BILL ANALYSIS Ó
AB 356
Page 1
Date of Hearing: May 3, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 356 (Hill) - As Amended: April 25, 2011
SUBJECT : Public works projects: local hiring policies.
SUMMARY : Prohibits a local agency from mandating that any
portion or percentage of work on a public works project be
performed by local residents or persons who reside within
particular geographic areas if any portion of that public works
project will take place outside the geographic boundaries of the
local agency and requires any increase in the cost of a
state-funded public works project that is attributable to a
policy of hiring only local residents be funded with local
funds. Specifically, this bill :
1)Prohibits a local agency from mandating that any portion or
percentage of work on a public works project be performed by
local residents or persons who reside within particular
geographic areas if any portion of that public works project
will take place outside the geographic boundaries of the local
agency.
2)Requires any increase in the cost of a state-funded public
works project that is attributable to a policy of hiring only
local residents be funded with local funds.
3)Defines the following terms:
a) "Local agency" means a city, county, city and county, or
any other local public agency;
b) "Local resident" means an individual who is domiciled,
as specified, within the jurisdiction of the local agency;
and,
c) "Public works project" means the acquisition and
improvement of sites, construction, modification, and
alteration of public buildings, airports, water supply
systems, and other publicly owned and operated facilities.
EXISTING LAW authorizes state agencies to enter into public
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works projects, as defined, and imposes various requirements
with respect to the contracting and bidding process.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of this bill . According to the author's office, " On
December 14, 2010, the San Francisco Board of Supervisors passed
an ordinance establishing the 'San Francisco Local Hiring Policy
for Construction', Ýwhich] requires contractors and their
subcontractors performing public works projects for the City and
County of San Francisco worth $400,000 or more to hire local San
Francisco residents?and extends to projects at sites located up
to 70 miles beyond the jurisdictional limits of San Francisco.
"While it is understandable for San Francisco to want to
increase local jobs, favoring local workers can negatively
impact neighboring cities that are also experiencing high
unemployment levels. According to the December 2010 figures by
the California Employment Development Department, six of the
nine Bay Area Counties have higher unemployment rates than, San
Francisco which was at 9.2%.
"San Francisco seeks 'to remove obstacles that may have
historically limited the full employment of local resident.'
While the goal is laudable, it should not be accomplished by
introducing new obstacles for the regional workforce. The Bay
Area is a mobile and economically interdependent region and it
does not benefit from pitting neighboring communities against
each other. In fact, according to the State Employment
Development Department those outlying areas are home to more
than 60 percent of the estimated 14,700 construction workers
employed in San Francisco.
"To create a more equitable approach AB 356 puts parameters on
San Francisco's local hire policy so that the policy does not
extend outside of the city's geographical boundaries."
Background . Prior to the enactment of the San Francisco Local
Hiring Policy for Construction (Policy), San Francisco required
contractors "to make a good faith effort?to hire qualified
individuals who are residents of the City and County of San
Francisco to comprise not less than 50% of each contractor's
total construction workforce, measured in labor work hours, and
to give special preference to minorities, women, and
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economically disadvantaged individuals." However, a 2010 study
by Chinese for Affirmative Action and Brightline Defense Project
found that, since 2003, the average local hire figures on
city-funded construction was less than 25% and actually dipped
below 20% for 2009.
On December 14, 2010, in order "to advance the city's workforce
and community development goals, removing obstacles that may
have historically limited the full employment of local residents
on the wide array of opportunities created by public works
projects, curbing spiraling unemployment, population decline,
and reduction in the number of local businesses located in the
city, eroding property values, and depleting San Francisco's tax
base," the San Francisco Board of Supervisors passed the Policy.
Effective on March 25, 2011, the Policy, among other things:
1)Applies to public work or improvement contracts with
contractors and subcontractors estimated to cost more than the
threshold amount, currently set at $400,000, constructed
within 70 miles of the jurisdictional boundary of the City and
County of San Francisco.
2)Requires an initial local hiring requirement with a mandatory
participation level of 20% of all project work hours within
each trade performed by local residents, with no less that 10%
to be performed by disadvantaged workers. Subject to periodic
review, the mandatory participation level increases annually
over 7 years at increments of 5%, up to a mandatory
participation level of 50%, with no less than one-half to be
performed by disadvantaged workers.
3)Specifies that the "local" requirement shall include San
Francisco residents and workers local to the area and region
where the work is located.
4)Specifies that for city projects constructed within 70 miles
of the jurisdictional boundary of the City and County of San
Francisco, the percentage requirements shall apply in
proportion to the city's actual cost after reimbursement from
non-city sources.
5)Authorizes the negotiation of reciprocity agreements with
other local jurisdictions that maintain local hiring programs.
6)Exempts the following:
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a) Projects using federal or state funds if application of
the Policy would violate federal or state law, or would be
inconsistent with the terms or conditions of a grant or
contract with an agency of the United States or the State
of California;
b) Project work hours performed by residents of states
other than California; and,
c) Project labor agreements entered into by awarding
departments prior to the effective date of the Policy or
public work or improvement contracts advertised for bids
after the effective date of the Policy that are already
covered by existing project labor agreements, where the
terms of the existing agreement and the Policy are in
conflict; and,
d) Special trades, as designated by the Office of Economic
and Workforce Development.
Local hiring ordinances . With the goal of increasing employment
opportunities for residents, cities and counties nationwide have
established programs to encourage and, in some cases, to require
developers of construction projects to hire locally for skilled
and unskilled labor. In fact, for projects funded by federal
stimulus dollars under the American Recovery and Reinvestment
Act, Section 1.6 of the April 3, 2009 Updated Implementing
Guidance for the ARRA contains the following guideline:
"Promoting local hiring: Departments and agencies should seek to
maximize the economic benefits of a Recovery Act-funded
investment in a particular community by supporting projects that
seek to ensure that the people who live in the local community
get the job opportunities that accompany the investment."
However, most local hiring ordinances only require a "good
faith" effort to meet the goal. Many have cited San Francisco's
ordinance as the strictest in the country.
Local hiring ordinances have historically been faced with
constitutional scrutiny. The Privileges and Immunities Clause,
Article IV, § 2, of the United States Constitution prevents a
state from discriminating against out-of-state citizens. In
United Building and Constructions Trades Council of Camden
County and Vicinity v. Mayor and Council of the City of Camden,
465 U.S. 208 (1984), the Supreme Court extended this protection
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to municipal residency classifications, and, thus, there must be
a "substantial reason" for the difference in treatment.
Arguments in support . The San Mateo County Board of Supervisors
writes in support, "Although many local agencies give preference
in awarding contracts to local businesses, Ýthe San Francisco]
ordinance goes much further by financially penalizing employers
who fail to meet minimum local hiring requirements and by
including sites outside of the city limits. In the past,
residents of San Mateo County have experienced the inconvenience
of San Francisco's construction efforts, but at least our
residents had an equal opportunity to participate in these
construction projects. AB 356 would take a regional approach to
state funded local public works projects by ensuring a truly
competitive process when choosing employees and contractors.
Economic interconnectivity of cities and counties is critical to
the development of successful employment centers."
Arguments in opposition . The City and County of San Francisco
writes in opposition, "In December of 2010, in the midst of
record unemployment levels among San Francisco's trades workers,
the Board of Supervisors passed landmark legislation?This effort
mirrors that of a number of other jurisdictions throughout
California, who are seeking a greater return for their residents
on public investments towards improving their streets,
buildings, and schools. Cities such as Los Angeles, Fresno,
Stockton, East Palo Alto, and Oakland all have local hiring
policies that may be affected by this legislation. AB 356?would
eliminate jobs for scores of Californians, not just San
Francisco residents."
REGISTERED SUPPORT / OPPOSITION :
Support
San Mateo County Board of Supervisors
Opposition
A. Philip Randolph Institute - San Francisco Chapter
Anders and Anders Foundation
Chinese for Affirmative Action
City and County of San Francisco
Coleman Advocates for Children and Youth
East Bay Alliance for a Sustainable Economy
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Equal Justice Society
Filipino Community Center
Global Exchange
Greenlining Institute
Kwan Wo Ironworks, Inc.
LA Black Worker Center
Liberty Builders
Mission Hiring Hall, Inc.
Osiris Coalition
PODER
POWER
San Francisco Chapter of the National Association for the
Advancement of Colored People
San Francisco Chinese Club
South of Market Community Action Network
Urban Habitat
Western Regional Chapters of A. Philip Randolph Institute
Young Community Developers
Analysis Prepared by : Marina Wiant / B.,P. & C.P. / (916)
319-3301