Report 2011-131 Recommendation 10 Responses

Report 2011-131: City of Vernon: Although Reform Is Ongoing, Past Poor Decision Making Threatens Its Financial Stability (Release Date: June 2012)

Recommendation #10 To: Vernon, City of

The city should determine whether employees have a vested right to longevity payments and whether it can legally reduce or discontinue the original longevity program as a means to reduce its costs.

Annual Follow-Up Agency Response From July 2014

Pursuant to the Citys July 2013 response, Public Sector Personnel Consultants (PSPC) completed its Citywide Classification and Compensation Study and found tiered longevity programs similar to Vernons elsewhere in the market. Additionally, PSPC found that longevity benefits were being discontinued on a go-forward basis.

The Citys labor law counsel has determined that current employees have a vested right to the longevity pay they currently receive. It cannot be unilaterally reduced or discontinued by the City. In accordance with the MMBA, the City must negotiate with all affected bargaining units to reduce or discontinue any longevity programs.

The City has recently been in negotiations with all six of its employee bargaining units and has, in good faith, proposed to each bargaining unit to discontinue the current longevity program for all employees hired after December 31, 2013. The City could not in good faith propose to reduce the original longevity program. As of July 9, 2014, negotiations with 3 units have concluded and all of those units have agreed to discontinue the current longevity program for future hires. Negotiations with the remaining units are expected to conclude by July 31, 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

Because the City's original longevity program applies to employees hired prior to July 1, 1994, as of July 1, 2014, all qualified employees will have achieved their full benefit under the program, and the program will continue to phase itself out over subsequent years without incurring any new costs. Further, of the thirty-five (35) employees who retired in January and June 2013 as part of the City's 2012-2013 Early Retirement Incentive Program, thirty (30) were under the City's original longevity program. On May 13, 2013, through an open and competitive RFP process, the City engaged Public Sector Personnel Consultants (PSPC) to conduct a Citywide Classification and Compensation Study of all active City classifications (approximately 158), including executives. Longevity benefits will also be reviewed as part of this study. If any changes to the City's original longevity program are recommended by PSPC as a result of the study, the City Attorney and outside labor law counsel will determine whether employees have a vested right to longevity and whether the City can legally discontinue the original longevity program. If determined to be legally permissible and in the City's best interests, the City will negotiate with affected bargaining units in accordance with MMBA, POBOR, and FOBOR, regarding any recommendations or proposals to discontinue the original longevity program.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

The city indicates that the original longevity program will be reviewed as part of its upcoming citywide classification and compensation study. The city states that if changes to the original longevity program are recommended as a result of the study, the city attorney and outside labor law counsel will determine whether employees have a vested right in the original program and whether the city can legally discontinue the original program and if so, will negotiate with affected bargaining units to discontinue the program. The city does not indicate when this will be completed.

6-Month Agency Response

The city indicates that as part of its classification and compensation study, the contractor will be asked to include the impacts of the city's longevity programs. As noted in recommendation 9, the city council instructed the city administrator to issue an RFP for the study. The city stated that if any changes to the original longevity program are recommended, the city attorney and outside labor law counsel shall determine whether employees have a vested right to longevity and whether the city could legally discontinue the program. If otherwise legally possible, the city would be required to negotiate with affected bargaining units to discontinue the original longevity program, after it receives the results from the study.

In November 2012 the city council approved the Public Agency Retirement System (PARS) Supplementary Retirement Plan as part of its 2012-13 Early Retirement Incentive Program to obtain budget savings over the next few fiscal years. In January 2013, the city council approved funding for the plan. The city indicates that 22 employees retired as of the end of January 2013 and 12 will retire by the end of June 2013. The city estimates these retirements will provide a savings of $1.9 million in fiscal year 2013-14 and a cumulative savings of $8.1 million over 5 years.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

60-Day Agency Response

The city did not address this recommendation in its August 2012 response. (See 2013-406, p. 192)

California State Auditor's Assessment of 60-Day Status: No Action Taken

All Recommendations in 2011-131

Agency responses received after June 2013 are posted verbatim.