Los Angeles Mayor Eric Garcetti emerged from his first labor showdown with some financial concessions on Department of Water and Power salaries but little progress on a key goal: getting employees to pay out of their own pockets for rising health insurance costs.
The deal is expected to save $6.1 billion over 30 years, in large part by cutting pension benefits for new hires and having workers go three years without raises, according to budget officials. But the DWP will continue its practice of covering 100% of employees' healthcare premiums, despite Garcetti's call for more concessions.
The labor pact was widely seen as Garcetti's first test as he moves to strengthen the city's shaky finances and negotiate with the powerful public employee unions over wages and benefits.
Garcetti said the deal represents the first step in his campaign to "reform" the DWP, a promise from his mayoral campaign. He also said the deal had gone from "good to very good," with tens of millions of dollars in increased savings since he took office last month.
But he appears to have shortened his honeymoon with City Council members who will be crucial to passage of his policy initiatives in the months and years ahead.
As tensions heated up in recent days, some council members said the new mayor repeatedly moved the goal posts as negotiators sought to satisfy his concerns and close a deal. Others privately complained after Garcetti announced a petition drive to build public support for his demands and urged ratepayers to contact their council representatives, according to two sources familiar with the talks, who were not authorized to discuss the negotiations.
A Garcetti spokesman disputed the notion that the DWP fight weakened the mayor's relationship with the council. Appearing together before reporters, the mayor and council members exchanged compliments as they praised the gains made in the proposed four-year contract, which still would have to be approved by union members.
"I truly believe we had a good deal a month ago ... but I think we have a better deal today because of the hard line the mayor took," Council President Herb Wesson said.
Garcetti said: "This department will now be managed by its owners: the people of Los Angeles."
The DWP union and its affiliates spent $2 million trying to defeat Garcetti in the mayoral election. By the time Garcetti took office July 1, union negotiators had agreed to postpone a raise scheduled for October and forgo pay increases for a total of three years, the first such concession by the union — International Brotherhood of Electrical Workers Local 18 — in some two decades, officials said. The union also agreed to a new, less costly pension system for new hires.
After Garcetti took office, negotiators secured new language requiring doctors' notes when employees take three or more sick days. Garcetti pushed for a potentially smaller raise in 2016 and reduced entry-level pay for some categories of new DWP employees. Still, those changes represented only a fraction of the total savings expected from the overall deal.
Avoiding raises until 2016 should save $385 million over four years, said City Administrative Officer Miguel Santana, who negotiated the deal.
A portion of the salary savings over the next few years will be used by the DWP to cover some health costs — for current employees and for retirees. Workers' paychecks will not decrease as a result of rising healthcare costs, budget officials said.
The lack of new health care concessions infuriates Porter Ranch resident David Lasher, who said he pays $800 a month for his family's healthcare coverage in the private sector. For DWP workers to make no contributions, he said, is "unethical and immoral."
"I know Mr. Garcetti is trying to do something, but this is ludicrous," he said.
Garcetti told neighborhood council activists at the start of the week that the city's progress on healthcare was "not enough." No additional concessions on that subject were achieved in the pact he now has endorsed.
But Garcetti, although saying the deal didn't go far enough on healthcare, said he had improved the city's ability to reexamine or change costly and inefficient work rules, some of which were imposed without the council's knowledge. And he said the deal would pave the way for his administration to achieve more cost-cutting measures in coming years.
"This isn't the last move we can have on any of these issues. There is an ability for us to adjust healthcare costs," he said.
Gary Toebben, president of the Los Angeles Area Chamber of Commerce, said Garcetti improved the deal by capping the scheduled 2016 raise at 2% and increasing the number of employees who will have a lower entry-level salary. He also credited the city's chief negotiator, Santana, and newly elected council members for drawing a harder line with DWP workers.
"For the first time in recent years, labor did not control both sides of the bargaining table," he said.
The DWP union's top leader said his members wanted a deal that would "create real savings for taxpayers while protecting the interest of working people." "This is an important step toward enacting real solutions that save billions of dollars for the city and the ratepayers while ensuring the long-term health of the DWP," said Brian D'Arcy, business manager of IBEW Local 18.
Much of the DWP pay pact had been negotiated by D'Arcy, former Mayor Antonio Villaraigosa and members of the city's closed-door negotiating committee — a panel that includes Wesson and Councilman Paul Krekorian. Within weeks of being sworn in, Garcetti announced that he would not sign off on the agreement without additional changes.
Seeking to leverage the political capital he won during the campaign, Garcetti turned to the public with an online petition supporting a tougher contract. One councilman said Garcetti had strengthened the city's hand in DWP negotiations even before he took office by focusing so much of his campaign on spending and compensation at the utility.
"The deal got better and better and better as the mayor's election got closer and closer and closer," Councilman Bob Blumenfield said.