BILL ANALYSIS �
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THIRD READING
Bill No: AB 302
Author: Chau (D)
Amended: 8/12/13 in Senate
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 3-1, 6/26/13
AYES: Monning, Leno, Yee
NOES: Wyland
NO VOTE RECORDED: Padilla
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 53-24, 4/18/13 - See last page for vote
SUBJECT : Public works: public subsidies
SOURCE : State Building and Construction Trades Council of
California
DIGEST : This bill provides a statutory definition for a de
minimis public subsidy that does not trigger the requirements of
prevailing wage law. Specifically, this bill defines de
minimis" to mean a public subsidy that is both less than $25,000
and less than 1% of the total project cost and will not apply to
a project that was advertised for bid, or a contract that was
awarded, before
January 1, 2014.
ANALYSIS : Existing law defines "public works" to include,
among other jobs, construction, alteration, demolition,
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installation, or repair work done under contract and paid for in
whole or in part out of public funds.
Under existing law, "paid for in whole or in part out of public
funds" means, among other things, the following:
1. The payment of money or the equivalent of money by the state
or political subdivision directly to or on behalf of the
public works contractor, subcontractor, or developer.
2. The performance of construction work by the state or
political subdivision in execution of the project.
3. Fees, costs, rents, insurance or bond premiums, loans,
interest rates, or other obligations that would normally be
required in the execution of the contract, that are paid,
reduced, charged at less than fair market value, waived, or
forgiven by the state or political subdivision.
4. Money loaned by the state or political subdivision that is
to be repaid on a contingent basis.
Existing law defines "awarding body" or "body awarding the
contract" as the department, board, authority, officer or agent
awarding a contract for public work.
Existing law requires all employees who work on public works
projects costing $1,000 or more to be paid the general
prevailing rate of per diem wages and the general prevailing
rate for holiday and overtime work for the specific location
where the public work is to be performed.
Existing law states that if the state or a political subdivision
reimburses a private developer for costs that would normally be
borne by the public, or provides directly or indirectly a public
subsidy to a private development project that is "de minimis" in
the context of the project, an otherwise private development
project shall not be subject to prevailing wage requirements.
This bill provides a statutory definition for a "de minimis"
public subsidy that does not trigger the requirements of
prevailing wage law. Specifically, this bill defines "de
minimis" to mean a public subsidy that is both less than $25,000
and less than 1% of the total project cost and will not apply to
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a project that was advertised for bid, or a contract that was
awarded, before January 1, 2014.
Comments
SB 975 (Alarcon, Chapter 938, Statutes of 2001) provided that if
the state or a political subdivision reimburses a private
developer for costs that would normally be borne by the public,
or provides directly or indirectly a public subsidy to a private
development project that is "de minimis" in the context of the
project, an otherwise private development project shall not
thereby become subject to the requirement to pay prevailing
wages. However, SB 975 did not provide a definition for the
term "de minimis."
According to the author's office, since the enactment of SB 975,
Department of Industrial Relations (DIR) has issued several
coverage determinations attempting to define the term "de
minimis." In 2005, DIR first articulated a standard for "de
minimis" in Public Works (PW) Case No. 2004-024 (New Mitsubishi
Auto Dealership)(March 18, 2005). In that case, DIR noted that
nothing in the prevailing wage law or the applicable legislative
history of SB 975 provided guidance as to the appropriate
measure of what should be considered "de minimis." Therefore,
DIR looked to other statutory or regulatory schemes for other
state agencies (including Franchise Tax Board and the California
Coastal Commission) and articulated a standard for "de minimis"
to mean "the public funding was proportionally small enough, in
relation to the overall cost of the project, that the
availability of those funds did not significantly affect the
economic viability of the Project" (emphasis provided). In that
specific case, DIR found that public reimbursement of $65,710 to
a project with a total cost of $4,010,010 represented only 1.64%
of the total project cost, and therefore could reasonably be
considered "de minimis."
Since that time, DIR has applied this test to find a "de
minimis" public subsidy ranging from a $23,475 public subsidy on
a $2.4 million project (or 0.99% of the total project costs), PW
Case No. 2008-038 (April 21, 2010) to a $1,664,804 public
subsidy on a $95 million project (or 1.75% of the total project
cost), PW Case No. 2011-033 (May 9, 2012).
According to the author's office, this bill restores the
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original intent of SB 975 that the "de minimis" exception be
limited to situations in which the public subsidy is trivial
such that it should not have legal significance. This bill
provides that a subsidy is "de minimis" if it is both less than
$10,000 and less than 1% of the total project cost.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/12/13)
State Building and Construction Trades Council of California
(source)
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California State Association of Electrical Workers
California State Pipes Trades Council
National Electrical Contractors Association - California Chapter
Southern California Contractors Association
Western States Council of Sheet Metal Workers
OPPOSITION : (Verified 8/12/13)
Air Conditioning Trade Association
Associated Builders and Contractors of California
Plumbing-heating-Cooling Contractors Association of California
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : According to proponents, Labor Code
Section 1720(c)(3) provides that a project does not become
subject to the prevailing wage law if it receives a public
subsidy "that is de minimis in the context of the project."
Proponents cite the legal definition of "de minimis" as:
"trifling, minimal?so insignificant that a court may overlook
it." Proponents contend that DIR has strayed from this legal
definition of "de minimis," and lacking a definition in statute,
has loosely interpreted the definition to apply to subsidies
ranging from thousands to millions of dollars. Proponents argue
that a public subsidy of $25,000 is a large amount of taxpayer
investment in a project and arguably is not "de minimis," making
it reasonable to require payment if the developer wants a public
subsidy over that amount.
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ARGUMENTS IN OPPOSITION : Opponents argue that existing law on
what constitutes "de minimis," a subject extensively debated as
part of the discussion surrounding SB 975, should be maintained
to ensure there is a true and substantial public investment in
the project before other state mandates come into play.
Specifically, opponents note that when Labor Code Section 1720
was amended in 2001 (SB 975) the "de minimis" exception was
discussed, and although never codified, was generally agreed by
the parties to be 2% of the project. Opponents contend that
subsequent DIR determinations have upheld this agreement by
requiring a substantial public subsidy to trigger California's
Public Works Law.
ASSEMBLY FLOOR : 53-24, 4/18/13
AYES: Alejo, Ammiano, Atkins, Bloom, Blumenfield, Bocanegra,
Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chesbro, Cooley, Daly, Dickinson, Eggman, Fong,
Fox, Frazier, Garcia, Gatto, Gomez, Gordon, Gray, Hall, Roger
Hern�ndez, Jones-Sawyer, Levine, Medina, Mitchell, Mullin,
Muratsuchi, Nazarian, Nestande, Pan, Perea, V. Manuel P�rez,
Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,
Torres, Weber, Wieckowski, Williams, Yamada, John A. P�rez
NOES: Achadjian, Allen, Bigelow, Ch�vez, Conway, Dahle,
Donnelly, Beth Gaines, Gorell, Grove, Hagman, Harkey, Jones,
Linder, Logue, Maienschein, Mansoor, Melendez, Morrell, Olsen,
Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Holden, Lowenthal, Vacancy
PQ:k 8/13/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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