BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |SB 331                           |Hearing    |4/29/15  |
          |          |                                 |Date:      |         |
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          |Author:   |Mendoza                          |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |4/22/15                          |Fiscal:    |Yes      |
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          |Consultant|Weinberger                                            |
          |:         |                                                      |
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                       LOCAL GOVERNMENTS' CONTRACT NEGOTIATIONS



          Requires counties and cities that have adopted a COIN ordinance,  
          as defined, to comply with specified disclosure requirements  
          relating to contract negotiations with private entities.


           Background and Existing Law

           The Meyers-Milias-Brown Act governs the relations between local  
          governments and their employees.  The Act applies to counties,  
          cities, and special districts, but not school districts (AB  
          2375, Brown, 1961).  The Meyers-Milias-Brown Act establishes the  
          framework under which local agencies' employees who are  
          represented by unions can collectively bargain over wages,  
          hours, and terms and conditions of employment through a  
          specified meet and confer process.

          The Ralph M. Brown Act requires local agencies' meetings to be  
          "open and public," with specific exceptions.  The Brown Act  
          allows local governments' legislative bodies to meet in closed  
          sessions for some aspects of labor negotiations.  For example, a  
          legislative body may meet in closed session to instruct its  
          bargaining representatives, which may be one or more of its  
          members, on employee salaries and fringe benefits for both union  
          and non-union employees.  The approval of an agreement  
          concluding labor negotiations with represented employees must be  
          reported after the agreement is final and has been accepted or  







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          ratified by the other party.  The report must identify the item  
          approved and the other party or parties to the negotiation.

          In response to the confidentiality that surrounds local  
          governments' labor contract negotiations, several California  
          local governments recently have adopted "Civic Openness in  
          Negotiation" (COIN) ordinances that impose requirements on local  
          governments' contract negotiations with represented employees'  
          bargaining units.  The ordinances typically require the local  
          government to:
                 Hire an independent negotiator.
                 Obtain an independent analysis of the costs of contract  
               proposals.
                 Require public disclosure, within 24 hours, of offers  
               and counteroffers made during the negotiations.
                 Disclose communications that elected local government  
               officials have with representatives of recognized employee  
               organizations.
                 Public disclosure of a proposed contract before it is  
               placed on an agenda for approval by a local legislative  
               body.
          Ordinances imposing some or all of these requirements have been  
          adopted by Orange County, the cities of Cost Mesa, Fullerton,  
          and Beverly Hills, and the East Bay Municipal Utility District.   
          The COIN ordinances' proponents argue that the local  
          requirements are necessary because the secrecy that shields  
          labor contract negotiations results in labor agreements' being  
          approved by elected officials without sufficient opportunities  
          for the public scrutiny.

          Local COIN ordinances have been opposed by local governments'  
          recognized employee organizations, arguing that the ordinances  
          unfairly focus only on labor contracts, while failing to extend  
          similar provisions to local governments' contract negotiations  
          for goods and services provided by private third-parties.   
          Unions representing local government employees want the  
          Legislature to require that any community in which COIN  
          ordinance requirements are imposed on labor negotiations must  
          also impose similar requirements on other contract negotiations.

           Proposed Law

           Senate Bill 331 requires a city, county, city and county, or  
          special district that has adopted a COIN ordinance that is  








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          effective and operative to comply with requirements related to  
          contracts that the local government negotiates with any private  
          person or entity that seeks to provide services or goods to the  
          local government.

          Specifically, SB 331's provisions apply to local governments'  
          contracts of a value of $50,000 or more and to any contracts  
          with a person or entity (or any related person or entity) of a  
          cumulative value of $50,000 or more in any fiscal year being  
          negotiated between the local government and any private person  
          or entity that seeks to provide services or goods to the local  
          government.

          SB 331 defines a "civic openness in negotiations ordinance" or  
          "COIN ordinance" as an ordinance adopted by a local government  
          that requires any of the following as a part of any collective  
          bargaining process undertaken pursuant to the  
          Meyers-Milias-Brown Act:
                 The preparation of an independent economic analysis  
               describing the fiscal costs of benefit and pay components  
               currently provided to members of a recognized employee  
               organization.
                 The completion of the independent economic analysis  
               prior to the presentation of an opening proposal by the  
               public employer.
                 Availability for review by the public of the independent  
               economic analysis before presentation of an opening  
               proposal by the public employer.
                 Updating of the independent economic analysis to reflect  
               the annual or cumulative costs of each proposal made by the  
               public employer or recognized employee organization.
                 Updating of the independent economic analysis to reflect  
               any absolute amount or change from the current actuarially  
               computed unfunded liability associated with the pension or  
               postretirement health benefits.
                 The report from a closed session of a meeting of the  
               public employer's governing body of offers, counteroffers,  
               or supposals made by the public employer or the recognized  
               employee organization and communicated during that closed  
               session.
                 The report from a closed session of a meeting of the  
               public employer's governing body of any list of names of  
               persons in attendance during any negotiations session, the  
               date of the session, the length of the session, the  








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               location of the session, or pertinent facts regarding the  
               negotiations that occurred during a session.

          SB 331 requires a local government that has adopted a COIN  
          ordinance to comply with the following requirements for all  
          contracts being negotiated between the local government and any  
          private person or entity that seeks to provide services or goods  
          to the local government:
                 The city, county, or city and county must designate an  
               unbiased independent auditor to review the cost of any  
               proposed contract.  The independent auditor must prepare a  
               report on the cost of the contract and provide the report  
               to all parties and make it available to the public before  
               the governing body takes any action to approve or  
               disapprove the contract. The report must comply with the  
               following:
                  o         The report must include a recommendation  
                    regarding the viability of the contract, including any  
                    supplemental data upon which the report is based, and  
                    must determine the fiscal impacts attributable to each  
                    term and condition of the contract.
                  o         The report must be made available to the  
                    public at least 30 days before the issue can be heard  
                    before the governing body and at least 60 days before  
                    any action to approve or disapprove the contract by  
                    the governing body.
                  o         Any proposed changes to the contract after it  
                    has been approved by the governing body must adhere to  
                    the same approval requirements as the original  
                    contract.  The changes must not go into effect until  
                    all of the requirements of this subdivision are met.
                 The local government must disclose all offers and  
               counteroffers to the public within 24 hours on its Internet  
               Web site.
                 Before approving any contract, the local government must  
               release a list of names of all persons in attendance,  
               whether in person or by electronic means, during any  
               negotiation session regarding the contract, the date of the  
               session, the length of the session, the location where the  
               session took place, and any pertinent facts regarding the  
               negotiations that occurred in that session.
                 Representatives of the governing body must advise the  
               governing body of all offers, counteroffers, information,  
               or statements of position discussed by the private entity  








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               and local government representatives participating in  
               negotiations regarding any contract.
                 Each governing body member and staff members of  
               governing body offices must disclose publicly all verbal,  
               written, electronic, or other communications regarding a  
               subject matter related to the negotiations or pending  
               negotiations they have had with any official or unofficial  
               representative of the private entity within 24 hours after  
               the communication occurs.
                 A final governing body determination regarding approval  
               of any contract must be undertaken only after the matter  
               has been heard at a minimum of two meetings of the  
               governing body wherein the public has had the opportunity  
               to review and comment on the matter. 

          SB 331 states that its provisions do not apply in a local  
          government that suspends, repeals, or revokes its COIN  
          ordinance.

          The bill declares that the statutes that it enacts chapter shall  
          be known, and may be cited, as the Civic Reporting Openness in  
          Negotiations Efficiency Act, or CRONEY.


           State Revenue Impact

           No estimate.


           


          Comments

           1.  Purpose of the bill  .  SB 331 advances the cause of  
          transparency in public contracting.  Greater public scrutiny of  
          contracts negotiated by public agencies can improve outcomes.   
          However, some local governments have adopted "COIN" ordinances  
          that focus transparency requirements only on labor contracts  
          negotiated through the collective bargaining process.  Problems  
          resulting from conflicts-of interest, unexpected costs, and  
          ill-considered contract provisions certainly are not exclusive  
          to local governments' labor contracts.  As a result,  
          transparency requirements should not be limited to a single  








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          interest group.  SB 331 will establish parity in local  
          governments' contract transparency requirements by ensuring that  
          a jurisdiction that imposes openness requirements on labor  
          negotiations must apply a similar degree of openness to its  
          negotiations of contracts for goods and services provided by  
          private third-parties.

          2.   Elevating form over function  .  In theory, applying roughly  
          similar transparency requirements to all local government  
          contract negotiations may seem fair.  However, in practice, it  
          is problematic to apply one-size-fits-all requirements to a wide  
          variety of contract negotiations that are not alike.  The  
          exemptions from statutory open meeting requirements that state  
          law grants to labor contract negotiations do not apply to most  
          other types of local government contracts for goods and  
          services.  This is not to suggest that favoritism, payoffs, or  
          bad judgment can't influence local governments' contract awards  
          for goods and services.  But, the problems with those contract  
          negotiations may not relate to a lack of public notice or  
          discussion in public hearings.  For example, in contrast with  
          the collective bargaining process, the details of solicitations  
          for public works contracts are circulated well in advance of the  
          bidding process and contracts are typically awarded to the  
          lowest responsible bidder through a public process, with minimal  
          opportunities to alter the details of the contract.  By applying  
          similar openness requirements on all local government contracts,  
          SB 331 may only achieve parity in form, while failing to address  
          the different policy responses that may be necessary to respond  
          to different types of undesirable contract negotiation  
          practices.

          3.   Mandate  .  The Legislative Counsel's Office says that SB 331  
          would impose a state-mandated local program because it requires  
          local government officials to perform additional duties related  
          to negotiating contracts.  The California Constitution generally  
          requires the state government to reimburse the costs of new or  
          expanded state mandated local programs.  However, on June 3,  
          2014, California voters approved Proposition 42, which amended  
          the California Constitution to require local agencies to comply  
          with the California Public Records Act.  Proposition 42 also  
          requires local agencies to comply with any subsequent statutory  
          enactment amending the Public Records Act that contains  
          specified findings that the newly enacted statute furthers  
          specified constitutional provisions guaranteeing public access  








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          to public agency meetings and records.  SB 331 contains  
          legislative findings that the bill furthers the purpose of  
          Section 3 of Article I of the California Constitution by  
          ensuring that members of the public have the opportunity to be  
          informed of, and meaningfully participate in, the negotiation  
          and approval of contracts for goods and services by a local  
          government that has adopted a civic openness in negotiations  
          (COIN) ordinance.  As a result, SB 331 disclaims the state's  
          responsibility for reimbursing local governments' costs of  
          complying with the bill's requirements.










































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          Support and  
          Opposition   (4/23/15)


           Support  :  American Federation of State, County, and Municipal  
          Employees; California Association of Professional Employees;  
          California Professional Firefighters; Association of Deputy  
          District Attorneys; Glendale City Employees Association; LIUNA  
          Local 777; LIUNA Local 792; Association for Los Angeles Deputy  
          Sheriffs; Los Angeles Probation Officers' Union; Los Angeles  
          Police Protective League; Orange County Employees Association;  
          Organization of SMUD Employees; Peace Officers Research  
          Association of California; Riverside Sheriffs Association; San  
          Bernardino Public Employees Association; San Diego County Court  
          Employees Association; San Luis Obispo County Employees  
          Association.

           Opposition  : Unknown.


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