BILL ANALYSIS                                                                                                                                                                                                    ”



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          SENATE THIRD READING


          SB  
          331 (Mendoza)


          As Amended  August 17, 2015


          Majority vote


          SENATE VOTE:  25-14


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Local           |5-4  |Gonzalez, Alejo,      |Maienschein,        |
          |Government      |     |Chiu, Gordon, Holden  |Cooley, Linder,     |
          |                |     |                      |Waldron             |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |12-5 |Gomez, Bloom, Bonta,  |Bigelow, Chang,     |
          |                |     |Calderon, Nazarian,   |Gallagher, Jones,   |
          |                |     |Eggman, Eduardo       |Wagner              |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Quirk, Rendon, Weber, |                    |
          |                |     |Wood                  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          SUMMARY:  Requires local agencies that have adopted a Civic  








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          Openness in Negotiations (COIN) ordinance for their labor  
          contracts to use a similar process to evaluate, negotiate, and  
          approve specified contracts for goods or services valued at  
          $250,000 or more.  Specifically, this bill:  


          1)Enacts the Civic Reporting Openness in Negotiations Efficiency  
            Act, or CRONEY.


          2)Provides that CRONEY applies only to a city, county, city and  
            county, or special district that has adopted a COIN ordinance,  
            which is effective and operative.  CRONEY shall not apply if  
            the city, county, city and county, or special district  
            suspends, repeals, or revokes its COIN ordinance.


          3)Provides that CRONEY shall not apply to a contract if the  
            contract is required to respond to, recover from, or mitigate  
            the effects of any of the following:


             a)   A temporary public safety emergency declared by the  
               chief law enforcement officer of a city, county, city and  
               county, or special district; and,


             b)   A state of war emergency, state of emergency, or local  
               emergency, as specified.


          4)Provides that CRONEY shall not apply to a renewal of a  
            contract if the employees performing the services are covered  
            by a collective bargaining agreement that is governed by the  
            National Labor Relations Act, as specified.


          5)Provides that CRONEY shall apply to any contracts with a value  
            of at least $250,000, and to any contracts with a person or  








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            entity, or related person or entity, with a cumulative value  
            of at least $250,000 within the fiscal year of the city,  
            county, city and county, or special district, being negotiated  
            between the city, county, city and county, or special  
            district, and any private person or entity that seeks to  
            provide services or goods to the city, county, city and  
            county, or special district, in the following areas:   
            accounting, financing, hardware and software maintenance,  
            health care, human resources, human services, information  
            technology, telecommunications, janitorial maintenance, legal  
            services, lobbying, marketing, office equipment maintenance,  
            passenger vehicle maintenance, property leasing, public  
            relations, public safety, social services, transportation, or  
            waste removal.


          6)Requires the city, county, city and county, or special  
            district to designate an unbiased independent auditor to  
            review the cost of any proposed contract, who 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. 


          7)Requires the report specified above to comply with the  
            following:


             a)   The report shall include a recommendation regarding the  
               viability of the contract, including any supplemental data  
               upon which the report is based, and shall determine the  
               fiscal impacts attributable to each term and condition of  
               the contract;


             b)   The report shall 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  








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               approve or disapprove the contract by the governing body;  
               and,


             c)   Any proposed changes to the contract after it has been  
               approved by the governing body shall adhere to the same  
               approval requirements as the original contract.  The  
               changes shall not go into effect until all of the  
               requirements of 6) and 7) above, are met.


          8)Requires the city, county, city and county, or special  
            district to disclose all offers and counteroffers to the  
            public within 24 hours on its Internet Web site (website).


          9)Requires, before approving any contract, the city, county,  
            city and county, or special district to 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.


          10)Requires representatives of the governing body to advise the  
            governing body of all offers, counteroffers, information, or  
            statements of position discussed by the contracting person or  
            entity and city, county, city and county, or special district  
            representatives participating in negotiations regarding any  
            contract.


          11)Requires each governing body member and staff members of  
            governing body offices to 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  








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            representative of the private entity within 24 hours after the  
            communication occurs.


          12)Requires a final governing body determination regarding  
            approval of any contract to 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.


          13)Finds and declares that Section 1 of the bill furthers,  
            within the meaning of paragraph (7) of subdivision (b) of  
            Section 3 of Article I of the California Constitution, the  
            purposes of that constitutional section as it relates to the  
            right of public access to the meetings of local public bodies  
            or the writings of local public officials and local agencies,  
            and declares, pursuant to paragraph (7) of subdivision (b) of  
            Section 3 of Article I of the California Constitution, that  
            the Legislature makes the following findings:


               This act ensures 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 city, county,  
               city and county, or special district that has adopted  
               a civic openness in negotiations (COIN) ordinance,  
               thereby furthering the purposes of Section 3 of  
               Article I of the California Constitution.


          14)Provides that no reimbursement is required by this bill  
            because the only costs that may be incurred by a local agency  
            or school district under this bill would result from a  
            legislative mandate that is within the scope of paragraph (7)  
            of subdivision (b) of Section 3 of Article I of the California  
            Constitution.









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          15)Defines "civic openness in negotiations ordinance" or "COIN  
            ordinance" to mean an ordinance adopted by a city, county,  
            city and county, or special district that requires any of the  
            following as a part of any collective bargaining process  
            undertaken pursuant to the Meyers-Milias-Brown Act (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, as defined in existing law governing local  
               public employee organizations;


             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  








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               employee organization and communicated during that closed  
               session; or,


             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.


          EXISTING LAW:   


          1)Authorizes the legislative body of any public or municipal  
            corporation or district to contract with and employ any  
            persons for the furnishing to the corporation or district  
            special services and advice in financial, economic,  
            accounting, engineering, legal, or administrative matters if  
            the persons are specially trained and experienced and  
            competent to perform the special services required.
          2)Enacts the MMBA, which governs the relations between local  
            governments and their employees.  The MMBA applies to  
            counties, cities, and special districts.


          3)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.


          4)Enacts the Ralph M. Brown Act (Brown Act), which requires  
            local agencies' meetings to be "open and public," with  
            specific exceptions.  










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          5)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.


          6)Requires the approval of an agreement concluding labor  
            negotiations with represented employees to be publicly  
            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.


          7)Requires public agencies, pursuant to the California Public  
            Records Act (CPRA), to make their records available for public  
            inspection and, upon request, to provide a copy of a public  
            record, unless the record is exempt from disclosure, and  
            allows a public agency to charge to the requester the direct  
            cost of producing the electronic public record.


          8)Provides, pursuant to the California Constitution, that the  
            people have the right of access to information concerning the  
            conduct of the people's business, and, therefore, the meetings  
            of public bodies and the writings of public officials and  
            agencies shall be open to public scrutiny.


          9)Provides, pursuant to the California Constitution (as amended  
            by Proposition 42 in 2014), that in order to ensure public  
            access to the meetings of public bodies and the writings of  
            public officials and agencies, each local agency is required  
            to comply with the CPRA and the Brown Act, and with any  
            subsequent statutory enactment amending either act, enacting a  
            successor act, or amending any successor act that contains  
            findings demonstrating that the statutory enactment furthers  








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            the purposes of the California Constitution that govern public  
            access to the meetings of public bodies and the writings of  
            public officials and agencies.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee:


          1)Unknown, but likely significant costs to impacted local  
            agencies for independent auditor reviews and required reports  
            for each impacted contract.  These mandated costs are  
            potentially reimbursable by the state, but may fall under  
            Proposition 42.  Should local agencies seek reimbursement from  
            the Commission on State Mandates and prevail, the cost to the  
            state is potentially in the millions of dollars (GF)  
            statewide.


          2)Unknown, non-reimbursable costs to local agencies to comply  
            with new public disclosure and meeting requirements.  These  
            costs would likely fall under Proposition 42 and, therefore,  
            are not reimbursable.


          COMMENTS:  


          1)Bill Summary.  This bill requires local agencies that have  
            adopted a COIN ordinance for their labor contracts to use a  
            similar process to evaluate, negotiate, and approve contracts  
            for goods or services valued at $250,000 or more in the  
            following areas:  accounting, financing, hardware and software  
            maintenance, health care, human resources, human services,  
            information technology, telecommunications, janitorial  
            maintenance, legal services, lobbying, marketing, office  
            equipment maintenance, passenger vehicle maintenance, property  
            leasing, public relations, public safety, social services,  
            transportation, or waste removal.  








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            The requirements of this bill would not apply if the city,  
            county, city and county, or special district suspends,  
            repeals, or revokes its COIN ordinance.  In addition, the bill  
            would not apply to a contract if the contract is required to  
            respond to, recover from, or mitigate the effects of any of  
            the following:


             a)   A temporary public safety emergency declared by the  
               chief law enforcement officer of a city, county, city and  
               county, or special district; and,


             b)   A state of war emergency, state of emergency, or local  
               emergency, as specified.


            The bill also does not apply to a renewal of a contract if the  
            employees performing the services are covered by a collective  
            bargaining agreement that is governed by the National Labor  
            Relations Act, as specified.  This bill is sponsored by the  
            American Federation of State, County and Municipal Employees,  
            AFL-CIO, and the Orange County Employees Association.


          2)Background.  Several local governments have recently approved  
            COIN ordinances or similar legislation in a stated attempt to  
            increase public awareness and involvement in their labor  
            contract negotiations.  The City of Costa Mesa in 2012 was the  
            first jurisdiction to adopt a COIN ordinance, driven in part  
            by its unfunded pension obligations.  Orange County also has a  
            COIN ordinance and the cities of Beverly Hills, Fullerton and  
            Palos Verdes have similar ordinances in place.  Similar  
            ordinances have been considered in the cities of Gilroy,  
            Sunnyvale and Yorba Linda, in Marin County, and by the Orange  
            County Fire Authority.









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            A COIN ordinance usually requires the local government to do  
            several things in the course of its labor contract  
            negotiations, including:


             a)   Hiring an independent negotiator;


             b)   Obtaining an analysis of the costs of contract  
               proposals;


             c)   Requiring public disclosure of offers and counter-offers  
               made during negotiations;


             d)   Disclosing communications between elected local  
               government officials and representatives of recognized  
               employee organizations; and,


             e)   Disclosing a proposed contract before it is placed on an  
               agenda for approval by a local legislative body.


            Proponents of COIN ordinances argue that these requirements  
            are necessary to provide opportunities for the public to be  
            informed about labor contract negotiations before they are  
            approved by their elected officials.


            Opponents of COIN ordinances argue that these 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.










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          3)Author's Statement.  According to the author, "SB 331 will  
            increase transparency in public contracting by establishing  
            the Civic Reporting Openness in Negotiations Efficiency Act.   
            The bill applies to local jurisdictions where a Civic Openness  
            in Negotiations Ordinances (COIN) has been approved and will  
            ensure that the same openness requirements apply to all  
            contracts whether they are labor contracts or contracts with  
            private entities for goods and services.


            "Under the bill, a local jurisdiction where a COIN ordinance  
            exists will be required to expand transparency to all  
            contracts with private entities for goods and  
            services?Transparency in public contracting is needed in ALL  
            public contracting, and can't be effectively directed at just  
            one interest group."


          4)COIN in Orange County.  Orange County's COIN ordinance was  
            proposed and approved last year amid heated controversy.   
            Proponents argued that there was a long history of labor  
            negotiations being held in closed session and then contracts  
            being approved immediately thereafter, depriving constituents  
            and voters of any input into the County's labor contracts.   
            Opponents criticized Orange County's Board of Supervisors for  
            failing to have the COIN ordinance cover all government  
            contracting, including contracts with private companies.  They  
            cited an Orange County Grand Jury report, entitled "Improving  
            the County of Orange Government's Multi-Billion Dollar  
            Contracting Operations," which found that most of the county's  
            budget, or $3.1 billion out of $5.4 billion, is spent on  
            private sector contracts.  In 


          response, proponents of COIN noted that the process and dollar  
            amounts for labor contracts are dramatically different from  
            negotiations for other kinds of contracts.  The Association of  
            Orange County Deputy Sheriff's also alleged that the ordinance  
            was unconstitutional and that its language and timing  








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            constituted an unfair labor practice.
          5)COIN Case at the Public Employment Relations Board.  In July  
            of 2014, three of Orange County's recognized employee  
            organizations filed unfair practice charges with California's  
            Public Employment Relations Board (PERB).  In November 2014,  
            PERB issued complaints in all three cases alleging that Orange  
            County's adoption of its COIN ordinance violated the MMBA and  
            PERB regulations.  


            PERB issued its proposed decision on June 16, 2015, finding  
            that some components of Orange County's COIN ordinance, as  
            well as the process by which it was introduced and adopted,  
            violate the MMBA and PERB regulations.  PERB ordered Orange  
            County to do the following:  rescind from its COIN ordinance  
            those components found to violate the MMBA and PERB  
            regulations; cease and desist from activities found to violate  
            the MMBA and PERB regulations; and, post notices of PERB's  
            orders.


            Orange County on July 13, 2015, filed an exception to PERB's  
            proposed decision, which initiates PERB's appeal process.  It  
            is unknown when PERB will finalize its decision. 


          6)Proposition 42.  Proposition 42, approved by voters on June 3,  
            2014, amended the California Constitution by requiring all  
            local governments to comply with the CPRA and the Brown Act,  
            and with any subsequent changes to those Acts.  Proposition 42  
            also eliminated reimbursement to local agencies for the costs  
            of complying with the CPRA and the Brown Act.


            This bill contains language stating that the Legislature finds  
                           and declares that Section 1 of the bill furthers the purpose  
            of the California Constitution as it relates to the right of  
            public access to the meetings of local public bodies or the  
            writings of local public officials and local agencies.  The  








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            bill also includes a finding, pursuant to paragraph (7) of  
            subdivision (b) of Section 3 of Article I of the Constitution  
            (which was added by Proposition 42), that states, "This act  
            ensures 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 city,  
            county, city and county, or special district that has adopted  
            a civic openness in negotiations (COIN) ordinance, thereby  
            furthering the purposes of Section 3 of Article I of the  
            California Constitution."


            Section 3 of the bill specifies that no reimbursement for  
            local agencies to implement the bill's provisions is necessary  
            because "the only costs that may be incurred by a local agency  
            or school district?would result from a legislative mandate  
            that is within the scope of paragraph (7) of subdivision (b)  
            of Section 3 of Article I of the California Constitution."


            That said, the provisions of this bill have been placed in the  
            Public Contract Code, rather than the statutes that contain  
            the CPRA and the Brown Act.  It is unclear whether the  
            provisions of this bill would fall under the requirements of  
            Proposition 42.


          7)Policy Considerations.  The Legislature may wish to consider  
            the following:


             a)   Pending PERB Decision.  As noted above, a COIN ordinance  
               decision is pending with PERB.  The Legislature may wish to  
               consider whether it is premature to enact legislation  
               affecting this issue before this decision is finalized, and  
               whether a more appropriate remedy at that time might be to  
               prohibit COIN ordinances from containing any provisions  
               that PERB found to violate the MMRA and PERB regulations.









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             b)   Applying COIN Provisions to Non-Labor Contracts.  The  
               Senate Governance and Finance Committee analysis of this  
               bill notes, "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."


          8)Previous Legislation.  AB 1333 (Roger HernŠndez) of 2013 would  
            have required a local legislative body to adopt a resolution  
            to either exercise, or decline to exercise, an option to  
            rescind an "evergreen" contract or memorandum of understanding  
            with a total annual value of $250,000.  AB 1333 was held in  
            the Senate Governance and Finance Committee.


            AB 834 (Roger HernŠndez) of 2011 was similar to AB 1333.  AB  
            834 failed passage on the Assembly Floor. 








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          9)Arguments in Support.  The American Federation of State,  
            County and Municipal Employees, AFL-CIO, co-sponsor of this  
            measure, writes, "While some transparency measures are already  
            present during many of the labor contracts in California, even  
            in the absence of COIN, private companies contracting with  
            cities and counties for public dollars are rarely held to the  
            same standard.  If municipalities are contracting with private  
            entities for public services, then taxpayers have a right to  
            know how their money is being used in private contracts; if  
            taxpayers are going to trust a for-profit company to provide  
            vital services, that company should be able to prove it can be  
            trusted.  SB 331 is a piece of municipal legislation that  
            would bring maximum transparency to contract negotiations with  
            private entities for public services, which have a  
            long-standing and increasing history of being done outside of  
            public view."


          10)Arguments in Opposition.  The Orange County Board of  
            Supervisors, in opposition, states, "SB 331 imposes far  
            greater restrictions on the Board's ability to conduct its  
            business than what is required of collective bargaining under  
            COIN, the most egregious of which would prohibit approval of  
            any contracts for no less than sixty days.  This proposed  
            state mandate on a local government would essentially stifle  
            the Board's primary responsibility to fund critical contracts  
            that keep county operations functioning? The mandates proposed  
            in SB 331 will only lead to increased costs due to delays in  
            the contracting process and unreasonable administrative  
            burdens.  Most importantly, this bill punishes two groups:   
            the people who work here, and the people relying on the timely  
            provision of County services.  While transparency is a worthy  
            policy goal, the size, scope and structure of this bill  
            demonstrates that it is more about retribution than it is a  
            sweeping policy aimed at transparency and openness."










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          Analysis Prepared by:                                             
                          Angela Mapp / L. GOV. / (916) 319-3958  FN:  
          0001609