Michael Zobrak

Tredyffrin Pays $83K for Police Contract Arbitration, or … was it really $133K?

The Board of Supervisors and the School Board have their first meetings of the New Year this week.  As is often the case, Tredyffrin’s Board of Supervisors meeting conflicts with the TESD Board meeting. Scheduled for Monday night is both the Board of Supervisor’s organizational and regular meeting at the township building and the T/E School Board will hold a special school board meeting to consider the 2013-14 budget at the T/E Administration Building.  Unfortunately, both meetings are at the same time – 7:30 PM.

The Board of Supervisor’s organizational meeting includes the adoption of the meeting schedule for the various township boards and commissions, naming of emergency service providers, adoption of township fee schedule, legal and accounting reviews, etc.

One of the interesting aspects of the organizational meeting each year is the naming of the Chair and Vice Chair of the Board of Supervisors.  The seven Board members nominate and vote on these positions.  Historically, these positions go to the longest-serving members on the Board.  However, in 2012, that tradition shifted with the naming of Michelle Kichline as Chair. Kichline had only served 2 years as supervisor and neither as a Vice Chair, but received the unanimous support of her fellow board members for the chair position.  Having served longer than Kichline, many had expected John DiBuonaventuro to receive the 2012 nod for Chair but instead he served as Vice Chair. The Board of Supervisors saw their share of controversy in 2012, so it will be curious to see if Michelle receives another vote of confidence to continue as Chair and JD to continue as Vice Chair.

After the ceremonious organizational meeting, there is a regular supervisors meeting, including a Public Hearing to “consider and enact an ordinance of the Township of Tredyffrin, Chester County, and the Commonwealth of Pennsylvania, fixing rates of taxation for the year 2013.”  We learned at the last BOS meeting in December that the township tax increase is set at 3.1%, down from the 5.5% originally forecast.

Since the December 17th supervisors meeting, we have learned of the Act 111 Arbitration Award issued for the collective bargaining agreement between the township and the police union. Much has been written about the agreement on Community Matters with many comments. If you are interested in details of the 4-year contract (2012-15), I would suggest you review posts from late December.  Once the arbitration award was announced, I submitted a right-to-know request for a complete accounting of the arbitration related expenses paid by the township.  It should be noted that this is the second police contract in a row that has gone directly to arbitration by the township.  In both instances, the impartial arbitrator came down on the side of the police union in regards to the post-retirement benefits. We know that retirement benefits , including pensions and healthcare, were major contributors to the long-standing debate between the two sides.

According to township manager Bill Martin, the arbitration costs to the township (taxpayers) re the police contract is as follows – Michael Zobrak, impartial arbitrator $14,136.46 and township arbitrators John McLaughlin, Patrick Harvey, Brian Pinheiro, etc. billed 273 hours for $69,337.50.  If my math is correct, the taxpayers paid $83,473.96 for the arbitration of the police contract.

Below are the details that Bill Martin sent for the township arbitrator costs.  John McLaughlin, Patrick Harvey and Brian Pinheiro are all partners in the Philadelphia law firm of Ballard Spahr.  The law firm billed the township 273 hours for a total of $69,337.50 which equates to $254/hr on the average.  On April 3, 2012 there are 100+ hours billed to the township under the name, ‘PFM’ — I am clueless as to what that means but I will contact the township manager for clarification.

I am struggling to understand these billable hours from Ballard Spahr.  It was my understanding that there was little (if any?) movement from the township’s initial position going into the arbitration process.  If that is the case, how is it that the total number of hours in 2012 (setting aside the hours from 2011) are so substantially higher than the total billable hours of  Michael Zobrak, the impartial arbitrator.

Something else I should point out is that on my right-to-know request in which I asked for ‘costs to date’ was dated January 1, 2013 and Martin’s response was dated January 4th. If you look at the last billing date from Ballard Spahr (below) it was back on Oct. 18, over 2 months prior to the signing of the arbitration agreement on December 23, 2012. It stands to reason that there are additional billable hours yet to be received from Ballard Spahr for those 2+ months, including the review of the arbitration award before its release.  I would maintain that the township has not seen the end of the costs — $83K may not be the entire costs.

TT Arbitrator Costs

I would suggest that we should also add the ICMA (International City/County Management Association) police department consulting fee of $49K to the total cost of the police contract negotiations.  Much of ICMA’s report was boilerplate language and their specific, cost-savings suggestions would require collective bargaining changes.  The way I see it, the township has already spent approximately $133K trying to lower police department expenses.  Based on the arbitration award, we know that the police department retained most of their prior contract benefits.

What bearing is the Act 111 arbitration award going to have on the township’s 2013 budget?  The supervisors and the finance director Tim Klarich did not have the benefit of a crystal ball in regards to the arbitration award when they calculated the 2013 budget. In addition, we still have the issue that there were 47 uniformed police in the 2012 township budget and the 2013 budget has the number reduced to 42.  The 42 uniformed police officers is two more officers than are currently in the department.  Now that the police contract is settled, will the supervisors OK the hiring of those two additional officers?

Tredyffrin Township Police Union Favored in Act 111 Arbitration Award

Addendum … In an earlier post I wrote about the extreme starting positions of the police union and the township, and it was my opinion that the “answer for the arbitrator must lie somewhere between these two positions.”  In response to my statement, John Petersen assured me that the arbitration award would not be ‘somewhere in the middle’ but rather it would be much closer to the union’s status quo starting position.  At the time, I argued with him, figuring that ‘cutting the difference’ between the opposing union/township positions would ‘make sense’ to the arbitrator.  In reviewing the arbitration award, it is obvious my assumption was incorrect … further explanation of the arbitration process would be helpful.


According to the township website, there is there has been an ‘Act 111 Interest Arbitration Award’ issued for the collective bargaining agreement between the township and the police union, Tredyffrin Township Police Association (TTPA). Enacted in 1968, Act 111 is a state law that provides binding arbitration to police and fire fighters in exchange for a prohibition against strikes. If collective bargaining reaches an impasse and proceeds to the interest arbitration level, the determination reached by the arbitration board is final on the issues in dispute and binding on both parties

I am not sure who is responsible for the arbitration award appearing on the website – our new township manager Bill Martin or Board of Supervisor chair Michelle Kichline.  But to whoever is responsible, thank you … it was a pleasant surprise to find the award pdf on the website, without necessitating a ‘right-to-know’ request.

Since January 2012, the contract between TTPA and the township has been in arbitration; the 3-year police contract expired December 31, 2011.  The process has been held captive for nearly a year, waiting for a ruling from the Board of Arbitration, impartial chair Michael Zobrak, Esq. township arbitrator John P. McLaughlin, Esq. and union arbitrator Stuart W. Davidson, Esq.

The biggest roadblock in collective bargaining contract disputes these days is health care benefits (in addition to salaries) and the Tredyffrin Township/TTPA contract proved no different. In reviewing the arbitration award, please understand that I do not claim labor attorney status or an expertise in contract law. However, it would appear that the independent arbitrator favored the township police in his award.  Some of the highlights of the arbitration award include –

A 4-year township-police contract, retroactive to January 1, 2012.  The term of the contract is January 1, 2012 to December 31, 2015. The arbitration award includes salary increases to TTPA members as follows:

  • January 1, 2012: 3.5%
  • January 1, 2013: 3.5%
  • January 1, 2014: 3.75%
  • January 1, 2015: 4%

The previous TTPA contract included yearly salary increases of 3.5% for 2009, 2010 and 2011.  As a reference point, this week the Lower Merion Township Police Association signed a new 4-year contract that includes 3.5% yearly increase for the first three years and then 3.75% in the final year. It is interesting to note that unlike Tredyffrin, Lower Merion Township and their police department were able to reach a new contract agreement prior to expiration of their current contract.  The TTPA contract expired December 31, 2011 and has been in arbitration for over 11 months.

The healthcare changes contained in the arbitration award for TTPA members should save the township some money.  Under the new agreement, the township will be able to change to medical coverage as soon as possible to a less costly plan (from Aetna PPO to IBC Personal Choice).  Co-pays will be $5 generic and $20 brand.  TTPA members will not contribute toward the cost of their health care insurance premium for 2013; township will analyze premium contributions annually starting in 2014.

Here is a twist in the health care coverage that could produce savings for the township but also some extra money for our police officers – an ‘Opt Out’ plan.  By opting out, the Township will pay officers the following amounts on a yearly basis:

  • Officer drops single coverage: $3,500
  • Officer drops dependent coverage (officer still covered) $4,000
  • Officer drops dependent coverage (officer not covered) $4,500
  • Officer drops spouse (officer still covered) $4,500
  • Officer drops spouse coverage (officer not covered) $5,000
  • Officer drops family coverage (officer still covered) $5,500
  • Officer drops family coverage (officer not covered) $6,000.

I like this incentive based healthcare coverage idea.  If police officers give back on their medical coverage, it will save the township money and in return, produce a financial incentive for TTPA members … a win-win for police officers and the township.

The arbitration award contains an adjustment in minimum payment upwards for officers’ appearance at non-District Justice Court to 4 hours (previous contract was 2 hours).  The award contains a downward adjustment on clothing allowance – previously, the clothing allowance was $600/yr. but is now amended to $200/yr.   The arbitrator dropped the clothing budget by 66% for TTPA members but Lower Merion police officers saw an increase in their clothing allowance in their new contract …   $900 for 2013, $950 in 2014, $1000 in 2015 and $1050 in 2016.

Other than the above points, all terms and conditions of the collective bargaining agreement, which expired December 31, 2011, continue under this new agreement.  If you recall, one of the sticking points during the contract negotiations had to do with the post-retirement benefits contained in the former police contract.  According to the arbitration award, post-retirement health care coverage for TTPA members is included in the new 4-year contract.

As a reminder, the 2009-11 police contract stated that if an officer retired on or after 1/1/2009, the township may coordinate its obligation to provide post-retirement medical coverage with available Medicare coverage.  “For those persons eligible for Medicare, the township shall reimburse them for any cost associated with acquiring Medicare, including the cost of Plan B coverage. In addition to being responsible for all costs associated with Medicare coverage, the township shall purchase supplement insurance and the township shall self-insure such as is necessary to provide the retired officer and spouse with the same level of insurance coverage they enjoyed before coverage was coordinated with Medicare.” 

The contract further stated that, “… Officers who retired prior to 1/1/09, as well as their spouses and eligible dependents, shall be permanently vested with, and continue to enjoy, the same level of healthcare benefits being provided for them by the Township as of 12/31/2008 at no cost, except for co-payments and deductibles then in effect.”

Part of the problem with the wording of the contract is that although the township will pay for Part B once a retired police officer qualifies for Medicare; there is not an absolute requirement for the police officer to go on Medicare. However, the costlier issue for the township has to do with the years of service requirement.  According to the contract, the requirement for retirement before 1/1/99 was only 15 years of service.  After 1/1/99, it became 20 years of service.  Conceivably, a police officer could retire many years in advance of Medicare qualifying age but continue to receive full healthcare benefits for him or herself plus spouse and dependents.

It would appear that the longevity bonus pay also remains intact for TTPA members as in the previous contract.  The bonus is computed as follows:

  • After 4 years of service              2% of Basic Yearly Salary
  • After 8 years of service              4% of Basic Yearly Salary
  • After 12 years of service            6% of Basic Yearly Salary
  • After 16 years of service            8% of Basic Yearly Salary
  • After 20 years of service           10% of Basic Yearly Salary

It should come as no surprise that the township appointed arbitrator John McLaughlin included his dissent with the arbitration award, claiming a “lack of overall balance in the award.”  McLaughlin states that the “neutral arbitrator [Michael Zobrak] issued an unbalanced award that fails to address the Township’s central issue of post-retirement health benefits and the unfunded liability that the Township is facing as a result of those benefits.”

For the record, the township’s unfunded liability is currently $40M.  The township’s 2013 budget contains an annual contribution of $500K to begin to ‘buy down’ the debt, however the unfunded liability grows annually by about $2M.  McLaughlin claims that Zobrak was fully aware of the township’s unfunded liability issue but that he inexplicably, “failed to address this issue in the award.  Instead, he [Zobrak] cherry picked around this issue, and issued an award that is a disservice to the Township’s taxpayers and all involved with this proceeding.”

It also should come as no surprise that the union arbitrator, attorney Stuart Davidson, concurred with the arbitration award.  So … how do you explain the arbitration award? Did Davidson do a better job of presenting the union’s position at the arbitration hearing than McLaughlin did for the township? Or is McLaughlin’s suggestion correct, that fault lies with Zobrak, for the ‘unbalanced award’?  And what about Zobrak, the independent arbitrator?  Why did it take him 11+ months for this award decision?  My research has shown that it typically takes 3-4 months in arbitration. Perhaps a timelier award could have saved the taxpayers some legal fees and certainly would have made the 2013 budget planning easier.

Beyond the financial responsibilities to the township contained in the new police contract, exactly how much did this yearlong arbitration cost the taxpayers?  Earlier in December, I asked township manager Bill Martin that very question in a right-to-know request.  As of December 14, 2012, the township had paid McLaughlin of Ballard Spahr $57,067.50 for 2012 legal fees. (McLaughlin’s billing rate is $300/hr.).

According to Martin, Zobrak, the independent arbitrator is paid on a per diem basis and submits his bill at the conclusion of the arbitration.  Martin stated “He [Zobrak] charges for hearing days, days when executive sessions were held and study days (when he reviews materials and drafts the award).  He also might charge partial days when the parties have relatively short conversations.”  I have received conflicting information as to who pays Zobrak’s bill – my understanding from the township manager is that the bill is split between the two sides but a police union representative told me that the township would pay the entire bill.  Now that the arbitration award is public, I will submit a new right-to-know request and obtain the total costs.  (** See Note)

Now that the police contract arbitration is settled, I have to wonder how quickly (or rather how slowly) the current police department staffing needs in the township will be met. There are currently 40 uniformed police officers, although there were 47 officers listed in the 2012 budget. The 2013 township budget approved the hiring of two additional police officers for a total of 42 officers, although the ICMA police operations and data analysis report indicated a minimum of three additional uniformed officers (total of 43 officers) were required to maintain the safety of the community. Police Supt Tony Giaimo’s request to reinstate 47 officers in the 2013 budget was denied.

Every time I think about that boilerplate consultant’s report that cost the taxpayers $49K I get angry – what a complete waste of money.  I wonder if the intention of some supervisors (in hiring consultants to review the police department) was to intimidate the police union during the negotiation process. Based on the outcome of the arbitration award, if that was their strategy, I’d say that their plan failed miserably.

Here’s hoping that the police department gets their budgeted, additional officers quicker than the sidewalks have gone in at St. Davids Golf Club!


** Note:  According to Allegheny Institute of Public Policy,  under the conditions of Pennsylvania’s Act 111 law,  “The employer has to pay the costs of its arbitrator as well as the costs of the neutral arbitrator.”  In other words, there will be no ‘splitting’ of Zobrak’s arbitration fee with the union — the taxpayers will pay bill for the township arbitrator and the independent arbitrator.

To make it sting more, I was told by several officers, that the township did not spend much time negotiating with the union, opting to go straight to arbitration.  It makes me wonder — could the township have saved a year’s worth of legal fees if they had tried reasonable negotiations with the union.  Upper Merion Township was able to negotiate with their police union without arbitration; signing a new 4-year contract prior to the expiration of their last contract.

Lifetime healthcare benefits of Tredyffrin Township Police Association result in $40M unfunded liability — What’s the Solution?

I attended the public meeting this week to discuss the township’s proposed preliminary 2013 budget.  About 10 residents attended plus township supervisors Michelle Kichline and Mike Heaberg (Heaberg is a member of the Finance Committee) and Acting Township Manager and Finance Director Tim Klarich.

Over the course of two hours, various topics were discussed with Klarich and the two supervisors, providing answers and background on numerous issues.  The townships’ $40 M unfunded medical liability and the open issue on the labor agreement between the township and the police union, Tredyffrin Township Police Association (TTPA) were of particular interest to me.  The ‘elephant in the room’ for the township’s 2013 budget and major obstacle (and the reason for the township’s $40M liability) is the ongoing arbitration with the police contract and their lifetime health benefits.

Since January 2012, the contract between TTPA and Tredyffrin Township has been in arbitration; the 3-year police contract expired the end of 2011. Kichline was quick to point out that both sides want an arbitration decision but unfortunately, for 10+ months, the process has been held captive, waiting for a ruling from independent arbitrator, Michael Zobrak from Aliquippa, PA.  According to PA Department of Labor & Industry website, Zobrak’s fee is $1200 per diem (however, his page was last updated in 2007).  Interesting to note, there is no requirement for the arbitrator to be an attorney — Zobrak’s education background includes BA, Geneva College and M.Ed, U of Pittsburgh.

According to Kichline and Klarich, Zobrak has held meetings with the attorneys representing the township and TTPA.  It was unclear how many meetings have been held and/or how often.  Although I am sure both sides hope that a resolution is forthcoming, there was nothing definitive stated as to when that might happen. For the record, I called Zobrak’s office and left a voice mail – I will update if I receive a response.

The biggest roadblock in collective bargaining contract disputes these days is health care benefits (in addition to salaries). Certainly health care benefits were an important component in the recently settled T/E teacher contract negotiations.  Appreciating the current economic environment, the teachers agreed that their generous healthcare plan of the past was no longer possible, changes were made in their teacher’s contract accordingly.  Considering the healthcare provisions of the former TESD contract, made it even more surprising to learn the details of the health care benefits of TTPA.

If some residents were bothered by the health care benefit package contained in the previous TTEA contract, I think they would be shocked at the level of TTPA health care coverage.  Currently, all Tredyffrin police officers receive free full lifetime health care benefits for themselves and their families after 25 years of service to the township.  At present 52 retired police officers and families, receive full free healthcare in Tredyffrin Township.  In addition there are a number (not sure of the exact count) of currently employed police officers that are in the 25+ years of service who will receive this  lifetime healthcar coverage under the conditions of the existing contract.

The lifetime healthcare benefits of TTPA constitute the township’s $40M unfunded liability.  According to Kichline, the lifetime health care benefits afforded members of TTPA in their current contract, is not found in most other area municipal police contracts. Here was an interesting twist — I assumed that any change to the current health care benefit of TTPA would affect new hires only (similar to what is being discussed in Harrisburg as it relates to the pension situation, where changes would not affect those employees already in the system).  It is possible (however, probably not likely) that the independent arbitrator could change the lifetime healthcare benefits to affect not only new hires, but also include TTPA members already receiving these benefits. As I have previously stated re the state pension, I support changing the benefits for new hires but not for those employees already in the system.  I am of the same opinion that the same should hold true for members of TTPA.  The healthcare benefits should only be changed for new police department hires – however that means the township still has the $40M unfunded liability ‘noose’ around its neck!

We spent much time during the meeting discussing the township’s $40M unfunded liability.  In the proposed 2013 preliminary budget, Klarich has increased funding from $250K to $500K as a way to start to buy down this debt.  A couple of the residents in attendance were advocating for a greater yearly contribution, say $2M annually, as a way of addressing the $40M debt.

Personally, I think there should be a degree of concern that this enormous liability of $40M could have an adverse effect on the township’s current AAA bond rating.  On the other hand, is it reasonable to expect that Moody’s would view the township’s yearly $500K contribution favorably and continue to award the township with its gold star rating?  Remember at $500K/year, it will take the township 80 years to reach that $40M mark.

Knowing that the township has an open issue on the TTPA labor agreement and the $40M unfunded liability, what is the answer?  I get it that we all want to keep the highest level of service in our community and pay nothing additional for those services, but practically speaking that is not possible.  Beginning in 2015, the state is requiring all municipalities to include their unfunded liability in its accounting.

There are few avenues available to the township to handle the staggering debt beyond an increase in our real estate taxes … except for the option to institute an Earned Income Tax.  Unlike the School Board, the township supervisors would not need a voter referendum to institute this tax.  The topic of EIT was brought up at the meeting, there appeared to be little interest in furthering the discussion.  Although not seen as a favorable option by some, shouldn’t there be serious consideration given to an EIT?

How many Tredyffrin residents work in another jurisdiction that has an Earned Income Tax?  If they do, the EIT dollars the Tredyffrin resident pays stays in that jurisdiction because our township does not have an EIT. There has always been much misunderstanding about who would pay an EIT but unearned income, such as Social Security, interest, dividends and pensions are exempt from the tax unlike an increase in property tax which affects all homeowners, whether they are on a fixed income or not.  I have struggled to understand why it is that the supervisors are reticent to consider the option – especially considering that most of our neighbors have an EIT and many of our residents are already paying this tax.  Millions of dollars leave Tredyffrin in EIT payments, helping to subsidize the budgets of neighbor’s budgets.

The proposed 2013 preliminary budget for includes a 5.5% tax increase in addition to a decrease in the police staff. Part of the rationale behind not replacing police staff is that any new hires will come in under the conditions of the last TTPA contract, which includes the lifetime healthcare benefit.  If the arbitrator were to come back with a contract that removes the lifetime healthcare benefit, it would be financially better for the township to wait until after the new contract is signed before hiring new police staff.

Again, no one wants to pay additional taxes but how much longer will it be OK with Tredyffrin residents to see their services reduced in order to balance the township budget?  What happens if the $40M unfunded liability jeopardizes township’s AAA bond rating? And what about capital improvements, ongoing maintenance and infrastructure needs of our community? With residential and commercial real estate transfer revenue way down, what is the funding solution for Tredyffrin …  if it isn’t raising real estate taxes or instituting an EIT?  What’s the answer?

What about the Tredyffrin Township resident who pays EIT to another municipality when it could be helping this community?  How does that resident feel – below are comments from John Petersen, a resident who pays EIT to a neighboring municipality:

Ever since the Tax Study Commission Report of 2006 was released, I’ve called it an intellectually dishonest exercise. I said that and continue to say that because of the factors that were willfully ignored. The unfunded pension liability under discussion was one of those factors. Back then, the unfunded liability was estimated to be around $25MM. As predicted, in a short amount of time, that figure has doubled. I remember Bob Lamina prophetically saying at a BoS meeting that this issue was the most significant one facing the township and the township will have to face up to this impending reality.

I pay an EIT – as do thousands of Tredyffrin residents. I for one am tired of being disenfranchised by this government – a government run by the TTOP proletariat that refuses to discuss an EIT. Not that the points have to be enumerated again, I will do so here:

  • Many pay an EIT already
  • Surrounding governments plan their budgets around the fact that Tredyffrin DOES NOT levy an EIT (read as we subsidize other townships)
  • Had an EIT been levied years ago, part of the unfunded liability could have been paid off
  • An EIT is the only means of providing property tax relief
  • At least one large company (Shire) is leaving Tredyffrin for East Whiteland (that does levy an EIT)

Indeed, there are some who will be adversely affected. Those who live in and work in Tredyffrin. I believe that to be an extreme minority of people. Regardless, the realities of the situation are such where an EIT must be discussed.

I won’t bother getting into who one particular political organization has sucked the oxygen out of the room re: stifling the conversation or how the opposing party has succumbed to fear by adopting the same philosophy re: the EIT.

Bottom line – I pay tax dollars that could make their way to Tredyffrin. The local government is denying that right and in the process, disenfranchising those like me who already pay an EIT.

Maybe at long last, there can be an honest discussion.

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