BILL ANALYSIS Ó
AB 438
Page 1
( Without Reference to File )
ASSEMBLY THIRD READING
AB 438 (Williams)
As Amended June 1, 2011
Majority vote
LOCAL GOVERNMENT 6-2 APPROPRIATIONS 11-5
-----------------------------------------------------------------
|Ayes:|Alejo, Bradford, Campos, |Ayes:|Fuentes, Blumenfield, |
| |Davis, | |Bradford, Campos, Davis, |
| |Gordon, Hueso | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Smyth, Norby |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
-----------------------------------------------------------------
SUMMARY : Imposes specified contracting requirements to be met
prior to an action by a board of trustees, common council, or
other legislative body of a city or a board of trustees of a
library district to withdraw from the county free library system
in order to operate the library with a private contractor.
Specifically, this bill :
1)Requires, if the board of trustees, common council, or other
legislative body of a city or the board of trustees of a
library district (hereafter referred to as "city or library
district") intends to withdraw from the county free library
system and operate the city's or the district's library or
libraries with a private contractor that employ library staff
to achieve cost savings, the following to apply:
a) At least once a week for four consecutive weeks prior to
taking any action, the city or library district shall
publish, in a newspaper designated by it and circulated
throughout the city or library district, notice of the
contemplated action, giving the date and place of the
meeting at which the contemplated action is proposed to be
taken;
b) The city or library district shall clearly demonstrate
that the contract will result in actual overall cost
AB 438
Page 2
savings to the city or library district, provided that, in
comparing costs, all of the following occur:
i) The city or library district's additional cost of
providing the same services as proposed by the contract
shall be included, including the salaries and benefits of
additional staff that would be needed and the cost of
additional space, equipment, and materials needed to
perform the necessary functions of the library;
ii) The city or library district's indirect overhead
costs, as defined, shall not be included unless those
costs can be attributed solely to the function in
question and would not exist if that function was not
performed by the city or library district; and,
iii) The cost of a contractor providing a service for any
continuing city or library district costs that would be
directly associated with the contracted function shall be
included, including but not limited to costs for
inspection, supervision, and monitoring.
c) The contract shall not be approved solely on the basis
that savings will result from lower contractor pay rates or
benefits, and contractors shall be eligible for approval if
the contractor's wages are at the industry's level and do
no undercut city or library district pay rates;
d) The contract shall not cause the displacement of city or
library district employees, as specified;
e) The overall cost savings of the contract shall be large
enough to ensure that the savings will not be eliminated by
private sector and city or library district cost
fluctuations that could normally be expected during the
contracting period;
f) The amount of the overall cost savings of the contract
shall clearly justify the scope and duration of the
contract;
g) The contract shall be awarded through a publicized,
competitive bidding process;
h) The contract shall include specific provisions
AB 438
Page 3
pertaining to the qualifications of the staff that will
perform the work under the contract, as well as assurances
that the contractor's hiring practices meet applicable
nondiscrimination standards;
i) The potential for future economic risk to the city or
library district form potential contractor rate increases
shall be minimal;
j) The contract shall be with a firm, as defined;
aa) The contract shall provide that it may be terminated at
any time by the city or library district without penalty if
notice is provided within 30 days of termination;
bb) The potential economic advantage of the contract shall
not be outweighed by the public's interest in having a
particular function performed directly by the city or
library district;
cc) If the contract is for library services in excess of
$100,000 annually, all of the following shall occur:
i) The city or library district shall require the
contractor to disclose all of the following information
as part of its bids, application, or answer to a request
for proposal:
(1) A description of all charges, claims, or
complaints filed against the contractor with any
federal, state, or local administrative agency during
the prior 10 years;
(2) A description of all civil complaints filed
against the contractor in any state or federal court
during the prior 10 years;
(3) A description of all state or federal criminal
complaints or indictments filed against the
contractor, or any of its officers, directors, or
managers, at any time; and,
(4) A description of any debarments of the
contractor by any public agency or licensing body at
any time.
AB 438
Page 4
ii) The city or library district shall include in the
contract specific, measurable performance standards and
provisions for a performance audit by the city or library
district, or an independent auditor approved by the city
or library district, to determine whether the performance
standards are being met and whether the contractor is in
compliance with applicable laws and regulations;
iii) Provides that the city or library district shall not
renew or extend the contract prior to receiving and
considering the audit report; and,
iv) The contract shall include provisions for an audit
by the city or library district, or an independent
auditor approved by the city or library district, to
determine whether and to what extent the anticipated cost
savings have actually been realized, and provides that
the city or library district shall not renew or extend
the contract prior to receiving and considering the audit
report.
2)Specifies that the provisions of the bill do not preclude a
city, library district, or local government from adopting more
restrictive rules regarding the contracting of public
services.
3)Requires, in both Los Angeles County and Riverside County, the
process of contracting established above in 1) in the
situation that the legislative body intends to operate the
city's or the district's library or libraries itself with the
help of a private contractor that will employ library staff to
achieve costs savings.
EXISTING LAW :
1)Allows boards of supervisors to establish and maintain county
free libraries, within their respective counties.
2)Allows, after the establishment of a county free library, a
city or library district to be a part of the county free
library, and for the city or library district to be entitled
to the benefits of the county free library; the property
within the city or library district shall be liable to taxes
levied for county free library purposes.
AB 438
Page 5
3)Allows the board of trustees, common council, or other
legislative body of any city or the board of trustees of any
library district, on or before January 1st of any year, to
notify the board of supervisors that the city or library
district no longer desires to be a part of the county free
library system.
4)Requires the board of trustees, common council, or other
legislative body of any city or the board of trustees of any
library district to publish at least once a week for two
successive weeks' notice of the contemplated action, giving
the date and the place of the meeting at which the
contemplated action will be taken, prior to notifying the
board of supervisors of the withdrawal.
5)Specifies that the notice of withdrawal shall be given to
specified entities including the county assessor and the State
Board of Equalization (BOE).
6)Contains special provisions for withdrawal of a city or
library district from the county free library system in Los
Angeles County and Riverside County.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill has no fiscal cost and does not contain a
mandate. A local government wishing to withdraw from the county
free library system may face costs of up to $100,000 for the
various study requirements contained in the bill's provisions.
COMMENTS : The current process contained in the Education Code
allowing the establishment of municipal libraries and the county
free library system dates back to 1911 and was continued in a
new code section in 1977 (Chapter 1010, Statutes of 1976), when
there was a major reorganization of the Education Code.
Existing law allows a board of trustees, common council, or
other legislative body of any city or the board of trustees of
any library district (hereafter referred to as "legislative
body") to notify the county board of supervisors that the city
or library district wants to withdraw from the county's free
library system.
Before any legislative body can take action to withdraw, the
legislative body must follow specific noticing requirements
contained in Education Code Section 19106. This section of law
AB 438
Page 6
requires the legislative body to "publish at least once a week
for two successive weeks prior to Ýlegislative action], in a
newspaper designated by the legislative body, and circulating
throughout the city or library district, notice of the
contemplated action, giving the date and the place of the
meeting at which the contemplated action is proposed to be
taken." Once the legislative body approves the withdrawal, the
legislative body must send a notice to the board of supervisors
who then works with the county assessor and the BOE to resolve
taxation issues related to the withdrawal from the county free
library system.
The author argues that some public entities have opted to turn
the administration and operation of their libraries over to
private, for-profit companies, and in certain instances
taxpayers have opposed the idea but did not have adequate
ability to have their voices heard or to have their will as
taxpayers impact the decision of their elected officials.
Additionally, the author notes that experiences with private
library service providers in other states have shown diminished
library services and new fees on taxpayers. The author asserts
that the existing public noticing requirements are not adequate
for the contemplated withdrawal from the county free library
system. Supporters of the bill argue that there is a need for
more public involvement before a decision is made by a local
government to withdraw from the county free library system.
This bill establishes a new process for a legislative body to
withdraw from the county free library system. The bill's
provisions establish new standards for contracting to be met by
any local government wishing to withdraw from the county free
library system, including the requirement to do a fair cost
analysis, prove cost savings to taxpayers, ensure competitive
bidding, prove qualifications of the contractor, and ensure that
the contract does not displace employees. The bill's provisions
additionally require performance and financial audits to be
conducted. Service Employees International Union (SEIU), in
support, believes that "the ultimate consumer of any government
services is the taxpayer and in the case of contracting out, the
taxpayer is the third party, so government must stand for the
interests of the consumer by ensuring that public dollars are
used meaningfully and accountably for the best services
possible."
Library Systems & Services, LLC (LSSI), in opposition to this
AB 438
Page 7
bill, states that "as the recession has hammered the budgets of
many states and local governments across the nation, local
elected officials are forced to maintain services with fewer
available dollars?to do so, our local leaders must be able to
exercise the decision-making authority for which they were
elected." The provisions of the bill may make it more difficult
for a local entity to withdraw from the county free library
system and use a private contractor, thus limiting the
decision-making authority of local elected officials. LSSI also
writes that this bill sets a significant precedent for existing
and future service contracts for cities and could affect other
procurement decisions for local governments going forward.
Support arguments: Service Employees International Union
(SEIU), in support, writes that "attaching a profit margin to
library services will inevitably result in new or increased fees
to the public, thus turning our "free" library system
increasingly into a system that only those who can afford the
extra costs will be able to benefit from the whole services of
the library." This bill places a number of conditions that must
be met, including cost savings, before a local entity can
withdraw from the county free library system.
Opposition arguments: The League of California Cities, in
opposition, writes that this bill "undermines the authority of
local elected officials by dictating how and when they can
contract for a service." Additionally, "as cities continue to
grapple with the state's fiscal crisis, cities are being asked
to provide the same level of services for less money. AB 438
will dictate the details of the contract between a city and a
private entity. Tying the hands of local government does not
help a city retain services, and instead makes it significantly
harder to continue to provide basic community services."
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0001199