The City of Omaha's effort to make money-saving labor deals comes with a significant price tag of its own.
In the two years since the city began using an outside labor negotiator, it has paid his firm about $500,000 — a rate of $315 per hour.
This year, with nearly 75 percent of city employees in line to get new contracts, that expense is likely to rise. The contract for Omaha's police union expired at the end of 2013. The two largest civilian unions have been without a contract since 2012.
And the fire union, which recently spent months wrangling with Mayor Jean Stothert over changes to its current contract, is likely to reopen discussions with the city sometime this year.
The long line for the negotiating table comes at a time when the unions are dealing with a new mayor who has made no secret of her intentions to push for major changes in pensions and health care. And although other public entities struggle with similar challenges over pensions, salaries and health plans, Omaha stands as a bit of an outlier in its reliance on an outsider to lead the charge.
Stothert says that while the city's payments to law firm Baird Holm and its lead negotiator, Mark McQueen, are significant, they will result in long-term savings.
She said McQueen's work could help the city win significant concessions from the unions — and keep the city out of the state's labor court, saving big legal bills associated with such proceedings.
City Councilman Chris Jerram — who helped negotiate the current fire contract along with Stothert when she was still serving on the council — noted that many voters were swayed by Stothert's push for an independent negotiator. It's what Omahans seem to want, he said.
“You're talking about not just millions but tens of millions (of dollars). And when you're talking about pensions, you're talking about nearly a billion dollars at stake,” he said. “So for voters who voted for the mayor overwhelmingly, this is one of the things she promised. But they need to know it's not cheap.”
For years, Omaha's labor negotiations were handled by a city employee, with help from various city departments.
In 2011, however, the City Council voted to strip the mayor of the power to negotiate contracts and hired McQueen.
When Stothert was elected last year, the council returned negotiating power to the Mayor's Office. Stothert kept McQueen and enlisted Steve Kerrigan, the city's former lead negotiator, to assist him.
Kerrigan, who was paid $82,000 in 2011, now makes $92,000.
In his first two years, McQueen has negotiated three completed contracts: those for the city's police managers, for the fire managers and for the larger fire union. He also took the lead on last fall's back-and-forth between Stothert and the fire union in which the mayor said she would lay off firefighters if the union didn't get its budget in line.
The city has paid an average of about $20,000 a month for McQueen's services, according to a World-Herald analysis of legal fees. The fees peaked at $50,000 in August 2012, a few months before the fire union contract was adopted.
Stothert and Jerram both said McQueen has proved to be a skilled, professional negotiator.
“He's worth his weight in gold,” Stothert said. “He is very intelligent. He has a good relationship with (union leaders), a working relationship. ... Both sides trust him, and he really understands the art of negotiation.”
Though internal negotiators cost less at face value, Stothert said it's important to have someone outside the city lead the process.
Years ago, she said, the city negotiator had a close relationship with union leaders; they even played golf together.
“I wanted to get an independent, outside negotiator that wasn't a city employee, that wouldn't be influenced politically by the mayor, the administration or the council,” Stothert said.
Outsourcing labor negotiations isn't common in Nebraska governments. The state, Douglas County, the Omaha Public Schools and the Omaha Public Power District all have full-time employees who spearhead contract negotiations.
Some that have relied on outside counsel are pivoting away from it.
The OPS board hired its chief negotiator in October, partly in hopes it could trim legal expenses that had averaged some $2 million a year. The school district had relied on attorneys from Baird Holm since the 1960s.
And the City of Bellevue hired an internal negotiator about a year ago to decrease its reliance on Baird Holm.
“It isn't so much a matter of us being unhappy as much as it is we think we can do better with in-house,” said Bellevue City Councilwoman Carol Blood.
Bellevue had been using McQueen for negotiations, paying $270 per hour.
But Omaha isn't alone in using outside help — or in relying on McQueen's assistance.
Sarpy County has hired McQueen to negotiate with its sheriff's deputies, paying his firm $270 per hour.
Sarpy County Administrator Mark Wayne, who continues to handle negotiations with most county unions, said McQueen's experience would be invaluable for the particularly tricky contract.
“It's our biggest union, and we haven't been that successful yet in terms of coming to agreement,” he said. “He's used by Bellevue, he's used by Omaha, he's very well-versed in contract negotiations for public entities.”
Now the City of Omaha, with negotiations underway or set to begin for about 1,800 city employees in four bargaining groups, is again counting on that advice.
Stothert said McQueen has been spending considerable time with city human resources officials, scouring the contracts for a line-by-line analysis of health care spending.
Former Mayor Jim Suttle moved the city to three health plans: one for fire, one for police and one for civilians. Previously, there were 34.
Ultimately, Stothert would like to see all the city's employees on a single plan.
But in the shorter term, she said, the city needs to push for specific changes to cut costs.
The mayor said she couldn't discuss specific items under discussion. But she noted a recent conversation with a retired police officer, who told her she goes to the ER for just about any type of health concern — even a cold.
The ex-officer told Stothert that she and others covered by the police union contract are encouraged to use the ER because visits are free through their health care plan.
“You look at what it costs us, what these huge costs are,” Stothert said. “We want to be very analytical and not just say 'You're going to go to this plan.' ”
McQueen is also helping Stothert lead the charge for pension changes in his talks with the civilian unions. Stothert said those talks have included conversations about a switch from traditional pension plans to something that would include elements of cash-balance plans.
She said cash-balance plans take some risk away from the employer and place it on the employees. But the employees can take the pension with them when they leave, which currently is not an option.
Selling any major change in pension plans, she said, will require the city to carefully calculate its needs and offer a range of options.
“They're not going to approve it unless they find it to be of value to them,” she said of the unions.
And the city needs to resolve that process without spiraling out of control — and landing both parties in state labor court.
It's happened before.
The city stayed out of the Commission of Industrial Relations from 1994 to 2008. But it had five cases before the labor court from 2008 to 2011, which cost hundreds of thousands of dollars each year in legal fees.
Legislators made big changes to the commission in 2011, and Stothert said it's unclear how the city will fare under the new rules.
“No one has tested the new CIR law yet. I don't want to be the first to do it,” she said. “I don't think the unions do, either.”
She's confident that investing in outside help to negotiate union contracts will help the city avoid turning to the Commission of Industrial Relations and paying large legal fees. That's why she doesn't mind the upfront cost for McQueen.
“If he can save us millions in health care and pensions, his fee is well worth it,” she said.