BILL ANALYSIS Ó AB 583 Page 1 Date of Hearing: May 8, 2013 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT K.H. "Katcho" Achadjian, Chair AB 583 (Gomez) - As Introduced: February 20, 2013 SUBJECT : County free public libraries: withdrawal: use of private contractors. SUMMARY : Requires a city or library district in which a withdrawal from the county free library system became effective on or after January 1, 2012, to comply with specified requirements before entering into a contract to operate a library or libraries with a private contractor. Specifically, this bill : 1)Requires that a legislative body of a city or board of trustees of a library district in which a withdrawal from the county free library system becomes effective on or after January 1, 2012, must comply with the specified statutory requirements established by AB 438 (Williams), Chapter 611, Statutes of 2011, before entering into a contract to operate a library or libraries with a private contractor that will employ library staff to achieve cost savings. 2)Requires that a legislative body of a city or board of trustees of a library district in which a withdrawal from the county free library system in both Los Angeles County or Riverside County becomes effective on or after January 1, 2012, must comply with specified statutory requirements established by AB 438 before entering into a contract to operate a library or libraries with a private contractor that will employ library staff to achieve cost savings. 3)Exempts a library or libraries from the withdrawal process, if the library or libraries are funded only by proceeds of a special tax imposed by the city or library district, as specified. 4)Makes technical changes. EXISTING LAW : 1)Allows boards of supervisors to establish and maintain county free libraries, within their respective counties. AB 583 Page 2 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)Imposes requirements as specified by AB 438 (Williams), 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 that will employ library staff to achieve cost savings, as follows: a) Establishes public notification requirements for the legislative body of the city or board of trustees of a library district prior to the meeting; b) Specifies that the legislative body of a city or the board of trustees of a library district must clearly demonstrate that the contract will result in overall cost savings as compared to the city's or library district's actual costs of providing the same services, for the duration of the entire contract; c) Prohibits the contract for library services from causing an existing city or library district employee from incurring a loss of his or her employment or employment seniority, a reduction in wages, benefits, or hours, or an involuntary transfer to a new location requiring a change in residence; d) Requires the contract to be awarded through a publicized competitive bidding process; e) Requires provisions regarding the qualification of the staff that will perform the work under the contract, and assurances that the contractor's hiring practices meet nondiscrimination standards; f) Requires the contract to specify that it can be terminated, if the contractor fails to perform, by the city or library district without penalty, if there is a material breach of the contract; AB 583 Page 3 g) Establishes additional requirements, if the contract for library services is over $100,000 on the contractor to disclose specified information, and for audits to measure performance standards and cost savings; h) Prohibits the term of the contract from being longer than five years from the date on which the board of trustees of a library district, or the legislative body of a city approves the contract; i) Specifies these provisions do not preclude a city, library district, or local government from adopting more restrictive rules regarding the contracting of library services; and, j) Specifies the requirements, as described above, also apply to the special provisions for a withdrawal of a city or library district from the county free library system in Los Angeles County and Riverside County. FISCAL EFFECT : None COMMENTS : 1)The 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. Before Proposition 13 (1978), a county could levy a separate property tax rate to support its library 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 from the Special District Augmentation Fund (AB 8, L. Greene, 1979). Prior to 2012, 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. Prior to January 1, 2012, the statute allowed a board of trustees, common council, or other legislative body of any AB 583 Page 4 city or the board of trustees of any library district to notify the county board of supervisors that the city or library district wanted to withdraw from the county's free library system. Before any legislative body could take action to withdraw, the legislative body had to follow specific noticing requirements contained in the Education Code. 2)Riverside County, several cities in Ventura County, including Camarillo and Moorpark, the City of Redding (Shasta County), and the City of Santa Clarita (Los Angeles County) currently contract with a private corporation, Library Systems and Services, Inc. (LSSI), for library services. In these cases the city continues ownership of the library building and materials, while LSSI provides the management of day-to-day operations and staffing responsibilities. Cities that opt for this model of providing library services argue that they maintain control over library operations, planning, financing, and the budget without having to deal with personnel and staffing responsibilities which leads to cost savings. Supporters of this bill argue the contrary and also express concerns that libraries do not remain public under this new model and that new fees may be charged. 3)AB 438 (Williams), Chapter 611, Statutes of 2011, establishes standards for contracting to be met by any local government wishing to withdraw from the county free library system, in order to ensure that the private contractor achieves cost savings over the duration of the contract for the city or library district, as compared with the city's or library district's actual costs of providing the same services. AB 438 imposes requirements related to public notice, demonstrated cost savings, wages and benefits, competitive bidding, staff qualifications and hiring, eligible contractors, contract termination, contractor disclosure and performance measurement. Provisions in AB 438 also require the contract for library services to be no longer than five years in duration, and to sunset on January 1, 2019, unless extended by another statute. AB 438, also sponsored by SEIU, noted as to the need for the legislation 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 AB 583 Page 5 taxpayers impact the decision of their elected officials. Opposition argued that the bill unfairly tied the hands of local governments at a time when cities are expected to provide the same level of services with less money. 4)On December 11, 2011, before AB 438 took effect, the Simi Valley City Council adopted a resolution announcing its withdrawal from the Ventura County Library System as of December 31, 2011, in order to establish the Simi Valley Public Library. The City of Simi Valley issued a request for proposal (RFP) seeking an operator for the City's library services, and entered into an agreement with the County of Ventura to operate the library, for what was anticipated to be a short-term transition to a new operator. According to the City, two public agencies and one private firm responded to the City's RFP. SEIU filed a lawsuit challenging the City's withdrawal from the Ventura County Library System that was eventually dismissed by a County Superior Court Judge. Ventura County continues to operate the library. The requirements established by AB 438 do not apply to cities like Simi Valley that withdrew from a county free library system to run their own library systems or contract with another public entity for library services. AB 2592 (Williams, 2012) was gutted and amended at the end of session to close this loophole in AB 438. Ultimately, AB 2592 failed to get referred out of the Senate Rules Committee. This bill is substantially similar to AB 2592 (Williams). 5)The loophole that this bill is addressing was known at the time that AB 438 (Williams) was making its way through the legislative process; however, the provisions of AB 438 were not amended to close that loophole. A June 27, 2011 analysis of AB 438 by the Senate Governance and Finance Committee stated the following: "AB 438 doesn't apply to a city that chooses to withdraw from a county free library system to run its own library system or contract with another public entity for library services. A city could avoid the bill's requirements by withdrawing from a county system to run its own library for a short time before contracting with a private firm for library services. To close this potential loophole, the Committee may wish to consider amending AB 438 to require a city to comply with the bill's provisions if it seeks to contract with a private firm AB 583 Page 6 at any time within three years from the date on which it withdraws from a county free library." 6)Under this bill, the requirements in existing law would not apply to a city or library district that withdrew from a county free library system prior to January 1, 2012, or between January 1, 2012 and January 1, 2014, if they have already entered into a private contract. However, under this bill a city or library district that withdrew from a county system after January 1, 2012, but has not entered into a private contract by January 1, 2014, must comply with the requirements in existing law before entering into a private contract. Looking forward, this bill imposes existing requirements on a city or library district which withdraws from a county free library system before entering into a contract to operate a library with a private contractor that will employ library staff to achieve cost savings. The requirements in existing law do not apply to charter cities or to general law cities that fund their own library systems, participate in a county library system under a joint powers agreement, or receive library services through a contract with a county or public library district. This bill would expand upon this list by exempting a library or libraries only funded by a special tax from the contracting requirements in existing law. This bill is sponsored by the California State Council of the Service Employees International Union (SEIU). 7)The sponsor argues, "To illustrate the possible exploitation of this loophole, a city may: 1) withdraw from a county free public library system without an express statement of intent to privatize at the time of withdrawal, 2) subsequently privatize after a period of time following the withdrawal, and 3) withdraw and privatize without being required to meet the provisions of existing law." 8)In opposition to the bill the League of California Cities argues, "According to the sponsor, this bill would simply close a 'loophole' in existing law that allows a city to withdraw from a county free public library system without first meeting specified requirements. However, there is no evidence to suggest that a single city has attempted to AB 583 Page 7 exploit the alleged 'loophole'." The Committee staff is not aware of any cities or library districts that have withdrawn from the county free library system on or after January 1, 2012, and have not entered into a private contract to operate their library. 9)Support arguments : SEIU argues that this bill simply closes a loophole and that the provisions of the bill are neither radical nor a departure from current law governing the state, school districts and community colleges. Furthermore, this bill will ensure that tax dollars are accountable and well spent. Opposition arguments : The League of California Cities, in opposition, writes this bill further erodes local control by expanding upon provisions in current law established by AB 438 which ties the hands of local governments. REGISTERED SUPPORT / OPPOSITION : Support SEIU [SPONSOR] California Labor Federation Glendale City Employees Association Organization of SMUD Employees San Bernardino Public Employees Association San Luis Obispo County Employees Association Sana Rosa City Employees Association Opposition City of Simi Valley League of California Cities Library Systems and Services, Inc. Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916) 319-3958