The city's largest municipal workers union, AFSCME District Council 33, signed a four-year labor agreement Friday that raises members' wages a total of 11.5 percent over its lifetime.
The agreement, worth $170 million, was signed about 5 p.m. 15 days after the expiration of the old contract, which took the Nutter administration years to finalize.
Mayor Kenney's spokeswoman, Lauren Hitt, said the mayor was unavailable for comment. In a statement, Kenney called the new contract "an agreement that is fair to employees but also fair to the taxpayers of this great city."
The contract includes 3 percent raises for all 7,000 union members working in city government for its first, second, and fourth years. In Year 3, employees will receive a 2.5 percent raise.
"With ... wage increases for state and local workers around the country averaging less than 1 percent, we were able to secure a wage package compounded at 12 percent over four years," Pete Matthews, D.C. 33 president, said in a statement.
Sam Katz, the former chairman of the Philadelphia Intergovernmental Cooperation Authority and a municipal finance expert, said his quick impression of the plan was that while there were some "useful concessions," it seemed very generous.
"For four years, there are higher than cost-of-living increases," Katz said. "The increase in wages is extremely generous. I would love to know how the city affords this."
Hitt said that while $170 million is a lot, the city will figure out a way to fund the contract.
"It will require some budgetary adjustments, but we anticipated that would happen," Hitt said. "It's our most basic responsibility to pay the people who clean our streets and help our children get to school safely. We will work in our other expenses around that."
The contract includes a new pension plan that requires greater contributions from higher-paid workers.
Current employees with a base salary of more than $45,000 a year will pay between 0.5 percent and 3 percent more toward their pension, depending on their salary bracket. For example, those earning $55,000 to $75,000 will contribute 1.5 percent and those earning $100,000 or more will pay 3 percent more.
Currently, most D.C. 33 employees contribute 3 percent of their pay into the pension fund.
The city's contract announcement noted that the average salary of a D.C. 33 employee is about $38,000.
The administration also decided to shut down the hybrid Plan 10 pension plan, similar to a 401(k), that the Nutter administration created for new hires. The city instead will institute what it is calling a "stacked hybrid" pension fund for new hires.
Employees will still receive the standard defined pension plan based on what they earn up to $50,000 a year. Above that, they can enroll in a 401(k)-type plan. The city will match half of the employee's contribution up to 1.5 percent of annual compensation.
Plan 10 participants will have the option to switch to the stacked plan.
The city is $5.9 billion short of its $11 billion pension liability, and more money is being paid out than is going in.
As part of the contract, the city agreed to end its court appeal to reduce the interest calculated on funds maintained in workers' Deferred Retirement Option Plan accounts. In return, the union agreed that anyone who now enters DROP will have the revised rate of about 0.5 percent, Hitt said.
The city also agreed to make a $10 million lump-sum payment to the D.C. 33 health fund within 30 days of contract ratification. Another $10 million will be paid into the fund July 1, 2017.