HomeMy WebLinkAboutItem 2a - Resolution No. 2320 Prevailing Wage SB7DATE: November 4, 2014
TO: Honorable Mayor and City Council
STAFF REPORT
Public Works Services Department
FROM: Tom Tait, Public Works Services Director
By: Maria Lourdes A. Taylor, Senior Management Analyst
SUBJECT: ORDINANCE NO. 2320 AMENDING THE ARCADIA MUNICIPAL CODE
TO REQUIRE COMPLIANCE WITH STATE PREVAILING WAGE
REQUIREMENTS ON CITY PUBLIC WORKS PROJECTS
Recommendation: Introduce
SUMMARY
The California Legislature passed Senate Bill 7 (SB 7) requiring all California charter
cites to adopt an ordinance or charter amendment mandating compliance with state
prevailing wage law on all public works contracts or forgo all state funding. On October
21, during a Study Session, the City Council directed staff to comply with SB 7 on the
basis that complying with prevailing wage laws would cost roughly one -third of the cost
of losing all state funding. Therefore, it is recommended that the City Council introduce
Ordinance No. 2320 amending the Arcadia Municipal Code to require compliance with
state prevailing wage requirements on City public works projects.
BACKGROUND
On October 13, 2013, Governor Brown approved SB 7 (Steinberg) to amend the
existing prevailing wage provisions and created Labor Code Section 1782 prohibiting
charter cities from receiving or using state funding for construction projects if prevailing
wage rates are not required in all public works contracts. Senate Bill 7 specifically
defines public works contracts as construction, alteration, demolition, or repair work
(including maintenance) that is paid using public funds. As a charter city, Arcadia
currently is exempt from requiring prevailing wage rates for public works contracts.
According to the State Legislature, prevailing wage laws help to maintain construction
work as an occupation that provides middle -class jobs to hundreds of thousands of
California workers, enabling workers to support families and contribute to their
communities. In addition, the state's prevailing wage law promotes the creation of a
skilled construction workforce.
Ordinance No. 2320 — Compliance with SB 7 Prevailing Wage Law
November 4, 2014
Page 2 of 3
"Prevailing wage" is the hourly wage, usual benefits, and overtime paid for each trade
and occupation employed in the performance of public works and construction projects.
This labor rate is established by the state's Department of Industrial Relations (DIR)
based from surveys and collective bargaining agreements paid to the majority of
workers and laborers for each trade in the nearest labor market area. Determinations
for prevailing wage rates are typically issued twice per year by the Department of
Industrial Relations.
DISCUSSION
Senate Bill 7 mandates that any public works contract advertised for bid or awarded on
January 1, 2015, must be paid by prevailing wage labor rate or the charter city will be
prohibited from receiving state funding or financial assistance. Existing law defines
"public works" 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. Additionally, SB 7 authorizes charter cities to receive or use state funding
or financial assistance if the charter city has a local prevailing wage ordinance
(applicable to all of its public works contracts), that includes requirements that are equal
to or greater than the state's prevailing wage requirements.
SB 7 excludes public works contracts for projects of $25,000 or less for construction
work; or projects of $15,000 or less for alteration, demolition, repair, or maintenance
work. The Director of Industrial Relations will maintain a list of charter cities that may
receive or use state funding or financial assistance for their construction projects.
Should the City choose to not comply with SB 7, it will result in a loss of approximately
$1,843,000 annually in various ongoing state funding and the inability to apply for future
state programs (e.g. emergency /disaster assistance, state loans, and grants).
Compliance with SB 7 will increase annual public works maintenance and Capital
Improvement Program (CIP) contracts by approximately 25 %, or $665,800. This is a
conservative estimate as the figure includes non -labor costs and it is possible that some
contractors are currently paying at or near prevailing wage rates. Based on this, it
would be at least $1,177,200 more expensive annually to lose state funding than it
would cost to comply with prevailing wage requirements.
Finally, compliance with SB 7 prevailing wage law requires the City to amend the
existing ordinance with the following changes to the Arcadia Municipal Code:
• Add Section 2842.8 (Prevailing Wages Required) to Chapter 8, Division 2, Part 4
of Article 11
• Add Section 2871.12 (Prevailing Wages Required) to Chapter 8.7, Part 1 of
Article 11
• Repeal Sections 1950 and 1951 from Chapter 13, Article 1 (relating to Public
Works Contracts, Exemption from Labor Code Requirements)
Ordinance No. 2320 — Compliance with SB 7 Prevailing Wage Law
November 4, 2014
Page 3 of 3
A charter city is not disqualified from receiving or using state funding for construction
projects based on the city's failure to require a contractor to comply with prevailing wage
laws if the city advertised or awarded a public works contract prior to January 1, 2015.
FISCAL IMPACT
Effective January 1, 2015, SB 7 prevailing wage compliance may result in an increase
in public works contracts (maintenance and capital projects) up to 25 %, or $665,800.
However, non - compliance will result to a loss of approximately $1,843,000 in annual
state funding as well as any future new state grants or loans.
RECOMMENDATION
It is recommended that the City Council introduce Ordinance No. 2320 amending the
Arcadia Municipal Code to require compliance with state prevailing wage requirements
on City public works projects.
Approved
Dominic Lazzar
City Manager
Attachment: Ordinance No. 2320
ORDINANCE NO. 2320
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF ARCADIA, CALIFORNIA, AMENDING THE ARCADIA
MUNICIPAL CODE TO REQUIRE COMPLIANCE WITH
STATE PREVAILING WAGE REQUIREMENTS ON CITY
PUBLIC WORKS PROJECTS
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 charter cities;
and
WHEREAS, the California Supreme Court has held that the wage levels of
workers constructing locally funded public works are a municipal affair; and
WHEREAS, the City of Arcadia ( "City ") is incorporated as a charter city, and thus
the City may exempt locally funded public works projects from state prevailing wage
requirements to conserve the City's limited financial resources; and
WHEREAS, the California Legislature passed Senate Bill 7 requiring all
California charter cities to adopt an ordinance or charter amendment mandating
compliance with state prevailing wage law on all public works contracts in order to
remain qualified for state funding on local public works projects; and
WHEREAS, in accordance with Section 200 of the City Charter, the City Council
has discretion to determine wages to be paid on City public works projects and may
require that prevailing wages be paid by contractors employed thereon; and
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WHEREAS, the City Council finds that it is necessary to adopt an ordinance
requiring contractor compliance with state prevailing wage law on all City public works
projects in order to preserve the City's eligibility for state public works construction
funding.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA,
CALIFORNIA, DOES ORDAIN AS FOLLOWS:
SECTION 1. Chapter 8, Division 2, Part 4 of Article II of the Arcadia Municipal
Code is hereby amended by adding Section 2842.8 to read in its entirety as follows:
°2842.8. Prevailing Wages Required. Except on locally funded public
works projects of twenty -five thousand dollars ($25,000) or less when the
project is for construction work, or fifteen thousand dollars ($15,000) or
less when the project is for alteration, demolition, repair or maintenance
work, all contractors performing work on a City public works projects shall
be subject to California prevailing wage law, codified at California Labor
Code Section 1720 et seq., as it may be amended from time to time. The
only limitation on this requirement shall be in the event federal funding
requirements supersede state prevailing wage laws."
SECTION 2. Chapter 8.7, Part 1 of Article II of the Arcadia Municipal
Code is hereby amended by adding Section 2871.12 to read in its entirety as
follows:
"2871.12. Prevailing Wages Required. Except on locally funded public
works projects of twenty -five thousand dollars ($25,000) or less when the
project is for construction work, or fifteen thousand dollars ($15,000) or
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less when the project is for alteration, demolition, repair or maintenance
work, all contractors performing work on a City public works projects shall
be subject to California prevailing wage law, codified at California Labor
Code Section 1720 et seq., as it may be amended from time to time. The
only limitation on this requirement shall be in the event federal funding
requirements supersede state prevailing wage laws."
SECTION 3. Chapter 13, Article I of the Arcadia Municipal Code is hereby
amended by repealing Sections 1950 and 1951 in their entirety without replacement.
SECTION 4. The City Clerk shall certify to the adoption of this Ordinance and
shall cause a copy of same to be published in the official newspaper of the City within
fifteen (15) days after its adoption. This Ordinance shall take effect on the later to occur
of (1) the thirty -first (315) day following its adoption and (2) January 1, 2015.
Passed, approved and adopted this day of , 2014.
ATTEST:
City Clerk
APPROVED AS TO FORM:
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Stephen P. Deitsch
City Attorney
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Mayor of the City of Arcadia