BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 7
Author: Steinberg (D) and Cannella (R)
Amended: 8/7/13
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 3-1, 3/13/13
AYES: Lieu, Leno, Lara
NOES: Wyland
NO VOTE RECORDED: Padilla
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13
AYES: De León, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SENATE FLOOR : 28-10, 5/28/13
AYES: Beall, Block, Cannella, Corbett, Correa, De León,
DeSaulnier, Evans, Galgiani, Hancock, Hernandez, Hill, Hueso,
Jackson, Lara, Leno, Lieu, Liu, Monning, Padilla, Pavley,
Price, Roth, Steinberg, Torres, Wolk, Wright, Yee
NOES: Anderson, Berryhill, Calderon, Fuller, Gaines, Huff,
Knight, Nielsen, Walters, Wyland
NO VOTE RECORDED: Emmerson, Vacancy
ASSEMBLY FLOOR : 52-22, 9/4/13 - See last page for vote
SUBJECT : Public works: charter cities
SOURCE : California Labor Federation, AFL-CIO
State Building and Construction Trades Council of
California,
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DIGEST : This bill prohibits a charter city from receiving or
using state funding for a construction project if the city has a
charter provision or ordinance that authorizes a contractor not
to comply with prevailing wage requirements on any public works
contract, as specified.
Assembly Amendments (1) delete the two calendar years after
January 1, 2014 date, which specifies that a charter city
project contract is prohibited from using state funding of
financial assistance for a construction project ; (2) add a
provision that specifies this bill does not restrict a charter
city from receiving or using state funding or financial
assistance that was awarded to the city prior to January 1,
2015, or from receiving or using state funding or financial
assistance to complete a contract that was awarded prior to
January 1, 2015; (3) add a provision that a charter city is not
disqualified from receiving or using state funding or financial
assistance for its construction projects based on the city's
failure to require a contractor to comply with these
requirements in performing a contract the city advertised for
bid or awarded prior to January 1, 2015; (4) define
"construction project" for purposes of this bill; and (5) make
other clarifying and technical changes.
ANALYSIS : Existing law defines the term "public works" 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.
Existing law also defines "public works" as street, sewer, or
other improvement work done under the direction and supervision
or by the authority of any officer or public body of the state,
or of any political subdivision or district thereof, whether the
political subdivision or district operates under a freeholder's
charter or not.
Under existing law, "paid for in whole or in part out of public
funds" means, among other things, the following:
1. The payment of money or the equivalent of money by the state
or political subdivision directly to or on behalf of the
public works contractor, subcontractor, or developer.
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2. The performance of construction work by the state or
political subdivision in execution of the project.
3. Fees, costs, rents, insurance or bond premiums, loans,
interest rates, or other obligations that would normally be
required in the execution of the contract, that are paid,
reduced, charged at less than fair market value, waived, or
forgiven by the state or political subdivision.
4. Money loaned by the state or political subdivision that is to
be repaid on a contingent basis.
Existing law requires all employees who work on public works
projects costing $1,000 or more to be paid the general
prevailing rate of per diem wages and the general prevailing
rate for holiday and overtime work for the specific location
where the public work is to be performed. This requirement is
applicable to work performed under contract and it does not
apply to work carried out by a public agency with its own
forces. Existing law provides certain exemptions to the payment
of prevailing wage that includes, among others, private
residential projects. The Director of the Department of
Industrial Relations (DIR) is tasked with the responsibility of
determining the general prevailing rate of per diem wages in
accordance with specified standards.
The California Constitution grants cities the ability to become
charter cities. A county or city may adopt a charter by
majority vote of its electors voting on the question. Under
existing law, a charter city may make and enforce all ordinances
and regulations in respect to "municipal affairs," subject only
to restrictions and limitations provided in their charters and
in respect to other matters they are subject to general laws.
This bill:
1. Prohibits a charter city from receiving or using state
funding or financial assistance for a construction project -
if the city has a charter provision or ordinance that
authorizes a contractor to not comply with prevailing wage
requirements on any public works contract.
2. Prohibits a charter city from receiving or using state
funding or financial assistance for a construction project if
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the city has awarded, within the prior two years, a public
works contract without requiring the contractor to comply
with all of the provisions of existing law governing
prevailing wage requirements for public works. This
provision does not apply if the charter city's failure to
include the prevailing wage or apprenticeship requirement in
a particular contract was inadvertent and contrary to a city
charter provision or ordinance that otherwise requires
compliance with existing law governing prevailing wage
requirements for public works.
3. Provides that a charter city may receive or use state
funding or financial assistance for its construction projects
if the charter city has a local prevailing wage ordinance for
all its public works contracts that includes requirements
that in all respects are equal to or greater than the
requirements imposed by the provisions of existing law
governing prevailing wage requirements for public works and
that do not authorize a contractor to not comply with
existing law governing prevailing wage requirements for
public works.
4. Provides, for the purposes of this bill, that the following
shall apply:
A. A public works contract does not include contracts for
projects of $25,000 or less when the project is for
construction work, or projects of $15,000 or less when the
project is for alteration, demolition, repair, or
maintenance work;
B. A charter city includes any agency of a charter city
and any entity controlled by a charter city whose
contracts would be subject to existing law governing
prevailing wage requirements for public works;
C. A "construction project" means a project that involves
the award of a public works contract; and,
D. State funding or financial assistance includes direct
state funding, state loans and loan guarantees, state tax
credits, and any other type of state financial support for
a construction project. State funding or financial
assistance does not include revenues that charter cities
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are entitled to receive without conditions under the
California Constitution.
1. Requires the Director of DIR to maintain a list of charter
cities that may receive and use state funding or financial
assistance for their construction projects.
2. Specifies that the provisions of this bill do not restrict a
charter city from receiving or using state funding or
financial assistance that was awarded to the city prior to
January 1, 2015, or from receiving or using state funding or
financial assistance to complete a contract that was awarded
prior to January 1, 2015.
3. Specifies that a charter city is not disqualified from
receiving or using state funding or financial assistance for
its construction projects based on the city's failure to
require a contractor to comply with these requirements in
performing a contract the city advertised for bid or awarded
prior to January 1, 2015.
4. Includes several related legislative findings and
declarations.
Background
A brief history of state and federal prevailing wage law . State
prevailing wage laws vary from state to state, but do share a
common history that predates federal prevailing wage law. Many
of these state laws were enacted as part of Progressive Era
reform efforts to improve working conditions at the end of the
19th and the beginning of the 20th centuries. Between 1891 and
1923, seven states adopted prevailing wage laws that required
payment of specified hourly wages on government construction
projects, the State of Kansas being the first in 1891.
18 additional states (including California in 1931) and the
federal government adopted prevailing wage laws during the Great
Depression of the 1930s amidst concern that acceptance of the
low bid, a common requirement of government contracting for
public projects, would reduce local wages and disrupt the local
economies. This was particularly in the depths of the Great
Depression, where, for some local economies, the government had
become the primary purchaser of construction products and a
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significant employer.
In general, the proponents of prevailing wage legislation wanted
to prevent the government from using its purchasing power to
undermine the wages of its citizens. It was believed that the
government should set an example, by paying the wages prevailing
in a locality for each occupation hired by government
contractors to build public projects. Even today, prevailing
wage laws are generally meant to ensure that wages commonly paid
to construction workers in a particular region will determine
the minimum wage paid to the same type of workers employed on
publicly funded construction projects.
Court decisions on charter cities and prevailing wage .
Determining whether the payment of prevailing wages is a
municipal affair subject to charter sovereignty versus an issue
of statewide concern, has been the subject of court cases for
many decades. Historically, charter cities have been found to
not be bound by state prevailing wage requirements as long as
the project is a "municipal affair," and not funded by state or
federal grants requiring the payment of prevailing wage. Such
was the case in Vial v. City of San Diego 122 Cal. App. 3d 346,
348 (1981), in which Donald Vial (Director of the DIR) and Labor
Commissioner James L. Quillin petitioned for a writ of mandate
to compel the City of San Diego to comply with the state
prevailing wage laws. The superior court denied the petition
and DIR appealed.
In a more recent case, State Building and Construction Trades
Council of California v. City of Vista, 173 Cal. App. 4th 567,
93 Cal. Rptr. 3d 95, 2009 Cal. App. LEXIS 627 (Cal. App. 4th
Dist., 2009), the issue was again at question. The case
involved two contracts to design and build fire stations with
local public funds. The State Building and Construction Trades
Council contends that the subject matter of the state's
prevailing wage law is a "statewide concern" over which the
state has primary legislative authority requiring the payment of
prevailing wages. The City responded that the matter was a
municipal affair and therefore governed by its local ordinances.
The court agreed with the City.
In a 5-2 decision, the California Supreme Court affirmed the
right of charter cities to opt-out of the state's prevailing
wage law pursuant to California's Constitution and stated,
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"Here, we reaffirm our view - first expressed 80 years ago [see
City of Pasadena v. Charleville (1932) 215 Cal. 384, 389
(Charleville)] - that the wage levels of contract workers
constructing locally funded public works are a municipal affair
(that is, exempt from state regulation), and that these wage
levels are not a statewide concern (that is, subject to state
legislative control)." However, the court went further in
questioning the existence of an "actual conflict" between state
law and charter city law and stated the following:
"This court's 1991 decision in California Fed. Savings,
supra, 54 Cal.3d at pages 16-17, emphasized the importance
of determining, as a matter of statutory construction, that
state law actually conflicts with local law before
proceeding to the difficult state constitutional question of
which law governs a particular matter."
According to the court, in this case, no party was contending
that California' prevailing wage law exempts charter cities from
its scope. They state that indeed, the prevailing wage law
makes express reference to charter cities, defining "public
works" to include "street, sewer, or other improvement work of
any political subdivision or district [of the state], whether
the political subdivision or district operates under a
freeholder's charter or not."; (Labor Code Section 1720 (a)(3)
Section 1720(a)(1) [applying the law to any construction work
"done under contract and paid for . . . out of public funds"]).
According to the court, because the state's prevailing wage law
does not exempt charter cities, and because Vista's ordinance
prohibits compliance with that law, they concluded that an
actual conflict exists between state law and Vista's ordinance.
Prior Legislation
SB 829 (Rubio, Chapter 11, Statutes of 2012) provides that if a
charter provision, initiative, or ordinance of a charter city
prohibits, limits, or constrains in any way the governing
board's authority or discretion to adopt, require, or utilize a
project labor agreement (PLA) that includes specified taxpayer
protection provisions for some or all of the construction
projects to be awarded by the city, state funding or financial
assistance may not be used to support any construction projects
awarded by the city, as specified.
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SB 922 (Steinberg, Chapter 431, Statutes of 2011) authorizes a
public entity to use, enter into, or require contractors to
enter into, a PLA for a construction project, if the agreement
includes specified taxpayer protection provisions. The bill
also provides that if a charter provision, initiative, or
ordinance prohibits the governing board's consideration of a PLA
for a project to be awarded by the city, or prohibits
consideration whether to allocate funds to a city-funded project
covered by such an agreement, then state funding or financial
assistance may not be used to support that project, as
specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, unknown total
costs, likely above $150,000 to DIR and other agencies to comply
with the provisions of this bill.
SUPPORT : (Verified 5/24/13) (per Senate Labor and Industrial
Relations Committee analysis of 3/13/13 - unable to reverify at
time of writing)
California Labor Federation, AFL-CIO (co-source)
State Building and Construction Trades Council of California
(co-source)
Bricklayers and Allied Craftworkers, AFL-CIO
Building and Construction Trades Council (Counties of Contra
Costa, Fresno, Imperial, Inyo, Kern, Kings, Los Angeles,
Madera, Mono, Orange, San Benito, San Diego, San Mateo, Santa
Clara, and Tulare)
California Chapters of the National Contractors Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California Sheet Metal and Air Conditioning Contractors National
Association
California State Association of Electrical Workers
California State Council of Laborers
California State Pipe Trades Council
California Teamsters Public Affairs Council
Carpet Linoleum and Soft Tile Workers Local Union No. 12
Cement Masons Local Union No. 500
City of Vacaville
Coalition of California Utility Employees
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Construction Employers' Association
Drywall Lathers Local 9083
Fitting Industry Underground Utility/Landscape Local 114,
355 and 484
Glaziers, Architectural Metal and Glass Workers Union, Local
718, of
Imperial County and 16 Affiliate Unions
International Brotherhood of Electrical Workers Local Union 234
and 340
International Union of Painters and Allied Trades Local Union
376
Masonry Industry Labor Management Cooperation Trust
Mayors of the Cities of Cotati, Seaside, Long Beach, Los
Angeles, and Sacramento
National Electrical Contractors Association
Northern California Carpenters Regional Council
Northern California Mechanical Contractors Association
Northern California Millwrights
Painters and Allied Trades District Council 36
Painters and Allied Trades Local 3
Painters and Drywall Finishers Local 741 District Council 16
Painters and Drywall Finishers Local 83 and 913
Plaster Tenders of Southern California Local Union 1414
Plumbers, Steamfitters and Refrigeration Fitters Local Union 230
and 467
San Francisco
Sheet Metal, Air, Rail, Transportation Workers Local Union 105
United Association of Journeymen and Apprentices of the Plumbing
and Pipe
United Brotherhood of Carpenters and Joiners of America
United Contractors
Western States Council of Sheet Metal Workers
OPPOSITION : (Verified 4/24/13) (per Senate Labor and
Industrial Relations Committee analysis of 3/13/13 - unable to
reverify at time of writing)
Air Conditioning Trade Association
Associated Builders and Contractors of California
Cities of Arcadia, Cerritos, Folsom, Glendora, Grass Valley,
Indian Wells, Norco,
Petaluma, Pico Rivera, Roseville, Selma, Shafter, Solvang,
Torrance, and Wasco
League of California Cities
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Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : According to the proponents, 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. Proponents argue that this bill 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.
The proponents argue that a long list of academic studies and
public policy research has confirmed that the prevailing wage
continues to be a useful and effective driver for local economic
growth. They argue that in charter cities with prevailing wage
exemptions, new developments have failed to generate quality
jobs and, in fact, these cities have not seen the cost savings
promised by prevailing wage exemptions and instead have had
their construction costs go up due to substandard construction
performed by under-qualified contractors. Further, the
proponents argue that removing prevailing wage protections
pushes workers into requiring more subsidies in healthcare,
housing and other social services.
According to the proponents, this bill does not change the
outcome of State Building and Construction Trades Council v.
City of Vista; instead it 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 allies with prevailing wage exemptions
that consequently pass on the costs of healthcare and
apprenticeship training to the surrounding cities. They argue
that cities that follow the prevailing wage law are furthering a
policy that benefits the state, not just their own residents, so
they are more deserving of state funds for their construction
projects.
The proponents argue that this bill does not require charter
cities to follow the prevailing wage law and, therefore does not
prevent charter cities from having their own policies. As such,
there is no conflict between this bill and the constitutional
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authority of charter cities. Instead, they argue, this bill
will reward the majority of cities that currently follow the
state prevailing wage law.
ARGUMENTS IN OPPOSITION : According to the opponents, their
opposition rests on the fundamental principle of local control
and the constitutional limits on state authority over charter
cities, as recently upheld by the California Supreme Court in
the Vista decision. They argue that in Vista, the Court firmly
protected the right of charter cities to determine whether they
should pay prevailing wages when contracting for public works
projects paid for with local funds.
The opponents argue that this bill conflicts with Vista by
attempting, via the Legislature, to leverage a different outcome
than the Court's ruling by withholding vital state construction
funds - derived from all of the state's taxpayers - from charter
cities that fail to adopt prevailing wage requirements for
projects built with local funds. According to the opponents,
while prevailing wage is the issue raised in this bill, the
threat posed by this bill to local charter authority is much
broader. They argue that if this framework is authorized, there
will be no end to efforts to leverage compliance with other
state edicts, while ignoring the constitutional legitimacy of
the doctrine of municipal affairs.
Some cities argue that they already require the payment of
prevailing wages for city funded projects, but fear that this
legislative tactic could be used in the future to erode other
local flexibility that is important to their communities.
Additionally, the opponents argue that by saddling local
taxpayers with higher costs, the state will guarantee less
construction will take place on locally funded projects.
Overall, the opponents argue that whether a charter city pays
prevailing wage with local funds is up to each city and not the
Legislature.
ASSEMBLY FLOOR : 52-22, 9/4/13
AYES: Alejo, Ammiano, Atkins, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Cooley, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Hall,
Roger Hernández, Holden, Jones-Sawyer, Levine, Lowenthal,
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Medina, Mullin, Nazarian, Pan, Perea, V. Manuel Pérez, Quirk,
Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Weber,
Wieckowski, Williams, Yamada, John A. Pérez
NOES: Achadjian, Allen, Bigelow, Chávez, Conway, Dahle,
Donnelly, Beth Gaines, Grove, Hagman, Harkey, Jones, Linder,
Logue, Maienschein, Mansoor, Morrell, Olsen, Patterson,
Wagner, Waldron, Wilk
NO VOTE RECORDED: Melendez, Mitchell, Muratsuchi, Nestande,
Vacancy, Vacancy
PQ:dk 9/5/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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