the strike option, with a novel alternative used by several mwricipalities in Colorado: the sUbmission of impasses io a vote of the electorate. Such a submission was successfUlly utilized to re- solve an impasse in negotiations between Denver and the International Association of FirefJghters, Local 858. The proposed proeedure will encourage realistic, meaningful bargaining and will avoid the lack of political accountabil- ity inherent in other impasse1:CSOlution techniques. To provide a~framewOl''' for· the proposed 'Referc'ldum Model: this article rust describes current methods of dispute resolution. It then discusses a critical distinction between public-sector and private-sector collective bargaining, the inherently political nature of public negotiations, and explores this distinction in the context of both judicial decisions and theory. Next, the feasibility of dispote resolution by public election is demonstrated through an examination of the Denver and Local 858 experience. Finally, a· legislative model is proposed, locnrporating third-party intervention, strikes, aod elections. *484 II IMPASSE RESOLUTION TECHNIQUES AND ATTENDANT PROBLEMS A. Third-Party Intervent/on ) The most common forms of dispute resolution involving intervention by a party outside the bargaining process are mediation, factfinding, and arbitration. Each method has its distinctive features and particular disadvaotages. 1. Mediation Mediation is based upon the theory that the injection of a neutral, but Jrnowledgeuble, third party into the nego- tiation process will assist the employer and the lUIien in reaching a voluntary settlement. fFNl7J The mediator, who may be either a private citizen or a professional government employee, [FN 18J perfonns a variety of functions· de- sigoed to facilitate a harmonious resolution of the dispute. Those functloo.s have been categorized as procedural, communicative, and substantive. [FNI9J The procedural function includes activities such as scbeduling and con- ducting meetings, developing agendas, and arranging deadlines .. [FNZOJ The commun.icative function involves main- taining " flow of information between parties who are unable or lUIwilling to exchange information directly. It is the substantive function which lies at the beart of mediation. Acting as a catalyst, the mediator encourages . settlement through strategies such as discerning priorities, offering specific-proposals for consideration, realistically evaluating respective positions, and helping to formulate bargaining 'packages.' I.E'lilll The end result is the parties' attBinment of mutca\ly beoeficial understandings which would have been unaltainuble withput the mediator's assis- tance. . Mediation is the most frequently used method of dispute resolution. ~ It is most effioctive when an im- passe derives from procedurel rether than substantive elements of bargeining. !FN23J Among the variables *485 conductive to successfi!1 mediation are inexperienced negotiators, overcolDlDitment to a given position, few SOllICes of impasse, parties motivated to reach settlement, and an aggressive, experienced mediator. !FN24] Conversely, mediation is least effective where hnpasse results from an employer's inability to pay, where the parties habitca\[y rely on the impasse proeedure, and where impasse occurs in large jurisdictions.lE:!22 1. F aotjuui;n8 to 20 II Thomson Reuters. No Claim to Orig. US Gov. Works. J .""'... 6lNDRELU 481 Page 3 6 Indus. ReI. LJ.481 Factflnding is predicated on the utility of rational persuasion rather than the exercise of power. It shares formal characteristics with both mediation and arbitration. A fru;tfinder or fuctfmding panel gathers information through a hearing process. Parties to the hearing introduce evidence and argue the meri15 of their respective proposals. The fucttinder snhsequently issues an advisory award. Each impasse is tentatively resolved and supported by an appropriate rationale. Theoretically, the award is suffi- ciently fuir and reasonable to fonn the basis for voluntary settlement. The assumption of the fuctfmding process is that once an award is put before the parties and the pnhlic. it wUl be clothed with sufficient authority to force the parties to acqiilesce in its conclusions. The pnhHc will regard the award as ajust settlement and bring pressure on the parties to accept it. But as one commentator observes, Every study of fuctfinding in the public sector has concluded •.. fhat it bas not had this result. In most cases the interest and concern of the public is not aroused sulliciently to activate the pressure needed to pro- duce a settlement. Public interest is apparently aroused only when a strike threatens or actually imposes direct hardship. [PN261 Moreover. the effe<:tiveness of factfmding has declined over time in regard. to several important objectives. in- cluding the ability to avoid strikes, to indnce settlements. and to attain increased acceptability. [FN271 Nevertheless. facttinding remains a popular component of dispute resolution. It may be used in conjunction with mediation ·or as a prelude to arbitration. [I'N281 When an impasse poses a significant risk to the parties, such as a strike, factfinding can beeome a viable intermediate stage in the resolution process. '4863. Arbitration The most formalized of dispute-resolution procedures, arbitration conclusively detennines aU impasses subject only to limited judicial review. [FN291 As a result ofits conclusive nature, arbitration achieves the highest level of avoidance of strikes. LEl:J1!ll As with fuctfinding, arbitration operates by means of a hearing before an arbitrator or panel of arbitrstors. Evi- dence and argument are presented, after which the arbitrator tuakes a final and binding disposition of each impasse. A popular modification known as 'final-offer' arbitration limits the arbitrator to a cboice of one of the final negotiat- ing packages of the parties. IEl'1ill The arbitrator's role in dispute resolution is to formulate an agreement which approximates as nearly as possible 'the settlement which the parties themselves would have reached. As one eminent arbitrator explained: Arbitration of contraot tel1llll differs radically from arbitration of grievances. The latter calls for ajudicial determination of existing contract rights; the former calls for a detennination, upon cousiderations of pOlicy. fairness, and expediency, of what the contract rights ought to be. In submltring this case to arbitration, the parties have merely extended their negotiations-they have left it 10 this board to determine what they should, by negotiatiollll, have agreed upon. We take it that the fundamental issue is: What should the parties them- selves, as reasonable men, have voluntarily agreed to? IEl':!ill In order to arrive at reasonnhle settlements, arbitrators rely on standards developed through prior adjudication,. Those sIllnderds, agone authority point, ou~ 'are not puned out of the air-nor are they artificially created. They are, generally speaking, the very same ones that are used by the parties in their negotiations.' [FN331 Such standards include prevailing practices within on industry or area, the nature of the work under consideraliOll, the employer's ability to pay, productivity, and general economic conditions. fFN341 In some inslllnces, standards are provided by the enabling legislation. [FN351 © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. \ ! i i ! J I \ ) 6 lNDRELLJ 481 Page 4 6 Indus. ReI. L.J. 481 *487 As a means of resolving dispules, arbitration is typically viewed as the most effective substitute for pub-. lic-sector work stoppages. There.is substantial empirical evidence In support the conclusion that rar fewer strikes ocour where arbitration is mandated. [FN361 In addition, arbitration may serve to redress inequalities in bargaining power and to provide social and pOlitical stability. L:fl§1l This fea.t!lre, however, is antithetical In the established concept under the NLRA that bargaining outcomes are determined by tbe eeonomic strength of the parties.1ENJ.lU One frequent criticism of erbitration is that it tends to inhibit genuine bargaining. fFN391 Rather than engage in realistic negotiations, parties select the less painful alternative of arbitration. According to FeuUle . .. Arbitration will be invoked beeause"3Ile or both sides believe that lID erbitration award may be more fa-"., vOTable !ban a negotiated agreement andbecause one or both believe the costs of using arbitration are COOl- paratively low (none of the trauma and costs of a work stoppage and none of the uncertainty of using other fonus ofpolitical influence). As a result oftbi. cost-benefit calculus, the availability of arbitration may have a 'chilling effect' upon the parties' efforts to negotiate an agreement, and over time there may be a 'narcotic ef- fuct' as the aprties become arbitration addicts who habitually rely on arbitrators to write their labor contracts. JftM[J A more fundamental attack on arbitration derives from the structure of our democratic society. The perceived weakness of interest arbitration is that it is 'inimical to a basic precept of political democracy, namely that authorita- tive political decisions should be reached by governmental officials who are accountable to the public. Arbitrators are not accountable to the public.' lE!:i1Il This lack of political accountability has led some courts ·to reject arbitra- tion, finding it to be an unconstitutional delegation of legislative power. ~ B. Constitutional Analysis and Policy Issues The majority of courts have' upheld statutes that provide fur binding interest arbitration fur public employees. J..E!:H;il Nevertheless, such statutes *488 have been attacJred on various COIlStitutiolllll grounds, including 1IIe viola- tion of the fourteenth amendment. [FN44] The most compelling argunient, however, challenges th~ statutes as unconstitutional delegations of legislative authority. This argument is significant fur purposes of Ibis article because it focuses attention on the ralations between the arbitrator and the processes of public decision-making. Greeley Polic. Union v. City Council of Greeley [FN451 illustrates the minority position. In that case, the Colo- rado Supreme Court Invalidated a city charter amendJrumt that provided for binding arbitration of unresolved police union dlsputes. The court held that delegation of legislative power to politically llDllccountable persons is unconsti- tntional. The court observed that certain basic principles ofrepresenlative government cannot be contravened, Fnodamental among them is the precept that officials engaged in governmental decision-making (e.g., setting budgets, salaries, and uther tenus and conditions of public employment) must be accountable to the citizens they reptesent. Binding arbitration removes these decisions from the aegis of elected representatives, placing them In the hands of an outside pemon who has no accountability In the public. [FN461 The court's chief concern was to preserve the process mandated by the BIlIte's constitntion, which provided that 'Calve!)' person having authority to exercise or exercising any public or govermnental duty, pov.'eI or function, shall be an elective officer, or one appointed, drawn or designated in accordllllce with law by ali elective officer or offi- cers.' [FN47J The court fuund that binding arbitration would unacceptably attenuate the link between the e1eclnrate and the decision-makers. ~ . ·In another case typical of this trend, the Utab Supre!lle court reached a similar conclusion regarding binding interest arbitration for '489 firefighters. [FN491 According to the Utab court, The power conferred on the panel of arbitrators is not consonant with the concept of representative de- .-- (Q 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. · . 6 INDRELU 481 Page 5 6 Indus. ReI. LJ. 481 mocracy. The political power, which the people possess under Article I, Sec. 2, and which they confer on their elected representatives is to be exercised by persons responsible and accountable to the people-not in- dependent of them. The act is designed to insulate the decision-making process and the results from account- ability within the politic.l process; therefore, it is not an appropriate means of resolving legisiative-political issues. J:fl:l2Ql Once again, tbe perceived threat to the representative government motivates the Court to invalidate the binding arbitration provisions. (FN511 Conversely, a majority nf courts have held that lack of political accountability does not ipso facto inVlllidate binding interest arbitration statutes. For example, in Milwaukee County v, District Council 48. (FN52J the Wisconsin Supreme Court upheld the constitutionality of a statute t.'lat mandated the appointment pf a mediator-arbilrator by the Wisconsin Employment Relations Commission (WERC) aOO a reasonable period of negetiation, if settlement procedures full to break a deadlock, [FN531 Under the statute, parties to the deadlock submit their final offers to the, mediator-arbitrator, who arranges a public meeting if so petitioned by at least five citizens. This meeting allows the parties to explain and justifY their positions, and affords the public the opportunity to offer comments and sugges- tions. Following this, the 'mediator-arbitrator attempts to mediate the dispute for a reasonable 'time; if unsuccessful, the mediator-arbitrator notifies the parties tbat the dispute will be resolved through binding arbitration. If both par· ties then withdraw their final offers. the labor organization may strike. OtherwiSe, binding arbitration would apply. In finding the statute ConstltutiOllll~ the court ontiined three requirements for a valid delegatiOll of legislative authority. First, the legislative purpose of the statute must be ascertainsble. Second, specific standards must limit the exercise of the arbitrators statutory power, And third, judicial and procedural safegeards must mst to ensure that the legislative purpose is setisfied. The Wisconsin court conceded that the statutory system does not provide for the mediator-arbitrator's direct accountability to the electorate, It concluded, however, it must defer to the legislature: "490 In this case the legislature siruggled with the difficult problem of arriving at a Wr dispute resolu- tion system for beth the public employer and the public employees. It detemained that the unilateral detenni- natioll of employment matters by the employer gave little wei&.ht to the rights of employees. It also deter- mined tbat the right to strike, a traditional employee right, posed too great a threat to the smooth operation of essential public services. It was in this context that the legislature devised Ii system for binding arbitretion , through an impartial arbilrator, The W1derlying premise of public employer-employee arbitration is that communities will forego the consequences of embittered economic warfare if there is a process to resolve disputes under fair and neutral principles. Consequently, the legislature must,be allowed some flexibility in formulating a procedure to re- solve the conflict between direct electoral accountability and the independence afforded through insulation ftem the political process. [FN541 Thus, the court recogni:res that some degree nf political accountability may need to be sacrificed in order to at- tain the iegislative ends sought. That determination is arrived at by legislative balancing. Other coUJ1s have reached similar conclusions. In City of Detroit v. Detroit Police Olfwers. fFN55J the Michi- gan Supreme Court foW1d that an amended statute which provided fur binding interest arbitration was constitutional despite limited accountability of the decision-malrer. After an extended discussion ofthe problems of accountability, the court suggested that the elected officials who devised the scheme provided a sufficient link between the eleetor- ate and the decision-maker, In the court's view: 'Should the people be dissatisfied with the accountability aspect',of 'the' engineered scheme which must necessarily transcend local boundaries, the onus is Upon the state's electorate, including the 10caUy affected voting population, to exercise lts political will.' fFN56] The accountability of the elected officials thus adequately safegnards representative democracy. Although it recogeizes that particular deci- sions by individUllI arbitrators remain insulated from the political process, the Michigan court's view minimizes the political' consequences of that fact. !FN571 Further, it tends to obscure the substantial policy issues implicit in the C 2011 Thomson Reuters. No Claim to Orig. US Gov, Works, ) , ' ) 6 INDRELLJ 481 Page 6 ' 6 Indus. ReI. L.1. 481 matter of accountability, Dissenting in Detroit Police Officers, Judge Levin Ihroefully delineates the theoretical basis of the delegation doctrine. Judge Levin '491 stlltes Illat the policy matter at stake is not simply the degree of control imposed on the decision-maker, but rather the integrity of the JIrechanism through which power is apportioned. He writes, A court reviewing a challenged delegation of legislative power should, we agree, examine whether ade- quate checks have been provided against arbitraIy or uncontrolled official action. Such an inqui1y cannot, however, supplant the basic inquiry whether the legislatively devised framework for official action- considered In its application-secures the fundamental goal of the delegation doctrine: preserving legislative responsibility for the detenninatio£ofpubljc policy. [FN58! cO, Thus, Judge Levin finds that accountability is a necessary element of any delegation, serving not so much to correct occasional aberrational rulinga as to ensure that the legislature and the electorate maintain control over the formulation of coberent policies. Regarding the statute UDder consideration, Judge Levin concludes that 'Act 312 arbitratlno is novel in that the policy-making power is dispersed among ad boc arbitrators, which prevents the emer- gen~ of visible and intelligible principles.' JJ::H22l. In the earlier case of Dearborn Fire Fighters, [FN60J Judge Levin rejected the contention tbat accountabillty could be sacrificed in order to attain finality and efficiency in dispute resolution. He asserted that maintenance of governmental processes should be the focal point of judicial inqui1y and that nO substantial diminution of electoral . power should he toleJ'!lled. He concluded, While delegation ofautbority to resolve the dispute to an independent outsider may resolve the immedi- ate crisi.'; and relieves the public employer and union officials of the need to justiJY the result, this'approach to legislative decision-making, precisely because it i.'; designed to insulate tha decision-making pro~ and the results from accoUDtebility within the political process, is not consonant with proper governance and is not an appropriate method for resolving legislative-political issues in a representative democracy. J:EIiQl.l Although Judge Levin's view reflects tha minority judicilll trend, it admnbrates concerns which are central to the theoretical framework ofpubJic negotiations and whicb must be addressed in a systam of dispute resolution. Binding interest arbitration necessarily invo!res queations concerning democratic values. Even though a majority of jurisdictions bave upheld binding arbitration, judicial opinions have shown considerable '492 sensitivity to the proper functioning of the political process. ~ In a system of dispute resolution that compramises the frame- work of democratic decision-making, the problem of inadequate accountebility will remain intractable for both Jeg- islatures and courts. Similar problems may also alise in the resolution of disputes through strikes. C. Public Slri/ws and the fuMic Imerest 1, Theoretical Considerations One of the most significant distinctions between private and public sector bargaining systems is the use of strikes as a means of impasse resolution. In the private sector, employees may freely apply economic sanctions against tha employer in order ro extract concessions . .!.fNru A weak employer will be forced to grant the conces- sions. On the other hand, a strong employer may pennanently replace the striking employees, [FN641 thereby fore- ing employee, who desire to !reep their jobs to accept tha employer's terms. Regardless of tha outcome, the terms and conditions of the contract are reached on a strictiy voluntary basis. In the public sector, employee and employer interests are not sharply delineated in an economic context. Public employers are primarily responsible for the delivery of services which are often not readily obtainable outside tha public sector, as in the cIISe of police and fire protection. These services are evaluated in terms of intangibles such as © 2011 TholUSon Reuters. No Claim to Orig. US Gov. Works. · . 6lNDRELLJ 481 Page 7 6 Indus. ReJ. L.1. 481 quality of service and public image rather than on profit-generation. As a 'servant' of the public, the public em- ployee is held 10 a different standard of conduct than that applied to the private sector worker. Consequently, in work stoppages, the economic consequences to both tbe public employer ·and employee may be secondary to the political consequences involved. The topic of public sector work stoppages has generated a substantial body of commentary exploring the rela- tionship between strike activity and the political process. The commenta!y is inconclu.,ive on the issue of whether public employees should be allowed to strike. Nevertheless, academic discussion has illuminated one major differ- ence between private and public bargaining: the political implications of public negotiations and impasse resolution. lnthe influential The Unions and the Citi •• , f!lN65] Professor.; Wellington and Winter propose the thesis that public sector strikes distort tbe *493 normal political process by focusing disproportionate pressure on public offi- cials. The Wellington-Winter argument holds tbat because strikes in public employment disrupt important services, a large part of a mayor's pOlitical con- stituency will, in many cases, press for a quick end to the strike with little concern fur the colli of settlement This is particularly so where the cost of settlement is borne by a different and larger political constitoency. the citizens of the state or nation. Since interest groups other than public employees, with conflicting claims on municipal government, do not, as a general proposition, have anything approaching the effectiveness of the strike-i)r at Icast cannot maintain that relative degree of power over the long run-tbey may be put at a sig- nificant competitive disadvantage in the political process. 1FN66] Thus, the argument continues, public sector unions do not suffer the same constraint!! as their private sector counterparts, in tbat the public strike will be promptly settled with no signficant economic S8llctloM against the un- ion membership. The strike weapon in public employment, therefOre, is qualitatively distinct from its function in the private sector. The Wellington-Winter theory hes been challenged on a number of grounds. An empirical study by Professors Burton and Krider J:ENQ1I suggests that effective market restraints on public employees do exist, such as the los. of wages, the threat of replacement, and public concern over possible tax increases. Moreover, it is clear that not aU governmental services are unavailable outside of the public BOOtor. Sanitation services, for example. are frequently provided by private contractor.;. A further argument in mvor of economic resolution of impasses is foal forcingJabor unions to rely on traditional political strategies such as lobbying can distort the political process by leading to cor- roption and patronage. Accordingly, Burton and Kridar conclude that [olur fleld work suggests that unions which bave actually helped their members either have made the strike threat a viable weapon despite. its illegality or bave intertwined patronage-political support arrange- ments. If this ssse,sment is correct, choice' of the No-Strike Model is likely to lead to patterns of decision making wbich wm subvert, if not the 'noimal' American political process, at least the political process which the Taylor Committee and Wellington and Winter meant to embrace. We would not argue that the misuse of political power will be eliminated by legalizing the strike; on balance, however, we believe that, in regard to most governmental functions, the Strike Model bas more virtues "494 than the No-Strike Medel. [FN68] The above discussion suggests two propositions essential to a theoretical analysis of public sector strikes. First, the inherent nature of public employment requires that focus be placed on the political consequences of strikes. ~ Second, no conclusive argument bas been offered which would justify probibiting all public sector strikes tmder all circwmrtances. lndeed, justiflcations edvanced in the past were, in many instances, dogmatic assertions aimed at preventing any form of public collective bargainiug. As one scholar nutes, [t]he predominant view during the first half of the century was that strikes were a fOrm of organized an- archy and, therefore, represented a direct assault on the sovereignty of government. Since strikes were viewed as a necessary component of any collective bargalning system, it followed that the collective hergainlng proc- ess was inappropriate for public employees. w.zm --- © 20 I I Thomson Rcuters. No Claim to Orig. US Gov. Works. () J 1 1 , ~ i .. ) 1 I 6 INDRELLJ 481 PageS 6 Indus. ReI. L.J. 481 . In contrast, contemporary scholarship tends to ragard strikes as. a viable option among the mechanisms for pnb- lic sector dispute resolution. fFN711 In one recent study, for example, the author concludes that 'the impact of strikes in the public sector bas not been sufficiently detrimental to the interests of the public to justilY the current presumption against their legality.' fFN721 He continues, [B]oth labor and management would benefit from the right to strike because it yields tbe billltera/ deter- mination of terms and conditions of employment. The importance of this outcome cannot be understated-De- spite the high costs of strikes relative to the direct costs of biTing an arbitrator to resolve interest disputes, few parties in the privale sector voluntarily agree to substitute interest arbitration fur the right tp strike, which in· dicates that the parties derive tremendous benefit from being able to determine their own future free from the unpredictable decisions of a",arbitrator. Assuming Iliat labor and management in the public sector,.!)"ve simi- lar preferences, each side would benefit from the right to strike because the ontcorne under a strike threal is a bilateral settlement that reflects the preferences and bargaining power of the • 4!1S parties. fFN731 The desirability of voluntary agreement as the product of nagotiation has also been emphasized by other au· thorities in the field: J:flrl!I In sum, pnblic sector strlkes involve a political component which distioguishes public sector bergaining from the private seclor. The arguments advanced both by WeJlingtori and Winter and by Burton and Krider claritY the relationship between public employee strike activity and the political system. Certainly every public sector strike does not result in imtnediate capitulation by the public employer, even when the strike involves an important service such as mass transportation. I!:1'l.m At the same time, an impasse-resolution mechanism ideally should Il£COmodste the potentiallY disproportionate application ofpoHtical power described by Wellington and Winter. Some states have chosen to allow designated public employees to strike. IEli1§1 The strike model adopted by Pennsylvania Is consid- ered as a viable example oCthe means by which public sector strikes can be anthorized and regulated 2. A Legislative Experiment In 1970, the Commonwealth of Pennsylvania enacted the Public Employee Relations Act (Act 195) L!'N11l which permits strikes by certain groups ofpubJic sector workers. The amendment ilIustratos. reasoned and balanced treatment of employee, employer, and public interests. Moreover, a number of public sector strikes have proven !bal the system is workable. Jl'NZJlJ hnpasse resolution under Act 195 Is based upon a series of mandatory steps. followed by several voluntary 0p- tions. The statute also incorporates explicit safeguards to prevent undue danger to the pnblic walfare. fPN791. The first step in impasse resolution is mediation, which the parties must invoke if an agreement has nnt been reached within a specified '496 period. J:EIiS!!l Mediation is initiated by writ1lOn notice 10 the Pennsylvania Bureau of Mediation. rrnn:J Once commenced, mediation continues as long as the parties are in disagreement After twenty days. J:B:lJll however. the Bureau of Mediation is required to RottIY the Pennsylvania Labor RelatiOllll Board Iilll!:il of the impasse. The Jloard may thereupon. in its discretion, appoint a. :iilctfinding panel empowered to conduct hearings and issue subpoenas. [FNS41 If the parties have not reached agreement during the filctfinding process, the factfinding panel will make rec- ommendations fur resolution of the impasse. The parties must accept or reject the recommendations witbin ten dsys, and must promptly notifY the board and each other of their choice. IE!'!llllfthe panel's reco!JllllOlldslions lire re- jected, the panel • shall publicize its findings of met and recommendations.' fFNII61 The parties are then given an additional ten·dsy period 10 reconsider tha recommendations. J:.E!:llll The fitilure of a party to submit to mediation or filctfinding procedures 'shall be deemed a refusal to bargain in good mith,' and is grounds for issuance of an un· fair-practice complaint. Ifl::!M] Nothing in the mandatory procedures precledes an agreement to submit the impasse to voluntary binding arbitration. ~ ©201l Thomson Reuters. No Claim to Orig. US Gov. Works. · . 6 INDRELLJ 48 J Page 9 6 Indus. ReI. 1.1. 481 Following exhaustion of the !1lllI1datory procedures, fE!::!2.Q1 disputes are governed by the strike clause. While generally permitting strikes, it prohibits strikes by guarda at prisons or mental hospitals Or by employees 'directly involved with and necessary to the functioning of the courts,' and prescribes appropriate actions in the event of such strikes. [FN91l Police and fire personnel, not speciflcaUy covered by Act 195, are granted collective bargaining lights by a separate statute.lfl!.26} These *497 workers are afforded a right to arbitrate bargaining irnpa.sses. [fN93] Provided that It is not explicitly prohibited and that mediation and factfinding have taken place, a strike 'shall not be prohibited unless or until such a strike creates a clear and present danger or threat to the health, safety or wel- fare of the public.' fFN94] A public employer who believes that this level has been reached may initiate an action for appropriate relief in tha jurisdiction's c;;:rrt of common pleas. [FN951 An injunction, however, will not iss~. simply because routine procedures have been disrupted ~ or because services cannot be furnished by the em- ployer. J:EH21l Furthermore, the strike must ac:tufIlly be in prograaa before an injunction will be issued. [FN981 The court typically will consider a number of factors in determining the merits of the action, including tha population percentage affected by the strike, the strike's interference with other statutorily mandated objectlves, nonstriker loss of wages, and potential and actual violence. fFN991lfthe strike is enjoined, the public employee's or the labor or- ganization's refusal to comply with the injunction may resuh in a varietY of sanctions for contempt. The employee . may be subject to discharge, a fine, or imprisonment, [FN 100 I and tha organization may be fined for each day it is in contempt fFN 10 I] In general, Act 195 serves to aceomodate the several interests that are affected by public negotiations. The Pennsylvania experience demonatrates that public sector strikes within the scope of municipal governance can be adequately regulated and can function effectively to resolve bargaining impaases. Nevertheless, the overwhebolng majoritY of states that permit public bargaining have rejected the strike as a means ofbopasse resolution. fFNI021 ) To the legislators in such siates public-employee work stoppages are simply unacceptable. Accordingly, the strike weapon in public negutlations must be appropriately circumscnbed in order to attaln any significant measure of sup- port. D. Evaluation ·and Summary As the foregoing analysis indicates, public-sector dispute resolution techniques exhibit certain obvious short- comingS: While some procedures *498 may perfurm more effectively in particular respects than do others, no single system has been widely adopted in bargaining legislation. Ideally, a resolution mechanism should avoid undue dis- ruption of and interference with necesaary community services. It should also protect against any 'chilling' or 'nar- cotic' effacts. fFN 1031 Finally, the mechanism should move parties toward realistic bargaining and volWltary set- tlements. Mediation to a certain degree satisfies the fmal criterion, assisting the parties to reach a voluntary settlement Also, because mediation is not binding, chilling and narcotic effuclS an: minimal. Mediation, however, has not proved to be a workable substitute for the strike weapon. [FN I 041 Further, mediation is most frequently successful in those situations where the parties are not in disagreement regarding substantive contract issues. !FN 1 05] Like mediation, f8ctfinding does not impose a binding decision on the parties, and therefore is not significant in preventing strikes. It may tend, however, to persuade parties of the essential correctoess of a given recommendation. Factfinding appears to have declined in popularity, thus indicating its undesirable quality as an impa.sse-resolution mechanism. fFN I 061 Arbitration has a better record of avoiding strikes than do other resolution procedures.· [FN I 071 Yet the features of arbitration which so effectively remove the strike incentive-availability, relative low cost, and finality-make arbitration an attractive diversion from genuine bargaining over difficult issues. There is a discernible tendency for C 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. .. ) 6lNDRBLLJ 481 Page 10 6 Indus. ReI. L.J.481 arbitration to chill bargalning and to induce a soporific bargaining environment. (fNI081 Consequently, arbitration does little to motivate parties 10 reach a vo1unfllry settlement; in fuct, it severely detracts from that dimension of the bargaining process. Althougb final-offer arbiiration may minimize these attribullls, it does not remove them. [FNJ091 '499 Arbitration is also unacceptable in terms oflegal and political the-ory: its delegation of legislative author- ity may be constitutionally invalid. Even if this hurdle is overcome, arbitration nevertheless removes important deci- sional processes from the dire<:t control of the electorate. rFN II 01 That consequence is in importsnt respects incom- patible with the notion ofa pluralistic democracy.illiUJl The option of sanction!",!> public se.ctor strikes as " mean, of dispute resolution has been util:;red in a minority of jurisdictions and bas attracted increasing support from commentators. [EN I 121 As in the private sector, tbe strike threat constitutes the most viable incentive to bargaining. [EN 113] Practical experience in one slate, at least, sug- gests that the strike option is feasible. . It must be recognized that public employment differs significantly from private-sector employment. Most im- portantly, determinations as to !he appropriate terms and conditions of employment are ultimately made by the dec- torate. Those determinations, involving such intangibles as the quality of community life, diffi:rentiate the individual as a participant in !he democratic process from the individual as a consumer of goods or services. Consequently, work stoppages by public employees evoke a response more complex than the economic self-interest which domi- nates indivldnals affected by • private sector strike. Accordingly, public sector impasse resolution procedures should accommodate the political implications of strikes as well as their economic impect. The model proposed in the next section does so. *500 III IMPASSE RESOLUTION THROUGH A REfERENDUM OR A STRIKE A. Submitting the Imp09se to the Eler:t01'ate: A Case Study qfLocoi858, International Association of Firefighters and the City of Denver, Colorado .In 1971, an amendment to lhe city cberter gave Denver fll1lfighters !he right to bargain collectively. The amended charter provided iliat employment bargaining impasses would be resolved through binding arbitration. This method was successfully used in 1975 to resolve a wage dispute between the City of Denver and Local 858, Interna- tional Association of Firefighters. Tbil arbitration panel in ilia! case awarded the firefighters a 9.5% pay increase, this validating the Union's belief in the fairness and efficiency of!he arbitration process. [FN 1141 The following year, the Colorado Supreme Court declared ilia! a binding arbitration ordinance in Greeley, Colo- rado, waa unconstitutional. [EN I 15) Accortiingly, Local 858 and the City of Denver discussed methods of impasse resolution to replace their own invalid contractual provision. Among the alternatives was a union proposal fFN1161 to submit impasses to a referendum of tbe electorate. The City of Englewood, Colorado. bed approved such a method in 1972, [EN1171 although it never used the procedure to resolve an impasse. [fNll81 The union's proposal was adopted. Following negotistions concerning election timing and procedures, the par- ties agreed that the relMmdum would be through special election. The specifics of the agreement provided that [u]pon!he requeSt of the employer or the so)e and exclusive agent of the firefighters, after publication of the advisory rect-fmder's report, and after the employer and the sole and exclusive agent ofilie *501 firefight- ers have had five (5) days to further negotiate the disputed issues, the final offers of!he employer and oftbe sole and exclusive agent of the firefighters on the issue. remaining unresolved shall each b. submitted as a1- @2011 Thomson Reuters. No Clabo to Orig. US Gov. Works. j j , ' I , 6 INDRBLLJ 481 Page 11 6 Indus, ReI. L.J. 481 temative single measures to a vote of the qualified electors of the City and County of Denver at a special elec- tion, The special election shall be held no later than August 3 I, The qualified electors shan select either the final offer of the employer or the final offer of the sole and IIKclusive agent ofth. firefighters, as presented to the advisory fact-finder, Issues agreed to during the five-day period shalI not be included in the final offer of the employer or of the sole and exclusive agent of the firefighters. The cost of such special elections shalf be borne by either the employer or the sole and exclusive agent of the firefighters, which ever refuses to accept -the recommendations of the advisory fact-finder. If both refuse, the costs shall be borne equally by the em- ployer and the sole and exclusive agent of the firefighters. [FNI191 In March 1981, the parties commenced negotiations for a labor agreement to become effective January 1, 1982, . A number of issues resulted in impasse, including the length of the fJrelighters' workweek, At the time, firefighters were scheduled on a 48-hour week w\1:h 'Kelly' days. The city proposed to extend the workweek to 56 hOU!'S under the so-called 'BerkeJey' system. [EN110J The union viewcd the city's position as aretrenchment whIch was'totany UJ:ulcceptable. [EN 121] The impasses proceeded to factfinding under the jurisdiction of a single impartial facttinder who had been se- lected by agreement. After five days of hearing, the faetfinder issued an award containing recommended resolutions of various issues. Regarding the workweek issue, he ruled that the city's proposal should be adopted. Tha asserted -justification for his ruling was that 'the hard core matters of managemeot of the fire suppression forces and the air· port subdivision trend heavily in favor of the Berkley [sic] plan.' IFNI221 The union's president said he was shocked and outraged at the hours ruling, IFNI231 He reportedly indicated 'little willingness to accept the recommendetions,' IFNI241 and indicated that it was 'highly ptobable' that !hernat· ter would be submitted to the electorate; the expense of this to the union was estimated at $175,000. [FN 1251ln con- trast, .the city was 'surprised and delighted with the recommendetions: [EN1261 and believed 'S02 that the city would have an advantage If the issue were placed before the electorste. [FNI27) The city publicly stated its intention to accept every recommendetion of the fuetfinder. IFN 1281. Local 858's membership voted 'overwhelmingly' to reject two recommendations made by the fa.tfinder, inClud- ing the ruling conceroing hours of work, and to exercise its right to an election. IFN129) Subsequently the election was scheduled for August 15, 1981. Framing the langoage to appear on the ballot regarding hours of work proved to be difficult. Tha union accused the city of misrepresenting facti> and of drafting submissions that were so compli- cated voters won~ understand them. [FN 130] The final form of the official ballot asked voters to select either the union's or the city's proposals. The work hours proposals appeared on the ballot as follows, as drafted by the union and the city, respectively: Firefighters in the fire suppression force shall work a work schedule consisting of twenty-four (24) hour shifts for an average work week of forty-eight (48) hours. This will be implemented by the' use of a three (3) platoon system with each firefighter working one (I) twenty-four (24) hour shift rolJowed by two (2) days off, with a 'KeUy' dey to be taken within each twenty-one (21) calendar day eycle. A 'Kelly' dey shall not be counted as a working shift for any purpose. Firefighters in the Suppression Force and Allport Subdivision shall be on duty based on a scheduling system commonly known as the Berkeley System, The Berkeley System consists of a nine (9) day dUly cycle in which the ftrst twenty-four (24) hour day (shift) is on duty, the second day is off duty, the third day is on duty, the rourth day is off duty, the fiftll day is on duty and the remaining sixth through ninth days are off dUly. This schedule is implemeDted by the use of a three (3) platoon system. Thus, the firefighter is on dUly for three (3) deys of each nine (9) day cycle or none (9) days in each twenty-seven (27) day period [FN 131 J The substantive issues of the dispute received considerable publicity duriog the campaign period, and public officials expressed their positionS .vigorously. The Mayor of Denver, for example, warned that the union's contract © 2011 TbOlllSOD Reuters. No Clsim to Orig. US Gov. Works. , (~~ .. ) \ j 6 INDRELU 481 Page 12 6 Indus. ReI. L.J. 481 delIllIDds would cost the taxpayers $2.5 million annually, and urged voters to support the city's contract pllln. ffN132] One Denver *503 newspaper supporting the city's position observed that Local 858 'appears to be stretch- ing Denverltes a bit too thin'; the editorial concluded, 'The outside arbiter's re<:ommendetions were sound and should have been adopted by bom sides in the fJISt place.' IFNI 33] And • group clllling itself 'Citizens ror Fiscal Responsibility' sponsored advertisements attacking the union, characterizing me union's bargaining demands "" 'an unmir and unreasonable burden on the city and Denver taxpayers,' [FN134] Local 858'. campaign consisted primarily of telephone contacts lIlld door-to-door cmvassing. Approximately 350 members actively perticipated in the campaign, eacb devoting approximately three or four days to campaign worle, On election day, SOme 200 firefighters perticipated in a final Cll1I1paign effort. fFN 1351 The eloctors!e voted to approve the final offer of Local 858, The concluding tally showed 22,519 votes in favor of !he union's proposal and 22,403 in favor of the city's proposaL [FN1361 According to Local 858'. president, the cost of the election W8ll deftayed Ihrough a two-year membership as- sessment of$15 per month. [FN 137) The assessment replaced $160,000 taken from the Local treasury to pay for the election. [FN1381 Thus, !he total cost of the election amounted to $360 per union member. In the Local's opinion, however, tbe benefit of retaining the shorter workweek clearly outweighed the effort and expense of the election. [FN1391 Besides fulfilling the Local's substantive goals, !he election gave the union a sense of strength and purpose. lhe election victory generated an increase in union perticipation and improved Moiale among union members, IFN 140J Conversely, an election loss would have had a deleterious effect on !he union and on the union's bargaining power relative to that of the city. [FN141 J Thus, the ell)ction alternative imposed substantial costs on and posed significant risks to the union. But, as the Local 858 example sbows, the referendum election was a viable option among impasse resolntion techniques. *504 B. The Riiferendum Model: A Specific Proposal The legislative framework for a proposed dispute resolution process (to be referred to as !he 'Referendum Model') is discussed below. The proposal incorporates various features of different impasse resolution processes, including the right to strike. Porpurposes of convenience, tlie existence of an administrative body CBoard')is postu-lated. . Step l. NotificatiOn, of Impasse. The perties engaged in public aector labor agreement negotiations are required to notiJY the Board of a bargniniog impasse. Notification is in the form ofa summary statement of the issues and the respective positions of the parties. If the parties cannot agree on the contents of the notification, each party may submit its own statement. Either party may declare an impasse. [FN 1421 Step :;, Mediation. Wi1hin ten days, the Board will appoint an official to mediate !he dispute at no cost to the porties. Alternatively, the perties may select and compensate !heir own mediator, upon the Board's epproval. The porties and the mediator have ten days in whicb to resolve the impasse. Following this period, the mediator will is- sue a written report to me Board. In its discretion, the Board may make the mediator's report public, [FN143] Step 3, Factfinding. If mediation is unsuccessful, the Board will direct tbe pertie, to engage in fuctfindlng. The Board will appoinl a factfmder who shall be compensated by the perties; !he Board may, in its discretion, appoint a factfinder jointiy requested by the parties, The factfmding process will include a bearing with the introduction of evidence, examination of witnesses, and argument, At the conclusion of the hearing, the factfinder will issue a writ- fen report resolving each area of impasse, supported by a statement of reasoniog, The report sball be made public. [FNl441 On a designated date no later than ten days following issuance of the report, the perties shan simultene- <02011 Thomson Reuters. No Claim 10 Orig. US Gov. Worles. j , ' I 6 INDRBLU 481 Page 13 6 Indus. ReI. L.J. 481 ously serve notice OIl the Board indicating acceptance or rejection of any or all of the findings. IFNI451 Following this, the parties shall have an additional five day period in which to engage in bargaining. Step 4. Referendum. If the employees' collective bargaining repres~ntative rejects and or all of the factfmder's recommendations, the "505 represenmtive may submit the impasse.to a referendum of the electorate. The choices on the ballot shall be the factfinder's recommendation on the issue and the proposal which the represenmtive submitted The cost ofthe election shall be borne by the representative, and the election commission may require adequate funds to be placed in escrow. Where both parties reject Ray or all of the fuctfinder's recommendations, the ballot choices· shall ha the positions . of the parties prior tofuctfindlng;·1lS contained in the mediator's report Alternatively, the parties may itlutuaJly agree to· the specific language of the ballot. [FNI46J In the event of a joint referendum. the cost of the election shall be shared equally between the employees' representative and the cmployer. Step 5. Strike. If the employer rejects any of the factfmder's recommendations; tbe labor organization shall be permitted to undertake a strike. provided it furnishes notice of its intent to do so at least ten days prior to the com- mencement of the action. Once 1he strike is in progress, the employer may petition the Board for an order declaring the strike to be an immediate and significant hazard to the public welfare, and ellioining the employees frOm further strike activity. If the employer obtains such an order, the fuctfinder's disposition of the hnpasse shall be hnple- meoted as tha terms of the labor agreement. [FN147J C, A Critical E~aluatio" of the Rqerendum Model On preliminary appraisal, certain objections might be directed toward the Referendum ModeL First, it might be contended that the cost of an election renders the Model hnpractlcal in many instances. particularly in a large city such as New York or Los Angeles or where the bargaining unit is statewide. [FN 148J Second, the Model might al- low public officials to manipulate the referendum process fur purposes of political aggrandizement, rather than em- ploy it for a legitimate collective-bargaining objective. Third, the Model ostensibly may not be conducive to the formulation of sound public pollcy. inasmuch as the electorate is *506 not capable of understanding and choosing among complex issues. of contract negotiations. Eacb of these points is considerad below. I. Election CrulS and Union Incentives to Bargain The Referendum Model forces a union which rejects a factfmder's award to make a substantial investment in the resolution process. For example, the cost of the Local 858 election was $160,000; the direct cost to each member was $360. In addition to monetary costs. the average union member donated approximately three to four days to campaign activity. [l'N149J These costs are not insumountable in a large state. A union could cooceivably afford an elaction in California. [FN ISOJ . Moreover, while the cost of an election can be predicted, the outcome of the election can not. The instrumentel- ity of the Model is highly attenuated In the case ofLeeal 858. for example. 117 votes out of 44,922 total votes cast would have reversed the election outcome. !FN 1511 Further, the consequences oflooing an election entall the risk of severe loss of morale and commitment WIthin the' bargaining unit. In view of the calculable immediate costs and the Incalculable but hnportant long-tenn ones, a small local union in a large city might, as a practical matter, be pre- cluded from seeking an election. However. this is more properly regarded as a strength of the Model than a weak- ness, Under the private sector strike model, union power is a function of such variables as 1he union's willingness to strike. the degree of unionization within the industry, the percentage of union members within the enterprise, and the size of the particular operation. [FN 1521 A union which lacks a sufficient measure of power will be deterred from <cioll Thomson Reuters, No Claim to Orig, US Gov, Works. \ ! · '. ) 6 INDRELlJ 481 Page 14 6 Indus. ReI. L.J. 481 undertaking a strike. One of the salient deficiencies of the public sector arbitration process as a means of impasse resolution is !bat It imposes no meaningful costs on the participants, and thereby treats dissimilar unions alike. The only expense in- volved in arbitration is payment of the arbitrator's fee and any incidental costs of the hearing. Legal representation may be an additional cost, but it i. not a requisite of arbitration. The most "507 serious risk incurred by either party is that its position wiD be rejected. Thus, it can be said with some justification thai a union loses nothing when it opts fur arbitration, and that a smaD, weak IncaJ stands to gain to the same extent as a large, strong one. fFNI53J The Referendum Model corrects the distortion of power inherent in the arbitration method. The union's ability to fund an .lecti"" and the willingness ofits members to do so are fairly comparable iP.the indicia ofumon strength that are significant in private-sector strike decisions. [FN1541 The public sector union is faced with a direct eco· nomic hardship in the expense of holding an election, and that hardship will be exacerbated if the election ends in defeat. Labor organizations in tlte private sector necessarily engage in a similar analysis of the costs and benefits of the strike weapon. Therefore, the public sector union operating under the Referendum Model will have 1IIe same incentives to engage in genUine bargaining as does its private sector counterpart under 1IIe pure strike model.' [FN1551 Thus, the Referendum Model will reflect the economic strength ofa local umon in an accurate fashion. That effect in and ofitselfrenders the Model superior to other impasseresolution methods now in existence. 2. ThI! Public Official's Perspective It can also be argued that the Referendum Model will lead to the abusive exercise of power by public official,. For example, an officeholder might refuse to bargain meaningfully with a weak local and thus provoke it into im· passe and mediation. The official could then rejeetthe mediator's award, regardless of whether or not it was equita. ble, and force the union either to strike or to yield to the employer's demands. In either event, the official's polltlcal furlunes would be eobenced through a putative solicitudc for the public fisc. One response is that a private sector union, if it is the significantly weaker party, is routinely subjected to such indignities by the employer. It ill well established that under the NLRA an employer" duty "S08 to bargain does not require tlte making of concessions. fFN I 56J Provided the employer bargains in good faith, [FN157J its legal obUga. tion is satisfied, and a weak umon must either accept the employer's offer or suffer the consequences of an unavail· ing strike. Public·sector unions logieaUy mould have no greater prntection or advantages. Furthennore, the Referendum Model militates against arbitrery employer conduct by means of political ac· countability. The union will presumably have an opportonlty to present its version of the dispute to the media lfit persuasively demonstrates that the responsible public official is acting in a capricious, demeaning and patentiy un· just manner toward public workers, the official can be punished through !he Model's election process or through general elections. Conversely, if it appears that tbe official has in fact acted in the best interests of the public, the official can be rewarded through public approbation. The Referendum Model assures a maximum of political ac· countability.and thus avoids a severe poliey shortcoming of the arbitration method. 3. Public Policy and IhI! Electorate Collective negotiations frequently involve issues of a sophisticated and complex nature, as the Denver FJre.. fighters work hours issue demonstrates. In public presentation, a difficult issue can be distorted to the advantage of. particular party or reduced to a simplistic and inaccurate level. fFNl581 Arguably, therefore, the public's choi"" might not be effective in terms of important poliey objectives. However, the Referendum Model does not significantly detract from the authority or responsibility of the bar· gaining parties to engage in meaningful decision·making. The strocture of the Model assures that poliey options wiU C 2011 Thomson Reuters. No Claim to Olig. US Gov. Works. I 6 INDRELLJ 481 Page 15 6 Indus. Rei. L.1.481 in the first instanctl be selected by the appropriate official. Only when there is a dispute of sufficient magnitude as to load to impasse will tbe public take part in the process. Accordingly, the election device serves primarily as a final check on decision-making, and not as a substitute for the myriad of functions performed by officials in shaping and directing policy during the formative stages. Second, on a more theoretical level, one essential premise of our political process is that 'an active and legiti- mate group in the population '509 can make itself heard effectively at some crucial slage in the process of decision.' [FN1591 Conceding WeIllngton and Winters' point that an organization ofpubJic workers ought not to wield a 'dis- proportionate' amount of power by means of strikes, [FN1601 there is nevertheless a political value in permitting workers to assert their claims in the democratic process. [FN16l] 'Ihatprocess, in filet, remains viable only through the reconciliation of confl::2ting interests. [FN162! ~. The Referendum Model adjusts the UIlSatisfilctory allocations of political power that inhere in the arbitration' model and the pure strike model, Impasse resolution through arbitration shields the public official from the power of the electorate. Similarly, a union potentially exercises an inordinate degree of pulitical power where it is permitted to strike without subslantial checks. Under the Referendum Model, the possibility of a strike can be conlroned in sig- nificant measure by the public employer. Thus, when a strike would be unduly harmfu~ the public official can oboose to accept the factfinder's award as the least destructive alternative, thercby preventing a powerful union from pursuing and attaining extreme demands by striking the relatively vulnerable employer. [FNI63] Finally, the Referendum Model will reinvigorate file democratic system on the state and local level. Although an election campaign under the Model will necessarily focus only on a limited number of issues, the broader Implica- tions of public employment will probably be addressed in public debate. Citizens will he motivated to participate by r_on of political and economic self-interest. The Referendum Model will serve to educate file electorate concern- ing public employment and wlll structure the relationship between the citizen and the public servant on a more inti- mate basis, a consequence that will inure to the larger public good. [FN 1641 '!lQ IV CONCLUSION The Referendum Model avoids the major obstacles confronting other impasse resolution procedures clU'l'entJy in effllct. It has, further, two positive attributes of importance to public-sector bargaining. First, it insures that negotis- tions will be conducted in a pragmatic, realistic environment where the parties have a genuine incentive to reach . agreement and where the risks of fiIiIing to do so are too substantial to he disregarded. Second, the procedure moti- vates citizens to take an active interest in matters of public employment, including a hroad range of issues beyond the merely ecooomic. It thus will enhance productivity and the quality of work in the public sector. Ultimately, of course, the efficacy of the Refereodum Model can be established only through prnctical experimentation, But ex- perience has already proved tbe weaknesses of present methods, and legislative innovation is necessary to develop more viable strategies. IE!'ll!ll. Assistant Professor, Department of Labor Studies, Pennsylvania State University. RA. Fort Lewis College, 1967; Ph.D., University of Colorado, 1972; J.D. University of Colorado, 1976. [FNrIl. Staff Attorney. Rocky Mountain District Joint Board, Amalgamated Clothing and Taxtile Workers, AFL- . CIO. B.A. University of New Hav"", 1972; J.D. University of Colorado, 1983. [FNll. For a study of union penetration in the public sector, see Burton, The Extent oleolleclive Bargaining in the Public Sector, in PUBLIC-SECTOR BARGAINING 1-43 (B. Aaron, 1. Grodin & J. Stem ods. 1979) [hereinafter cited as PUBLIC-SECTOR BARGAINING]. Cl20 11 Thomson Reuters. No Claim to Oligo US Gov. Works. I ' ' 1 () 6INDRELU 481 Page 16 6 lndrnl. RIll. L.J. 481 J:flill. The development of protective legislation is reviewed in Schneider, Public-Sedor Labar LeglslaJio1t-An Evolutionary Analysis, in PUBLIC-SECTOR BARGAINING, supra note I, at 191. [FN3J. 29 U.S.C. §§ 151-169 (976) [hereinafter referred to as the NLRAJ. Section 2(2) excludes 'any state Or po- litical subdivision thereof from the definition of 'employer.' 29 U.S.C. § 152(2) (1976). The provision is construed in NLRB v. Natural QlIS Util. Dis! .. 4Q2 U S. 600 097]). 1l:lli:J.. See, e.g., Detroitpolice Officers Ass'll. v, CitY of Detroil 391 Mich. 44, 214 N.W.2d 803 (1974) (state pr0- vision pertailring to scope of bargaining is patterned after federal law; fudernl interpretations are persuasive prete- denll!). . .... IB:ill. Compare, e.g., 29 U.S.C. § 1113 (]976) ('Nothing in this Ac~ except as specifically provided fur herein, shall be construed so as either to interfere with or impede or diminish in any way the right to strllre, or to affect the limita- tion Or quali£ications on that right') with IOWA CODE § 20.12 (] 977) ('It shall be unlawful for any public em- ployee or any employee organization, directly or indirectly, to induce, instigate, encourage, authorize, ratUY, or par- ticipate in a sIrib against any public employer.'). [FN6J. international Union. UAW-AFL Local 232 v. Wisconsin Employment RIllations Bd" 336 U S, 245 (1949), modified on other grounds, Machinists Loiise 76 v. Wisconsin Employment Relation,;; Bd .. 427 U.S. 132 (1976); DOrcby y. Kansas. 272 U.s, 306 (1226). Su generally Hlmslowe & Acierno, The Law and Theon' o(Strikes bv (Jovel'l7n1ent Emplol'des. 67 CORNELlcL,REY. 1055 (] 982). ) fFN71.29U.S.C. § 163(1976). IE!ial. NLRB v.Erie Resistor C9lJ) .. 373 U.S, 221 (j 963). f1'N91. Schneider, supra note 2, at 203 n.32, conclUdes that eight state. provide legisJative protection for strikes (Alaska, Hawaii, Minnesota, Montana, Oregon, Pennsylvania, Vermont and Wisconsin). Effective in April, 1984, Ohio will provide bargaining rights for broad categories of public wQrkers. The statute also affords employees right to strike, with the exception of certain designated groups. The Wxt of tbe statute is reprinted in 51 GOV'f EMPL.REL.REP. (BNA) 441 (Augll.9tlS, 1983). Illinois, in addition, Juis adopted legislation effective in 1984 al- lowing public employee bargaining. The legislation consists of two separate acta, one covering teachers and the other covering general groups of public workers. Each act is to be administered by its partiCular agency. With the exception of security personnel and workers in essential services. employees have a right to strike. See 51 GOV"!' EMPL.REL.REP. (BNA) 1954 (Oct. 3,1983). IENlQl. United f'ed'n ofPos\a1 Clerks_v. BlOlln!, 325 F.Supp. 879 (D.C. Cir.), qffd 404 U.S. 802 (971). lEMlll. For a review of impasse procedures on a state-by-smte basis, see Morris, The Role of Interest Arbitration in a Collective BargainingSyate"" 1 INDUS.REL.L.J. 427,456-78 (1976). ~. In the private sector, negotiation impasses are rarely submitted to arbitration. Where the procedure is util- ized, 'it functions within fairly narrow parameters} Grodin, Political Aspects of Public Sector Interest Arbitration, I . INDUS.REL.L.J. I, 6-7 (1976). Thus, the preferred method of private-sector hatgaining is based on consent rather than on the mandate of a disinterested ijldividual. [FNB]. E.g., Greeley Police Union v. City Council of Greeley, 191 Colo. 419, 553 P.2d 79il (]9761 (invalidatiJ\g a proviSion of a city charter providing for final and binding arbitration as a means of impasse resolution, on the basis @ 2011 Thomson Roulers. No Claim to Orig. US Gov. Works. ~ .' , . 1 6INDRELLJ 481 Page 17 6 Indus. ReI. L.J. 481 lhat the ordinance results in an unconslillllional delegation of legislative power). The cose is discussed i'lfra notes 4548 and accompanying text. IFN 141. One measurement of strike activity is the loss of working time. According to one authority, 'The total work- ing time lost due to strikes ... continues to range well below one half of one percent; the range in recent yem has heen hetween 0.14 and 0.37 percent.' T. KOCHAN, COLLECTIVE BARGAINING AND INDUSTRIAL RELA- TIONS 249 (1980). [¥N151. See ge""rally, Feume, Se/ecu4 Benefits and Costs of Compulsory Arbitration, 33 INDUS. &. LAB.REL.REV. 64 (1979). [¥N 161. Wilhout lho 1hreatened hardship oflhe strike, neither party will have much incentive to give anylhing away· in negotiations. And if one assumeS lhat the arbitrator will split lh. difference between opposing positiorul, lhe proc- ess will reward tbe obdurate, rather than those who modifY their positions during negotiations. Thus, while compul- sory arbitratioo can settle disputes, it can also undermine and supplant the bargaining process. Feigenbaum, Fina/ Offer Arbilration: Better Theory Than Practice, 14lNDUS. REL. 311, 312 097S1. l1'lil11. See Kochan, Dyriam/cs of Dispute Resa/lition in the Pub/ic Sector, in PUBLIC SECTOR BARGAINING, supra note I, at 177-182. . [¥NlS!. For example, Congress creared 1he Federal Mediation and Conciliation Service (FMCS), an independent federal agency, under Title II oflhe Labor Management Relations Act, 29 U.S,C. § 171 (1976). Through mediation, lhe agency aids in preventing and minimlzmg labor disputes affecting commerce, and will provide the services of a mediator to parties upon request State agencies may offer similar services. Se .. e.g., PA. STAT. ANN. tit. 43, § IlQ1.801 (purdon 1977-78). I [FNI91. W. SIMKIN, MEDIATION AND THE DYNAMICS OF COLLECTIVE BARGAINING 77 (1971). [FN20J. See fa: at 77-94. ~.fa: ot98·106. IB:Jm. T. KOCHAN, supra note 14, at.272. [FN23J. fa: at 283-84. I!'!'lW. T. Kochan, DUnamics of Dispute Resolution In the Public Sector, in PUBLlC-SECTOR BARGAINING, supra note I, at 179. ~. T. KOCHAN,supranote 14, at 293. [FN27J.]a: rFN28J. The experience in New York State indicates .that fact-finding, as a preliminary to arbitration, may result in substantial duplication of effort. Kochan, Dynamics of Dispute ResolutiOn, in PUBLIC-SECTOR BARGAINING, aupranote 1, at 183-85. [FN291. The extent to which. court will examine lhe merits of an' interest arbitratIon award is discussed in Grodin, © 2011 Tbolll5onReuters. No Claim to Orig. US Gov. Works. , . 6lNDRELLJ 481 Page 18 6 Indus. Ret 1.J. 481 Judicial Response to Public-8ectar Arbitration, in PUBLIC-SECTOR BARGAINING, supra note I, at 224, 24&- 253. See also Mor:rl.s, supra note II, at 492-94; Caso v. Coffey, 41 N.Y.2d 153, 359 N.E.2d 683 (1976), [FN301. T. KOCHAN, supra note 14, at 295. ~. Final-off'er arbitration is based upon the assumption that it wiR encourage realistic bargaining and limit the discretion of the arbitrator, For a detailed study of the systems in Pennsylvania, Michigan and Wisconsin, see J. STERN, FlNAL-OFFER ARBITRATION: THE EFFECTS ON PUBLIC SAFETY EMPLOYEE BARGAlNING (1975). [!'N:;'2J. Twin City Rapid Transit Co., 7 Lab.Arb. &; Dispute Res. 845, 85~'(McCoy, 1947), [FN331, F. ELKOURJ &; E. ELKOURJ, HOW ARBITRATION WORKS 745 (3d ed. 1972). [FN3~, See id at 749-96, [FN351. E.g., MICH. COMPo LAWS § 423.239 (1976), L!::!::illil. Fellille, supra note IS, at 65, [FN371.1d at 68-71. 1 [FN381. ~LRB v,Insurance Agents' [nt'1 Union, 361 U.S. 477 (1960). [FN39J. See, e.g., Feigenbaum, supra nota 16, at 312. [FN40 I. Feuille, supra note IS, at 73. J:.!:N!U. Horton, Arbitration, Arbitrators and the Public Interost, 28 IND. & LAB.REL.REV. 497,499 (1975). ~. See~ey Police Union v. City Council ofGre.ley. 191 Colo. 419.553 P.2d '190 (]976); Salt Lake City y, International Assn of Firefj~hters, 563 P,2d 786 (Utah. 1977); Siou, Falls y, Sioux Falls Firefighters, 89 S.D. 455, 234 N.W.2d35 (1975); Town ofBerlin v. Sanmquida, 98 L.R.R.M. (BNA) 3289 (Conn. Super. ct. 1978). [FN43J. See, Iii.g., fire figbters Union,Local 1186 v. Vallejo. 12 Cal.3d 608,526 P.2d 971.116 CaLRptr. 507, (1974); Biddeford y. Biddeford Teachers Ass'n. 304 A.2d 387 (Me. 1973); Arlington v. Board oJ Conciliation and Arbiu'lltion, 370 MasS. 769. 352 N.E.2d 914 (1976); .Richfield v. Local .. l'lo. 12.15...111t'l Ass'n of Fire fighters, 27§ N.W.2d 42 iMinn. 19791: Medfurd Fire fighters Ass'n v. Medford. 40 Qr.App. 519.595 P.2d 1268 (979); Warwick v, Warwick Regular firemen's AlIs'n. 106 R.I. 109.256 A.2d 206 (J969); Spokane v. Spokane Police Gvlld. 87 Wash.2d 457.553 P.2d l3.I6 (1976). IFN441. See, e.g., Amsterdam y, HeJsQy. 37 N,Y,2d 19,332 N.E.2d 290 (1975) (equal protection a!!acl< rejected); Buffalo v. New. York Stale Public Employment Relations Bd" 80 Mjsc,2d 74 L 363 N,Y.S.2d 896 (] 975) (due proc- ess attack rejected); Harney v. Russo. 435 Po. 183,255 A.2d 560 (]%9). [FN45J. J91 Colo. 419.553 P,2d 790 (976). ~. Id at 422. 553 P.2d a1793. C 2011 Thomson Reuters. No ClaIm to Orig. US Gov. Worn. 6 INDRELLJ 481 Page 19 6 Indus. Rei. L.J. 481 rnl~lI. COLO. CON ST. art. XXI. § 4. [FN48J. In City of Denver v. Denver Fh'efigbters Local No. 858, AFL-CIO, No. 81SC70, slip cp. (Colo. May 9, 1983), the Colorado Supreme Court recently reaffum<;d 1hat Greeley Poiice Union stends (or the proposition thai 'the ultimate responsibility for the establishmeni of ... terms and conditions of public employment ... are legisla- tive matlers, and the ultimate responsibility for the establishment of such terms must rest with elected officials.' IfMiH Salt Lake City v, l!llernatiol1!ll Ass'n ofFirefig!@rs.LQC!lls 1645,593,1654 and 2064. 563 P.2d 786 IUteh 1977). . ... , [FN50J.ld. al790. [FN5lJ. Se. also Sioux Falls v. Sioux Falls Firefighters, Local 814, 89 S,D. 455, 234 N.W.2d 35 (]975); Town of Berlin v.Santaguic!a 98 LR,R.M. (BNA) 3259 (COM, Super. Ct 1978). [FN521. 102 Wis.2d 14. 325 N.W.2d350 0982}. [FN53J. Id at 20-29, 325 N.W.2d.at 354-58. [FN54J.14 al30-31. 325 N.W.2d at 357'58. fFN55J. 408 Mich. 410. 294 N.W.2d 68 (l980). [FN56J. 14 at 477. 294 N.W.2d at 94. [fli~lJ, The opinion suggests that such insulation may actually be a virtue. It quotes approvingly from Richfield v . .b2C1il No. 1215, Inri Ass'n of8re Fighters 276 N,W.2d 42CMjnn. 19791. to the effilct that the )egi.Jaturemay have deliberately isolated the amitrators from public pressure to protect .tJieir ded .. ions from undue influence. City of De- troit y, Detroit Police Officers. 408 Mich. 410, 473 n.SS, 294 N.W.2d.6.~, 91 D.S5(980). (FN581. Detroit Polic.Officers, 408 Mich. aI 520. 294 N.W.2d all13 (Levin J" dissenting). fFN59J.1d al 522, 294 N,W.2dat 1l4.· J:.EN§!!l. 394 Mich. 229. 231 N.W.2d226 (1 975). [FN61J, Id. at 258.231 N.W,2d ill 236. ~. For a discussion of some of the political conceros which may alise from the arbitration process, see Grodin, supra nole 12. [FN63J. See, e.g.,.NLRB v. Mackay Radio & Tel. Co .. 304 U.S. 3.33 (938). fFN64). til. at 345. J:!:N.QfI. H. WELLINGTON & R. WINTER. JR., THE UNIONS AND THE CITIES (1971). © 2011 Thomson Reuters. No Claim to Orlg. US Gov. Wow. ) i I j ( ) 6INDRELU 481 Page 20 6 Indus. ReI. L.J. 481 J:Etl2Q]. Id. at 25. See also. Wellingtoo & Winter, The Limils ofColiectfw Bargaining In Public Empiayment, 78 YALE LJ. 1107 (1969). rFN67J. Burton & Knder. The Role and Consequences ofSlrlkes by Public Employees, 79 YALE L.J. 418 (1970). [FN681. Jd at 432. [FN691. Burton and Krider point out lliat 'any scheme which differentiates economic power from political power lIIces a perplexing definitlonall$k.' Jd. at 429. That assertion may bave some degree of validity insofilr as it per- tains to the exertion of preasure by a labor organization. Nevertheless, a functional distinction can be drawn between ~'lheindMduill .. a consumer of goods and services and as a citize.t:f~fllie m1Dlicipalily. As demonstrated by the case stody discussed, clti=s may in fuct place civic concerns above their own economic self-interest. See il1fra notes' 12741 and accompanying text. 1.f1:!1QJ .. Kochan, Dynamics of Dispute Resolution in the Public Sector, PUBLIC-SECTOR BARGAINING, supra note I, at 151. ffl'!1U See Id at 157-69 .. [FN721. Olson, The Use of/he Legal Right to Strike /n the Public Sector, in INDUS. REI.. RESEARCH ASSOC., PROCEEDINGS OF THE 1982 SPRING MEETING 494, 500 (E. Dennis ed. 1982), fEN11l. Jd. at 50 1 (emphasis in original). ffl!1'!]' See, e.g., Clark. A Discussion in INDUS. REL. RESEARCH ASSOC., PROCEEDINGS OF THE 1982 SPRING MEETING 508 (E. Dennis ed. 1982) '[l]fl were faced with the 1llsk of selecting one of [the] alternatives,l would unequlvocaUy favor granting all non-essential public employees the right to strike in lieu of mandating com- pulsory mbitration as the terminsl step of the bargaining process.' ~. See Hogler, The Rilfliorud Transportqtion District Strike and the Colol:!1do Labor. Peace Ad: A Stud ... in Public Sector Collective. Bargaining. 54 U.COLO.L.ReV. 203 (1983). lIl:!12J., See supra note 9 and accompanying text. I..Elfl1l PA. STAL ANN. tit. 43. § 1101.10] (pordon Supp. 1977-78). fFN78I. For an analysis of the statute and its upemon, see Decker, The Right to Strike for Pennsylvania's Public Employees-Jts Scope, Limits, and Ramf/icodonsfor the Public Employer, 17 DUQ.L.REV. 755 (1978-79). [FN79I. Any strike may be enjoined if it threatens the public health, safety or welfilre. See infra text accompanying notes 94-IO 1. [FN80). PA. STAT. ANN. tit. 43. § llOI.801 (Purdon Supp. 1977-78). Impasse procedures are triggered by the 'budget submission date.' Mediation must commance if an agreement has not been reached 150 days prior to that date. [FN82!.Jd at § 1101.802. © 2011 ThOlDl1on Reuters. No Claim to Orig. US Gov. Works. I j 6 !NDRELLJ 481 Page 21 6 Indus. Ret L.J. 481 ll'Ji!tll. The Board is an administrative oody legislatively authorized to implement Act 195 with the power to issue rules and regulations. Id. §§ J 101.501-11O 1.503. fFN84J.ld § 1101.802. ll'Ii82.l. Id § 1101.802(2). lEm2l. Jd § 11 01.802(2). IENru: Jd § 11 01.803(3). fFN8SJ.Jd § 1101.803. fFN89J.ld § 1l01.804. fPN90J. Exhaustion ls a necessary condition to a legally protected strike. If the condition is not satisfied, sanctions rnlU' be imposed against the labor organization and striking employees. United Tra!lsp. Union v. Southeastern Penn- sylwmi. Transp. Auth" 22 Pa.CoID!!1ow. 25. 347 A.2d509 CJ975). fFN9 JJ. PA. STAT. ANN. tit. 43, § 1101.1001 (purdon Supp. 1977-78). The public employer is required to Initiate an action 'for.apptopriate equitable relief including but not limited to injunctions.' fFN92J.ld §§ 217.1-217.1 O. fFN93J.ld § 1101.805. [FN94J.ld § 1101.1003. fFN95].ld rFN96J. See. •. g., Armstrong !;due. Ass'n. v. Armstrong School Dist" 5 Pa.Commw. 378, 291. A.2d 120 (1972). ID:!.211. See, e.g., Highland Sewer an\! Water Auth. v. Local Union 459. 676 Pa.D, & C.2d 564 (1973) (strike by . municipal water and sewage treatment employees). [FN981. See Commonwealth y. Ryall. 459 Fa. 148. 327 A.2d 351(974). [FN99J. Decker. supra note 78, at 766~7. and esses cited. [FNIOOI. PA. STAT ANN •. tit. 43, § 1101.1007 (purdoo Supp. 1977-78). [FNIOIJ.1d at § 1l01.1008 .. [FN I 021. See supra note 9 and accompanying text. fFNI 031. T. KOCHAN. supra note 14. at 291.92, Kochan advilllces five criteria for the evaluation of dlspute resolu- tion procedures, including the avoidance of strikes. ld. The procedW'O proposed here would pennit strikes whicb do ;,-- ©2011 Thomson Reuters. No Claim to Orig. US Gov. Works. ) j I .~ 1 ) 6INDRELtJ 481 Page 22 6 Indus. ReL Ll. 481 not involve subs1antial honn to the community. [ENI04]. In one study, for example, the author contends that a mediator's effectiveness deriveS in significant part from the mediator's ability to 'bluff' the parties Into a belief that their adversaries are desirous of a striJre. Byrnes, Mediator-Generated Pressure Tactics, 7 J. OF COLLECTIVE NEGOTIATIONS IN THE PUB. SECTOR 103 (1978). [FN J 051. S"" supra note 24 and accompanying text [EN I 061. 'Although the lIll\iority of state. that have enacted bargaining legislation still have f1lct!Indlng as an impor- tant part of their impasse· procedures -for nonunifimned servi();js, the bulk of the evidence suggests that it, effective- ness, both in avoiding strikes and in achieving settlements, has atrophied over time.' Kochan, DynamiCS of Dispute Resol'Ulion in the Public Sector, inPUBLIC-SECTOR BARGAINING, supra note l,at 183. [FN 1071. T. KOCHAN, supra note 14, at 295. [EN I 081. See mpra text accompanying note 40. [FN I 091. An01her approach which bas some popularity is to IimJt the arbitrator to the full endorsement of either party's last offer. Although this would appear to stimulate the parties to set forth their true final demands, it need not in fact elicit such bonesty. Each.side is bound to frame its last offer in the light of what it believes will be forthcom- ing from the other side. And indeed, the 'last offers' from both might be little different from their initial positions, placing the arbirrator in an untenable position if he wishes to issue an award which is most likely to provide the greatest HllSurance of the parties continuing in • good ongoing relationship. Additionally, the number of issues which traditionally constitute an impasse make a simple choice of one side's last offer by the arbitrator not only weighty but, mOre impor1antly, conduciVe to destruction rather thao improvement in the partie,' relationship. Such an ap- proach might more easily work If the choice were between positions preseated on one issue, but too few impasses are so simple. . Zack, lmpc.sses, Strikes, ami Resol'Ulions, in PUBLlC WORKERS AND PUBLlC UNIONS 120 (S. Zago,;a ed. 1972): . [FN II 01. See cases cited supra notes 44-62 and accompanying text. IFNI 1 I]. See mpra text accompanylng note 41. [FN 1121. See supra note 71 and accompanying text. [fNl13J. 'While strikes occur in only about two to three percent of all private sector negotiations, many of the re- maining paacefully negotiated contracts would not be reached in a timely fashion if it were not fot the threat of a striJre.' Olson, supra note 72, at 494 (footoote omitted). [FNI14J.lnterview with Ron MOeder, current President ofLocaI 858, IntematiooaI Assn of Firefighters, and memo ber of the union's negotiating team at pertinent times, in Denver, Coloredo (June 14, 1983) (hereinafter cited as Moeder Interview). [FN 1151. See supra note 13 and accoropanymg text. IFNI I§]. Moeder llllerview, supra note 114. The language of the proposal was framed by the attorneys representing Local 858. iO 20 II Thomson Renters. No Claim to Orig. US Oov. Works. 6 INDRELLJ 481 Page 23 6 Indus. ReI. LJ. 481 [FN 111J. The referendum process appears to heve originated in Englewood as an amendment to the city charter. It was proposed by the city and adopted by the voters. City M&.nager Andy McCowan stated 1hat the referendum is an effective method of avoiding strikes and is prererable to arbitration as a means of impasse resolution. McCowan observed, 'The most damaging aspects of binding arbitration I believe are twofold: one, it often makes fur unrealis- tic bargaining on the psrI of the unions since they have absolutely nothing to lose; and secondly, decisions o~ go far past wages and fringe benefits and get into areas preferably reserved for JOaIlllgement.' Andy McCowlln, Refer- endum Impasse Plan Works in Englewood, Colo .• g LAB.MGMT.REL. SERVICE NEWSLETTER 2·3 (June 1977). [FN 118]. According to McCowan, two impesses bave been resolved under the procedure without resort to an elec- tion. Id. at 2. . [FNI19]. DENVER, COLO. CHARTER art. C5.80-8 (1979). [FN120)' For explanations of the 'Kelly' and 'Berkeley' Systems see illfra text accompanyiog note 132. [FNI2Jl. Moeder Interview, supra nute 114. '~. Fact-Finding Recommendations, Denver Fire Fighters Local 858 and City and County of Denver 24 (1981) (Sembower, Footfinder). [FN1231. Denver Post, June 24,1981, at21, col. 5. fFN 1241. Rocky Mountain News, June 24, 1981, at 140, col. 2. [FN 1251. Denver POB, June 24, 1981, at 21, col. 5. [FNI26).ld June 23, 1981, at 13, col. I. [FN 1271. Id WhIle the basis for the city's belief Is not elaborated, the context of the article indicates that the city felt the fuctfinder's award would carry significant weight relative to public opinion. !FN1281.1d. June 25, 1981. at 3, col. 1. IFN 1291. Rocky Mountain'News, June 28,1981, at 15, col. 3. IFN130J. Denver Post, July 21, 1981, at II, col. I. Local President Moeder reportedly said, 'As a final insult ... the city's proposed ballot language was written without consulting the firefighters, despite the ill.ct we are paying for the Aug. 25 election.' Id. [FN 13lJ. OFFICIAL SAMPLE BALLOT (Special Municipal Election, CitY and County of Denver, August 25, 1981). [FNI32]. Denver Post, August 8, 1981, at2, col. 1. [FN133]. Rocky Mountain News, August 24, 1981, at 63, col. I. [FN134Ud, August 19,1981, at 83, co1.3. 020 II Thomson Reuters. No Claim to Orig,US Gov. Works. , I 6 INDRELLJ 481 Page 24 6 Indus. Ret L.J. 481 [EN 1351. Moeder Interview, supra note 114. [FNI3QJ. Denver POB!, August 26, 1981, at I, col. I. [EN 13 7J. Moeder Interview, 31qJ1'a note 114. [FN 138J. Prior to the election, the Denver Election Commission had required Local 858 to put up a $160,000 surety bond or estllbIish a cash escrow account. Denver Post, July 25,1981, a13, col. I. [FNI39J. Moederlnterview,supranote 114. [FN140J. Jd. Moeder pointed out that the Local also bad gained and demonstrated substantial expertise in political campaigning, a fact wbich appeared to bave made some impression on Council members. [FN142J. By allowing either party to declare an impasse and invoke the next stage of the process, the Model will enhance genuine bargaining prior to impasse. Once that threshold is passed, only mutUal agreement will prevant one party ftom progressing to the finaJ stllge. [FNI431. lithe Board detennines that disclosure would loed to a positive result, it may make the report public. The threat of disclosure might itself encoW"qge meaningfW bargaining. IFNI44J. At this stage of the procedure, public opinion will prove valuable to the parties in evaJuating furtber strate- gies. [EN 1451. The Model will generate maximum pressw-e on the parties by forcing both sides 10 reach a decision with- out knowledge of the adversary's decision. Rejection of the award by only one party automatically result. in grave risk or subsequent capitulation for that party. [FN I 4!iJ. By requiring a ballot submission consisting of respective positions as of impasse, the parties will be en- couraged to moderate their demands so as to gain some strategic edvantage in the evenl of a joint referendum. Like- wise, a mutual formulation of the ballot languqge might conceivably loed to resolution of the dispute. fFN147J. If the employer could successfully hall a work stoppqge with no effective sanctions for doing so, the strike weapon would be significantly vitiated. Consequently, the Model provides a substantial disincentive fur the em- ployer to seek an injunction. [FNI481. See, e.g., HAWAII REV, STAT. § 89=6 (Repl. Vol. 1976 & Supp. 19&2), which states, 'All employees lbroughout the State within any of the following categories sball constitute an appropriste bargaining unit,' and then continues to list thirteen occupational groups. Likewise, there may be unique circumstances obtaining in the federal sector. Where the bargaining unit is nationwide, bowever, the Model could apply to it as feasibly as to a state-wide model. See irlfra nole 150. Moreover, in a situation sucb as the Air Traffic Controller's dispute, the Model arguably would have provided a result superior to that reached in the actual case. [fN149J. Moederinterview,suprooote 114. [fN150J. The administrative cost of a statewide referendum in California is $15,000,000, Legislature v. Deuk.- mejian, 34 Cal.3d 658. 194 Cal.Rptr. 781. 659 P.2d 17 (1983). There are 31,989 employees in California's largest © 2011 Thomson Reuters. No Claim to Orig. US Gov. Works. 6 INDRELLJ 481 Page 25 6 Indus. ReI. L.J. 481 bargaining unlt. 3 CAL. PUB. EMP. REL. SPECIAL REPORTING SERIES NO. 17 (July 10, 1981). Each em· ployee would thus have to pay $467. Alternatively, if the union, California Stille Employees Association (CSEA), created an 'election fund' similar to a 'strike fund' in the private sector, and the entire union membership contrib· uted, the cost would be only about $163 fur each of the union's 91,792 members. This membership figure was ob- tained in a telephone interview with Larry Bauman, CommunicatlOllS Specialist, California Stille Employees Asso- ciation, Sacramento, California. (fNI 5 1]. See supra text accompanying hole 138. [fN] 521. T. KOCHA..'1, JlqJrannte 14, at 317·24. (FN1531. Clark, slqJra note 74, at 508, observes of the arbitration process that'its very availability tends tomult in its over-usage.' He continues that arbltratlon awards necessarily have a broader impact than their effect on the im- mediate parties. [fN1541. For a general discussion of strike costs to a unlon, see D. DILTS & C. DEITSCH, LABOR RELATIONS 140-142 (1983). IFN 1551. Wellington and Winter argue than an important difference between private and public-sector strikes is duration. Because the latter interrupnervices to the community, they will be settled more quickly than the funner. TlIwI, public sector strikes are not restrained by the 'unemployment trade-off.' See H. WELLINGTON & R. WIN· TBR, JR., supra note 65, at 25-26. The cost of an election to each member of a labor organizatlon under the Refer- endum Model will vary according to the totslmembership. In some cases, the election option will fairly approximete the economic losses incurred in a protracted work stoppage, !FNI56J. Section 8(d) of the NLRA specifically provides that the obligation to bargain collectively 'does not compel either a party to agree to a proposal or require the making of a concession ••. .' 29 U.S,C, § 158(d} (1976). Ike gen- erally I THE DEVELOPING LABOR LAW 553-58 (C. Morris, ed. 1983). [pN 1571. See 1 THE DBVELOPING LABOR LAW, JlqJfa note 156, at 570-606. [FNI58J. For example, the newspaper advertisement of the 'Citizens fur Fiscal Responsibility' (CPR) characterized the dispute strictly in tenns of economics. With no explanation of its data, the CPR concluded that the cost of the Union's plan to the taxpayer would amount to $2.5 million per year. It urged the citizen 'to vote to save $2.5 miUion lUUlually.' There was no discussion of the unique working conditions in frreflghting. Rocky Mountain News, supra note 136, page 1. [pN159J. R. DAHL. A PREFACE TO DEMOCRATIC THEORY 145 (1956). !FN160J. The pelitic.l theory relied upon by Wellington and Winter is that expressed by Dahl, id, transposed to the eollective bargaining context Their assertion that publlc sector strikes provide unions with Ii 'disproportionate share of effective power in the process of decision' is an inference drawn from Dahl's framework. See H. WELLINGTON & R. WINTER, JR., supra note 65, at 24-29. [FNI61l. Dahl observes, 'The fundamental axiom in the theory and prectice of American pluralism is, I believe, tbis: Instead of. single center of sovereign power there must be multiple centers of power, none of which is or can be wholly sovereign.' R. DAHL, PLURALIST DEMOCRACY IN THE UNITED STATES: CONFLICT AND CONSENT 24 (1967). 02011 Thomson Reuters. No Claim to Orig. US Gov. Works. ) 6INDRELLJ 4&1 . Page26 6 Indus. ReI. LJ. 4&1 fFN1621. Jd Dahl contends that 'conlltant negotiations among diffetent centers of power are necessary refine· and 'perfect methods of conflict resolution.' 1FN 163). Arguably, the employer may be afforded some tactical adventage by retaining control over tbe strike weapon. See Gallagher, The Use of Interest Arbitration in the Public Sector, INDUS. REL. RESEARCH ASSOC., PROCEEDINGS OF THE 1982 SPruNG MEETING, supra nate 72, at SOl, 506-507. However, under the Refuren- dum Model, the union is afforded the choice of an election, thereby minimizing any power accruing to the employer by virtue of its slrikelno-strike option. rPN 164), Se.e Macy, The Role of Bargaining In the Public Service, in PUBLIC WORKERS AND PUBLIC UN· IONS 5, supra note 109. . ... , 6 Indus. ReI. LJ. 481 END OF DOCUMENT C 2011 Thomson Reuters. No Claim to Orig. t.:S Gov. Works, 1 ] J '. I i ] l , ... ~ I ATrACHMENT 2 Public Employment: Mediation, Fact Finding and Arbitration by William B.. Gould Blue flu rages; walkouts are becoming more popul'lJ" with teachers, zookeepers, sanitation men •••• It It Is Inapproprlatefor . the 8.6 mlll\2.n persons In the public employ 10 rely on the stn ke, ilien mediation, foot findIng and arbllralion must be used to the best possible advantage. As a start, legislatures will have to provide for a greater measure 01 finality in ilie lact-flndlng and arbitration processes, andl outslde the colleo1lve bargaining arena, traditional meiliods 01 financing local govemment must be replaced_ FOR THE PAST lour year. pubH~ employees throughout the country have demonstrated their dissatisfaction with existing employment conditions in unmistakably clear terms,., Whether it has been the "blue Hu" ohsene •• of De- trv"it policemen, the refusal of New York City :iianitation workers to ratify agreements negotiated by their leader· ship, IllB.ss resignatiQl18 "by New York City achool teaohers, or walkouts by Atlanta firemen and Miehlgan zookeep. er~ the message ia clear. The ~ignifi. canoo of thia upheaval lies in the .tatis· tics: Thera are now 8.5 IllUlion work~ ers employed by state, county and local go~e.rrunents, with another 4 million eatimated to join their nmhl by 1975_ The American Feder"ation of State, County and Municipal Employees' -membership has increased hy 66 per cent ainc. 1959-and hoth the Na- tional Ed.ucation Auoclation and the American Federation of Teachera have enjoyed comparable success. In the sleeping giant of federal employment (wher. the .trihl weapon is still pun, ishahl .... felOllY) urrlons DoW hold exclusive representation rights for ~5 per cent of the entire work foroe.· It i. the right 0/. public employees to .trike that has heen the. center of dis- cussion thus far,1 But the factors which give rise to the increased reliance' upon the slnke weapon by pu!illc employ ... ba vc received less attention. Probably nothing has been hOld to be more ,o, spansihle for today!s turmoil than the disparity in economic benefits that is said to. exiat between privato and pub- lic employees. Unions in th& private sector ha.ve negotiated a hoat of atira¢oo ti« wage and fringe-benefit packages for their incIeasingly aJIluent :mcmber- ship. It is an understatement to s.y that public workers are no. longer thought to. have a monopo.ly on employ~~tse~ emily.' All 01 .. thia i. accentuated by HeinOnHne -~ 55 A.B.A. J. 835 1969 • the inflationary spiral u..! ~ontinlles, On tho other hand~ many puhlic em- ploy_ have received .ehstantial-,in SOIne instances? a.stronomical-wage .... inereas€s in recent years.-In 1967, Pro« f."or George Taylor-fath., of New York'a Taylor Law-<:hallenged the a,· sumption that aU public employees are relatively underpaid: . It may he thet the widespread belis! that government employees are under- paid relates primarily to' ocCuplltional categories, espcclilly those lor which that, are no oount61'parts in the pri· vale sectOI. School teachers, policemen and firemen, and welfare wo.t:kers whO' have been m6st milita:ut seem w iall in this category. There is an ohvious need for more information to enable onc to appraise the :results o£ using oompaia.- . ble wage criteria.s One might note that teachers appear to bo paid more than their private counterparts. (Of Cl)Urse, working conditions in the private schools are often better.) In any event, public workers ~em to believe that 'they are behind-and this 10 more imPortlllit E.j)ITORl Non! This a:rticle is Dased on a paper which the author delheted at ~ Tltir~ teenth· Annual LabI1t Management C{jnie:r~ enct: ~t the UnivCT$ity of Iowa on May 7f 1969. . I. See. ror lnstancili, Guul4. Managlfi-K J!mel'geney Strikes, The New Uad,er, March 14. 1966 at : Kheel. Report to Spea.keJ' An- thony J. Tr«vla 911 the TaY](lT Law: With a ProI!osed Plan To Pie-vellt Strikes by Pu,hlic W()rkers -<Fehmary 211 1968); Mo.tria, Public Policy in. the Low Relating lei Col1~ ave Bsrgaining il'i tlu: Pu.blW Set*e. 22 SW. L. J 585 (1968); ,ee generally Ross, 'f1ws15 Newly Militant GfWf:rnment TriJrkerQ. FORTt.'liE. AIlgUSt, 1968, at 104-. 2, See Collective Bargaining in the PuLlic. Sector: .An Interim Report (ptepared fur Executive Board. AFt-CIO Maritime .Trade<! Department, Feh:ruary 13, 19(9). 3. TnYUlr, Strike!:! in Puulic Ewployment 8, addrCQ presented at ~rUer~e held by New York State SebGol of Ind'wrtriill Ilud" Labor Relations, Cornell Univenrity, in 'New York City, on November 15, 1967; c/_ Taylor, PubUc Employment St1~kes or PrGCtWts?, 20 !Nn. & LAs. !IEL. Rxv. 617 (1!l67l •• September, 1969 • Volume 55 835 Publ!" Employment than the ""tud f.c~ Also, it needs to b. pointed out that, generally speaking, experienced workers in the puhlic sec- tOr are behind-and this is where one finds the political wallop in the unioIll!. • Public Employees L:eamlng from the New Prolesl TacHes Another'reason for current unr~t is that public employees are learning from the tactics used by othera. Not only are the number of private em.· ployee stoppages in whiCh: the rank and file . reject the leadership'. negotiated settlement on the upswing, but there are glOWing numbers of people who use methods of protest and n direct ac- tionn, Civil righUl .actmRts ha.ve been successful in achieving some of their oQjer..tlves through demonstrations .• Some critics of the Vietnamese war Lave fonowed the same road. And cur- rently student rchelliolU seem' to know no hound~?th in tactics used and objecth'ell which are sought. In .part, lInyway~ public workers are responding to a general growing disrespect for au- thority. These are not times in which l'the king can do no wrong", Antistrike laws hav~ not -seemed to persuade peo- ple not to strike.' The rn.tahillty that flows from multiunion bargaining with the public employer doe. not seem to haye helped matters any.6 Finally, in public education, we wit- ness the ~owing number oj male teacher-s willi families to eupport.1 Few . opportllDities eXist for Pl'Oll1otion iuto the administrative jobs. Besides un~ preoedented Ml.:ry demands, the , .. nit is a preoccupation with poUey matters that the teacher regards .as witbin hia competen<;e as a. professional. As (lne &uperinttn~ent told me: "Moat teachers . in the school helieve that they can do my joh hetter thsn me-and m.ybe they can. But that attitude doean ~ , m~e for harmony." If the problems of tho public em· plo'ymcnt relationship are great and the strike weapon inappropriate (or ]&\S appropriate than in the private sectox) t 'varioua forms of thl:rd~party intervention Illay'-ftllgge.st themselves as 11 means to resolve the impasse-the is-. sues on which the parties are dead .. locked while negotjating a new colIoo- tive-bargaining agreement. But 6uch procedures should be rOIled on as • last resort, when collective hargaining avenues have heen exhausted, for the parties understand their own prohlelD8 better than anyone elsa.. It is they who mus~ live with what is negotiated at the .bargaining t.ah1e. Moreover, one cannot expect third· party ir:.tervention to he any' kind of panacea-indeed, it may sometimes he' the exact opposite. Unions and public employers act wisely and reap~nsihly when they strive to avoid «(outsiders" through dealing with their own prob .. lems and relying on their own abilities", . OJ the three approaches Ii:> imp ... e resolution, mediation is the moot tried .. nd reliable. The skilled mediator can use hie ~lneutral" position to good ad: vantage' in Qifering' sllggestiona and proposals for compromises that are hoth practical and "face saving" for the parties. He may he of assistance ui getting tho !acts straight concerning the issues in' dispute. The requisite insigbte caD he ob- tained hy gaining the confidence of the parties in informal oH-the-rec(jfd di.- cossion. and by meeting with both sides aepnrately. But a good' mediator i. only able 10 ope, ate successfully. if he obtains the parties' trUst, so that neither side believes that the mediator is the conduit for passing vruuahle se- crets and bargaining edvantages to the other Bide of the table. The Federal Mediation and Concili- ation Service has: provided much ex~ pert assistance in the p:dvate sector. In the publle seetor, the New York Public Employment Relations Board has u .. d ad hoc mediatol'B who are .not em~ ployed on a full·time bam with gov- ernment In MichigDll, the Labo, Me- diation Board relies on its -full-time .taH for both private and public em· ployee disputes. But the success potentia.l for negotia- tion "' seriously limited hy two factors. The fitst is that in these troubled times agenci .. b'ke the Michigan Labor Mo- diation Board cannot place mediators. in all of the truuble "po_particularly 836 American Bar ·AssoclaUonJournal HeinOnlin< .-55 A.ll.A. J. 836 1969 when school oontracts are all heing ne- gotiated in August and September. The reuson is an inadequate budget which res~lts in unrealistic limitations on the amount of mediation ataH to be hired and a dtsinclination to,hue ad hoe me- diators for the "busy season". Fro com. plain ahout strikes without providing furuls with whieb to pay mediator. de· nes COIl'llJlon sense. Second, mediation cannot achieve anything if the parties refuse to budge from their respective positions. The hest of mediators cannot unsnarl recal- citrant pa.rties. and untractahle issues. And unIortu.nately in Michigan "[i]n the crisis bargaining atmosphere of the education ar~ experienee showed par· tiee holding back eettlement offers from the me-diator for use heiore the fact-linder. This procedure inhihited mediatora' elforla and resulted in an inordinately high nwnber of di.putes suhmitted to f.ct finding. Both em- ployer and. union recalcitranee to meet during the suI11l'ri.er vacation period re· 5lllted in uieis bargaining for teaehers' contracts. "8 It is interesting to note that in WiscoIl6in, where, unlike. Michi· gan, the partie. ohare the costs of fact finding, unions and puhlic employers are not nearly ~o addlcted to Using the fact 6nder.9 . .If Mediation Faile, Then Whal? If mediation faiTs, how is the puhlie interest in uninterrupted aervicea to he protected? . A number 01 jutisdictions have en' acted statut.. which provide for fact finding with recommendations to 4. Most recentlY1 ~mI iights de'monatralors in 1I0MEl inetancea .have ecimbin-ed eil()rtQ with thE! labor oninn lendflTs to ~U:i!li!'t the organiza· tion or ntinodtygroup workers. See W-Q!)Wn, 14 Ri8n-u. Lead6rs Supprltt Strik.tl'T.$, The New' York Times, April 211 1969, at 29. 5. See Goldberg LaLnrMal6agement Rf1/n· tions Laws in Public Sermco, 91 M01fTllLY LAs. REV. 48 (1968). 6, See Gray, The City Untona Need One Bargujning Tahle, The New Yo:rk Time"l De· cWllbtlr 16, ]967, at 40, (l01. 2. 7. See Dom:Ji'IY & OBERER, TJo::1.CHEBS,· Senoot. BoAJU)s, .AliD COLLECT:l.'Vi3 DAl't~AlNENQ (1967).· . 8. AliNUU REpORT OF DEPARTMENT OF L.UOR STAn: OT MICltIG/Hf FOR 1967-68., 75- 76. 1 ... 9.-800 StfIIl, The Wisconsin PuhGk Em- ployee FIJijj-.FimlJ,,~ Procedure, 20 I!fl) •. & L.B. Rn. REv. 3 (1966). 1 I achieve resolution of impasse~ 10 Faet finding retains the principle of volun~ taryism since it does not bind the dis- putan ... The Taft.Haxtley Act emer· gency dispute, provisions do Dot give that . ,tatute', faci·finding hoard the power to make -recommendations.l~ The idea that compulsion hnpo~d upon the parties by puhlic.' reaction WIlS cousistent with voluntaryism and would prodUce settletnents enoouraged Serntlor Talt to advooale giving the board the aut}lonty to make recomM mendllli.ona~1_~._,~.~ _____ .. The most prominent rationale for Ihis process .is llie one advanced by the 1966 Taylor Report, Factrfinding 'tequirf'-s the parties to gather ohjective information and to present arguments with references to these data, An unsuhstantiated or ex~ treme demand from either party tends to loee its forW and status in 1ma forum.-The fnct.futding iepori and reo- ommendations provide 11 .basis to in~ form -and crystallize thoughtful pubJie opicion an-d news media commenr. Such reports and tecotnmendationS have a special relevance when the pubLio's business is involved. The public has a special right· to bo in .. formed on the issucs, content and met~ its Elf disputes lnvolvjng public employ~ ees.13 Thus, if one looks to the Taylor Re- port fur guidance, laet finding is an ex~ excise in rationality, i careful comUder~ ation of the issues on their meri1:!t---as dieting\lished nom their resolution through hrute economic Iorce. Presutn· o1>ly the public interest-•• r.eflected in both noninflationary settlements and some bridle on ~ neoeaaity to lay nilw' taxes in order to nnnnce the aettle:n:ielit -ehould he considered' in' the proctli!B~ But the problem is that the parties are not always interested in availabil- ity of good logical argument. to sup· port their po,utiona·-Olld ",dly enough, the same can often be said of the public itself. Indeed~ newapapers and television stations sometimes re- fuse to report the recommendations. This may he altributahl6 to the editor's viel'1( of what is newsworthy and, in some cf}}run~nities, the fad: that the me4ia -disagree with the fact finderts "~_conelusions. -Thust fact finding, at least in certain circumstances, may he sub- lIIantiaUy different from the judicial proceeding that is envisioned. by the Taylor Report. My experien"" is thet the "un~tlbsta.ntiatedU or t'extrelOOH position does'not necessarily I.'. •. lose, its force and "atu. in this [faot·find. iug] forum". The fa.ct that some unio.os and public .members are interested in an old-fashioned practical "bargaining" -and seem insistent upon it'tc<Jrporat. ing this prefertmce ~tO: the fact~linding process-indicates that the chllJ:scteri .. tics of foct·finding will not he p .... ly judicial. For, if one assumes tha.t fact finding is intended to f!lerVe in lieu of the strike, then the fact finder's ability to get the parties together without eco- nomic warfare is to he a large measure of hi. succ ..... Therefore, the accepta· bility of the fact linder's recommend.· . tion i, an appropriate goal, but the .rec. ommendation should also he the mo.t practicable and equitable alll!Wer-lllld these three elements: ere not always synonytrtous with one another. In New York. the Taylor Law pro· videa that faiiure to reach agreement as of sixty -days prior to the hudget ~miseion date constitutes an imperese, end the fact finder'. report IIIIl!!t he . submitted twenty da}'!! hofore the budget sublllis!aion dato.14 Theoreti- cally. th:m timetable is most ·condudve to the calm, delihttrate setting whicli IS so important to "the judicial process, But in Michigan, no timetable for fact finding exists. The result _i!, often !(in·· stant fact tindit1g", wherehr the fact finder-must' devise a settlement whiCh gets llic alre.dy .• triking workers hack on the joh.15 Is the Fact Finder a Judge or a Mediator? Is ilie fact finder's poSition, then. that of a judge or arhitrator, who makes a detorlnination predica.ted upon purely objective criteria? Or is he. more akin to the mediator, whose fWlC- tion is to he acceptable to the parties '0 that he may bring them together on an amicable basis? . It is easy to sec that the weight given to eithei 01 tit ... IuncuoUK ~a.y depend on the statutory timetable or lack. 01 one. , ..... __ Chairman Rubert Howle!! of the Hein0111ine 55 A.BA.I. 837 1969 Public Employment WIlliam B. Gould Is a professor of law at Wayne State University LaW School in Detroit. He was engaged in the private practice 01 labor law be· fore teaching and has served as fact· finder and mediator in public employ· ment labor dIsputes in both Michigan and New York. From 1961 to 1962 he was assistanf general counsel for the United Automobile Workers, and from 1963 to 1.965 ha was an attorney for the National Labor Relations Board. Mr. Gould was educated at the Uni- versity of Rhode Island (A.B. 1958) . and Cornell Law Scnool (LL.B.-19B1) and studied comparative labor law at the London School of Economics (1962-1963). Michigan Labor Mediati~n Board h ... recently expressed hi. board'. hostility toward medIation efforts by fact fin· ders: 10. S'etl, !or -instance, CONN. GEN. S'rAT. ANN. tit. 31. § rn·10I et seq. 0960,; MAss. GE~. LAws ANN, ch. 15A. § 1 et seq. (195B) ; .Mr<il1. MAT. !.r;N. tit. 17~ § lUi fit seq. (l96(j); N. Y. Crm SEl<'/lCIl LAw § 205 (Mc.Kinney PUpp. 1%7); WIt. STAT. ANN. oh. lII, ! l1l.O1 .... q_ (l9S7). 11. The emergency disputes Ptmisions ate !}(lDtained in 61 Stat. 141 (1947), 29 U.S.c. 111S7,206·21U (1958). . 12. S. 249. Slat Cong., 1st. Sess. (1!li)9) , 18. GOV!JtNOftIS COM1lllTIEE O:!i PUBLIC EMI'WY2E RnJ.ATlONS 53 CMlUch 31; 19(6). 14. 288 GERR F.5 (March 17. 1969l. 15. CJ. AllEN, 1967 SCHOOL DTSPUTES Ui MiCHtGAN (1968) 'and SCltMlD'rL, Onsr.nvlv noNS ON 'l'BE PROCESS OF F.ACT~J:llN!lINC Iff MIClOCAN PUBLlC EOUCATlON 'TEACJ::iJsR· ScUOOL BOAJ\b ConttAG'l' DL'.II'UTE!J IN PUBLtC EMnOYER_ ORG.\.NJU.TION ,n.o BAR- CAnlINC: A REPORT ON TIn: JOINT CoNrea~ IilVt.:E Ol<' 'i'tUI AssoctATiON (g L..l:&<m MEw- rlOIi AC&NClb5 AND THE NATIONAl.-AS69ciA~ 'I'lO!1 OF STATE l.t:I1oo REU110:t<"'S ACENClES (196ll). September, 1969 • Volume 55 837 Publlo EmplQymenf This [mediation by-hct~finder5J, we' decided; WW5 a D.rlsta.ke. "In 1968. we, in· structed' our bet-finders to he judges., not mediatorj. 'We do-DOt nIle out an l'ip chambers" settlement if it -appears p."lhle. lA Au_tl September, 1968, our ract~ii-nders, pl:lI'ticularly thilllc with collective bargaining expeIience, were Dot always' obedient to our instructions. They pref~rred to mediate. Some of the hargaining tC/UDS preferred it that way,16 In my judgment, the fact· finding ,prooe .. nece..arily partakes of hoth Iho niediatory lllliJudicial discipline •• While the proces& 18 a. fluid one ahout wbich the drawing of hard and fast 1inea is still an audacious !Iet,' I am oonvincQd ,that Chairman Howlett'. -analogy to '~in chambers" settlements :is a good one. For it Se6lllS difficult for tlt~ fact foodcr to intrQduce hiwelf 815 a mediator, gain the parties' confi· dence and ,trust and then-having failed 10 hring them together without rooommendatio~to put on his judi- cial robes and hear formal testimony on the ;59Ues in dispute. Th. parti •• are houad to feel confos.d and he· trayed by this role switching, which can. resuh in a. ·«judge's" reliance on infonnatiou obtained through informal and frank olf-the-record :mediation. sessions.. On Iho other hand, the sldllful fact finder may he able to lind a stage of the proceeding when, in his opini;m!.a settielnenl is near and when it is there- lore ptopitious to adjourn the hearing for a limited p<iriod of lim .. Some· times the opportunity is presented through the appearaJlce 01 misunder- standings hy one tdde of the othe'r)s po· sition. An atteltlpt to obtain clari.fic:a. tion concerning the differences hetween the parties may give the :!'act finder the chance to doD. bis n.rediator·s hat, But, at this I'm chambers" stage-as distin. guieh~ from the beginning of the hearing-the parties shO\1ld have ~ qulredSOlIle "' •• '01I" of respect f"" and confIdence in the fact finder. II not, biB request to adjourn for clarifi. cation or for anything else will be met with a refui!al or lack of enthl1siasm, However, even when the fact finder ,is proceeding down the "in ehllJXl.bers" route, th!t-.Itarties are -v.ery often in- clined tJ hold hack, anticipating the possible rCl!ll!llj!tion of formal hear· ill'gs. The fact finder m.ust convince the partie, that he will keep the two proce· dures sepllrate in his own mind. It is .an understatement to note that this is not always the easiest feat to cauy off. A Marriage Thal's Bound To Fail Whal ore the h .. ;. !itn.ita\io,," of fact findiog? One nf the t~ouhlesome aspeclS of £ant finding is thet all lou often thl';OO .is an attempt by oQe or both of the parti .. to marry Iho proc- ess with unfair labor practice machin· ery. U.ually tlrl. tabls the £Ollll of each or hoth. parties exoor.iati.n~ the o~ for failing 10 bargain in good faith or for engaging in varions other kinds of reprchensihle conducl. One .an ap. preciate the frustrations of the partie. in states like New Y ork,!7 where, prior to the 1969 amendments anyway, the Public Employment Relations Board has refused to exercise Il substantial amount of unfair labor practice juris- diction. Bul any a\tempt 1<> IWlrge two auch processes jiiat" doesn't work. The first reason m that acrimony eJl" au.. and the p<irtie. only heat tham· selv.. up, though one of tho pur. poSes of the facl·finding proc ... is to get them to come together peaceably. Second, except .in the most exttemc cases, il the fact finder begins to "as-- Bess blame" or Btate in his report thllt one party has refused to bargain in good faith, (1) he i15urps that which is more appropriately handled by an' ad~ ministrative agency elitahlished to deal with·nnfai~ lahOI practice ch&tges~ and (2) he winds up. antagonizing one or both of the parties who he hopes will accept his r-ecommendatio·Ds. I do· 'not mean to rule out a detailed statement of fact. which w:U1--without drawing conclusions in the 'report-make the public aware as to who it! re-,poneible· for the imp"" that h.. developed. Bu~ for the most part, straightforward' hlame assessment at any stage in the procMs is an exeroi56 hi. futility ~ An institutional defect i. that the prooe.ss i. 100 rlgld. The prospect of • report places .nbatantlallimitaliollll on the fcrt finder'. mediatory skilla. Once the report is issued, the positions of each ~ide harden. If one 'Side rejects the recommendations and the other ac~ capta, the latter will bud"", precious lit· tle. Although the. fact tinder can be successful in II post.faet-J)nding,report ' mcdiati-on eiIortJ all too often the par- tie. will gi~e vent 10 their hostiliti.s and pour out their-c:riticiBllls of the re~ port and recommendations. . To cope with this general prohlem, Professor Hildehr."d has proposed that "[i]n [its] first step the [foct. ' finding hoard] would investigate the issues-rmd submit a confiden~a1 report 10 the porti"", to give them a further opportunity to reach a settlement. If • settlement were not reached within a specified ~ then the second stage would hegU\' the h.ard would ",ak. puhlio its findings and reeommenda· r.)ODS."lS The 1969 amendments to the Kew York Taylor Law prOVide for making the report available to the par· ties be£.ore issuing it to the puhlic.19 Thus, the faet finder's roie as'mcdiator . has received statutory recognition. This may bc one way· of making ~e report's acceptability as a framework I 16. Howlett, ArbitratilJl1 in the Public Sec. ;fisccm$in Public. Empioyu Fact-Findi.ng roT', in SOt,'mWKS'rERN I."RCAJ. FmlNDATto.N" Procedure, 2f.) JND_ & LAB. R"RL... REV. ;) 15TH ANNUAL IN81nuTR ON WoR UW 249 (1966); ZacK. Dispute Sett.lcmtmt in thlf U%9). . Puclic Secto1'7 14· N. Y. L. Fonm.1 249 l? For a dloo,"",on gf tho New York Tay· (196!l). Ct. _1 Public Lahnr Polley, IQr Law and a somewhat different vemlon of "New York Tilne&j January 1St 1~ .at .30. the uniak labor practice autlmrity under that· 19. 56e nots 14 wpm: " ••• if "the dispute sw.tute see Could. The New Yark Taylvr ill not Ulllolved at least twenty m)"o pm to Li.rw; A PrdiTniJUZFy Ass~nt, 13 LAb. L. thl') hudget suhmi...'lRinfi date, the fact-finding J.·323 {1967}. board, acting by a majority of iL';j mem.bel'!:!, 18. Hiideb.rand, The Public Sector.in W ahall :f.m.modiateh transmit it.; £nding of FJlo1l'11EBS OF COLL:EC'.£YV]; B.uiGJ.IN1Ne 146 faet and :reOOtnmmldati\lll.S for resolution: of {Dtwlop & Chamherlain ed. 1967); for tlX-the d:iejluta to the chief executive officer of celt.ant dl~ell.S6ion8 of the faet.finding jlrnces<I, the government inv(llved and tQ the employee see also Mc.Kelvey, Face·FinJi:Jtg UI. Public Otgani~stion inVolved. (ii) mar thereafter a.s, Employmffnt Displlt8S: Pr.omise or lllusiorr.?, sist tT.c pa.rt~C3 to perfect a lIol~lltrJry resow- 22 IND. & LA!:l. REJ,. REV. 528 (1969); Rice, tiM of !.he di.vpure. and Wi) shall within five Reaohing Irnpasse!h--Mediation and FaJ:t"'"·"-day" of suoh tratJsmis8km make puhlio such l"indinl? (unpublished 1968); Stem, The findings and recommendations ••.• ? 838 Anierlcan Bar Associallon Journal HeInOnli.ne .. 55 ABA 1, 838 1969 '/ \ for the settlement more likeJy. Publio exposure would require ttiI imm~diata reaction and posturing by the parties. ·Re:adju!:ltmeJlts in the package and new avenues of compromise may suggest themselves in the interim period he- tween private and puhlic release of the report. In short, the pro_cess heco~ more flexihl~. 'While . ilie New Yorle a:mendmentl! _m to contemplate one report, which. is issued to the parties and the publio . at difft...rent times, a more sensible re- f'.' It is achieV1!d if the fact finder may ;"HUe a diIletent oll",ial report to the poh1ic if be ~a it ,advisable. Diseua~ SiOIlB with the parties about the pri'fate report may make 8 revised public ver~ slon desirable. Presumably, aIeo, thore :is no statutory obligation in New York to release the report to the public wban a set1lement has been reached Bub .. • quent to the issuance of the private re-- port and prior to the deadline for the public report. In the Face 01 Another Fie/eclion But what iJ ooe of the parties ,tiU rejects the recoJUm'6ndatlons. in the public report? Although the unions seem to have heen more prone to reject fact-finding reporls and facl finding it- sell in New York City," public em- ployers are usually the offending par. ties. Since public employee unions are generally prohlbited from 4Itriking, the complaint;;' thet the public employ"r wID simply institute" its own position on employment conditions: when the re- :port is hot to its liking inasmuch as the fact :find~'s recommendations are not binding. It is also 'contended that since fact fuders hoUt want t~ issue recom- mendations that are ·acceptable and un· derstand that the union is shorn of power without the strike weapon, there will be a tend"""y on the part of the lact finder to IeIl1l toward thepubllc employer hecause it ia in ,a hetter posi~ tiOD to flout ~e report. The absence of :finaDty in the mct· finding proc"". has impelled the Taylor Committ~ in iIB interim repOrt, to moke the following proposol: The transmission of these recommenda- " tiOIl5~ if not accepted hy the parties,.to the appropriate representative hody lot 41CUOl1 milking them binding on the parties. Such action should be taken. unless, afte1 due oonsideration, incltui* ing a hearing to which the parties are summoned to show ~8-use why that steP should not be taken, the recommenda~ tio!\.s are determined to be ,Patently un- just and arbitrary. all interosts, includ~ ing those of the public, considered.Z1 It may he that the "patently unjust and llIbitrarytl standard Should he the only basis upon whieh a fact finder'FI recommendatiOll sho,uld be nonhind~ ins:. But this comes perllouslX,close to compulsory arhill'ation, and tllUs ra_ues llloet of the _ues which are a pm of that d"hate. Moreover, if this app10acli is taken, the pressure fol' statutory criteria which: fact finders are obli- gated to follow when i_ing their ree· ommendations would properly become more persuasive. A ntlonnle to sup- port the report"s conclusions would be~ come a minil1lUJ'll requireroen;t'.22 If both mediation and fact findlng fail to resol.., puhlie employee dis; putes, it re diffimilt to avoid thinking about the UllthfukabIe-4lnding arbi· tratiop. The American experience with arhi~ Iration is generally limited to the grievance' vs.xiety, b-hich . involyes an interpretation 01· the terms of a collective bargaining agreement-or "rigblB" arhitration.'" The legal obsta· cl~s 'to grievance arbitration in the pub~c sector seem to he surmounta~ ·20. See Raskin, Why New York: Is "Strike City", The Now York Titnea, December 22, 1968. (Magazine)y at 7 .. 21. GuVERNOR'S CoMMITTEE ON -POlILfC . E:MI'WYEE RIlLA'fi.o:te, INTSRIM REPORr, lunit 11, 1968, at 28. The ".!IAoW cat'l.6e" propOeal has been incorporated in the 1968 anllilld· menu. 22, See Rule 35 of Michigan 'Labor Media- tion Board Rules and Regulations. which. au-th~r= the plU"tiea to waive 'the roquiMm&l.t of a formal report w· be lS&ued by the fact finder. 23. For dlseu~81oM ()f thh issue; see H~ lett. :rupra note 16; Ringer. Legality 4!ltl Pto[1!iety of Agreements T c Atbilrate Major flJul Mlnl1r DiSPHU:S' in Pubtl~ Employment, 501 ConNELL L REv. 128 (196B). Cmalnly the pnrties to an arbitration agreement can provide that the arbitrator' is not to offe.nd existing laws. 24. Ibid. 25. See Perlmutter, CitY and San:ltntlcn. mer; T.o Abide Dr ArbitNltio-n; State Take¥ Ovar Dropped1 Th.e New YOlk Times, Febru- lillY 18. 1966, at 1, cill. Or 35. 001 1. 26,: See GoVElllillll:N'1'1i CoM1d:trTEE ON PIllILIC EMl'LOYEE R~. 68 (March 31, 1966) • HeinOnline -55 A.B.A.], 839 J969 Public Emp/oyman' hIe. 24 But it is "interest" arhitraQ.on- impMise disputes concerning the terms _ of a new contract-"Which -is the pri. mary center of controversy today.25 - Voluntary "mtereat" arbitration procedures agreed llPO:I1 by the parties them,el..,s have been advocated by lb.e Tayl.r· R"J'0rt26-and the AFL·CIO, insofar as the federal government is eoncerned"-and they were utilized by the ]larties in th. 1968 New York City sanitation strike.28 But the dissatisfaction with volun· biry, arhilrauun sterns fl'om. ilie fact that the community is dependent upon the good sense of the parties to arbi, !tate and not strike when important government services are involved. The Report of the Preeidentis Review of Employee·Managel!lBnt Relation, in the Federt;l Service tale., -the position that when either party requests the services of a new federnl laho:r rela~ tiona panel, _ the panel ~Yt among other things, require the parties to StJh. mit to hinrung arhitrations . .2t Moreovex, Rhbd. Lslaod,'o Pennsylvania," Wyo. ming'"' and Michigan" have provided for compulsory arhitration in the caae of unresolved ''interest" rusputes in .. vol'9mg policemen and fil'eIllen.34. The traditional argument against any form of compulsory .rbitration is that it will undermine collective. har- gaining because neither side will make a conceeaion lor fear of prejudicing ita ,case in the arbitratifin proceeding,:!' 27. 233 GERR B·1 (1966). 28, See note 25 $uprfl, Ct. Raskin, Hou'-To .Avow SIri.kes br Garbagemen. '!Vur$es, The New York Times, February 25.1968, (Maga- ziM) at 34 . 29. 280 GERR (Sp"laI SUJlPlemlllll; 1",,· ary 20.1969). 30. (Firufiah"''') R. l. G"". LAw, § 28-9J·7; (policemen) § 28-9.2.7, -lUI amended hy H.· B. 1331, L. 196~ e/Ieetive lu:n.e 4, 196B. 3L (Firefighters and poUc~) PuRDON'S hNN. STAT. Alm. tit. 43, §§ 211.4, 217.7. 32, WYo. STAT. § .21·269 Hire1ighters), 33. (Poliotlnlen, tirefighltr.rs aud "ther mUN nicipal employees} P. A. 312 of 1969, effec- tive: October 1, 1969. Th:i3 al:t requires Cftm· pulsoxy p;rbitratiitn <tn an expmUncntal haeis :lrom October 1, 1969, thrClugh June BO, -1m 34. Maine has enacted a statute, effective OllloL~ 1, 1%9, p:rovidin,!J fot the arbitra. lion of impa.age disputes if the parties agree to arbitrate._ However,' the aw~nd ill: non· binding and merely advisQry all to salaries, pensions and insurance. 35, H~r. the Canam811 experience TaWS qu.eetJons· as te lhe atC\ll'llCY of this claim. See remarks of H, D. Woods at Covet- nor's Conference 0.'1 Puhlic Employment Re- latiOns. OClober 14, 1968, September, 1969 • Volume 55 . 839 Publlo Employment One response to this: argmuent is that the need for uninterrupted service jlLS- tines the impairment of flee collective hargaining. Bittj more signi:fic~tly, ar- hitration does nol neces .. rlly mean the end oi oolleen"" bargaining if Ulled sparingly and if the parties are n.t cor; lain about its . availabllity--{)r the Imma under which it will be availahle -if collective hargaining fail.. When sll othar procedure. have been ex· hau~ted, there may be no other effec- tive approach. And while ttnions might .till .trike'igainst the award, public pressure for severe petllllti .. might be greater than in the case of nonbinding fact~finding recommendations, the sta- tus of which i. much lower. The Real .Confrontatiol\-. with the Taxpayers But in public employment, there is ~n evell more formidable objection to compulsory arbitration.-For' here one confronts the authority of elected officials to raise revenues B.~d lay taxes. Putting .aside the legal issUes, it is questionable whether public official, and taxpayers will permit. their power to be delegated. away to ~joutsiders". Compulsory "interest" arbitration would reqiIire aome modification of contemporary beliefs about t~presenta· tive goyernment~ Assuming that such arbitration is 8 practicable idea,-what criteria should ·the arbitrator use? For the meat part, the criteria would consist of the very same factors that most" fact finders take into account: (1) comparability with similar j oD e1aoomcations and oc- cupations in private industry; (Z) comparability with the wage patterns for the geograph1callahor market; (8) cost of living considerations; (4) abil· ity to pay, -both in terms of monies immediately available in the hudget and the government's ability to raise reve.- llUes in the fulur.e through its tax base.36 It.seeiw; to me that a hasie prerequisite for the success of interest arhitra- tion in public employment is that the public interest and welfar~ should he among the criterja tQ which the arbi~ tramr is ohJigated to adhere. The pttblic. interest criterion, bowever, ie at the heat~ of -the tensions which are built into public employment interest arbitration. One question posed hy reli· ance on it jg whether it is poeewle in our kind of ,ociety to deal effectively· with two public interest questions in one lell swoop: (1) the strike prohibi- tion and the importance of uninter- rupted ,ervice .nd (2) respon,ible eco- nomic settlements w:hich are not iniu~ nOllst" the commnnlty. would "'-arpen their ""lieelive bargain. ing ski:!. a bit, I am .f the view !.hat the legislators and judges might have less necf..sl'!ity for ·involvin-g themselV(f5 with steps aDd procedures for the par· ties to IoHow. In my judgment the lolicwing pro. po,!ials flow from some of the ohserva~ tion, that I have outlined above; (1) The state must comrnlt· ilself to nse ad hoc mediatorS during the bUlly What About II seasons, such as school contract nego.- Fu". Time Labor Court? _ li,tiOD sea.on. Mediation IDlliIt he I udge Samuel l. RO!!llllman has pro--. ,:vailahle to all parties who require .s· . pOlled that • full-thtte labor court ."taru;e. who •• jndges would have life 'ppoint. (2) The costs of using f •• t finding mont. "'-ould be established to ,djudi. "'-ould be ilnposed on the ~.rties re- cate laber disputes whicR .ffecl the gardl""" of whether the partles or the public interest.37 However, it 1>:J con~ state invoke the procedS, It ~y he nec~ tended that arbitration can succeed essary lor the state to reqUlI'e the par~ . only i! the .third party i. acceptable to ties 10 go to fa;" finding in ~e public the patties involved at the bargaining interest. But ~ons. ~d puhli~ ~ploy,. . table-that, in effec~ he must he •. .." shouJ~ be ~.lized iinanc,~y f01 creature of their own milking, as is the not reaoIVl~ then' pro~1ems e6rlie~. case in grievance arbitration. This cori-{3) A hmetable-liko that of the ~ept is not easily reconelled with the New York Taylor :u.w-;;hould be .,. pllblic interest criterion and the' idea ,tablished 50 that fact finding can be in· that the arbitrator mu,t .guard .the voked in advance 01 either the budget treasury against the venality of avari-submission or contract expiration date. cious unions and overly generous poll. (4) State legislation must provide a ticians. It is difficult to envisage the great measure oj finality as a part of success of hinding awards which take the process. whether it goes under the money from the public txeasury and ' rubric of fact finding, advisory arbitra- are. not in aome manner responsive to tion or arhitrati6n~ If states insist. that . taxpayer interest Dot directly repre. public employ ... do not have the right sc-bted-in the negotiations. Moreover, to strike. we must futd a way to pr&> our' urban centers are popula~ed with vide nn effootive and hinding altema-. many people who do not believe that tive to ~e strike. . public officials are generally responsive But if this alternative is to bB ac- to their needs. We do not have to 00-ceptable to the public as well as the cept all features-of the Rosenman labor parties, I 'am c.onvinced that at least court-which, after al~ is intended to "two refo~ must be instituted outside create public conGdence in the fairness the collective bargaining arena. One of the adjudication-to realize that the reform involves the widespread proc- parties· at the bargaining table nre not tiee almaking laos! taxes 'depend""t the only people whose viem are enti-upon referenda or miJlages. It simply tIed to representa:tion. While the al:bi~ does not make sense to submit an athi~ tralor must have the underatanding of tration award to the puhlic in this the particSt his collbtituency mllst he form. This ill especially true in this age broadly defined. To ignore this elemen- tal principle of democratic society JS to increase !.he risk of taxpayer rcvoils which veto the most properly reasoned arbitration awa.:rds. There are no "answers" to this prob.- lem to_lmpasse reSolution in p;.,lbl.:W em~ ployee labor disputes. H both .iiles 36. Soo In. "he Malter of F f.Wt-Fi.murJI Be-,ween In.kster Bo<uri uf Educat:itm anti Ink. ster FerkmtifJ'fI. Q! Teaelws., Lucal 1068, 2$6- GERR F~l (Septmnhlw 23$ 1968) I which dramatizes the bnpact of the tax baee upon. ooJlecthe h!1Tgaiumg in pUhHc tlmplolment. 37. IIfJfJM/?$ on S. 176 Before a SUhccmm. of ike Senate Comm. 0'"' ilte Judicv.zrr. 90th C:mg.! 1st Sesm. 12 (1961), See ge,nemlly- F1e.mfng, The Labor Court Idea. 65 MlCH. 1.. REv. llfSl (1967). 840 AmerIcan Bar Association Journal HeinOnlintl --55 A.B.A. J. 8401969 " \ of taxpayer revol!. Public ollic;als and the electorate must retain substantial 'Control over what is to he, expended lrom the public treasury-but I am not sure !.hat ~hc practice of millages or re~ feren~a are the most responsible tOrut'!l for the exerei;:ie of this power. SecQndly, the sad truth is that, for the most part, 1"".1 tax .. are property taxee--and that means that they a~e predica~d upon factor.s other. than ability to pay through ;ncomc. Moro· over, to the extent that the local prop- erty tax ean b. equated with wealth, the fact of the matter .is that it becomes-· increasingly diflicult for local official. to con,vinee publie employees they ,h ould accept less than those worms who live in another community a lew miles down the road. It will b" diffieult, if not impos,ible, . to obtsin taxpayer support for any process which hath treats poblic em· ployees equitably (.niI it seems to ,me </c., Awards of Merit for 1969 Are Announced THffiTY.EIGHT awards of moIit were presented -to Btat~ aed local har associations when the results or the 1969 competition were announced Au. gustl0 at /.he 92d ·An"ual Meeting 01 Am_erican Bar Assoeiation in Dallas. TIle list of aSllociatiollB recognllllld fol· Iowa: DIVIS-rON I-A (state associ.ations hav- ing IDore than 4,000 mambers) -New York State Bn Association for its new grievance procedures. Honorable men' tion to The F10rida Bar for efforts to achieve court modernization and the State Bar of Wisconsin for its crime preventiun a.nd control progra.m:s. DIVISION I·B (etnte associations hav- ing 1,500 to 4,000 memhers)-North Carolina Bar Association for its educe.- tiona] programs ~igned to· inertlase the public'. undentanding and r .. peel for law. DlVISION I-e {etate nssociations hnv· ing fewer than 1,500 memhen;)-Ar. kansas Bar Aasociation for ita program to reol'gani$e and unify the Bat in Ar .. kansas. DrvtsIO" II·A (city and county bar associations having more than .2,000 members) -The Chicago Bar As,oci., tion for its teacher training program, "'Law in American Society". HOllora· hie mention to the Cleveland Bar As,a· elation for involvement in inner-city problems. DJVllllo" II·B (city snd county bar associations having 8oo'to 1,200 rne:rn7 hers)-Akron Bar Assof'jation for its program of providing obse:vers and representation of accused persons duro ing civil disorders. Honorahle mention to tire Milwaukee Bar Association for its e1forts to revise the Wisconsin pro- bate code and to the Bar Assooiation ofEri. C<>Ullty (New York) for its '01· Wl61TY arhitration plan for small acci· dent claims. :OMSION U·C (city and county har. associations having 300 to 800 mem~ hcre-}-lBar Association of Tampa and Hillsborough County (Florid.) for its "Teenage Alert" program of crime pre· venti~n and control Honorable men~' ti<m to the Bar Association of Union County (New Jersey) and a special award for ·progress to the· Oklahoma County Bar Association (Oklahoma City) . DIVISIO" II·D (city and count:r bar "".oelations haviug 100 to 300 inem· beral-Ev.nsville Bar AssociaHon (In· di.na) for its proj..,t studying crime in Evansville. Honorable mention to the Society 01 the B.r and the First Ju· dicial Dist':ot-<>f F1odd. and a special award to the Winnebago County B,u HeinOoHne·-55 A.B.A. T 84119"69 Public Employment that part 01 equity is compar.bility) and speaks in terms of firuility i.f tradi· tional methods'· of local gQ'Ternmen! finance are reta.ineti They-are par.ti~u. lady burdensome to individuals who are on fixeil ineomes. , ... __ . Unless we mote carefully tram our 1 sights-on p08sihiliti~ for reform.in I these are." I am fearlul that the most I thoughtful propoa,als for labor law re·, form wlll ~ aground on the reef. o;..-J taxpayer refllstance. Assooiation (IllinoIs) ~ DMSION !I·E (city and county 'har assooiatioU3 having fewer than 100 mOmber.) -Craighead County Bar As- sociaLion (ArkallSas). I-Iononmle men- . tion to the Kankakee County Bar Asso· ciation (Illinois) ~ Lhe Mesa County Bar A"ociation (Coloredo) and the Yolo County Bar· AssOGiuJiun (CallIor· nia). Law Day USA awards were pre- sented to ilie State Bar of Georgia} the Mississippi State -Bar Association, ·the Weat Virginia Slate Bar, the· Philadel· pbia Bar As,ociation, the Cincinrutti Bar Assooiation, _ 'the Birminglilun Bar AssOciation, the Jefferson County Bar Associatioll(Texas) and tire Ada:ms Coun'y Bar Association (Hlillois). Honorable mention· for Law Day USA ohServances was presented to the Oklahoma Bar Associatiolii the Kansas Bar .A..ociation, the Wyoming State Bar Association, the L-os Angeles COUllty Bar Association, the San Diego County Bar Association, tire Orange CoUDty Bar AS5ociation (Florida), tho Wyandotte County Bar Association (Kamas), the Clinton Counl.)' Bar As· sociation (Iowa) und the Seventh Judi· . ci.1 Ilistrict Bar A.soeiation (Idaho). Aspecial Law Day award W8.a given to the Tulsa County Bar Associationj·'-- (Oklahoma) • Sep!amber, 1969 • Volume 55 841 / ATTACHMENT 3 Refwintea From , '} !NnU5T1lIAL AN}.} LABOR RFLATIONS REVIEW VOL. 27. No.2, ]ANUAlty 1974 Copyright @l1974 by Cornell Univenity AI.! right. reserved FINAL-OFFER ARBITRATION: "SUDDEN DEATH" IN EUGENE GARY LONG and PETER FEUILLE THE TREMENDOUS expansion of colleo- tive batgaining that occurred in the public sector during the 1960s and early 1970s has fostered a con tinuous, often heated, and probably unresolvable de. bate over the type of collective bargain- ing. system that would be most appropri- ate for the public sector. A. might have been expected. the most controversial issue has been the role of work stop- pages. Since the majority of public employ- ees do not have the de jure right to strike, much attention has been focnsed Final-offer arbitration-requiring an arbitra- tor to select one of the Jalt offers made by the parties to a negotiation--was first proposed less than ten years ago, but it has already become the source of 1:onsiderable rolltroversy, a major element in President NixoD's 19'ffl proposal for handling national emergency strikes in trans- portation, and the prescribed method of :resolv- ing certain public sector disputes in three states and two cities. This study reports on the expe- rien-ce with final-offer arbitration in Eugene, Oregon, one of the first jurisdictions to adopt this procedure. Based Qn an analysis of the first six .sets of negotiations under Eugene's final- offer system, the authors c(m'ttade that this pro- cedure has been relatively successful in pre~e:rv· ing the partieS' incentive to negotiate their own agreements. Gary Long is Pe11iOfiUel Director of the City of Eugene» Oregon and Peter FeuiHe is Assist- ant Professor of Management in the College of Business Administration at the Unive;rsity of Oregon. They arc grateful for the support pro- vided by the Institute of Industrial and Labor Relations, at the University of Oregon from . lunds provided by a grant from the Manpower Administrati()fl of the U.S. Department of La- bor.-EnIToR 186 on the question of a balancing of inter- est., how can bargaining impasses be re- solved in a manner that protects the in- tereslll of both parties at the table, if public employees are denied the right to effectively manipulate management's costs of disagreement, and at the same time protect the public's interest in continuously receiving essential govern- ment services? In the private sector, in- terests are balanced by the relative abili- ties of the two sides to take a work stoppage, since the marketplace affords the consumer some freedom-of·choice protection from the results of bargain- ing. To a limited extent. this approach is undergoing experimentation in se- lected public jurisdictions as some em- ployee groups are granted the right to strike.' In most public sector jurisdic- tions, however, the strike i. banned and some kind of formal impasse-resolution machinery ·is provided; under which a third party assists the employer and lAlaska, Hawaii. Pennsylvania, and Oregon""" legislation grant most state and loatI govern- ment employees (en:ept police and fire fighters or "essential" employees) the right to strike. except in aU four stal<:8 this right can be abridged if such a strike endangers public health, safety, or welfare. Vermont legislation prohibits local government employee strikes but says they are enjolna'hle only if they endanger the public interest or welfare. M~tana legisla- tion allows nunes to strike only if no other health care strike is in progress within 150 miles and after 80 days' notice is given of in- tent to strike J I I 1 187 lith this cilY, has there six under a 1~71. In r frame- )m final- re. The line and ne with ! resolu- ~ believe· 2ader ro ,on this premise , highly ed by a :her au- Il~'r- 54., j,y ctory so-· in the Id prolJ.. :hat the )ll (Le., riety of parties ,romises It final- ard this al arbi- • xperi- vidence_ natenal )f these ffer LIars of be use- d final- 188 INDUSTRIAL AND LABOR RELATIONS REVIEW offer arbitration, with particular atten- tion focused on the effect these rwo pro- cedures have on the negotiation process_' Conventional arbitration-the submis- sion of a bargaining impasse to an arbi- trator who then faShions the binding award he deel1.l!i proper for the issues in dispute-has been used in this country in both the private and public sectors_ Its limited use in the private .ector has !ended to be in impasses that threat- ened work stoppages perceived as na- tional emergencies, such as railroad disputes_' Interest arbitration has been used more extensively in the pU'blic sec- tor, especially in impasses involving public safety employees_' The apparent rationale of these laws is that police and 51n the interests of readability and brevity, we will not aJ:ways use the adjectives "compul. sory," "binding," and 'Iinterest" in the remain~ der of the paper. It should be understood. how~ ever. that our discussion is limited to interest arbitration that is both wmpulsory and bind~ ing~ unless otherwise noted. flThe recent Unitec1 Steelwoilcers-steel in· dustry agreement to arbitrate 1974 negotiation differences i.s a significant departure hom the traditional reluctance of parties in the private sector to utilize in terest arbitration. It remains W be seen~ howeverf whether the steel decision is a harl::linger of the "wave of the future" or is only a single industry's response 1.0 its own par~ ticular bargaining and product marite. condi· tions. See The Wall Street Journal, 24 April 1973, p. 18 . 'TAIaska. Pennsylvania. Rhode Island, Michi- gan. Wi!fQ){lSjn. and Oregon have legislation mandating arbitration of police and ure bargain- ing disputes. The current Mtchigan and Wit- consin laws provide for a form of final-offer ar· bilration; the previous Michigan law providro for conventional arbitration. Wyoming has an arbitration law appJica'ble to fire fighters, Min- nesota permits the Public Employment ReJa· tions :Board to invoke ,finaJ~offer arbitration. and the arbitration decision. is binding on "es- sential" employees. Several states. including Ha- waH, Kansas, Maine. New Jersey, New Mexico. and South Dakota, have legislation that permits compulsory arbitration for various groups of employees. At the municipal level, New York City and Vallejo, California have a conven- tional arbitration framework to rewlve impasses with alr""cify employee groups: Oakland, Cali~ fornia voters recently amended the city charter fire services are too essential to the pub- lic health and safety to be interrupted, and arbitration provides a peaceful means of resolving bargaining disputes involving those services while protecting the interests of both parties to the nego- tiation. '"' Compulsory arbitration has been touted as the "wave of the future" in public sector impasse resolution,' and certainly it has been used increasingly since 1968_ Interest arbitration in its conventional form, however~ has re- ceived its share of criticism. Perhaps the bulk of these critical comments foeuses on conventional arbitration's deterrent or "chilling" .flfect on the bargaining process. In the typical private sector ne- gotiation, the parties are presumed to engage in sincere attempts to reach agreement because o[ the significant costs they will incur if they remain in disagreement. These costs of disagree- mimt are usually associated with a work stoppage: no revenue for the firm, no paychecks for the employees, and a re-. duced treasury for the union_ Perhaps equally important is the fact that each party is able to make only relatively un- certain estimates of what its costs of dis- agreement will be if a work stoppage oc- curs1 in either absolute terms or re1ative to the other party's costs_ The fact that these costs, if incurred, are substantial, -_ ... :--:---:-:-----:-to provide for arbitration of police and fire fighter disputes; and Boulder, Colorado recently adopted a final-offer arbitration ordinance. :Probably the JllO$t romplete analysis of pub~ lie sector interest arbitration has been made by J. Joseph Loewenberg, "Campuoory Binding Arbitration in the Public Sector" (Paper dcliv~ ered at the International Sympotlinm on Public Employment Labor Relations. New York City, May 4, 19-71). An abridged version of this paper can be wood in International Symp06~ ium of Public Employment l,abor Relations, New York, PrQceedings (New York: New York State Public Employment Relations .Board. 1971) . sSee Gilroy and Sinio-6'jSi;'lmpasse Resolu- tion in Public Employment," p_ 503. FINAL-OFFER ARBITRATION 189 and also of a relatively uncertain magni- tude before the fact, tends to push the parties toward a voluntary settlement. 111e same reasoning applies to public sector disputes in which the employees have a right to strike, although a com- plicating factor is the political ratber thap. economic nature of the costs of dis~ agreement (especially··~n the manage- meut side). These strike-associated costs of disa- greementare dr~matically reduced when bargaining takes place in a context culminating in conventional arbitration. Not only will there usually be no ,trike-induced costs of disagreement, but also the uncertainties associated with disagreement are significan tly red uced. Conventional arbitration awards tend to llGrodin.. "Either-or Arbitration fol' Public Employee Di&put~:' p. 262. lOLoewenberg. "Compulsory Binding Arbitra- tion in the Public 8«,tor/' p. 39. uLoewenberg concludes that the arbitration experiences he examined do not prove the skeptics' predictions ~t its inevitable use, yet he provides evidence that it is used rather fre- quently. (Ibid .• pr. 37-40.) JUris and FeuiUe in 197'1 examined police labor rela.tions in six cit- ies using conventional arbitration and found that po1ke bargaining regularly ended in the arbitrator's lap in five of these cities:. Hervey juris ,an,d Peter Feuille. Police Unionism: Power ,and Impact in Public Sector Bargaining (Lexington. M .... : D. C. Heath, 197$). chap. 5.' Hines examined the use of interest arbitration in Ontario hospital disputes from 1966 through 1970 and ,found the iucidence of arbitration in- creaSing over 'time. Robert 1-H~neS-. ",Manda- tory Contract ArbitratiQn-Is It A Viable Proc- ess?'" Industrial and Labor Reltltioru Reviewl Vol. 25, No.4 (July 19'I~), pp. 533-544. Prob., bly the ~O$t campl,ete study \,)f public safety in- terest arbitration has be:en done by Bowers. who examined polke and fire fighter negotia~ tion oUtcomes under the' Michigan and Pennsyl- vania arbitration statutes from the statutes' im~ pIementation (in 1969 and 1968, respectively) through 1971, and found that approximately 19 percent ·of Michigan pubJic safety negotiations and 45 to 50 percent of Pennsylvania public safety negotiations '(ulminated in an arbitration award. One of her conclusions is that the de- sign of an arbitration procedure rnay result 1n a deleterious effect on the incentive to bargain. be based on the compromise principle: the arbitrator's award gives more than the employer has offered and less than the union has asked for. Consequently, it can be argued that it will "be to the advantage of each party to enter the ar- bitration proceeding without having given away too much in advance."£! ~R, the extent that this reasoning is valid; eonventional arbitration has a Hchill_ ing" effect on good-faith bargaining as each ·side bolds hack in anticipation of handing the dispute to an arbitrator. Although the available evidence ,shows that conventional arbitration "does not immediately and inevitably destroy collective bargaining:l1G there is evi., dence that conventional arbitration has often reduced the incentive to bargain.u Molli.e Bowers. "A Study of Legislated Arbitra- tion and eoHectlve Bargaining in the Public ,Safety Services in Michigan and Pennsylyania" (Ph.D. dissertation, Cornell University, 19'13). a version of which is SOO~ to be published by Prentice-Hall. The "chilling" effect of conventional arbitra- tion on negotiations in the private settor has often been noted, See Stevens, "Is Compulsory ArbHration Compatible wi~ Barga.i!J.ing?" pp. 44-45; and Carl M. Stevens, Strategy and Collective Bargaining NegQtiati(ffl (New York: ~cGraw.Hi1lf 1963). p. 53. Kaufman presen(s an interesting examination of impasse tI~solu tion (including de jure and de facto arbitra- tion) and the erosion of genuine collective bar~ gaining in the railroad .industry. Jacob J. Kaufman,. "ProcedUlfe5 Versus CoHective Bar-gain!~J In.:RaUroad Labor Disputes," lndwll-ial and, lAbor ·Relations Review, Vol. 26, No. 1 (October 1971), pp. 53-70. Probably the most complete examination "<>f "conventional interest arbitration in the priva,te sector has been per- formed by Northrup. After reviewing the expe- rience with wartime adjustment procedures. state compulsory arbitration laws, national emergency. disputes under the Railway Labur and Taft-Hardey Acts, and. sele<:ted foreign pro- cedure$" be concludes that his analysis "a)Ofirms beyond a suggestion of doubt that a)Dlpulsory arbitration .•. [d]iscourages collective bargain- ing." Herbert R. 'Northrup. Compulsory Arb;- iTalian and Gcueinment Intervention in Labor Disputes (Washington: Labor Policy Association. 1966), p. 207. r i , ! a ( C o c " a t. p p n p rn E, , J'--__ 190 INDUSTRIAL AND LABOR RELATIONS REVIEW Other criticisms of conventional arbi- tration can be made: it may involve an unconstitutional delegation of legislative or executive decision-making power; elected officials should not pennit an ar- bitrator to determine <issues they were elected to decid;,; arbitration may in- hibit the bargaining compromises and innovatiolUi necessary to cope with changing conditions; and it tends to prevent the parties < from coming to grips with efficiency versus equity ques- tions, It i.s in response to these criticisms~ es- pecially the deterrent effect of conven- tional arbitration on bargaining, that final-offer arbitration has been pro- posed. As Grodin explains. under the final-offer procedure, "an arbitrator would nOt be free to compromise be- tween the positions of the parties but would be required to .accept one posi- tion or the other in toto . . . . The theory is that the process, instead of chilling bargaiuing, will induce the par- ties to develop their most "reasonable' position prior to the arbitrator's deci- sion."12 The possibility that either party "may lose the entire ball game" in arbitration is intended to act as a psy- chological, economic, and pol; tical in- centive for the parties to reach their own agreement: "This [one-or-the-other] criterion generates just the kind of un- certainty about the location of the arbitration award that is well calculated to recommend maximin notions of prudence to the parties and, hence, com- pel them to seek security in agree- ment."" In other words, the final-offer procedure functions as a "strik.elike" mechanism by posing potentially severe 12Grodin. "Either-or Arbitration for Public Employee Dispute'," p. 2611. 13Stevens, "Is Compulsory Arbitration Com~ patlble wit.:~ning?" p. 46. costs of disagteement in a manner that conventional arbitration does not. It is primarily this incentive-to-bar- gain criterion, and only secondarily the other criteria just described, that will be used to assess the final-offer arbitration experience in Eugene. The Eugene Setting Eugene', approximately 800 public service employees provide the city's 90,000 citizens with the usual range of municipal services. The city has three bargaining units, each represented by a different union. The Eugene Police Pa- trolmen's Assodation .(an independent organization) represents a total of 145 nonsupervisory police officer, and civil- ian records clerks employed in the police department, The Eugene Fire Fighters Association, International Asso- ciation of Fire Fighters < Local 851, AFL.CIO, represents the 140 nonsuper- visory fire fighters. The American Feder- ation of State. Co\lnty. and Municipal Employees Local 1724A represents a unit of 300 civilian employees from the re- maining city departments." None of the city's professional employees have se- lected union representation, and the city bargaining ordinance denies representa- tion rights to confidential and supervi- sory employees." The city has a council- manager form of government, with an eight-member coundl elected on a stag- HThe AFSCME unit consists of bJue~coHar and white-collar, pUibUc W()rks~ parks mainte· nance, clerical. and technical employees. uU nder previous Oregon labor legislation. local jurisdictions had great latItude in struc- turing the bargaining ~eJationship and also could elect not to be <overed by the law and thus have 00 legal obligation to bargain. A new law, passed in July 1973~ mandates bargaining rights for all state and local government em- ployees. but it also includes a grandfather clause that -protects existing bargaining ,an-ange- ments. ;,,..-- FINAL.OFFER ARBITRATION 191 gererl, nonpartisan. uncompensated. dis- trict basis for four·year terms. The city's administrative branch handles the labor relatio:o.~ function. The personnel direc- tor --is -the thief negotiator and contract administrator, and he reports to the city manager. The city council plays a mini· mal role in labor relations. Council mem- bers, by oro.ipanee, have delegated the responsibility for labor relations to the city manager and the personnel director. The council limits itself to reviewing privately the city's bargaining position and to deciding on tentative contracts submitted by the manager. The legal framework governing these bargaining relationships was developed with inputs from both sides. As the city council was studying the wisdom of es- tablishing a collective bargaining system in 1969-70, the IAFF and AFSCM,E 10' cals circulated among the voters an ini- tiative petition to amend the city charter to require collective bargaining and "compulsory binding arbitration" to resolve impasses. In May 1970, the voters narrowly adopted the initiative, and bargaining began shortly thereafter with the fire fighters, the only group that was well organized at that time. The negotiations halted, however, be· cause of disputes over the interpretation of the charter amendment. The two sides went to court to resolve the mat- ter, and in March 1971 the court up- held the amendment's validity and sug· gested that it be implemented by ordinances in a manner to ensure its constitutionality." Consequently, duro ing the spring and summer of 1971, city and fire fighter representatives drafted an ordinance that clarified and defined lGCity of Eugene v. Eugene Fire Fighters As· sociation No. 85-1 and AFSCME Local 1724A, Case No. 100756 Lane County Circuit Court, Eugene. Oregon. the more general language m the charter amendment. The city council passed the ordinance (which was sup· ported by city administrators and two of the three unions) in September 1971, and it is this ordinance which estab- lished Eugene's unique final·offer procedures.l1 The ordinance establishes~a bargain- ing-arbitration timetable so that union- management contracts will he geared to a fiscal year basis and will be finalized hefore the annual budget.adoption deadlines in May and June." Conse· quently, the ordinance provides that be· tween October I and 15 of any year in which a party wants to negotiate a con- tract for the next fiscal year, that party must send a "letter of intent" to bar- gain to the other party. After such noti- fication, the period between October 15 and December 15 is to be used for "pre. liminary discussions" during which time the participants shall "meet and confer in good faith" on contract terms. If, by December 15, the two sides have not reached a "tentative agreement," the city manager shall request mediation as- sistanee from the state (this require. ment may be mutually waived). If ei- ther party then wishes to proceed to "bi-Iateral negotiations," it must selid a letter of intent to the other party be· tween January 2 and 5, and such nego· tiations shall commence within ten cal- endar days (by January 15)." 11See Bureau of National Affairs, Govern- ment Employee Relations Report, No. 423 (Washington: October 18. 1971). for a descrip- tion of and the text of the ordinance. l!!ln recen~ years, the city bUdget usually has been submitted to the voters for their approval because the property tax rate necessary to fund the budget has exceeded a legislated limitation. 19The distinction between "preliminary dis- cussions" and "bi·lateral negotiations" is pri- marily a semantic one designed to cope with the language of the fire fighters' -charter amend- )' ! I , 191 in the r council was sup- Id two of Jer 1971, ch estab- final-offer bargain- at u,nion .. geared to finalized -adoption 18 Conse. , that be- .y year in lte a con .. hat party .. ,r-------~"\tu'-suL~ ,~\i .. Ictober 15 i for "pre- 'him time nd confer IDS. If, by have not lent," the illation as- S require- !d). If ei· .roceed to ust send a party be- such nego- tn ten cal- Jrs. Govem~ rt, No. 423 (Jf a descrip· e. t usually has :ler approval yaIY to fund !d limitation. lin: . dis- iori.., 'pri- to oop~ with larter amend: 192 INDUSTRIAL AND LABOR RELATIONS REVIEW The official negotiation period is short. If the two side, have not reached agreement within twenty,five days from the beginning of official negotations, "each party shall submit. a fmal offer and may at the .ame time· submit one alternative offer to the· other party." These four offers tnay constitute a com- plete proposed contract or may be lim- ited to the specific items still in dispute. In either case, these offers are filed with the city recorder and preserved for the arbitration board. If only the disputed items are submitted, all items previously agreed on also shall he filed with the re- corder. This filing of. final offers does not end negotiations, for after the filing the parties are mandated. to continue their ·negotiations. If, after five more days, agreement has not been reached on a complete package (i.e., by Febru- ary 15). the arbitration procedure shan be invoked. Negotiation is again encour- aged at this point, by a provision that the "parties may continue to discuss these offers until agreement is reached or a decision is rendered" by the arbitra- tion panel. The arbitration board i. tripartite, eonoisting of a representative from each side and a chairman. When arbitration i. invoked, the ordinance provides ten days for the selection of the . panel, ten more days for the panel to convene, and ten more days for the panel to make its selection of one fmal offer from among ment, which limits ubi-laterai negotiations" to a thirty-day period in January· and February. In order to cope with this overly, rigid require- ment, those who drafted the ordinance added a "preliminary discussion" peiiOd prior to the of- ficial negotiation period in or~er to have more time to reach an agreemerit. In effect. the Eu- gene otdinance calls for a 'negotiation process that. begins in October and ends in February (except in cases in !Which the parties mutually agree to deadline extemlons) • with most of the hard ,bargaining O'OCUrrlng during the official "bi-lateral negotiations" period. four (i.e., by approximately March 15 the process should be completed). The arbitrators shall hold at least one hear- ing to discuss the offers submitted and then shall select "the mO!lt reasonable" of the offers submitted. The board can- not make any chA'ages in the offer se- lected, and the selection must be based solely "on the content of that offer." The board is to detennine which offer is the most reasonable according to four criteria: the bargaining history of the parties, relevant market comparisons in the private sector, relevant market com- parisons in the public sector, and the dty's ability to pay." The ordinance also provide~ that the city shall pay all of the arhitration panel's expenses. It should be noted that the Eugene procedure was based on the Nixon administration's proposed legislation for dealing with national emergency disputes in the transportation industty. This was. due to the fact that the Nixon proposal was one of the few (and perhaps the only) specific final-offel:' procedural pro- posal then in circulation, and it conven- iently suited the city administration's desire to avoid implementing a conven- tional arbitration system. Although there are significant differences between that proposed legislation and the Eugene sys- tem, the latter is closer to that proposed by President Nixon than are the other final·olfer systems now in effect." ooSee the source cited in footnote 17 fur the complete criteria language. 211m the text of that proposed legislation, see Bureau of National Affairs, Daily Labot' Re- pew!, No. 40 (February ']J. 1970) pp. Fl-F6. Perbaps the most important difference between that proposal and the Eugene procedure is that the former provided final-otfer atibitration as one of three alternatives in an "arsenal of weapons." whereas in. Eugene. the fina1·offer pl."OCednre is the only Jmpasse resolution mecha- nism' available. In addition, the administration proposal ~ sharing of the al'bitration costs; 1n Eugene~ the city picks up the entire j ~I FINAL-OFFER ARlHTRA nON 193 The Eugene Experience The city and the union, have negoti- ated a total of seven contracts since collective bargaining was introduced into city government-three with the fire fighters, and two each with the po- lice and AFSCME. Six of these contracts were negotiated under the auspices of the final-Offer ordinance. (The initial fire ~""lters' contract was agreed to 'in February·March 1971 under the threat ofa court-imposed conventional arbitra- tion procedure.) The first final-Offer experience in- volved the negotiation in 1971-72 of the second fire fighter,' contract. During these negotiations, the city and the union tentatively agreed on several items, but because of significant disa- greements on selected items, they de- clared the entire package in dispute. The rna jor dispu ted issues induded the incorporation into the contract of man~ ning standards and civil service proce- dures (both of which the union wanted included), longevity pay, which the union also" demanded, and the size 01 the economic adjusunent. Each side sub- mitted two offers (a final offer plus an alternative offer) to the arbitrators. The economic packages offered by the city to- taled 6.0 percent and 6.5 percent in its two offers, with the first offer consisting mostly of an across-the-board wage in- crease and the second emphasizing an increase in bealth and retirement bene- fit.'!. The union asked for economic ad- justments of 8,6 percent and 7.4 per- cent," with longevity pay induded in tab. Finally, there ate differences in the selec- tion criteria, particularly a "catch-aU" criterion in the Nixon proposal ·that would give more d.i~tion to the arbitrators than do the more spedfic criteria in the Eugene procedure.. 22These cotlt estimates are those ~ by the city and as sum Include an increase, mandated by the state ~hlic Employees R.etirement Sys~ both it. proposals. In addition, both union proposals contained the disputed manning and civil service provisions. A majority of the arbitration panel (the chairman and the city representa- tive) selected the city's firSt offer pri- marily because of the chairman's objec- tions to the manning requirement (that a three-man crew of designated rank be used on certain fire~vehides) in both union offers: "If it had not been for the inclusion of the mandatory manning re~ quirement dause in both Association offers, the Chairman would have voted to select [the alternate] Association offer ... as the most reasonable."" The chairman also objected to the union's inclusion of civil service provisions.u The city', first offer was selected, even though the size of the increase was smaller than in it< alternate offer, be- cause ito;. across--the-board wage increase Was preferred by the union Over the tem, of 1.15 percent in both 1971 and 1972. The -city's position is that although stith legis~ lated increases may not have been bargained at the table. they are a very real portion of the city's labor costs and ooosEquently must be in- cluded in any i;a1culatioru of annual economic adjustments, Naturally. the unions have not en~ thu8iastk:any agreed with this position, and in a laler case (AFSCME in 1972-73), this issue was an important cone of contention, with the arbitration chairman agreeing with tbe city's position. 2$Paul D. Hanlon, "Expianatiou of the Selection of Final Offer," In the Matter 0/ A7~ bilT4tion between InteNUJtional Assrx:iaticm 0/ Fire Fighteff) Eugene Fife Fightfff's Associ4ticm No, 851, AFL·CIO and City 0/ Eugene, Ort'fgon (American Arbitration Association Case No. 75·!I9-0004-72,Marcll 8, 1972) , p. 10. MIbid .• pp. 7-8. The city administration and the fire fighters disagreed l'tbou t the con linued existence of the civil service system, The city's position haa been that the bargaining-arbitra- tion cbarter amendment eliminated civil serv~ ice; that is, the emp~oFs have either bargain- ing or civil service t.ights" but not both. The city's position has been upheld in oouTt. Funk D. Jackson v. City of Eugene, Case No. 72·1590, Lane County .Circuit Court, Eugene, Oregon •. (-J ~----'-'--------------'--------'------"-- I I i j 193 lth 1 ted nel l :ta- lti~ ec- !tat be )th the re- ~on ted Lon 11e m's 5.24 lei'~C~, Ita,_ be- age the 912. '81.-i at the In- lmic en- i in .. ne 'he ;ty'. the Ar- • of !tion egon No, and me<! :ifY'S -ilra- ICI'V- tain~ The Tali' 15~ )\ ;"- 194 INDUSTRIAL AND LABOR RELATIONS REVIEW fringe benefit increases in the alterna te offer. The second final-offer experience in- volved the negotiation of an initial con- tract with the police union during the period 1971-72. As in the case of the fire .... 'ighters, all items were declated in dispute, and earo side submitted two final offers for conSideration. The Ill;ljor disputed items included the scope of management righ ts and the size of the economic adjustment. The city offered package increase, of 6,2 percent and 6.7 percent, and the union asked for 15.9 percent and 13.0 percent." As a result of feedback from its arbitration repre- sentative about the third party's reac- tion to the size, of ilS proposals, the union approaroed the city about a ne- gotiated agreement. Consequently, dur- ing the seconi! day of arbitration hear- ings. tbe two sides mutually requested a recess; reached agreement pn all itemsj and the arbitration process was termi- nated. The final settlement was based largely on the city'S alternate offer and the financial adjustment was slightly in- creased (to 6.8 percent). The noneC()- nomic clauses in the final agreement fol- lowed the language in the city's alternate offer. The third final offer experience in- volved the negotiation of an initial con- tract with the AFSCME local. Both sides wanted to avoid arbitration of thi' first contract, and as a result they agreed on all items with me single ex- ception of union security. The union wanted an agency shop (labeled a "fair share" arrangement), and the city of- fered a maintenance 01 membership pro- vision. The city believed it could not voluntarily agree to the agency shop 2.6Thae are the city's caku1ations and as 'such im::lude the 1.15 percent legiSlated increase in retirement contributions. proposal, because a sizeable number of emplo.yees in the AFSCME unit were opposed to being represented by the union and were not members. The ci ty representative did not oppose the agency shop in prInciple,however, and the union repres<:.!1tatlves recoguized that the city's maintenance of member- ship offer would strengthen the union's position over the existing open shop sit- uation. Both sides were merefore will- ing to let a third party decide the Issue. Instead of utilizing the city's arbitration procedure on this one issue, the parties agreed to use the fact finding services provided free by the state and to be bound by the fact Jinder's decision. Al- though the parties officially labeled this procedure "binding fact finding," It was actually final-otfer arbitration since they agreed to be bound by the decisinn, and, as a practical matter, the third party had altnost no molee other man to select either the union or city posi- tion. In this case, the union', position was selected The 1972~73 round of bargaining also yielded a variety of results. In early 1973, the city and the police union rearoed a two-yeat agreement without resorting to the arbitration procedure • In addition to an overall 12.0 percent economic adjustment, tbe agreement in- eludes a new promotion hierarchy, from patrol officer to police agent, with advancement based on a combina- tion of advanced education, training, and above-average performance_ Shortly mereafter, the city and the fire fighters' local rearoed agreement on almost all items in a. two-year contract wim the ex- ception of the form of part of the pay package, . which was another manifesta- tion of ,the continuing dispute over me establishment of longevity pay. The two sides tool\,A/lis single issue to atbitra· I I J I f FINAL-OFFER ARBITRATION 195 tion, with the union proposing a lon- gevity pay plan estimated to cost 3.1 percent annually and the dty offering a tax"heltertrl annuity benelit of 3.0 percent in its first offer and an across-the- board increase of 2.8 percent in its al- ternate offer." The majority oE the ar- bitration panel (i.e., the chairman and city representative) selected the dty's across-the-board increase as the most rea- sonable offer and rejected the other pro- posals",mimarily because of the scarcity of similar pay plans in the relevant labor market. In their second contract negotiations, the city and AFSCME reached agree- ment on the noneconomic clauses in the contract (which amounted to little mOre than a continutation of the first contract's language) , but they could not agree on the sire oE the economic adjust- ment. Each side submitted two one-year final offers to the arbitrators, with much disagreement over the caleula tion of the value of each side's offers. The arbitra- tor's ligures put the city's offers at 5.9 and 6.2 percent and the union's offers at lOA and 10.0 percent." The arbitration board received ~he parties' testimony, convened in executive session to make a selection, and tentatively decided in favor of the city's alternate offer-that f:$These figures do not include the L15 per- cent legislated jncrease in ret.ittment -contribu- tions. In addition to longevity pay. the union's offer proposed to eljminate all the pay steps in several ranks except fOT the hIghest step. 21The city calculated the COSt of its offers to be 6.1 and 6,4 percent. and the cost of the un~ ion'$ offers to ·be 10.8 and 10.4 percent. The union's cakulatiom of the city's .offers were 4.6 and 4.1 percent, and of its own offers, 9.Q and 8.6 percent. The union's figures did not include the legislated increase in retirement (;<)ntribu~ dons, a pomtion -the arbitrator rejected. H. Kenneth Zenger. In the Matter of the Arbitra- tion Between the Cit, of Eugene Local 1724~A, AmiTican Federation of State" Counly, and Mu~ nidpal Employees} IlFL-CIOs Affiliated with CoullCi17J (March 21, l!m) , pp. 4-7. is, the chairman indicated he favored that offer. The two adversary represent- atives on the board then communicated this tentative decision to their princi- pals, and the two sides resumed direct negotiations. Refore a formal arbitration award was served on the parties, they reached direct agreement on a three- year contract containing a 13 percent economic adjustment over the first two . years and a wage reopener for the third year. 4. The results of the Eugene experience are summarized in Table l. Effects on the Negotiation Process A. noted previously, the most salient criterion by which to evaluate the Eu- gene experience is whether or not this particular fonn of arbitration induces the parties to reach their own agree- ments. Since the evidence offers support to both opponen ts and proponents of final-offer arbitration, any conclusions reached must be tentative and will de- pend in part on one's preferences and vantage point. The initial contract negotiations with the police were unsuccessful in produc- ing an agreement prior to arbi tration, but the actual arbitration proceedings show how this procedure can induce the parties to reach an agreement. After the arbitration hearings commenced, the as- sociation's representative on the board informed his principals that their pro- posals would not meet the arbitrators' criteria for selecting the most reasonable offer.1I6 As a result, association and city representatives conferred, mutually re- quested a reces., and then negotiated an agreement. As a consequenoe of this lirst-round 28The union representative was a Portland attorney. This statement is. baBed on oonversa- tions whh bim and with union leaders. ) 195 e favored represent- nunicated ir princi- ,ed direct rbitration ti~s, they a three- I percent first two the third <perience roceM ,t salient the Eu- not this (-' -\;s \ }-f '. J/ n asL ..... --e- support oents of lclusions will de- lees and >DS with produc- itration, reedings 1uce the .fter the . the as- ~ board eir pro- ittators' sonable ,nd city ally re- ated an ~ t-round 196 INDUSTRIAL AND LABOR RELATIONS REVIEW Table 1. Eugene Negotiation'Arbitration Experience in the Public Sector, 1970-73. Employ" Group 1970-71 negotiations (under conventional arbitration): Fire Fighters 1971-72 negotiations (under finalo.offer arbitration); Fire Fighten Police: Patrolmen AFSCMll 1912-73 negotiations (Wlder final-offer arbitration): Fire Fightel'$ . Police Patrolmen AFSCMll Arbitr4tion Invoked? No Yes Yes Yes (binding faot finding) Yes, No arbitration experience, police associa- tion leaders indicated their desire to avoid arbitration during 1972-73 nego- tiations. Consequently, the two sides ne- gotiated a two-year contract that in- cluded the innovative promotion' hier- archy referred to earlier. Both sides have indicated their satisfaction with this contract, and it seems fair to give substantial credit to the previous year'. arbitration experience as providing the incentive necessary for this negotiated agreement. The experience with the fire fighters Items SuhmUUd to ArlJiJrl.JJrJrJ .-.... Entire contractual package Entire contractual package Union security;-,ill other items agreed to in negotiations Lt:mgevity pay dispute; all other items agreed to in negotiations One .. year erooonUc package; noneconomic issues agreed to in negotiations ()utcom~ Negotiated agreement City first offer selected Direct agreement reached during arbitra .. fum proceedings Union pooition (agency shop) selected City alternate offet selected Negotiated, agreement City alternate offer selected but was moot beca.we of three-year agreement negotiated during arbitTation proceedings does not lead to any clear-cut conclu- sion. After negotiating a first contract under a conventional arbitrationproce- dure in February-March 1971, the city and the union did not formally agree on anything in their next n~tiation, and each took two complete contract packages to arbitration. Although the two sides were net very far apart on the size of their economic ,proposals (6.0 and 6.5 percent versus 8.6 and 7.4 per- cent), they differed widely on noneco- nomic issues, and the chairman selected one of the city's offers because he ob- FINAL-OFFER ARBITRATION 197 jected to the manning requirements in both union offers. This outcome appar- ently had a salutary effect on the incen- tive to bargain, for the next year' the two sides agreed on a two-year package with the exception of longevity pay. which was submitted for arbitration. Negotiations with the AFSCME local reflect a mixture of bargaining incen- tives, the importance of informal com~ munications. and internal union po]it~ leal considerations. The fITst set of negotiations resulted in a direct agree- ment. and union leaders' comments in~ dicate that the incentive to bargain WaB IncreaBed because of the police and fire unions' experiences _ a few months previously." The second round of AFSCME negotiations went to arbitra- tion on the economic adjustment pack- age. in part because of internal union political considerations. Selected por- tions of the bargaining unit were un- happy with union representation. in part because of the imposition of the agency shop a few months previously.'· Union representatives felt constrained to ask for a relatively large package in, order to ':Jefend their own organiza- tional position, It was only after the union leaders learned from their associa- tion representative that the arbitration chairman had tentatively decided in favor of the city that they negotiated an agreement. The result was a three-year contract that provides increased security for both sides. This outcome is similar to that of the initial police experience. in that both agreements were negotiated after the unions involved were informed 2'&The serious bargaining with AFSCME over this first contract was conducted .in the summer of 1912. The initial pollee and fire fighter!' ex- periences with final-offer procedures occurred in February and May 1972. SOAl"bitration was invoked in February 1973; the agenty" shop award was issued in November 1972. by their arbitration representatives that their offers would fail <as in the case of the police negotiations} or had failed <as in the ease of the AFSCME) the "most reasonable" "tests. One can conclude. after examining these experiences, that the incentive to bargain is increased primarily because of the "sudden death" nature of the procedure: either party may "lose the entire balt game" if the arbitrators deem its offers less reasonable than one of those made by the other party. The 1971-72 arbitration experiences with police and fire fighters and the 1972-13 experience with AFSCME dem- onstrated this possi bili ty. The police and AFSCME experiences revealed the futil- ity of asking for economic gains that considerably exceed prevailing marke t standards. and the fire fighters' experi- ence revealed that it is possible to lose an entire package because of the inclu- sion of one objectionable provision. These experiences have made all the parties in Eugene aware that a success- ful final-offer arbitration strategy is the antithesis of a successful conventional arbitration strategy: instead of main- taining wide areas of disagreemen t in hope of a more favorable compromise award. each side must develop more rea- sonable proposals than the other side. which. on economic .issues in Eugene, translates into narrowing the areas of disagreement around a central figure supplied by market comparisons. It can be seen why this record offers comfort to both supporters and critics of final-offer arbitration: proponents may stress that only one of six cases re- sUlted in an arbitration decision rover~ ing the entire contractual package; op- ponents may argue that arbitration was invoked in five out of six cases, Consid- ering the parties' almost total lack of j 1 ~ 1 I 198 INDUSTRIAL AND LABOR RELATIONS REVIEW bargaining and arbitration experience, howev~, on.d the fact that the city pays all arbltratlOn costs, we believe that final-offer arbitration has been at least mo~erately successful in Eugene in pre- servmg the parties' incentive to bargain. Procedural Characteristics Selected aspects of the Eugene final· offer procedure deserve examination for their contribution to the workability of the process. To the extent .these pro- cedural characteristics have unifying themes, . these themes are flexibility and uncertamty, Probably the most unusual aspect of the Eugene final-offer framework, as compared to final-offer procedures adopted elsewhere, is the £act that each side may submit two final offers. This dual opportunity greatly increases each side's flexibility in its presentation to the arbitrators, and this fledbility is especially evident with multi-item packages.31 This was demonstrated in the first lire fighters' arbitration case, in which the economic portion of the city's first final offer consisted largely of an across-the-board pay increase, and the city's alternate offer consisted primarily of fringe benefit increases, The second AFSCME arbitration provides a similar example. This dual opportunity also al· lows both sides more flexibili ty in acced. ing to constituent pressures, For exam- ple, union leaders may load one offer with many "goodies" in order to satisfy membership· pressures, but they may also make another offer that is struo- tured in a more realistic manner. An equally important result of the dual offers is that they increase uncer~ slGrodin argues in faV()l' of n:tultiple offers in multi-issue cases all one way of providing _ ....... :flexibility. Grodin. ''Either~ Arl>itradon for ~ Public Employment Dispute~," pp. 264-200. tainty on both side. of the table. If a party only had to present one offer, it seems reasonable to expect that this offer would approximate its final negotiating pos! lion and the other paTry would be aware of that. This relative certainty is substantially reducect' when each side may present two offers, for even if one offer does approximate the final negotia- tion position, the o'ther may not, Not only does this uncertainty put pressure on both parties to be more "reasonable" ~n their offers, it increases the probabil- lty that each party might have one offer so close to an offer of the other party that the two sides can reach their own agreement. ' The second procedural aspect worth emphasizing is the maintenance of the flow of communications-between the parties directly and between the parties and the arbitration chairmJln-once the arbitration procedure is invoked. As ~oted, the ordinance mandates negotia- 110llS for five more days after the parties have exchanged final offers, and it also invites negotiations after the arbitration procedure has begun. The tripartite form of the arbitration board has also assisted significantly in maintaining the flow of communications, and in both the first police and second AFSCMI. cases, union representatives on the board were instrumental in conveying information to their principals, about the chairman's tentative decision, which resulted in negotiated agreements." Used in this manner, the Eugene proce- dure becomes a form of "med-arb" in which the arbitrator uses his decision. making power to pressure the parties into reaching their own agreement. i'U1Stevens speculates on the usefulness of this kind of oommunication in his diS1:ussion of "Type II" one-or-the-other arbitration. Stevens. "Is ~~pul!lory ~~bitration Compatible with Bargauung?·· p. '47 ~~ FINAL-OFFER ARBITRATION 199 Critics may legitimately question whether in most situations there would be an incentive for a party to negotiate further if it knew ,i t was going to be awarded the decision. For instance, in a ci ty where union~management relations are hostile, internal politieal constrain~ normally would not permit union lead· ers to negotiate away anything achieved as a result of an arbitration award. The fact remains. however, that in Eugene ~ most of the arbitration chairmen have , perceived' the city's offers as most rea~ sonable. and yet city representatives have been willing to resume negotia- tiOns.38 The third aspect of the Eugene proce- dure worth empbasi7lng is the extent to which the arbitration criteria reduce the arbitrators' discretion and consequently the parties' uncertainty about which final olIer will be selected, The ordi- nance was purposefully fashioned to include only four specific criterla- bargaining history, private market com· parisons, public market comparisons, and the city'S ability to pay. The interests of both sides can thus be con· sidered, but the arbftrators do not have a "catch·all" criterion on which to base their selection," Such specificity signifi. .asCit}l representativee place 11 high vaiue on negotiated settlements because they believe ,that such agreements are mare lik.ely than imposed !lettiements to re8ect ooth parties" objectives and that needed innovatiOns can be imple~ mented successfully -only if .'voluntarily agreed to, and also because they d~ire to, avoid the negative impad on urlWn-1l1l;lllagcment relations that may result when one party loses in arbi~ tratiOn. 4H·Consider, for instance, the final criterion in the Michigan public safety arbitration law': "Such other <factors ... which are non:uaUy or traditionally taken into consideration in the de-- termlnatio~ of wages, hours and mnditions of employment through VOluntary collective bar~ gaining. mediation, (act-findings. arbitration or otherwise between the' parties, in the public service or -in private employment." Subsection (h) of Section 428.239 of Mldigan Publk Act cantly reduces the possibility that the arbitrators may make a decision on the basis of factors unknown to Of not con~ sidered by the parties, Consequently, there is little incentive to use a strategy of "let's take it all to the arbitrator and he might find a way to justify giving us the award," Also, if the parties know in advance the criteria the arbitrators will use, they can use these same criteria to reach a negotiated settlement. The final pi\Jcedural aspect to he con· sIdered involves Eugene's negotiation- arbitration timetable described earlier in this article. In the 1971-72 negotla· tions and arbitrations with police and AFSCME, this timetable was walven be· cause the ordinance permits such waiv- ers in initial contract negotiations. Simi- larly, in 1972-73 negotiations, the union and the city in the police and AFSCME negotiations mutually waived the pro· cedural deadlines,' but in the case of the fire fighters, there was no mutual waiver and negotiations and arbitration proceeded as required by the ordinance. Although there needS to be a hard·and- fast deadline in any negotiation setting, there also needs to be some flexibility to allow the parties additional negotiating time~ if such time can be used to achieve a settlement, This flexibility is not built into the Eugene procedure, and if the two sides cannot agree to mu· tually waive the time constraints, the timetable's rigidity may operate to in· hibit a negotiated settlement. Environmental CharacteriBtics Any examination of the Eugene sys· tem wouln be incomplete without men· .tion of two salient characteristics of the negotiation~arbitration environment: '12 (1!l69) , as a.tnended by Public At:< 127 (19'{,2), in Bureau of National ~,\fIairs. Govern- ment Employe.e. Relations Report Reference File, 51: 3N5. I , r ,~'--'l t , 'n f, c fi tl t< tl tI 0' F: w at hi ti, dl er til Be Yo u1. I -, I I I I I ! I I I .. / , 1 , 200 INDUSTRIAL AND LABOR RELATIONS REVIEW the union~management attitudinal rela~ tionships and the relationship between city labor relations and city politics. In terms of Walton and McKersie's typol- ogy, interactions between theetty and its three unions probably are' best de- scribed as accommodation: .the parties accept each other's legitimacy, are will· ing to trust each other up to a point, and are reasonably friendly in their day-to-day de.alings with each other." Although each party protects its righls and interests, both have displayed a fair amount of goodwill in their dealings with each other. A second important factor is the rela- tive absence of "distributive" or compet- itive elements in the city's political situ- ation, at least with respect to labor relations. Elected ci ty officials serve on an uncompensated pait-time basis and are relatively removed from the union- management interaction system. Also, these officials have not attempted to use municipal Jabor relations as a vehicle for the advancement of their political careers. On the financial side, the city'S financial position is strong enough that the city has not relied on an "inability to pay" theme in negotiations or arbi~ Itation, so there has been almost no dis- tributive competition among the parties over the allocation of scarce resources. Finally, the city is overwhelmingly white," SO the racial tensions that have affected labor relations in other cities have been absent. The fact that the negotiation-arbitra- tion system does not have to cope with distributive political pressures and ov- ertly hostile union~management interac .. tion patterns has con tributed to .the £$Richard Walton and Robert McKersie. A Beiutviarat Theory of Labor Negotiq.tions (New Yon" McGraw-HilL 1965), pp. 185-189. seApproxlmately 2 percent of the city'S pop- ulation are members of racial mrnority groups. parties' willingness to seek direct agreements instead of inslstmg on pursuing the complete arbitration route over all issues in each negotiation. In addition, the existence of the bargain- ing-arbitration ordinance has tended to de-F~liticize the city labor relations sys- tem. The ordinance gives elected officials a legitimate reason for refusing access to union leaders, and the final~of~ fer process prevents matters within the scope of bargaining from being resolved in political arenas, such as the floor of the ci ty council." Concluding Observations ~ In this concluding section, the Eugene experience will be used as a base from which to respond to the follOWing criti- ciSlIl1! of final-offer arbitration: the need for bargaining sophistication, the lack of face-saving quality in final offers, and the almost complete elimination of the arbitrator's discretion. The Eugene experience offers some support to both proponents and oppo· nents of Grodin'S view that the final-of- fer procedure "appears best suited for parties fairly· sophisticated in the bar- 3TIt is difficult to present "before and after" evidence regarding the de-politiclzation of bar~ gaIning, since very little bargaining occurred pricn to the implf'.mentation of the finat-offer system. Prior to the introduction of bargaining. however. the city employee organizatioI1S regu- larly lobbied with city council members C(}n~ cerning pay and other personnel matteI'$. With the introduction oJ formal collective bargaining in September 100 1, the council designated the city manager or his appointed representative to handle aU matters within the scope of bargain~ ing, Since then, the council has rebuffed at- tempts by city union representatives to disCll,SS bargainable matters and has referred tbem to the city manager and the personnel director. The ordinance also preempts any role the council might play in dispute resolution by marydating that all impasRS ,be referred to the arbitrators, This Mll.lle effect, of COl.\rse. might ~ve been achieved by a conventional arbItI'a- , troo system. FINAL-OFFER ARBITRATION 201 gaining process, fairly well able to judge the reasonableness of their own posi- tions in relation to the standard, likely to be applied by the arbitrator." " Pro- ponents of this view can point to the first police. second lire lighters. and sec- ond AFSCME cases for support. Cer· tainly the 13-16 percent economic ad- justments propnsed by the police union would not have met the arbitrators' "most reasonable" criteria, especially with city offers in the 6-7 percent rdnge, and the AFSCME case present~ a similar although less clear-cut example. The lire lighter'S manning proposals were found so objectionable that both their offers were rejected. One might argue that the union representatives in these cases lacked the bargairnng sophis- tication necessary to participate success- fully in linal-offer arbitration and thus were penalized unfairly. Tills argument. however, has a hollow ring when one considers the fact that city representatives also had almost no experience in bargaining or arbitration. Also, it must be remembered that in other cases the same parties either did not go to arbi tratR.>n or went to arbitra- tion with only one issue after agreeing to all the others. One must also realize that in the second fire fighters case, the parties were not very far apart on ec0- nomic issues. Consequently, the Eugene experience does not necessarily support the contention that sophisticated and experienced practitioners are needed to make the final-offer mechanism function properly. Furthermore, We believe the Eugene experience suggests that actual immersion in the final·offer process fa- dlitates sophistication in the most rapid manner possible. Another criticism that has been lev- 3SGrooin. "Either-or ArbItration for Public Employee DIspute.," p. 2M, eled at final-olEer arbitration is that the procedure "lacks the face-saving quality available in conventional arbitration where one of the parties, or both, feels it must assert certain positions which it knows to be 'out of the ball park', for political or ideological reasons."" In conventional arbitration the arbi trator can excise these unreasonable proposals, but in final-o/fer arbitration he cannot. Tills criticism seems faulty for at least three rt~sons. First, if direct settlement is going to be reached in any negotiat- ing setting. these "out of the ball park" proposals must be dropped. Tills criti- cism seems to imply that conventional arbitration should be the end point of all negotiations 50 that adversary repre- sentatives will be free to advance unrea* sonable proposals. It is difficult to see why final-offer arbitration should be sin- gled -out for criticism on this dimension, especially when one considers that the "loss of face" question is integrally in- volved in all strike·resolved impasses. Second, the dual-offer framework allows an escape valve for these situations. The "out of the ban park" demands can be loaded in one offer, and the second offer can be made more realistic. Third, in· the second AFSCME and first police final-offer experiences, a union dung to extreme offers until it received negative feedback from its panel representative, after which the parties negotiated their own agreement. Thus, this process per- mits the union leaders to tell the mem- bership that the negotiated agreement was the best they conld do, given the unfavorable decision. Perhaps the most widespread and di ... turbing criticism is that the final-offer procedure too severely circumscribes .the arbitrator's discretion~ For instance, Grodin's primary objection to having an 3Olbtd., p. 264. 201 >at the quality tration n, feels hieh it rk', for ,. at! II:;~' )itrator >posals, cannot at least :Iement egotiat. I park" is criti- ntional oint of I repre- unrea .. to .-] be sm: tension. hat the ally in· npasse$. . allows 08. The tan be ,d olfer lird, in police lung to legative ntative, :d their ess per· .emem .. ."eement' ven the lnd dis- laI·offer ibe. the nstance, . ving . 202 INDUSTRIAL AND LABOR RELATIONS REVIEW arbitrator select an entire package of is- sues is that he would not have tbe ftexi- bility necessary to effectuate the priori. ties he considers appropriate." Another example is the complaint by one of the neutrals in a recent lim.l-offer case in Indianapolis, ~ho has said that the arb'" tration panel in that case did not have the necessary flexibility to "fashion a lahor agreement which, i;n its judgment, would have been workable and equita- ble and which would have met the needs of the parties." n Finally, the ar- bitrator in one of the, Eugene cases also criticized the fact that he was not in a position to use his discretion to fashion what he considered to be the most desir- able award." This kind of criticism is disiutbing because it suggests a misconception of ' tbe' function of the nnal-olfer procedure." In conventional interest arbitration, the arbitrator. issues an award in which he elIectuates iUs judg. ment of the comprol!lises that the par- ties could not or w01lld not elIectuate at the table. The overriding purpose of 4<OIbid· .. · p. 265. -nW,itney> "Final OlIer Arbitration: T'he In~ diaoapoUs Experience," p. 25, The criJicisms of final~offer arbitration offered as a re.ault of this experience seem exceptionally misplaced." For final offers to be effective as a "strike1_ike" 00" pa.sze resolution mechanism. negotiati~~s must take p~ in a «;Ontext ,in which the parties know in advnnce that if they do nqt agre~. an arbitrator will select one party's 6nal offer. In Itf'dianapolis. the f3rties decided 10 use a.1inal- offer procedure after tJu:ty had negotiated to im- passe. The paTtieg~ lack of understanding of whiit unal·offer arbitration is designed to do. is exemplified -further by their selection of two ar~ bitrators to hear the case. .aHanion. "Expfauation 'of the Selection of Final Offer," p. 10. ..swe are assuming that these fXitidstits are genuine and 3.'te not Offered simply as face·$av- ing so1ace to the losing party, If this assump .. tion is inCOlTect, our responses to the 'O'iticiams are Il\:apla<:ed. -.-:-- the linal-ofi'er procedure, however, i. to induce the parties to make their own com promises by posing potentially .... vere costs if they do not agree. In other words, a successful final...,ffer procedure is one that is not used; one that induces direct agreement during the p~p'ceedings; or, using a less rigorous definition of success, one that SUbstantially narrows the area of disagreement. And when the proced ure is used, the function of the arbitrator is to operationalize its poteo- tial costs by deciding against the party that advocated the less reasonable offer (s). In other words, the final-offer mechanism is intended to promote the give-and.take 9,f good-faith bargaining by acting as a "strikelike" substitute rather than to serve as a mechanism by which arbitrators may exercise their discretion. Consequently, arbitralors' complaints of a lack of discretion suggests that the linal-olfer procedure is functioning as it was designed to fuuction." This ctiticism stems in part from the dilIiculties a final..,ffer arbitrator would presumably have in trying 10 resolve a multi-issue impasse. In 'response, some authors have proposed that in multi- issue disputes the arbitrator might choose among the final offers on an issue.by- issue basis," and the Michigan public safety arbitration statute does provide for that type of selection on economic "These romplainta IDay stem in part from arbitrators' objections to the win·lOl!e nature of the final-oller process. It is. undel1ltandable that a third party would prefer to-fashion an award that gives something to both sides rather than issue an award tha.t is idendfied SOlely with one side or the (}too. See Byron E. Ca1ame, ., ':Beat Offer' Arbitntion's Critio." Wall Street 1000:r~ "al, June 14-. 1972. editorial page. 4t1See Lev, "Strikes by Government Employ- ees: Problems and Solutions," pp. '1'11-'1'17; and Gilroy and Sinicropi, "Impasse Resolutkm In Public Employment: A Current Assessment," p • 511, 1'----- 1 I 1 FINAL·OFFER ARBITRATION 203 issues," The Eugene experience with entire package selection snggests that is- sue-by·;ssue selection would pennit the arbitrator to substitute his judgment lor the compromises the parties could not or would not make at the table and to balance a multi·issue award with some· thing lor each side, thus reducing the incentive to avoid flnal.offer arbitration. As such, issue·by.issue selection, seems conceptually more similar to the com- pl'()l}1is~e·J.)y·!hiId,party-fiat nature of ~n· ventional arbitration than to the compro- mise.across·the·table nature of the Eugene final-offer procedure. Tbe experience in one city obviously does not establish a prima facie case ei. ther lor or against the workability of the final-offer' con,cept, and much more empirical evidence is needed before any accurate conclusions can be formulated. There is no perfect final-offer proce- dure. Instead, final-offer procedure. can be built in a variety of forms (entire package versus issue.by.issue selection, one versus two offers, tripartite board versus single arbitrator, specific, versus gen~al 'selection criteria, shared costs ~ 4tlMicbigan Public Act 312 (1969) • as amended by Public Act 127 (1972), Section 423.288; and Bureau of Nationa! Affairs. GotItrn- ment Employee Relations Report Reference File, .!iI, Sill>. versus employer paid, etc.), and the out· comes under any procedure must be evaluated against the provisions con· tained in that particular procedure. In addition, any evaluation of the final. offer process must consider the issues involved in the various disputeS. The Engene experience suggests that the final·offer procedure is effective in nar· rowing the area of disagreement around many monetary and nonmonetary issues but may be,Jess effective in bringing the parties together on certain issues requir. ing "yes or no" positions (e,g., the first fire fighter arbitration concerning the union's insistence on the inclusion of manning standards in the contract and the city's insistence on their exclusion, or the first AFSCME arbitration con· cerning the union'. demand for the agency shop and the city's offer of main· tenance of membership), In all. the Eu· gene experience suggests, but certainly does not prove, that final-offer arbitra· tion, as compared to conventional arbi· tration, can' incre... the probability of negotiated settlements ,by requiring the parties to bargain in the context of an effective "strikeIike" impasse resolution procedure. Accordingly, it is the recom- mendation of the authors that the final· offer procedure he used mOfe widely in place of conventional arbitration. ~- I IAFF Binding Interest Dates of Arbitration Arbitration History 1980 Hearing dates August 11, 12 & 13 of 1980 Decision issued 12/11/80 1999 2000 Hearing dates February 29, March 9 and 10 of2000. Decision on 6/19/2000 Fire Union local 13191AFF Binding Interest Arbitration History Issue # 1 Issue # 2 Issue #3 City salary proposal: Pension Fonnula: Pension Calculation: 9.5% on Jan '80 City proposed 2nd tier for City position status quo of 4.5% on July '80 new hires of2%@ss. highest 36 mos Union salary proposal: Union position status quo of Union proposed Single 9.5% on Jan '80 2%@SO. Highest Year 4.5% on July '80 6.5% on Jan '81 [City Prevailed} [Union Prevailed] [Union Prevailed] Union proposed to broaden City's nepotism policy to allow employment by Fire Dept of relatives by ''blood, marriage or adoption" of current employees but could not supervise/hire/fire Cityposition: status quo [Union Prevailed] Salary Increase Comnarable Survey City proposal: 5% increase Agencies Union proposal: 8% increase Cityproposal: 15 regional comparable fire agencies [Alameda, Berkeley, Fremont, Hayward, LivennorelPleasanton, Menlo Park, Milpitas, Mountain View, Redwood City, San Jose, San Mateo, San Ramon, Santa Clara County, Santa Clara City, South San Francisco] Union proposal: 9 regional comparable fire agencies [Santa Clara City, Santa Clara County, Milpitas, Mountain View, San Jose, Sunnyvale, Menlo Park, Redwood City, Fremont] [City Prevailed] [City Prevailed] Cost of Arbitration Arbitrator Arbitrator $12,000 Adolph Koven Court Reporter $1,420 Attorney Fees paid by City: $8,000 City portion + atty fees equivalent to $38,949 in 2010 dollars·. Per CMR 116:1 dated 118181 staff estimated Single Highest YR benefit added cost was $50,000 or 1.4% ofsal & bens. Cost to implement total Arbitrator Award $568,000 or 16.7% ofsal & bens. Not able to find data on costs Not able to find data on costs Phillip Tamoush ~once Union ... Binding Interest Arbitration History PAPOA Dates .of Issue #1 Issue '# 2 Isslle#3 Issue #4 Issue #5 Issue #6 Issue#? Issue #8 ls'SU9 #9 Issue #10 Issue#11 Issue #12 Cost of Arbitration Arbitrator Arbitration 1981-82 Hearing dates Salaries: Police Agent Pension Working Out of Vocational Incentive Psychological Work Schedule: Arbitrator $6,000 Sam Kagel June 3, 4, & 6 of City proposal: 9.5% Classification: Calculation: Class: Pay ReQualifier Counseling Program: City Court Reporter $766 1981 July '60 and 10% City proposed to City position: City proposal-(POST certification City proposal -proposal-Existrng 4~ Decision issued July '81 elfminate. Union status quo of 7%WOC pay pay): mutually acceptable 10 schedule continues Attorney Fees paid 8113181 on 6 position that highest 38 months after 5 City trial program to and City has right to by City $4,186 issues. Work Union proposal: classification was a Union proposal: consecutive shifts, proposal-annual overlap with existing determine days off schedUle 9.5% Jan '80, 4,5% promotional opportunity Single Highest Union requirements to programs. through bidding based remanded back to July '80 and 6.5% and could not be faken Year Proposal-pay qualify for Incentive Union on seniority. City portion + atty parties; they could Jan '81 away without adequate, ,same Step # at pay proposal-Implement Union fees equivalent to not reach compensation. the higher Union plan similar to Santa proposal-Establish a $17,113In 2010 agreement. classification (Ie proposal-waive Clara County Deputy committee (2 union/2 doltars·, Decision Issued from step 3 Police requalification Sheriffs, city) to analyze 4~ 10 7/6/82 on work Officer to step 3 requirements schedule and propose Per CMR 432:1 on I schedule issue Police Agent) for recommendations for 9/10/81, cost of entire shift with effectiveness Single Hlgh •• t YR any work in higher $36,464 or 1_3% sal class. & benefits, I I I I Cost of total I [compromise-! Arbtitrator Award : : : [compromise-some : : $630,351 or 22.5'% [Crry Prevailed] [Union Prevailed] [Union Prevailed] '[City Prevailed] :requirementsj : implement plan '[City Prevailed] sal & benefits. :mutually agr~ble] 1983 Hearing dates Term: Salaries: Holiday Pay: Working Out of Payment of Medical·Oental: Personal Business Tuition Sick Leave Accrual: Vocational Incentive Shift Assignment: Payoff of Sick Leave ArbHrator $6.000 Sam Kagel November 15, 16 City proposal: 1 year City Proposal: 9,2% Only PAPOA Class Employee Portton of City position: status LeaVe: Reimbursement: City posItion: status Pay (POST City position: status for Disability Court Reporter & 17 1982. Union proposal: 2 Officers and 8.5% membetS (egularly City position: PERS pension: quo Cummtlyemployees Crty position: status quo certification pay): quo Retirement $1705 Decision February years Sergeants eft 7/1182 assigned to work Status Quo (from City position: status Union proposal: 3 may use up to 20 quo Union proposa!: City position: status Union proposal: allow City Proposal: $7,705 sput by 16,1983 Union Proposal: 11 % holidays receive last arbitration) quo separate proposals: hours of sick. leave for Union proposal; Increase accrual from qtro from last to stay on shift of equal1ze payoff for parties eff 7/1182 and CPI eff "holiday in Ifeu pay" Union proposal: Union proposal: City 1) eliminate Personal Business per Increase amount from 96 hours per year to arbitration choice beyond 2-year service and disability 711183 which is the !mmediate 1% should pay both deductible, 2) new year. $450 to $000 per year 120 hours per year, Union proposal: rotation requirement retirements by Not able to find data equivalent of WOCpay Employer (29,91%) vision plan 3) expand City position: status and extend to physical Remove any reducing unlimited on attorney costs. Holiday Pay for and Employee (9%) dental to include quo fitness programs requallflcatian sick leave payoff for time off converted portions orthodontia Unlo!l proposal: requirements disability retlrement City pGttl-on to cash. provIde separafe bank. Union position: status equivalent to City proposal: of 2(1 hours Personal quo $8440 in 2010 status quo Business leave dollars". Union proposal: ALL officers Per CMR 212:3 on receive Holiday in 3/1 0/83 • cost of 'Iteu cash 7% pickup of I Employee ! contribution to ! : : pension $185,435 orS.18%ofsal& [Union Prevailed] [compromlse~9.8% [City Prevailed] (compromise-after [Union Prevailed, bul bens. Coet of total year 1 and City~paid 1 shift, 7% WOC apply additional City [City Prevailed] [City Prevailedl [Union prevailed] [City PrevalledJ [Union Prevailed] [mutual agreement1 [City Prevailed] Arbitration Award PERS considered 2nd paYI pick up as wage $540,601 or 15.1% yr wage increase] increase in yr 2] of sal & bene 1994 Hearing dates Salaries; Vacation Accrual: Drug IAlcohol Arbitrator $10,894 Nonnan February 14, 15, City proposal: 3% City position: status Testing: S10,894 spilt by Brand 16, 17 and May g, eff712419S quo City: Nnegotiate partie. 1994 Union Proposal: 5% Union Proposal: program for Decision July 5, eff 711193 Increase vacation reasonable Not able to find data 1994 retroactively applied accrual rates after 14 suspicion/random on attorney costs. years of service and testing; remand again after 19 years of back to parties with City portion service. Arbitrator retaining equivalent to jurisdiction if they , $8,019 in 2010 cannot agree doUars*. Union proposal: No language in MOAon alcohol/drug ! monitOring and arbitrator has no )urisdiction In this matter. I [Union Prevailed· [Ci;y Prevailed] i[Unlon Prevailed] arbitrator declined : i jurisdiction) I I I I Policy and Services City Council Committee Special Meeting Tuesday, June 7, 2011 EXCERPT MINUTES 2. Further Review and Discussion Regarding Binding Interest Arbitration Provision in City Charter for Public Safety. City Manager, James Keene, gave a followup on the prior discussions on binding interest arbitration, its status and history in the City, and the potential alternatives to look at in terms of the existing provisions. Staff had provided a fair amount of information in the preliminary meeting and had been directed to do more research, as well as offering experts in the field, and looking at practices outside of California to make sure they had something reflective of the best possible practices. The report advanced this information in a clear manner for what was a complex subject. Human Resources Staff was also working on this and the new City Attorney had provided a lot of analysis and information. Acting Assistant Director of Human Resources, Marcie Scott, walked them through the binder of information that was provided to the Council and the public. The question remained whether to take no action, modify the Charter, or eliminate the Charter provision, and then passing these recommendations on to Council. Timing was also discussed since there was an upcoming election in November. She noted there was a detailed handout provided by the City Clerk regarding these timeline issues. If the option chosen was elimination of the provision, Staff suggested moving this to Council for their opinion and consensus. If Council decided to modify instead of elimination, they could send it back to Policy & Services for general subject areas and modifications in language. She discussed the many elements involved in modification. She also discussed election data and information including election options and the details of cost, type and dates of elections. She also discussed all-mail ballots, their dates and language deadlines. Council Member Klein thanked Staff for the binder of information. He asked for clarification on the cost differences in the ballots listed. City Clerk, Donna Grider, stated the November 2012, election costs included Council seats. Council Member Klein stated the costs were still less than those of 2011. Ms. Scott discussed arbitration formats, noting a summary of these formats was also included in the at-places materials. Mr. Keene noted that the information in this binder had been assembled a week prior to the current meeting and that Staff likely would still be making commentary to the materials during the meeting. There had been subsequent Staff conversations prior to the binder’s completion which included information from experts in the field. He stressed that new information was always coming in when it came to restructuring of processes. He noted the Committee might wish to consider a session where they hear more information as well as perhaps from some of the experts. Ms. Grider gave additional information on the election costs for November 2012. She stated the cost was also spread out to include the cost of legal noticing. Mr. Keene questioned whether these legal notices went out no matter the case. Mr. Grider stated this was true, but also noted that Council seats do not have arguments and were not as involved as other ballot measures. Council Member Klein asked how the cost would change if there were other items on the November 12, 2011 ballot. Ms. Grider noted the costs actually go down each time a measure was added, though she could not cite a specific cost reduction per measure added. Chair Price appreciated Staff’s work on the information provided. She noted this was a great deal of information to digest. Darrell Murray, City of Palo Alto chief negotiator, IEDA, spoke regarding the contents of the binder. He noted they were talking about format and not the entire arbitration system, specifically the form of the offers and the latitude or lack of latitude regarding these offers. He discussed the various forms of arbitration available. Council Member Burt asked if it was correct that out of all Santa Clara County cities, only three still have binding arbitration. Mr. Keene stated that was correct. Palo Alto, Gilroy and San Jose still had binding arbitration, though San Jose had amended their use. Council Member Burt asked how other cities handled things without binding arbitration, not only how they do it, but how well it functions. Mr. Keene gave an overview of the cities and Charter Cities in California and discussed those with binding interest arbitration. City Attorney, Molly Stump, discussed the baseline requirements set by State Law regarding labor and management bargaining discussions. She noted that how well these processes work was dependent on the policies, skills and effort of those involved. Chair Price asked for clarification on the use of binding arbitration processes in the area, which had been cited as being used 13 times. Mr. Keene noted there was evidence that there were jurisdictions that have binding arbitration and do not use it. He did not have specifics on this but was speaking to an article he had read on the issue. Council Member Burt clarified that it was the number of cities that had used this process, not the number of times it was used, thereby 13 jurisdictions made use of this process for any number of times. Mr. Keene noted this was correct. He stated it was also used by 23 cities in the state, but that Charter Cities had the ability to create binding interest arbitration. It was 23 out of 482 cities, all-total. Mr. Murray stated the union that goes to arbitration spends a lot of money on it. The smaller jurisdictions avoid the process for this reason. Chair Price asked if the costs were split between both parties. Mr. Murray stated the arbitrator and the arbitrator’s fees were split between both parties. Ms. Scott discussed the various arbitrator selection approaches. Staff felt the better route was to stick with a professional, credentialed arbitrator. She went over the timelines for arbitration in various City charters. Public access and transparency was also discussed, as well as the standards of judicial review. She pointed out two additional articles in the at-places materials, which included further information. Chair Price discussed the timelines. She asked whether the City and County of San Francisco had these timelines built into their language. Ms. Stump stated the City and County of San Francisco was a unitary jurisdiction. She noted the City of San Diego also used a timeline system as well as some other jurisdictions. Chair Price asked if they had time to look at the pros and cons of this approach in terms of refining their own process with timelines being part of the language. Ms. Stump stated the Staff Report included some of these pros and cons. She noted staffing the effort was one consideration. However, one benefit to this was that both labor and management are able to focus on current financial data and align labor negotiations with the budget process. This allowed for a predictable labor negotiation season. Council Member Burt asked whether the timelines applied to circumstances where arbitration existed or can timelines be built into a city’s bargaining provision. Ms. Stump stated San Diego used a system that had timelines and was not dependent on impasse resolution procedures. Council Member Burt noted they could have a separate and later discussion on the broader bargaining issues. He asked when they make comparisons between Palo Alto and the other cities if the staffing levels were included in these comparisons. Ms. Stump stated there was a background document which surveyed the staffing issue across the cities in the county. She noted this detail was not provided in their at-places materials, but she did hand out a copy of this material to be shared with the Committee and the public. Council Member Burt asked if they had reached any bottom-line conclusion on the staffing levels for those cities that still had binding arbitration. 39:58Mr. Keene stated that the City of Gilroy has what appears to be both, apparatus and unit wide minimum staffing requirements and they are a smaller jursidiction than us. The City of San Jose has minimum staffing per engine but not per shift or unit wide. The only other jurisdiction within the County that has binding interest arbitration and unit wide minimum staffing is Gilroy Frank Ingle spoke regarding the various formats of arbitration and not eliminating arbitration. He discussed what this meant for the citizens and voters. Bob Moss gave his interpretation on what the citizens expected of the City and the various aspects of what occurred during binding arbitration processes. He also discussed what should appear on the November ballot. Council Member Burt was concerned on the complexity of the modifications for both the Council Members and the citizens. He inquired about the number of Fire Department applications that came in for the open positions. Mr. Keene stated they had received between 1000-1500 applications. Council Member Burt noted that arbitration distorted the market that goes on between a willing employee and a willing employer. He noted the differences between the Police and Fire Departments regarding this. He stated a year ago, the City Council voted to put this on the ballot last November and other colleagues expressed an interest in addressing the issue but wanted more time, while still others were hesitant. A year later, he was hearing again they needed more time, but he felt it was time to present this to the voters for a decision. Council Member Holman stated this was an issue of accountability and responsibility. She stressed it was a union issue and not a management issue. She noted arbitrators were not accountable to the public, but the Council was. Union negotiators were also not accountable to the public, though Council was, both legally and ethically. She noted Staff members were strong members of the community and their work with their fellow community members was very important. She spoke to eliminating binding interest arbitration. Chair Price noted it was appropriate that they, as a community, look at modifications of the Charter language to capture some of the practices used in other communities. She stated it was worth the time to continue working on it. She felt it was possible to set up a workable timeframe for this. She stated it was inappropriate to take it to a ballot measure to repeal it in the Charter. It was more responsible to modify the language, to include and introduce the timeframes that would align them to the budget cycles. Other communities’ examples were also helpful in their continued discussions regarding limiting the scope of the process. She noted it was also not appropriate to wordsmith it at the current meeting but in a study session later. She also stressed that Palo Alto has not entered into the binding arbitration more than four times in the recent past, which was in no way an abuse of the process. She stressed the importance of introducing mediation into the process, which helped to keep communication open and prevent the occurrence of binding arbitration. Council Member Klein stated there were two interests before them. Number one, all other employees were able to strike, but not Public Safety employees. There remained, then, the problem of how to protect their interests beyond this process. He noted they should learn from San Jose’s procedures, have something ready by November 2012, but to make sure to do it right. He agreed bargaining should be on a timeframe, moving forward with the type of procedures they saw in San Francisco and San Diego. He stated the job before them was to refer to Council either a guideline of repeal, substantial revisions or changes and then wait to hear suggestions from Council on now to move forward. MOTION: Council Member Klein moved, seconded by Council Member Holman to forward this to the City Council for a policy decision whether to: 1) put this on the ballot to repeal or to put on the ballot to substantially modify it, 2) refer it back to Policy & Services Committee if it is to modify, and 3) provide guidance as to when this would go on a ballot. Council Member Holman agreed it was important to move this on to full Council for direction on how to proceed, though this did not change any of her previously stated opinions. Council Member Burt looked forward to the discussion with full Council as well. Chair Price thought before it went to full Council a focused study session was appropriate. From there, she felt they could move on to a more thoughtful discussion at the Council level. Mr. Keene noted she was suggesting a Study Session at the Council level. He suggested they could have a Study Session with language allowing the Council to take action. No matter what occurred, any changes, reforms or eliminations required a vote. Council would need a chance to decide on whether this should be on the November 2011 ballot, which argued for getting the issue to Council sooner rather than later. Council Member Holman agreed that Council needed full and additional information. She stated the Staff Report and information was very informative and organized. She did not agree it should go to the Council as a Study Session but as an Action Item at a regular Council meeting for the conveyance of all the same information. As their Motion stated they were looking for direction from Council. Council Member Klein agreed a Study Session was not necessary and that everyone involved had the ability to read through and digest the very organized and informative binder information. Council Member Holman asked what the timeframe was for getting the completed binder to Council prior to their meeting. Mr. Keene stated they had distributed the binder to all Council Members already, except for the at-place item from the current meeting. This information would be forwarded onto Council as well. He thought, judging by the meeting calendar, that the latest this item would reach Council was June 20th. MOTION PASSED: 4-0 Minor,8eth From: Sent: To: frank ingle [frankwingle@gmail.com] Friday, June 10, 2011 5:08 PM Council, City Page 1 of 1 City OF PAlQ ALTO. CA mITy CLERK IS OFf lEE II JUN 13 AM m: 23 Subject: request that you approve a measure for the November 2011 election to remove from the city charter the requirement for mandatory binding arbitration Members of the Palo Alto City Council, I attended the last two meetings of the Policy and Services Committee as it considered its recommendations to the City Council regarding mandatory binding arbitration. I strongly recommend that the city council vote to place on the November 2011 ballot a measure to completely eliminate from the city charter the requirement for mandatory binding arbitration. This measure has already been delayed a year by council member requests for more study. Any attempt to modify the requirement for mandatory binding arbitration piece by piece will create a delay which will prevent the citizens from voting on the measure another year. Delaying the measure until a special election will cost more and result in a smaller voter turnout. If you really wantto know what the citizens think on this subject, put it on the ballot this November. Removing the requirement for mandatory binding arbitration does not eliminate binding arbitration. It is still available as an option if the two parties agree to it. Please give the voters the choice in the November 2011 election to voice our opinion on the measure. The strong voter response in defeating the firefighter's measure last November should demonstrate to you how decisively this measure is likely to pass. It is past time to heed the voter's wishes and return the power to the city to manage the budget and revenues. Eliminate the requirement for mandatory binding arbitration from the city charter. Thank you, Frank Ingle Midtown 650-799-3813 6/13/2011 City of Palo Alto (ID # 1756) City Council Staff Report Report Type: Action ItemsMeeting Date: 6/20/2011 June 20, 2011 Page 1 of 5 (ID # 1756) Summary Title: Master License Agreement Title: Adoption of Two Resolutions: (1) Adopting Utility Rate Schedule E-16, as amended; and (2) Approving the Master License Agreement and Exhibits For Use of City-controlled Space on Utility Poles and Streetlight Poles and in Conduits From:City Manager Lead Department: Utilities Recommendation Staff recommends that the City Council: (1) Adopt a resolution, approving an amended Utility Rate Schedule E-16. (2) Adopt a resolution, approving a standard form Master License Agreement (the “MLA”) and Exhibits for third party access to and use of City–controlled spaces on utility poles and streetlight poles and in conduits for the purpose of providing wireless communications facilities services in Palo Alto, and delegating to the City Manager the authority to sign the standard form MLA. Background Over the past nine months, the City has been contacted by a handful of personal wireless communications service providers and distributed antenna system (“DAS”) network operators, which have expressed strong interest in accessing and using City of Palo Alto-controlled spaces on utility poles and streetlight poles and in conduits for the purpose of installing wireless antennas and related infrastructure. Wireless communications companies are experiencing increasing demand for fourth generation (“4G”) wireless communications services and are expanding their wireless antenna networks to improve both broadband facilities’ capacity and coverage in Palo Alto. Generally, under federal and California law, and subject to certain conditions protecting the City’s public rights-of-way management and compensation authority and land use authority, the City cannot prohibit wireline and wireless communications facilities from gaining access to the public rights-of-way and utilities infrastructure located therein. Although the law is less clear, federal and California law also generally, and subject to certain conditions, encourage, if not require, the City to allow wireline and wireless communications facilities to access and use the utilities infrastructure located in the public rights-of-way. The City can, however, establish June 20, 2011 Page 2 of 5 (ID # 1756) reasonable rates, terms and conditions of access to utilities infrastructure in the public rights- of-way, including adopting rules and regulations relating to the time, place and manner of attachment to that infrastructure. The City has been supportive of the placement of advanced broadband communications facilities in Palo Alto since Congress enacted the Telecommunications Act of 1996 (the “1996 Act”). In 1997, the Council approved four Telecommunications Policy Statements (CMR: 369:97), which laid the foundation for bringing advanced broadband services to Palo Alto. Policy statement number 1 declared the City’s policy to facilitate the competitive delivery of conventional and advanced telecommunications services in Palo Alto in light of the 1996 Act. Policy statement number 2 declared the City’s policy to regulate these facilities in accordance with reasonable and non-discriminatory regulations. Policy statement number 3 declared the City’s policy to permit the use of the Utilities Department’s infrastructure for advance broadband communications purposes, provided such use does not unduly interfere with the City’s primary mission of providing electric utility service to its customers. Policy statement number 4 declared the City’s policy to permit interested parties to use other City property and facilities for the siting of telecommunications infrastructure, consistent with the City’s zoning, environmental, legal and other requirements. At the time, the City’s Telecommunications Policy was focused on encouraging the deployment of dark fiber-related broadband services to expand advance broadband services in Palo Alto. Staff noted that as of August 1997, 48 of the 96 competitive local exchange carriers were authorized to provide “facilities-based services” that would require the construction of new wireline and wireless facilities. Today, the telecommunications industry has changed and there has been a shift in emphasis to wireless communications as the fastest growing form of telecommunications and broadband services. The City’s Telecommunications Policy Statements are sufficiently broad that they can be interpreted to encourage the deployment of wireless communications facilities services today for the same reasons that the policy statements were drafted in support of wireline communications services a dozen years ago. In 1997, staff reported that the Telecommunications Policy extended certain goals of the draft 1996-2010 Comprehensive Plan, including the development of technologically-advanced communications infrastructure (Policy B-13), working with electronic information network providers to maximize potential benefits for Palo Alto businesses, schools, residences, and other potential users (Policy B-14), and allowing the creative use of City Utilities Department infrastructure and public rights-of-way to ensure competition among networks in providing information systems infrastructure (Policy B-15). Discussion Utility Rate Schedule E-16, as amended. Amended Utility Rate Schedule E-16 incorporates a new license fee that will be charged on an annual basis for permitting communications service providers to attach wireless antenna June 20, 2011 Page 3 of 5 (ID # 1756) facilities and communications network equipment on utility poles and streetlight poles and in conduits.The license fee is intended to recover the City’s actual or reasonable estimated costs, including, without limitation, the annual pole operation and maintenance costs, engineering and legal costs incurred to date that are associated with developing a standard form agreement and engineering specifications relating to providing pole and conduit access to wireless communications service providers, and general administration and operational expenses incurred due to the presence of such equipment on City-owned utility poles. The annual license fees to be charged are contingent on the number of antennas that are attached by wireless communications service providers. The various service and facilities-based providers have applied for, or are anticipated to apply for, attachment to approximately 200 out of approximately 6,000 poles in Palo Alto. Assuming all antenna attachments are processed, the approximate annual revenues will be $300,000 ($1,500 x 200 poles). The annual pole attachment fee ensures that the City will recover its projected and actual costs now and over time. The City’s rates, fees and charges for pole attachments and conduit occupancy to be charged in accordance with Utility Rate Schedule E-16, as amended, and the MLA are consistent with all of the Telecommunications Policy statements and the Comprehensive Plan goals. In addition, these rates, fees and charges are not considered “charges” or “fees” subject to voter approval under Proposition 218, which does not extend to electric utility charges and fees in any event, and they are not considered “taxes,” “levies,” “charges” or “exactions” subject to voter approval under Proposition 26, as they are charges for the rental of local government property. Master License Agreement and Exhibits. The terms and conditions of the MLA also further the Telecommunication Policy Statements. The contract spells out the essential terms and conditions governing the deployment of wireless antennas that will enable current and new service providers to address coverage and capacity issues relating to 4G broadband service in Palo Alto. The deployment will be managed in a manner that allows the Utilities Department’s infrastructure to be used for advanced broadband communications purposes, without materially affecting the City’s provision of electric utility service to the community, and in a manner consistent with applicable City ordinances, rules and regulations. Among the key terms and conditions are: Term -The initial term of the MLA is ten (10) years, and there is a right to extend the term for another ten years. This period of time has been requested by interested parties who desire a sufficiently long period of time in which to amortize their capital investments. Changes in law -As the resolution pertaining to the approval of the MLA notes, telecommunications law relating to pole attachments is in a state of flux, and further changes are highly likely. For example, at the federal level, the Federal Communications Commission June 20, 2011 Page 4 of 5 (ID # 1756) recently adopted its Order 11-50 (April 7, 2011), which implements Section 224 of the Communications Act of 1934 (the “Pole Attachment Act”) in a very different way compared to past practices. The Order notes the substantial delays allegedly caused by utilities in the processing of pole attachment applications. The FCC Order 11-50, which does not apply to local agencies, sets forth detailed requirements that utilities must comply with in regard to pole attachment requests. At the California state level, there is pending before the California Legislature a bill, Assembly Bill 1027 (“AB 1027”). This legislation, which contains several requirements that are similar in some ways to those of FCC Order 11-50, would apply to California municipal utilities and charter cities. AB 1027 would place limitations on the City in dealing with parties wishing to attach antennas to poles in regard to fees and roll-out schedules; the MLA does not contain any of the limitations set forth in the most recent version of AB 1027. To the extent AB 1027, if enacted, requires the modification of the terms and conditions of the MLA, a process for the parties to deal with these changes is established in the MLA. Application process -The MLA sets forth a detailed time schedule for the processing of pole attachment and conduit occupancy applications. The attachment of wireless antennas to the City’s utility poles could occur within six months of the filing of a completed application. To the extent there are multiple applications for the same set of poles, the licensees are required to coordinate their activities with their competitors. Timeline Resource Impact The MLA represents an increased workload for Utilities, but staff will make the time to review and administer the installation, inspection and billing associated with these wireless communication facilities. Assuming all antenna attachments are processed, the estimated annual revenues will be $300,000 ($1,500 x 200 poles). Staff expects that the revenue will be deposited in the Electric Fund and the General Fund based on the type of installation. If approved, staff will monitor the revenue and propose a mid-year 2012 budget adjustment to reflect the revenue change in the appropriate funds. Policy Implications This recommendation is consistent with the Telecommunications Policy adopted by the Council in 1997, to facilitate the competitive delivery of advanced telecommunications services in Palo Alto in an environmentally sound manner. Environmental Review The California Environmental Quality Act (CEQA) does not apply to the Council’s approval of legal documents such as the MLA and Exhibits, because approval of these documents does not constitute a “project” for purposes of CEQA review.In the case of a third party applying to undertake certain action under the MLA, whether or not CEQA applies will be determined by Staff on a case-by-case basis with respect to each application, based on location, supporting structure, and other factors. June 20, 2011 Page 5 of 5 (ID # 1756) Attachments: ·Attachment A: Resolution Amending Utility Rate Schedule E-16 (PDF) ·Attachment B: E-16 effective Rev July 2011 (PDF) ·Attachment C: Resolution Approving Master License Agreement (PDF) ·Attachment D:MLA Final Draft (PDF) ·Attachment E: MLA Exhibits Final Draft (PDF) Prepared By:James Fleming, Management Specialist Department Head:Valerie Fong, Director City Manager Approval: James Keene, City Manager CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-01-20092011 Supersedes Sheet No.E-16-3 dated 7-01-2008 2009 Sheet No. E-16- 1 UNMETERED ELECTRIC SERVICE UTILITY RATE SCHEDULE E-16 A. APPLICABILITY: This rate schedule is applicable under the regular terms and conditions of the City of Palo Alto Utilities Department to Customers who contract with the City for unmetered electric service for billboards, unmetered telephone services, telephone booths, railroad signals, cathodic protection units, traffic cameras, WiFi equipment, community antenna systems, cable TV power supplies, and automatic irrigation systems and also applies to other miscellaneous Electric Utility fees to various public agencies and private entities. B. TERRITORY: Within the incorporated limits of the City of Palo Alto and land owned or leased by the City. C. NET MONTHLY BILL: 1. Customer Charge: $9.00 per month 2. Energy Charge: (for all kWh supplied) using Electric Rate Schedule E2 plus all applicable riders 3. Minimum Charge: Minimum monthly charge will be the Customer Charge. D. DETERMINATION OF ENERGY REQUIREMENTS: a. Initial Inventory Customer shall enter into a contract for service under this Schedule and provide a written inventory of all equipment at each of service requested, including the type and nameplate rating for each piece of equipment. The billing energy for each point of service will be determined by the Utilities Electric Engineering Division estimation of the kWh usage based on the type, rating and quantity of the equipment provided by the Customer. Monthly bill will be based on the following calculations: 1. Total Wattage. 2. Total Wattage times estimated annual operating hours as set in the contract equals annual watt hours. CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-01-20092011 Supersedes Sheet No.E-16-3 dated 7-01-2008 2009 Sheet No. E-16- 2 UNMETERED ELECTRIC SERVICE UTILITY RATE SCHEDULE E-16 3. Annual watt hours divided by 1000 hours equals annual kilowatt hours (kWh) 4. Annual kWh divided by twelve (12) months equal monthly kWh. 5. Monthly kWh times current rate per kWh = monthly bill for each unmetered service location or equipment. b. Updating Inventory Customer will update its inventory by informing the Utilities Electric Engineering Division in writing of changes in type, rating and/or quantity of equipment as such changes occur, and billings will be adjusted accordingly. Upon Utilities Electric Engineering Division request, but no later than the one year anniversary of the date on which Customer first takes service, Customer shall provide an updated inventory of all equipment at each point of service. c. Test Metering The Utilities Electric Engineering Division may, at its discretion, test meter the load at various types and ratings of the Customer’s equipment to the extent necessary to verify the estimated kWh usage used for billing purpose and, where dictated by such test metering, Utilities Electric Engineering Division will make prospective adjustments in estimated usage for subsequent billing purposes; however, Utilities shall be under no obligation to test meter- the load of Customer’s equipment. Utilities’ decision not to test meter the load of Customer’s equipment shall not release Customer from the obligation to provide to Utilities Electric Engineering Division, and to update, annually as provided in section b, an accurate inventory of the types, rating and quantities of equipment upon which billing is based. d. Inspection The Utilities Electric Engineering Division shall endeavor to inspect the equipment at each point of service annually as close to the anniversary date of the contract as is practical, and make prospective adjustments in billing as indicated by such inspections; however, Utilities shall be under no obligation to conduct such inspections for the purpose of determining accuracy of billing or otherwise. Utilities decisions not to conduct such inspections shall not release Customer from the obligation to provide to Utilities Electric Engineering Division, and to update, an accurate inventory of the types, rating and quantities of equipment upon which billing is based. CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-01-20092011 Supersedes Sheet No.E-16-3 dated 7-01-2008 2009 Sheet No. E-16- 3 UNMETERED ELECTRIC SERVICE UTILITY RATE SCHEDULE E-16 e. Billing for Service As the service described in this schedule is unmetered, Customer agrees to pay amounts billed in accordance with the current inventory, regardless of whether any of the installations of the Customer’s equipment were electrically operable during the period in question and regardless of the cause of such equipment failure to operate. E. MISCELLANEOUS RATES: Service Description Rate * 1. Traffic Signal maintenance and energy costs (A) Controller $522.26 ea (B) 8" Lamp (LED) $1.85 ea (C) 12" & PVH Lamp (LED) $2.16 ea (D) Pedestrian Head (LED) $5.58 ea (E) Vehicle, System and Bike Sensor Loop $43.22 ea 2. Permit License Fee for Electric Conduit Usage (A) Exclusive use 1.40/ft/yr (B) Non-Exclusive use 0.70/ft/yr 3. Processing Fee for Electric Conduit Usage Actual Cost 4. Permit License Fee for Utility Pole Attachments (A) 1 ft. of usable space $24.41/pole/yr (B) 2 ft. of usable space $26.86/pole/yr (C) 3 ft. of usable space $29.32/pole/yr (D) 4 ft. of usable space $31.77/pole/yr 5. Processing Fee for Utility Pole Attachments $54.00/pole 6. License Fee for mounting communication equipment including distributed antenna systems on utility poles $1500/pole/yr * Rates are monthly unless otherwise indicated. CITY OF PALO ALTO UTILITIES Issued by the City Council Effective 7-01-20092011 Supersedes Sheet No.E-16-3 dated 7-01-2008 2009 Sheet No. E-16- 4 {End} Contract No. ______________ 110520 MLA template MASTER LICENSE AGREEMENT FOR USE OF CITY-CONTROLLED SPACE ON UTILITY POLES AND STREETLIGHT POLES AND IN CONDUITS BETWEEN THE CITY OF PALO ALTO AND ______________________________________________ Contract No. ______________ 110520 MLA template TABLE OF CONTENTS Section Description Page 1 Definitions 2 2 Terms and Termination 6 3 Grant and Scope of License 8 4 Other Rights and Obligations of Licensee 11 5 Application for Access 13 6 Costs and Fees 17 7 Construction and Installation of the Licensee Facilities 18 8 Moving the Licensee Facilities 20 9 Inspection of the Licensee Facilities 20 10 Unauthorized Attachment or Occupancy 21 11 Installation and Replacement of the Licensee Facilities 21 12 Indemnity; Waiver; Risk of Loss 23 13 Insurance 24 14 Performance Bond; Letter of Credit 26 15 Representations and Warranties 26 16 Default; Remedies for Default 27 17 Dispute Resolution 29 18 Notices 30 19 Miscellaneous Provisions 30 Contract No. ____________ 1 110520 MLA template MASTER LICENSE AGREEMENT FOR USE OF CITY-CONTROLLED SPACE ON UTILITY POLES AND STREETLIGHT POLES AND IN CONDUITS BETWEEN THE CITY OF PALO ALTO AND ______________________________________ THIS MASTER LICENSE AGREEMENT (the “Agreement”), dated as of _________________, ____ (the “Effective Date”), is entered into by and between the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”), and __________________________, a _______________ (the “Licensee”) (individually, a “Party” and, collectively, the “Parties”), in reference to the following facts and circumstances: RECITALS 1. The City represents that it owns (or co-owns with Pacific Bell Telephone Company dba AT&T California or Pacific Gas and Electric Company, or both) or controls, operates and maintains certain utility poles and streetlight poles located within its jurisdictional boundary. The City also represents that it owns, controls, operates and maintains certain ducts and conduits located within its jurisdictional boundary. 2. The Licensee represents that it is either (a) a personal wireless service provider authorized, certificated or licensed by the FCC or other agency, (b) an operator of a distributed antenna system network authorized, certificated or licensed by the FCC, the CPUC or other agency, (c) a wireline provider of Telecommunications Service authorized, certificated or licensed by the CPUC, or (d) a provider of Multichannel Video Services which is franchised by the CPUC or other agency. 3. The Licensee represents that it is authorized to provide Communications Service, is otherwise qualified to do business in California, and has obtained all necessary authorizations, certifications or licenses from the FCC, the CPUC or other agency. A copy of the Licensee’s CPCN or WIRN, if applicable, is attached hereto as Exhibit “A.” 4. The Licensee desires access to and use of the City-controlled spaces on certain Poles and/or in certain Conduits in order to attach and/or install its wireline and/or wireless communications facilities and equipment for the purpose of providing Communications Service in Palo Alto. As of the Effective Date, the identity of certain Poles and/or Conduits, which the Licensee seeks access to and use thereof, and their locations are described in Exhibits “B” (Poles) and “C” (Conduits). This information may be updated periodically as provided in this Agreement or an amendment hereto and as the Licensee’s requirements may change during the term of this Agreement. The Licensee Facilities, which will be attached to certain Poles and/or installed in certain Conduits, are identified in Exhibit “D.” This information may be updated periodically as provided in this Agreement or an amendment hereto and as the Licensee’s requirements may change during the term of this Agreement. Contract No. ____________ 2 110520 MLA template 5. Subject to the terms and conditions of this Agreement and further subject to the City’s good faith determination that the Licensee Facilities will not unreasonably interfere with the City’s duty to serve its municipal utility customers (including, without limitation, its electric, natural gas, dark fiber optics and water utility customers) or will not adversely affect the City’s obligation to otherwise provide for and protect the public health, safety and general welfare, the City is willing to grant to the Licensee a non-exclusive license to attach and/or install the Licensee Facilities on certain Poles and/or in certain Conduits. NOW, THEREFORE, in consideration of the Recitals and the following agreements, covenants, and obligations, the value and sufficiency of which are acknowledged, the Parties mutually agree: AGREEMENT 1.0 DEFINITIONS Except as the context otherwise requires, the capitalized terms used in this Agreement shall have the meanings noted in this Article 1.0. “Applicant” means any Person who requests the approval and authorization of the City to access, use and occupy any City-controlled space on Poles and/or in Conduits. “Application” means the application to access and use Poles and/or Conduits, as set forth in the Processing Request Form, Exhibit “I,” referred to in Section 5.1. The term does not extend to an application for a permit that is required by Title 12 or Title 18 of the Palo Alto Municipal Code, with which the Licensee shall comply. “Available” means, when used in the context of Conduit Occupancy or Pole Attachment, any usable space on a Pole or in a Conduit that is not otherwise occupied by the City, a joint owner of a Pole and/or an existing licensee at the time an Application is submitted and is available for use by the Licensee. “Business Day” means any Day, except a Saturday, Sunday, and any Day observed as a legal holiday by the City. “City Facilities” mean the Poles, Conduits and any other City and/or CPAU facilities that are exclusively controlled by the City. “City Manager” means the individual designated as the City Manager of the City by Palo Alto Municipal Code section 2.08.140, and any individual who is designated the representative of the City Manager. “Communications Service” means a Telecommunications Service, Multichannel Video Service, Information Service, or any other service involving the transport or transmission of information electronically by wire or radio. Contract No. ____________ 3 110520 MLA template “Conduit” means any metal, plastic or like-material duct or pipe that is wholly- owned and/or exclusively controlled by the City. “Conduit Occupancy” means any attachment and/or installation in Conduit. “Costs” means the utility rates, fees and charges estimated or incurred by the City to perform the Preparatory Work and the Make-Ready Work at the Licensee’s request, including, without limitation, (a) the estimated or actual rates, fees and charges or other expenditures to be incurred or incurred by the City and/or any general contractor or subcontractor acting on behalf of the City to perform the Make-Ready Work, and (b) if the City’s employees perform the Make-Ready Work, the work performed at their labor rates. “CPAU” means the City’s Department of Utilities, including, without limitation, the City’s electric utility, fiber optics utility, gas utility and water utility. “CPCN” means the certificate of public convenience and necessity, issued by the CPUC to the Licensee. “CPUC” means the California Public Utilities Commission or successor agency. “Day” means a calendar day, unless a Business Day is specified. “Director” means the Public Works Director, the Utilities Director, the Planning Director or any other Person who exercises the responsibilities of the director of any City department, identified in Chapter 2.08 of the Palo Alto Municipal Code. “FCC” means the Federal Communications Commission or successor agency. “Fee” means any fee, assessment, charge (other than Costs), imposition, or other levy (but excluding a franchise fee and any tax, including the telephone utility users tax, now or hereafter in effect), lawfully imposed by the City; provided, however, that “Fee” shall not include “Costs” as defined herein. “Force Majeure” means an incident, event or cause, whether or not foreseeable, that is beyond the reasonable control of a Party, including, without limitation, an act of God, act of a superior governmental authority, earthquake, fire, flood, labor strike or sabotage, which has an adverse effect on the design, construction, installation, management, operation, testing, use or enjoyment of the Facilities. “Information Service” means “information service,” as defined in 47 U.S.C. § 153(25). “Law” means any applicable administrative or judicial act, decision, certificate, charter, code, constitution, opinion, order, ordinance, policy, procedure, rate, regulation, resolution, rule, schedule, specification, statute, tariff, or other requirement of the City, of any county, state or federal agency, or of any other agency having joint or separate jurisdiction over the Licensee or the Contract No. ____________ 4 110520 MLA template City, or both, and their separate facilities, now or hereafter in effect during the term of this Agreement, including, without limitation, any regulation or order of an official entity or body. “Letter of Credit” means an irrevocable standby letter of credit issued by a U.S. bank or other financial institution, which has an issuer or other creditworthiness rating of at least “A” by Standard & Poors and an “A2” by Moody’s Investor Services. “Licensee Facilities” means, without limitation, aerial, surface or underground wires, amplifiers, antennas, boxes, cabinets, cables (including fiber optic and coaxial cables), circuits, conduits, conductors, converters, copper wires, decoders, demodulators, drop wires, ducts, electronics, encoders, equipment, generators, hubs, inner-ducts, lasers, manholes, microwave, modulators, multiplexers, networks, nodes, optical fibers, optical repeaters, patch panels, processors, receivers, splice boxes, switches, tap-offs, terminals, traps, vaults, wires, wire and wireless transmitters and receivers, and other similar equipment owned, leased, or controlled by the Licensee that is used for or is useful in the provision of Communications Service, in existence either as of the Effective Date or at any time during the term of this Agreement and located in or on the City Facilities. “Make-Ready Work” means changes to be made to City-owned or –controlled Poles, its own Pole Attachments, the existing Pole attachments of any joint owner(s) and any existing licensee, or the existing additional equipment associated with those attachments, that may be needed to accommodate a proposed additional pole attachment. It also includes Make-Ready Work relating to access to Conduits by the Licensee Facilities. “Multichannel Video Services” means “cable service” as defined in Chapter 2.10 of Title 2 of the Palo Alto Municipal Code and in 47 U.S.C. § 522(6), “video service” as defined in Cal. Pub. Util. Code § 5820(s), services provided over an open video system certificated by the FCC pursuant to 47 U.S.C. § 573 or a cable communications system, as defined in Chapter 2.10 of Title 2 of the Palo Alto Municipal Code, and any other form of delivery of multichannel video services to subscribers in Palo Alto over the Licensee Facilities located in the Public Rights-of-Way or Public Utilities Easements. “Person” means any individual, for-profit corporation, nonprofit corporation, general partnership, limited partnership, limited liability company, limited liability partnership, joint venture, business trust, sole proprietorship, or other form of business association, but it does not include the City. “Pole” means (a) any utility pole, excluding towers, used to support mainly overhead distribution wires and cables, jointly or separately owned by the City, (b) any Streetlight Pole, wholly owned by the City, and (c) the anchors and guy strands/guy wires, which are located in the Public Rights-of-Way and the Public Utility Easements. The term does not include any utility pole that is wholly owned by a Person other than the City. “Pole Attachment” means any attachment to a Pole by the Licensee. Contract No. ____________ 5 110520 MLA template “Preparatory Work” means, except as otherwise provided herein, work of a preliminary nature undertaken by City staff, including, without limitation, survey and field inspection work, review of engineering plans and specifications and other related work, that precede, and are required to establish, the Make-Ready Work in order to facilitate the attachment and/or installation of the Licensee Facilities in, on or about Poles and/or Conduits. “Provision” means any agreement, circumstance, clause, condition, covenant, fact, objective, qualification, restriction, recital, reservation, representation, term, warranty, or other stipulation in this Agreement or an Exhibit or by Law that defines or otherwise controls, establishes, or limits the performance required or agreed by any Party hereto. All Provisions, whether covenants or conditions, shall be deemed to be both covenants and conditions. “Public Rights-of-Way” means the areas in, upon, above, along, across, under, and over the public alleys, boulevards, courts, lanes, places, roads, streets, and ways, including, without limitation, all Public Utility Easements, within the jurisdiction of the City. This term shall not include any real property, in whole or in part, owned by any Person or agency other than the City except as provided by Law or pursuant to an agreement between the City and any such Person or agency, nor shall it include any real property owned and/or controlled by the City that is not dedicated to utility or public transit use. “Public Utility Easement” means any privately owned land, in which the City holds an easement for public utility uses and purposes, without regard to whether any “public utility,” as defined in California Public Utilities Code section 216(a), has an easement for similar public utility uses and purposes. “Schedule” means a site-specific license for the attachment and/or installation of Licensee Facilities, as identified in Exhibit “E,” commencing with Schedule “E-1.” “Standard Drawings and Specifications” means the general terms and conditions, specifications, and requirements of the City which govern the design, construction, installation, and maintenance of any improvement to be located within the Public Rights-of-Way and Public Utility Easements. This document is authored by the City’s Department of Public Works, Engineering Division, and any reference to such document shall include additions, amendments, deletions, revisions, modifications, and updates to this document. This term shall include documents entitled “General Conditions” or words of similar import, now or hereafter existing, which directly pertain to all aspects of general construction work. “Streetlight Pole” means any standard design concrete, steel or aluminum (or other metal) or wooden pole, including any decorative streetlight pole, that is used for street lighting purposes. “Telecommunications Service” means to the extent not inconsistent with federal law, the transmission of voice, video or data information in rendering audio, video or data service, which may be offered by the Licensee pursuant to its FCC, CPUC or other agency approval, authorization, certification or license. Multichannel Video Service shall not be considered a Contract No. ____________ 6 110520 MLA template Telecommunications Service or an Information Service hereunder, except to the extent required by Law. “Utilities Rules and Regulations” means the City’s utilities rules and regulations, authorized by Chapter 12.20 of the Palo Alto Municipal Code. “WIRN” means the wireless identification registration number that the Licensee is required to obtain from the CPUC in order to offer intrastate wireless telecommunications services in California. “Work” means and includes both Preparatory Work and Make-Ready Work. 2.0 TERMS AND TERMINATION 2.1 Initial and Extension Terms. The initial term of this Agreement is ten (10) years (the “Initial Term”), commencing on the Effective Date, unless and until it is earlier terminated in accordance with this Agreement. The extension term of this Agreement is ten (10) years (the “Extension Term”), commencing on the expiration of the Initial Term, provided that: (a) the Licensee shall give the City Manager written notice of its intention to extend this Agreement no less than sixty (60) Days prior to the expiration of the Initial Term; (b) the Licensee is in substantial compliance with the Provisions; (c) there has not been any change in Law that may materially affect the Provisions or their enforceability; and (d) the City has not otherwise terminated this Agreement in accordance with the Provisions. 2.2 Renewal of Agreement. The Parties may in good faith negotiate the terms and conditions of a new master license agreement, which negotiations the Parties shall use reasonable effort to commence by no later than six (6) months before the expiration of the Extension Term; provided, however, the negotiations shall be based on the terms and conditions of the City’s standard master license agreement then in effect or in accordance with such other contract rates, terms and conditions or Law as may be adopted by the City. If the Parties fail to negotiate the renewal of a new master license agreement, then the Licensee shall be deemed to hold over and shall be otherwise liable to perform its obligations hereunder, including the payment of all Costs and Fees, in accordance with the terms and conditions of the standard master license agreement then in effect, unless there is no such standard master license agreement then in effect, in which event the terms and conditions of this Agreement shall continue to apply. 2.2.1 If a new master license agreement has not been executed by the Parties by the expiration of the Extension Term and the Parties do not otherwise agree, in writing, to renew, then the Licensee at its option shall either: (a) sell the Licensee Facilities to the City at fair market value, if the Licensee desires to sell and the City desires to purchase the Licensee Facilities or any part thereof; (b) at the Licensee’s sole cost and expense, remove the Licensee Facilities from the City Facilities if the City does not intend to purchase the Licensee Facilities; (c) without cost or charge to the City, abandon the Licensee Facilities on Poles and/or in Conduits, provided the City first approves, in writing, the proposed abandonment of the Licensee Facilities and the terms and conditions applicable to that abandonment, whereupon in the absence of any agreement by the Parties to the contrary, such facilities shall become the property of the City; or (d) sell or transfer the Contract No. ____________ 7 110520 MLA template Licensee Facilities to a third party subject to the City’s prior written approval, which will not be unreasonably withheld. Upon the occurrence of subsection 2.2.1(d), this Agreement shall be deemed terminated, and the Licensee shall not be deemed to have made an assignment pursuant to Section 19.2. 2.3 Termination. Except as otherwise provided herein, the City may terminate this Agreement for cause (as defined in subsection 2.3.1) upon ten (10) Days’ prior written notice sent by the City to the Licensee; in that event, the City may exercise its legal rights and/or equitable remedies hereby reserved under this Agreement or by Law at any time, including, without limitation, the right to recover any uncollected Annual Fees that would be due and payable by the Licensee to the City if this Agreement had not been terminated during the Initial Term or the Extension Term, if any. 2.3.1 A termination for cause means: (a) the Licensee has failed to cure a material default of this Agreement within thirty (30) Days after it receives the City’s notice of default, or, if the default can be cured and such cure reasonably requires more than thirty (30) Days to achieve, fails to commence such cure within the specified period but, thereafter, diligently continues such cure until completion thereof; (b) the CPUC, the FCC or other agency exercising jurisdiction over the Licensee has, by final order or action that is no longer subject to appeal, terminated or otherwise revoked the Licensee’s approval, authorization, certification or license to operate the Licensee Facilities, to provide Communications Service, or to transact business referred to in Recital numbers 2 and 3; or (c) the Licensee’s authority to do business in California has expired or is rescinded or terminated by final order or action that is no longer subject to appeal. 2.3.2 Upon the establishment of termination for cause, the right to attach to any Pole and/or occupy any Conduit will immediately terminate after the City delivers thirty (30) Days’ prior written notice to the Licensee. In that event, the Licensee shall, within six (6) months of the effective date of termination of this Agreement, remove or cause the removal of the Licensee Facilities from the Poles and/or Conduits, or, if the Licensee fails to remove or cause such removal within such six-month period, the City may remove the same for the account of and at the sole cost and expense of the Licensee. The preceding sentence notwithstanding, the Parties by mutual agreement may exercise any option made available under subsection 2.2.1. 2.4 Changes in Law. The Parties acknowledge that the subject of wireline and wireless communications facilities in the context of utility pole attachments has been addressed and continues to be addressed by federal and California authorities. If, during the Initial Term or the Extension Term, a Law is adopted, amended or repealed and is made binding upon the City and is applicable to this Agreement, then the Parties shall agree to negotiate in good faith an amendment to this Agreement (or a new agreement, as the case may be) to the extent necessary to comply with such Law. If the Parties cannot mutually agree to an amendment to this Agreement (or a new agreement) within three (3) months after a Party receives the other Party’s request to negotiate an amendment to this Agreement (or a new agreement, as the case may be) pursuant to this section 2.4, then the Parties will agree to submit the dispute to mediation and non-binding arbitration under mutually acceptable terms and conditions. Contract No. ____________ 8 110520 MLA template 3.0 GRANT AND SCOPE OF LICENSE 3.1 Grant of License. The City grants to the Licensee, and the Licensee accepts from the City, subject to the Provisions, a non-exclusive license to access and use certain Poles and/or Conduits and attach, install, operate, maintain, repair, remove, reattach, relocate and replace the Licensee Facilities in, on or about those certain Poles and/or Conduits. The rights and obligations of the Licensee under this Agreement will be exercised at the Licensee’s sole cost and expense, unless otherwise agreed to by the Parties. 3.2 Scope of License. The grant of license to the Licensee is subject to (a) the prior use and existing and continuing rights, consents and approvals of the City, including CPAU and other City departments, the joint owner(s) and any existing licensee of certain Poles and/or Conduits, and (b) existing and future recorded and unrecorded deeds, easements, dedications, agreements, conditions, covenants, restrictions, encumbrances and claims of title which may affect any right, title and interest in and to the Public Rights-of-Way, Public Utility Easements, and any City-owned or -controlled facility located in the Public Rights-of-Way or Public Utility Easements. 3.2.1 Nothing in this Agreement shall be deemed to grant, convey, create, or vest in the Licensee a perpetual interest in land or the Public Rights-of-Way or Public Utility Easements, including, without limitation, any fee, leasehold interest, easement, or franchise rights. Neither the City, nor the joint owner(s) of certain Poles, nor any existing licensee shall be liable to the Licensee for the failure of the City, the joint owner(s) of certain Poles, and/or any existing licensee to secure the proper legal authority from a grantor of an easement affecting any Pole or Conduit. 3.2.2 The Licensee, as a condition precedent to its right to access, use, and attach and/or install the Licensee Facilities in, on or about any Pole or Conduit, shall obtain from the City other necessary approvals, authorizations, and/or permits to access and use the Public Rights-of-Way and the Public Utility Easements controlled by the City. 3.2.3 The Licensee’s right to access, use, and attach to and/or install in, on or about any Poles and/or Conduits is subject to the City’s prior right to use or remove from use at a future date any Pole or Conduit space occupied by the Licensee in the reasonable exercise of its governmental or proprietary powers. The Licensee acknowledges and agrees that its right to attach and/or install is also subject to the prior rights of the joint owner(s) of certain Poles and/or any existing licensee. If the Licensee’s right under this subsection 3.2.3 is affected by such City action, then the City will use reasonable efforts to find one or more alternative locations for the Licensee to attach the Licensee Facilities in accordance with the facilities relocation procedure set forth in Section 7.2. 3.2.4 The City may for consideration of the public health, safety, or welfare, including, without limitation, safety, reliability, security or engineering reasons, terminate or otherwise modify the scope of the Licensee’s non-exclusive license granted by this Agreement, upon sixty (60) Days’ prior written notice to the Licensee. If the City exercises its rights under this subsection 3.2.4, then it will use reasonable efforts to find one or more alternative locations for the Licensee to attach the Licensee Facilities. Contract No. ____________ 9 110520 MLA template 3.2.5 Except as authorized by Law or this Agreement, the Licensee in the performance and exercise of its rights and obligations, shall not obstruct or interfere in any manner with the Public Rights-of-Way, Public Utility Easements, private rights-of-way, sanitary sewers, sewer laterals, water mains, storm drains, gas mains, poles, aerial and underground electric and telephone wires, electroliers, Multichannel Video Service facilities, and other telecommunications, utility, and municipal property or facilities without the express written approval of the City and/or the other owner(s) of the affected property or properties. 3.2.6 The City reserves to itself the right to attach, install, maintain, replace and enlarge the City Facilities and to operate the same from time to time in such manner as will best enable it to meet the needs of CPAU’s utility customers and fulfill its service requirements. Except as provided in subsection 12.1.1, the City shall not be liable to the Licensee or its customers for any interruption of service of the Licensee or for interference with the Licensee Facilities arising in any manner relating to the City’s, the joint owner(s)’or any existing licensee’s use of the City Facilities under this Agreement, or arising in any manner out of the condition or character of the City Facilities or their manner of operation. 3.3 Compliance with Laws. The Licensee shall comply with all Laws, including, without limitation, the CPUC’s General Orders (“GO”) that are applicable to the Licensee, in the exercise and performance of its rights and obligations under this Agreement. The preceding sentence notwithstanding, the Licensee shall furnish a copy of the notification letter required by GO 159A, Section IV.C.2 to the Planning Director, to the extent GO 159A applies to the Licensee. 3.3.1 The Licensee shall obtain the City’s review and approval of the proposed siting and design and the construction methods to be used with respect to the Licensee Facilities, as may be required by Law. The Licensee shall obtain architectural review of the Licensee Facilities by the City’s Planning Department staff and by the City’s Architectural Review Board, which review will be dependent on the characteristics of the Licensee’s proposed project, as may be required by Law. The Licensee acknowledges that additional review by any other City board or commission or the City Council may be required by Law. The reviews referred to in this subsection 3.3.1 shall be conducted in conformance with the City’s land use approval process, to the extent applicable to the Licensee Facilities. 3.3.2 The City may require the Licensee to file one or more written reports with any of the Directors within the time(s) requested. The Licensee shall file with the Utilities Director a copy of the radio frequency propagation study of any Licensee Facilities within thirty (30) Days of the completion of the first authorized attachment and/or installation of the Licensee Facilities occurring during the Initial Term and the Extension Term, if any. 3.3.3 The City may require the Licensee to obtain a conditional use permit, if the City determines that the Licensee Facilities are subject to the requirements of Title 18 of the Palo Alto Municipal Code or other Law. 3.4 Authorized Services. The Licensee shall use the Licensee Facilities for the sole purpose of providing Communications Service that is subject to any FCC, CPUC or other agency approval, authorization, certification, or license. If the Licensee is authorized to offer new Contract No. ____________ 10 110520 MLA template and/or additional Communications Service not now approved, authorized, certified, or licensed under its current FCC, CPUC or other agency approval, authorization, certification, or license, then the Licensee shall furnish the City Manager and the City Attorney with a copy of its application(s) for any such additional approval, authorization, certification, or license and a copy of any additional authorization, certification, grant, license within thirty (30) Days of its filing and its issuance. 3.4.1 The Licensee shall not allow any other Person to control the Licensee Facilities, or any portion thereof, for compensation, whether in cash or cash equivalent, for any purpose not directly related to the Licensee’s provision of Communications Service or other services approved, authorized, certified or licensed by the FCC, CPUC or other agency, unless the Licensee first gives thirty (30) Days’ prior written notice to the City Manager and the City Attorney of such intended use. 3.4.2 The Licensee acknowledges and agrees that (a) this Agreement is not a “franchise” within the meaning of 47 U.S.C. § 522(9), California Government Code § 53066, or California Public Utilities Code § 5800 et seq., and (b) this Agreement does not authorize, certify, grant or license the Licensee to use the Public Rights-of-Way and the Public Utility Easements to provide Multichannel Video Services or any other comparable services to subscribers in Palo Alto. 3.5 Location of Licensee Facilities. The non-exclusive license granted hereby shall not extend to any Pole and/or Conduit to which the attachment and/or installation of the Licensee Facilities thereon or therein would result in a forfeiture of rights by the City or the imposition of additional obligations or liabilities upon the City, the joint owner(s) of certain Poles, and/or any existing licensee to occupy the Public Rights-of-Way or Public Utility Easements. 3.5.1 If the existence of the Licensee Facilities in, on or about such Poles and/or Conduits would result in a forfeiture of the rights of the City, the joint owner(s) of certain Poles and/or any existing licensee, then the Licensee, at its sole cost and expense, shall promptly remove the Licensee Facilities within ninety (90) Days after receipt of written notice from the City. If the Licensee Facilities are not timely removed, the City may at the Licensee’s sole cost and expense remove them or cause their removal after the expiration of the notice period without liability on the part of the City or any third party hired or directed by the City to remove the same or parts thereof. In that event, the Licensee shall pay the City, upon demand, for the City’s actual costs of removal and for all losses and damages that are incurred by the City by such undertaking. This obligation shall survive the early termination or expiration of this Agreement. 3.5.2 The Licensee shall relocate the Licensee Facilities within ninety (90) Days or other period of time established by Law after the Licensee's receipt of written notice by the City that the Licensee must remove or relocate those facilities to another designated location within the City's jurisdictional boundary pursuant to the City’s exercise of its police powers, including, without limitation, in accordance with the establishment of an underground utility district. 3.5.3 During the Initial Term and the Extension Term, if any, the Licensee may voluntarily remove the Licensee Facilities or part thereof from the City Facilities or part thereof on a permanent basis, provided that the Licensee first gives the City and any affected joint owner(s) of certain Poles and/or any existing licensee at least sixty (60) Days' prior written notice of its intention Contract No. ____________ 11 110520 MLA template to remove the Licensee Facilities. The voluntary removal of the Licensee Facilities prior to the expiration of the Initial Term or Extension Term, if any, shall not relieve the Licensee of its obligation to pay any Costs and Fees associated with the removal then due and payable to the City, including the uncollected Annual Fees that would be due and payable by the Licensee to the City if this Agreement had not been terminated. The Licensee shall obtain from the City any other approvals, authorizations, and permits required by Law prior to the commencement of such removal work. Upon removal, the Licensee may transfer the Licensee Facilities to the City, provided that the City first agrees, in writing, to accept title thereto, consistent with subsections 2.2.1(a) and (c). Within six (6) months after the Licensee voluntarily abandons its License Facilities, or parts thereof, and fails to remove them upon the earlier of the date of voluntary abandonment or the date of early termination or expiration of this Agreement, the City shall arrange for the removal of the Licensee Facilities at the Licensee's sole cost and expense if the City does not approve or otherwise accept the abandoned Licensee Facilities. Prior to the effective date of abandonment, the Licensee shall post security with the City to assure the City will recover the reasonable costs of removal of the Licensee Facilities; at the City’s election, the security may take the form of a Performance Bond, described in Article 14.0, or a Letter of Credit in the amount specified therein, as may be established by the City. 3.6 Disclaimer; Waiver. In no event shall either Party or its successors and assigns, elected officials, officers, employees, agents or representatives be liable for any lost profits, consequential, special, exemplary, indirect, punitive or incidental losses or damages, including loss of use, loss of goodwill, lost revenues, loss of profits or loss of contracts even if such Party has been advised of the possibility of such damages, and the Parties each waive such claims and releases each other and each of such Persons from any such liability. This Section 3.6 shall not apply to any Costs or Fees or any other cost or fee referred to herein that the Licensee owes to the City. 3.6.1 The Parties acknowledge that California Civil Code Section 1542 provides that: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” The Parties waive the provisions of Section 1542, or other similar provisions of Law, and intend that the waiver and release provided by this subsection shall be fully enforceable despite its reference to future or unknown claims. 4.0 OTHER RIGHTS AND OBLIGATIONS OF LICENSEE 4.1 General. During the Initial Term and the Extension Term, if any, the Licensee shall request, in writing, the City's approvals and authorizations to add, attach, install, move, remove, repair, replace, or otherwise alter or change the Licensee Facilities, except as may be otherwise provided in this Agreement. The Licensee shall file the applicable requests for approvals and authorizations with the appropriate Director(s). 4.1.1 Each Party will use due care, and shall ensure that no damage, beyond reasonable wear and tear, is caused to the other Party’s facilities or the facilities of the joint owner(s) of certain Poles and Conduits and/or any other licensees, including, without limitation, the joint owner(s)’ fibers, wires, cables, poles and/or conduits lawfully located in, on or about the Poles or Conduits to which the License intends to attach and/or install the Licensee Facilities. Any damage or destruction which is caused by any Party or its agent or representative shall be reported within Contract No. ____________ 12 110520 MLA template forty-eight (48) hours to the other Party, the joint owner(s) of certain Poles and Conduits, and/or other licensees who could be directly affected by such damage. The Party causing such damage shall reimburse the other Party and/or any other affected Person, upon demand, for any damage caused the Party or its employees, contractors, subcontractors, agents, and representatives. 4.2 Identification of Facilities. The Licensee shall identify its Licensee Facilities, including, without limitation, its fibers, wires and cables, and wireless facilities with appropriate durable, visible identification tags that describe the Licensee’s name, number, color, identification code, size, and manufacture of the Licensee Facilities, including the fibers, wires and cables and wireless facilities, the type of service, and any other criteria as may be established or agreed to by the Utilities Director. Such information may be provided to the Utilities Director in accordance with the requirements set forth in Exhibits “F,” “G,” and “I.” 4.3 Notices to City, Joint Owners and Licensees. Excepting emergencies which may require the restoration of functionality of the Licensee Facilities within twenty-four (24) hours of loss of functionality, the Licensee shall give not less than ten (10) Business Days' prior written notice to the Utilities Director, the joint owner(s) of certain Poles, and/or any existing licensee, whenever the Licensee will perform any approved or authorized Make-Ready Work in regard to the Licensee Facilities that will concurrently occupy any portion of the Poles and/or Conduits with the City, the joint owner(s) of certain Poles, and/or any existing licensee. Any Make-Ready Work required of the Licensee by the City shall be performed with due care by the Licensee or any Person acting on behalf of the Licensee, including its employees, agents, contractors, subcontractors and representatives. With respect to maintenance and repairs of the Licensee Facilities, the Licensee shall provide the City with reasonable prior notice in order that the City may determine whether to assign appropriate staff to be present during any such work. 4.4 Compliance with Technical Specifications. Subsection 3.3 notwithstanding, the Licensee Facilities shall be attached, installed, maintained, removed and repaired in accordance with the applicable requirements and specifications, including, without limitation, the Standard Drawings and Specifications, the specifications of the National Electrical Safety Code and National Electric Code and amendments thereto, and the applicable rules and regulations of the CPUC, the FCC and any other agency exercising jurisdiction over the Licensee. The Licensee may use the pathways inside the Streetlight Poles only if the attachment and installation work is conducted in accordance with the Standard Drawings and Specifications and the Utilities Rules and Regulations. Use of the Poles and Conduits shall be subject to any security plan now or hereafter approved by the City. 4.5 Repair of City Facilities, Public Rights-of-Way and Public Utility Easements. The Licensee, at no liability, cost or expense to the City, shall repair, replace, or restore, or shall cause the repair, replacement, or restoration, reasonable wear and tear excepted, of any damage to the City's streets, sidewalks, underground facilities, Poles, Conduits, curbs, gutters and other City property caused by or resulting from the performance of any Make-Ready Work by the Licensee, its employees, agents, contractor, subcontractors or representatives, or by the Licensee and others, if the Work is performed jointly by such parties. Contract No. ____________ 13 110520 MLA template 4.6 Removal of Markings. The Licensee, at its sole cost and expense, shall remove all Underground Service Alert markings from the streets and sidewalks as may be required by Law or by the City. 5.0 APPLICATION FOR ACCESS 5.1 Processing Request Form. The Licensee shall complete and file a Processing Request Form to request access to and use of Poles and/or Conduits (the “Application”) with CPAU and apply for and receive from the Public Works Director, Planning Director and/or the Utilities Director any other necessary authorizations and approvals. Upon receipt of approval of the Application and other authorizations and approvals and the payment of all required Costs and Fees, the Licensee shall coordinate with CPAU in making attachment to Poles and/or occupancy of Conduits within the time period specified in Section 5.2. To the extent not inconsistent with Law, the City reserves the right to reject any completed Application in accordance with Section 3.2 and subsections 3.2.1 through 3.2.6 or any incomplete Application. The City, in acting upon an Application, will use reasonable efforts to process and accept or reject the Application, within the parameters and time periods set forth below: A. The City will complete its Preparatory Work to determine whether and where the Pole Attachments and/or Conduit Occupancy are feasible and what Make-Ready Work will be required, within twenty (20) Days of receipt of the processing fee that shall be due and payable following CPAU’s review and acceptance of the Processing Request Form and all attachments thereto, which the Licensee acknowledges shall be complete in all respects in order for the City to deem the Application validly submitted; B. The City will notify the Licensee within seven (7) Days of completion of the Preparatory Work (1) whether the Poles and/or Conduits identified in the Processing Request Form can be subject to a detailed engineering analysis to be conducted during the Make-Ready Work phase of the Application and (2) whether the Make-Ready Work, including the required replacement of any deteriorated Pole, will be performed by the City or the Licensee or its City-approved, qualified and licensed contractor; C. Within seven (7) Days of the Licensee’s receipt of the City’s notice to the Licensee referred to in (B) above, the Licensee will give written notice to the City to proceed to the Make-Ready Work phase and the Licensee will proceed to hire qualified and licensed contractor(s) if the City authorizes the Licensee to perform the Make-Ready Work; D. The City will provide the Licensee with the City’s estimate of Costs of Pole Attachments and/or Conduit Occupancy, including the Costs of any Make-Ready Work to be performed by CPAU, within thirty (30) Days of the Licensee’s notice to the City to proceed with the Make-Ready Work phase referred to in (C) above; E. The Licensee shall accept or reject the City’s estimate of Costs and make payment of the estimated Costs within seven (7) Days of receipt of the City’s estimate of Costs referred to in (D) above; and Contract No. ____________ 14 110520 MLA template F. The City will complete the Make-Ready Work for the Licensee Facilities, as needed, within one hundred five (105) Days of the receipt of the Licensee’s written acceptance of the City’s estimate of the Costs and the payment of such Costs. Notwithstanding Sections 5.1(A) through (F), the City may toll or stop the clock on any of the timelines mentioned in Sections 5.1(A), (B), (D) or (F) in the event of an emergency as determined by the City or for other good and sufficient cause. The City will provide written notice to the Licensee of the City’s determination regarding the emergency or other good and sufficient cause. If the City is unable to complete any of the Work contemplated in Sections 5.1(A), (D) and/or (F) within the specified time periods, then the Licensee may request the City’s approval to undertake and complete such Work, provided that (i) the Licensee gives to the City not less than 72 hours’ prior notice of its desire to complete such Work, (ii) the Licensee certifies, in writing, to the City that the Person(s) who will complete such Work on behalf of the Licensee is/are duly qualified and licensed to perform the Work in the electric utility space of the Pole and/or or Conduits, and (iii) the Person(s) is /are pre-authorized by the Utilities Director to complete such Work on behalf of the Licensee. As a condition precedent to the City’s obligation to approve any Person(s) who will perform such Work on behalf of the Licensee, the Licensee shall provide the name(s), copy of their license(s), and a statement of qualifications of the Person(s) designated to perform the Work on the Licensee’s behalf in the electric space on the Poles or in the Conduits at the time the Application is submitted. 5.1.1 Except as otherwise approved by the City, the Licensee shall limit the filing of an Application for Pole Attachment to not more than the number of Poles per Applications established by the City by Utility Rule and Regulation or, if no such requirement or specification exists, fifteen (15) poles per Application. 5.1.2 The Utilities Director may approve the modification of the limitations set forth in subsection 5.1.1, if the Licensee requests, in writing. The Licensee shall specify a desired priority of completion of the Work for each Application in the event that the Licensee submits multiple Applications to the City within a rolling thirty-Day period. 5.1.3 If the Utilities Director rejects or otherwise disapproves of the Application, then the City will provide the Licensee with a written detailed explanation of the basis of disapproval. 5.2 Lapse of Application. Authorization or approval to the Licensee to attach to Poles and/or install in Conduits shall terminate without further notice to the Licensee as to any Poles or Conduits covered thereby, to which the Licensee has not attached or occupied within one hundred eighty (180) Days from the date of the City’s notice to the Licensee that such Pole(s) and/or Conduits are Available. The preceding sentence notwithstanding, the Licensee may re-submit the Application and, subject to subsection 7.5.2 hereof, the City will use reasonable efforts to expedite the City’s review and approval in accordance with the process set forth in Sections 5.1(A) through (D), inclusive. 5.3 Multiple Applications for Same City Facilities. Applications received by the City regarding the same Pole or Conduit will be processed by the City on a first-come, first-served Contract No. ____________ 15 110520 MLA template basis. First-come, first-served priority shall be determined according to the Applicant who is determined to have first submitted a complete Application. Whenever two or more Applications are filed with the City pertaining to the same Poles and/or Conduits, the City, within thirty (30) Days of receipt of the later filed Application, will notify all affected Applicants of the following: (a) one or more Applications have been received for some or all of the same Poles and/or Conduits; and (b) the name, email address and telephone number of each Applicant who has submitted such Application. 5.4 Cost Sharing Arrangements. In the event that one or more other Applicants may wish to share the costs of attachment and/or installation with the Licensee, unless otherwise agreed to by the Applicants, the Licensee, if it is the “first-in-time” Applicant, will endeavor in good faith to coordinate efforts relating to the sharing of all Make-Ready Work. Unless the Applicants otherwise agree, the Licensee, if it is the “first-in-time” Applicant, will endeavor to transmit to the City any mutually agreed to Make-Ready Work costs on behalf of the Applicants affected by such arrangement. The City shall bill the Licensee, if it is the “first-in-time” Applicant, for the entire cost of all Make-Ready Work necessary to accommodate the Applicants, including the Licensee. The City shall not be responsible, and it expressly disclaims any obligation or responsibility, for assisting the Licensee, if it is the “first-in-time” Applicant, in collecting the prorated costs of Make-Ready Work from any additional Applicant. 5.5 Performance of Work. 5.5.1 Prior to the commencement of the Make-Ready Work relating to CPAU facilities which the City may authorize the Licensee to perform, the Licensee shall post or shall cause the posting of notices of its proposed Make-Ready Work in accordance with the Public Works and the Utilities Departments’ rules and regulations. Absent such rules and regulations, the Licensee shall at least ten (10) Days before the commencement of its Make-Ready Work deliver or shall cause to be delivered a written schedule for each portion of Work to: (a) those residents and businesses whose properties abut and are within 300 feet of the proposed Work sites or such other distance as set forth in any City-issued approval or authorization; and (b) other Persons whose facilities will be directly impacted by such Work. In addition, the Licensee shall be required to post “No Parking” notices at least seventy-two (72) hours prior to the commencement of each portion of the Work in the absence of any time period as set forth in the approvals or authorizations. 5.5.2 The Licensee upon the completion of its Make-Ready Work shall promptly furnish to the City accurate plans and record drawings or as-built drawings depicting, in detail, the locations and dimensions of the Licensee Facilities, including, without limitation, the Pole and/or Conduit numbers, if available, notwithstanding that such information may have been initially provided with the Application(s). These plans and drawings shall be incorporated in any form as may be reasonably specified by the City Manager. The Licensee shall furnish its plans and drawings to the City in an electronic storage medium (which utilize AutoCAD or Geographic Data Systems software or equivalent), containing the full set of plans and record drawings or as-built drawings, whenever such information may be required by the City Manager or any Director. Unless the City requires the Licensee to submit the final load calculations prior to the issuance of any authorization, approvals or permits, such information shall include, without limitation, the load calculations for each proposed Pole Attachment, including any Streetlight Pole attachment, as may be required by CPAU, as set forth in Exhibit “I.” Contract No. ____________ 16 110520 MLA template 5.5.3 In the event that the City determines any Pole to which the Licensee seeks access for attachment purposes is inadequate to support the Licensee Facilities in accordance with Law, following the receipt of the Licensee’s load calculations as requested by the City, the City will inform the Licensee of any required changes and the estimated costs thereof in order for the City to consider making provision for adequate load-bearing Poles in accordance with the timelines set forth in Sections 5.1(A) through (F). If, after the receipt of the City’s information, the Licensee desires to proceed with the Pole Attachments by submitting to the City the Licensee’s acceptance of the City’s estimate of Work and payment, in advance, in accordance with the timelines set forth in Sections 5.1(A) through (F) to reimburse the City for the total estimated Pole modification or replacement costs and expenses, including, without limitation, the costs of installing new Poles, plus the expenses of replacing or transferring the City’s electric and/or fiber optics utility facilities from the old Poles to the new Poles, the City may, at its option, replace the Poles with suitable Poles. The Licensee will reimburse the joint owner(s) of certain Poles and/or any existing licensee for any expense incurred by each of them in relocating their facilities from the existing Poles to the new Poles. Upon the completion of Make-Ready Work, the City will prepare and submit a final billing for reimbursement by the Licensee to the City for the final Pole replacement costs, including, without limitation, the costs of the new Pole, the labor associated with the transfer or rearrangement of the facilities of the joint owner(s) of Poles and/or other license holders, the cost of removing the old Poles, and other matters itemized on the bill. In the alternative, the City may permit the Licensee to replace any Pole in accordance with terms and conditions mutually agreed to by the City, the joint owner(s) of certain Poles and any existing licensee thereof. 5.5.4 The City shall determine or otherwise specify the point of attachment on each Pole and/or the point of entry in each Conduit to be occupied by the Licensee Facilities after consultation with the Licensee. Information regarding the Licensee’s preferred point(s) of attachment or entry will be included on each Application. 5.5.5 The Licensee shall notify the City in the Application at least thirty (30) Days before the Licensee will add to, relocate, replace or otherwise modify the Licensee Facilities attached to a Pole or occupying a Conduit, where additional space or holding capacity shall be required on either a temporary or permanent basis. 6.0 COSTS AND FEES 6.1 Payment of Costs and Fees. In consideration of the City’s grant of a non- exclusive license to the Licensee under this Agreement, during the Initial Term and the Extension Term, if any, the Licensee shall pay to the City the initial/one-time Costs and Fees (the “Initial/One- Time Costs and Fees”) and the annual Costs and Fees (the “Annual Costs and Fees”) referred to in the Schedules, as set forth in Exhibit “E.” Payments shall be due and payable upon the specified date(s) for the Work relating to any Pole Attachment and/or Conduit Occupancy through the end of the calendar year of the attachments and/or occupancies, unless otherwise provided by Exhibit “E” or by Law. All other payments set forth in the Schedules will be payable on a calendar year basis. All payments shall be made payable by check, draft or other negotiable instrument to the “City of Palo Alto” and delivered to the address set forth in Article 18.0. Contract No. ____________ 17 110520 MLA template 6.1.1 Unless otherwise provided by Exhibit “E” or by Law or mutually agreed to by the Parties, the Annual Costs and Fees shall be payable thereafter annually, in advance, by the January 1st of each year during the Initial Term and the Extension Term, if any. Except as expressly provided in the Schedules, the Annual Costs and Fees shall not be adjusted in the event that the Licensee removes or reduce the fibers, wires, cables or wireless facilities, or removes the wireless facilities attachments during any calendar year, whenever the adjustment or removal is effected and the Annual Costs and Fees have been paid. The City shall increase the sum total of all Annual Costs and Fees payable to the City, whenever the Licensee installs additional fibers, wires, cables or wireless facilities, in accordance with the adjustment formula specified in the Schedules or by Law. 6.1.2 In addition to the Initial/One Time Costs and Fees and the Annual Costs and Fees payable hereunder, the Licensee shall pay as additional consideration other Fees and Costs for services rendered by the City (the “Additional Costs and Fees”). The Additional Annual Costs and Fees shall be due and payable in accordance with the Schedules, the Provisions and Law. 6.1.3 In addition to the Costs and Fees referred to in subsections 6.1.1 and 6.1.2 above, the Licensee shall be obligated to pay the City for any uncollected Annual Fees which may be otherwise due and payable by the Licensee on account of its early termination without cause of this Agreement. 6.1.4 The City will prepare and deliver to the Licensee an invoice for Costs and Fees and Additional Costs and Fees estimated or incurred by the City or due and payable by the Licensee for the privilege of accessing and using the City-controlled spaces on the Poles and/or in the Conduits. The amounts shall be due and payable within forty-five (45) Days of the invoice date. Any invoice that is not paid in a timely manner shall be assessed a late fee with respect to the overdue sum, which shall be due and payable with the invoice. The Licensee shall pay amounts not then in dispute. As to any amount subsequently determined to be due and payable, the Licensee shall promptly pay such amount and the applicable late fee with the invoice. 6.2 Failure to Pay. The Licensee’s failure to pay the Initial/One-Time and Annual Costs and Fees any Additional Costs and Fees, and any early termination Fee as and when they shall become due, shall constitute a default by the Licensee under this Agreement; provided, however, the Licensee shall have the right to cure a monetary default in accordance with Article 16.0 and the right to dispute the amount of any Cost or Fee in accordance with Article 17.0. The Licensee’s obligation to pay the Costs and Fees and Additional Costs and Fees existing as of the effective date of early termination or expiration of this Agreement shall survive the expiration or earlier termination of this Agreement. 7.0 CONSTRUCTION AND INSTALLATION OF THE LICENSEE FACILITIES 7.1 Make-Ready Work by City. The City shall perform its Make-Ready Work in regard to the City Facilities before the City or the Licensee can perform the Make-Ready Work in regard to the Licensee Facilities, unless the Parties otherwise agree. Nothing herein shall prohibit the City from authorizing the Licensee to perform the City’s Make-Ready Work in accordance with Contract No. ____________ 18 110520 MLA template City requirements. The Licensee will pay the City’s Costs for the services rendered by the City and/or CPAU to the Licensee in accordance with this Article 7.0. 7.1.1 The City may install or add electrical switches in order to accommodate the Licensee Facilities within or above the electric utility space on the Poles at the License’s sole cost and expense. 7.1.2 The City will trim and cut trees, shrubbery and other vegetation necessary for the proper operation of its utility infrastructure. 7.1.3 Whenever the City deems it necessary to remove or relocate the Licensee Facilities, or any part thereof, pursuant to the lawful exercise of its governmental or proprietary rights and powers, the City will issue timely notice to the Licensee to permit the Licensee to secure the necessary approvals or authorizations, before the removal or relocation may commence. 7.1.4 Within the periods of time reasonably established by the City, the Licensee, at its sole cost and expense, shall construct, install, maintain, remove and relocate the Licensee Facilities in the manner authorized by this Agreement or by Law and in a safe manner, as not to physically or electrically interfere with the City Facilities or the facilities of the joint owner(s) of certain Poles and/or any existing licensee. 7.2 Facilities Relocation. At the request of the City, acting in accordance with Law, including the provisions of Chapter 12.16 of the Palo Alto Municipal Code, the Licensee shall relocate the Licensee Facilities in aerial locations to underground locations in accordance with Law, including, without limitation, any Law which applies to any dominant or non-dominant telephone corporation, as such term is defined in Section 234 of the California Public Utilities Code. In such event and to the extent permitted by the City, the Licensee may elect to relocate the Licensee Facilities, which are wireless facilities, affected thereby to any other available Pole, including a Streetlight Pole, as practicable, subject to the Provisions. If there is not available any other utility pole or a Streetlight Pole, then the City will endeavor to accommodate the Licensee’s request to either relocate, at the Licensee’s sole cost and expense, the Licensee Facilities, which are wireless facilities, or part thereof, to the nearest available utility pole or a Streetlight Pole or to a new utility pole or a Streetlight Pole to the extent the City can accommodate the Licensee’s requirements, which will be located in the Public Rights-of-Way or Public Utility Easements outside of the underground utility district in question. 7.3 Work in Electric Utility Space. Notwithstanding any other Provision in this Agreement to the contrary, no approval or authorization issued to the Licensee, that would allow the attachment of the Licensee Facilities to any Pole, shall allow the Licensee to encroach upon, perform any work, or attach and/or install the Licensee Facilities to the electric utility space on any Pole or in any Conduit, unless it is expressly permitted, in writing, by the Utilities Director. Any attachment and/or installation within the City’s electric utility space on a Pole or in a Conduit shall be performed by the City, at the Licensee’s cost and expense, unless the Licensee is otherwise permitted, in writing, by the Utilities Director to perform such work in accordance with the timelines set forth in this Agreement and Sections 5.1(A) through (F). The terms and conditions under which the Licensee or the Person representing the Licensee may be permitted, in writing, to work within Contract No. ____________ 19 110520 MLA template the electric utility space of a Pole and a Conduit are set forth in Exhibits “F” and “G,” respectively. The Licensee will be permitted to place one or more additional Licensee Facilities onto an existing cable or strand that constitutes a part of the City Facilities subject only to availability as determined by the City and in compliance with prevailing industry safety standards. 7.3.1 In the event that a Pole must be replaced to accommodate the Licensee Facilities, to the extent that the Licensee is authorized to perform such work, the Licensee shall conform to the Pole replacement requirements of the City, as set forth in Exhibit “H.” 7.4 Coordination of Work. In the event of a service outage affecting both the City Facilities and the Licensee Facilities, subject to the City’s reasonable exercise of discretion, the Licensee shall be entitled to maintain and repair the Licensee Facilities concurrently with the City’s maintenance and repair of the City Facilities. The Parties agree to work cooperatively with each other while effecting the maintenance and repairs of their respective facilities. 7.5 Facilities Removal. The Licensee, at its sole cost and expense, will permanently remove the Licensee Facilities from any Pole and/or Conduit within ninety (90) Days of the expiration or termination of the respective Schedule or this Agreement, as applicable, unless the Parties otherwise agree, in writing. The Licensee shall be liable to the City for the payment of all Costs and Fees and any Additional Costs and Fees until all of the Licensee Facilities are permanently removed. This Provision shall survive the expiration or earlier termination of this Agreement. 7.5.1 No proration or refund of any Annual Cost or Fee will be due and payable by the City to the Licensee on account of such removal on a permanent basis; provided, however, the City will not charge any Annual Cost or Fee attributable to the Licensee Facilities for the first calendar year commencing after their proper removal. Should the Licensee thereafter wish to make attachments or placements to such Poles and/or occupancy of such Conduits, it shall apply for and obtain the required authorizations and approvals. 7.5.2 Whenever the Licensee Facilities are removed from the City Facilities, no reattachment to the same Pole or insertion in the same Conduit may be made until: (a) the Licensee has first complied with the Provisions as though no such Pole Attachment and/or Conduit Occupancy had previously been made; and (b) all undisputed Costs and Fees and Additional Costs and Fees due and payable to the City for such previous Pole Attachment and/or Conduit Occupancy have been paid in full. 7.6 Notice to City. The Licensee shall inform the City, in writing, of the dates on which the removal of the Licensee Facilities has been completed. The City reserves the right to inspect each new attachment and/or installation, as conditions may warrant, and the Licensee shall reimburse the City for the Costs of such inspections at the rate per worker-hour then in effect. The surveys and inspections, whether or not made, shall not operate to relieve the Licensee of any responsibility, obligation or liability assumed under this Agreement or imposed by Law. Nothing in this Agreement shall be construed to obligate the Licensee to pay for inspections by the City of the City Facilities, made in the ordinary course of business. Contract No. ____________ 20 110520 MLA template 8.0 MOVING THE LICENSEE FACILITIES 8.1 Temporary Removal of Facilities. The Licensee will move or transfer or cause the removal or transfer of the Licensee Facilities on a temporary, non-permanent basis, whenever the City will move or replace the City Facilities. Except as otherwise required by the City, within the time required by Law or, if no such Law exists, thirty (30) Days of receipt of written notification by the City, the Licensee shall move or transfer or cause the removal or transfer of the Licensee Facilities in a workmanlike manner in accordance with the Licensee’s specifications, if those specifications are timely furnished to and subsequently approved by the City, in advance, and, if not, then in accordance with Law and the Provisions. Such movement or transfer by or for the Licensee will be performed only in the common operating areas served by the Parties. If the Licensee Facilities are not moved or transferred within the required period of time, the City may remove or transfer or cause the removal or transfer of the Licensee Facilities on behalf of the Licensee at the Licensee’s sole cost and expense. The Licensee shall pay the City, upon demand, the City’s actual Costs of removal or transfer, and this obligation shall survive the termination or revocation hereof. 9.0 INSPECTION OF THE LICENSEE FACILITIES 9.1 Inspection by City. The City reserves the right to inspect the Licensee Facilities at the time of Pole Attachment and/or Conduit Occupancy and to thereafter make reasonable periodic inspections of any part of the Licensee Facilities that are attached to Poles or installed in Conduits. The frequency and extent of such inspections by the City shall be reasonably established by the City. The Licensee shall reimburse the City for the Costs of any inspections performed by the City that may be made necessary by the Licensee’s actions or as reasonably determined by the City. The obligation to pay shall survive the expiration or earlier termination of this Agreement. 9.1.1 The City shall provide the Licensee with not less than ten (10) Business Days’ prior written notice before conducting the periodic inspections. The preceding sentence notwithstanding, where, in the sole judgment of the City Manager, the public health, safety and welfare considerations warrant an immediate or prompt inspection, the City may conduct such inspection without furnishing any prior written notice to the Licensee. 9.1.2 The City’s conduct of periodic inspections, or the failure to so conduct, shall not operate to impose upon the City any liability of any kind whatsoever, nor relieve the Licensee of any responsibility, obligations or liability assigned to the Licensee by this Agreement or by Law. 10.0 UNAUTHORIZED ATTACHMENT OR OCCUPANCY 10.1 Unauthorized Access. If, during the Initial Term or the Extension Term, if any, the City determines that the Licensee Facilities have been attached to or occupy the City Facilities, for which no Application was submitted to the City and no authorization or approval by the City was issued to the Licensee, the City may audit the Licensee’s records regarding such attachments and occupancies. Without prejudice to its legal rights or equitable remedies made available by this Agreement or by Law, the City may impose Costs and other financial requirements not otherwise prohibited by Law, which Costs for each unauthorized Pole Attachment or Conduit Contract No. ____________ 21 110520 MLA template Occupancy will not exceed the lesser of an amount equal to five (5) times the Annual Costs and Fees referred to in Section 6.1, for the type of Licensee Facilities that are attached without authorization, or the sum of ten thousand dollars ($10,000) or such other sum established by Law. The failure to pay any such Costs shall be subject to the same Provisions set forth in Article 6.0 pertaining to unpaid amounts then due and payable to the City. 10.1.1 The Licensee shall submit, in writing, to the City within ten (10) Days after receipt of the City’s written notice of the unauthorized attachment or occupancy, a statement concerning the unauthorized action purportedly taken by the Licensee and shall promptly submit an Application pertaining to the unauthorized Pole Attachment or Conduit Occupancy. If the completed Application is not received by the City within the time period specified in the notice of unauthorized attachment or occupancy, the City may require the Licensee to remove its unauthorized attachment or occupancy within ten (10) Days of the date on which such Application shall be due, or the City may remove the Licensee Facilities or portion thereof without liability, and the cost and expense of such removal shall be borne by the Licensee. The obligation to pay shall survive the expiration or earlier termination of this Agreement. 10.2 No Implied Ratification. No action or inaction by the City with respect to the unauthorized use of any Pole or Conduit by the Licensee shall be deemed to be a ratification of the unauthorized use. 11.0 INSTALLATION AND REPLACEMENT OF THE LICENSEE FACILITIES 11.1 Lack of Access. Except as otherwise provided by Law, the City reserves the right to refuse to approve or authorize an Application, whenever the City determines that the available City-controlled spaces on Poles or in Conduits are required for the reasons set forth in Section 3.2. The City Facilities, at the City’s discretion, may be rearranged or replaced to accommodate the Licensee Facilities, as practicable. If the City denies the Licensee access to and use of the City Facilities in question pursuant to this Section 11.1, the City will use reasonable efforts to identify one or more alternative locations at which the Licensee may attach and/or occupy the Licensee Facilities, including, without limitation, at the Licensee’s sole cost and expense the placement of a new Pole or Conduit. 11.2 Preparatory Work. The Licensee acknowledges that Preparatory Work, consisting of an engineering survey and other related review and analysis, by the City will be required to determine the load adequacy of the existing Poles and/or the capacity of the Conduits to accommodate the Licensee Facilities, unless the City authorizes, in writing, the Licensee to perform the engineering survey and related work. The City may require the Licensee to provide its preliminary load calculations. The City also will take into account all engineering and other safety- related considerations in determining the utilization of the existing available capacity of an anchor or ability to accommodate an extension, when such utilization does not result in a reduction of the holding capacity below the level normally required by the City for safety or other purposes. 11.2.1 Except as otherwise determined by the City, the field inspection portion of the Preparatory Work will be performed by the Licensee, at its sole cost and expense, as may be Contract No. ____________ 22 110520 MLA template reasonably required by the City. The City, the joint owner(s) of certain Poles, or any existing licensee may participate in the field inspection at its own cost and expense. The administrative processing portion of the Preparatory Work’s work order, the coordination of the Work requirements, and the schedule with the joint owner(s) of certain Poles and/or any existing licensee will be performed by the Licensee, at its sole cost and expense, as may be reasonably required by the City. 11.2.2 Before the Licensee may perform any portion of the Preparatory Work and before the City will be required to review any Application, the Licensee shall submit the required Costs and Fees with the Application or at such other time as may be established by the City. If a nonrefundable deposit is required by the City in order for the Licensee to conduct the Preparatory Work, this deposit will be applied to the cost of the Preparatory Work and/or the total cost of the job to the extent of the City’s participation or to future payments that the Licensee shall owe to the City. Upon receipt of the Application and the deposit, the City will notify the Licensee, in writing, of the estimated charges that will apply, should the City’s participation be required. The Licensee’s failure to respond within the specified period will be a ground for canceling the applicable Application and forfeiting the non-refundable deposit. 11.3 Make-Ready Work. The City, acting by the Utilities Director, will perform the Make-Ready Work for the Licensee Facilities, unless the City authorizes the Licensee to perform such Work under terms and conditions established by the City. If the City performs the Make-Ready Work, the Licensee shall pay the City for the Costs of such Make-Ready Work, and shall also reimburse the City for any other Cost that the City may incur for transferring or rearranging the facilities of the joint owner(s) of certain Poles and/or any existing licensee that are attached to the City Facilities, or part thereof, and for any such Costs incurred by the City, the joint owner(s) of certain Poles, and/or any existing licensee, in transferring or rearranging their facilities to accommodate the Licensee’s requests. The Licensee shall not be entitled to any monies paid to the City for Pole Attachments and/or Conduit Occupancies by reason of the use by the City, the joint owner(s) of certain Poles and/or other licensee, of any additional capacity on such Pole or in such Conduit resulting from such replacement or rearrangement. The City may require the Licensee to obtain the services of a City-pre-approved, pre-authorized and pre-qualified contractor to perform the transfers, rearrangements and/or replacements of facilities. If the City authorizes the Licensee to do the Work, the City reserves the right to inspect such performance of Work. The performance of such Work shall not commence in the absence of the City’s inspectors, who will be made available on a timely basis. All materials, equipment and/or work methods and practices shall be approved by the City prior to the commencement of the Work. Notwithstanding Section 3.6, the Licensee shall be responsible for liability, losses and damages suffered by the City that may result from the Licensee’s failure to comply with the Provisions or otherwise resulting from the Licensee’s attachment, installation, operation, repair or maintenance of the Licensee Facilities. 11.4 Project Collaboration. Should the City, the joint owner(s) of certain Poles, and/or any existing licensee have Pole or Conduit accommodation rights for its own service requirements, or needs to attach additional facilities to any Pole or Conduit to which Licensee is attached or has occupied, and wishes to avail itself of the holding capacity of an anchor being utilized by the Licensee, or needs to use the Conduits occupied by the Licensee, the Licensee will either rearrange the Licensee Facilities in, on or about the designated Pole(s) and/or Conduit(s), or Contract No. ____________ 23 110520 MLA template transfer them to replacement Pole(s) and/or Conduit(s), as determined by the City, so that the additional facilities of the City, the joint owner(s) of certain Poles and/or any existing licensee may be accommodated. The costs and expenses of such rearrangement and/or transfer will be at the sole expense of the Person seeking an additional attachment and/or the modification of an existing Pole Attachment, or additional Conduit capacity. 11.5 City Obligations. Subject to Section 7.1, in performing Make-Ready Work to accommodate the Licensee Facilities, the City will use reasonable efforts to include such work in its normal work load schedule to the extent that its actions exercised in its governmental and propriety capacities are not adversely affected. 11.6 Cost Sharing. Except as otherwise provided herein, all Costs and capital investments subject to reimbursement shall be determined in accordance with the regular and customary methods of determining costs, expenses, and capital investments on the books and records of the City, the joint owner(s) of certain Poles and/or any existing licensees in their respective businesses. 11.6.1 The invoices for replacement, rearrangement, engineering, inspections, expenses and other charges levied or collected under this Agreement, other than rentals for Pole Attachment or Conduit Occupancy, shall be payable within forty-five (45) Days after the date of receipt of such invoices by the Licensee. 12.0 INDEMNITY; WAIVER; RISK OF LOSS 12.1 Indemnity. The Licensee shall indemnify, protect, defend and hold harmless the City, its council members, officers, employees, and agents, from and against claims, demands, losses, damages, liabilities, fines, charges, penalties, administrative and judicial proceedings and orders, judgments, remedial actions of any kind, including the costs of any “hazardous material” (as such term is defined in Section 17.04.040(e) of the Palo Alto Municipal Code, as amended), remedial actions of any kind and all other related costs and expenses incurred in connection therewith, including, without limitation, reasonable attorneys’ fees and costs of defense, to the extent caused directly, in whole or in part, by the negligence or willful misconduct of the Licensee, its directors, officers, employees, agents, contractors, subcontractors and representatives, or arising, in whole or in part, from the Licensee’s construction, installation, operation, maintenance or repair of the Licensee Facilities, but not to the extent arising out of the negligence or willful misconduct of the City. 12.1.1 The City shall be liable only for the costs of repair to the damaged Licensee Facilities arising from the City's sole negligence or willful misconduct, and the City shall not be otherwise responsible for any damage, loss, or liability of any kind occurring by reason of anything done or omitted to be done by the City or by any third party, including, without limitation, damages, losses, or liability arising from the City’s approval of an Application. 12.2 Waiver. The waiver by a Party of any breach or default or violation of any Provision by the other Party shall not be deemed to be a waiver or a continuing waiver by that Party of any subsequent breach or default or violation of the same or any other Provision. Contract No. ____________ 24 110520 MLA template 12.3 Risk of Loss. The Licensee shall assume all responsibility for, and shall promptly reimburse, in full, the City, the joint owner(s) of certain Poles and/or any existing licensee, for any of their losses and expenses associated with damages caused, directly or indirectly, by the Licensee, its employees, agents and/or contractors to the City Facilities, including, without limitation, any Poles and Conduits or damage caused by the presence of the Licensee Facilities. The Licensee shall provide immediate notification to the other Party upon the occurrence of any such damage. 12.4 Notice to City. The Licensee shall promptly advise the City of all known claims relating to damage of property or injury to or death of persons, arising or alleged to have arisen in any manner, directly or indirectly, from the erection, maintenance, repair, replacement, operation, presence, use or removal of the Licensee Facilities. The Licensee shall promptly notify the City, in writing, of any known suits or causes of action which involve the City and, upon request of the City, provide to the City’s insurer copies of all relevant accident reports and statements made to the Licensee or others. 13.0 INSURANCE 13.1 General. Unless the City’s insurance risk manager agrees, in writing, to accept the Licensee’s self-insurance in fulfillment of these insurance requirements, the Licensee shall obtain and maintain at all times during the Initial Term and the Extension Term, if any, commercial general liability insurance and commercial automotive liability insurance protecting the Licensee in an amount of two million dollars ($2,000,000) per occurrence (combined single limit), including death, bodily injury and property damage, and not less than two million dollars ($2,000,000) aggregate, for each personal injury or death liability, products-completed operations, and each accident. Such insurance, pursuant to ISO Form No. GC2010 or equivalent or other commercially reasonable form acceptable to the City’s insurance risk manager, shall include the City, its council members, officers, employees, and agents as an additional insured as respects liability arising out of the Licensee's negligent performance of any Work that it performs or may be authorized to perform under this Agreement. Coverage shall be provided in accordance with the limits specified and the Provisions indicated herein. Claims-made policies are not acceptable. Such limits may be satisfied by a combination of primary and umbrella policies. Such insurance shall not be canceled or non- renewed until the City has received at least thirty (30) Days’ prior written notice of such cancellation or non-renewal. The Licensee shall be responsible for notifying the City of such change or cancellation. 13.2 Certificates. The Licensee shall file the required original certificate(s) of insurance with endorsements with the City's insurance risk manager, with a copy to the Utilities Director, subject to the City's prior approval. The certificate(s) shall clearly state or provide: 13.2.1 Policy number; name of insurance company; name, address and telephone number of the agent or authorized representative; name, address and telephone number of insured; project name and address; policy expiration date; and specific required coverage amounts; Contract No. ____________ 25 110520 MLA template 13.2.2 With the certificate(s), the Licensee shall provide prior written notice of cancellation to the City that is unqualified as to the acceptance of liability for failure to notify the City; and 13.2.3 That the Licensee's required insurance is primary as respects any other valid or collectible insurance that the City may possess, including any self-insured retentions the City may have, and any other insurance the City does possess shall be considered excess insurance only and shall not be required to contribute with this insurance. 13.3 Notice. The certificate(s) of insurance with all endorsements and notices shall be mailed to: (a) City of Palo Alto, Utilities Department, P.O. Box 10250, Palo Alto, CA 94303, Attn.: Electrical Engineering Manager; and (b) City of Palo Alto, Public Works Department, P.O. Box 10250, Palo Alto, CA 94303, Attn.: Supervising Project Engineer. 13.4 Other Coverage. Unless the City permits the Licensee to self-insure, the Licensee shall obtain and maintain at all times during the Initial Term and the Extension Term, if any, statutory workers' compensation and employer's liability insurance or qualify as a self-insurer in an amount not less than one hundred thousand dollars ($100,000) or such other amounts as required by Law, and furnish the City with a certificate showing proof of such coverage. 13.5 Insurance Rating. Any insurance provider of the Licensee shall be admitted and authorized to do business in California and shall be rated at least A-:VII in Best's Key Rating Guide. Insurance certificates issued by non-admitted insurance companies will not be acceptable to the City. 13.6 Deductibles. Prior to the execution of this Agreement, any self-insured retentions must be stated on the certificate(s) of insurance, which shall be sent to the City, and any deductibles shall be reported, in writing, to the City’s insurance risk manager. "Cross liability", "severability of interest" or "separation of insureds" clauses shall be made a part of the commercial general liability and commercial automobile liability policies. 14.0 PERFORMANCE BOND; LETTER OF CREDIT 14.1 Posting Security. The City may require the Licensee to procure and provide the City with a surety bond (the “Bond”), naming the City as the obligee in the amount of not less than one hundred percent of the estimated cost of the Work or one hundred fifty thousand dollars ($150,000), whichever sum is greater (or such other amount as may be required by Law), to guarantee and assure the faithful performance of the Licensee's obligations under this Agreement. The City will notify the Licensee of the date by which such Bond shall be posted. The City shall have the right to draw against the Bond in the event of a default by the Licensee or in the event that the Licensee fails to meet and fully perform any of its obligations hereunder or in accordance with the City’s exercise of its rights upon the Licensee’s abandonment of the Licensee Facilities and failure to remove them as required by this Agreement. 14.2 Replenishing Bond. Within fifteen (15) Days of receipt of written notice from the City, the Licensee shall renew or replace such sums of money as shall bring the Bond Contract No. ____________ 26 110520 MLA template current. A failure by the Licensee to bring current the Bond within the specified time and give the City notice thereof shall constitute a default under this Agreement. Any Bond may be canceled by the Licensee at the end of the applicable construction or installation project. The Licensee shall provide thirty (30) Days’ prior written notice of cancellation to the City. 14.3 Letter of Credit. The Licensee may provide the City with a Letter of Credit in the amount set forth in Section 14.1 and in accordance with other terms and conditions as may be agreed to by the City, if the City Manager agrees to accept the Letter of Credit in lieu of the Bond to secure the Licensee’s performance under this Agreement. 15.0 REPRESENTATIONS AND WARRANTIES 15.1 Representations and Warranties of the Parties. As of the Effective Date, each Party represents and warrants to the other Party that: A. It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; B. The execution, delivery and performance of this Agreement and the Exhibits are within its powers, have been duly authorized by all necessary action and do not violate any of its governing documents, any contracts with any joint owners to which it is a party or any Law; C. The Agreement and the Exhibits and any other document executed and/or delivered in accordance with this Agreement constitute its legally valid and binding obligation, enforceable against it in accordance with its covenants, terms, conditions and provisions; D. It has not filed and it is not now contemplating the filing for bankruptcy protection or, to its knowledge, any action is threatened against it which would result in it being or becoming bankrupt; E. There is not pending or, to its knowledge, threatened against it or any of its affiliates any legal or administrative proceedings that could materially adversely affect its ability to perform its obligations under this Agreement and the Exhibits; and F. No “event of default” or potential “event of default” with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement and the Exhibits. 15.2 Representations and Warranties of the Licensee. The Licensee represents and warrants to the City that: A. The Licensee has all approvals, authorizations, certifications, licenses and franchises required by the CPUC, the FCC and/or any other agency to provide the Communications Service; Contract No. ____________ 27 110520 MLA template B. The Licensee is not aware of any facts or circumstances that would call into doubt the continuing validity of any such approvals, authorizations, certifications, licenses or franchises; C. There is not pending or, to the Licensee’s knowledge, threatened against the Licensee or its parent corporation or any of its subsidiaries or affiliates, any legal or administrative proceedings that could materially adversely affect the validity of such licenses, authorizations or franchises; and D. All Work to be performed by the Licensee pursuant to this Agreement will be (i) performed in a good and workmanlike manner, consistent with any specifications and with any prevailing industry standards, applicable Laws, and the Provisions hereof, and (ii) will be free from defects. 16.0 DEFAULT; REMEDIES FOR DEFAULT 16.1 Event of Default. This Agreement may be terminated upon the occurrence of an “event of default” by a Party (the “Defaulting Party”). 16.1.1 An “event of default,” which will constitute a material breach of this Agreement if it is not cured in a timely manner as described below, means the occurrence of any of the following: A. A representation or warranty made by a Party is false or misleading in any material respect when made; B. The failure to perform any material covenant, or obligation set forth in this Agreement, if such failure is not remedied within thirty (30) Days after written notice of default is given or, if such cure reasonably requires more than thirty (30) Days, fails to commence such cure within the specified period or, thereafter, fails to continue diligently such cure until completion thereof; C. A Party files a petition or otherwise commences or acquiesces in the commencement of a proceeding under any bankruptcy, insolvency, reorganization or similar Law, makes an assignment for the benefit of its creditors, has an administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or is generally unable to pay its debts as they fall due; D. The failure to make, when due, any undisputed payment required by this Agreement if such failure is not remedied within ten (10) Business Days after written notice of default is given; and E. The revocation, expiration or denial of renewal, by final order or action that is no longer subject to appeal, of any license, authorization or franchise that is required by the FCC, the CPUC, and/or any other agency for the Licensee to provide Communications Service by means of the Licensee Facilities or to install or maintain or operate the Licensee Facilities in Palo Alto, if Contract No. ____________ 28 110520 MLA template such expiration or denial prohibits the Licensee from operating the Licensee Facilities or providing Communications Service. 16.2 Remedies for Default. If an event of default occurs and is continuing with respect to the Defaulting Party, the other Party (the “Non-Defaulting Party”) will have an election of rights and remedies, in addition to all other legal rights and equitable remedies or as otherwise provided in this Agreement, to which the Non-Defaulting Party may resort cumulatively, or in the alternative: A. The right to terminate this Agreement by giving to the Defaulting Party thirty (30) Days’ prior written notice of termination, in which event this Agreement will terminate on the date set forth in the notice of termination; and B. Any other right that is made available under applicable Laws. 16.3 Excusing Performance. A Party will be temporarily excused from the performance or further performance of any of its covenants or agreements hereunder, excepting only the obligation to pay Costs and Fees, and such Party’s nonperformance shall not be deemed an event of default under this Agreement for any period, to the extent, but only to the extent, that such Party is prevented, hindered or delayed for any period of time not in excess of thirty (30) Days from performing any of its covenants or agreements, in whole or in part, as a result of a Force Majeure event, including, without limitation, any denial of access to the City Facilities in order to engage in the Work. The Parties hereby agree to use reasonable efforts to remedy the effects caused by the occurrence of the Force Majeure event giving rise to a Party’s temporary nonperformance of its obligations, covenants or agreements under this Agreement. A Party will provide notice promptly to the other Party to the extent that Party relies on the provisions of this Section to temporarily excuse its failure to perform any of its covenants or agreements hereunder. 17.0 DISPUTE RESOLUTION 17.1 Informal Process. If a dispute between the Parties arises in regard to this Agreement or any Exhibit (the “Dispute”), the following procedure will govern the resolution of the Dispute: (a) the Parties will nominate their respective representatives to be responsible for and exercise the appropriate authority to resolve all Disputes hereunder for the fourteen-day resolution period of time set forth below; and (b) if the Dispute remains unresolved within such fourteen-day period, before either Party may resort to the process described in Sections 17.3 and 17.4, either Party may refer the Dispute, in writing, for final settlement to a senior principal, vice-president or other officer of the Licensee and the City Manager, who will jointly convene within ten (10) Days of receipt of a referral request and use reasonable efforts to consider and resolve the Dispute. The Parties will ensure that their respective representatives confer for a period of fourteen (14) days from the date of referral by either Party. If final resolution cannot be achieved, the Parties may resort to the procedures described in Sections 17.3 and 17.4 hereunder. 17.2 No Bar to Other Relief. Nothing contained in this Agreement will prevent or otherwise restrict either Party from pursuing its rights at law or in equity, including injunctive relief and specific performance, in the event of a default and a material breach by the other Party. Contract No. ____________ 29 110520 MLA template 17.3 Mediation. In the event of a Dispute, either Party may, by notice to the other Party (the “Mediation Notice”), request that such Dispute be submitted to non-binding mediation in Palo Alto, California, with a mediator acceptable to the Parties. If such mediation does not result in a settlement of the Dispute within one hundred eighty (180) Days from the date of the Mediation Notice, either Party may request that such matter be submitted to non-binding arbitration in Palo Alto, California, under the rules of the American Arbitration Association. Action of any kind by either Party arising out of this Agreement must be commenced within one (1) year from the date the right, claim, demand or cause of action first arises. 17.4 Continuation of Rights. Notwithstanding anything to the contrary set forth herein, in no event will the City interrupt or suspend or terminate the Licensee’s rights granted under this Agreement or perform any action that prevents, impedes, or reduces in any way the Licensee’s rights to conduct its authorized, certificated or licensed services, unless: (a) the authority to do so is granted to the City by this Agreement or by Law or conferred by a court of competent jurisdiction; (b) this Agreement has been validly terminated in accordance with this Agreement; or (c) the Licensee has failed to pay the City any undisputed invoice that is past due in excess of thirty (30) Days after receiving a delinquency notice from the City. 17.5 Immediate Relief. Nothing in this Agreement shall be deemed or construed to prohibit a Party from obtaining judicial, regulatory or other relief necessary in order to preserve the status quo or prevent the loss or violation of that Party’s rights. 18.0 NOTICES All notices which shall or may be given pursuant to this Agreement shall be given, in writing, and shall be deemed validly given if delivered or sent by certified mail, return receipt request or by commercial courier, provided the commercial courier’s regular business is delivery service, and addressed, as follows: CITY: City of Palo Alto Department of Utilities P. O. Box 10250 Palo Alto, CA 94303 Attn.: Director of Utilities CITY: City of Palo Alto Department of Public Works P. O. Box 10250 Palo Alto, CA 94303 Attn.: Director of Public Works Copy to: City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 Contract No. ____________ 30 110520 MLA template Attn.: City Clerk Copy to: City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 Attn.: City Attorney Any notice to be sent to the City Manager or City Attorney shall be sent to the same post office box referred to above. LICENSEE: Name Address Phone: Fax: Attn.: 19.0 MISCELLANEOUS PROVISIONS 19.1 Amendments. This Agreement may not be amended except pursuant to a written instrument signed by the Parties. 19.2 Assignment. This Agreement is personal to only the Licensee and no other Person. The Licensee may not directly or indirectly assign, transfer or convey to another Person this license or any of the rights and obligations of the Licensee established by this Agreement. Any assignment or transfer of this Agreement shall be void, and the City may terminate this Agreement if the Licensee attempts to assign or transfer this Agreement without compliance hereof. The preceding sentences of this Section 19.2 notwithstanding, the Licensee may assign or transfer this Agreement to its parent corporation or any subsidiary corporation or affiliate or successor in interest, provided that such parent corporation, subsidiary corporation or affiliate or successor in interest first agrees, in writing, to be fully bound by this Agreement and the Exhibits and to assume all of the Licensee’s obligations and liabilities hereunder, whether arising before or after the date of such assignment or transfer. 19.3 Attorneys’ Fees. Each Party in any litigation, including mediation, regarding this Agreement will bear its own costs and expenses of suit, including, without limitation, reasonable attorneys’ fees. 19.4 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 19.5 Entire Agreement. This Agreement contains the entire understanding between the Parties with respect to the subject matter herein. There are no representations, warranties, agreements or understandings (whether oral or written) between the Parties relating to the subject matter hereof which are not fully expressed herein. Contract No. ____________ 31 110520 MLA template 19.6 Exhibits. As of the Effective Date, all exhibits referred to in this Agreement and any addenda, attachments, and schedules which may, from time to time, be referred to in any duly executed amendment to this Agreement are by such reference incorporated in this Agreement and shall be deemed a part hereof. 19.7 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of California without regard to its conflicts of laws rules or principles. 19.8 Headings. The headings hereof are inserted for convenience of reference only, are not a part hereof and shall have no effect on the construction or interpretation hereof. 19.9 Independent Contractor. Each Party acts as an independent contractor and not as an employee of the other Party. Nothing in this Agreement shall be construed to establish a partnership, joint venture, group, pool, syndicate or agency relationship between the City and the Licensee. 19.10 Resolving Conflicting Provisions. To the extent the Provisions and any other authorizations and approvals required to be obtained by the Licensee from the City are in conflict, the Provisions of the Agreement, authorizations and approvals which impose(s) the higher or greater legal duty or obligation upon the Licensee shall take precedence. 19.11 Rules of Construction. Each Party and its counsel have reviewed this Agreement. Accordingly, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the construction and interpretation hereof. 19.12 Severability. If a court of competent jurisdiction finds or rules that a Provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected Provisions of this Agreement and any amendments thereto will remain in full force and effect. 19.13 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the lawful successors and permitted assignees of the Parties. 19.14 Time of Action. For the purposes hereof, the time in which an act is to be performed shall be computed by excluding the first Day and including the last. If the time in which an act is to be performed falls on a Saturday, Sunday, or any Day observed as an official holiday by the City, the time for performance shall be extended to the following Business Day. 19.15 Venue. In the event that suit is brought by a Party, the Parties agree that trial of such action shall be vested exclusively in the state courts of California, County of Santa Clara, or, assuming jurisdiction is otherwise proper, in the United States District Court, Northern District of California, in the County of Santa Clara. 19.16 Waiver of Lien Rights. The City waives any lien rights that it may have in the Licensee Facilities, which shall be deemed personal property for purposes of this Agreement regardless of whether or not the same is deemed real property, fixtures or attachments thereto, or Contract No. ____________ 32 110520 MLA template personal property by Law. Subject to and as limited by the Provisions, the City grants the Licensee and the Licensee’s mortgagee the right to remove or cause the removal of the Licensee Facilities from time to time, whether before or after a default by the Licensee under this Agreement, in the discretion of the Licensee or the Licensee’s mortgagee. // // // // // IN WITNESS WHEREOF, this Agreement shall be deemed duly executed by the Parties in Palo Alto, County of Santa Clara, State of California, as of the Effective Date. APPROVED AS TO FORM CITY OF PALO ALTO _____________________________ ______________________________ Senior Asst. City Attorney City Manager ATTEST: LICENSEE _____________________________ ______________________________ Director of Utilities Title: _________________________ _____________________________ ______________________________ Director of Public Works General Counsel Contract No. ____________ EXHIBITS In accordance with Section 19.6 of the Master License Agreement between the City and the Licensee (the “Agreement”), Exhibits A through I, inclusive, any new exhibits hereinafter existing and any amendments thereto, are hereby incorporated in and made a part of the Agreement. 110520 MLA Exhibits template Contract No. ______________ A-1 110520 MLA Exhibits template Exhibit “A” The Licensee shall submit one of the following documents (or documents), as applicable, which shall be attached hereto: [a] Certificate of Public Convenience and Necessity or [b] Wireless Identification Registration Number. Contract No. ______________ Exhibit “B” List of Poles Rented by Licensee No. of Poles: ______________________ City of Palo Alto Pole Number Nearest Street Address B-1 110520 MLA Exhibits template Contract No. ______________ Exhibit “C” List and Location of Conduit Footage Rented by Licensee Total Conduit footage: _____________________ Location Number From Street Address To Street Address Footage (Ft) Number and size of cables to be installed 1 2 3 Etc C-1 110520 MLA Exhibits template Contract No. ______________ Exhibit “D” Description of Licensee Facilities [to be Attached To City-spaces on Poles and/or Streetlight Poles And/or Installed in City Conduits] The Licensee shall provide the City with a detailed description of the Licensee Facilities that the Licensee proposes to attach to and/or install in the City Facilities. The following information shall be included: [1] Typical Installation drawing; and [2] Power requirements for the Licensee Facilities to be attached and/or installed. D-1 110520 MLA Exhibits template Contract No. ______________ Exhibit “E” Schedule E-1, dated as of ____________ Description of Licensee Facilities to be Attached and/or Installed, Duration of Attachment and/or Installation, and Fees and Costs A. Licensee Facilities: 1. Number of Pole Attachments: ______________________ 2. Total Conduit footage : ______________________ B. Duration of Pole Attachment/Conduit Occupancy: 1. For Poles: ___________________________ 2. For Conduits: __________________________ C. Initial/One-Time Costs and Fees 1. The Licensee shall reimburse the City for its actual or estimated Costs and Fees of preparing the City Facilities (the City’s overhead and underground facilities) for each new or modified Pole Attachment or Conduit Occupancy. This reimbursement is a one-time charge for each attachment to Poles and/or installation in Conduits. The charges shall be due upon the City’s receipt of the Licensee’s written approval to attach, install or modify any Pole contact or Conduit usage, and they shall be paid before the City’s construction shall commence. Charge: Processing Charge Description: The actual or estimated cost for performing preliminary field investigation to review pole attachment or conduit usage submittal. Price: Total Cost Charge: Engineering Charge Description: The costs estimated by the City for reviewing contact design, designing City modifications and updating operation records. Price: Total Cost Charge: Cable Attachment Charges Description: The costs estimated by the City for making space available and other modifications necessary to accommodate each line attachment. E-1-1 110520 MLA Exhibits template Contract No. ______________ Price: Total Cost Charge: Anchor Attachment Charges Description: The costs estimated by the City for making provisions for guying the structure at the communications level. Price: Total Cost Charge: Equipment Mounting Charges Description: The costs estimated by the City for making space available and other modifications necessary to accommodate equipment (amplifiers, nodes, battery backup) mounting. Price: Total Cost Charge: Electric Services Connection Charges Description: The costs estimated by the City for providing electric service connection to provide power to equipment attached to the pole. Price: Total Cost Charge: Inspection Charge Description: The costs estimated by the City for providing inspection services upon completion of make-ready work and Licensee’s equipment – typically 3 hours per pole. Price: Total Cost Total Initial/One-Time Costs and Fees for Schedule E-1: $ _______________________. D. Annual Costs and Fees: 1. Wire facilities attachment fees. The Fees for wire communications facilities attachments to Poles shall be as set forth in the City’s Utility Rate Schedule E-16 or, if such rate schedule is not applicable, any other applicable CPAU utility rate schedules. 2. Wireless facilities attachment fees. The Fees for wireless communications facilities attachments to Poles shall be as set forth in the City’s Utility Rate Schedule E- 16 or, if such rate schedule is not applicable, equal to the rental rate of one thousand five hundred dollars ($1,500.00) per Pole per year. 3. Conduit occupancy fees. The Fees for occupancy of Conduits shall be as set forth in the City’s Utility Rate Schedule E-16 or, if such rate schedule is not applicable, other applicable CPAU utility rate schedule(s). The City reserves the right to impose and collect different fees for the exclusive and nonexclusive occupation of the Conduits. 4. Other City service fees. The Fees for the City’s rendering of services in regard to the attachment or installation of the Licensee’s wire and/or wireless facilities on Poles E-1-2 110520 MLA Exhibits template Contract No. ______________ E-1-3 110520 MLA Exhibits template or in Conduits shall be established in accordance with applicable CPAU utility rate schedules. 5. Electric Service charges. The Fees, rates and charges for electric utility service consumed or used annually by the Licensee shall be as set forth in the City’s Utility Rate Schedule E-16 or, if such rate schedule is not applicable, other applicable CPAU utility rate schedules. 6. Late Payment fee. If the Licensee fails to pay the amounts of Costs and Fees due and payable within the time period required by this Agreement, then the License shall pay a late fee established by Law or the lesser of an amount equal to five percent (5%) of those amounts then due and payable as set forth in the invoices or five hundred dollars ($500). 7. Utility Rate Schedules. The utility rate schedules referred to in this Exhibit “E” and any amendments thereto now or hereafter in effect shall be deemed incorporated herein by reference. The rates may be amended and adopted by the City in the ordinary course and scope of business. The Fees shall be subject to annual cost-of-living increases. The Fees upon commencement of the Extension Term shall be calculated in accordance with the utility rate, fees and charges applicable to Pole Attachments and Conduit Occupancy then in effect. Total Annual Costs and Fees for Schedule E-1: $ _______________________. E. Other Terms and Conditions: F. Attachments: Contract No. ______________ Exhibit “E” Schedule E-2, dated as of ____________ Description of Licensee Facilities to be Attached and/or Installed, Duration of Attachment and/or Installation, and Fees and Costs A. Licensee Facilities: 1. Number of Pole Attachments: ______________________ 2. Total Conduit footage : ______________________ B. Duration of Pole Attachment/Conduit Occupancy: 1. For Poles: ___________________________ 2. For Conduits: __________________________ C. Initial/One-Time Costs and Fees 1. The Licensee shall reimburse the City for its actual or estimated Costs and Fees of preparing the City Facilities (the City’s overhead and underground facilities) for each new or modified Pole Attachment or Conduit Occupancy. This reimbursement is a one-time charge for each attachment to Poles or installation in Conduit usage. The charges shall be due upon the City’s receipt of the Licensee’s written approval to attach, install or modify any Pole contact or Conduit usage, and they shall be paid before the City’s construction shall commence. Charge: Processing Charge Description: The actual or estimated cost for performing preliminary field investigation to review pole attachment or conduit usage submittal. Price: Total Cost Charge: Engineering Charge Description: The costs estimated by the City for reviewing contact design, designing City modifications and updating operation records. Price: Total Cost Charge: Cable Attachment Charges Description: The costs estimated by the City for making space available and other modifications necessary to accommodate each line attachment. E-2-1 110520 MLA Exhibits template Contract No. ______________ Price: Total Cost Charge: Anchor Attachment Charges Description: The costs estimated by the City for making provisions for guying the structure at the communications level. Price: Total Cost Charge: Equipment Mounting Charges Description: The costs estimated by the City for making space available and other modifications necessary to accommodate equipment (amplifiers, nodes, battery backup) mounting. Price: Total Cost Charge: Electric Services Connection Charges Description: The costs estimated by the City for providing electric service connection to provide power to equipment attached to the pole. Price: Total Cost Charge: Inspection Charge Description: The costs estimated by the City for providing inspection services upon completion of make-ready work and Licensee’s equipment – typically 3 hours per pole. Price: Total Cost Total Initial/One-Time Costs and Fees for Schedule E-2: $ _______________________. D. Annual Costs and Fees: 1. Wire facilities attachment fees. The Fees for wire communications facilities attachments to Poles shall be as set forth in the City’s Utility Rate Schedule E-16 or, if such rate schedule is not applicable, any other applicable CPAU utility rate schedules. 2. Wireless facilities attachment fees. The Fees for wireless communications facilities attachments to Poles shall be as set forth in the City’s Utility Rate Schedule E- 16 or, if such rate schedule is not applicable, equal to the rental rate of one thousand five hundred dollars ($1,500.00) per Pole per year. 3. Conduit occupancy fees. The Fees for occupancy of Conduits shall be as set forth in the City’s Utility Rate Schedule E-16 or, if such rate schedule is not applicable, other applicable CPAU utility rate schedules. The City reserves the right to impose and collect different fees for the exclusive and nonexclusive occupation of the Conduits. 4. Other City service fees. The Fees for the City’s rendering of services in regard to the attachment or installation of the Licensee’s wire and/or wireless facilities on Poles E-2-2 110520 MLA Exhibits template Contract No. ______________ E-2-3 110520 MLA Exhibits template or in Conduits shall be established in accordance with applicable CPAU utility rate schedule(s). 5. Electric Service charges. The Fees, rates and charges for electric utility service consumed or used annually by the Licensee shall be as set forth in the City’s Utility Rate Schedule E-16 or, if such rate schedule is not applicable, other applicable CPAU utility rate schedules. 6. Late Payment fee. If the Licensee fails to pay the amounts of Costs and Fees due and payable within the time period required by this Agreement, then the License shall pay a late fee established by Law or the lesser of an amount equal to five percent (5%) of those amounts then due and payable as set forth in the invoices or five hundred dollars ($500). 7. Utility Rate Schedules. The utility rate schedules referred to in this Exhibit “E” and any amendments thereto now or hereafter in effect shall be deemed incorporated herein by reference. The rates may be amended and adopted by the City in the ordinary course and scope of business. The Fees shall be subject to annual cost-of-living increases. The Fees upon commencement of the Extension Term shall be calculated in accordance with the utility rate, fees and charges applicable to Pole Attachments and Conduit Occupancy then in effect. Total Annual Costs and Fees for Schedule E-2: $ _______________________. E. Other Terms and Conditions: F. Attachments: Contract No. ______________ Exhibit “F” Terms and Conditions Regarding Use of Pole Spaces 1. The Licensee shall be responsible to performing its own engineering analysis, which shall be submitted with the Processing Request Form – Exhibit “I”, in order to enable the City to determine where on the Pole the Licensee Facilities will be attached in compliance with CPUC GO 95 Rule 94 clearance and construction requirements. CPAU in its Make-Ready Work inspection will evaluate the Pole for its ability to accommodate all of the existing and new attachments from a clearance- and pole-loading perspective. 2. Subject to the City’s express written consent, the Licensee shall perform all attachments and installations; only qualified contractors reasonably approved by the City will be allowed to work in the Electric Utility space subject to any monitoring by City staff. 3. As there may be Make-Ready Work that needs to be performed by other parties attached to the Pole, the Licensee shall make arrangements with those other parties to move/transfer their facilities. 4. The Licensee shall remove existing “out of service” communications cable/devices to facilitate the new attachments and installations. 5. The City will approve the Licensee’s Pole Attachment and Conduit Occupancy requests over two phases. The first phase will entail ensuring the Make-Ready Work is completed in accordance with CPAU specifications. The second phase will entail permitting the Licensee to attach the Licensee Facilities to the Poles and/or installation in the Conduits. The City’s personnel will perform a final inspection after all Work is completed. 6. The Licensee shall identify the Licensee Facilities newly installed or serviced at each contact point by means of a marking method mutually agreed to by the Parties. Such identification shall be visible from ground level. The Licensee shall provide the City with a 24/7 contact phone number to enable the City to promptly report any concerns regarding the Licensee Facilities. In the event that the City should report any such concerns to the Licensee, the Licensee shall promptly respond to such call(s) and perform the required repair or correct any adverse impact to the City’s electric utility operations caused by such Licensee Facilities at no cost to the City unless the same shall be caused by the City or a party under the City’s control. 7. The City reserves the right to operate and maintain its electric utility City Facilities in order to fulfill its utility service requirements to its electric utility ratepayers or dark fiber/communications customers. The City shall not be liable to the Licensee for any interruption to the Licensee’s service or for any interference F-1 110520 MLA Exhibits template Contract No. ______________ with the operation of the Licensee Facilities arising in any manner from the use of the City Facilities, including the electric utility overhead facilities, by the City in accordance with this Agreement, provided that the City shall give the Licensee fifteen (15) Days’ advance notice of any non-emergency work which affects the Licensee Facilities. 8. The Licensee Facilities shall not be installed, placed, or maintained on any of the City Facilities which carries voltage of 60,000 volts or greater between the conductors. 9. If, at any time, the City deems it necessary to intentionally increase its voltage to 60,000 volts between conductors, on the Poles jointly occupied under this Agreement, the City shall give the Licensee ninety (90) Days’ prior written notice, as provided herein, of its intention to increase said voltages. 10. In the event any City Facilities occupied by the Licensee under this Agreement are to be replaced, repaired or altered, the Licensee shall, at its own sole risk and expense (except in the case of rearrangements required by third parties or City- owned commercial communications facilities), upon reasonable notice from the City, relocate or replace its Licensee Facilities or transfer them to the replacement City Facilities, as available, or perform any other work in connection with those facilities that may be required by City. 11. In the event of an emergency or other event or condition that the City determines presents an imminent danger or threat to the public health, safety or welfare, the City may remove a Pole and shall in such case immediately notify the Licensee of the action taken. The City shall make commercially reasonable efforts to notify the Licensee of the removal of its Licensee Facilities, prior to the emergency removal of those facilities. 12. The Licensee shall use due care to avoid causing damage to the City Facilities, including its electric utility overhead facilities, and the Licensee shall assume responsibility for any loss arising from such damage caused by the Licensee. The Licensee shall make an immediate report of the occurrence of any such damage to the City and shall, on demand, reimburse the City for its total cost that are incurred in making any repairs. 13. The City shall have the right to inspect each new installation of the Licensee Facilities attached to or installed in the City Facilities and to make periodic inspections at the City’s discretion as conditions may warrant. Such inspections shall not relieve the Licensee of any responsibility, obligation or liability assumed under this Agreement. 14. The Licensee, at its sole risk and expense, shall install and maintain guys and anchors as required where the Licensee’s anchorage requirements are not coincident with the City’s or the City Facilities’ existing anchorage requirements. F-2 110520 MLA Exhibits template Contract No. ______________ F-3 110520 MLA Exhibits template 15. Where the anchorage requirements of the City Facilities used by the Licensee and the City are coincident, the existing guys and anchors shall be used. 16. If the City, in accordance with accepted electric utility standards, determines that separate guys and/or anchors are necessary, the Licensee, at its sole risk and expense, shall install the new guys and/or anchors. 17. If the City, in accordance with accepted electric utility standards, determines at the time of installation of the Licensee Facilities that the existing guys and/or anchors need to be replaced on account of and due to the weight of the License Facilities to be installed, the City, at the Licensee’s sole cost and expense, shall install the new guys and/or anchors. 18. If the Licensee Facilities cause to displace or pull any reasonably serviceable Poles or anchors out of line, or damage any City Facilities or such other facilities, equipment or installations owned by the City or any other third party in any manner, the Licensee shall pay the cost of any replacements, repairs or restoration of such Poles, anchors, facilities, equipment or installations. Contract No. ______________ Exhibit “G” Terms and Conditions Regarding Use of City Conduit 1. The Licensee shall submit a Processing Request Form – Exhibit “I” to the City, which will perform a preliminary site investigation jointly with the Licensee to determine the feasibility of the Licensee’s occupancy or use of any available Conduits. 2. No Licensee Facilities, including any cables, shall be permitted to be installed in electric pull boxes, electric vaults or Conduit that contains the City’s electric or dark fiber cables. 3. The Licensee Facilities or other cables shall be identified with durable and clearly visible tag when they are installed in Conduits. 4. For all installations, inner-duct shall be used prior to installing the Licensee Facilities or other cables. When, in the opinion of the Utilities Director, it is necessary to facilitate maintenance or the additional use of the Conduit, the City will require the Licensee to also install a divide-a-duct prior to installing the inner-duct. 5. Any pull box replacement or enlargement will be made at the Licensee’s sole cost and expense. G-1 110520 MLA Exhibits template Contract No. ______________ Exhibit “H” Pole Replacement Requirements 1. All Poles identified by the City’s records as being deteriorated and scheduled or planned for replacement within the next twelve (12) months will be addressed as follows: The City will advise the Applicant or the Licensee to seek another good Pole. The Pole will be replaced by the City, but the City will not make any guarantee to complete the replacement to meet the Applicant’s or the Licensee’s desired schedule. 2. Whenever a Pole top extension will be used to mount the Licensee Facilities and whenever the Pole top is deteriorated, then the Pole shall be replaced at the Applicant’s sole cost and expense in order to accommodate the Licensee Facilities’ attachment or installation. H-1 110520 MLA Exhibits template Contract No. ______________ Exhibit “I” Processing Request Form (for Pole Attachment/Conduit Usage) REQUEST SUBMITTED BY: FIELD INVESTIGATION CONTACT: Name: Name: Title: Title: Company: Company: Street Address: Street Address: City, State, Zip: City, State, Zip: Telephone Number: Cell Phone: Email Address: Email Address: Today’s Date: ____/____/____ Project Description: Attach the following: 1. A list of Poles with City of Palo Alto Pole number and nearest street address; 2. Size and Conduit Occupancy details; 3. Size and number of pull boxes; 4. A map showing the Pole/Conduit locations; 5. Pole loading calculations; 6. Typical Installation details of equipment to be attached on the Pole; 7. Completed Electric Service Request Application (one per wireless pole attachment location; application shall include all power and attachment requests); and 8. Other: Desired completion date: __/____/__ NOTE: Please budget 8-12 weeks from make ready and service connection payment (not this processing payment) to completion. POLE ATTACHEMNT/CONDUIT USAGE PROCESSING CONDITIONS: I am submitting this processing request with the full understanding of the following conditions: I-1 110520 MLA Exhibits template Contract No. ______________ I-2 110520 MLA Exhibits template 1. The Licensee shall pay the fee to be submitted with this Processing Request Form within seven (7) Days of receipt of the City’s invoice for the processing fee. 2. The processing fee is a non-refundable fee required to cover the cost of completing the Preparatory Work, that is, work of a preliminary nature to be undertaken by CPAU staff, including, without limitation, survey and field inspection work, review of engineering plans and specifications and other related work, that precede or are required to establish the Make-Ready Work in order to facilitate the attachment and/or installation of the Licensee Facilities in, on or about Poles and/or Conduits. 3. Upon the City’s completion of the Preparatory Work, the City will notify the Licensee whether the proposed Pole Attachments and/or Conduit Occupancies will be approved for the preparation of detailed engineering drawings and other specifications. 4. If the Parties mutually agree to proceed to the Make-Ready Work phase, then the City will prepare detailed construction plans and a cost estimate that will include (a) the Costs for any Make-Ready Work that may be performed by CPAU staff and (b) an electric service connection fee, both of which must be paid in full prior to the start of construction. 5. The processing fee will be credited against any Make-Ready Work and the electric service connection fee. Please Note: You will be invoiced for established standard processing fees or by estimate for special conditions, per Utilities Rate Schedule E-16. Please do not remit any fee until you receive an invoice. Signature: ____________________________________ Date:___/______/____ Please submit the completed form with authorized signature and direct questions to: Utilities Electric Engineering City of Palo Alto Utilities 1007 Elwell Ct Palo Alto, CA 94303 Phone: (650) 566-4500 Fax: (650) 566-4536 Electric.Engineering@CityofPaloAlto.org Note that all inquires of a legal nature must be directed to the Office of the City Attorney, 7th Floor City Hall, 250 Hamilton Avenue, P.O. Box 10250, Palo Alto, CA 94303, Attention of Senior Assistant City Attorney, Utilities.