Philadelphia's union leadership approved a new contract yesterday, apparently resolving the city's labor crisis just 14 hours after calling a strike.
A vote by union rank and file is still required before the contract is finalized, but union leaders said yesterday they expected their deal would be ratified.
A walkout that had threatened to end garbage collection, close museums and libraries, and halt most other nonessential city services was called off ahead of the final vote, expected over the next few days.
A preliminary summary of the terms of the new contract released late yesterday by Mayor Edward G. Rendell's office said the contract would save the city $79 million in fiscal 1993, instead of the $98.6 million Rendell promised in his five-year fiscal recovery plan. A spokesman for the mayor said the figures in the summary might be subject to last minute revisions, but updated figures were not available late in the day.
Over the life of the contract, savings to the city will total $374 million, compared to the $492 million envisioned in the five-year plan, the preliminary summary said. The city also agreed to wage increases in fiscal 1994 and 1995 not anticipated in the plan, adding another $29 million to the total cost of the new contract, Rendell's office said.
In addition, delays in implementing the new, leaner contract have cost Philadelphia an additional $21 million that must be factored into the equation.
Rendell's five-year plan was drafted in conjunction with a $475 million bond sale in June by the city's oversight board, the Pennsylvania Intergovernmental Cooperation Authority. The plan, which was a key element in convincing investors that the city was serious in its effort to balance the budget, promised an end to Philadelphia's chronic deficits by fiscal 1994.
The summary from Rendell said the new contract will create aa cumulative shortfall of $132.5 million, or an average of $33 million a year, through fiscal 1996. But the administration said that amount "can be managed through selective service cuts."
Bernard E. Anderson, the oversight authority's chairman, said in a statement yesterday that good news about the end of the strike should not blind the city to "the stark fiscal reality we have before us."
He noted that the new contract means the city will have to find "well in excess of $100 million" in order to get back in compliance with Rendell's five-year plan. "That is not an insignificant amount," Anderson said.
"We continue to have substantial concerns about delays in implementation of the non-personnel initiatives in the plan -- those which promote improved management and productivity," Anderson added. "While some have been delayed due to the extended negotiations, the results to date for many other initiatives have not been encouraging."
Throughout the labor negotiations, Rendell has said a key ingredient to his savings proposals was to abolish the various health plans now offered to city employees and replace them with a choice of less expensive alternatives.
Over the past several days, however, the mayor has reportedly softened his insistence on that point, as long as the unions instead give him greater flexibility to use layoffs to meet savings targets.
The final deal, according to the mayor's preliminary summary, establishes the city's alternative health plans but maintains the option of staying with existing coverage as well. The city, however, agreed to pay only $360 monthly per employee to fund health plans for workers who choose to stay in the old plan. Last year, Philadelphia paid premiums of $480 a month for its blue-collar workers and $435 a month for its white-collar workers.
The new premium equals the cost of the city's alternative coverage plans and will save Philadelphia $300 million over the next four years, the administration said.
The new contract also expands Rendell's flexibility in using layoffs to achieve savings goals as well as his ability to privatize city services under certain conditions.
Paid holidays are reduced to 10 from 14, which will save the city $22.5 million over the next four years. The 20 sick days a year now available to city employees will be maintained, but future employees will be limited to 15. Reforms intended to limit sick leave abuse are also included in the new contract.
The strike, which union officials called a "lockout," capped months of feuding over how much city workers should contribute to Philadelphia's fiscal recovery.
Rating agency officials have said for weeks that, strike or no strike, a quick resolution to the labor crisis was needed so the city could begin generating the savings envisioned in Rendell's five-year plan. Those savings have been gradually eroding since July, when the mayor originally hoped to have his new contracts in place.
Administration officials have estimated the city lost about $2 million for every week that passed without a new contract.
Philadelphia's oversight board has remained mostly on the sidelines during the intense bargaining sessions between the city and its unions over the past two weeks.
"Our role is not to become an intermediary in the negotiating process," said Ronald G. Henry, PICA's executive director.
In exchange for selling bonds for the city, the board has the right to hold back state aid if members feel the administration is not sticking to the terms of its five-year plan. But PICA is not empowered to dictate how the city should meet the broad savings goals of the plan, only that the goals be achieved.
The city's workers are represented by district councils 33 and 47 of the American Federation of State, County and Municipal Employees. Police and firefighters are legally barred from striking, and are currently involved in arbitration proceedings.
