BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 2272 - Gray Hearing Date:
June 17, 2014 A
As Introduced: February 21, 2014 FISCAL B
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DESCRIPTION
Existing law establishes the California Advanced Services Fund
(CASF), administered by the California Public Utilities
Commission (CPUC), to help fund deployment of broadband
infrastructure and bring high-speed Internet access to all areas
of the state and authorizes collection of a customer surcharge
on intrastate communications services of up to $315 million for
the CASF through 2015 with collections capped at no more than
$25 million per year. (Public Utilities Code � 281)
Existing law authorizes the CPUC to use ratepayer funds
collected for universal service programs, including the CASF, to
compensate regulated telephone corporations for their costs of
providing universal service. (Public Utilities Code � 270)
Existing law requires the prevailing wage rate to be paid to all
workers on "public works" projects over $1,000 and 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.
(Labor Code � 1720)
Current law exempts from the definition of a public work certain
projects including work done directly by any public utility
company pursuant to an order of the Public Utilities Commission
or other public authority and some affordable and low-income
housing projects. (Labor Code � 1720)
This bill defines a "public work" for purposes of prevailing
wage law to include CASF projects.
BACKGROUND
CASF Supports Universal Service Goals - The CPUC established the
CASF in 2007 in order to promote broadband deployment statewide
and to comply with state law declaring that California's
telecommunications policies include closing the "Digital Divide"
and assuring that all Californians have universal access to
high-quality, state-of-the-art, advanced telecommunications
services (D.07-12-054). The program is a continuation of
long-held state and federal universal service programs that
provide support to cover the cost of providing service in
high-cost areas so that all Californians can be connected to the
telecommunications network at affordable rates. Historically
these programs have supported landline voice service. But more
recently, recognizing that high-speed Internet access is
essential to modern life, universal service goals require
support for broadband where private investment has not been
viable. As stated by the CPUC, "the areas that are being funded
and will be funded by CASF are areas that have no broadband
precisely because these are high cost areas that are
characterized by rugged terrain and low population density,
which would not otherwise be economically viable or make
business sense for private entities to invest in without CASF
funding assistance" (Resolution T-17233).
The grants are funded through a ratepayer surcharge on
intrastate telephone service and help pay the capital cost of
broadband infrastructure projects and to support adoption of
broadband service. Eligible applicants include telephone
corporations regulated by the CPUC that hold either a
certificate of convenience and necessity or a Wireless
Identification Registration, entities that received funds from
the American Reinvestment and Recovery Act of 2009 (ARRA) for
broadband deployment, and regional consortia, local governments
or nonprofit or for-profit entities meeting specified criteria
including the provision last-mile broadband access to households
that are unserved by an existing facilities-based broadband
provider.
At the end of 2013, the cumulative total CASF award funding was
as follows:
Broadband Infrastructure Grant Account: The CPUC
authorized $80.37 million for 41 projects that will benefit
up to 278,119 households when completed. Of these
households, 15,741 were previously unserved and 262,378
were underserved;
Regional Broadband Consortia Grant Account: The CPUC
authorized $2.85 million for 14 consortia grantees in 2013,
and has provided grantees with a three-year budget
allowance of $8.55 million to improve broadband adoption;
and
Broadband Infrastructure Revolving Loan Account: The
CPUC authorized $40,977 for one loan awardee in 2013 and
continues to review a remaining $1.5 million in loan
applications.
CASF Status - the CPUC has allocated the CASF funds into
subaccounts dedicated to different capital outlay programs and
grants to support broadband adoption. A rough estimate of the
encumbered funds in the infrastructure accounts dedicated to
capital outlay is $120,000 million. The commission reports that
there are approximately $35 million in applications from the
2013 cycle that remain to be processed and could be approved by
the commission this year which would bring the total encumbered
capital outlay funds to approximately $155 million. The
projects are in varying phases with some completed, some in
progress, and some yet to commence construction.
There is $20 million set aside for broadband capital outlay
projects in public housing along with approximately $145 million
unencumbered and yet to be applied-for funds for infrastructure
grants and loans assuming that the remaining applications from
the 2013 cycle are funded this year. A negligible amount of
funding remains in the consortia grant account and $5 million
was set aside for grants to increase adoption rates for
broadband services in public housing. These two accounts are
not for infrastructure.
COMMENTS
1. Author's Purpose . The CPUC authorized the California
Advanced Services Fund (CASF) in 2007 to provide grants to
telephone corporations to bridge the digital divide in
unserved and underserved areas of the state. The Central
Valley Next Generation Broadband Infrastructure Project
(CVNGBIP) is a 1,371 mile fiber-optic infrastructure
project encompassing 18 counties that will serve a
population of 4 million people when completed. The $66.6
million project is funded through federal, state, and local
funds, and receives 10% of its total budget from the CASF.
The CVNGBIP petitioned the Department of Industrial
Relations (DIR) with the belief that prevailing wage
requirements do not apply to the project, because state
funds constitute only 10% of the project's total budget. In
November 2013, Director Christine Baker determined that,
because the CVNGBIP is partially funded by state monies,
the project is subject to California's prevailing wage
requirements.
AB 2272 simply codifies Director Baker's determination in
statute to avoid confusion and legal questions in the
future and will give clarity to contractors who are bidding
CASF funded-projects, and to labor standards officers who
are responsible for enforcing labor laws on the project.
2. DIR Ruling . The issue of prevailing wage application to
CASF-funded projects came to the fore as a result of a
filing with the DIR which ruled that prevailing wage
applied to those projects. However, according to a
statement on the DIR website, the department:
?will no longer designate public works coverage
determinations as 'precedential.' The determinations
should be considered advice letters directed to
specific individuals or entities about whether a
specific project or type of work is public work
subject to prevailing wage requirements.
Consequently, this bill would be needed to clearly apply
the director's decision in the CVNGBIP determination to all
projects funded with CASF grants.
3. Surprise ? Broadband infrastructure grants have been
awarded to a variety of groups including small telephone
carriers, local governments, nonprofit organizations and
other community-based organizations. Some entities have
employees with collective bargaining agreements but most do
not. Additionally, a good deal of the work relies on
subcontractors with unknown employee wage policies. Some
entities became familiar with prevailing wage requirements
after the award of grants under the Broadband Technology
Opportunities Program as a result of the receipt of ARRA
grants.
However, the necessity to comply with prevailing wage
requirements was a surprise to most program participants
and they argue that that prevailing wage should not apply
because they are grant recipients and not public works.
Some projects are also sponsored by small telephone
companies which are public utilities and are specifically
exempt from prevailing wage requirements under current law.
They further opine that applying the requirement to
projects in the pipeline will severely jeopardize the
viability of these projects as they struggle to come up
with what they anticipate is additional funding needed to
comply and for projects where the need for broadband is
critical and the rural communities are expensive to serve
due to the remote location.
The CPUC last accepted applications for broadband grants in
February, 2013 and is still processing awards as a result
of those applications. Some grants have been awarded and
projects completed, some are under construction, some have
been awarded and yet to begin construction, and six
projects remain from the 2013 cycle for the CPUC's
consideration this year. A new application cycle is
scheduled this fall but those projects would not likely be
acted on by the commission until at least 2015.
Many program applicants expect the requirement of
prevailing wage to affect the budgets upon which the grant
applications were based and are concerned that compliance
requirements will stall the projects, some midstream, as
compliance is studied and additional funding is secured to
whatever degree it may be required. To prevent the
disruption of these projects the committee may wish to
consider amending the bill to require prevailing wage
compliance for any project applications approved by the
commission after the bill takes effect.
4. Broadband Adoption Grant . The CASF is not limited to
grants and loans for capital outlay. Some funding has been
set aside for grants to community-based organizations to
undertake outreach and education to increase broadband
adoption rates. Thus far $10 million was allocated to the
Regional Broadband Consortia Grant Account which is mostly
encumbered and $5 million remains unencumbered for adoption
services in public housing. The author and committee may
wish to consider amending this bill to limit the
application of prevailing wage requirements to capital
outlay projects funded by the CASF.
5. Technical Amendment . The bill refers to "CASF projects"
which is a program administered by the CPUC to fund
broadband projects. There are no projects administered
directly by the CASF. The author and committee may wish to
suggest amending the bill to state "Broadband
infrastructure projects funded with CASF grants."
6. Double Referral . Should this bill be approved by the
committee, it will be re-referred to the Senate Committee
on Labor and Industrial Relations for its consideration.
ASSEMBLY VOTES
Assembly Floor (56-17)
Assembly Appropriations Committee (13-4)
Assembly Labor and Employment Committee
(5-1)
POSITIONS
Sponsor:
California-Nevada Conference of Operating Engineers
Support:
California Labor Federation
California State Council of Laborers
Oppose:
California Association of Competitive Telecommunications
Companies
California Communications Association
California's Independent Telecommunications Companies
Consolidated Communications Inc.
Kellie Smith
AB 2272 Analysis
Hearing Date: June 17, 2014