The panel’s decision, announced Wednesday by Metro, requires that the transit agency provide an average annual wage increase of 1.6 percent for workers over a four-year period ending in July 2020. The award is effective retroactively to July 1, 2016.
The transit agency will probably ask the jurisdictions that fund it for larger subsidies to cover the cost of the raises.
Metro officials said they were “disappointed” with the decision, but also pointed to some savings for the agency. For example, Metro is expected to save $21 million in health-care costs because the arbitration panel said employees must increase their contribution to care to 20 percent from 17 percent, starting in January 2019. It also increases employees’ deductibles and prescription co-pays.
“This award puts employees represented by Local 689 a step closer to a more equal footing with employees represented by other unions, supervisors and staff with respect to healthcare cost sharing,” Metro General Manager Paul J. Wiedefeld said in a statement. “The award also provides modest, well-earned wage increases for our workforce.”
ATU Local 689 called the agreement a “rational decision, under the current circumstances.”
“Although under normal circumstances the totality of this decision would not be adequate, we are willing to accept the terms of this final and binding arbitration award for what we believe is in the best interest of the system,” the union said in a statement.
The arbitration board chose not to weigh in on one of the most contentious issues: retirement funds. In negotiations, Metro had pushed to switch all future hires from the current pension system to a 401(k) — the retirement system that Metro’s second-largest union, AFL-CIO OPEIU Local 2, uses for its newer members. ATU Local 689 had strongly opposed such a change. The arbitration board stuck with the status quo.
“Workers got a pay increase, we got a little bit back on the health care, and they punted the biggest issue we had: the pensions,” Metro board Chairman Jack Evans said. “So hopefully everybody’s happy or unhappy — equally unhappy — and we can get on with the other bigger issues facing Metro.”
Other Metro board members said they, too, were satisfied with the terms of the panel’s decision.
“It seems that this is something that [Metro] and the jurisdictions can live with,” board member Michael Goldman said. “I hope it’s something that the union can live with going forward.”
The union, however, said the contract award has not eliminated many of the issues that continue to cause conflict with management. Last month, its members voted to authorize a strike over a range of issues from disciplinary policies, to the elimination of jobs and open positions, to Metro’s push to privatize some services.
On Wednesday, the union — which represents about 8,000 of Metro’s 12,500 employees, including train and bus operators, inspectors, and maintenance and track workers — reaffirmed that it’s not backing away from the strike threat.
Goldman agreed that the arbitrator’s decision isn’t likely to eliminate the tension between the two sides. He jokingly compared it to the aftermath of the high-stakes summit between the United States and North Korea in Singapore in June.
“I don’t think we’ll go to nuclear war,” Goldman said. “But I think there will be a level of tension that will persist between management and the union going forward.”
The arbitration panel also declined to cap the amount of overtime hours that can be used toward pension calculations, a common practice at other transit agencies, and something that Metro had wanted.
The 1.6 percent annual wage increase is modest compared to the union’s ask of 4 percent annually over three years — the previous figure provided by individuals with knowledge of Metro’s and ATU Local 689’s positions. Metro had sought a three-year wage freeze, with a 2 percent pay increase in the fourth year and an additional 1 percent increase contingent on ridership recovering.
Metro will not pay a wage increase for the first year — July 2016 to June 2017. But it will have to pay workers a 1 percent wage increase for the fiscal year that just concluded — from July 2017 to June 2018 — and then another 2.5 percent increase for the current year, as well as another 2.3 percent wage increase for the fourth year of the contract, which will expire at the beginning of July 2020.
The agency did not budget for wage increases, so Evans said officials will ask for higher subsidies from the jurisdictions that contribute to its operating budget.
“[Say] this year it is $20 million. And then you divide it by three for the jurisdictions roughly,” Evans said. “You’ll send a bill to each of the jurisdictions for $7 million or something like that.”
That amount would keep the agency within the 3 percent cap in annual growth in its subsidy request to the jurisdictions as mandated by the new dedicated funding law.
Still, Evans said he was disappointed the panel did not address the pension issue; the agency has nearly $3 billion in unfunded retirement liability.
“Why the arbitrator doesn’t do what is the obvious thing to do, I don’t know,” he said. “If you do that, you stop the bleeding.”
Board member Jim Corcoran said the arbitrators have simply put off the inevitable.
“The elephant in the room has left the room for now,” Corcoran said, “But future negotiations have to begin to take place now. . . . In the long term, the region is going to have to come to grips with these retirement liabilities. They’re unsustainable, and eventually we’re going to have to figure out where this money is going to come from.”
Metro spokeswoman Sherri Ly said that with the new award, the agency manages to avert the prospect of busting the subsidy cap, which would put it at risk of $180 million a year in penalties.
“Going forward, in FY2020, had the Union prevailed with its request for 4 percent annual raises and no health changes, that would have busted the cap,” she said. “This award provides an opportunity for Metro to live within the cap, subject to other cost containment and revenue raisers, because labor costs are only one budget driver.”
Metro arbitrator Jonathan C. Fritts, who also criticized the panel’s decision to not address pensions, laid out the potential implications in a dissent letter.
The arbitration “Board has missed an opportunity to place Metro on a more stable financial footing for the benefit of everyone concerned,” he wrote. “This missed opportunity diminishes Metro’s ability to control operating costs and results in an award that Metro cannot pay for.”