Bill Introduced to Keep Charter Cities Paying Prevailing Wage

February 21, 2013 - Bipartisan legislation sponsored by the State Building Trades was unveiled this week to make charter cities eligible for state funds for public works projects only if they pay the prevailing wage. Currently, the anti-union group Associated Builders and Contractors (ABC) lobbies charter cities to pay less than prevailing wage, and lobbies general law cities to become charter cities for the purpose of removing prevailing wage. Senate Bill 7 addresses that problem.

SB 7, co-authored by Democratic Senate President pro tem Darrel Steinberg of Sacramento and Republican Senator Anthony Cannella of Ceres, will promote middle class jobs, sustain a skilled work force, and ensure cost-efficient and high-quality public works projects. Steinberg noted that cutting wages doesn’t save taxpayer money, but eliminates the economic net benefit of California’s prevailing wage. Cannella, a civil engineer and former mayor, said society suffers when firms game the system by undercutting wages to win bids. He added that projects should be built based on the lowest bid with a streamlined, well-trained workforce, doing the project in the least amount of time, doing it once, and doing it right.

SBCTC President Robbie Hunter commented: “The public works projects of the 1930s, such as Hoover Dam, were built by the best-trained workers earning fair wages. Those well-built projects have lasted decades and continue to benefit us today. Prevailing wage guarantees cities that expertly-trained local workers will build their projects. Without it, bidders are forced to cut corners on training and apprenticeships to get low bids. Quality suffers. California’s workforce is rapidly aging. We need a strong prevailing wage throughout our state to encourage young people to enter apprenticeships and tackle the next generation of infrastructure and public works.”

Of California’s 121 charter cities, 70 require compliance with the prevailing wage law, ten cities require partial compliance, three specifically forbid prevailing wage specifications, and the remainder have charters that are silent on prevailing wage.

Following is a press release on the bill from Steinberg and Cannella.

Bi-partisan bill by State Senators to require prevailing wage jobs in California Charter Cities

February 19, 2013

Steinberg / Cannella proposal promotes skilled workforce and fair salaries on public construction projects

(Sacramento) – Senate President pro Tempore Darrell Steinberg (D-Sacramento) and Senator Anthony Cannella (R-Ceres) will co-author a measure on prevailing wage to increase middle-class jobs, sustain a skilled workforce, and ensure cost efficient and high quality public works projects. Senate Bill 7 would make charter cities eligible to receive or use state funds for a public works project only if the city has a policy of requiring contractors on all its municipal projects to comply with the State’s prevailing wage law. The bill is sponsored by the State Building and Construction Trades Council, AFL-CIO.

“Continuing California’s economic growth depends on creating more middle class jobs, especially in the construction industry that was hit so hard during the Great Recession,” said Steinberg. “Low wage contractors cut costs by cutting corners, but the data shows that they’re not saving public money. We can’t afford to shortchange workers and taxpayers by ignoring the economic net benefit of California’s prevailing wage law.”

“As a civil engineer and former mayor, I am proud to co-author SB 7. It is important that we close this loophole that allows certain firms to game the system. Those firms know that they can marginally undercut prevailing wage to win a contract,” said Senator Anthony Cannella (R-Ceres).

Several economic studies show that prevailing wage contracts save tax dollars through higher productivity, better quality workmanship, and a faster rate of project completion. Higher-wage workers also have more money to spend, boosting economic activity at home and contributing more in taxes to provide critical public services. A portion of the prevailing wage also funds apprenticeship programs to support a better-trained workforce for the future.

Antonio Villaraigosa, Mayor of Los Angeles,  said, "The City of Los Angeles has benefited for years from construction industry jobs and prevailing wages which support our focus on quality, efficiency and training in construction careers for the residents of Los Angeles.  For this reason, I am supportive of Senate Bill 7 which focuses on protecting fair wages, quality construction and apprenticeship opportunities throughout California."

Mayor of Sacramento, Kevin Johnson said “When we’re seeking bids for city construction projects, quality and value for our citizens and taxpayers is our priority. Paying prevailing wage addresses this concern. Making sure the workers on our projects are paid a fair wage strengthens our city’s and our region’s economy. I strongly support Senate Bill 7, as it clearly benefits the workers and taxpayers of Sacramento.”

“As Mayor of the City of Long Beach I support the prevailing wage because it ensures we have a streamlined, trained and highly-skilled workforce for building the public works projects that our City needs” said Long Beach Mayor, Bob Foster. “It also provides local residents with the opportunity to access skilled apprenticeship training programs that will eventually lead to middle class careers in construction, thus using our tax dollars to drive our own economy and providing value and assured quality projects that will last for decades.  For these reasons I support SB 7.”

A 2011 Colorado State University study[1] documented the use of prevailing wage in City of San Jose projects, which increased countywide economic activity by $164 million, increased local jobs by 1,510 and increased local tax revenues by $1.9 million over a five year period.

The same study also compared two Northern California public projects: Mitchell Park Library in Palo Alto, scheduled to open this spring and built without prevailing wage, which cost taxpayers $430 a square foot and with only 12 percent of the work going to local contractors; the similar-sized Gilroy Public Library, opened last year and built with prevailing wage, which cost taxpayers less at $326 per square foot and with 71 percent of the work going to local contractors.

The example is consistent with a 2001 study by the University of Utah, which found that non-prevailing wage contractors are more dependent on imported labor, resulting in a greater percentage of those lower wages being spent outside the community where the original investment was made.

“The public works projects of the 1930s, such as Hoover Dam, were built by the best-trained workers earning fair wages. Those well-built projects have lasted decades and continue to benefit us today.
Prevailing wage guarantees cities that expertly-trained local workers will build their projects. Without it, bidders are forced to cut corners on training and apprenticeships to get low bids. Quality suffers,” said Robbie Hunter, President of the State Building and Construction Trades Council of California. “California’s construction workforce is rapidly aging. We need a strong prevailing wage throughout our state to encourage young people to enter apprenticeships and tackle the next generation of infrastructure and public works.” 
 
Background on SB 7
All state and local government agencies in California, except charter cities, require contractors to pay prevailing wage on taxpayer-funded. While most of the state’s 121 charter cities already recognize the economic benefits of using contractors and sub-contractors who pay workers prevailing wages, some charter cities continue to use public funds to contract without a prevailing wage requirement.

SB 7 would provide that a charter city is not eligible to use state funds or financial assistant for its construction projects unless the city has a policy of requiring contractors on all its municipal projects to comply with the State’s prevailing wage law. Under SB 7, a charter city would not be eligible to receive state funding if either:

  1. the city has a charter provision or ordinance that excuses contractors from complying with the prevailing wage law on any projects; or
  2. within the current calendar year or prior two calendar years, the city has awarded public works contracts without including the specifications required by the prevailing wage law. SB 7 would not apply to contracts awarded prior to January 1, 2014, so the disqualification from eligibility to use state funding for construction would apply only going forward.

SB 7 would not apply to contracts under $25,000 for construction or under $15,000 for maintenance, installation, alteration and repair work, so a city would not have to require prevailing wages for such contracts to be eligible to use state funding or construction.

There are 121 charter cities in California, of which 70 require compliance with the prevailing wage law on municipal projects or allow the city council to require compliance with the prevailing wage law on municipal projects including: Los Angeles, San Jose, San Francisco, Sacramento, Long Beach, Oakland, and Bakersfield.

There are an additional ten cities whose charters allow the city council to require some compliance with the prevailing wage law on municipal projects, including San Diego, Fresno, and Anaheim. There are 41 cities whose charters are silent on issue including Modesto, Oceanside and Merced. The charters of Leemore, Norco, and Woodlake are the only cities that forbid the inclusion of prevailing wage specifications in public works contracts.

Other studies:
Economic Policy Institute, 2008: Analyzing a body of economic studies, the report found that prevailing wage regulations do not increase government contracting costs, but do provide social benefits from higher wages and better workplace security.
http://www.epi.org/publications/entry/bp215

University of Utah, 2005: Analyzing reconstruction in the wake of California’s Northridge earthquake, the study found that high productivity per hour of prevailing wage contractors largely offsets any difference in labor cost per hour.
http://www.epi.org/publications/entry/bp166

Construction Labor Research Council, 2004: A study of highway construction in 17 states, built from 1994 through 2002, shows high wage states saved $30,000 per mile in construction costs when compared to lower wage states.
www.buildri.org/contentmgr/showdetails.php/id/2004

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