Our View: SB7 limits charter city wage control

June 30, 2013 

Senate Bill 7, sponsored by the trades unions and other labor groups, challenges the independence of charter cities in ways that are heavy-handed and unfair, and violate the principle of local control.

The bill would deny state construction funding — including state bond money, loans or grants — to any city whose voters have approved charter provisions that exempt contractors from paying prevailing wages for locally funded projects.

The bill seeks to blunt the impact of a California Supreme Court decision last year in State Building and Construction Trades Council of California, AFL-CIO v. City of Vista et al. In that case, the justices ruled 5-2 that when a charter city is using purely local funds to pay for municipal projects such as a firehouse, bike trail or street repairs, the city is not bound by the state's prevailing wage laws.

Of California's 120 charter cities, 51 have approved charter provisions that exempt them either partially or completely from state prevailing wage requirements when they use their own money for city construction projects. Merced is among the cities with such an exemption.

In 1995, the Modesto City Council voted 4-2 to end its policy of paying prevailing wages and to pay them only on construction projects funded in whole or part by state or federal funds which require those rates.

Modesto's hybrid practice is typical. Even cities that have exemptions from prevailing wages for locally funded projects usually cannot avoid usually higher union wage rates if they use any state funds to build their public works. That's fair. It's expected that strings will be attached to state funding. The state gets to make the rules when it's paying the bills.

But Senate Bill 7 seeks to punish charter cities for exercising their right to spend their own money in ways they decide is best, in ways that are most cost efficient to those cities and their residents.

Interestingly, the bill is authored by Senate President Pro Tem Darrell Steinberg, whose hometown of Sacramento is a charter city that would be affected. And it was co-written by Sen. Anthony Cannella, R-Ceres, who is a fiscal conservative on most issues but is generally pro-union.

In the case of Vista, city voters approved a half-cent sales tax increase in 2006 to construct municipal projects, including two firehouses, a civic center and an amphitheater. By electing to become a charter city and thus exempt from prevailing wage laws, voters in Vista were told that the city could save millions of dollars in construction costs for these projects.

SB 7 would punish them for that vote. The bill would deny Vista, or any other city whose voters exercised their constitutional right to use local funds in ways they see fit, their fair share of proceeds from state water, park or transportation bonds that their residents pay for with their taxes. That's bullying and an outrageous misuse of legislative authority.

While the independence of charter cities is under attack specifically in this bill, the prevailing wage rate issue touches all jurisdictions. The Department of Industrial Relations sets prevailing wage rates based on the most frequently occurring rate in a region.

That methodology, unique to California, means that the prevailing rate will be the union rate and almost always the highest rate paid. But union rates don't reflect the reality of most local labor markets. They can inflate construction costs wildly, particularly in the economically depressed Central Valley, boosting the cost of a project from 15 to 30 percent.

Hard-pressed cities with limited budgets often can't afford to fix streets, upgrade schools or improve water systems.

Labor-friendly Democratic legislators are likely to approve this union-backed bill; it passed the Senate, largely along party lines. Now it is in the Assembly, which also has a Democratic majority.

If SB 7 reaches Gov. Jerry Brown's desk, the governor, who has championed local control, should veto it. Beyond that, he should do something about how his Department of Industrial Relations calculates prevailing wage rates.

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