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BREAKING: CA Supreme Court Says Cities Can Determine Their Own Construction Wage

BREAKING: CA Supreme Court Says Cities Can Determine Their Own Construction Wage

Posted July 3rd, 2012 by Kevin D. Korenthal Kevin D. Korenthal in News

The California Supreme Court handed down a landmark decision yesterday, the ramifications of which could quite likely dwarf the major wins that supporters of Fair & Open Competition enjoyed in the June 5th Elections.

First some background about California Prevailing Wage. Wages on public works construction in California (which apply whenever any public money is involved) are based on an examination of construction union Collective Bargaining Agreements (CBAs) for each of the major municipalities in California. Essentially, whatever the unions are paying their workers is the wage that the state requires all public works contractors to pay in that region. For instance, the CBA for a bulldozer driver in Sacramento determins the wage that the same tradesman must be paid in Bakersfield.
The state sets the wage package for a bulldozer driver in Sacramento (Group 4, Area 1) at a straight time total rate of $62.00 per hour: $37.15 $24.12 in fringe benefits $0.73 for “Other.”
So while this high wage might be appropriate for the expensive metro economy of Sacramento, the same high wage is required to be paid in the much less expensive economy of Bakersfield, CA. This union-backed rule essentially allows labor unions to employ their metropolitan-located workers in rural communities without a loss in the amount of wage that is paid for the work region by region. In practice, this policy has led to cost over-runs on school, government building and library projects across the state.
 
But 121 California cities have been able to take advantage of a city incorporation designation that mirrors the flexibility advantage enjoyed by Charter Schools. Charter Cities as they are known, unlike General Law Cities, are allowed flexibility in the way they contract for outside work and can thus establish wages that are reflective of the local economy. The unions challenged one city, Vista, CA on the legality of waiving the state-mandated Prevailing Wage in favor of a locally-determined wage. After more than 6 years of working it's way through the court system the California Supreme Court ruled yesterday that in fact the practice is legal.
 
Kevin Dayton at the Dayton Public Policy Institute (and a former ABC colleague of mine) is amassing a collection of media reporting on the decision here. But The North County Times Reported it this way:
 
The California Supreme Court affirmed on Monday what we have long believed to be both the law and the advantage of charter city rule: Such cities do not need to pay statewide "prevailing wages" on construction projects paid for by local dollars.
 
That is a clear win for the city of Vista, its taxpayers and other charter city residents.
 
In 2006, Vista voters adopted a half-cent sales tax to fund a number of civic construction projects, including a new city hall, two firehouses, improvements to the Moonlight Amphitheatre and other public construction works. A year later, its voters adopted a city charter that explicitly refused to comply with the state's prevailing-wage law.
 
That brought a lawsuit by construction trade unions to force the city to pay the wages as set by a state bureaucrat.
The state's high court has conclusively vindicated the city, reasoning like this:
 
  • The wage levels of private workers constructing locally funded public works projects are a "municipal affair." Hiring employees or contracting help generally for the building of a city-operated facility for the city's residents and paid for by them makes it so.

  • Although there is an "actual" or express conflict between state law and Vista's charter, no "convincing basis" exists to claim that state interference was necessary, and there was no general state concern operating, despite the Legislature's pronouncements to the contrary.

  • Rather, "autonomy with regard to the expenditure of public funds lies at the heart of what it means to be an independent governmental entity." 

The court reasoned that if the state is interested in regional labor standards and keeping the union apprentice vocational training system alive, it could use "its own resources" to do so.
 
Vista has prevailed in its argument, and has given a victory to the Oceanside council majority, which supported adopting a city charter in 2010, and to Escondido if its voters so choose to adopt a city charter in November.
 
We'll be doing additional reporting on this landmark decision incuding the potential political ramifications to California unions and benefits to California cities in the upcoming days and weeks. So keep your eye on this blog!

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