City, police union agree to 3-year, $245 million contract

Philadelphia Police officers will receive annual raises of about three percent for each of the next three years in a contract that will cost the city $245 million, according to a new agreement announced Tuesday.

The agreement marks a quick end to a short stalemate: The union’s old contract had expired on June 30, though negotiations had continued in subsequent weeks with few public signs of discord between the city and union officials.

Decided by a panel of three arbitrators, the deal’s total cost exceeds by $45 million the amount the city had budgeted for this contract and two others currently being negotiated with major municipal unions — deals which could cost hundreds of millions of dollars on their own. The city has 20 days to revise its five-year financial plan; officials said the Kenney administration was “examining its options.”

In the city’s favor, members of the Fraternal Order of Police Lodge 5 — which represents the majority of the Police Department’s 6,300 officers, as well as some in the Sheriff’s Office — will be asked to contribute more toward their pension plan. The change that will pump $160 million more into the depleted pension fund over the next 13 years, according to Mayor Kenney’s office.

Still, the deal did not go as far as city officials had hoped. Initially, they proposed placing new employees in a “stacked” retirement plan, with a smaller pension plan alongside a 401(k). The FOP had long opposed that approach.

Despite not achieving its preferred pension outcome, city officials touted the money that will be freed up for its pension fund, as well as a provision creating the ability to electronically notify officers of court appearances, and a rejection of the FOP request to change city residency requirements.

The contract did not make significant changes to the grievance and arbitration process, which some criminal justice advocates have said is too forgiving for officers accused of misconduct.

John McNesby, president of the local FOP, did not return a request for comment Tuesday.

The deal, which runs through June 2020, calls for a 10.5 percent raise over the life of the contract, spread out in near-equal annual increments. Police officers, on average, currently earn over $75,000 a year, according to the city’s annual pension report.

The Kenney administration had wanted all new employees, unionized and not, to participate in a new hybrid pension plan that would allow for a traditional defined contribution benefit of up to $50,000 annually. Above that, they could enroll in a 401(k) plan. The city would match half of the employee’s contribution up to 1.5 percent of annual compensation.

In addition, the administration wanted all labor unions to agree to the same increased pension contribution plan that AFSCME District Council 33 agreed to last year. Anyone paid an annual salary of more than $45,000 pay between 0.5 percent and 3 percent more toward one’s pension, depending on the salary bracket. For example, those earning $55,000 to $75,000 contribute 1.5 percent and those earning $100,000 or more pay 3 percent more than their current contributions, which vary among the unions.

If every union agreed to those two major set of changes and the pension fund return rate on investment remained steady, the city estimated that the pension fund would be more than 80 percent funded in 13 years. Currently, the fund has only 45 percent of the money it needs to satisfy its $11 billion liability.

Kenney spokeswoman Lauren Hitt said that the police’s increased pension contribution — .92 percent this year and another .92 percent next year for current employees; an additional 2.5 percent more for any new employees – would still keep the city on track to meet its 80 percent funded goal in 13 years.

“Over next to 13 years it’s $160 million in increased contribution,” Hitt said. “The amount of money (under the proposed plan) would’ve been the same, so it doesn’t really derail us.”

However, with the police balking at a stacked hybrid pension plan, the city could have a harder time trying to get the firefighters and city’s white collar workers’ union to agree to such a plan.  Leaders of both said earlier this year that they were hesitant to agree with the city’s pension proposals.



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