Compulsory Interest Arbitration and the Financial Restructuring Board for Local Governments



On June 24, 2013, Governor Cuomo signed into law Chapter 67 of the Laws of 2013, which amends compulsory interest arbitration procedures for certain municipalities and establishes the Financial Restructuring Board for Local Governments. This memorandum provides a summary of the new legislation.

Compulsory Arbitration

Pursuant to Civil Service Law Section 209.4-a, certain public employees have the right to have their negotiations impasse resolved through compulsory interest arbitration. Chapter 67 amends those procedures, but only for counties, cities, towns or villages that are also subject to the property tax cap law. For all other municipalities, interest arbitration procedures remain unchanged.

The legislation is effective retroactive to April 1, 2013, but does not apply to a negotiations impasse where: (l) the Public Employment Relations Board (PERB) received a petition for compulsory interest arbitration before June 14, 2013; or (2) PERB received a declaration of impasse on or after April 1, 2013, but on or before June 14, 2013.

The Civil Service Law requires that a compulsory interest arbitration panel’s (“the Panel”) decision be based upon the following criteria, “in addition to any other relevant factors:”

a.  comparison of wages, hours and conditions of employment of the employees involved in the arbitration proceeding with the wages, hours and conditions of employment of other employees performing similar services or requiring similar skills under similar working conditions and with other employees generally in public and private employment in comparable communities ;

b.  the interests and welfare of the public and the financial ability of the public employer to pay;

c.  comparison of peculiarities in regard to other trades or professions, including specifically (1) hazards of employment; (2) physical qualifications; (3) educational qualifications; (4) mental qualifications; (5) job training and skills; and

d.  the terms of collective agreements negotiated between the parties in the past providing for compensation and fringe benefits, including, but not limited to, the provisions for salary, insurance and retirement benefits, medical and hospitalization benefits, paid time off and job security.

N.Y. Civ. Serv. Law 209(a)(c)(v). Chapter 67 expands these criteria for any compulsory interest arbitration governed by it by requiring the Panel to also determine whether the at-issue employer is a “fiscally eligible municipality” as pan of its analysis of the employer’s financial ability to pay; i.e., criterion (b) set forth above. In making this determination, the Panel must also consider the employer’s average full value property tax rate and the average fund balance percentage.

The term “full value property tax rate” is the amount that the employer raised through real estate taxes in a given fiscal year, divided by the full valuation of taxable real estate for that same year as reported to the State Comptroller. The average is the sum of the rates for the five most recent fiscal years, divided by five.

The term “fund balance percentage” is the total fund balance in the employer’s general fund in a given fiscal year, divided by the total expenditures from the general fund for that same year. The average is the sum of the percentages for the five most recent fiscal years, divided by five.

The Panel must deem an employer to be a “fiscally eligible municipality” if: (1) the employer’s average full value property tax rate is greater than the average full value property tax rate of 75% of the counties, cities, towns and villages with fiscal years ending in the same calendar year as of the most recently available information submitted to the Comptroller; or (2) the employer’s average fund balance percentage is less than 5% of the total expenditures from the general fund and the Comptroller has certified that, even if the fund balances in other funds which are available to pay for a compulsory interest arbitration award; i.e. unrestricted funds, were added to the general fund, the fund balance would still not exceed 5%. With regard to either category, an employer may not be deemed to be a fiscally eligible municipality if it has not reported to the Comptroller the information necessary to calculate its average full property tax rate or average fund balance percentage.

If an employer is deemed to be a fiscally eligible municipality, the Panel must give a weight of 70% to the ability to pay portion of the statutory interest arbitration criteria. All other criteria, taken together, must make up the remaining 30%. In addition, with regard to the total monetary value of the award, the Panel must take into account the constraints, obligations and requirements of the property tax cap law.

The Financial Restructuring Board for Local Governments

The Financial Restructuring Board for Local Governments (“the Restructuring Board”) assists fiscally eligible municipalities. The Restructuring Board consists of the following 10 members: the Director of Budget (who serves as the chair); the Attorney General; the State Comptroller; the Secretary of State and six members appointed by the Governor, one of whom is appointed upon recommendation of the temporary President of the State Senate, one of whom is appointed upon the recommendation of the Speaker of the Assembly and one of whom has significant experience in municipal financial and restructuring matters.

A fiscally eligible municipality (by resolution of its governing body with concurrence of its chief executive) may request that the Board conduct a comprehensive review of the municipality’s operations, finances, management practices, economic base and other factors which the Restructuring Board deems relevant for the purpose of making findings and recommendations on reforming and restructuring the municipality’s operations. As part of this process, the Restructuring Board may hold hearings and require the production of any information it deems necessary for its review. Before making its final recommendation, the Restructuring Board must consult with the municipality.

The Restructuring Board may recommend that the municipality agree to fiscal accountability measures including, but not limited to, multi-year financial planning. It may also identify cost-saving measures; recommend consolidation of certain functions within the municipality or with other municipalities; make grants and loans, consistent with applicable law, on terms and conditions established by the Restructuring Board; and make other recommendations which the Restructuring Board deems just and proper. The Restructuring Board may not award a fiscally eligible municipality more than $5 million.

A loan from the Restructuring Board may not be for a term longer than 10 years. As a condition of accepting a grant or loan, the municipality must adopt and implement all of the Restructuring Board’s recommendations and, if the Restructuring Board so requires, submit report(s) on the status of the actions taken.

The Restructuring Board’s recommendations are not final and binding unless the municipality formally agrees to abide by and implement them. The recommendations will be made publicly available on the Restructuring Board’s website.

Interest Arbitration Conducted by the Financial Restructuring Board for Local Governments

A fiscally eligible municipality and an employee organization representing its employees may jointly request that, in lieu of commencing an interest arbitration proceeding through PERB, the Restructuring Board resolve its impasse. This joint request is irrevocable. If so requested, the Restructuring Board must render a just and reasonable determination by a majority vote of all members based upon the criteria set forth in the Civil Service Law, as amended by Chapter 67.

Each party to an interest arbitration conducted by the Restructuring Board may be heard either in person, by counsel, or other designated representatives and may present, verbally and/or in writing, statements of fact, supporting witnesses, other evidence and argument in support of its position. The Restructuring Board may require the production of additional evidence. All proceedings will be held in Albany.

The Restructuring Board’s determination is final and binding for the period set forth in the award. The award may not exceed four years from the date on which the previous collective bargaining agreement expired or, if there is no previous agreement, four years from the date of the Restructuring Board’s determination.

If you have any questions about Chapter 67 including, but not limited to, how it affects negotiations or an impasse with one of your bargaining units, please contact us.


© Lamb & Barnosky, LLP 2013