BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 438| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 438 Author: Williams (D), et al. Amended: 8/29/11 in Senate Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 7/6/11 AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu NOES: Huff, Fuller, La Malfa ASSEMBLY FLOOR : 43-28, 6/3/11 - See last page for vote SUBJECT : County free libraries: withdrawal: use of private contractors SOURCE : Central Coast Alliance United for a Sustainable Economy Ventura Readers Book Group DIGEST : This bill imposes requirements, until January 1, 2019, on a city or library district that intends to withdraw from a county free library system and operate libraries with a private contractor. Senate Floor Amendments of 8/29/11 clarify the bill's cost-savings and contract termination requirements, add coauthors, and make technical changes. Senate Floor Amendments of 8/18/11 add library services contracting requirements relating to library employees, extend the maximum allowable length of a library services CONTINUED AB 438 Page 2 contract, and extend the bill's sunset date. ANALYSIS : 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. 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. If the legislative body of a city or the board of trustees of a library district intends to withdraw from the county free library system and operate the city or district's AB 438 Page 3 library with a private contractor that will employ library staff to achieve cost savings, this bill imposes requirements relating to: Public notice Demonstrated cost savings Wages and benefits Competitive bidding Staff qualifications and hiring Eligible contractors Contract termination Contractor disclosure and performance measurement Term of contract This bill specifies that its requirements do not apply if the city or district library or libraries are funded only by the proceeds of a special tax imposed by the city or district, pursuant to state law. 1. Public notice . Requires the legislative body of the city or the board of trustees of the library district to publish a notice of the contemplated action, giving the date and place of the meeting at which the contemplated action is proposed to be taken. The notice must be published at least once a week for four consecutive weeks before the city or library district acts. 2. Demonstrated cost savings . Requires the legislative body of a city or the board of trustees of a library district to clearly demonstrate that the contract will result in actual overall cost savings to the city or library district for the duration of the entire contract as compared with the city's or library district's actual costs of providing the same services, provided that, in comparing costs, all of the following occur: A. The city or library district's additional cost of providing the same services as proposed by the contract must be included. These additional costs include 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. AB 438 Page 4 B. The city or library district's indirect overhead costs must 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. "Indirect overhead costs" means the pro rata share of existing administrative salaries and benefits, rent, equipment costs, utilities, and materials. C. 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 must be included. Continuing city or library district costs include costs for inspection, supervision, and monitoring. 3. Contract approval and wages . Prohibits city or library district officials from approving a contract solely on the basis that savings will result from lower contractor pay rates or benefits. Specifies that contracts are eligible for approval if the contractor's wages are at the industry's level and do not undercut city or library district pay rates. 4. Employees . Prohibits a contract from causing an existing city or library district employee to suffer a loss of his/her employment or seniority, or a reduction in wages, benefits or hours, or an involuntary transfer to a new location requiring a change in residence. 5. Competitive bidding . Requires that a contract must be awarded through a publicized, competitive bidding process. 6. Staff qualifications and hiring . Requires a contract to include specific provisions 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. 7. Eligible contractors . Requires a contract to be with a "firm," which means a corporation, limited liability company, partnership, nonprofit organization, or sole AB 438 Page 5 proprietorship. 8. Contract termination . Requires a contract to provide that it may be terminated at any time by the city or library district without penalty if there is a material breach of contract and notice is provided within 30 days of termination. 9. Contractor disclosure and performance measurement . If the contract is for library services in excess of $100,000 annually, this bill requires: A. A city or library district must require a contractor to disclose the following information as part of its bid, 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. (4) A description of any debarments of the contractor by any public agency or licensing body at any time. B. The city or library district must 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. This bill prohibits a city or library district from renewing or extending the AB 438 Page 6 contract before receiving and considering the audit report. C. The contract must 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 been realized. This bill prohibits a city or library district from renewing or extending the contract prior to receiving and considering the audit report. 10. Term of contract . Specifies that the term of the contract shall not be more than five years from the date on which the board of trustees, common council, or other legislative body of a city or the board of trustees of a library district approves the contract. This bill declares that it does not preclude a city, library district, or local government from adopting more restrictive rules regarding the contracting of public services. This bill has a sunset date of January 1, 2019. Background Exactly one century ago, the Legislature authorized counties to establish county free library systems (SB 289, Hans, 1911). Before Proposition 13 (1978), a county could levy a separate property tax rate to support its library system. Nearly 30 county free libraries had separate rates. A county could extend the property tax rate to parcels in a city that wanted to join the library system and would cease to levy the rate within a city that withdrew from the system. After Proposition 13, the Legislature divided the remaining property tax revenues among local governments. Although they were not separate institutions, state law treated county free libraries as if they were special districts because they had their own property tax rates before Proposition 13. The county free libraries received shares of the property tax revenues and they could receive money AB 438 Page 7 from the Special District Augmentation Fund (AB 8, L. Greene, 1979). In general, to withdraw from a county library system, a city must negotiate the amount of property tax revenues, if any, that it will receive from the county library system. Different procedures apply to city withdrawals from county free library systems in Los Angeles and Riverside counties (AB 1998, Mountjoy, 1996 and AB 927, Thompson, 1997). Instead of participating in a county free library system, a city can provide library services to its residents in several other ways: by operating its own libraries, through a library district, or by contracting with another public agency or private firm. For charter cities, contracting arrangements with private firms can be governed by their charters. General law cities must follow the standards and procedures in the state statutes. While general law cities' specific statutory authority to contract for services is limited, court opinions have recognized general law cities' authority to enter into contracts to carry out necessary functions, including those expressly granted and those implied by necessity. State law requires state departments that contract for personal services to follow specific criteria: a clear demonstration of cost savings, a clear definition of costs, ensuring that work will not be contracted out solely on the basis of lower pay or benefits, and justification of savings based on the contract's size and duration. State law requires school and community college districts to comply with the same standards that apply to state departments (AB 1419, Alarcón, 2002). Riverside County and the Cities of Camarillo (Ventura County), Moorpark (Ventura County), Redding (Shasta County), and Santa Clarita (Los Angeles County) contract with a private corporation, Library Systems and Services, Inc. (LSSI), for library services. In response to some cities' recent efforts to contract with LSSI, some library advocates and labor unions want the conditions that apply to state, school district, and community college district service contracts to apply to any city that intends to withdraw from a county free library system and contract with a private firm for library services. AB 438 Page 8 FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 8/30/11) Central Coast Alliance United for a Sustainable Economy (co-source) Ventura Reader's Book Group (co-source) AFSCME American Library Association Student Chapter at UCLA California Democratic Party California Labor Federation California Nurses Association California Professional Firefighters Association California Public Interest Research Group California School Employees Association California Teachers Association City of Arcata Councilmember, Shane Brinton City of Artesia Councilmember, Michele Diaz City of Irvine Councilmember, Steven Choi City of Port Hueneme, former Mayor and Councilmember, Murray Rosenbluth Community Coalition Concerned Citizens Coalition of Stockton Democratic Alliance for Action, Santa Clarita Democratic Party of the San Fernando Valley Friends of Bell Foundation Friends of the Artesia Library, Treasurer, Karen Speers Friends of the Hollydale Library Friends of the Huntington Park Library Friends of the Nevada County Libraries Laborers' International Union of North America Local 777 & 792 Los Angeles Alliance for a New Economy Los Angeles County Democratic Party Los Angeles Youth Council Chapter The Multi-Taskers Montebello Friends of the Library Orange County Employees Association Public Services for the County of Los Angeles Public Library, Assistant Director, Barbara S. Custen Santa Clara Valley Democratic Club Santa Clarita Organization for Planning and the Environment AB 438 Page 9 Santa Clarita Valley Fair Election Committee Service Employees International Union Ventura County Democratic Party OPPOSITION : (Verified 8/30/11) California Contract Cities Association Cities of Artesia, Azusa, Bellflower, Beverly Hills, Brea, Camarillo, Carlsbad, Cerritos, Chino Hills, Cloverdale, Costa Mesa, Covina, Culver City, Danville, Diamond Bar, Encinitas, Fillmore , Galt, Goleta, Healdsburg, Highland, Holtville, Hungtington Park, Huron, Imperial Beach, Irvine, La Verne, Laguna Hills, Lake Elsinor, Lakewood, Lanthrop, Lemoore, Livermore, Livingston, Lodi, Lynwood, Manteca, Merced, Montclair, Moorpark, Moreno Valley, Mt. Shasta, Murrieta, Norwalk, Palmdale, Paradise, Paramount, Pico Rivera, Pomona, Rancho Cordova, Redding, Rocklin, Rosemead, San Clemente, San Leandro, San Mateo, San Pablo, San Ramon, Santa Clarita, Santa Maria, Santa Rosa, Selma, Signal Hill, Simi Valley, South El Monte, Temecula, Torrance, Tracy, Tulare, Union City, Upland, Visalia, Vista, Wasco, West Hollywood, and Windsor City of Arcata Councilmember, Mark Wheetley Friends of Redding Library Howard Jarvis Taxpayers Association League of California Cities Library Systems & Services, LLC Mayor of Fresno, Ashley Swearengin Mayor of Pico Rivera, David Armenta Mayor of Redwood City, Jeff Ira San Mateo City/County Association of Governments Shasta Public Library Foundation ASSEMBLY FLOOR : 43-28, 6/3/11 AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block, Blumenfield, Bonilla, Bradford, Brownley, Butler, Charles Calderon, Campos, Cedillo, Davis, Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Galgiani, Gatto, Hall, Hayashi, Hill, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Pan, Perea, V. Manuel Pérez, Portantino, Skinner, Solorio, Swanson, Wieckowski, Williams, Yamada, John A. Pérez NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly, AB 438 Page 10 Fletcher, Beth Gaines, Garrick, Gordon, Grove, Hagman, Halderman, Harkey, Huber, Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell, Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner NO VOTE RECORDED: Buchanan, Carter, Chesbro, Gorell, Roger Hernández, Mitchell, Monning, Nestande, Torres AGB:mw 8/30/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****