BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2272| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2272 Author: Gray (D) Amended: 8/22/14 in Senate Vote: 21 SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 8-1, 6/17/14 AYES: Padilla, Block, Cannella, Corbett, De León, DeSaulnier, Hill, Pavley NOES: Fuller NO VOTE RECORDED: Knight, Wolk SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 4-1, 6/25/14 AYES: Hueso, Leno, Padilla, Mitchell NOES: Wyland SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14 AYES: De León, Hill, Lara, Padilla, Steinberg NO VOTE RECORDED: Walters, Gaines ASSEMBLY FLOOR : 56-17, 5/27/14 - See last page for vote SUBJECT : Public works: prevailing wage SOURCE : California-Nevada Conference of Operating Engineers DIGEST : This bill establishes that infrastructure projects funded by the California Advanced Services Fund (CASF) are public works projects. Senate Floor Amendments of 8/22/14 add double-jointing language CONTINUED AB 2272 Page 2 to this bill in order to avoid chaptering out issues with AB 26 (Bonilla). ANALYSIS : Existing law: 1.Establishes the CASF, administered by the Public Utilities Commission (PUC), to help fund deployment of broadband infrastructure and bring high-speed Internet access to all areas of the state and authorizes collection of a customer surcharge on intrastate communications services of up to $315 million for the CASF through 2015 with collections capped at no more than $25 million per year. 2.Authorizes the PUC to use ratepayer funds collected for universal service programs, including the CASF, to compensate regulated telephone corporations for their costs of providing universal service. 3.Requires the prevailing wage rate to be paid to all workers on "public works" projects over $1,000 and defines "public work" 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. 4.Exempts from the definition of a public work certain projects including work done directly by any public utility company pursuant to an order of the PUC or other public authority and some affordable and low-income housing projects. 5.Defines "awarding body" or "body awarding the contract" to mean department, board, authority, officer or agent awarding a contract for public work. This bill: 1.Establishes that infrastructure projects funded by the CASF are "public works" projects. 2.Specifies that the PUC is not the "awarding body" or "body awarding the contract." 3.Contains double-jointing language with AB 26 (Bonilla). CONTINUED AB 2272 Page 3 FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: Annual costs of approximately $280,000 from the General Fund to the Department of Industrial Relations for increased enforcement of prevailing wage laws. One-time costs, estimated at $75,000 to the CASF (special) to the PUC 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. SUPPORT : (Verified 8/25/14) California-Nevada Conference of Operating Engineers (source) California Labor Federation California Legislative Conference of the Plumbing, Heating and Piping Industry California State Council of Laborers National Electrical Contractors Association OPPOSITION : (Verified 8/25/14) California Association of Competitive Telecommunications Companies California Communications Association California's Independent Telecommunications Companies Consolidated Communications Inc. ARGUMENTS IN SUPPORT : According to the author: The [PUC] authorized the [CASF] in 2007 to provide grants to telephone corporations to bridge the digital divide in unserved and underserved areas of the state. The Central Valley Next Generation Broadband Infrastructure Project (CVNGBIP) is a 1,371 mile fiber-optic infrastructure project encompassing 18 counties that will serve a population of 4 million people when completed. The $66.6 million project is CONTINUED AB 2272 Page 4 funded through federal, state, and local funds, and receives 10% of its total budget from the CASF. The CVNGBIP petitioned the Department of Industrial Relations (DIR) with the belief that prevailing wage requirements do not apply to the project, because state funds constitute only 10% of the project's total budget. In November 2013, Director Christine Baker determined that, because the CVNGBIP is partially funded by state monies, the project is subject to California's prevailing wage requirements. AB 2272 simply codifies Director Baker's determination in statute to avoid confusion and legal questions in the future and will give clarity to contractors who are bidding CASF funded-projects, and to labor standards officers who are responsible for enforcing labor laws on the project. ARGUMENTS IN OPPOSITION : The California's Independent Telecommunications Companies writes in part: There is simply no business case for providers to build in these areas without the grant funding because the potential customer base is too small to cover the infrastructure deployment costs. Applicants for CASF grants must supply thirty to forty percent of the capital required to complete a proposed project, and are hard pressed to achieve the financial margins for projects to pencil out. Unlike the [American Recovery and Reinvestment Act of 2009] Broadband Technology Opportunities Program, the CASF rules and solicitations did not state that projects are public works subject to prevailing wage requirements. As such, grant recipients did not include these requirements in their cost estimates. With estimated margins already razor thin, existing projects could easily be stalled or shelved by the cost of complying with public works requirements. ASSEMBLY FLOOR : 56-17, 5/27/14 AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chesbro, Cooley, Dababneh, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Hall, Roger Hernández, Holden, Jones-Sawyer, Levine, Lowenthal, Medina, Mullin, Muratsuchi, Nazarian, Nestande, CONTINUED AB 2272 Page 5 Pan, Perea, John A. Pérez, V. Manuel Pérez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada, Atkins NOES: Achadjian, Chávez, Conway, Dahle, Donnelly, Beth Gaines, Grove, Hagman, Harkey, Jones, Logue, Maienschein, Mansoor, Melendez, Wagner, Waldron, Wilk NO VOTE RECORDED: Allen, Bigelow, Linder, Olsen, Patterson, Quirk-Silva, Vacancy JG:k 8/25/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED