BILL ANALYSIS Ó
AB 852
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
852 (Burke) - As Amended April 6, 2015
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY: This bill defines "public work." for purposes of
prevailing wage law to also mean any 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. For purposes of this
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section, "general acute hospital" has the same meaning as
defined in the Health and Safety Code.
FISCAL EFFECT:
1)Approximately $120,000 to $125,000 (special funds) for the
Department of Industrial Relations (DIR) Compliance Monitoring
Unit (CMU) to monitor and enforce the prevailing wage
requirements of this measure.
To the extent this measure results in additional public works
projects, the Department of Industrial Relations (DIR) would
experience additional workload related to the administration
and enforcement of California prevailing wage law. The number
of future health facility construction projects subject to
this bill is unknown; however, if the additional workload to
DIR required a new position, total costs (salary, benefits and
equipment expenses) would be in the range of $120,000 to
$125,000.
The CMU is the component within DIR that monitors and enforces
prevailing wage requirements on public works projects. This
unit is funded through contractor registration fees submitted
to the newly created State Public Works Enforcement Fund,
authorized through the 2014 Budget Act.
2)Expanding the definition of public works would likely result
in increased costs for general acute care hospital projects
that currently utilize conduit bond financing.
COMMENTS:
1)Background. 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
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projects. Existing law requires prevailing wage to be paid to
all workers on public works projects (except for projects of
$1,000 or less). 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."
Bonds that are issued for the purpose of making loans to
entities other than state or local governments are commonly
referred to as conduit bonds. The public entity issuing the
bond acts solely as a "conduit" and does not receive any bond
proceeds. The bond proceeds are transferred to a private
developer, who is responsible for making the payments to the
bondholders. Because the interest is tax-exempt to the
bondholders, they are willing to accept a lower return on
their investment, and, therefore, the cost of borrowing for
the developer is lower.
Many types of governmental agencies can issue conduit revenue
bonds, including state financing authorities, chartered
cities, counties, and joint powers of authorities. The
California Health Facilities Financing Authority (CHFFA),
established in 1979, serves as the conduit issuer for public
and non-profit health care providers in the state. The
authority provides financing assistance to a number of
entities, including rural community-based organizations and
large multi-hospital systems. CHFFA collects reimbursements
for assisting entities in the issuance of bonds.
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2)Purpose. Existing law related to the definition of a public
works project, and whether or not a conduit revenue bond meets
the definition of "paid for in whole or in part out of public
funds," has been the basis for DIR determining projects funded
via this financing mechanism are not "public works" projects,
and therefore, are not subject to prevailing wage statutes.
For example, in 2005 DIR determined an affordable housing
project in Rancho Santa Fe financed under a conduit revenue
bond is not subject to prevailing wage laws because it is not
a public works project. Specifically, DIR states: "?money
collected for, or in the coffers of, a public entity is
'public funds' within the meaning of [state law referenced
above.] Here neither the conduit bond revenues nor the loan
repayments ever enter the coffers of a public entity, nor are
they collected for the public entity. Since none of the money
flows into or out of the public coffers, the conduit bond
financing is not 'the payment of money in the equivalent of
money by the state or political subdivision within the meaning
of [state law referenced above]."
The State Building and Construction Trades Council are
sponsoring this bill to add conduit bond financing to the
types of subsidies that trigger prevailing wage coverage,
thereby recognizing that public funds (through foregone tax
revenues) are being used to subsidize the project.
3)Prior Legislation. SB 615 (Galgiani) of 2013 proposed to
expand the definition of "public works," for the purposes of
prevailing wage payment requirements, to also include any
construction, alteration, demolition, installation, or repair
work done under private contract on a hospital or health care
facility project when the project is paid for, in whole or in
part, with the proceeds of conduit revenue bonds. This bill
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was vetoed by Governor Brown, the veto message reads as
follows:
"While I am staunchly supportive of prevailing wages, and the
quality work and good paying jobs that are associated with these
wages, I am unable to sign this measure.
Applying prevailing wage requirements to healthcare facility
projects that receive conduit revenue bond financing would
result in unbudgeted state enforcement and investigative costs.
Further, the measure fails to define the term 'health care
facilities' which could result in many more projects being
subject to this measure than intended."
This bill differs from SB 615 in that applies to a "general
acute care hospital" rather a hospital or health care facility
project generally.
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081
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