BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 436| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 436 Author: Solorio (D) Amended: 5/27/11 in Assembly Vote: 21 SENATE LABOR & INDUSTRIAL RELATIONS COMM. : 5-0, 6/22/11 AYES: Lieu, DeSaulnier, Leno, Padilla, Yee NO VOTE RECORDED: Wyland, Runner SENATE APPROPRIATIONS COMMITTEE : 6-3, 7/11/11 AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg NOES: Walters, Emmerson, Runner ASSEMBLY FLOOR : 52-24, 6/1/11 - See last page for vote SUBJECT : Public works: prevailing wages SOURCE : State Building and Construction Trades Council DIGEST : This bill amends the definition of public works to also mean the construction or maintenance of renewable energy generation capacity, located on property wholly or partially owned by a school district or community college district or on public property specifically to serve a school district or community college district. ANALYSIS : Existing law : CONTINUED AB 436 Page 2 1. Requires that not less than the general prevailing wage rate be paid to all workers employed on a "public works" project costing over $1,000 dollars and imposes misdemeanor penalties for a violation of this requirement. 2. Defines "public works," for purposes of regulating public works contracts, as, among other things, construction, alteration, demolition, installation, or repair work done under contract and paid for, in whole or in part, out of public funds. 3. Defines "paid for in whole or in part out of public funds" as used in public works as the following: A. Payment of money or the equivalent of money by a state or political subdivision directly to or on behalf of the public works contractor, subcontractor, or developer/ B. Construction work performed by a state or political subdivision in execution of a project. C. Transfer of an asset of value for less than fair market value. E. Fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations normally required in the execution of a contract that are paid, reduced, charged at less than fair market value, waived or forgiven. F. Money loaned that is to be repaid on a contingent basis. G. Credits applied against repayment obligations. 4. Exempts from the definition of "paid for in whole or in part out of public funds" specified types of affordable housing, private residential housing, private development projects, qualified residential projects, low income housing projects, state manufacturing tax credits, and single family residential projects. CONTINUED AB 436 Page 3 This bill provides that specified work related to renewable energy generation is considered "public works" for purposes of prevailing wage law. Specifically, this bill expands the definition of "public works" to include construction, alteration, demolition, installation or repair work done under private contract when the work is performed in connection with the construction or maintenance of renewable energy generation capacity, located on property wholly or partially owned by a school district or community college district, or on public property, specifically to serve a school district or community college district. Comments Existing law requires that not less than the general prevailing wage rate of per diem wages, as determined by the director of the Department of Industrial Relations (DIR), be paid to all workers employed on a public works projects. The prevailing wage rate is the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, classification or type of work within the locality and in the nearest labor market area. According to DIR, California's prevailing wage laws ensure that the ability to get a public works contract is not based on paying lower wage rates than a competitor. All bidders are required to use the same wage rates when bidding on a public works project. Energy prices are expected to increase over the long term, stimulating the demand for renewable energy supplies. By providing for the payment of prevailing wage on work related to renewable energy generation, this bill arguably allows for an increased number of public-private partnerships supporting renewable energy projects while providing adequate wages and benefits to workers on the projects. Prior Legislation AB 677 (Solorio) of the 2009-10 Session, is identical to this bill with the exception of a recent amendment which deleted the requirement that the work be performed in connection with a long-term arrangement, as specified. The bill vetoed by Governor Schwarzenegger, who stated the CONTINUED AB 436 Page 4 following in his veto message, "Defining projects for renewable energy generating facilities serving school and community college districts as public works when the only public funds are those spent to purchase power produced is an unwarranted expansion of prevailing wage requirements into private works of improvement. Because the payment of prevailing wages results in higher costs, the bill may potentially reduce the number of renewable energy projects undertaken." FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Amendment of definition Up to $30 Up to $60 Up to $60 Special* of public works *Labor Enforcement and Compliance Fund SUPPORT : (Verified 7/13/11) (unable to verify at time of writing) State Building and Construction Trades Council (source) California Chapter of the National Electrical Contractors Association California Labor Federation California State Pipe Trades Council Chevron Corporation Coalition OF California Utility Employees International Brotherhood OF Electrical Workers International Union OF Elevator Constructors Utility Workers Union OF America Western States Council OF Sheet Metal Workers OPPOSITION : (Verified 7/13/11) (unable to verify at time of writing) CONTINUED AB 436 Page 5 Associated Builders and Contractors of California California Association of School Business Officials ARGUMENTS IN SUPPORT : According to the author's office, in February of 2009, Chevron announced the completion of what is believed to be the largest K-12 solar and energy efficiency project in the United States. Chevron installed solar panel roofs on 14 sites in the San Jose Unified School District. The project, which includes a total of 5.5 megawatts of solar power at 14 district sites, is expected to reduce the district's energy costs by more than 30 percent and help save the district $25 million over the 25-year life of the project. Furthermore, conversion to the solar power will help reduce carbon dioxide emissions by more than 100,000 metric tons - equivalent to planting more than 1,400 acres of trees. Most significantly, the author argues, the project was built profitably by construction workers earning the prevailing wage. The sponsor and author's office state that public-private partnerships like this one could potentially be a huge bonus to a number of unemployed workers suffering through these difficult times. Unfortunately, they argue, the definition of public work projects is currently too narrow, which consequently denies many workers the right to a fair wage. According to the author's office, construction workers who are hired to complete public work projects at sites performed in connection with the construction or maintenance of renewable energy generation capacity are not currently protected under prevailing wage stipulations. The author's office and proponents argue that without these provisions, contractors bidding for state money could undercut prevailing wages in any given area by 20 to 30 percent and ultimately hurt vulnerable workers and their families. Proponents argue that with the significant public investment by the schools, commitment to a long-term purchase agreement, and numerous taxpayer subsidies for solar installations, these types of public-private partnerships should be clearly designated as public works prevailing wage projects. ARGUMENTS IN OPPOSITION : Opponents argue that this bill CONTINUED AB 436 Page 6 is an unreasonable new prevailing wage mandate on private works of improvement and is unwarranted. They argue that, often times, the cost of converting to solar is very high and the payoff period for school districts is 15-20 years and savings to the school district, and payment to the vendor, comes monthly through savings in electricity costs. Opponents argue that forcing these projects to pay prevailing wages will increase the cost of the projects and erase the bottom line savings. They argue that this bill could lead to fewer solar conversions in school districts. ASSEMBLY FLOOR : 52-24, 06/01/11 AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Galgiani, Gatto, Gordon, Hall, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning, Nestande, Pan, Perea, Portantino, Skinner, Solorio, Swanson, Torres, Wieckowski, Williams, Yamada, John A. Pérez NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly, Fletcher, Beth Gaines, Grove, Hagman, Halderman, Harkey, Jones, Knight, Logue, Mansoor, Miller, Morrell, Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner NO VOTE RECORDED: Garrick, Gorell, Jeffries, V. Manuel Pérez PQ:do 7/13/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED