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San Mateo County City Managers Association 6.1G Page 4 ! . Response to the San Mateo County Grand Jury Report On The Upward Trajectory of Employee Costs in Cities The Cities of San Mateo COWlty have received and reviewed the "San Mateo County Grand Jury report on the Upward Trajectory of Employee Costs in the Cities of San Mateo County.>> We appreciate the efforts of the Grand Jury to elevate this very complex issue for cities and one that bas recently been under much public scrutiny. This response is being sent on behalf of a San Mateo County task force that began cooperatively looking at the issue of public employee wages and benefits in the County in June 2008t prior to the release of the Grand Jury report. In this response, which has also been sanctioned by the San Mateo County City Manager's Association and Human Resources Association, we provide the following information: I) Background information - in addition to what is provided in the grand jury report, this response will provide additional background information related to this issue. m Common and shared interests - the response will also highlight the stakeholders' . common and shared interests. Stakeholders include the tax -payerst City Cotmcils, City personnel, labor groups, and the grand jury. III) General responses to the grand jury's recommendation - These responses will be provided from a regional perspective and elaborate on initiatives that have already been developed and/or implemented throughout San Mat~ County. 1) Background Information: As the grand jury statest two significant pieces of legislation were passed by the State of California in the late 1990s: enhanced retiremen.t formulas for safety groups and binding . arbitration for safety contract negotiations. This resulted in safety unions having tremendous leverage at the bargaining table and they were empowered then to bargain significant wage and benefit enhancements for their members. At this same time, cities were having much difficulty in attracting police and fire candidates in what was a very tight, "dot-com" labor market. As the grand jury recommends, cities did consider the number of applicants for these occupations when negotiating salaries in the 1990's. In .........-.-----.:..- ..--..-that era,..candidates.were-hard to- come..by.-and wages..were-not competitive.with the........ overall Silicon Valley labor market. Many public employees do not participate in social security and do not have the stock option plans and 401(k) plans that were experiencing substantial investment return growth during the dot-com boom. The confluence of these events lead to wage and benefit enhancements that are beyond affordability in today's economy.. Another factor that contributed to pension enhancements was the proposed costs supplied by the California Public Employee's Retirement System (CalPERS). When initially adopted, pension enhancements were calculated by Cal PERS and reported in actuarial