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Home My WebLink About17 - Prevailing Wage Exemptions�EW `Rr CITY OF NEWPORT BEACH City Council Staff Report Agenda Item No. 17 September 11, 2012 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dave Kiff, City Manager 949 - 644 -3001, dkiff @newportbeachca.gov PREPARED BY: Dave Kiff, City Manager APPROVED: V A TITLE: Prevailing Wage Exemption ABSTRACT: On July 2, 2012, the California Supreme Court issued a decision exempting charter cities from the payment of prevailing wage for locally funded public works projects. As a charter city, the City of Newport Beach may adopt a resolution exempting itself from California's prevailing wage requirements. RECOMMENDATION: Adopt Resolution No. 2012 -79 exempting locally funded public works projects from prevailing wage. FUNDING REQUIREMENTS: Because public works projects vary in size and price, it is difficult to determine an exact dollar amount. However, the City of Newport Beach anticipates saving considerable financial resources by exempting locally funded public works projects from prevailing wage. DISCUSSION: In 1931, the California Legislature enacted the state's prevailing wage law. That law required contractors on public works projects to be paid the general prevailing rate of per diem wages for work of a similar character in the locality in which the work is performed. Prevailing Wage Exemption September 11, 2012 Page 2 In 2007, the City of Vista passed an ordinance that prohibited any city contract from requiring payment of prevailing wage unless: (a) such payment is compelled by the terms of a state or a federal grant; (b) the contract does not involve a municipal affair; or (c) payment of the prevailing wage is separately authorized by the city council. This ordinance was subsequently challenged in court. The challenge revolved around a charter city's ability to exempt itself from the state's prevailing wage law. On July 2, 2012, the California Supreme Court held that the wage levels of contract workers constructing locally funded public works are a "municipal affair." Under the California Constitution, charter city laws supersede state law with respect to a city's ,'municipal affairs." Thus, the court held that Vista's prevailing wage ordinance supersedes the state's prevailing wage law. The City of Newport Beach is a charter city and may adopt a resolution to assert its municipal autonomy and conserve valuable financial resources by exempting itself from the prevailing wage requirement for locally funded public works contracts. The attached resolution provides an exemption for public works projects, unless: (a) prevailing wage is compelled by the terms of a federal or state grant; (b) the public work is a matter of state -wide concern; or (c) the payment of prevailing wage is separately authorized by the City Council. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: This agenda item has been noticed according to the Brown Act (72 hours in advance of the City Council meeting). Submitted by: a Y. By '9 Dave Kiff City Manager Attachment: Prevailing Wage Resolution 2 Prevailing Wage Exemption September 11, 2012 Page 3 RESOLUTION NO. 2012- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH EXEMPTING LOCALLY FUNDED PUBLIC WORKS PROJECTS FROM PREVAILING WAGE WHEREAS, the California prevailing wage law requires contractors on public works projects to be paid the general prevailing rate of per diem wages for work of a similar character in the locality in which the work is performed; and WHEREAS, under the California Constitution, Article XI, Section 5, the laws of charter cities supersede state law with respect to municipal affairs of the city; and WHEREAS, the California Supreme Court has held that the wage levels of workers constructing locally funded public works are a municipal affair, and therefore a charter city's prohibition on the payment of prevailing wage supersede state law; and WHEREAS, the City of Newport Beach is incorporated as a charter city, and thus the City may exempt locally funded public works projects from prevailing wage to conserve the City's limited resources. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: SECTION 1: The City of Newport Beach exempts locally funded public works projects from prevailing wage, unless: (1) prevailing wage is compelled by the terms of a federal or state grant; (2) the public work is a matter of state -wide concern; or (3) the payment of prevailing wage is separately authorized by the City Council. SECTION 2: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting this resolution. ADOPTED this 11th day of September, 2012. Nancy Gardner, Mayor Attest: Leilani Brown, City Clerk K Brown, Leilani From: Harp, Aaron Sent: Tuesday, September 11, 2012 9:47 AM "RECEIVED AFTER AGENDA To: Brown, Leilani PRINTED :" - -P Subject: FW: Prevailing wage policy for the City of Newport Beach Communication regarding Prevailing Wage item on Agenda. From: sdraper(o)smartcitiesi)revail.org [ mailto: sdraoer (d)smartcitiesprevail.org] Sent: Monday, September 10, 2012 3:39 PM To: Henn, Michael; Rosansky, Steven; Hill, Rush; Daigle, Leslie; Selich, Edward; Gardner, Nancy; Curry, Keith Cc: Buzby, Lisa; Grubisich, Erin; Kiff, Dave Subject: Prevailing wage policy for the City of Newport Beach Dear Newport Beach City Council Members, I am a Research Analyst with Smart Cities Prevail, a non - profit organization that provides research and advocacy on prevailing wage standards in California's Cities. It has come to our attention that the Council will consider a resolution to exempt prevailing wage on municipally funded public works projects at tomorrow's City Council meeting. The California Supreme Court has ruled that charter cities can exempt themselves from prevailing wage requirements for public works projects funded through municipal funds. While the decision settled outstanding legal issues, it only brought public policy considerations to the fore. Prevailing wages remain the best value for taxpayer money on public works construction. There is no credible research which supports the assertion that eliminating prevailing wage standards lowers public works construction costs. Research has shown time and time again that prevailing wages do not raise costs on public works construction projects because workers on prevailing wage projects tend to be higher skilled, better trained, more productive, and less prone to serious and fatal injuries on the job site. As a result you have fewer delays, lower supervisory and management costs and less maintenance costs over a structure's lifespan due to higher quality construction. Research also indicates that prevailing wage standards have many positive impacts on the community. Since municipal building projects covered by a prevailing wage policy employ a higher proportion of local contractors and local workers, the local economy and local government are propped up by a prevailing wage policy. More money circulating in the local economy means enhanced tax revenues, and more consumer spending. Prevailing wages discourage unscrupulous contractors who typically cheat on payroll taxes, employ low skilled workers and shirk health and safety requirements on the job site. Prevailing wages also help 1 expand apprenticeship training programs which enrich the community by offering avenues for residents to secure good paying middle class jobs. Fiascoes in Oceanside and Palo Alto illustrate the problems with exempting prevailing wage on public works construction. Oceanside taxpayers are paying 65 percent more per square foot on a non - prevailing wage project than was originally planned with prevailing wages. The Oceanside Harbor Center is more than a year behind schedule after the contractor admitted being unable to complete it. In Palo Alto, an attempt to build a library without prevailing wages faces massive cost overruns and extensive delays that have the city considering litigation. In contrast, Gilroy recently completed a library project on time and under budget. Although a charter city with the authority to ignore prevailing wages, the city chose not to after doing its own research. Gilroy's public works staff understood that complex engineering and design elements cannot be executed by unskilled workers and that prevailing wages attract qualified contractors, ensuring quality construction. Gilroy's and Palo Alto's library projects were put out to bid at nearly the same time, but Gilroy's library used 6 1/2 times more local contractors than were employed in the building of Palo Alto's library. That means more taxpayer money stayed in the local economy. We strongly encourage City Council and staff members to visit the Smart Cities Prevail website in order gather more information on prevailing wage standards (www.smartcitiesprevail.org.) The website has available numerous research reports, charts, graphs and other educational materials. Thank you for your consideration of the information contained in this email. The economic benefits of prevailing wage cannot be understood without looking at the bigger picture. When larger issues like overall project and maintenance costs, local consumer spending and city tax revenue are taken into consideration, prevailing wage clearly emerges as the best, and most logical course of action for cities looking to promote growth and a healthy economy. Please call me at 916/ 284 -1049 if you have any questions. Sincerely, Samantha Draper Smart Cities Prevail 2 Cc: City Attorney City Manager