BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 2272 (Gray) - Public works: prevailing wage.
Amended: June 26, 2014 Policy Vote: EU&C 8-1, Labor 4-1
Urgency: No Mandate: Yes (see staff
comments)
Hearing Date: August 4, 2014 Consultant:
Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2272 would establish that infrastructure
projects funded by the California Advanced Services Fund (CASF)
are "public works" projects.
Fiscal Impact:
Annual costs of approximately $280,000 from the General
Fund to the Department of Industrial Relations (DIR) for
increased enforcement of prevailing wage laws.
One-time costs, estimated at $75,000 to the CASF (special)
to the California Public Utilities Commission (CPUC) to
determine any necessary changes to existing CASF
infrastructure grants.
Unknown cost pressures, likely in the millions of dollars,
to the CASF as a result of increased project costs both for
existing and future projects.
Background: The California Advanced Services Fund (CASF), which
is administered by the California Public Utilities Commission
(CPUC), to help fund the deployment of broadband infrastructure.
It is funded by a surcharge on intrastate communication which is
subject to statutory collection ca[s (PUC §281). Grants awarded
with the CASF help pay the capital cost of broadband
infrastructure project and support adoption of broadband
service. At the end of 2013, the cumulative total CASF award
funding was over $83 million dollars, of which $80.37 million
was for broadband infrastructure grants and $41,000 was for
broadband infrastructure loans.
Existing law requires that certain conditions are met for public
works projects, including that all employees of public works
projects costing $1,000 or more be paid the general prevailing
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rate of per diem wages (LC §1711) DIR is tasked with the
responsibility of determining the general prevailing rate of per
diem wages in accordance with specified standards (LC §1773).
"Public works" projects are defined in LC §1720 to include,
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. Work done directly by any
public utility company pursuant to an order of the CPUC or other
public authority is exempt from the definition of a public works
project.
Under the public works law, there are multiple responsibilities
of the awarding body, which is defined as the department, board,
authority, office, or agent awarding a contract for public work.
Responsibilities of the awarding body include, among other
things, provide for prevailing wage determinations to be posted
at each job site, provide notice of the project to DIR, report
any suspected violations to the Labor Commissioner, and
cooperate with DIR in any investigation of suspected violations.
Proposed Law: This bill would include in the definition of
"public works" all infrastructure project grants from the CASF.
Staff Comments: This bill will increase workload to the DIR
regarding enforcement and investigations by increasing the
number of public works projects. DIR indicates that they will
experience approximately $280,000 of additional workload
annually.
This bill will also result in unknown costs pressures to the
CASF, likely in the millions of dollars, because more funds will
be needed to complete the same amount of projects as a result of
increased labor costs.
This bill would become effective on January 1, 2015 for all
infrastructure projects funded in part by the CASF, including
those projects which are currently underway. The CPUC will incur
some one-time costs to identify the status of the existing
projects and make a determination of whether the project costs
will change as a result of this bill. If so, the CPUC will need
to determine whether the CASF grant amount should be adjusted to
accommodate higher labor costs. These costs are unknown and will
depend on the number of existing projects, the status of those
projects, and whether the CPUC determines that the CASF grant
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should be adjusted. Staff estimates that the one-time costs will
be approximately $75,000 for additional workload plus unknown
costs to the CASF should any existing grant amounts be increased
as a result of this bill.
The awarding body for CASF funded projects will likely be
considered the grantee as the CPUC provides CASF grants to
telephone and non-telephone corporations who then issue
contracts for work. However, the CPUC reviews those contracts,
which raises some ambiguity as to who is the awarding body.
Should the CPUC be considered the awarding body, the CPUC
anticipates needed additional staff at an annual cost of
$426,000 annually to ensure compliance with public works laws.
These costs are unlikely though the author may wish to consider
whether it is desirable to clarify who is the awarding body in
the case of project grants from the CASF.
This bill creates a new crime by subjecting infrastructure
project grants to public works laws, and therefore is a
state-mandated local program. However, under the state
constitution, such local mandates are not reimbursable.