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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Human Resources
Meeting Date: March 17, 2025
Report #:2502-4174
TITLE
Adoption of Memorandum of Agreement with SEIU, Local 521 for a Term of Three Years Expiring December 31, 2027; CEQA Status - Not a Project
RECOMMENDATION
Staff recommends that the Council adopt a new Memorandum of Agreement (MOA) between the City of Palo Alto and the Service Employees International Union (SEIU), Local 521, effective from the first full pay period following Council adoption through December 31, 2027.
BACKGROUND
As a local public agency, the City of Palo Alto is required under California State law to meet and confer in good faith with recognized labor organizations to reach agreements regarding wages, hours, and other terms and conditions of employment. Negotiations between City representatives and SEIU representatives have concluded with a tentative agreement, pending Council approval.
The SEIU unit is the City’s largest bargaining group, representing 605 full-time positions across departments including Utilities, Libraries, Public Works, Public Safety, Community Services, Planning, Information Technology and Administrative Services. The previous agreement expired on December 31, 2024. Formal negotiations began in September 2024, and after 19 sessions, a tentative agreement was reached on February 12, 2025. The SEIU membership voted to ratify the agreement on February 27, 2025.
ANALYSIS
The successful negotiation of this agreement advances the City’s long-term labor strategy, originally established by the Council in 2019. This agreement aligns with key strategic priorities and reinforces the three core pillars of our labor strategy: Recruitment, Retention, and Operational Efficiencies—ensuring a sustainable and competitive workforce model for the future.
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Following what industry analysts coined the “Great Resignation,” a nationwide workforce shift triggered by the COVID-19 pandemic, the City experienced a decade-high vacancy rate of 17%.
The previous labor agreement (January 2023 – December 2024) focused on competitive market positioning and increased flexibility in benefits—providing greater employee choice to enhance retention. As a result, vacancies have steadily declined toward 10% over the past contract term.
To sustain this positive workforce trajectory, reinforce a strong organizational culture, and uphold the City’s reputation as an employer of choice, this agreement continues competitive market placement while introducing additional operational efficiencies—such as streamlining recruitment processes to expedite hiring top talent. Additionally, the agreement supports the retention of institutional knowledge and advancement of skilled employees, strengthening the City’s long-term workforce sustainability.
Key Terms of the Tentative Agreement:
1. Term: Three years (effective from the first full pay period following Council adoption through December 31, 2027).
2. General Wage Increases (COLAs):
Year 1: 3%
Year 2: 2.5%
Year 3: 3%
3. Market-Based Adjustments:
Applied selectively to classifications identified through market surveys to ensure competitive placement within the local job market.
Market-based increases will be distributed over the first two years (50% in Year 1 and 50% in Year 2).
4. Flexible Compensation (Flex Comp):
Year 1: Additional $150 per month in flexible compensation (in lieu of increased medical premium contributions).
Year 2: Additional $50 per month in flexible compensation.
5. Medical Premium Contributions:
Year 3: City contributions toward employee medical premiums will increase by approximately 4%.
6. One-Time Payment:
A $300 discretionary one-time payment to all SEIU-covered classifications, payable in the first full pay period following Council adoption.
7. Streamlined Recruitment process
Posting period reduced to 5-day minimum
Expedited internal/external initial candidate review process
8. Additional Improvements
Clean up of contract verbiage to ensure clarity and inclusive neutral language 6 5
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Improved Long Term Disability coverage at a reduced cost to City and Employee Streamlined grievance procedure
FISCAL/RESOURCE IMPACT
Approval of the staff recommendations outlined in this report will result in cumulative costs of approximately $7.7 million in the General fund ($20.2 million in all funds) over the term of the SEIU agreement, which extends three years (from the first full pay period following Council adoption through December 31, 2027). Ongoing annual costs for these agreements once the contract term ends are estimated at $4.7 million in the General Fund ($12.5 million in all funds).
The FY2025 Adopted Budget and FY 2026 – 2035 Long Range Financial Forecast (LRFF) include a level of modeling and reserves to plan for additional costs resulting from new labor agreements. The City’s forecast is in alignment with the terms of this recommended agreement. Staff acknowledges that this forecast reflects projected deficits; however, as noted earlier, has planned the use of reserves to ensure the City can support the near-term financial impacts of this contract during uncertain economic times. Ongoing, staff will continue to monitor economic uncertainty and work with the City Council to fund priority needs while funding costs associated with this agreement.
For funds other than the General Fund, no specific reserve for these increases were allocated, however sufficient funding remains in these funds through either appropriated funds or reserves, including fund balance. These compensation adjustments will be included in the annual budget development process.
STAKEHOLDER ENGAGEMENT
City staff will post the Memorandum of Agreements and salary schedules on the City’s website after Council adoption for public access. In addition, Human Resources will communicate the changes to the terms of these agreements to support employee retention and highlight in job postings to attract new talent and fill vacancies.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by the California Environmental Quality Act (CEQA) because approval of this MOA is a continuing administrative activity. CEQA Guidelines section 15378(b)(2).
ATTACHMENTS
Attachment A: MOA between SEIU 521 and the City of Palo Alto – Redline copy Attachment B: MOA between SEIU 521 and the City of Palo Alto – Clean copy Attachment C: Salary Schedules
APPROVED BY:
Sandra Blanch, Human Resources Director