With tens of millions of dollars in potential retiree medical liabilities at stake, Vallejo is fighting a legal battle with its police union over cuts to health benefits imposed as part of the city’s plan to exit bankruptcy.
At the center of the year-old case is the Vallejo Police Officers Association’s claim that it has a “vested right” to fully paid retiree medical benefits based on previous labor agreements. The union also alleges the city negotiated in bad faith before declaring an impasse and imposing the reduced medical benefits on its members last December.
The city has vehemently rejected the union’s claims.
In court documents filed this month, the city argues its retired employees have no vested right in any specific level of medical benefits.
It also contends it bargained with “extraordinary patience” during 32 meetings spanning nearly a year and half, in an unsuccessful attempt to convince the union to accept the same, reduced medical benefits now received by all other city employees and retirees.
Following months of court proceedings and voluminous legal filings by both sides, the case could be decided in a hearing set for Dec. 2 in Solano Superior Court Judge Paul Beeman’s Fairfield courtroom.
‘SKYROCKETING’ COSTS
The case is rooted in negotiations between the city and the police union during and after the Vallejo’s bankruptcy filing, which commenced in May 2008.
In a court documents, Assistant City Manager Craig Whittom said the bankruptcy was triggered by skyrocketing and unsustainable employee costs. The crisis was exacerbated, Whittom said, by a nearly 25 percent drop in revenues as a result of the Great Recession about a year later.
During bankruptcy, the city was required to develop a five-year plan detailing its strategy for maintaining fiscal stability. The plan was premised largely on reducing contributions to employee and retiree health plan premiums to $300 per month.
As a result of the reductions, the city predicted it could slash its retiree medical liabilities by 40 percent, from $135.4 million as of June 30, 2008 to $82.1 million as of June 30, 2010.
However, as of June 30, 2012, retiree medical obligations had grown to about $106.6 million, according to the city. Of that total, $65 million — more than 50 percent — was attributable to police union members and retirees.
The city calculated that, upon implementing the $300 per month retiree health benefit for police officers and administrative, professional and confidential employees, that figure would be reduced by about 62 percent from $106.6 million to $39.9 million.
2009 NEGOTIATIONS
During bankruptcy, the police union agreed to limit its medical benefits to the full cost of only the Kaiser premium, which led to a corresponding change for retirees. The bankruptcy court upheld that change over the objections of union retirees.
In 2009, the union proposed the city pay 100 percent of the Kaiser premium forever. The city rejected that proposal.
According to the city, the subsequent, agreed-upon contract made no promises regarding retiree health benefits after its expiration on June 30, 2012. The union, however, maintains the agreement locked in fully paid retiree health benefits in perpetuity.
‘AT LOGGERHEADS’
After several delays, the parties resumed contract talks last year as the city pushed to spread the reduced health benefits equally across all employee groups.
However, the two sides could not reach agreement, resulting in the city declaring an impasse and making its “last, best and final offer.”
“At that time, it was clear that the parties were at loggerheads over the issue of retiree medical contributions,” the city’s recently filed opposition to the union’s lawsuit states.
Despite threats of a prolonged legal battle, the City Council voted on Dec. 16, 2013 to impose some, but not all, of the city’s final offer, including the $300 per month cap on health benefits.
Former councilwoman Stephanie Gomes, who participated in the 6-0 vote, stated in a court declaration for the city, “This was a critical achievement, in my view, because it restored equity between the police and most other city employees.”
The city, meanwhile, has denied the union’s allegations that Gomes had a conflict of interest because her husband, former police Capt. Tony Pearsall, is a retired city employee. Pearsall receivers retirement benefits through the city, not the union.
The union has further alleged the council was obligated to swear in three newly elected members before voting. The city has rejected that claim.
Contact Tony Burchyns at 707-553-6831.