BE IT RESOLVED, that the proper city officials are authorized to execute and implement a collective bargaining agreement with the city of Duluth Supervisory Association, containing the same terms and conditions, and being in the same form (except for typographical or insubstantial corrections) as the contract on file with the city clerk as Public Document No. _________, covering the years 2004-2006.

STATEMENT OF PURPOSE:  The police, fire and supervisory bargaining units came to agreement to jointly negotiate new contracts. The first negotiation between the joint bargaining units and city management began on July 8, 2002. Negotiations proceeded thorough 2002 and 2003 and have recently wrapped up. The supervisory bargaining unit approved the contract on January 15, 2004.

The significant changes to the contract include:

1. A three year contract with wage increase of: 2004 - 1.5%, 2005 - 4%, 2006 - 4%. With consideration of the zero increase in 2003, this is a 9.5% increase over 4 years or 2.375% per year. If all contracts are settled with the same wage increases the additional expense is estimated as 2004 General Fund - $523,000, 2004 Non-general Fund - $459,000, 2005 General Fund $1,415,000, 2005 Non-general Fund - $1,242,000, 2006 General Fund - $1,472,000 and 2006 Non-general Fund - $1,292,000.

2. Active employee health insurance is changing from a defined employer contribution for family coverage to an employer percentage contribution for family coverage. All bargaining units will have access to Plan 4, which previously was only available to AFSCME employees. The city will contribute 35% of the cost of family coverage for Plans 1, 2 and 4 and 80% of the cost of family coverage for Plan 3. Employer will pay 100% of the cost for single coverage for all plans and additionally will deposit $50 per month into a flex benefits account for employees taking single coverage under Plan 3. Additionally, employees will now be required to pay for prescriptions on a tiered basis; $7 for generics, $12 for non-generic with no generic equivalent and $20 for non-generic where there is a generic equivalent. The estimated additional expense is difficult to determine when considering that there will be movement between plans and there is the potential for a decrease in total cost as participants move to the deductible plan. Based on current demographics and premiums, the additional expense in 2004 will be approximately $1,000,000 across all funds.

3. Retired employee health coverage now contains language that a.) has new hires retiring under Plan 3 only and puts into place a sliding scale for the percentage of the cost borne by the city (this is new for Police and Fire units, the language is already in the Supervisory contract); and b.) allows the city to research and if approved by all unions purchase a Medicare supplement for new retirees. These changes have the potential of reducing the city's future accumulated post-employment benefit obligation by 12%-15% and if applied to all retirees, a reduction of 25%.

4. Dental health care per year maximum has been increased from $750 to $1,000 and the eligible date for receiving health, dental, life insurance and to start accumulating paid vacation are changed to being the first of month after hire instead of six months after hire.

5. In 2004 only, employees have the opportunity to sell back to the employer one week of accrued vacation.

6. The severance package for supervisory employees has been changed from four months maximum to 26 weeks maximum depending on duration of service.