INTEREST ARBITRATIONS

In the Matter of the Interest Arbitration ) OPINION AND AWARD ) ) PERC Case No. 026501-I-14-0644 ) between the ) ) ) ) WASHOUGAL POLICE OFFICERS’ ) ASSOCIATION, ) ) ) Union, ) ) and ) ) CITY OF WASHOUGAL, ) ) Employer. ) )

OPINION AND AWARD INTEREST ARBITRATOR: MICHAEL ANTHONY MARR HEARING DATE: JANUARY 30, 2015 EMPLOYER’S COUNSEL BRUCE L. SCHROEDER SUMMIT LAW GROUP PLLC 315 Fifth Avenue South, Suite #1000 SEATTLE, WASHINGTON 98104-2682

UNION’S COUNSEL JAIME B. GOLDBERG MAKLER, LEMOINE & GOLDBERG 515 NW SALTZMAN ROAD, #811 PORTLAND, OREGON 97229

HEARING LOCATION: WASHOUGAL, WASHINGTON WITNESSES FOR THE EMPLOYER: PAUL LEWIS CAROL WILMES DAVE SCOTT JEANETTE CEFALO

WITNESSES FOR THE UNION: DEBRA FEAGLER KATE TIERNEY ZANE FESCHETTE

DATE OF OPINIION AND AWARD: APRIL 24, 2015 EMPLOYER EXHIBITS: A. GENERAL BACKGROUND A.1 State of Washington Revised Code of Washington (RCW) A.2 Washington Administrative Code (WAC) A.3 Current Collective Bargaining Agreement A.4 PERC Letter Certifying Issues A.5 Employer’s Proposal A.6 Union Proposal A.7 Agency Description A.8 Organizational Chart A.9 Employee Roster B. COMPENSATION COMPARISIONS B.1 Employer’s Methodology B.2 Population Served of Comparables B.3 Assessed Valuation Comparables B.4 Sales Tax Revenues Proposed Comparables B.5 Washington Cities Population, Assessed Valuation Sales Tax and Property Tax Data B.6 Unsuitability of Association Comparbables B.7 Clark County Local Area Profile B.8 Grays Harbor County Local Area Profile B.9 King County Local Area Profile B.10 Lewis County Local Area Profile B.11 Pierce County Local Area Profile B.12 Snohomish County Local Area Profile B.13 Whatcom County Local Area Profile B.14 Geographic Location of Comparables C. FINANCIAL OVERVIEW C.1 Washougal Financial Conditions C.2 Costing of Overall City Proposal C.3 Costing of Overall Association Proposal C.4 Q2, 2014 Financial Update 2

C.5 Q3, 2014 Financial Update C.6 GFOA Best Practice Memo, Appropriate Level of Unrestricted Fund Balance C.7 Annual Financial Reports, 2008-2013 ISSUES ISSUE 1: Article 2, Term of Agreement 1.1 Employer’s Proposal 1.2 Employer’s Position ISSUE 2: Article 13, Wages 2.1 Employer’s Proposal 2.2 Employer’s Position 2.3 Cost of Living 2.3.1 CPI History 2.3.2 Actual Salary vs. CPI 2.3.3 Per Capita Income Comparision 2.3.4 Average Annual Wage Comparisons 2.3.5 Median Home Price Comparison 2.4 Internal Comparisons – Contracts Settlement Overview 2.5 External Comparisons 2.5.1 2013 Wage Comparison 2.5.1 2014 Wage Comparision 2.6 Local Labor Market 2.6.1 Comparison of Clark County Median Household Income with 2014 Top Step Officer Pay 2.6.2 Employment Security Department Labor Area Summary 2.6.3 Clark County Unemployment Rate, 2004-2014 2.7 Voluntary Separations ISSUE 3: Article 14, Medical and Dental Benefits, Life Insurance and Funeral Expenses 3.1 Employer’s Proposal 3.2 Employer’s Position 3.3 Growth in Association’s Premium Cost 3.4 Internal Comparisons 3.5 External Comparables 3.6 Kaiser Family Foundation 2014 Benefits Surveys 3.7 AWC Medical Plan Comparisons, 2014 and 2015 3.8 Comparison of Premium Rates, AWC HealthFirst and AWC HealthFirst 250 3.9 Health Insurance Demographics 3.10 Savings to City with Health Insurance Proposal 3.11 AWC Cadillac Tax Analysis 3

UNION’S EXHIBITS 1. 2011 -2013 Collective Bargaining Agreement City of Washougal Officers’ Association 2. Washougal Police Officers Association Interest Arbitration Proposals 3. City of Washougal Interest Arbitration Proposals 4. Washougal Police Officers Association List of Comparator Jurisdictions 5A/5B Association vs. City Comparators 6. Map of Washington with Comparator Cities 7A Compensation Analysis (without Insurance) 7B Compensation Analysis (with Insurance) 8. Union Resource Notebook (see separate notebook) 9. Camas Washougal Information 10. Comparison of Health Insurance for Washougal Police Officers 11. CRESA CAD Statistics 12. Zane Freschette Insurance Cost Comparision 13. January 2015 Employee Newsletter 14. Camas-Washougal, WA Post-Record News Article dated March 15, 2011 15. Newspaper Article entitled “Councilman needs to verify information, accurately,” dated September 6, 2011 16. Camas-Washougal, Post-Record News Article entitled “Washougal budget adds new police officer,” dated October 25, 2011 17. City of Washougal “Revenue and Expense Type” for 2015 18. Camas-Washougal, Post-Record News Article entitled “Washougal financial picture brightens.” 19. The Columbian News Article entitled “Washougal opens pickleball courts,” dated July 15, 2014

I. THE ARBITRATION HEARING The interest arbitration held on January 30, 2015 was transcribed by Aleshia K. Macom, a court reporter with Buell Realtime Reporting. 1 Therefore, when applicable, citations to the transcript in this Opinion and Award shall be in the following format: “Tr. [page number].” Citations to the City’s exhibits shall be referenced as “City Ex. [exhibit number].” Citations to the Associations exhibits will be referenced as “Assn. Ex. [Exhibit number].” City Ex. A.3/Assn. Ex. 1 contained the Collective Bargaining Agreement

1 This decision and award shall refer to many arbitrators. Therefore, the words “your Arbitrator” shall always be in reference to arbitrator “Michael Anthony Marr.”

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between the parties for the period of January 1, 2011 through December 31, 2013, and shall sometimes hereinafter be referred to as the “CBA.” The parties were given full opportunity to present evidence, call witnesses, and cross-examine witnesses. Your Arbitrator received an electronic copy of the closing briefs of the parties on March 19, 2015 and hard copies of the closing briefs on March 25, 2015. Your Arbitrator’s Opinion and Award, as agreed by the parties, was therefore due on or before April 24, 2015. Your Arbitrator has reviewed the argument and evidence presented during the arbitration hearing and the written transcripts of the proceedings. Your Arbitrator has also considered the numerous exhibits stipulated into evidence. Your Arbitrator does not feel compelled to address all of the numerous arguments and issues raised by the professional advocates of the parties. Please note that this is not to be interpreted that your Arbitrator has not read and reread his notes, the transcripts and numerous pages of exhibits and carefully considered all arguments of counsel. Rather, your Arbitrator has elected to address only those elements that your Arbitrator is mandated to consider pursuant to the WAC, Title 391, Chapter 391-55, “Impasse Resolution Case Rules” and RCW, Title 41, Chapter 41.56, “Public Employees’ Collective Bargaining” or as otherwise mandated by law, which have had a significant impact on his decision-making process. Your Arbitrator, as a general rule, will not comment on matters he believes are irrelevant, superfluous, redundant, or rendered moot by his opinion and award. II. BACKGROUND The CBA between the Washougal Police Officers’ Association and the City of Washougal expired on December 31, 2013. The parties were unable to successfully

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negotiate several matters to their successor collective bargaining agreement. The opinion and award that your Arbitrator renders shall be retroactive to January 1, 2014. By letter dated May 28, 2014, Michael P. Sellers, the Executive Director of the Washington State Public Relations Commission, noted that the parties were in mediation two times, that the mediator felt that an impasse has been met, that the mediator recommended that certain issues be certified to interest arbitration, that he met with the mediator and that he found that the parties were at impasse. Executive Director Michael P. Sellars certified issues to interest arbitration as they related to Article 2 (Term of Agreement), Article 13 (Wages), Article 14 (Medical and dental benefits, life insurance and funeral expenses), Article 15 (Mandatory overtime selection), Article 16 (Vacation scheduling – number of officers/sergeants off per shift), Article 26 (Employee Discipline/Termination), Article 27 (Investigation Policy) and Article 29 (Shift Exchange). He also noted that the interest arbitration proceedings would be conducted as provided in WAC 391-55-200 through WAC 255. On July 12, 2014 your Arbitrator was informed by the parties that he has been mutually selected by the parties to act as their interest arbitrator. By letter and email of same date your Arbitrator accepted service. On November 5, 2014, the Union submitted proposals for interest arbitration pursuant to WAC 391-55-220 in regard to Article 2 (Terms of Agreement) and Article 13 (Wages). On November 6, 2014, the City submitted proposals pursuant to WAC 391-55- 220, as they related to Article 2 (Term of Agreement), Article 3 (Wages), Article 14 (Medical and Dental, Life Insurance and Funeral Expenses), Article 15 (Mandatory Overtime Selection), Article 16 (Vacation Scheduling – Number of Officers/Sergeants

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Off Per Shift), Article 26 (Employee Discipline/Termination, Article 27 (Investigation Policy), and Article 29 (Shift Changes). The interest arbitration hearing was scheduled for November 20, 2014. However, the parties agreed to continue the hearing to January 30, 2015. Between these two (2) dates, the parties settled the issues relating to Articles 15, 16, 26, 27, and 29. Therefore, at the interest arbitration hearing held on January 30, 2015 evidence taken was limited to Articles 2, 13, and 14. III. THE CITY OF WASHOUGAL AND ITS POLICE DEPARMENT

The City of Washougal is a small community located on the Washington State side of the Columbia River. The City’s population in 2014 was 14,910 people. The City has approximately 70 employees which are divided into three groups. The AFSCME Local represents approximately 35 employees. A second group of approximately 15 employees are not represented. The third group of employees are 17 commissioned law enforcement officers through the rank of sergeant. Washougal had had a fire department which it is now part of the city of Camas. IV. THE REMAINING CERTIFIED ISSUES As noted above, the parties were unable to resolve three (3) issues out of seven (7) issues which were certified. The first unresolved certified issue relates to Article 2 (Term of the Agreement). The City proposes a two-year contact. The Association seeks the status quo of a three-year contract. The second unresolved certified issue concerns Article 13 (Wages). The City proposes a 2% increase for 2014 and a 1.5% increase for 2015. The

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Association proposes a three (3) year contact with a 3.0% increase in 2014, a 3.5% increase in 2015, and a 4.0% increase in 2016. The third unresolved issue involves Article 14 (Medical and Dental). The City proposes to move Association members from their current health plan (HealthFirst), which is being eliminated by the health insurance carrier due to excessive costs and the “Cadillac Tax” of the Affordable Care Act to the next best alternative plan (HealthFirst 250). The City also proposes a modest increase in employee cost-sharing health and dental insurance premiums. The Association proposes the status quo. V. INTEREST ARBITRATION IN WASHINGTON STATE The State of Washington Supreme Court has held that the legislature did not intend for statutory interest arbitration to displace the negotiation process, interest arbitration was not a substitute for collective bargaining, and interest arbitration is an instrument of collective bargaining which displaces possible “economic tactics.” 2 City of Bellevue v. Int’l Ass’n of Firefighters, Local 1604, 119 Wn.2d 373, 381 (1992). Subsequently, the Washington State Supreme Court stated that interest arbitration is a process whereby, if a union and an employer cannot agree on a new contract during collective bargaining, an arbitration panel will be formed to resolve any disputes over the

2 In exchange for the right to strike, essential government employees such as police officers and firefighters were given access to interest arbitration. For an interesting and scholarly discussion on this topic, the differences between grievance arbitration and interest arbitration, and a comparison of interest arbitration statutes of several states, see Interest Arbitration: The Alternative to the Strike, by Arvid Anderson and Loren A. Krause, 56 Fordham Law Review No. 4 (1987). For example, in Hawaii, factors considered in interest arbitration hearing for police officers include, but are not limited to, the lawful authority of the employer, stipulations of the parties, interests and welfare of the public, the ability of the Employer to pay provided it is not predicated upon raising or imposing taxes or developing other sources of revenue, future general economic conditions, comparators of persons performing similar services, average consumer prices for food (cost of living), overall compensation presently received by the employees, and other factors normally and traditionally considered in disputes regarding wages, hours, and conditions of employment. Hawaii Revised Statutes, 89-11(f).

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terms of the new contract. International Ass’n of Firefighters v. City of Everett, 146 (2002). The Washington State Supreme Court has also made it clear that when interpreting statutory language, the goal of the court is to carry out the intent of the legislature. Id. In ascertaining the legislative intent, the language at issue must be evaluated in the context off the entire statute. Id. If a statute’s meaning is clear on its face, the court will give effect to that plain meaning as an expression of the legislative intent. Snohomish County Public Transp. V. PERC, 173 Wash.App. 504, 294 P.3d 803 (2013). The Association argues that your Arbitrator should not view interest arbitration in the State of Washington as a process where your Arbitrator’s decision and award should be one which constitutes a “compromise” between the positons of the parties or one which “splits the baby” and cites to Arbitrator Marvin L. Schurke who stated as follows: At pages 27-28 of its brief, the employer asserts the propriety of an entirely different task for the Arbitrator here. Without making any reference to RCW 41.56.465, the employer quotes from decision issued in 1995 by another arbitration under RCW 41.56.450, as follows: ‘The Arbitrator’s task is to fashion an award that will, as nearly as possible, approximate what the parties themselves would have reached had they continued to bargain without determination and good faith’.” The employer’s brief then goes on to cite a private sector arbitration award from 1947, Elkouri and Elkouri “How Arbitration Works” treatise (4 th Edition, 1985), and two more Washington interest arbitration decisions issued by the same arbitrator as the quoted 1995 decision. None of those employer citations are persuasive (let alone binding) precedent here. Interest arbitration under Chapter 41.56 RCW is a statutory proceeding, not a forum for itinerant philosophers to dispense their own brand of industrial justice. None of the decisions cited by the employer were issued by the Public Employment Relations Commission or by the Washington courts, and none of them provide any basis to add to or subtract from the criteria set forth by the Washington State Legislature in RCW 41.56.465….

The Association also notes Arbitrator Schurke’s impressive background. He has almost 50 years of public sector labor relations experience, most of them as Executive

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Director of the Washington State Public Employees’ Relations Commission. In your Arbitrator’s view, unless Arbitrator Schurke is clearly wrong, his opinions should be given substantial deference and consideration. The Association notes that Arbitrator Schurke’s position was recently adopted by Arbitrator Karyl Elinski in the City of Orting and the Orting Police Guild. (Elinski, 2015). Arbitrator Elinski was also clearly impressed by Arbitrator Schurke’s background. Your Arbitrator has carefully reviewed State of Washington Supreme Court cases which interpret the function of interest arbitration in Washington State. Interest Arbitration under RCW 41.56.465 and RCW 41.56.430 is clear and unambiguous. Arbitrators are mandated to consider and apply the statutory criteria listed in RCW 41.56.465 while being mindful of the legislative intent set forth in RCW 41.56.430. The essence of any interest arbitration award must be based upon a consideration of RCW 41.56.465 and RCW 41.56.430. Your Arbitrator is persuaded that the reasoning and position taken by Arbitrator Schurke is correct. In your Arbitrator’s view, if the essence of an arbitrator’s opinion and award is based upon the factors set forth in RCW 41.56.465 and RCW 41.56.430, the opinion and award does not violate the intent of the State of Washington Legislature and decisions decided by the State of Washington Supreme Court. So that your Arbitrator is not misunderstood, RCW 41.56.430 does not mandate that it is your Arbitrator’s responsibility and duty to determine what the agreement the parties should have reached if they continued to bargain,” or to “compromise” or to “split the baby” as part of his analysis as to which proposals to award. This is not the function of interest arbitration nor are they factors to be considered by your Arbitrator under RCW 41.56.465. Your Arbitrator shall weigh the proposals of the parties on their merits while applying the

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criteria set forth in RCW 41.56.465 while being mindful of the legislative intent set forth in RCW 41.56.430. VI. APPLICABLE STATUTORY LAW The interest arbitration before your Arbitrator is governed by RCW Title 41, Chapter 41.56. Your Arbitrator is mandated to consider the proposals within the context of RCW 41.56.465, entitled “Uniformed personnel-interest arbitration panel, Determinations, Factors to be considered,” which provides in relevant part as follows: (1) In making its determination, the panel shall be mindful of the legislative purpose enumerated in RCW 41.56.430 and, as additional standards or guidelines to aid it in reaching a decision, the panel shall consider:

(a) The constitutional and statutory authority of the employer; (b) Stipulations of the parties; (c) The average consumer prices for goods and services, commonly known as the cost of living;

(d) Changes in any of the circumstances (a) through (c) of this subsection during the pendency of the proceedings; and

(e) Such other factors, not confined to the factors under (a) through (d) of this subsection, that are normally or traditionally taken into consideration in the determination of wages, hours, and conditions of employment. For those employees listed in RCW 41.56.030(7)(a) who are employed by the governing body of a city or town with a population of less than fifteen thousand, or a county with a population of less than seventy thousand, consideration must also be given to regional differences in the cost of living.

(2) comparison of wages, hours, and conditions of employment of personnel involved in the proceedings with the wages, hours, and conditions of employment of like personnel of like employers of similar size on the west coast of the United States.

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The legislative purpose set forth in RCW 41.56.430, entitled “Uniformed personnel, Legislative declaration,” which your Arbitrator must be “mindful” of, provides as follows: The intent and purpose of chapter 131, Laws of 1973 is to recognize that there exists a public policy in the state of Washington against strikes by uniformed personnel as a means of settling their labor disputes; that the uninterrupted and dedicated service of these classes of employees is vital to the welfare and public safety of the state of Washington; that to promote such dedicated and uninterrupted public service there should exist an effective and adequate alternative means of settling disputes.

Accordingly, your Arbitrator has applied the declaration set forth in RCW 41.46.430 and the standards and guidelines set forth in RCW 41.56.465 to the certified issues that are the subject of this Opinion and Award which are set forth below. VI.A. CONSTITUTIONAL AND STATUTORY AUTHORITY OF THE EMPLOYER

The constitutional and statutory authority of the City was not an issue before your Arbitrator. VI.B. STIPULATIONS OF THE PARTIES As noted above, the parties agreed that Articles 15, 16, 26, 27, and 29 of the CBA were settled. Therefore, evidence was limited to Articles 2, 13, and 14. The parties also agreed that all exhibits presented by the parties would be in evidence for your Arbitrator’s consideration. Your Arbitrator is unaware of any other stipulations entered into by the parties. VI.C THE AVERAGE CONSUMER PRICES FOR GOODS AND SERVICES, COMMONLY KNOWN AS THE COST OF LIVING

The City’s CPI-U: showed the inflation rate for the Portland-Salem area between 2003 and 2014. City Ex. C.1, p.4. Inflation between 2003 and 2008

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grew at an average of 2.7% between 2003 and 2008, slowed during the recession, but increased in 2010 by 1.25%, 2011 by 2.86%, 2012 by 2.31%, 2013 by 2.50%, and 2014 by 2.57%. Id.

VI.D CHANGE OF CIRCUMSTANCES DURING THE PENDENCY OF THE PROCEEDINGS

Your Arbitrator is unware of any changes in circumstances, in regard to factors set forth above in items VI.A, VI.B. and VI.C., as none were argued by the parties during the pendency of the proceedings. VI.E OTHER FACTORS NORMALLY AND TRADITIONALLY TAKEN INTO CONSIDERATION IN THE DETERMINATON OF WAGES, HOURS, AND CONDITIONS OF EMPLOYMENT

The Revised Code of Washington, Section 41.56.465 provides that arbitrators shall consider other factors normally considered by arbitrators in determining wages, hours, and conditions of employment. The factors are not specifically named. However, such factors traditionally include the ability to pay, bargaining history, and retention and recruitment.

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VIII.E.I. ABILITY TO PAY The ability to pay is a broad and relative factor. It includes, but is not limited to, the size of the employer, the ability of the employer to generate revenue, the employer’s fiscal health, general economic conditions, the size of the bargaining unit requesting a wage increase, the proposed wage increase, and the effect that the proposed wage increase will have on the employer. There is no set formula that arbitrators use to determine an employer’s ability to pay. Many employers in Washington State, like the City, had substantial financial difficulties during the economic recession that began in 2008. During this time the City experienced decreasing tax and sales revenues and found it necessary to reduce spending. The City stressed that it had the lowest revenue from sales taxes when compared to the City’s nine (9) external comparators. Your Arbitrator is persuaded that the City is recovering from the recession but has not fully recovered. This favor falls in favor of the City. VI.E.II. BARGAINING HISTORY The bargaining history between the parties from 2004 and 2014 shows that the actual wage increases for Association members exceeded the rate of inflation. City Ex. 2.3.2. If Association members had been paid in concert with the rate of inflation, rather than received their actual wage, on the average, their wages would be 14.1% less than what they are currently receiving. Id. These facts support the City’s position. However, as discussed below, for the contract period, the wages of Association members lagged behind inflation at 5.67% and are 5.1% behind the average of the

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Association’s set of comparable cities. This factor shall be discussed more for fully below. This factor falls in favor of the Association. VI.E.III. RETENTION AND RECRUITMENT The City has not had difficulty with retention and recruitment of police officers. The City offered data that regarding employee retention and turnover within the Washougal police department. The data indicates that over the past decade there have been almost no voluntary departures from the Washougal Police Department. Those officers that have left have done so for reasons unrelated to wages and benefits. City Ex. 2.7. These facts are undisputed. This factor falls in favor of the City. VI.F. LIKE EMPLOYERS OF SIMILAR SIZE The Revised Code of Washington Section 41.56.465(2) provides that arbitrators shall compare wages, hours, and conditions of employment of “like employers of similar size” on the west coast. The City argues that its comparators meet the statutory requirements. Your Arbitrator agrees. The City’s comparators are set forth below in City Ex. 2.5.2.

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The City’s methodology in developing a set of proposed comparators began with a review of the statutorily mandated component of “like employers of similar size on the West Coast of the United States.” The City examined the population of other cities in comparison to Washougal. Population is the most commonly used factor by arbitrators to to determine what constitutes an employer of “similar size.” The City used a band of 25% smaller and 25% larger to determine “similarly sized” employers. This resulted in populations ranging from 11,183 to 18,638. The result was the City proposing nine (9) cities. The City was 12.8% below the average, ranking seventh in terms of population. The Association argued that the City’s band of 25% smaller and 25% larger was too narrow. Your Arbitrator is persuaded by the Association’s argument. Bands are