BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: July 8, 2009 2009-2010 Regular
Session
Consultant: Rodger Dillon Fiscal:Yes
Urgency: No
Bill No: AB 677
Author: Solorio
Version: June 25, 2009
SUBJECT
Public works: prevailing wages.
KEY ISSUE
Should the definition of public works be expanded to include
projects done under private contract in connection with
renewable energy generation designed to serve a school district
or community college district?
PURPOSE
To apply prevailing wage law and related procedures to such
renewable energy generation projects.
ANALYSIS
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;
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.
This Bill 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, in or off
of school district or community college district property,
specifically to serve a school district or community college
district.
2.The work is performed in connection with a "long-term" (at
Hearing Date: July 8, 2009 AB 677
Consultant: Rodger Dillon Page 2
Senate Committee on Labor and Industrial Relations
least five years) arrangement for the purchase of partially or
fully exported power by or for the benefit of the school
district or community college district.
COMMENTS
1. Need for this bill?
Energy prices are expected to increase over the longer term
and trend of global warming is nearly universally accepted,
thus giving an impetus to the demand for renewable energy
supplies. This bill would arguably allow for an increased
number of public-private partnerships supporting renewable
energy projects while providing adequate wages and benefits to
workers on the projects. School and community college
districts may be able to lower their energy costs and/or gain
revenue by exporting a portion of the energy capacity.
2. Proponent Arguments :
This bill is sponsored by the State Building and Construction
Trades Council. They state that several energy companies have
teamed up with private investment firms and are securing long
term energy deals with local school districts. The local
school district allows the firm to build a solar installation
on their rooftops and signs a long-term commitment to buy the
energy produced by the solar installation. The sponsor argues
that clearly the use of the rooftops and the long-term
commitment to provide a revenue stream to the firm should
trigger the project as a public works project and require the
payment of prevailing wages to the construction workers.
Prevailing wage law, according to the sponsor, is meant to
protect workers in a time of rapidly growing unemployment and
government involvement in the economy.
3. Opponent Arguments :
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
Hearing Date: July 8, 2009 AB 677
Consultant: Rodger Dillon Page 3
Senate Committee on Labor and Industrial Relations
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.
SUPPORT
State Building and Construction Trades Council, AFL-CIO
(sponsor)
Chevron
OPPOSITION
Associated Builders and Contractors of California
Association of California School Administrators
California Association of School Business Officials
Riverside County Schools Advocacy Association
Western Electrical Contractors Association
* * *
Hearing Date: July 8, 2009 AB 677
Consultant: Rodger Dillon Page 4
Senate Committee on Labor and Industrial Relations