Performance-based bonuses were also awarded to the city manager, the city attorney and city clerk. The nine top department heads received increases in the amount of bonus pay that can be given upon good performance reviews.
The city also struck a deal last week with two of its major unions, the Eagles and the Firefighters Association, after seven months of arduous talks that stalled over retirement health benefits.
The firefighters took a one-year contract with few changes, while the Eagles, representing City Hall employees and low-level managers, received a four-year contract worth a total of $3.5 million over four years. The Eagles took the lead in accepting what some believe to be inevitable cuts to increasingly expensive retirement health benefits.
Despite those cuts, the Eagles received a tremendous pension increase, from 2 to 2.7 percent. Assistant finance director Patty Kong said the immediate cost of the newly awarded pension plans to the Eagles and other unrepresented employees was $6.9 million.
Council members Greg Perry and Matt Pear were not happy with the agreement.
"This is giving away the house," Pear said about the new pension plans. "People are going to be making more when they retire than they did when they were working for the city. This is going to hit five to 10 years from now in such a way we may need to cut services in certain areas."
Perry called the pension increase a "retroactive gift" for longtime city employees, and said that 2.7 percent was unusually large. He said he knows of cities that have it set at 1.1 percent.
The benefit allows employees with 30 years of service, for example, to receive 2.7 percent of their highest salary for each year worked, or 81 percent. By contrast, a 2 percent pension benefit would be worth 60 percent after 30 years.
Council member Mike Kasperzak noted the concessions made for retirees' health by the Eagles, and said that was positive.
"I think where we have ended up with the Eagles is cutting-edge for cities," Kasperzak said. "I'm really impressed with how thoughtful the Eagles were. They realize this is taxpayer money, and taxpayers don't get these kinds of benefits. To make those concessions really shows a lot."
Kasperzak had just returned from the National League of Cities conference, where he found that retirement health care costs and new accounting standards to keep track of them "are incredible and create real headaches for municipalities across the country." Mountain View is the only city making real headway with the problem, he said.
Under the new Eagles contract, employees hired after June 30, 2007, will have to work 15 years before they can have 85 percent of an HMO plan paid during retirement. Those not planning to stay with the city for 15 years will have the option, after five years of employment, to receive $200 a month during retirement towards any health plan, and up to $300 a month will be available to those who have worked 10 years for the city.
"You have a liability that accrues from a defined benefit," said Eagles representative Fred Erwin about the old standard retiree health benefits. His remark echoed city finance manager Bob Locke's concerns about health care costs rising dramatically in the future to an unknown level, creating an unpredictable "liability" the city would have to pay no matter how impractical.
Enrollment in the city's most expensive medical plan has been frozen for the Eagles, and a cap has been put on the plan's cost at $1,497 per employee.
On top of the pension increase, Eagles employees also get a 3.5 percent cost of living increase for the first two years of the contract and a 3.2 percent increase the following two years — a total of 13.4 percent over four years.
Several other unrepresented employees received contracts similar to the Eagles, raising the number to 234 employees with a new contract.
Firefighters buy time
Meanwhile, firefighters took a one-year contract with no changes in order to buy more time and deal with the retirement health care problem.
John Miguel, president of the Firefighters Association, said he has seen several firefighters in Mountain View die from diseases linked to the job, such as exposure to chemical fumes in fires, which is why his union believes the retirement health benefit should be a priority.
"There is no need to make rush decisions that would take away such an important benefit," Miguel said.
He added that CalPERS may soon make its giant retirement health care fund available to cities like Mountain View, which would provide the city with an investment fund to make retirement heath care costs more viable.
"As we learn more about this, there will be more options available," Miguel said.
The Service Employees International Union local 715 has also been in negotiations with the city for seven months, but did not reach an agreement before press time.
Merit pay for officials
Also Tuesday, after receiving good performance reviews from the city council, the city manager, city attorney and city clerk received an increase in bonus pay.
Kasperzak said the increase in merit pay, which is a calculated salary percentage, was "definitely" worth it. Mayor Nick Galiotto said the three officials had not received any merit pay while navigating the city through tough economic waters in recent years.
The city attorney received an 8 percent merit adjustment, the city manager a 5 percent merit adjustment and the city clerk a 4 percent merit adjustment.
"When city employees see that, that may not sit well," Perry said.
Perry registered the only no vote, saying the officials had already received their high-paying positions through merit. According to Kathy Ferrar, employee services director, the city attorney's annual salary is $184,000, the city clerk's is $107,000 and the city manager's is $203,000. The figures do not include benefits.
In a staff report, city manager Kevin Duggan announced increases in merit pay for the nine major department heads, which did not a require a council vote. The merit pay is given when department heads receive positive annual performance reviews. Duggan noted that Sunnyvale provides merit pay for the same positions up to 10 percent of salary, and Palo Alto sometimes exceeds 10 percent.
Duggan said he'll raise it to 10 percent.
"I am concerned with encouraging existing department heads to remain within the organization as long as possible while also positioning the city to compete effectively with other organizations for their eventual replacement," Duggan wrote in the report.
The following city positions earn these annual salaries, not counting benefits:
Assistant City Manager: $171,897
City Attorney: $183,725
City Clerk: $106,683
City Manager: $203,173
Community Development Director: $171,897
Community Services Director: $171,897
Employee Services Director: $149,646
Finance & Administrative Services Director: $171,897
Fire Chief: $174,664
Library Services Director: $140,182
Police Chief: $175,230
Public Works Director: $171,897