BILL ANALYSIS Ó SB 331 Page 1 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 SB 331 Page 2 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 SB 331 Page 3 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 SB 331 Page 4 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 SB 331 Page 5 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. SB 331 Page 6 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 SB 331 Page 7 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. SB 331 Page 8 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 SB 331 Page 9 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. SB 331 Page 10 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. SB 331 Page 11 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. SB 331 Page 12 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 SB 331 Page 13 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 SB 331 Page 14 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. SB 331 Page 15 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 Hernández) 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 Hernández) of 2011 was similar to AB 1333. AB 834 failed passage on the Assembly Floor. SB 331 Page 16 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." SB 331 Page 17 Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0001609