BILL ANALYSIS
AB 677
Page 1
Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
William W. Monning, Chair
AB 677 (Solorio) - As Amended: April 14, 2009
SUBJECT : Public works: prevailing wages.
SUMMARY : Provides that specified work related to renewable
energy generation is considered "public works" for purposes of
prevailing wage law. Specifically, this bill provides that
"public works" includes construction, alteration, demolition,
installation or repair work done under private contract when all
of the following conditions exist:
1 The work is performed in connection with the construction or
maintenance of renewable energy generation capacity
specifically to serve a school district or community college
district.
2)The work is performed in connection with a "long-term" (at
least five-years) arrangement for the purchase of power by or
for the benefit of the school district or community college
district.
EXISTING LAW :
1) Requires the prevailing wage rate to be paid to all workers
on "public works" projects over $1,000.
2) Defines "public work" to include, among other things,
construction, alteration, demolition, installation or repair
work done under contract and paid for in whole or in part out
of public funds.
3) Defines "paid for in whole or in part out of public funds" as
used in public works as the following:
a) Payment of money or the equivalent of money by a state
or political subdivision directly to or on behalf of the
public works contractor, subcontractor, or developer;
b) Construction work performed by a state or political
subdivision in execution of a project;
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c) Transfer of an asset of value for less than fair market
value;
d) Fees, costs, rents, insurance or bond premiums, loans,
interest rates, or other obligations normally required in
the execution of a contract that are paid, reduced, charged
at less than fair market value, waived or forgiven;
e) Money loaned that is to be repaid on a contingent basis;
and
f) Credits applied against repayment obligations.
4) Exempts from the definition of "paid for in whole or in part
out of public funds" specified types of affordable housing,
private residential housing, private development projects,
qualified residential projects, low income housing projects,
state manufacturing tax credits, and single family
residential projects.
FISCAL EFFECT : Unknown
COMMENTS : This bill is sponsored by the State Building and
Construction Trades Council.
The sponsor and the author state that in February of 2009,
Chevron announced the completion of what is believed to be the
largest K-12 solar and energy efficiency project in the United
States. Chevron installed solar panel roofs on 14 sites in the
San Jose Unified School District. The project, which includes a
total of 5.5 megawatts of solar power at 14 district sites, is
expected to reduce the district's energy costs by more than 30
percent and help save the district $25 million over the 25-year
life of the project. Furthermore, conversion to the solar power
will help reduce carbon dioxide emissions by more that 100,000
metric tons - equivalent to planting more than 1,400 acres of
trees.
The sponsor and author state that this partnership could also
potentially be a huge bonus to a number of unemployed workers
suffering through these difficult times. Current law requires
that all contractors on public works pay their workers based on
prevailing wage rates, which are established and issued by the
Department of Industrial Relations, Division of Labor Statistics
and Research.
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However, the sponsor and author contend that, unfortunately, the
definition of public work projects is currently too narrow,
which consequently denies many workers the right to a fair wage.
In California, construction workers who are hired on to
complete public work projects at sites performed in connection
with the construction or maintenance of renewable energy
generation capacity are not currently protected under prevailing
wage stipulations. Prevailing wage law is meant to protect
workers in a time of rapidly growing unemployment and government
involvement in the economy. They argue that, without these
provisions contractors bidding for state money could undercut
prevailing wages in any given area by 20 to 30 percent and
ultimately hurt vulnerable workers and their families.
The Western Electrical Contractors Association (WECA) opposes
this measure, stating that under existing law a variety of
federal, state and local public works projects paid for with
state dollars or other incentives are subject to prevailing wage
requirements. WECA argues that this bill expands this
requirement to private contracts under certain circumstances and
represents a significant and unwarranted expansion of the policy
into private works of improvement. WECA states that there can
be little disagreement that a prevailing wage mandate results in
higher costs. While this bill only applies to projects that
supply school and community college districts with renewable
energy, it is inappropriate to saddle either the energy provider
or its customer - the school or community college district -
with the higher costs.
Similarly, the Riverside County Schools Advocacy Association
argues that the additional costs imposed by this measure would
have a chilling effect on school district ability to consider
renewable energy projects. They contend that this bill would
result in a disservice not only to schools and students, but
also to local communities and the environment.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Sheet Metal and Air Conditioning
Contractors National Association
State Building and Construction Trades Council (sponsor)
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Opposition
Riverside County Schools Advocacy Association
Western Electrical Contractors Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091