BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 219 (Daly) - Public works: concrete delivery
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|Version: June 1, 2015 |Policy Vote: L. & I.R. 4 - 1 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: July 6, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 219 would expand the definition of public works to
include the hauling and delivery of ready-mixed concrete to
carry out a public works contract.
Fiscal
Impact:
The California Department of Transportation (CalTrans)
estimates that this bill would result in increased costs of
$32 million to $54 million (special funds), which includes
impacts to materials costs, compliance and administration (see
Staff Comments).
AB 219 (Daly) Page 1 of
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The Department of Industrial Relations (DIR) would incur
first-year costs of $127,000 and $119,000 in the out-years
(special funds) monitor and enforce the bill's prevailing wage
requirements for non-CalTrans projects. To the extent that DIR
issues additional fines, special funds revenues would
increase. The magnitude is unknown.
While the bill would impact CalTrans disproportionately at the
state level, it could also potentially result in increased
administrative, materials and compliance costs to other
departments that use ready-mix concrete, including the High
Speed Rail Authority, the Department of Water Resources, the
Department of Corrections and Rehabilitation, the Department
of General Services, and the three segments of higher
education (the University of California, California State
University, and the California Community Colleges). The
magnitudes are unknown.
Background: Current law requires that prevailing wage rates, as determined
by DIR, be paid to all workers employed on a "public works"
projects. The prevailing wage rate is the basic hourly rate
paid on public works projects to a majority of workers engaged
in a particular craft, classification or type of work within the
locality and in the nearest labor market area. Current law
requires that the "prevailing wage" to be paid to all workers
employed on public works projects. Projects valued at $1,000 are
exempted from the requirement. In general, "public works" is
defined to include construction, alteration, demolition,
installation or repair work done under contract and "paid for in
whole or in part out of public funds."
Under current law and DIR precedent, the employees of
subcontractors who haul material to public work sites must be
paid prevailing wage. Conversely, employees of bona fide
material suppliers are excluded from prevailing wage
requirements. A 1999 DIR decision, Alameda Corridor Project: A&A
Ready Mix Concrete and Robertson's Ready Mix Concrete (Public
Works Case No. 99-037), addressed the issue of whether the
state's prevailing wage laws applied to the delivery of
ready-mix concrete to public works job sites.
AB 219 (Daly) Page 2 of
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DIR relied on a California Court of Appeals decision to set
forth the general test for determining whether the work was
subject to the payment of prevailing wages, comprised of three
criteria: (1) a material supplier must be in the business of
selling supplies to the general public, (2) the plant from which
the material is obtained must not be established specially for
the particular contract, and (3) plant may not be located at the
site of the work.
Applying these three criteria, DIR determined in Public Works
Case No. 99-037 that the concrete entities involved were
material suppliers and not subcontractors. The opinion also
stated that the Legislature failed to pass legislation
designating concrete mix on-hauling a public work; however, it
also noted "that such action does not reflect a legislative
intent to preclude the payment of prevailing wages to concrete
mix delivery drivers."
In 2008, DIR determined that the off-hauling of demolition
debris and materials, whether performed by the on-site
demolition contractor's employees or by an independent trucking
company, is subject to prevailing wage requirements. In
addition, DIR determined that the on-hauling of material for
backfill performed by the on-site demolition contractor's
employees is also subject to prevailing wage requirements.
Proposed Law:
This bill would expand the definition of "public works" to
include the hauling and delivery of ready-mixed concrete, as
specified. Specifically, this bill would do all of the
following:
Expand the definition of "public works" to include the
hauling and delivery of ready-mixed concrete to carry out a
public works contract, with respect to contracts involving
any state agency or any political subdivision of the state.
AB 219 (Daly) Page 3 of
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Provide that "ready-mixed concrete" means concrete that
is manufactured in a factory or batching plant, according
to a set recipe, and then delivered in a liquefied state by
mixer truck for immediate incorporation into a project.
Provide that the "hauling and delivery of ready-mixed
concrete to carry out a public works contract" means the
job duties for a ready mix driver that are used by DIR
under existing law, and includes receiving the concrete at
the factory or batching plant and the return trip to the
factory or batching plant.
Provide that the applicable prevailing wage rate shall
be the current prevailing wage rate as determined for the
geographic area in which the factory or batching plant is
located.
Provide that the entity hauling or delivering
ready-mixed concrete to carry out a public works contract
shall enter into a written subcontract agreement with the
party that engaged the entity to supply the ready-mixed
concrete. The written agreement shall require compliance
with specified requirements of existing law.
Require the entity hauling or delivering ready-mixed
concrete to carry out a public works contract to submit a
certified copy of the payroll records to the party that
engaged the entity and to the general contractor within
three working days after the employee has been paid,
accompanied by a written time record certified by each
driver.
Provide that this bill does not apply to contracts
advertised for bid or awarded prior to the effective date
of this bill.
Related Legislation: AB 852 (Burke, 2015) would define "public
work" for purposes of prevailing wage law to also mean any
AB 219 (Daly) Page 4 of
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construction, alteration, demolition, installation, or repair
work done under private contract on a general acute care
hospital when the project is paid for in whole or in part with
the proceeds of conduit revenue bonds issued by a public agency.
A project for a rural general acute care hospital with a maximum
of 76 beds would be exempt from this requirement. This bill is
scheduled to be heard in this Committee on July 6th.
Staff
Comments: Caltrans indicates that it currently has 652 ongoing
construction contracts valued at $10.6 billion, and uses 4.6
million cubic yards of concrete annually.
CalTrans' fiscal estimates of this bill employs a myriad of
interacting assumptions. First, it estimates the average hourly
rate for ready-mixed drivers is currently $16 per hour. Based on
its research, the department estimates that this bill would
cause the wage rate to rise to a range of $42.06 per hour to
$53.37 per hour. The department then combines this assumption
with others, specifically (1) the average amount of concrete
carried per truck (8 to 10 yards), and (2) that each delivery
job will take, on average, two hours. Putting all of these
assumptions together, CalTrans estimates that the bill would
result in an increase in materials (concrete) costs in the range
of $27.6 million to $49.4 million annually.
Caltrans' Division of Construction has an approved labor
compliance program that performs the responsibilities for
enforcement of prevailing wages in lieu of DIR. Caltrans
indicates that this bill would increase support costs both for
(1) inspection of the hauling activities, and (2) enforcement of
prevailing wage requirements under the department's labor
compliance program's operations. Caltrans' estimates an average
of one additional hour per week per contract. Assuming an
average of 250 contracts for 52 weeks per year, this would
require an additional 7.4 PYs and about $1.1 million ongoing.
Finally, CalTrans would need additional staff to administer
projects and accept concrete delivery on site. Assuming an
average of 1,000 cubic yards of concrete are placed per 8-hour
AB 219 (Daly) Page 5 of
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day, it would take 4,600 days to lay the 4.6 million cubic yards
Caltrans averages in a year. This would require an additional
21 PYs at approximately $3.15 million ongoing.
State construction costs are often paid for using General
Obligation (GO) Bonds. Because this measure would increase the
costs for projects that use ready-mix concrete, the GO bond
issuances would likely need to be upsized, leading to higher
debt-service payments. The magnitude is unknown.
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