Labor, Charter Cities Clash Over Prevailing Wage

By John Howard

Special from Capitol Weekly

Millions of public dollars and thousands of jobs are on the line, but the impact of the prevailing wage on municipal projects is more than the price tag.

It’s also about the constitution – and fairness.

At issue is a requirement that cities and local governments pay the prevailing wage when they build public works projects. The prevailing wage, set by the state’s Department of Industrial Relations, is the level of pay for similar work in the locality where the public works project is being built.

California has some 121 charter cities, or about a fourth California’s incorporated cities, and it’s a group that includes the top 15 heavy hitters -- such as Los Angeles, San Diego, San Francisco, San Jose, Fresno and Riverside.  A charter city, created with the approval of voters, creates its own charter and defines its own system of governance. A general law city is organized according to state law.

For years, efforts have been by anti-union groups to persuade the charter cities to exempt themselves from the prevailing wage requirement for public works projects, an option typically not open to general law cities.

The prevailing wage, particularly in large cities, often reflects the level of pay of unionized workers in the area with contracts that have been negotiated through collective bargaining. The powerful, non-union Associated Builders and Contractors, a nationwide group with chapters across the country, has long opposed prevailing wage requirements in California and elsewhere, citing high costs and the usurpation of local authority to decide their own costs.  

“One of the most conspicuous ways for city governments to reduce spending and increase revenue is to exempt contractors from paying costly state-mandated prevailing wage rates,” according to one ABC study.

Not surprisingly, labor doesn’t see it that way, opposing any drive to pay less for projects built by non-union workers

They “urge cities to exempt themselves from prevailing wage and encourage general law cities to become charter cities for the same purpose,” according to the California Building and Construction Trade Council, which has some 160 affiliates with 390,000 members. “Middle class jobs with decent wages are the key to California’s economic recovery.”

In the Capitol, major legislation authored by Senate Leader Darrell Steinberg, a Sacramento Democrat, and Sen. Anthony Cannella, a Ceres Republican, would choke off state dollars to charter cities if they don’t pay the prevailing wage for public works projects. The bill, SB 7, is at or near the top of the cities’ attack list.

The cities see the prevailing wage issue not only in dollars but in authority. Since a charter city’s governance is locally approved and created by law, how can the state override how that lawful entity decides to spend its dollars?

“This is a fundamental issue for us,” said Dan Carrigg of the League of California Cities. “This is a leverage play to try and compel cities to do something they are not required to do under the constitution. It is a charter city’s policy decision whether to pay prevailing wage on projects where it only spends its own money.”

Too, the cities see the legislation as the progenitor of a larger move to contravene charter cities’ authority. “They will use this same leverage play, and withhold every dime of money until you comply with whatever the issue of the day is,” Carrigg added.

Others agree.

In a letter opposing SB 7, the non-union builders and contractors said the bill “extends to a wide variety of local issues including whether (or not) to reform, amend or repeal the prevailing wages” and “seeks to punish a charter city for exercising constitutionally provided rights.”

For some cities, the legislation stirs little controversy.

The impact of SB 7 “would be little to none,” said Tim McDermott, the finance director of Santee near San Diego. “Our charter requires that the prevailing wage will be paid, similar to general law cities. It would take a four-fifths vote of the council to modify that. Basically, that trigger has never been pulled and I don’t see it having a major impact going forward.”

During the past two years, Santee has spent about $15 million on public works projects, McDermott added.

Wages are a piece of the dispute, but so is transparency.

“We don’t what charters to exempt themselves from a public contract code that says you have to go to competitive bidding to ensure that the public knows what the real costs are,” said Carolyn Hilliard of CIFAC, a Martinez-based, nonprofit group that includes unions, builders and trade groups.

The state Supreme Court last year ruled in favor of the city of Vista in northern San Diego County, which built a series of voter-approved public works projects but did not pay the prevailing wage, a move that the city later said saved some $2 million in lower wages.  The voters earlier approved the projects, including a civic center complex and fire stations, in 2006, and the city adopted its charter the following year.

Organized labor had fought Vista and had filed a lawsuit, but the Supreme Court ruled 5-2 that Vista was properly exercising its authority as a charter city. “Autonomy with regard to the expenditure of public funds lies at the heart of what it means to be an independent government entity,” the court’s majority opinion said. In dissent, Justices Kathryn Werdegar and Goodwin Liu said the decision allowed “charter cities to opt out of the constraints of state law.”

The thrust of SB 7 responds to the court decision.
“The Supreme Court said to labor that the decision to require a prevailing wage on local projects is up to the city and not to the state,” Carrigg noted.

 

Capitol Weekly has been a must-read in Sacramento since 1988 and its editor, John Howard, has long been a trustworthy figure in the Capitol community. Visit capitolweekly.net for more stories from the Capitol, and follow Capitol Weekly on Twitter (@Capitol_Weekly) for more updates.

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