City of Baltimore v. American Federation of State, County and Mun. Emp., AFL-CIO, Council No. 67 and Local No. 44, AFL-CI

• Citation: 379 A.2d 1031,281 Md. 463
• Decision Date: 05 December 1977
• Docket Number: No. 50,COUNCIL,AFL-CI,50
• Parties: , 96 L.R.R.M. (BNA) 3404 CITY OF BALTIMORE et al. v. AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES,NO. 67 AND LOCAL NO. 44, et al.
• Court: Court of Appeals of Maryland

Page 463

281 Md. 463

379 A.2d 1031, 96 L.R.R.M. (BNA) 3404

CITY OF BALTIMORE et al. v. AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL

EMPLOYEES, AFL-CIO, COUNCIL NO. 67 AND LOCAL NO. 44, et al.

No. 50.

Court of Appeals of Maryland.

Dec. 5, 1977.

Before MURPHY, C. J., and SINGLEY, ^* SMITH, DIGGES, LEVINE, ELDRIDGE and ORTH, JJ.

ELDRIDGE, Judge.

Several labor organizations representing employees of the City of Baltimore, and several individual members of those organizations, instituted this action for declaratory and injunctive relief in the Baltimore City Court, seeking to enforce certain provisions of collective bargaining agreements between the labor organizations and the Board of Estimates of Baltimore City. On the basis of these agreements, the Baltimore City Court found that the Board of Estimates had a "contractual duty and obligation" to include in the proposed Ordinance of Estimates, which is the proposed budget that the Board is required to submit to the City Council, appropriations for the payment of annual step-in-grade salary and longevity increments to employees covered by the agreement, and that the Board had failed to do so in the ordinance for fiscal year 1977-1978. The court issued an injunction requiring the Board of Estimates to submit to the City Council an amended Ordinance of Estimates containing these appropriations.

The City appealed from the judgment and order to the Court of Special Appeals, and we granted a writ of certiorari prior to any proceedings in that court. In order that this question could be resolved prior to final action by the City Council on the budget for the fiscal year beginning July 1, 1977, we advanced this case for argument. Following oral argument, we filed a per curiam order on June 29, 1977, which, after reciting that the plaintiffs were not entitled to the declaratory or injunctive relief requested, vacated the order of the Baltimore City Court. We now state the reasons for the order.

The basic facts of this case are undisputed. The plaintiff employee organizations, ¹ are all recognized by the City as exclusive negotiating representatives for certain employees of the City of Baltimore pursuant to the provisions of the Municipal Employee Relations Ordinance (Ordinance 251 of 1968 as amended, Baltimore City Code (1966), Art. I, §§ 110-126(a)). Following negotiations in 1976, the Board of Estimates and each union executed a "Memorandum of Understanding," as purportedly authorized by the Employee Relations Ordinance, defining the rights and obligations of the parties in respect to certain conditions of employment. The memoranda were negotiated for the two year period from July 1, 1976, to June 30, 1978. The memoranda were ratified by the unions' members during July 1976, and they were formally signed by the unions and the Board of Estimates in August and September 1976, to be effective retroactively as of July 1, 1976.

Although each memorandum covers a broad spectrum of matters relating to conditions of employment, the only provisions of the memoranda at issue here are those relating to employee compensation. Each memorandum provides that employees covered shall receive across the board percentage pay raises for each of the two years covered by the memorandum. In addition to the pay raises, each memorandum refers to the payment of "step" increments and longevity increments. ² Some of the memoranda also have attached salary schedules reflecting the payment of these increments within the various employee classifications represented by the particular bargaining unit. Additionally, each memorandum has a preamble which states:

"To the extent that implementation of these points requires action by the City Council, this memorandum will serve as a request and recommendation to such body that it be so implemented."

For the fiscal year 1976-1977, the Board of Estimates included in the Ordinance of Estimates which it submitted to the City Council appropriations sufficient to pay both the pay raises and the "step" increments and the longevity increments. However, the proposed Ordinance of Estimates submitted by the Board of Estimates for fiscal year 1977-1978 did not include appropriations for payment of the annual increments but only appropriations sufficient for the percentage pay increases included in the memoranda of understanding. Because, under the Baltimore City Charter, the City Council may neither increase any appropriation in the proposed Ordinance of Estimates nor include any new appropriations, the action of the Board of Estimates precluded the payment of annual increments to city employees. In a letter to the City Council which accompanied the Ordinance of Estimates, the Mayor noted several economies made in the budget because of the City's financial condition. The letter explained that it was the Board's policy in the past that payment of the increments was conditioned upon the City's fiscal condition, and that, "(i)n order to avoid a greater tax increase than (is) absolutely essential," the Board was withholding the payment of the increments.

The unions' position is that the Board of Estimates entered into binding two year agreements with the employees, and that these agreements were authorized by the City's Employee Relations Ordinance. ³ The unions contend that the agreements obligated the Board to include in the Ordinance of Estimates prepared by the Board for each of the two years covered by the memoranda appropriations sufficient for payment of both the pay raises and the annual increments. The unions do not deny that ordinarily, the Board of Estimates may, in its discretion, choose not to pay the increments. However, they argue that the Board, by entering into the two year contracts in order to project labor costs for that period, effectively exercised its discretion and determined that continued payment of the increments would be more beneficial than uncertainty as to labor costs in future years. Moreover, the unions' argument continues, if payment of the increments would impose too great a financial burden on the City, as the Board of Estimates now claims, the City Council, in its discretion, could delete appropriations for the increments from the Ordinance of Estimates. The unions agree that the memoranda of understanding are not in any way binding on the City Council.

The City, on the other hand, denies that the Board of Estimates is under any contractual obligation to include appropriations for the payment of increments in the Ordinance of Estimates, arguing that, as a matter of contract interpretation, the memoranda do not contain any clear and unambiguous promises to pay the increases. Alternatively, the City argues that under the terms of the memoranda, it was the intention of the parties that any such promises be conditioned upon the Board's discretion to withhold payment of increments in any given year for financial reasons. Finally, the City contends that if the terms of the memoranda required the Board of Estimates to include appropriations for the increments in the Ordinance of Estimates, the memoranda would be invalid to that extent, on the ground that a municipality "may not contract so as to deprive itself of powers conferred upon it" by its charter.

Before considering the dispute among the parties in this case, it would be helpful to review the role of the Board of Estimates in the appropriation process, as set forth in the Charter of Baltimore City. The City of Baltimore, like the State of Maryland, has what is commonly known as an "executive budget system." ⁴ At the heart of the City's system is the Board of Estimates which is composed of the Mayor, the President of the City Council, the Comptroller, the City Solicitor, and the Director of Public Works. Charter, Art. VI, § 1. Under the City Charter, the Board of Estimates is vested with broad discretionary powers concerning the City's fiscal management. The Board is "responsible for formulating, determining, and executing the fiscal policy of the City . . . ." Art. VI, § 2(a). Accordingly, it is required to submit to the City Council for each fiscal year a proposed Ordinance of Estimates, Art. VI, § 2(b). The proposed ordinance must contain "(e)stimates of appropriations needed for the operations of each municipal agency," estimates for appropriations for other purposes, and a separate listing of appropriations needed for capital improvements, Art. VI, §§ 2(c)(1), (2). Accompanying the proposed Ordinance of Estimates must be "(a) breakdown of the amounts stated for each . . . purpose . . . of each municipal agency," including information concerning "the compensation of every officer and salaried employee of the City," Art. VI, § 2(f)(1). The Board also must submit comparisons between the appropriations actually contained in the ordinance for each agency with the appropriation requested by the agency, as well as the amounts appropriated for the current fiscal year compared to the amounts expended in the prior year, Art. VI, § 2(f)(2). Detailed information as to the source of funding for the appropriations must be submitted, Art. VI, § 2(f) (3). And the Mayor must send to the Council a message "explaining the major emphasis and objectives of the City's budget for the next ensuing fiscal year." Art. VI, § 2(f)(6).

The City Council has only limited powers in relation to the proposed Ordinance of Estimates. It "may reduce or eliminate any of the amounts fixed by the Board in the proposed Ordinance of Estimates . . . ." However, the City Council does not have "the power to increase the amounts fixed by the Board or to insert any amount for any new purpose in the proposed Ordinance of Estimates," Art. VI, § 2(g). After passage of the Ordinance of Estimates by the City Council, the Board of Estimates must certify to the City Council the difference between the anticipated expenditures contained in the ordinance and expected revenues other than those from the property...