BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 22, 2011 20011-2012 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: AB 436
Author: Solorio
Version: As amended May 27, 2011
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 requirements and related procedures to
renewable energy generation projects, as specified.
ANALYSIS
Existing law :
1) Requires that not less than the general prevailing wage rate
be paid to all workers employed on a "public works" project
costing over $1,000 dollars and imposes misdemeanor penalties
for a violation of this requirement.
2) Defines "public works," for purposes of regulating public
works contracts, as, 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 would provide that specified work related to renewable
energy generation is considered "public works" for purposes of
prevailing wage law. Specifically, this bill would:
Expand the definition of "public works" to include
construction, alteration, demolition, installation or
repair work done under private contract when the work is
performed in connection with the construction or
maintenance of renewable energy generation capacity,
located on property wholly or partially owned by a school
Hearing Date: June 22, 2011 AB 436
Consultant: Alma Perez Page 2
Senate Committee on Labor and Industrial Relations
district or community college district, or on public
property, specifically to serve a school district or
community college district.
COMMENTS
1. Need for this bill?
Existing law requires that not less than the general
prevailing wage rate of per diem wages, as determined by the
director of the Department of Industrial Relations (DIR), be
paid to all workers employed on a public works projects. The
prevailing wage rate is the basic hourly rate paid on public
works projects to a majority of workers engaged in a
particular craft, classification or type of work within the
locality and in the nearest labor market area. According to
DIR, California's prevailing wage laws ensure that the ability
to get a public works contract is not based on paying lower
wage rates than a competitor. All bidders are required to use
the same wage rates when bidding on a public works project.
Energy prices are expected to increase over the long term,
stimulating the demand for renewable energy supplies. By
providing for the payment of prevailing wage on work related
to renewable energy generation, 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.
2. Proponent Arguments :
According to the author, 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
Hearing Date: June 22, 2011 AB 436
Consultant: Alma Perez Page 3
Senate Committee on Labor and Industrial Relations
25-year life of the project. Furthermore, conversion to the
solar power will help reduce carbon dioxide emissions by more
than 100,000 metric tons - equivalent to planting more than
1,400 acres of trees. Most significantly, the author argues,
the project was built profitably by construction workers
earning the prevailing wage.
The sponsor and author state that public-private partnerships
like this one could potentially be a huge bonus to a number of
unemployed workers suffering through these difficult times.
Unfortunately, they argue, the definition of public work
projects is currently too narrow, which consequently denies
many workers the right to a fair wage. According to the
author, construction workers who are hired 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. The author and proponents 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.
Proponents argue that with the significant public investment
by the schools, commitment to a long-term purchase agreement,
and numerous taxpayer subsidies for solar installations, these
types of public-private partnerships should be clearly
designated as public works prevailing wage projects.
3. Opponent Arguments :
Opponents argue that this bill is an unreasonable new
prevailing wage mandate on private works of improvement and is
unwarranted. They argue that, often times, the cost of
converting to solar is very high and the payoff period for
school districts is 15-20 years and savings to the school
district, and payment to the vendor, comes monthly through
savings in electricity costs. Opponents argue that forcing
these projects to pay prevailing wages will increase the cost
of the projects and erase the bottom line savings. They argue
that this bill could lead to fewer solar conversions in school
districts.
Hearing Date: June 22, 2011 AB 436
Consultant: Alma Perez Page 4
Senate Committee on Labor and Industrial Relations
4. Prior Legislation :
AB 677 (Solorio) of the 2009-10 Session: Vetoed by the
Governor
This bill �AB 436] is identical to AB 677, with the exception
of a recent amendment which deleted the requirement that the
work be performed in connection with a long-term arrangement,
as specified. That measure was vetoed by Governor
Schwarzenegger, who stated the following in his veto message:
"Defining projects for renewable energy generating
facilities serving school and community college districts
as public works when the only public funds are those spent
to purchase power produced is an unwarranted expansion of
prevailing wage requirements into private works of
improvement. Because the payment of prevailing wages
results in higher costs, the bill may potentially reduce
the number of renewable energy projects undertaken."
SUPPORT
State Building and Construction Trades Council (Sponsor)
California Chapter of the National Electrical Contractors
Association
California Labor Federation
California State Pipe Trades Council
Chevron Corporation
Coalition of California Utility Employees
International Brotherhood of Electrical Workers
International Union of Elevator Constructors
Utility Workers Union of America
Western States Council of Sheet Metal Workers
OPPOSITION
Associated Builders and Contractors of California (ABC
California)
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CA Association of School Business Officials
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Senate Committee on Labor and Industrial Relations