INTEREST ARBITRATIONS

BEFORE THE ARBITRATION BOARD

Neutral Arbitrator:
Jane Wilkinson, Attorney and Arbitrator


Date of Award: March 3, 2004

WITNESS LIST

For the Employer:
Jane Christianson, Assistant to the Mayor
Doug Evans, President, R.L. Evans Co.
Heidi Ryan, Health Care Actuary
Larry Gainer, Assistant Chief of Police
Martin Chaw, Financial Planning Manager
Doug Albright, Attorney, Ogden, Murphy, Wallace

For the RPA:
Glenn Kaleta, Guild negotiator (police detective)

EXHIBIT LIST

City's Exhibits:

RPA Exhibits:

I. PROCEEDINGS

This dispute, between the City of Redmond (City) and the Redmond Police Association (RPA) concerns certain terms of a Labor Agreement covering the period between January 1, 2002, and expiring December 31, 2004, between the Employer and its commissioned police officer bargaining unit. The parties reached an impasse in their negotiations on three issues. Pursuant to RCW 41.56.450, those issues were certified for interest arbitration by the Public Employment Relations Commission (PERC) and submitted to Neutral Arbitrator Jane R. Wilkinson for resolution. Evidentiary hearings were held in Redmond, Washington, on October 20 and 21, 2003. Each party had the opportunity to present evidence, examine and cross-examine witnesses and argue its case. A court reporter transcribed the proceedings; that transcript constituted the official record as required by RCW 41.56.450. The Arbitrator received the parties' post-hearing briefs on January 20, 2004, which shall be deemed the closing date of hearing. The parties stipulated to three-week extension of time for this award.

II. STATUTORY AUTHORITY AND CRITERIA

RCW 41.56.030(7), read in conjunction with RCW 41.56.430-.450, states that unresolved disputes concerning the terms and conditions of a collective bargaining agreement must be settled by interest arbitration when the affected bargaining unit is composed of "uniformed personnel," including:

RCW 41.56.452 states that an interest arbitration panel is a state agency and specifies:

In RCW 41.56.465, the Washington Legislature specified that the interest arbitrator must apply the following criteria when resolving disputes over the terms of a new collective bargaining agreement:

In resolving the issues in this dispute, whether or not fully articulated herein, the undersigned arbitrator has been mindful of these criteria and has given consideration to all of the evidence and arguments presented by the parties relative to these criteria.

III. BACKGROUND INFORMATION

The City of Redmond has a population of approximately 45,000, although it serves a daytime population of about 75,000. The RPA represents a bargaining unit of 63 commissioned officers and lieutenants.(fn:1) The parties' last contract expired on December 31, 2001. The parties negotiated for, but were unable to reach agreement on a successor contract.
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The Executive Director of the Public Employment Relations Commission certified 14 issues to interest arbitration and the arbitration hearing. Prior to the start of the hearing, the parties resolved eleven of those issues, leaving three in dispute (medical premiums, wages, and longevity/education premiums). At hearing, the parties presented testimony and exhibits on all three issues.

At the outset of the hearing, the parties' stipulated to using the Seattle-Tacoma-Bremerton CPI-W as the appropriate CPI index. The parties stipulated to a three-year agreement. They stipulated that the comparable jurisdictions in this case would be the following cities: Auburn, Bellevue, Everett, Federal Way, Kent, Kirkland and Renton.

According to the City's evidence, in 2002, the population of this comparator group was as follows:

Assessed valuation figures for 2003, ranked on a per capita basis, are as follows:

The parties have historically used the CPI-W for Seattle, Tacoma, Bremerton, previous year's June to June figures. The inflators using that index for 2002, 2003 and 2004 are as follows:

IV. PARTIES' PROPOSALS COMPARED

The following table shows the parties' proposals on the three issues in dispute:

          Increase
10-15  from 1.5% to 2%
15-19  from 2.5% to 3%
20-24  from 3.5% to 4%
25+    from   4% to 5%

    Effective January 1, 2002:

        Increase-AA
 3- 4   from 1.5% to 3%
 5-14   from 1.5% to 3%
15-19   from 2  % to 3%
20+     from 2.5% to 3%

        Increase-BA
 3- 4   from 1.5% to 3%
 5-14   from 3  % to 6%
15-19   from 4.5% to 6%
20+     from 5  % to 6%

V. PARTIES CONTENTIONS IN SUPPORT OF THEIR PROPOSALS

Arguments of the RPA

Arguments of the City

VI. ARBITRATOR'S DISCUSSION AND DETERMINATION

A. Statutory Considerations (Except Comparability)

The following discusses the pertinent statutory considerations in this case, except for comparability, which is discussed with the proposals in dispute.

1. The City's Financial Picture:

The recent economic downturn has reduced sales tax revenues, Financial Planning Manager Martin Chaw testified. However, since 2001, three large retail stores have opened in Redmond. The City's Financial Report for the fiscal year ending 2002 states that its largest employer, Microsoft, has emerged relatively unscathed from the downturn in the high tech industry. RPA Exh. 6, pg. 23. Craw testified that in 1995, the State passed a high-tech sector sales tax exemption for R&D expenditures, which has cost the city about $13 million since that time. The primary beneficiary of the law in Redmond is Microsoft, which has been aggressive in identifying expenditures as R&D. Initiative 747, passed in 1998 or 1999, limited property tax increases to 1% a year. Property taxes are a significant source of revenue for cities and counties. On the other hand, the City has an additional $1.2 million in potential property tax revenues that it has not tapped. Initiative 695 significantly reduced the motor vehicle excise tax. The tax revenues were shared between the state and local jurisdictions, and the city was transferring about $5 million annually to its road construction fund. Redmond lost about a $1 million dollars a year in revenues. In 2000, however, the Legislature backfilled the lost revenues at a 50% rate for two years, and then eliminated those funds, Chaw testified. But, the City's Financial Report (fn:4) states that the state's budget woes will have only a minimal effect on Redmond's transportation capital funding from the state. Id. King County, the county in which Redmond is located, is in dire financial straights, is effectively transferring its parks and recreation functions to municipalities, charging higher fees for municipalities' use of its district court functions, and has told municipalities it will no longer house misdemeanor inmates within the county jail. The City's Financial Report states, however, that "Redmond has been successfully working with King County and surrounding cities to continue regional services with little or no increase in costs to the city." Id. Chaw testified that the City has had to reduce expenditures over the past several years. Since a significant portion of its spending is on salaries and benefits, the City first decided not to fill existing vacancies, eliminating 11.7 FTEs. See generally, City Exh. 8.5.1. The City had to reduce reserves from 10% to 8.5% to balance its budget for 2003-04. The reduction was controversial because 10% was in the ballpark for neighboring municipalities. The City Council agreed to cut the reserve only if it was restored to 10% for the 2005-06 fiscal year.
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According to Chaw, the "current thinking on the street" is that the Seattle economy will not recover until late 2004 or early 2005. Tr. 70. This is based on the projections of two prominent local economists.

The City asks the Arbitrator to consider that the City's contributions to LEOFF are projected to go up for the next biennium due to the poor stock market performance over the past several years.

The parties came up with different cost estimates of one another's proposals. The City estimates that the RPA's proposal will cost $514,863 more than the City's proposal over the three-year life of the contract. The RPA estimates that its proposal will cost $211,164 more. Either figure, spread over three years, would not unbearably burden the City, in my opinion. In sum, the City obviously has the ability to pay the RPA's proposals, and it possibly could do so without curtailing other services. It is reasonable to prognosticate that its outlook for 2004 and beyond is better than what it experienced in 2002 and 2003.

One must bear in mind, however, that if interest arbitration is to replicate collective bargaining, one needs to turn back the clock to the first year of this contract cycle, 2002, which was stressful economically for the City, as well as the entire Puget Sound region, as was the next year, 2003. An economic downturn affects a jurisdictions revenues to the extent it relies on taxes that fluctuate with the economy, such as the sales tax. Although property tax revenues tend to be more stable, a municipality is ill-advised to tap any potential untapped property taxes during a recession, particularly one accompanied by the high unemployment rate that the State of Washington experienced during the most recent downturn.(fn:5) A breadwinner who is out of a job and struggling to make mortgage payments can scarcely afford to pay higher property taxes. These considerations favor the City's wage proposals, in my opinion, especially for the first two years of the agreement.
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2. Changes in the Cost of Living

According to the evidence, the changes in the cost of living (CPI-W for Seattle-Tacoma-Bremerton) in recent years have been quite low. The figures are as follows:

June 2000 through June 2001 (used for 2002): 3.9%
June 2001 through June 2002 (used for 2003): 1.5%
June 2002 through June 2003 (used for 2004): 0.9%

The City submitted evidence showing that for the period from 1992 to 2003, with 2002 and 2003 based on the City's offer, police officer wages exceeded the changes in the consumer price index by 3.01%. I note that this figure would descend slightly with any 2004 award based on 90% of the CPI, as compared with 100% of the cost-of-living increase.

The RPA contends that Redmond historically has given bargaining unit increases that at least match the CPI increases, making a 90% increase unjustified.(fn:6) I agree, although for different reasons. A lower-than-CPI increase might be justified, despite the historical pattern, when, for example, bargaining unit wages have become quite high relative to the jurisdictions comparators, when tight economic circumstances force slightly lower increases, or when the employer bears the burden of increases in certain significant areas, such as health care costs, to the benefit of its employees. Increases based on a percentage of the CPI (usually 80% to 90%), with a minimum and maximum, came into use when changes in the CPI were very high, but weren't being matched by corresponding increases in a jurisdictions revenues. Questions also were raised about the validity of the CPI measurements (the argument being that the increases were overstated), particularly since individuals are affected differently, depending on their pattern of consumption. I understand that the method of calculating the CPI has since been adjusted so that it no longer overstates actual inflation levels. The City did not present any evidence one way or the other on this point, at any rate. Therefore, percent-of-CPI increases should have an ancillary justification, such as the ones previously mentioned (e.g., tight economic circumstances or high increases in employer-paid health care costs). The same can be said of the "floor and ceiling" clauses that often accompanied CPI clauses during past periods of relatively high inflation. These clauses are particularly unnecessary when, as here, the CPI escalator for the contract period are already known. The RPA proposes a CPI-based increase, with an arbitrary floor of 3% and ceiling of 5%. This, of course, would virtually guarantee a 3% wage increase for 2003 and 2004, but without any particular justification.
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Accordingly, I conclude that other things being equal, any wage increases tied to the CPI should be at 100% of the CPI, with no minimum or maximum.

3. Other Considerations - Turnover

Larry Gainer, Assistant Chief of Police, testified as to turnover with the police department. Approximately 18 officers have left over the past five years. Three or four left in order to find more "action." Another left because his commute was too long (his new employer, however, gave him a take-home car). Several relocated to a new area for personal reasons. Four decided to get out of police work (two joined Microsoft, doing investigations, and a third joined a software company, for higher pay), and two joined the military. The RPA pointed out that the three officers who left for security related jobs in the private sector were attracted by the higher pay.

To me, the evidence concerning turnover in Redmond does not show that it is a problem. The higher pay offered for security work in the private sector could be a consideration if a flood of officers were going in that direction, but that is not the case here. Moreover, private sector security work, in my opinion, is not the "like personnel of like employers of similar size" contemplated by the Legislature. Although the RPA does not offer private sector employers as comparators, I believe the statutory criteria for comparable jurisdictions should be kept in mind when considering evidence regarding turnover, given that turnover itself was not specifically set out as a statutory criterion.

4. Other Considerations -- Relative Demographics

According to the City's evidence, among its comparators, only Kirkland's crime rate is lower, according to the City's evidence. The argument is sometimes made that jurisdictions with high crime rates should compensate their police officers at a higher level because of the higher demands of the job. Ipso facto, the reverse should be true. However, I have never seen a comprehensive study that has shown either proposition to be true, at least as a general rule. And, unfortunately, jurisdictions with the highest crime rates -- particularly when they are of small or moderate size - often cannot afford higher compensation levels, given that their crime rate and their relative poverty go hand-in-hand.

Reflecting its affluent bedroom-community status, many officers have complained they cannot afford to buy a house in Redmond. Unfortunately, it often is true in affluent areas with high property values that public servants, such as police officers and teachers, have to live elsewhere, where housing is more affordable.

The RPA attempts to parlay the fact of Redmond's affluence into an argument for higher wages.(fn:7) The RPA points out that Redmond's assessed valuation is second only to Bellevue's, even though it ranks sixth in population, and its median family income is the highest. The RPA then develops a correlation between police officer wages and assessed valuation, and states that for officers, Redmond is 27.30% below the average correlation for all of the agreed to comparable jurisdictions. For first line supervisors (lieutenants in Redmond), the figure is higher, at 30.51%.
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Just as comprehensive data showing a correlation between wages and crime rates is lacking, so is any evidence showing that police wages and the community's affluence have any correlation. If one were to take this argument to its logical extreme, then the police officers in tiny, but wealthy, Medina or Clyde Hill should be the highest paid in the State. Moreover, I am unaware of any interest arbitration award that has taken the correlation between wages and affluence (whether measured by assessed valuation, median family income, or other measurements) into consideration. The RPA's argument is creative and novel, but without ample supporting evidence, is not usable.

5. Other Considerations -- Internal Equity

The City is, understandably, striving to seek parity in wage adjustments across its employee group lines, and in my opinion, internal equity can be a valid consideration, particularly in difficult economic times when it becomes necessary to ask employees to make sacrifices. Obviously, it does nothing for the morale of one employee segment to accept, for instance, a wage freeze, and then see another group receive a whopping increase, no matter how deserving the latter group is of that increase.

During the relevant contract period of 2002-2004, given the pressure on the City's resources, the City is asking all employee groups to accept the same deal, and it particularly wants all groups to sign on to its proposed health care premium cost sharing. Unrepresented employees, of course, have no choice. Four represented bargaining units, however, have agreed to the City's proposals. But, there are three holdouts: the police officers' unit, the firefighters unit, and one other.

As I indicated, I find internal parity considerations to be valid, but they may be weighted lower than the explicit statutory considerations.

B. Wages

1. Comparator Analysis

Although the parties did not agree upon a single "benchmark" in terms of years of service or education level, the evidence was that the average tenure in the bargaining unit is ten years, and although more officers (36) fall into the BA category than any other, a majority of officers (12 with AA, 32 with neither, and two on leave of absence whose educational attainment was not specified), have not attained a BA level. The parties presented the effect of their proposals on about 30 different longevity/education configurations (for officer and lieutenant) vis-a-vis the stipulated comparators. I will simplify this presentation by setting forth a ten-year benchmark for officers with three variations: no degree, AA and BA, although in reaching this award, I have considered the various permutations as well.

a) Methodology Review

I will begin with a analysis of the parties methodology and computations, since my first endeavor was to figure out why they analyzed the same comparators, but obtained different results. The following tables show, by way of illustration, each parties' comparison of base and total compensation against those of the stipulated comparators for 10-year officers with no degree:

The differences in the methodology are as follows:

The parties also have one significant difference in viewing the results. The RPA would prefer viewing them on a monthly (or annual) basis, while the City urges that the comparison be made on an hourly basis. Because the bargaining unit has more holidays, the hourly computation works to the City's advantage.

As I stated in King County Fire District 44 (IAFF Local 3816), PERC No. 15764-I-01-360 (Wilkinson, 2002), given identical compensation levels, most people would rather have the job with fewer hours and more time off. If one has to work on holidays, then the employee comes out ahead compensation-wise because of the premium pay he or she will receive. Thus, with the salary as a constant, one's equivalent hourly wage is higher when one works fewer hours. Arbitrator Lankford reached the same conclusion in a case where the hourly wage analysis favored the union and was opposed by the employer):

City of Kelso (Kelso Police Officers Association) (Lankford, 2001), at 9-10. See also, City of Centralia (IAFF Local 451), PERC No. 11866-I-95-253 (Lumbley, 1997); City of Vancouver (Vancouver Police Officer's Guild), (Beck, 1997); City of Ellensburg (IAFF 1758) (Snow, 1992); City of Bellingham v. IAFF 106, (Beck, 1991); Cowlitz County v. IBT RPA 58, (Beck, 1987); City of Bellevue (IAFF 1604), (Gaunt, 1987); City of Seattle v. Seattle Police Officer's Guild, (Kienast, 1984).

The RPA cites City of Wenatchee, PERC No. 16277-I-02-379 (Savage, 2002), where the Arbitrator wrote:

The RPA contends that excluding vacation in the hours calculation is appropriate because some officers may not use all of their accrued vacation hours in any given year. I disagree; ignoring accrued vacation in connection with hours worked doesn't give an accurate compensation picture. In any event, I note that the RPA also presented vacation and holiday compensation information (converting them to a dollar value) in its compensation analysis.

2. Arbitrator's Analysis of Compensation Data

For a detailed comparison, I am setting out my own calculations for the ten-year employee, an appropriate benchmark, in my opinion, and this is also the level that is the most behind the comparator group. My results are somewhat different than those shown by the parties, but the differences are not particularly significant.(fn:11)

As seen from these tables, although the lag appears significant on a monthly basis, when shown on the more appropriate net hourly basis (without retirement and insurance), the 2001 wages of this group are at the most, 1.5% behind the 2002 wages of the comparator group, and with retirement and insurance included, the total compensation (net hourly) very close to that of the comparators.

The percent differences at other longevity and compensation levels are approximately as shown on the next table, which was taken from the City's data, but with its 3.51% offer backed out of the Redmond figure:(fn:12)

For Lieutenants, the RPA offered the more comprehensive data. However, as stated previously, the RPA looked at comparator pay for 2003, while I prefer viewing it at 2002. In addition, the RPA prefers a monthly pay comparison, while I prefer hourly. The RPA's data shows, depending on longevity and education, Lieutenant's 2001 monthly pay to be between 5.25% to 7.82% behind the 2003 comparator average, including insurance and retirement, and a 4.31% to 7.39% lag, with those benefits excluded The RPA asserts that the comparators received, on the average, a 2.2% increase for 2003. See RPA Exh. 2-1. Backing that figure out, one can infer that Lieutenants are somewhere between 2+% and 5+% behind the 2002 comparator average, depending on longevity and education. When compared with the ten-year employee detailed above, Lieutenant's are better positioned on both a monthly basis. One can therefore infer that they are also better positioned on an hourly basis than the ten-year employee, meaning that their 2001 wages are close to the 2002 comparator average.

Based upon all the considerations identified above, I have concluded that the bargaining unit, with the City's offer of 3.51%, will be compensated above the average of the comparators, when viewed on an hourly basis.

3. Arbitrator's Determination

The following sets forth what I have determined to be the appropriate wage increase for this bargaining unit. In making this determination, I had in mind and took into account my disposition of the dispute over employee contribution to medical premiums, discussed in the next section.

For the first year of the contract, given the difficult economic times extant in 2002, the absence of an employee contribution to the rapidly escalating health care premiums, and the above-average positioning of the bargaining unit relative to the comparators, I am awarding the City's proposal of a 3.51% increase. This is a 90% CPI increase. For the subsequent two years of the contract, I am awarding an increase equal to 100% of the CPI-W change, for Seattle-Tacoma- Bremerton (June to June). I using the 100% of CPI figure in light of the improving economy, the increased burden on employees for contribution to premiums, discussed in the next section, and the fact the CPI increases are quite small.

These increases amount to a 6% cumulative increase over the life of the contract.(fn:13) The employer's contribution to health premiums, after deducting the employee's contributions for 2003 and 2004, is the equivalent of a 6.85% increase to the 2001 base wage (including fitness, longevity and education pay). In other words, with this award, there will be a 12.85% increase in the City contribution to compensation for the bargaining unit over the three years of the labor agreement. After subtracting the employee's share of dependant health costs for 2003 and 2004, the net increase in compensation for an officer with full family coverage will be 9.73%. For an officer with no dependants, the net increase will be 12.85%.
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C. Employee Contribution to Dependent Medical Premiums

The City seeks a 10% contribution to dependant coverage for 2003, 20% for 2004. The City will pay for 100% of the employee's own coverage. The RPA has agreed to cost-sharing, but its proposal is for a 10% contribution to dependant coverage, beginning in 2004.

1. Inflationary Costs

By way of background, the City explained that in 1993, the City decided to self-insure (the plan is called "Red-Med") and went off the AWC (Association of Washington Cities) plan. The 1993 plan document set a benchmark of a 7% annual increase; its annual increases for five years were less than this amount. The City also formed an employee benefits advisory committee (EBAC) (fn:14) that met monthly to address mundane plan concerns. In 1999 and 2000 the City began more vigorously tracking its claims experience, and in the fall of 2002, hired consultants to gather information on costs and comparable costs and to look at ways to better control costs. EBAC, according to the City's evidence, became highly involved in looking at the issues for a consultant, and selecting and monitoring the consultant.
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Consultant Ryan had been retained to project City's future plan costs. Ryan performed both a best case and worse case analysis based on current costs and trend rates to project future costs. Her findings were that with no changes, on a best case or worst case basis, the City's cost increases would be 10.8% to 14.6% annually over the subsequent five years. See City Exh. 6.4. She stated that her most pessimistic projection was comparable, or perhaps a little less than, what was projected in the marketplace generally. Unfortunately, according to Ryan, the City's experience since her report has shown that it reflects her "worst case" scenario. See City Exh. 6.8. Ryan explained that from an actuarial standpoint and in simple terms, the City's premium rates must cover claims, along with stop-loss premiums, the cost of a prudent reserve, and administrative costs. On cross-examination, Ryan stated that an objective of limiting annual increases to 7.7% was "absolutely" realistic. Tr. 58.

The City also retained Insurance Consultant Doug Evans, President of R.L. Evans Co. to review its plans and with Ryan, to propose and price out plan changes that would help control costs. The City's objective was to design plan changes that would put it back to its original objective of 7% annual rate increases.

City representatives met with EBAC and various employee representatives in February 2002 to begin a process for obtaining employee input on the best ways to reduce costs. The City gave the employees a menu of options, including reducing benefits, or requiring a larger contribution from employees to premiums.(fn:15) The feedback that the City received from EBAC was that employees would prefer paying a larger contribution to premium over a cut in benefits.
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2. Comparator Data

a) Premium Costs, by Jurisdiction

The City presented the following comparator analysis showing the total cost of premiums, along with employee and employer share, among the comparators.

b) Relative Benefits

As shown above, the City's cost for medical is less than the average of its comparators. But its costs for dental and vision coverage significantly exceeds the costs of the comparator group. Keeping in mind that an "apples to apples" comparison is difficult for medical benefits, the evidence suggested that Redmond"s medical benefits were at least equal to the average of its comparators. No evidence disputing this point was offered at any rate. Doug Evans, the City"s insurance consultant, opined that the City offered the best dental plan of the group and one of the best vision plan.

c) Employee Contribution to Premium, by Jurisdiction

The following chart shows the employee contribution to sharing of premiums in the comparable jurisdictions:

3. Arbitrator's Determination

The strongest case for the City is based on internal parity. I can well appreciate the need benefit of uniformity and fairness when an employer is asking for concessions from employees. On the other hand, the comparator data gives no support to the City's proposal that employees pay 20% of dependant premiums. The RPA has agreed to pay 10% of dependant premiums, (for medical only, starting in 2004). Ten-percent of the 2003 premiums equals $71.54. Only Bellevue police officers make a larger contribution to premiums, and the difference is not particularly large. Twenty-percent of premiums would result in this bargaining unit paying more than four times the average paid by comparable jurisdictions. Bear in mind that three jurisdictions paid 100% of premiums in 2002 and 2003, and two of those will continue to do so in 2004. The City presented evidence of intent on the part of several jurisdictions to negotiate increases in employee cost-sharing, and no doubt at least some of those employers will achieve some measure of success. But what those employers would like, and what they will end up with, are two different things. In any event, those employers are seeking far less from their police officers' unit than the City proposes.

The City emphasizes that its proposal will not effect some 14 officers (25% of the bargaining unit) who do not require dependant insurance. Nevertheless, I note that 75% of the bargaining unit will be affected by the cost-sharing proposals.

As the City noted in its brief, in a prior award I reviewed Washington interest arbitration awards between 1997 and 2001, and observed a trend to require employee cost sharing. See, King County Fire District 44, PERC No. 15764-I-01-360 (Wilkinson, 2002). The City updated my survey in its brief, showing that this trend continues. However, I note that in general, arbitration awards have not imposed the degree of cost-sharing that the City seeks for 2004. In the King County Fire District 44 case, I imposed a cost-sharing arrangement on subscribers to the highest priced plan; those subscribers with a spouse and two dependants would pay $51.72 monthly for 2002.

In my opinion, a 10% cost-sharing is a reasonable starting point for this bargaining unit. As to whether it should begin in 2003 or 2004, I have determined that 2003 is appropriate. Just as wage awards are generally retroactive -- so as not to penalize bargaining unit members for delays in obtaining a new labor agreement, then other provisions should be also - to the extent proposed. Since the 10% for 2003 (and for 2004 to the date this award is implemented) will come out of the back pay award, the retroactive imposition of the 10% contribution to premium will not cause financial hardship to unit members.

The RPA has proposed that the employee contribution be limited to medical only. However, I have analyzed this issue in terms of cost to the employee, and have determined that a cost of $71.54 is within the realm of reasonableness, I will include vision and dental with the employee's 10% cost-sharing obligation.

Accordingly, the new contract will contain a 10% contribution to dependant premiums for medical, dental, and vision for both 2003 and 2004.

D. Education and Longevity

The RPA proposes increasing longevity premiums by one-half of one percent. The City opposes this change. The RPA also proposes increasing the educational premium by between .5% to 3%, depending on the employee's position on the education/longevity matrix. The Employer opposes this proposal, but proposes to add a .7% and 1.5% premium at the entry level for an AA degree and BA degree, respectively.

Thirty-six of the 63 bargaining unit members hold a BA degree, and twelve hold an AA degree. Thus, more than half are qualified for the education incentive.

The RPA bases its proposal on comparator analysis. It contends that the bargaining unit's longevity pay is below average, and that Auburn, Bellevue, Everett 22 , and Renton pay a higher education incentive.
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The City argues that the RPA inappropriately isolates premium pay from a total compensation analysis, that internal equity and the increased cost do not justify the RPA's proposals. It also contends that the City has had a long-standing policy against paying for longevity alone. Doug Albright, Attorney, (Ogden, Murphy, Wallace) testified that he has negotiated a number of collective bargaining agreements for the City, including agreements for its police bargaining unit. According to Albright, the City has had a long-standing policy against paying employees strictly for longevity, and has avoided the practice when possible, although there are exceptions such as in the firefighters' contract. The City prefers adding incentive pay for other reasons.

As the City pointed out, I am generally against awarding increased premium pay in interest arbitration. Rather, I look at the entire wage and economic structure and make my award accordingly. If the parties wish to divide the economic pie differently, they are free to negotiate changes. There could be exceptions, particularly for longevity when it is apparent that one or two particular levels of tenure are significantly out of step with the others. A longevity premium could be a workable way of correcting the disparity. But that was not the case here, and the RPA did not propose changes that equalize certain longevity levels. As to how to value other skills, duties, and contributions, those are determinations best made by those with knowledge of how valuable they are to the service provided by the employer. In other words, it is something better left to the parties for negotiation. I also agree with the City that isolating premium pay for purposes of comparison inappropriately leaves out the rest of the economic picture. For example, a bargaining unit could be way above average in pay generally, and below average for premium pay. That is an insufficient reason to raise premium pay. Conversely, one should not ignore a lag in base pay merely because an employer's premium pay is above average. The reason for performing a total compensation analysis is to give appropriate weight to all aspects of the pay structure. That is what I have done in this case with the wage award, discussed previously.

Accordingly, the RPA's proposals are denied. The City's proposal to increase the entry level education premium is awarded.

VII. AWARD SUMMARY

The decision and award of the Arbitrator in this dispute is as follows:

A. Wages:

B. Contribution to Health Care Premiums

C. Longevity and Education Premium Pay