BILL ANALYSIS Ó
SB 7
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Date of Hearing: August 30, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 7 (Steinberg) - As Amended: August 7, 2013
Policy Committee: Labor and
Employment Vote: 6-1
Local Government 6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill prohibits any charter city from receiving or using
state funding or financial assistance for construction projects,
if the charter city allows contractors to not comply with the
state's prevailing wage law on any public works contract.
Specifically, this bill:
1)Prohibits a charter city from receiving or using state funding
or financial assistance for a construction project if the city
has awarded, within the current or prior two years, a public
works contract without requiring the contractor to comply with
all of the provisions of current law governing prevailing wage
requirements for public works, as specified.
2)Provides that a charter city is not disqualified from
receiving or using state funding or financial assistance for
its construction projects if the charter city has adopted a
local prevailing wage ordinance for all its public works
projects that includes requirements that in all respects are
equal to or greater than the requirements imposed by the
provisions of current law governing prevailing wage
requirements for public works and that do not authorize a
contractor to not comply with current law governing prevailing
wage requirements for public works.
3)Requires the Director of Industrial Relations to maintain a
list of charter cities that may receive and use state funding
and financial assistance for their construction projects.
FISCAL EFFECT
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Unknown total costs, likely above $150,000 (GF and special fund)
to state agencies to comply with the provisions of the bill.
COMMENTS
1)Purpose . According to the author, the prevailing wage law is
critical to the delivery of a quality construction product
because it encourages contractors to perform the work with an
efficient, skilled and streamlined workforce, ultimately
creating long-term cost-savings to the taxpayers. The author
argues this legislation is designed to provide incentives to
charter cities to follow the prevailing wage law on municipal
projects and thereby deter the underground economy and
low-road construction models driven by unscrupulous
contractors.
2)Rationale . The sponsor, the State Building and Construction
Trades Council of California, argues SB 7 rewards the majority
of cities that currently follow the state prevailing wage law,
the cities that have rejected the false arguments of
anti-prevailing wage groups and low-road construction
associations. According to the sponsor, these shadowy groups
seek exemptions from the prevailing wage through vaguely
drafted city charters developed entirely by a few politicians
instead of a charter commission of elected representatives of
the voting public. The sponsor contends, these charter
amendments are placed on the ballot in low voter turnout
elections to deceive local voters. The sponsor notes this
process has led to mismanagement and abuse of public funds in
many cities throughout California, citing the City of Bell's
former city manager, Robert Rizzo, who removed the prevailing
wage requirement during a special election that recorded a
vote of less than 1% of the city's population.
The sponsor concludes that SB 7 helps protect other local
governments, including all general law cities and the majority
of charter cities, from the practices of a minority group of
charter cities that wish to reward their political allies with
prevailing wage exemptions that consequently pass on the costs
of healthcare and apprenticeship training to the surrounding
cities.
3)Opposition . The League of California Cities, in opposition,
states that SB 7 would impose devastating consequences on 51
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California cities, with combined populations of over 5 million
residents, by making them ineligible for all state grants,
loans, tax credits and other financial assistance for
construction projects for exercising fundamental rights
granted by our constitution to voters. The League notes the
affected cities, many of which are still suffering from high
rates of unemployment and deep revenue losses, have done
nothing to warrant such an aggressive and punitive action;
their only offense was their voters conducted themselves in
lawful compliance with the State Constitution, which has for
over 100 years empowered local voters to govern city municipal
affairs via a local charter. Moreover, the California Supreme
Court confirmed that decisions on how to spend local funds
were a municipal affair, and that the Legislature could not
impose conditions on such spending.
The League states the right to vote is the cornerstone of our
democracy and the California Constitution empowers voters to
create city charters to govern their municipal affairs. They
note the Courts are tasked with interpreting the boundaries of
municipal affairs, and by seeking to impose punitive measures
for decisions made by local voters that are valid under the
Constitution, the Legislature infringes upon the fundamental
right to vote.
4)Background . The California Constitution gives cities the
power to become charter cities. Of California's 482 cities,
121 are charter cities. The state's 361 general law cities
are subject to the general laws passed by the Legislature.
Under the Constitution, the ordinances of charter cities
supersede state law with respect to municipal affairs, while
state law prevails with respect to matters of statewide
concern. This is often referred to as the home rule doctrine.
The courts decide whether a matter falls within the home rule
authority of charter cities.
While the Constitution does not explicitly define municipal
affair, it does outline four categories that are presumed to
be municipal affairs, stating that "it shall be competent in
all city charters to provide, in addition to those provisions
allowable by the Constitution, and by the laws of the State
for: (1) the constitution, regulation, and government of the
city police force (2) subgovernment in all or part of a city
(3) conduct of city elections and (4) plenary authority is
hereby granted, subject only to the restrictions of this
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article, to provide therein or by amendment thereto, the
manner in which, the method by which, the times at which, and
the terms for which the several municipal officers and
employees whose compensation is paid by the city shall be
elected or appointed, and for their removal, and for their
compensation, and for the number of deputies, clerks and other
employees that each shall have, and for the compensation,
method of appointment, qualifications, tenure of office and
removal of such deputies, clerks and other employees."
5)Prevailing wage . California's prevailing was law was enacted
in 1931. At the same time, the federal Davis-Bacon Act was
enacted by Congress and requires workers employed under public
construction contracts of the federal government in excess of
$2,000 to be paid a minimum wage that the United States
Department of Labor determines to be prevailing for
corresponding classes of workers. In addition, 60 separate
federal laws currently specify the payment of Davis- Bacon
wages for work prescribed.
Most public construction projects contracted for or by the
federal government or the District of Columbia are covered by
the federal prevailing wage law, the Davis-Bacon Act (Act),
while 33 states have prevailing wage laws, encompassing
projects financed by states and their political subdivisions.
6)Related litigation . In October 2007, the Vista City Council
approved contracts to design and build two fire stations with
funds generated by the 2006 sales tax increase. These
contracts, which totaled several million dollars, did not
require compliance with the state's prevailing wage law. The
State Building and Construction Trades Council of California
filed suit seeking a writ of mandate ordering Vista to comply
with the state's prevailing wage law. The City of Vista
argued that prevailing wage issues are not a statewide
concern, and that the Constitution and laws governing charter
cities give charters the right to determine whether to pay
prevailing wages for public works that involve locally funded
municipal affairs.
The trial court denied the Union's petition, citing Vial v.
City of San Diego (1981) 122 Cal. App. 3d. 346, which found
that the expenditure of city funds on public works projects
and the rates of pay of workers hired for such projects are
municipal affairs of a charter city over which the state has
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no legislative authority. By a 2-1 decision, the court of
appeals affirmed the trial court's decision. The California
Supreme Court, by a 5-2 vote, also ruled in favor of Vista,
deciding that charter cities are not required to pay
prevailing wage for local public projects that are paid for by
local funds
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081