City Council on Wednesday held a hearing in attempt to pin down the cost to the city of honoring firefighters union Local 22's four-year contract, originally set to go in effect in July of 2009. "We need to know so we are not caught by surprise," said Councilman David Oh, who called the meeting. "And have to make payments we cannot plan for, putting taxpayers at risk."
Mayor Michael Nutter's administration on Tuesday filed its third appeal of the contract award, claiming the city does not have the funds to cover three years of retroactive wage increases that have now snowballed into a potentially large up-front payout.
"The impact of the award would be substantial," Finance Director Rob Dubow said. "Over the course of the current five-year plan, it would add more than $200 million in additional costs to the city's general fund, with the cost this fiscal year alone more than $84 million."
But others testified that figure is inflated because it includes both the three years of retroactive wages and the cost of Local 22's compensation package for the next five years.
"It's part of a five-year plan, but it's an eight-year calculation because you have the retroactive piece in there," Councilman Dennis O'Brien said. "To me, with all the other things going on, I can't help but come to the conclusion there is some sort of a punitive agenda here."
Local 22's legal counsel Rick Poulson said the award's actual cost is closer to $66 million – $34 million in salaries and $32 million in active and retiree medical costs. He believes the city's figure is high even for an eight-year projection due to other disputed accounting methods.
But Poulson said in the event the award does cost $200 million, it would still not have a major financial impact because that amounts to a mere 1.5 percent of the city's total $32 billion budget over eight years.
The administration also came under fire for not putting aside any money to pay the award. "Already, the city is in arrears $84 million on a bill they know they have to pay," City Controller Alan Butkovitz said. "And their answer is this: 'How about we don't pay it some more?'"
The administration in August proposed in the city's five-year fiscal plan to
offset Local 22's award with a package of two to five percent
across-the-board cuts to all city departments, which they are arguing on appeal would negatively affect key city services.
The savings were outlined
in an 11th hour addendum to the plan after some members of the
Philadelphia Intergovernmental Cooperation Authority expressed
reluctance to approve it because of the contract issue.
"We just know there's an amount of money spent on something and there's been no money set aside, which means all of this money is going to be suddenly due," Oh said to administration representatives. "Being the city has lost two arbitration and a Common Pleas appeal and has now presented all of its evidence, do you believe that you are going to win this appeal and not have to pay anything?"
The Nutter administration and Local 22 have been waging a battle in arbitration and in court over the contract for more than three years. Negotiations begin at the end of this month for Local 22's next four-year contract.
"The bigger issue is, regardless of whether the contract costs $60 million, $70 million or $200 million, is that the award has now been issued twice and affirmed in court," said Local 22 President Bill Gault. "Act 111 says these [arbitration] awards are supposed to be final and binding."
July 1, 2009. Local 22's contract with the city expired.
Sept. 17, 2010 – Oct. 12, 2010. The city and Local 22 went to arbitration and a four-year contract was awarded.
Nov. 12, 2010. The city appealed to the Court of Common Pleas.
Nov. 16, 2011. A Common Pleas judge sent the contract back to arbitration.
July 2, 2012. An arbitration panel awarded virtually the same terms.
July 17, 2012. Local 22 filed a lawsuit against the city compelling them to implement the contract.
July 27, 2012. The city again appealed the arbitration award to the Court of Common Pleas.
Aug. 9, 2012. PICA delayed its vote on the city's five-year plan. After some members expressed reluctance to approve the plan without provisions for paying Local 22's contract, Nutter submitted an addendum of possible cuts.
Sept. 5, 2012. PICA approved the five-year plan, but chairman Sam Katz cautioned he would vote against next year's plan if the city failed to agree on contracts with municipal unions.
Nov. 21, 2012. A Common Pleas judge upheld the union's arbitration award.
Dec. 11, 2012. Mayor Michael Nutter's administration appealed, asking the judge to stay her order. If the judge denies to do so, the city can appeal her denial to the Commonwealth Court.
Dec. 31, 2012. Negotiations begin for Local 22's next four-year contract, which goes into effect July 1, 2013.