BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 436|
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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 :
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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.
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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
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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 7/14/11)
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 7/14/11)
Associated Builders and Contractors of California
California Association of School Business Officials
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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
is an unreasonable new prevailing wage mandate on private
works of improvement and is unwarranted. They argue that,
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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 7/14/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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