Senate Insurance, Commerce and Labor Committee

Senator Kevin Bacon, Chair

Testimony of Stephen J. Herwat

Deputy Mayor – Operations
City of Toledo

Senate Bill 5

February 15, 2011

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Chairman Bacon, Vice Chairman Faber, Ranking Member Schiavoni and members of the
Committee, including our own Senator Edna Brown, on behalf of Toledo Mayor Michael P. Bell
thank you for the opportunity this afternoon to speak about Senate Bill 5.

My name is Steve Herwat. I am the Deputy Mayor of Operations for the City of Toledo. Today
I will provide you with our perspective from a local government viewpoint on the need to reform
Ohio’s collective bargaining law.

For those of you not familiar with Mayor Bell let me give you a brief history of his
accomplishments. Mike’s family moved to Toledo when he was five. He was raised and
educated in Toledo, attending Toledo Public Schools and graduating from the University of
Toledo, where he was a captain of the football team.

Mayor Bell spent 27 years as a member of the Toledo Fire and Rescue Department, rising from
the rank of Firefighter to Chief of the Department, a position he held for seventeen years. After
his retirement Governor Strickland appointed Mayor Bell to the position of State Fire Marshall.

In 2009 Mike Bell left the State Fire Marshall’s office to run for Mayor in order to make a
difference in the city he loves - Toledo. He was elected Mayor in November of 2009, and took
office on January 4th 2010.

Mayor Bell, as Chief, sat at the bargaining table with the unions representing our Firefighters.
He also knows firsthand what happens when a city cannot afford to pay its employees. In the
early 1980’s he was laid off for a year when the city faced a budget shortfall. When he ran for
Mayor he talked to and empathized with Toledo police officers who were laid off in 2009.

Let me make one thing perfectly clear. Mayor Bell and his administration are committed to the
principle of collective bargaining. We welcome the opportunity to sit across the table with our
unions to negotiate a fair wage and benefit package. We must do so recognizing that there is a
limit on what we can afford to pay, especially in today’s unprecedented and trying fiscal reality.

The taxpayers, whom we all work for, demand that we control our costs and spend their tax
dollars wisely. Unions, management and our elected officials must clearly understand the
message sent by the voters in last November’s elections here in Ohio and nationally – no new
taxes and control spending. Furthermore, their must be a level playing field in negotiations, and
we owe our citizens a duty to take back management rights to efficiently and effectively run our
operations.

Recognizing the ability of a local government to pay for wages and benefits in a collective
bargaining agreement is the single most important factor that must be included in any reform of
Ohio’s collective bargaining act.

Mayor Bell and Governor Kasich have spoken about the need to include the ability of a local
government to pay as a key factor in collective bargaining negotiations.

We wish to thank Senator Shannon Jones for her leadership in introducing Senate Bill 5 to begin
the debate on needed collective bargaining reforms in Ohio. Governments at all levels in our
state need to pay our employees within the stark realities of today’s economy.

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Today, to exemplify the need for sensible reforms to Ohio’s collective bargaining law, I will
discuss the budget challenges Mayor Bell faced when he took office in January of 2010, the steps
he took, some controversial, to balance the budget, the commitment of local private sector union
leadership to work with management to preserve jobs in Toledo, and appreciation for the
dedicated men and women we have working for the City of Toledo.

I will also discuss three recent experiences of the City of Toledo under Ohio’s current collective
bargaining act, and recommend changes to Chapter 4117 from a local government perspective.

Balancing Toledo’s 2010 Budget

Upon taking office in January 2010 Mayor Bell faced a daunting task that no one foresaw –
balancing a $48 million deficit in the City’s General Fund – or one fifth of the total General Fund
budget. Compounding this situation was the fact that the Mayor had 86 days to balance the
budget by the City Charter mandated deadline of March 31st.

Our General Fund is primarily supported by a 2.25% tax on income and business profits, which
supports our Police, Fire, garbage collection, court and criminal justice systems, and other
general government operations. The income tax represents approximately two-thirds of the
City’s General Fund, with the balance coming from fees, fines, licenses and support from the
state.

Toledo was hard hit by the recession. As a community highly dependent upon manufacturing,
especially in the auto industry, we saw our income tax revenue drop from nearly $170 million in
2007 to $154.5 million in 2008, and then to $141.5 million in 2009 – a loss of over $28 million
in revenue over two years.

In 2009 the previous Mayor and Council entered into labor contracts giving public safety forces
a 3.5% raise in 2011, while also providing a 2% increase in wages for the bulk of the rest of the
City’s workforce.

Facing an unprecedented $48 million deficit, Mayor Bell took a three-pronged approach to
balancing Toledo’s budget. First he cut spending – the City spent $17 million less in 2010 as
compared to 2009. Secondly, he enhanced revenues by giving the Finance Department the
resources necessary to pursue persons who failed to pay their past-due income taxes, and, with
the cooperation of Council, raised the fee for refuse collection – admittedly an unpopular move.
Voters also approved a shift in dollars from the Capital Improvements Fund to the General Fund
to help balance the budget.

The third step was to seek concessions from Toledo’s employee unions. Prior to the adoption of
the 2010 budget Mayor Bell asked union leadership to agree to concessions. When no union
agreed, he was forced to ask City Council to adopt ordinances unilaterally imposing concessions
(invoking the doctrine of exigent circumstances) including elimination of the City paying the
employee’s share of pension payments, and requiring our workers to pay 20 percent of the cost
of providing them with health care benefits.

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One union, representing our rank and file Firefighters, stepped to the plate prior to the adoption
of exigent circumstances and negotiated a concession package saving the City over $3 million in
2010. After our Council voted to implement concessions on March 30th five of our six unions
recognized the City’s financial position, and subsequently agreed to concessions, thus avoiding
layoffs of 125 police officers and 125 firefighters.

Another union, representing Police command officers, has steadfastly refused to agree to
concessions, and we are presently before the State Employment Relations Board (SERB)
concerning the imposition of exigent circumstances. Our remaining union, Teamsters
representing our refuse collectors and wastewater treatment plant operators, filed an unfair labor
practice charge against the City with SERB after Council imposed the City’s last best offer in
September of 2010. I will discuss both the command officers and Teamsters cases in my
testimony today.

Toledo’s experience in balancing the 2010 budget underscores the need to establish clear criteria
in the collective bargaining bill to address changes in a local government’s ability to pay its
employees when revenues decrease.

Private Sector Unions in Toledo

Private sector union leaders across the country, and especially in Toledo, understand that the
survival of their union and its employees is dependent upon working with management to control
costs. In Toledo we are fortunate to have local leaders in the United Auto Workers who
recognize the challenges the auto industry faces in a global economy, and are willing to adapt to
the economic realities to keep jobs in our city.

As a result we have a Fiat-owned Chrysler plant in Toledo producing the world famous Jeep – a
facility rated number one in productivity in the entire Chrysler system. We also have the most
productive General Motors transmission plant in Toledo. Hard working men and women in
these two plants, and the supplier facilities that support them, demonstrate that unions and
management working together can prove that the American worker is truly the best in the world.

Our public sector union members must emulate the actions of their private sector brothers and
sisters and work with local governments to keep their members employed with a fair salary and
benefits commensurate with the employer’s ability to pay.

Our Dedicated Public Sector Employees in Toledo

Allow me to take time to discuss the dedicated public employees Mayor Bell and I have the
privilege of serving with in the City of Toledo. Mayor Bell started his career as a Toledo
Firefighter, knowing firsthand the dangers faced by our public safety forces on a daily basis.
When he was promoted to Fire Chief he worked diligently to insure our Fire personnel had the
training and equipment needed to protect them in their mission.

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Mayor Bell has told our public safety forces that there is no way he can ever pay them enough
for the job they do – laying their lives on the line every day to protect our citizens. Two weeks
ago, in the midst of a major snowstorm, Mayor Bell met with and thanked our excellent snow
plow crews who had just come off of, or were about to begin, 12-hour shifts to keep our streets
safe for the traveling public.

The Mayor and his entire administration appreciate the dedication and commitment of our
employees as they keep our streets safe, fight fires and save lives, repair broken water mains in
freezing temperatures, fix broken sewer lines, provide safe drinking water, take care of our parks
so kids can play ball or swim, provide assistance to a struggling family to put a new roof on their
home, and countless other examples of the good work our employees do on a daily basis.

But the practical reality is that we can only afford to pay these dedicated public employees
within the constraints of the revenues that our taxpayers are willing and able to pay. The
collective bargaining act must be modified to reflect the ability of local governments to pay for
the terms of the contracts.

The City of Toledo’s Recent Experience Involving the Collective Bargaining Act

Toledo Police Command Officer’s Association

The Toledo Police Command Officer’s Association (TPCOA) represents approximately 120
sergeants, lieutenants and captains on the Toledo Police Department. There is one command
officer for every four patrol officers on the force. The TPCOA’s contract states that no
command officer can be laid off until at least 75 patrol officers are laid off, and then one
command officer then can be laid off for every additional four patrol officers in excess of 75.

In March of 2010 City Council declared that exigent circumstances existed in Toledo due to the
unprecedented and unforeseen magnitude of Toledo’s fiscal crisis. In an effort to address the
emergency conditions, narrowly tailored unilateral changes were made to the City’s collective
bargaining agreements, including the TPCOA – requiring the members to pay the employee’s
portion (10%) of their pension contribution (the City was paying this employee share) and
requiring TPCOA members to pay 20% of the cost of their medical coverage. Incidentally, the
concessions sought were designed to share the burden equally across all bargaining units.

The City reached a concession agreement with TPCOA leadership in April of 2010 that would
have deferred payment of compensatory time and unused sick leave until 2011 to help balance
the 2010 budget. The union membership rejected this concession agreement. This matter is now
before the State Employment Relations Board (SERB). The City offered to mediate the dispute
with TPCOA under SERB’s jurisdiction. Unlike their fellow City employees, the police
command union would not budge.

On January 24, 2011 SERB held a hearing on the unfair labor practice charge filed by TPCOA.
During my cross-examination by the union’s attorney he suggested to me, incredulously, we
could have made the command officers whole in 2010 by simply laying off patrol officers to
achieve the savings attributed to the concessions imposed on members of the TPCOA.

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Mayor Bell was also cross-examined during this hearing. The union’s attorney repeatedly asked
the Mayor if the TPCOA contract required the City to pay the employee’s 10% share of their
pension contribution. Mayor Bell responded, repeatedly, only if we’ve got the money to pay it.

The attorney asked Mayor Bell again what does the contract say? The Mayor responded “it’s
silent to if you don’t have the money to pay it.”

This short exchange during a SERB hearing points out a major problem in the current collective
bargaining act – it ignores the ability of a local government to pay for what a union demands.

Teamsters Fact Finding

Teamsters Local 20 represents about 160 workers in the City’s refuse collection and wastewater
treatment operations. The Teamster contract expired at the end of 2009 and was not resolved
when Mayor Bell took office. After negotiations during the first half of 2010 resulted in an
impasse the parties engaged in a fact finding session in July of 2010.

The City presented evidence of its financial condition during the fact finding session. We
demonstrated unequivocally that Toledo was hard hit by the recession. As a community highly
dependent upon manufacturing, especially in the auto industry, we saw our income tax revenue
drop from nearly $170 million in 2007 to $154.5 million in 2008, and then to $141.5 million in
2009 – a loss of over $28 million in revenue over two years.

In his fact finding report issued on August 17, 2010 Paul Gerhart made the following statement
on page 5:

“One would have to be in the Wonderland World of Alice not to recognize the
City’s financial situation is substantially worse than what it was only three years
ago. The funds are simply not there in 2010 to support either substantial wage
improvements or Cadillac benefit plans.”

Inexplicably, he then awarded the Teamsters a 2% wage increase in July of 2011, or a 3%

increase in January of 2012. He also awarded the refuse drivers a two pay grade increase in
wages, and the refuse collectors a one pay grade increase to compensate for the end of incentive
payments – and then also granted them lump sum payments in 2010 and 2011.

Mr. Gerhart also allowed the Teamsters to remain in their own union health care plan, despite
uncontroverted testimony by the City that the Teamster plan costs us up to $300 more per month
per employee as compared to the comparable City health care plan that provides similar benefits.

He did, however, uphold the City’s position that the Teamster refuse drivers and collectors
should be forced to work 8 hours per day instead of going home when their routes were
complete.

Mayor Bell asked Council to reject the fact finder’s report. On August 17, 2010 Council decided
7-4 (with one member absent) not to adopt the fact finder’s report. As this action did not

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constitute a 60% rejection by the legislative body as required by Chapter 4117 (in Toledo’s case
8 of 12 Council members), it neither accepted nor rejected the fact finder’s report.

Two days later, on August 19th, Council reconvened, and by a 10-1 vote rejected the fact finding
report.

The Teamsters agreed to go back to the bargaining table after Council rejected the fact finding
report despite their contention that the second action by Council was invalid based on the fact
that the parties has executed a mutually agreed dispute resolution agreement (known commonly
as a “MAD”) that called for “a vote” by Council within 14 days of issuance of the fact finder’s
report. The union contended that the second Council action was invalid, as, according to the
union, as the MAD called for “a vote.” Despite the fact that the elected Council
overwhelmingly rejected, the union argued that the use of the indefinite article “a” before “vote”
limited the City Council to one vote.

After Council’s rejection of the fact finder’s report, four weeks of negotiations ensued with the
Teamsters. The parties reached an impasse and on September 30, 2010 Council approved, by an
8-4 vote, implementation of the City’s last best offer from the latest negotiations. The
Teamsters filed an unfair labor practice charge stating that Council’s rejecting the fact finding
report by a 7-4 margin was the only permitted vote, and that Council’s action two days later to
reject the report by a 10-1 vote was invalid.

This matter is presently scheduled before an Administrative Law Judge, not the SERB Board, on
March 3rd to essentially decide whether Council’s actions to reject the fact finder’s report by a
10-1 vote, and subsequently impose the City’s last best offer by a vote of 8-4 are invalid because
Council was limited to act only one time when it decided 7-4 not to adopt the fact finder’s report.

We are literally debating the meaning of the letter “a” next month before a SERB
Administrative Law Judge.

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Toledo Police Patrolman’s Association Shift Change Grievance Arbitration

Governor Kasich has stated repeatedly his opposition to binding arbitration. Last week an
arbitrator issued a ruling in a case involving transferring police officers from one shift to another
when 75 patrol – not command - officers were laid off. If upheld by the courts, this will cost the
City of Toledo $460,000 – money we simply don’t have. This grievance arbitration is a
microcosm of the problems associated with Ohio’s collective bargaining act.

In May of 2009 the former Mayor laid off 75 police officers due to lack of funds. These officers
were the lowest in seniority, thus the vast majority of them were assigned to the afternoon and
midnight shifts. Necessarily, and within his management rights, the Police Chief reassigned
more senior officers from the day shift to the afternoon and midnight shifts in order to keep
police officers patrolling our streets. The Toledo Police Patrolman’s Association (TPPA) filed a
grievance claiming the reassignment was contrary to the collective bargaining agreement which
called for the annual bidding by officers for “permanent” shifts. The union maintained that the
contract quote “allows for no permanent shift exceptions whether it be exigent circumstances,
layoffs, training or some other situation that was purportedly like or unlike anything previously
encountered.”

The arbitrator based her decision on a temporary change in shifts back in 1996 to provide
sufficient officers for a curfew sweep. As a result of this temporary shift officers received four
hours of vacation time for each shift worked.

In the present arbitration the union argued that the 25 year practice of allowing officers to bid
annually for “permanent” shifts was unequivocal. The arbitrator, without regard to the City’s
financial position, concocted a ruling that the officers were entitled to four hours of overtime pay
for each changed shift worked – a $460,000 decision.

Even more disturbing was the fact that the arbitrator ruled against the City while she, and I
quote, “has no doubt the City was experiencing a budget shortfall in May 2009.” Chief
Navarre’s only other choice was to bring back the 75 officers, something the City could not
afford, or leave the afternoon and midnight shift unmanned – an unacceptable public safety risk.

This arbitration decision highlights the problems with arbitration under the current collective
bargaining act:

 Arbitration awards that ignore a local government’s ability to pay

 Loss of management rights through negotiations – I will proposed a simple one

sentence edit to the existing law to remedy this problem

 Outsiders with far too much authority determining what is best for a community

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  The devastating impact of binding arbitration

We assure the taxpayers that Mayor Bell will seek to vacate the arbitrator’s decision.

Needed Revisions to Ohio’s Collective Bargaining Act

Ability to Pay

The most important change the Ohio General Assembly can make to the collective bargaining act
is to add a provision that a governmental unit must demonstrate that it has sufficient revenue to
honor a contract. The Revised Code must also forbid a jurisdiction from signing a contract when
it cannot meet the financial terms of the agreement.

In addition, there needs to be a clear threshold in the Code that allows a local government to
terminate, modify or renegotiate a collective bargaining agreement if a decrease in revenue
precludes it from honoring the financial provisions of the contract.

Senate Bill 5 contains a new section (4117.104) that provides for a public employer to notify a
union of its intent to terminate, modify or renegotiate a collective bargaining agreement if the
Auditor of State declares the government to be in a state of fiscal emergency.

As we learned first-hand in January 2010, we respectfully contend that by the time the Auditor
has declared a state of fiscal emergency local governments are already way beyond their ability
to meet their contractual obligations.

Revised Code Section 118.03(A)(4) permits the Auditor to declare a fiscal emergency
prospectively. If the Auditor finds that a General Fund deficit exceeds one-sixth of the total
budget at the end of the preceding fiscal year, he or she can declare a fiscal emergency exists.

Revised Code Section 118.03(A)(2)(a) also states that the Auditor can declare fiscal emergency
if a local government fails to meet payroll for more than 30 days after the paycheck is due.

In either case, waiting for the Auditor to declare a fiscal emergency is way too late in the game.
The collective bargaining bill must contain provisions allowing for the modification or reopening
of contracts mid-term based on the level of resources available to a local government.

Management Rights

Currently, Revised Code Section 4117.08(C) allows a local government to bargain away its
management rights. By simply deleting the words “unless a public employer agrees otherwise in
a collective bargaining agreement” in the first sentence of 4117.08(C) the General Assembly can
restore to local governments the right to effectively and efficiently manage the public workforce.
Management rights should not be subject to the quid pro quo of negotiations

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Role of the Attorney General’s Office

An Assistant Attorney General currently serves in the role of prosecutor for the side filing the
complaint before the State Employment Relations Board (SERB) and representative of SERB –
the very body deciding the merits of labor disputes. To rebalance equities, the Attorney
General’s office should serve only as a legal advisor to SERB on the application of Ohio law and
court decisions, and not take sides in the dispute.

Collective Bargaining Agreements Must Not Contain Certain Provisions

Revisions to the collective bargaining act must include the following provisions to protect local
governments and their taxpayers:

 A prohibition on a local government paying any portion of the employee’s contribution to

a public pension system - in Toledo’s 2011 budget we will pay over $11.4 million for the
employee’s share of pensions - the net result is that we will have to eliminate our
residential street repaving program this year to pay for pension pickups

 Eliminate mandatory or minimum staffing levels in any labor contract

 Prohibit one union from receiving an automatic increase in pay or other benefit based on
another bargaining unit receiving a raise or other economic benefit

 Eliminate “me too” clauses in contracts – union A has the right to an automatic raise or a
wage reopener because union B negotiated a greater economic benefit – this is a never-
ending cycle

 End the practice of prohibiting one union from having its members laid off until members
of another union are laid off – please recall my discussion of our Police command
officers contract that requires 75 street cops to be laid off before a command officer can
be laid off

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  Eliminate mutually agreed upon dispute resolution procedures (MADs) and revise the
statute to provide for a more realistic timeframe for collective bargaining

 Require employees to pay at least 20% of the cost of their health care coverage and give
management greater discretion in selecting affordable employee health care plans

 Prohibit bargaining that automatically recognizes terms of past collective bargaining

agreements or “past practices”

 Limit sick leave payouts for new employees upon retirement or separation to the amount
presently allowed by state statute

Collective Bargaining Agreements Absolutely Must Contain Certain Provisions

The new collective bargaining act must contain provisions to achieve the following:

 Ability of the employer to pay – clear standards for the modification or reopening of a
contract

 Mandatory mid-term bargaining language if the local government finds it cannot pay
based on its financial condition

 All terms of the agreement must be within the “four corners” of the contract – no side
letters, memorandums of understanding or past practices

 Cannot base a contract on provisions that were included in prior collective bargaining
agreement – no automatic continuation of past contractual provisions

 Grievances must be based on express statements of the contract provision claimed to

have been violated and must be supported by a good faith argument alleging the violation

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  The express right of the legislative body to implement its last best offer in the event of an
impasse

 If arbitration is to remain, it shall be subject to appeal to a court of common pleas, and the
court shall review the appeal based on an abuse of discretion standard

Mayoral Veto of a Collective Bargaining Agreement

A fundamental flaw in the current collective bargaining act with respect to cities is the fact that a
Mayor is powerless to veto the acceptance of a collective bargaining agreement approved by the
legislative body. In many cities the Mayor is the only elected official voted for by all of the
electorate, yet he or she has no say, based on the current collective bargaining act, as to whether
a contract should be approved.

The collective bargaining act must include a provision allowing a Mayor, under the provisions of
either the Revised Code or a City Charter, to veto the legislative body’s approval of a contract,
thereby allowing the legislative body to vote to override the veto. This will allow for the sacred
constitutionally adopted fundamental principle of checks and balances to apply to employee
contracts. Doing so will restore a proper balance for taxpayers and the people who elect them.

Section 4117.22

Revised Code Section 4117.22 calls for Chapter 4117 to be “liberally construed”. This section
needs to be deleted from the chapter. The collective bargaining act needs to be construed
primarily based on local governments’ ability to pay for the terms and conditions of employment
for those who deliver vital public services.

Conclusion

This afternoon the City of Toledo has had the opportunity to present to this Committee revisions
needed, from a local government perspective, to Ohio’s collective bargaining act.

Let me restate that the City of Toledo is willing to sit across the table from our unions and
collectively bargain. But we can only do so within the constraints of our ability to pay. and at a
bargaining table that is not unfairly tilted in one direction.

This testimony has described the budget challenges Mayor Bell faced when he took office, and
the measures he took, many unpopular, to balance the 2010 budget.

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Toledo again faces budget challenges in 2011. Having cut and cut and cut, now, we face the
reality of needing to eliminate our residential street resurfacing program in order to pay for
employee contracts.

Today I have outlined Toledo’s recent experiences under the current collective bargaining act.

I have also stated the City’s position as to needed revisions in Chapter 4117 including:

 Recognizing the ability of a local government to pay its employees under the terms of a
contract – Senators, if you do nothing else with this act, please recognize this as the
most important factor in revising the law

 Restoration of management rights

 Provisions that should not be subject to collective bargaining

 Provisions that must be included in any revision to the collective bargaining act

 Finally, the need to provide a Mayor with the ability to veto the approval of a contract by
the legislative body, while respecting the right of that body to override the Mayor’s veto
– a fundamental recognition of the principle of checks and balances that has served this
nation well for over 200 years

On behalf of the citizens of Toledo, and Mayor Michael P. Bell, I thank you for the opportunity
to present this testimony today.

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