City, police union agree to 3-year, $245 million contract

Philadelphia police officers will receive annual raises of about 3 percent for each of the next three years in a contract that will cost the city $245 million, it was announced Tuesday.

The agreement marks a quick end to a short stalemate: The union’s old contract had expired on June 30, though negotiations had continued in subsequent weeks with few public signs of discord between the city and union officials.

Decided by a panel of three arbitrators, the deal’s total cost exceeds by $45 million the amount the city had budgeted for this contract and two others currently being negotiated with major municipal unions — deals that could cost hundreds of millions of dollars on their own. The city has 20 days to revise its five-year financial plan; officials said the Kenney administration was “examining its options.”

In the city’s favor, members of Fraternal Order of Police Lodge 5 — which represents the majority of the Police Department’s 6,300 officers, as well as some in the Sheriff’s Office — will be asked to contribute more toward their pension plan. That change will pump $160 million more into the depleted pension fund over the next 13 years, according to Mayor Kenney’s office.

Still, the deal did not go as far as city officials had hoped. Initially, they proposed placing new employees in a “stacked” retirement plan, with a smaller pension plan alongside a 401(k). The FOP had long opposed that approach.

Despite not achieving its preferred pension outcome, city officials touted the money that will be freed up for its pension fund, as well as a provision creating the ability to electronically notify officers of court appearances, and a rejection of the FOP request to change city residency requirements.

The contract did not make significant changes to the grievance and arbitration process, which some criminal justice advocates have said is too forgiving for officers accused of misconduct.

John McNesby, president of the local FOP, did not return a request for comment Tuesday.

The deal, which runs through June 2020, calls for a 10.5 percent raise over the life of the contract, spread in near-equal annual increments. Police officers, on average, currently earn more than $75,000 a year, according to the city’s annual pension report.

The Kenney administration had wanted all new employees, unionized and not, to participate in a hybrid pension plan that would allow for a traditional defined contribution benefit of up to $50,000 annually. Above that, they could enroll in a 401(k) plan. The city would match half of the employee’s contribution up to 1.5 percent of annual compensation.

In addition, the administration wanted all labor unions to agree to the same increased pension contribution plan that AFSCME District Council 33 agreed to last year. Doing so, the city estimated, could have meant that the city’s $11 billion pension liability would be more than 80 percent funded in 13 years. Currently, the fund has only 45 percent of the money it needs to meet its obligations.

Kenney spokeswoman Lauren Hitt said that even though police balked at the city’s preferred pension plan, the new contract, with its increased employee contribution, keeps the city on track to meet its enhanced pension fund goals.

Still, the development could make it harder to persuade the firefighters and city’s white collar workers’ union to agree with the city’s pension proposals. Leaders of both unions said earlier this year that they had issues with the options being presented.