Fresno Bee Newsroom Blog

FCEA’s Dee Barnes sends e-mail on blog, Measure G

This blog has two parts. The first part is an e-mail I received Wednesday from Dee Barnes, president of the Fresno City Employees Association — the city’s white-collar union.

Dee’s e-mail is a response to a blog I posted Tuesday evening. My blog was an analysis of how power works at City Hall in general, and how power works in the Measure G campaign in particular.

I give you Dee’s e-mail as she wrote it to me.

The second part of this blog is my Tuesday evening blog with a Wednesday morning correction and several additions.

The original blog had received 19 reader comments as of Thursday night. The reader comments are at the bottom of the original blog posted elsewhere on this site.

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DEE BARNES’ E-MAIL

To say that I was disappointed with George Hostetter’s blog, titled “Measure G is about who gets the power,” is an extreme understatement. It is difficult to understand how a reputable and respected reporter could include so much misinformation and inflammatory anti-union statements in a newspaper blog. I am afraid that money and power are corrupting and changing the role of reporters and news organizations in our country.

I understand how much is at stake with the Measure G ballot issue on June 4th. There is a lot of money on the line and unfortunately too many see this as defining moment for power and political careers instead of what is best long term for our community. It is becoming more and more obvious that the Fresno Bee has chosen sides on Measure G and is no longer presenting facts in a fair and unbiased way to the residents. I believe ideology, money, and power are the major motives and George’s blog was catering to the segment of our population that already hates unions and public employees.

Our national economy has drastically changed since 2008 and many labor agreements should be scrutinized. However, salaries and benefits need to be looked at from the top down, including managers and elected politicians; not just the represented employees. The media should present actual facts and tell the entire story.

There were numerous inaccuracies in today’s blog and the article that was printed this past Sunday. Here are just a few of the inaccuracies:

Overtime wages are NOT pensionable. Please see page 23 of the attached retirement summary plan or confirm with the city retirement office.

Employees entering DROP have a variable interest rate and are no longer receiving a fixed 8%.

Council Members do not negotiate labor contracts. The City Manager works directly for the Mayor and is responsible for the negotiated labor contracts. Council ultimately approves labor contracts but they usually follow the recommendations of City Staff presented during CLOSED sessions with Council.

Staffing levels, overtime approval, and garbage routes are decided by managers, not employees. If drivers were consistently finishing routes in less than 7 or 8 hours, the problem lies with the decision makers, not the line-level employees.

Local 39 offered to make changes to the “task” overtime system in the past, but the city wasn’t interested. It had nothing to do with the threat of privatization. They, along with at least two other labor groups have made concession offers that the city is refusing to seriously consider.

Lee Brand claims the driver’s contract provides for 47 days of paid leave but doesn’t mention that the Fresno Municipal Code provides 45 days of paid leave to all employees with 20 years of service. You don’t have to be in a union to receive those benefits and the 12 days of sick leave are only paid when an employee is actually sick. ALL permanent city employees, whether union or non-union, receive at least 13 holidays, 12 sick days, and 8 vacation days unless they are the select few that receive annual leave instead of sick and vacation. You should also look into Administrative Leave.

I will not even bother asking where George got the information published in his blog; but he should certainly be questioning the motives of his source. It is disappointing that City Hall appears to be encouraging the demonization of public servants and the perception that all public employees receive bloated salaries, benefits, and retirements.

I realize that newspaper readership has severely declined over the years and like so many other print publications the Fresno Bee is struggling. I have shared with George on more than one occasion that even though I may go days without even opening my newspaper I have so far refused to cancel my subscription because I believe we need local news outlets. My husband and I have been loyal Fresno Bee customers for around 36 years and even added the electronic version of the Bee to our subscription when it became available.

I realize that George “updated” his blog sometime this afternoon and apologized for his error. However, the damage was done and how many will go back and read the “updated” version? Unless there is a new blog or printed story that addresses the mistake regarding overtime and retirement along with some of the other inaccuracies and omissions, we will be canceling our subscription and sharing our decision with others. I will no longer support a newspaper with such an obvious bias against working people.

Dee Barnes

******

MY ORIGINAL BLOG, WITH CORRECTION AND ADDITIONS

Measure G is about who gets the power

by George Hostetter on May 21, 2013

READER NOTE: This blog has been updated to correct an error I made. Overtime is not pensionable for the city’s home trash drivers. My thanks to Marina Magdaleno at Local 39, Stan McDivitt at the City of Fresno Pension System and Fresno City Council Lee Brand for providing information in this updated blog. I apologize for my error.

The pivotal number in the Measure G debate — 1.3 million.

The pivotal concept — a funnel.

The pivotal player — Mancur Olson.

You know all about Measure G. I’ll be spare with background. The June 4 election is two weeks away.

The key question: What is the fundamental dynamic here?

Here’s my stab: The big prize is the unusual power to be found in residential trash.

Let’s begin with 1.3 million.

The city serves more than 105,000 residential trash accounts. Each account-holder pays her bill each month. She does this 12 months a year.

For the sake of argument, let’s say everyone pays by check. To round-off, 1.3 million trash checks flow into City Hall annually.

The typical monthly bill is $25.37. That’s $33 million a year from all accounts.

That’s a lot of money. But a key when we talk about something like trash collection (a public good) is the source of all that cash.

It comes from 1.3 million individual checks. On top of that, each customer writes her 12 checks over the course of a year. A small check written once a month — it’s a habit.

A few extra dimes on the monthly bill are irrelevant to the average trash customer. But multiply 50 cents by 1.3 million and you get $650,000. That is a big deal.

(As an aside, I attended in January a Saturday morning rally held by outsourcing opponents. It was part of their successful petition drive to put the outsourcing ordinance on the ballot. I chatted with the wife of a trash driver. She said she tells voters who like the promised rate cut in the Mid Valley deal: “It’s only $4 a month. That’s nothing. But it’ll hurt the workers.”)

Now the funnel.

The $33 million flows into the funnel. The money pays for a cash-intensive service. The $33 million gets smaller and smaller. No one in the public pays attention. That’s the cost of doing business.

Then the funnel narrows. Left-over dimes tumble out at the bottom. Lots of them.

The money is enough to fight over.

What happens at the funnel’s bottom is out of the customers’ sight.

A very small group benefits from all those dimes. After all, a funnel concentrates the flow.

Now Mancur Olson.

Olson was an economist and social scientist. He died at age 66 in 1998. He wrote “The Logic of Collective Action: Public Goods and the Theory of Groups” in 1965.

Small groups — business associations, farmer coalitions, labor unions — can wield immense power in a large democracy, Olson said.

The small group has clear, specific aims. Each individual member gets something substantial if the group succeeds. Everyone works hard for a common goal.

Society at large doesn’t have these advantages. Too many factions, too much friction. Therefore, the small group often achieves stunning success.

We now come to Measure G, Mayor Ashley Swearengin, Stationary Engineers Local 39 (the city’s blue-collar union) and Mid Valley Disposal.

Local 39’s collective-action success has enabled it to grab a lot of the funnel’s left-over dimes.

This becomes clear in a three-page document I got last week at City Hall. The document lists the total pay and hours worked in 2012 by the city’s 95 trash drivers.

The list has regular hours worked, overtime hours, leave hours used, and total paid hours for each driver.

If you add regular hours worked, overtime hours and leave hours used, you get the total paid hours.

A veteran driver makes $22 to $23 an hour as regular pay. Let’s say $22.50 for this discussion.

A regular work week is eight hours a day, five days a week. There are 52 weeks in a year. That’s a total of 2,080 work hours in a year.

Council Member Lee Brand says the drivers’ contract provides for 13 paid holidays per year, 12 days of sick leave per year and up to 22 days of vacation per year for an employee with more than 20 years’ service. That’s 47 paid days — 376 hours of so-called leave at regular pay.

The means the typical driver works 213 days a year at regular pay — slightly less than 43 weeks, or 1,704 hours of labor at regular pay. He’s paid $22.50 an hour.

Add it all up — 1,704 hours of work at regular pay and 376 hours of leave time at regular pay — and you get a base salary for a veteran driver of $46,800 for 2,080 total hours.

The list shows that only nine of 95 city trash drivers worked at least 1,704 hours at regular pay in 2012. However, 69 of the 95 drivers made more than $46,800.

One driver worked 1,239 hours at regular pay (29 hours a week for a 42.5-week work year) and made $66,086.

Another driver worked 951 hours at regular pay (22 hours a week for a 42.5-week work year) and made $59,707.

Another driver worked 517 hours at regular pay (12 hours a week for a 42.5-week work year) and made $46,056.

The list goes on and on in this fashion. The list shines a spotlight on how top elected officials and Local 39 decided trash drivers should be paid.

I don’t recall such a list ever being discussed by the City Council in open session.

The Local 39 contract and something called the task system explain why drivers get so much overtime.

Drivers are paid for at the standard rate for an eight-hour day. A driver who finishes his route in five hours can do the route of someone else (perhaps someone on vacation) over those other three hours and get paid overtime.

Bottom line: The task system encourages drivers to use leave hours in a way that leads to more overtime and fewer hours of work paid at regular pay.

This series of events has many advantages for elected officials and drivers.

It keeps labor peace.

It’s easily hidden from ratepayers. The solid waste division is an enterprise department. It seeks no profit. It merely charges ratepayers the cost of providing the service. Labor costs are simply added to the monthly bill. Ratepayers are told: We’re not gouging you — as an enterprise department, we’re only charging you the cost of the service. Labor costs are what they are. Pay no attention.

Overtime costs are spread over 1.3 million annual checks — the broad top of the funnel.

Overtime costs are hardly noticed because they benefit fewer than 100 workers — the narrow bottom of the funnel).

(READER NOTE: It was here that I explored the implications of overtime as pensionable compensation. This is where I made my error. Again, my thanks to Marina, Stan and Lee for correcting me. With their information in hand, let’s explore driver salaries and pensions.)

Trash drivers aren’t part of Social Security. The formula for their defined benefit pension pays 2% of final wages for each year worked to a maximum of 25 years and 1% for each year after that.

The drivers’ wages have seen steady growth. According to an e-mail from Brand, Local 39 received 3% raises per year from 2007 through 2010 and a 2% raise in 2011.

If trash driver John Doe’s wages for his last year are $46,800 and he worked 40 years, he would get $30,420 in annual pension (25 years at 2% each and 15 years at 1% each equals 65% — 65% of $46,800 is $30,420).

There’s another wrinkle in this. The city’s pension system has something called DROP — the Deferred Retirement Option Program. DROP allows a city worker to stay on the job after retirement, collect a paycheck and bank his pension checks in an investment account run by the pension system’s experts. The worker gets this investment account when he retires for good.

The worker can be in DROP for a maximum of 10 years.

Let’s say John Doe works 30 years, then enters DROP. His wages in his final year before entering DROP are $46,800. His annual retirement pension is $25,740 (55% of $46,800).

John Doe then works for another 10 years. His $25,740 annual pension is deposited every year in his DROP account. That totals $257,400 after 10 years. The city’s retirement system on average gets an 8% annual return on its investments.

Thanks to the magic of compound interest, John Doe when he retires could expect to have $400,000 in his DROP account.

John Doe would retire after 40 years with an annual pension until death of $25,740 and a DROP annuity that figures to pay him $25,000 a year for 20 years.

That’s a total annual retirement income of $50,740 for John Doe. His standard annual wage for his final year of work was $46,800. John Doe doesn’t get Social Security, but he does retire with income of 108% of his final standard annual wage.

There are many variations to this formula. Each worker’s situation is different. For example, if John Doe worked 30 years and then an additional five years in DROP, his expected annual city retirement (pension and DROP payouts) could be in the $37,000 range — 79% of his final year’s wages.

(An aside: Mid Valley Disposal will pay $17 an hour to city drivers who transition to the private hauler should Measure G pass. Mid Valley has a defined contribution, not a defined benefit, pension program.)

(Another aside: Make no mistake, pensions among workers in all of the city’s other unions are a factor in the complex politics of Measure G. Swearengin has said she wants 4% wage/benefit concessions from all labor groups, whether they’re in general fund or enterprise departments. She says she’ll get them through negotiation or, when contracts are up and an impasse hits, simply by imposing new deals. The handwriting is on the wall for the other unions: If Measure G passes, Swearengin gets her steady stream of Mid Valley franchise fees, and the economy picks up, she may lighten up a bit on the wage-concession demand. That could mean a bit higher final salary for these other union members when they retire and a bit higher pension in their golden years. I’m not saying this possible calculation of worker self-interest is right or wrong. I’m just saying it’s part of the rough, behind-the-scenes fight that is Measure G in an era of tight city budgets.)

The are three reasons why such wages and pensions are possible at the city of Fresno.

1.) The 1.3 million ratepayer checks.

2.) The magic of the funnel.

3.) The dynamic best described by Mancur Olson — small and highly-focused special-interest groups can dominate the majority.

I’m not saying this is good or bad. It’s simply the way the city’s home trash system works. Voters on June 4 will decide if they like this system or not.

But voters must keep in mind that the 1.3 million checks, the funnel and Mancur Olson’s principles work the same way on the other side of Measure G’s coin.

The city’s outsourcing deal promises a 17.6% rate cut for nearly two years. Future rate hikes are capped in the nearly nine-year deal. Mayor Swearengin says Mid Valley’s rates won’t hit their current level until 2020.

The Mid Valley deal includes 10 years of options with rate-hike caps.

The math is clear. Mid Valley in its first few years wouldn’t be pulling in the approximately $33 million that the city’s solid waste division now gets.

But Mid Valley right out of the chute would be getting 1.3 million checks a year at about $21 each. That’s not chicken feed.

And as the years move on, the number of checks flowing into Mid Valley would rise steadily. So, too, would the size of those checks.

This represents concentrated power in the trash industry on a scale never before seen in any central Valley city or region.

Critics of outsourcing say this power would be used to leverage City Hall into raising consumer rates far above the contract’s maximum. I understand why the critics say this. This fear might influence with voters.

But I’ve never thought this to be a likely scenario. There’s simply no reason for Mid Valley to risk losing a highly-politicized deal when the contractual limits already contain so much power and possibilities.

All Mid Valley has to do is follow the contract to the letter and it’s all but guaranteed to be the Willie Mays among Valley trash companies for years to come, if not for the rest of the century.

Just imagine 10 years from now. The extension has been signed. Mid Valley is getting 1.5 million checks a year from Fresno residential trash customers. The average rate is, say, $26.50 a month. That’s $40 million a year — guaranteed as long as the trash is hauled away.

The contract puts a limit on Mid Valley’s profit margin. But the funnel works the same way for Mid Valley as it does for Local 39. There are all sorts of ways to shake out an unseen dime here and an unseen quarter there (unseen by the public) in the course of managing all that money. All those dimes and quarters, in addition to the contractual profits, will add up.

They’ll add up year after year.

All of that money and power would, as Mancur Olson might say, be concentrated in a small, highly-focused special interest unit with goals determined behind closed doors at Mid Valley headquarters.

What would Mid Valley do with that all that money and power? Based on its track record, Mid Valley would try to continue to aggressively expand in the Valley.

Mid Valley would have to compete with all the other private haulers (some of national scale) for government contracts. But Mid Valley, thanks to its city of Fresno residential accounts, would certainly have a strong grub-stake.

I’m not saying any of this is good or bad.

I do know many outsourcing critics — among them community activist Susan Good, Fresno City Council Member Oliver Baines, and former Fresno County supervisors Susan Anderson and Doug Vagim — say this issue is the elephant in the room when it comes to Measure G.

The unacknowledged elephant.

Responses

Susan McCall Carrasco says:

George, The F. Bee and other Media still fail to accurately report that Measure G is a
‘Taxpayer / Resident’ Issue…
rather, they sensationalize Measure G as a ‘union fight’ to sell and peddle their slanted misinformation as ‘news and editorials’.

I work along side Democrats, Republicans, Independents,
Progressives and Conservatives who have had “FULL’ access to the real Facts and the Omissions that City Hall does not want the Public to know.

Jeffrey Barnes says:

Something no one is really thinking about here is the impact this is going to have on the solid waste employees who will move over to Mid Valley. Their income is going to be impacted all the way into retirement. As a city employee, they do not pay into Social Security, so would not draw it in retirement if they stayed with the city. When they shift over to Mid Valley they will take roughly a 25% pay cut and begin to pay into Socuial Security retirement. Their city pension will be frozen at the benefit level they attained at the point of their separationn from city employment, so it wil be less than it would be if they continued in city service. Since there has already been at least one round of layoffs, these city employees are going to be more senior than the ones already gone, so they will likely be older than the others and have had more years with the city. They will not be paying into social security for as long as someone younger or someone who has never been outside the social security system. This becomes problematic when it is time to retire due to a little proovision in law called the “Windfall Elimination Provision.” The law basically states that if a large portion of your lifetime earnings were eaarned outside the Social Security system, then when it comes time to draw Social Security (if you have worked long enough to qualify), your Social Security benefit will be reduced by some formula to account for the time you spent outside the system and will not include your non-Social Security wages. So the result is that ythey will have a reduced pension from the city and they will receive little to no Social Security. They could be relegated to a lower standard of living forever.

Sandra Brock says:

A couple more facts are missing from the blog. Once an employee withdraws their accumulated DROP savings, that source of income is over. It’s NOT a continuing lifetime benefit. Some people draw it all out within a few years to meet financial needs; others who elect the “annuity” option (and take smaller monthly draws) may outlive the actuarial table.

It might have been nice if the blog had noted that the earnings paid on all active employees’ DROP accounts last year was only 2.01%, representing the blended average of the last five years of investment returns That five year span encompasses The Great Recession with its big crater in returns. It will take awhile for the moving five-year average to get much better.

While a potential $50,748 annual pension sounds like a lot of money, it’s not much for a household to depend on in retirement. The first takeaway is that employees pay income tax on the full amount of their pensions and DROP withdrawals (same as everybody else).

And then there’s the cost of health insurance and health care. The “golden years” are the most medically expensive portion of people’s lives. Nationwide, the average retired couple will spend $250,000 before they die, for insurance, copays, deductibles, and health care needs that are not covered at all).

City Retirees who stay in the City’s insurance plan in FY 2013-14 will have to pay between $1,005 and $1,291 per month. This amount has also been increasing a lot every year, tracking the general trend of ballooning health care costs in America. If a retiree discontinues participation in the City’s insurance program, they cannot get back in later.

Within this $1,005 – $1,291 range, the retiree’s cost depends on whether dental coverage is elected, and on whether the employee is over 65 and has Medicare. Employees hired by the City before summer of 1987 were never enrolled in Medicare…when the Federal law changed to drag all public employees back into the program, the City did not include those prior hires.

So, when you reduce the solid waste worker’s estimated “best case” pension for health insurance and taxes, you realize that $50,740 of retirement income is not a gravy train. I don’t know how the retirees who only accrued a basic $30,420 annual pension are going to make it.

Responding to Mr. Barnes’ comment: It is incorrect to assume that City trash workers who go to Mid Valley will thereby become fully eligible for Social Security. The employees would need to accrue 10 years of covered employment (that is, employment in one or more jobs where they pay OASDI taxes to Social Security). That’s going to be challenging for any of the workers in their 50s or 60s…and that’s the easy part.

The smackdown is, Social Security retirement benefits are decreased 60% (SIXTY percent) for anyone who has a pension from any public agency that does not participate in the Social Security retirement system. This takeaway program was enacted in 1983 as the “Windfall Elimination Program (WEP).” It is explained in Social Security Publication #05-10045.

Until recent years, the City never warned prospective hires about this. People who had (or got) 10 years of covered earnings before (or after) working for the City have been rudely surprised when they applied for SSA pensions (…that they paid full OASDI taxes on 10 or more years of earnings for… where are all the “unconstitutional takings” lawyers when ya really need one?)

To partially avoid WEP’s drastic reduction, a worker would have to accrue more than two decades of “Substantial” covered earnings. At 20+ years of those earnings, the penalty goes away 5% per year. It’s completely obliterated if the worker has 30 or more years of “Substantial” covered earnings.
But even then, there’s another “gotcha:”
For calendar year 2013, the required Substantial earnings amount for WEP is $21,075 or more. The Substantial earnings requirement has increased 7% per year, on average, twice the inflation rate. It won’t take many more years for this to exceed what a solid waste worker could reasonably earn.

Nor can a worker with a City pension get Social Security retirement benefits as a spouse of someone else who had covered earnings–that benefit reduction program is called “Government Pension Offset (GPO).” The SSA Publication for GPO is #05-10007.

The hard reality is, once a worker stays at the City long enough to vest, WEP and GPO apply. When the employee continues working there for a substantial chunk of hia/her life (leaving little time to work 3 decades elsewhere), the employee has pretty much kissed goodbye to 60% of all Social Security retirement benefits that the employee paid in for (and ever will pay in for) on other jobs.

Kirk Pool says:

Another error, here you state the following: That’s a total annual retirement income of $50,740 for John Doe. His standard annual wage for his final year of work was $46,800. John Doe doesn’t get Social Security, but he does retire with income of 108% of his final standard annual wage.

However, during the ten years of DROP the employee would presumably receive more COLA raises. So there ending salary would be higher than the $46,800, but would be $57,548 if they received just a 2% COLA each year for the ten years. The DROP retirement of $50,740 is now only 88% of final salary after 40 years of service. Not the 108% as stated in the article.

jim richards says:

Detailed benefit calcs, reporting errors, etc. do not change the simple fact that measure G is a good sense thing for us residents and taxpayers.

sandra brock says:

Um, sir, are you asking that we not bother you with any financial details related to this financially-based ballot measure?

Jeffrey Barnes says:

The people who feel that Measure G is good – no matter what – have obviously no regard for their less fortunate neighbors and have, in all likelihood, either not read the contract or do not understand it. And, worse than anything else, probably trust their elected officials.

Jeff says:

Measure G is a $40 million dollar gift to Mid Valley that will never solve the City’s fiscal problems. Mr Hostetter, I was wondering did the mayor write you a letter of recommendation too?

Freespeech says:

Measure G I hope doesn’t pass. These workers make decent wages for oustanding work they do. This deal will make a million dollar company richer and stimulate a bad Mayor’s political career. We already have a diminishing middle class and this will deal will surely decrease it They should make cuts starting on the top of the heirachy …cut the City Manager’s Mark Scott salary 175,000.!

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