BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 331| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 331 Author: Mendoza (D) Amended: 4/22/15 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 4/29/15 AYES: Hertzberg, Beall, Hernandez, Lara, Pavley NOES: Nguyen NO VOTE RECORDED: Moorlach SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 SUBJECT: Public contracts: local agencies: negotiations SOURCE: Author DIGEST: This bill requires counties and cities that have adopted a civic openness in negotiating (COIN) ordinance, as defined, to comply with specified disclosure requirements relating to contract negotiations with private entities. ANALYSIS: Existing law: 1)Enacts the Meyers-Milias-Brown Act (MMBA) which governs the relations between local governments and their employees. The MMBA applies to counties, cities, and special districts, but SB 331 Page 2 not school districts. 2)Establishes, under the MMBA, 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. 3)Enacts the Ralph M. Brown Act (Brown Act) which requires local agencies' meetings to be "open and public," with specific exceptions. 4)Allows, under the Brown Act, 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. 5)Requires the approval of an agreement concluding labor negotiations with represented employees must be reported after the agreement is final and has been accepted or ratified by the other party. The report must identify the item approved and the other party or parties to the negotiation. This bill: 1)Requires a city, county, city and county, or special district that has adopted a COIN ordinance that is 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. 2)Specifies that its 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 SB 331 Page 3 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. 3)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 MMBA: a) 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. b) The completion of the independent economic analysis prior to the presentation of an opening proposal by the public employer. c) Availability for review by the public of the independent economic analysis before presentation of an opening proposal by the public employer. d) 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. e) 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. f) 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. SB 331 Page 4 g) 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 location of the session, or pertinent facts regarding the negotiations that occurred during a session. 4)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: a) 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: i) 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. ii) 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. iii) 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 SB 331 Page 5 requirements of this subdivision are met. b) The local government must disclose all offers and counteroffers to the public within 24 hours on its Internet Web site. c) 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. d) Representatives of the governing body must advise the governing body of all offers, counteroffers, information, or statements of position discussed by the private entity and local government representatives participating in negotiations regarding any contract. e) 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. f) 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. 5)States that its provisions do not apply in a local government that suspends, repeals, or revokes its COIN ordinance. SB 331 Page 6 6)Declares that the statutes that it enacts shall be known, and may be cited, as the Civic Reporting Openness in Negotiations Efficiency Act, or CRONEY. Background In response to the confidentiality that surrounds local governments' labor contract negotiations, several California local governments recently have adopted 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 SB 331 Page 7 for the public scrutiny. Local COIN ordinances have been opposed by local governments' recognized employee organizations, whose members argue 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. Comments 1. Purpose of this 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 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 SB 331 Page 8 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes SUPPORT: (Verified5/19/15) AFSCME District Council 36 American Federation of State, County, and Municipal Employees Association for Los Angeles Deputy Sheriffs Association of Deputy District Attorneys Association of Orange County Deputy Sheriffs California Association of Professional Employees California Professional Firefighters Glendale City Employees Association In the Public Trust International Union of Operating Engineers, Local 501, AFL-CIO LIUNA Local 777 LIUNA Local 792 Los Angeles Police Protective League Los Angeles Probation Officers' Union Orange County Employees Association Orange County Professional Firefighters Association IAFF Local 3631 Organization of SMUD Employees Peace Officers Research Association of California Riverside Sheriffs Association San Bernardino Public Employees Association SB 331 Page 9 San Diego County Court Employees Association San Luis Obispo County Employees Association United Domestic Workers of America, AFSCME Local 3930, AFL-CIO OPPOSITION: (Verified5/19/15) California Chamber of Commerce Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119 5/20/15 17:16:09 **** END ****