Loading...
HomeMy WebLinkAbout01/12/96 I ~ ~ . . - B A K E R 5 F I E L D MEMORANDUM January 12, 1996 TO: HONORABLE MAYOR AND CITY COUN I FROM: ALAN TANDY, CITY MANAGER SUBJECT: GENERAL INFORMATION 1. We received some good news this week. PERS has notified us that we will be receiving another one time rebate of approximately $2 million dollars. This is not recurring money. It would be available for capital improvement activities in the future. One anticipated use is for the building depreciation and replacement fund which has been partially depleted because of the Convention Center project. 2. As we advised you in an earlier General Information memo, we had rejected the draft of the consultant1s Fire Department study. It was very poorly done and needed to be reworked. Because that study had some things which the County fire union 1 i ked, it has been distributed around and my understanding is that it came back to you, despite the fact that it has been rejected by our staff. 3. There is a letter enclosed that was sent regarding the Canlan ice skating project on White Lane. This is the first step in the process to get that project underway. They will be doing a presentation to you at the January 24th Council workshop. 4. You should be aware that we are being hassled by the State (PERS). They are contending that the current pol icy we have which picks up employee costs for retirement after six years cannot be continued, and that we have to pick it up immediately upon hiring individuals. That carries with it a potential liability of $500,000 per year. Our current arrangement is as structured with the MOU's with the bargaining units. We will be protesting administratively, and if that does not work legally, you should be aware of the potential liability. 5. Enclosed for your information i s the survey done by George K. Baum & Company on the wastewater system rates and fees for selected cities. We compare very favorably. . 6. The proposed time frames for selection of the consultants for the Chester Avenue Streetscape project and the wastewater treatment plant expansion are attached. I , I I I 1 --~--~-~ I. I' . I' .f 'I HONORABLE MAYOR AND CITY COUNCIL January 12, 1996 Page -2- 7. Listings of the 1996 meeting dates for the following Council committees are enclosed: Budget and Finance, Urban Development, Community Services, and Personnel. AT:rs cc: Department Heads Carol Williams, City Clerk Trudy Slater, Administrative Analyst I --- --- II 'I J'Þ' - ~ ~ ~ . -- B A K E R 5 F I E L D Alan Tandy. City Manager January 8, 1996 Mr. Daniel Marsh, III Executive Director The National Development Council 41 East 42nd Street New York, New York 10017 RE: Bakersfield Ice Skating Center Dear Mr. Marsh: The City of Bakersfield (the "City") hereby requests that National Development Council CNDC") undertake the above project (the "Project"). As we currently understand the Project, it contemplates that NDC will purchase a long term leasehold on a parcel of land designated as Parcel B of Parcel Map 8383, located between White Lane and Schirra Court in the City of Bakersfield, and erect thereon pursuant to a fixed price contract at an arm's length price, a two-surface ice skating center, for the use of the general public. We understand that the hard and soft costs directly and indirectly connected with the construction of the Project and the placing of it in service will be approximately $5.5 million, and a debt service reserve and financing costs may add another $1 million for a total bond issue of approximately $6.5 million. We understand that this financing will be through the issuance of tax exempt "501 (c) (3) Bonds," which we agree to issue or cause to be issued by an Industrial Development Authority for the benefit of NDC on a non-recourse basis to the issuer and to the City. In the discussions that have taken place between the City and NDC, NDC has confirmed that, in keeping with its own tax-exempt purposes, it will own and operate the Project after its completion on a non-profit basis. By this, the City and NDC understand that the fees and other charges to the general public for using the Project will be set by NDC with the following goal in mind: to encourage the widest possible public usage of the facilities, especially in that bargain rates will be charged to public school students, the poor and underprivileged. The Project will not be operated to maximize net income but to encourage the groWth of the sport of ice skating as a recreational activity in the City of Bakersfield. City of Bakersfield. City Manager's Office. 1501 Truxtun Avenue Bakersfield. California. 93301 þ- ". Mr. Daniel Marsh, III Page 2 January 8, 1996 We further understand that, after gross receipts from the Project have been used to pay the staff, utilities, maintenance and supplies for the Project; to pay the debt service on the financing for the Project; to pay the manager of the Project pursuant to the Management Contract; and to accumulate reasonable IIrainy dayll and maintenance reserves, the excess (if any, since the goal will be to price the fees and other charges to the general public as close as possible to their cost) will be used for qualified §501 (c){3) charitable purposes, either at the Project or elsewhere within the City. The City will set up a joint advisory committee to help NDC determine what those purposes might be. We also understand that NDC will limit the expenses for which it reimburses itself from the Project to the direct and indirect costs and overheads reasonably associated with its ownership and operation of the Project, and will account for the Project separately from its other activities. The City of Bakersfield long ago determined that it has a burden to provide reasonable recreation facilities for the citizens of the City, particularly for those who would be unable to afford comparable private facilities, if any were available. We have been able to do so in the past, and wish to continue to do so with respect to a form of recreation, ice skating, which is relatively new to our section of the country. As City Manager, after making an appropriate review of the Project with the City Council, it has been determined that the recreational facilities to be provided by the Project for our citizens, when operated as set forth above, are the type of recreational facilities that the City feels that it should provide. However, at a time when many voters are calling for reduced budgets and payrolls, and ~ when other pressing municipal needs have a higher priority call on our resources, the City has neither the discretionary extra money, the supervisory time that is now being used, nor the personnel presently on board who would be needed to construct and run facilities, such as those to be provided by the Project. Based on the above commitment by NDC as to the manner in which the proposed Project will be operated, the City considers that NDC, in providing the Project on a basis that will not cost the City any revenues, will not require that it increase the public payroll, will not expose it to any liability for operational problems, nor require it to advance its credit, will significantly lessen what would otherwise be the City's burden of providing appropriate recreational ice skating facilities for the citizens of the City of Bakersfield. Notwithstanding any other provision of this letter, you are hereby advised that this letter in no way exempts NDC or any other person involved with the Project from any requirements of the City, or any department or agency thereof or other governmental body, that would apply in the absence of the proposed 11501 (c){3) Bondsll mentioned above, and compliance with all such requirements is an express precondition to all provisions of this letter. Such requirements include, but are not limited to, local land use planning requirements, environmental laws, any applicable fees, taxes or other charges relating to such bonds or the Project and City Council consideration and approval of the p ... Mr. Daniel Marsh, III Page 3 January 8, 1996 Project and such bonds. You are hereby further advised that nothing herein creates any obligation, indebtedness or liability on the City or any department or agency thereof, or creates any obligation of the City to pay money, be subject to any claim, proceeding or lawsuit, or creates any encumbrances on any funds of the City. AT:rs cc: Rick Hiscocks; Orrick, Herrington and Sutcliffe Kevin M. Dailey, Attorney at Law Jim Carstensen, Castle & Cooke -~ George K. Baum & Company INVESTMENT BANKERS MEMBER 717 SEVENTEENTH STREET NEW YORK STOCK EXCHANGE. INC. SUITE 2500 CHICAGO STOCK EXCHANGE, INC. DENVER. COLORADO 80202 TELEPHONE (303) 292-1600 January 8, 1996 Mr. Alan Tandy, City Manager Mr. Gregory J. Klimko, Finance Director City of Bakersfield 1501 Truxton Avenue Bakersfield, CA 93301 Dear Alan and Greg: copies of the Wastewater Survey for which you earlier I trust that these presentation copies, which contain additional explanatory materials, as well as graphs of the data collected, will be useful as you proceed to put together the wastewater project. . Please let me know if you have any questions or need additional copies. Best wishes for the New Year, I hope to see you both soon. Sincerely yours, Douglas, . Houston Senior V' ce President DLH/dn cc: Chuck Youtz '" . ~<--. -- - - ~ -- c. 1- " J¡~~ RECEIVED - ~ î . I, , '-- i ~ .I!I\\.I @~I ù L,,_-~_~-,-=, ~-, j ,, ' tJV. i ~CITY 1\ i~/\N,(\GER'S OFFICE "_..~"w_-.....,,-,,.-_. "----'-T----- -C----. --. ! . I 0 Wastewater System Rates and Fees Æ . Survey of Selected CRies - Januaty 1996 BAKERSFIELD George K. Baum. & Company INVESTMENT BANKERS 660 "J" Street, Suite 460 Sacramento, California 95814 (916) 443-5525 ------- , ~ Comparative Wastewater Rates and Fees Survey of Selected Cities January 1996 e. . Summary of SuNey Data Collection Methodology 1 . Comparative California Cities Location Map 2 . Population 3 . Wastewater Connection Fees 4 . Wastewater User Fees (Annual Basis) 5 . Comparative Wastewater Rates Among Selected National Cities (Annual Basis) 6 . Data Tables 7&8 & . - BAKERSFIELD = = . The City of Bakersfield is in the process of planning for the enhancement and expansion of its wastewater treatment system; user and connection fees may be the primary means of financing such changes to the system. . A wastewater connection fee and user charge survey among selected California "Peer Group" cities was conducted by George K. Baum & Company on behalf of the City of 1 Bakersfield. Cities chosen for the comparative survey were selected on the basis of: I ~ proximity in central and southern California, ~ population size of 50,000 - 400,000, and ~ undergoing current growth. . The 12 "Peer Group" cities chosen for this survey include: Fresno, Lancaster, Modesto, Oxnard, Pleasanton, Redlands, Rialto, Riverside, San Bernardino, Stockton, Vacaville and Visalia. . Information for the survey was obtained from certain documents and follow-up telephone calls to the selected cities to verify the most current fees and charges for single family dwellings. The 1995 handbook published by Information Publications, California Cities, Towns and Counties was used to derive population- data. The California State Water Resources Control Board report entitled "Wastewater User Charges Survey FY 1993-94 Data" was used to cross check the wastewater connection fees and monthly charges obtained by telephone interviews. A third document, Ernst & Young, 1994 National Water & Wastewater Rate Survey provided comparative user charge data for selected national cities. . This study is not meant to be an exhaustive examination of all the selected or other comparative cities, but it is intended to provide the City's management with important information to assist in future financing decisions for its wastewater system. ~ . - BAKERSFIELD 1 ~ ""'" -, '----..r- /" ""\ Denotes City in study (Pleasanton and Rialto are not shown) ~ \ ~ 7' (") - ~ - (") 0 (") II ~ '7 ('.f~""" --t. "" Son NItA."" ~ . - B A K E R 5 F I E L 0 2 Comparative Wastewater Rates and Fees Survey Fresno Riverside Stockton Bakersfield San Bernardino Modesto Oxnard Lancaster Visalia Vacaville Rialto Redlands I- 1994 Population II Bakersfield I Pleasanton 0 100 200 300 400 500 Thousands . Bakersfields 1994 population is estimated at 201,800, placing it fourth highest among the Population Growth: 1990 - 1994 surveyed cities. Lancaster . Between 1990 and 1994, Bakersfield's Visalia population increased a total 15.4%, or an Bakersfield average of 3.7% annually. This was third Vacaville highest among the surveyed cities and was Fresno more than three times the national average. San Bernardino Rialto Redlands Pleasanton Modesto Stockton Riverside Oxnard 0 5 10 15 20 Æ Percent Change . - BAKERSFIELD 3 Comparative Wastewater Rates and Fees Survey San Bernardino Pleasanton Oxnard Vacaville Riverside Stockton Fresno 1.1 Coonecticn Fees California Average . Bakersfield Visalia Rialto Peer Group Average Redlands Lancaster Bakersfield Modesto 0 1,000 2,000 3,000 4,000 5,000 6,000 Dollars . Among the 13 IIPeer Groupll cities in the wastewater user fee survey, Bakersfield had the second lowest single family dwelling connection fee of $1,080. The highest connection fee, $4,912, was charged by San Bernardino. . The average connection fee charge was $2,438. . The state average wastewater system connection fee as reported by the California State Water Resources Control Board, for 1993-94 was $1,841. ' ~ . I . Based on wastewater connection fees as of October 1995 I - BAKERSFIELD 4 -- I ------------- Comparative Wastewater Rates and Fees Survey Oxnard 2"f" . Pleasanton ;~~,.:. " Stockton ';10; San Bernardino ;:-.~ '<:.:, , Vacaville;]' '.,,::'.. ' ,I Rialto ';:: ,-, I, m Amual USa' Fees Riverside . Bakersfield Modesto ;~:;:~ Fresno~~' Redlands ~/Ii ~ Bakersfield Visalia ';-~"';::" 0 50 100 150 200 250 300 Dollars . Bakersfield's annual wastewater user fees for singre family dwellings of $108, or $9.00 per month, are the third lowest among the 13 surveyed cities. Oxnard has the highest annual wastewater user charge of $248. . The average among the 13 surveyed "Peer Group" cities is $157. The statewide average according to the California State Water Resources Control Board, Wastewater User Charges Survey was $204, or an average of $16.98 monthly. ~ . - BAKERSFIELD 5 -- -- ---- 0 Comparative Wastewater Rates and Fees Survey Lakeland, FL Austin, TX Colorado Springs, CO Clearwater, FL Reno, NV Las Vegas, NV Eugene, OR Fort Lauderdale, FL Davenport, fA . Annual User Fees Bakersfield . Bakersfield Albuquerque, NM Arlington, TX Wichita, KS Tucson, AZ EIPaso, TX Peer Group Fort Wayne, IN Average Phoenix, AZ Boulder, CO Peoria, IL 0 50 100 150 200 Dollars . Among the selected 18 national cities, the City of Bakersfield's annual user fees* of $108 are just above the average of $104. The highest annual fee among the selected national cities was Lakeland, Florida at $156, with the lowest fee Peoria, Illinois at $37. I! ~ . . Based on residential rates at 500 cubic feet. - BAKERSFIELD 6 ------- .. Wasterwater Comparative Population Rates and Fees 1994 Growth Connection Annual Ctl¥ Population 1990 -1994 Fees User Fees Oxnard 151,900 6.80% $3,539 $247.68 Pleasanton 55,400 9.58% 3,900 222.00 Stockton 228,700 8.41% 2,525 197.52 San Bernadino 184,400 12.32% 4,912 178.80 Vacaville 82,500 15.41 % 3,131 175.00 Rialto 80,000 10.50% 1,990 158.40 Riverside 244,200 7.81% 2,684 156.60 Modesto 180,300 9.45% 500 148.20 Fresno 402,100 13.52% 2,110 134.28 Redlands 66,300 9.77% 1,800 124.80 Bakersfield 201,800 15.43% 1,080 108.00 Visalia 89,400 18.62% 2,027 100.80 Lancaster 115,500 18.71% 1,500 90.00 Source: Individual cities Prepared by George K. Baum & Company 01/02196 --- . . , Lakeland, FL $156 Austin, TX 153 Colorado Springs, CO 142 Clearwater, FL 142 Reno, NV 141 Las Vegas, NV 141 Eugene, OR 140 Fort Lauderdale, FL 123 Davenport, IA 112 Bakersfield 108 Albuquerque, NM 93 Artington, TX 89 Witchita, KS 79 Tucson, AZ 72 EI Paso, TX 67 Fort Wayne, IN 62 Phoenix, AZ 60 Boulder, CO 59 Peoria, IL 37 Source: Ernst & Young 1994 National Water & Wastewater Rate Survey Prepared by George K. Baum & Company 01/02/96 I The proposed time frame for the selection of the consultants for these two projects is as follows: "- Chester Avenue Streetscape January 19 Receive SOQ's from interested firms January 22 Staff reviews SOQ's for completeness January 22 Staff distributes SOQ's to the Selection Committee members January 22 - 25 Selection Committee members individually review the SOQ's .and evaluate the firms January 26 Selection Committee meets to tabulate their evaluation scores and select the top firms which will be invited to an interview February 2 Selection Committee conducts interviews and review the fee proposals submitted by the top firms: Committee selects the consultant for the project. February 12 Central District Development Agency approves award of contract to the recommended consultant. Waste Water Treatment Plant Expansion January 19 Receive SOQ's from interested firms January 22 - 23 Staff reviews SOQ's for completeness January 24 Staff distributes SOQ's to the Selection Committee members January 24 - February 5 Selection Committee members individually review the SOQ's and evaluate the firms February 6 Selection Committee meets to tabulate their evaluation scores and select the top firms which will be invited to an interview February 28 Selection Committee ~onducts interviews and review the fee proposals submitted by the top firms: Committee selects the consultant for the proJect. March 20 City Council approves award of contract to the recommended consultant. To maintain our schedule, we must assemble the select committees by Thursday, January 11, 1996. cc: Donna Barnes \ fhilt vV I I Fred Kloepper I &~M Arnold Ramming h if V¡f(/f G:\PROJECfS\ARNOLD\ WWfP3EXPIT A>"IOY. ! 03 ~ . -- BAKERSFIELD Gail E. Waiters. Assistant City Manager !5!r 6 ~- ~~~ ~.~~ ~ ~ tfdc:4d- ~ dß ~ ~~~k ~-~.~~ þ/~ I %fiJ . I I I BUDGET AND FINANCE COMMITTEE. 1996 MEETING SCHEDULE MONDAYS @ 12:15 PM COMMITTEE MEETING COUNCIL MEETING January 8 January 1 0 None January 24 None February 7 February 12 February 21 None March 6 March 11 March 20 None April 3 April 8 April 17 None May 8 May 13 May 22 None June 12 June 17 June 26 None July 10 July 15 July 24 None August 7 August 12 August 21 None September 11 September 16 September 25 None October 9 October 21 October 23 None November 6 November 18 November 20 None December 4 December 9 December 18 - - URBAN DEVELOPMENT COMMITTEE - 1996 ADOPTED MEETING SCHEDULE WEDNESDAYS @ 12:15 PM COMMITTEE MEETING COUNCIL MEETING None January 10 January 17 January 24 None February 7 February 15 February 21 None March 6 March 13 March 20 None April 3 April 1 0 April 17 None* May 8 None* May 22 None* June 12 None* June 26 None July 10 July 17 July 24 None August 7 August 14 August 21 None September 11 September 18 September 25 None October 9 October 16 October 23 None November 6 November 13 November 20 None December 4 December 11 December 18 *No meeting scheduled because of budget hearings/holidays. ~ . - B A K E R 5 F I E L 0 ': COMMUNITY SERVICES COMMITTEE - 1996 PROPOSED MEETING SCHEDULE I , SECOND TUESDAY OF EACH MONTH AT 4:15 P.M. COMMITTEE MEETING DATES 1996 February 13 March 12 April 9 May 14 June 11 July 9 August 13 September 10 .. October 8 November 12 December 10 I ~ . I --- B A K E R 5 F I E L 0 PERSONNEL COMMITTEE - 1996 PROPOSED MEETING SCHEDULE TUESDAYS @ 4:15 P.M. 1 I COMMITTEE MEETING' 1996 January 2 March 5 April 2 May 7 June 4 - - July 2 August 6 September 3 October 1 November 5 December 3 I I II -- I, I ~~ ~ .- BAKERSFIELD Alan Tandy. City Manager January 9, 1996 VIA FAX: 916/327-5297 The Honorable Richard Rainey, Chair Assembly Local Government Committee The State Assembly State Capitol Building Sacramento, CA 95814 RE: Support for AB 1341 (Sweeney) Dear Assemblyman Rainey: The City of Bakersfield is in support of AB 1341 as it prevents a county from approving development within a city's sphere of influences unless the city and county have reached agreement on and adopted an annexation agreement and the development is consistent with the annexation agreement. AB 1341 takes steps to resolve inequities within the annexation process by giving cities an equal footing in negotiating Revenue and Taxation Code Section 99 agreements and in protecting city spheres of influence from inferior county development projects. Please support AB 1341. ~ City Manager s:m0108961 cc: Local Legislators League of California Cities City of Bakersfield. City Manager's Office. 1501 Truxtun Avenue Bakersfield. California. 93301 IRnC\) ~')h-~7C\1 . F;¡y (RnC\) ~'JA.-1RC\n I ~ . -- B A K E R 5 F I E L 0 January 8, 1996 MarIton B. Simpson /..~, -- ¡'- I 1407-1409 19th Street ' , Bakersfield, CA 93301 Re: Property at 1407-1409 19th Street Parcel # 00602114 - - Dear Mr. Simpson, This letter serves as notification that you may begin work on your URM property located at 1407-1409 19th Street. Your application for the city's URM Incentive Program has been processed, your workplan has been accepted, and the necessary environmental review has been completed. With the completion of this evaluation, you may now proceed with your planned retrofit. If your retrofit project could affect any other properties, you are required to contact this office immediately. With this notification you may now obtain a building pennit and proceed with your work. When the work is complete, please forward to this office your invoices for eligible reimbursement items as detailed in your submitted workplan. Please be aware that the incentive program will reimburse up to $5,000 for allowable expenses. You must also provide the appropriate certification from the Building Department indicating their acceptance of the seismic work performed. Please call Andre Devereaux at the Economic and Community Development Department at (805) 326-3765 if you ve any questions. Sincerely, Þ John F. Wager, Jr. Economic Development Director ) RECEIVED l ~ Alan Tandy, City Manager ~ " 1 JAN~~_~ J I cc: ~ Dennis Fidler, Building Director ' f Jack Leonard, Assistant Building Director Mike Quon, Building Plan Check Engineer ':!TY IV!ANAGER'S Or-FIC ' ""-._-._-~-- <-.~- -..- a:ad/Simpson,1tr City of Bakersfield. Economic and Community Development Department 515 Truxtun Avenue. BaKersfield. California 93301 (805) 326-3765 . Fax (805) 328-1548 . TOO (805) 324-3631 I '... REPORT OF THE CITY OF BAKERSFIELD BUILDING DEPARTMENT For the Period Between Jan. 1995 to Dec. 1995 Permits Valuation No. No. This This CLASS OF BUILDING Bldgs Units Period Period, $ 1 Single Family Residence 1,567 1,567 1,567 161,880,365 2 Condominium 3 Two-Family Bldg. (Duplex) 1 2 1 92,640 4 Three-Four Family Bldg. 19 71 19 4,321,704 5 Five or more Family Bldg. 38 '309 38 17,144,684 13 Hotel/Motel 18 Amusement Recreational Bldg. 3 3 4,016,178 19 Church/Religious Bldg. 20 Warehouse Bldg. 6 6 955,652 21 Commercial Garage 2 2 374,908 22 Service Station/Repair 3 3 ~ 637,594 23 Hospital/Medical Office 2 2 235,192 24 Office/Bank Bldg. 5 5 2,017,794 25 Public Works Bldg. 26 School/Educational Bldg. 1 1 983,204 27 Restaurant/Store Bldg. 8 8 6,977,584 28 Other Non-Residential Bldg. 9 9 272,778 29 Swimming Pool and/or Spa 507 6,943,968 33 Garage Conversion 4 17,651 34 Residential Alt/Rep/Add 501 4,916,775 35 Fire Sprinkler System 29 37 Commercial Alt/Rep/Add 319 13,934,753 38 Residential Garage/Carport 4 37,871 40 Mobile Home Accessory Structure 1 51,000 41 Mobile Home Installation 9 10 460,022 42 Commercial Coach/Office Trailer 14 282,600 45 Demolition/Single Family Reside 14 28,400 46 Demolition/Multi-Family Residen 3 4,000 49 Demolition - Commercial Structu 12 97,500 50 Fire Damage Repair/Residential 45 1,046,295 51 Fire Damage Repair/Commercial 3 86,478 52 Moved Bldg./Residen 3 10,000 64 Other Miscellaneous 133 311,506 54 Re-roof/Residential 636 3,192,061 55 Re-roof/Commercial 66 546,323 80 CD/ED Rehab Project 24 186,135 65 Permanent Sign 279 769,135 66 Temporary Sign 133 25,700 70 Mechanical Permit 253 603,150 71 Plumbing Permit 378 423,525 72 Electrical Permit 417 678,800 73 Combination Mech/Plbg/Elect 108 176,750 90 Other Permits 78 6,700 TOTAL 1,664 1,958 5,638 $234,760,875 FEES COLLECTED THIS PERIOD -----> $1,984,326 ~~. ,=~~ ~ I' ' ' RECEiVED 'i )IÁ'IF I ~ ! : L~~~~~=~~~~.~~.,^, :"""'Tyr"i,'f<:r".,i(','" r:" \ , ~~~-_.._.-. - " ,',. ;"~' "'.", ,. .'~ '" ,:, , ,- " ',~,' J '. '... '~', 'C. ..,.,., '..,' ' . ,,'. ' , ': '~", ,/JJ1 ~','."'" ,,' '~~,'~',"'~,,",""',"'~, ;;;' .."'" , ".,:,' " ",'",;,' ~ ..,,',"'.,., ",.,' ""'-"', "",' """".",.~"t,,/""/".'" ,,"', ',"':"",;" I,c",,"", '-""" ',:",""",,:, ;,eentråt V2lIe~8usirlessFòrmß' c",""",',',,'. " -" c -, -~-~ 14,Ò():EASTÒN DRIVE,SUE '110,.:ÒAKÊRSfIELD,'<:A'9:U09 ,', ',:\',:,";', . ,,:'. ,'; " ",.' ':" ' ,", / ,,: (895);323-7777 -FAX (805)323-2713,. :', " ,', ' : ,'- ,';', " ¡ ,":", ; ,::, ',.. """" , " ,~'Mr,. Alan :Tandy,' 'City Hafulger ,,'," ," 'Ci~y.ò£,'~ersfietd,- ",' " ,,' "" "" " ,,150ìTruxtùnAven1,1è,," " (, ';' .. ' BakersficHd~, ,C'A93301 ' ' " . ," ',,' ," I' ...' I',;',,' - J, " ;,' " , "'Jahuary8~1996 ' , . , ,', f , "".' "'," .. ",~..",,-~~ -,,-"-. ,', ":','-'" ,,' ., ' " , ' Dear:}{r..: Tàhdy;, " " ,;,' . ,'" Ian writiIig'to 'YOu'as'a~e~",~f:-tm:;'Board "6f Directors ofth~ GOid~'-" ~"\' ~it.e Gleaners. The'Gleårièrs contribution of hel,p:l.~ the les¿' fort~te in, our ' ,. "comm.JI?ity;i.s 'well Jmown~ Thesupport receivedfran the:búsîness' canriUnity and; , ,'òthers"'over,,the paSt'~en.:'YE!ars, ~s a .t~tament to ,th~ ~~cc,ess of.,our,pr()9r~:~", . " ' ThéGleánërs' recently rea~hed'a cr'ossroadS with its f~od 'di~tribuÙ.on , . . , program'. ' Facêd with the ,likelihôòdof having to;curtáil. all' foOd .C?perations because of ',fâcility problems ,the 'finding' lot ;theGarceS Circle, property 'haS , " ' \ ' ' " , ,," ' breat,hed 'anew life', 'into that, program. However; - we cannot" bring this' neW '" location'info'an ,operationafstatus,'without the 'help of the' city: òf ,'Bakersfield: " ' , ',"'" ,'," ' , '>',", ,,', " ' , ' ' , .. ^,' ',' ", .' '~.. '~' I fully suppòrt~, .The GleaÌler~r~t for' $340',000 '"of, CDBG'furids,to ' . ,rehabi,lit,atetœ Garces Cirqleprppèrtý. , I encourage you and' thè 'City Council 'tolôok favòrablyupon, thisréqUest~ An."approvål Ôf ~hè reqùeSt, will ,not only, - ~~e Th~ Gleaners, to cont,in~e, seryingthe: 'hungry but to expand: ,its ne~ed,'~ > services;" Ithank,'youfòi"your every cònsid~ration. ' ", ,- '>, '~~ê .. >1 "', "Sincer,ely, " , ..' ",'" " ,> "'" -- ",- ,-^~",_. ,,'" "'c":c' '.... - ,.-,(,;~,--,-, " " " - ",'," -, '," .. ',:," c =- ,--' " ,I , , , '" ,.', ;, ,,' ',' ,'" ,J ' , " ' " ' ,,' ~ ," ',' ";";""""'C',.rR"'¿¡::"O'ë"',,-" '"I '" :" "" ' ", ,', ,1, RE ,r.:u.,!c. , , -,'.<" ,,': ", ,,':< "'"", , .."",,~'t~~'f',::,JAW~;"9\996:," " , "',' ';"'"",'~';, ,~,:,' "::v;,'..",':,,, '~"',j.,,)'1 ,~'- "C~, "°," "",, """ 'c'TYMANAG'~,~:S9FFI<:~¡ "" ',',' " - ' "WE 'pRiNT ~VERVTHING:EXC~PTMONEV.:",'" , .. " " J ' ' .. , ' , ,', " .., ' , , ' I . !'> Water Content (I ." . I nchBS): ~.. ¡;; '" ~, I . p I Y g: .J < 1 CD " 3 \ CT " CD I . -, \ 1 \I ii 1"'-"" "'" a CD 2 Q å- ~ ~ ~ 1:1:1 (J) - ~ ~ 8 ^ 0 * m ~~ 0 ~ ~ "0 ~ '. ~-.. Z ft, c: " -- - ~ - 0-' ~ .:! ~" 0"0" - ~ ~ ,- < ~ » -" -, - m ,. 0 ' ..... 0 ,~ :D OJ c: . Q CJ . 3 '" ~ m» . OJ - '" c' -...... <Q G> en ;:<; -' \ <11 '- :I:- "" a I '. !!¡ --I Z t;j õ' ~ . -. ! c: (J) (J) ~ ::> <T' 1 .!!1 m Z ~ 2 ' ' . 0 ~ 00. t \ C> z CD -< '. - en ::E Pl 1....... 1 ~ O"T'l ~ - ~. ø Y " 0 I '. "' :JJ» '" :> .... - . 0> - 0 c:::: ... ' z ~ I c~ &1 I ~ I ~è) '" I a ,.' C f ) I ;s: I !j. } 00 -" c ~ / ~ '------"" ~ ,~ . - ('" ¡ 0 ,~ I Z I œ I , ' t C l -..-- . ' , I / \ -'- > { - ~ ,>"0' ' "' ' Q =./ " // /' ..' / I' - \ ( . - '. ) , ' , ., ..............................., ~O) lr)aJ'8-r.oi- .....0I1(Y)a)~"":~ -§¡ ~ I C\J .- 0) 0> > ~« ~~O~~~~~ 0> "'¡ß(\ lr)oq-....(\ CD 0> - .... ::::¡:r-. E "' 0 mmoov~m'8- ~ lIIëj)O"Õ>'o ã) 0) ",-oq-(\ o....~.... 0> D O>cxj .... Iß Iß ï m .r..r. 0> !!!. gg t; oð ...J ,- .- "' 0) ~ "ã>"Eomm'8-CD'8- CD CO '8- '8- ~ '8- 8 0 c: "' LO . . (\ . 0) oq-........ LO ('I) III c: :J m (\ CD oq- LO .... " oq- oq- <0 a.."' ~ ~C)cxj"" mKf ~ §. ~ > en c: < c: U w .!1l w CD !::: 3: 0 (\ oq- 'S- ('I) '8- C) ..,. m C/) ã) 0 Ir) . ..... . oq- .... ~ 0) ~~O)oq-('I)('I)O.... ° 0.... ~m - .... ('I) -0> ~ O)aJ III~ U. ~:E 111111111111 ~.ê a: z .....û)' ;( 0 W =0>", en c: C/) 0)0 0 Ir) 0 '8- m '8- .!!! Õ ~ "' LO . '.... . co c: I Z"") ~ &¡ .... oq- .... oq- oq- .... ëii 0> 0> Wi:> ma)"" C\J ....~t; en ~ 0 Q.. ~~"' Z -00 C/) .... ~""'O > - -""'0 > 0) c:0 :J~- 0 "' ñí j~ E:Jèõ enz g. æ 0 r.o r-. 'S- aJ '8- CillO) ~ g oq- 00" .... III 0)01 III 01 2 ('I) oq- m ~ .... (\ .- ¡¡¡ a:", 2 D .... m m - (\ 0) .r. E e: .... "' :J 'õ Z.. .r.Q..-0 .....""'....O~O> ~111~ W .... "'~O'--> t- en I- 0 c~z!!í~< 2§3J < « I/)-_:J",- ""'-0> m C :E "'0 E.!tl o ....ñía: ::E'S-:Jo'8- ~"S"' 0)3: 0&> 0&> 00 g'Ee: oE= a: ~ 0 g "': <X! ~ <X! ~ u.. z .5 < .-.- Ü :J ~ W ""'~r-.(\ aJ('I)m.... )()()(~:t::t: OH", > D"'-"" 0>0>0) 00 ~III - ",0)0 ~~'O¡¡ e:e: 11"'- a: c)::::¡:"" .5.5.5¡-ææ )(~2 e:e:e:o>.>. ~~3: Z ,S! .S! .S! e: '3 '3 c: 3: 0 a: ñí ñí ñí C/) ...,..., .~ 0 ~ Wo&>o&> .~:::::: ° .1..1. 0 c: .- ~ CD =æ ~ 0 0 (\ IS' r-. IS' ,9- ,9- .9- ë '¡::.¡:: :¡:; I/) 0> c."O:B~.oC\i:t~~ ~~~-~~ .~æg' o.c:....-.... (\ ~~~O> o.'-~ ::> ~ 0 ;:: Q.. Q.. Q.. ~ i i .- i ~ ~~~'Eñíñí ~E"' "'"'"'O>EE a.1II~ C) C) C) ~ ,-"- 0) 0) :J Illæ~~ OlE? ('I) ('I) ('I) ~ :J = 0) ..... ~ .....('1) I g¡ Ci .... .... ('I) « « II Ciii 'E ............... - 0> ....(\ ('I) Õ 0> 2.!!1 'E c: .....",,1:""'8 ..... æO) "'Ol-C: ~ 0> CIIIE2.... 'E ~~ .!!1:E0)§2 0 ~~ ~I-Eo"' 0 1< .....'E8""~ .... =- C:O> 0)0> 0> Cio o>.....~ñío> ~: <::!'! 'E§2~!!! ~. .... 0 0 ,,", 0> :>uj", ""'o'""::It 0) > - 0) 0> ã)....::It 0>< 0-,= >m O)""O)-m III" m -O)~",........ o>~ III"" """"""UEO) c:-=:J c:~~....>.¡:: .-c: 0 o:>_o<a. ~._";> :¡:;-",Z....< n,O> 0> "'"'E- - "'...."" >:J 0'-0 ~"' Q.. .!1lü°o&>Ci I W<ZIS'<'S- ~~- ~ I ~ :;~ '" - I ~ GOVERNOR'S OFFICE January 5, 1996 To: City Managers County Administrators Enclosed for your infonnation and use is a copy of the revised regulations which would bring impottant components of California's prevailing wage regulations in line with federal requirements and other states. This revised version contains additional economic information which you may fipd useful for your own analysis. If you have questions or comments, please contact John Duncan at the California Department of Industrial Relations (415) 972-8835. As before, your comments and support are welcome. Sincerely, {!~ "/ Carol G. Whiteside Director Intergovernmental Affairs Enclosure --. RECEi\fED t. \ :~N_~~~: ~¡ CITY rVIAI\JAGER'S Or-FIC-', : ,_.,------~.'" ' GOVERNOR PETE WILSON . SACRAMENTO, CALIFORNIA 95814 " (916) 445-2841 -,- II 1 IJ ,~, .. ~Hì 1 ,J : ;:¡ Z LoU,.H ,5 ,I ï:: ,~ ,~.n ' DI R :\WI 1:\ ~ III) :.: , '~ 'C"cI.=t'~~~'~ 1,' ' :1,10", ~t"@a' ' I""":,),, '" , "," . , ~" ,," ~' I", " '~'~~""~~ ,~,,", '. ,~', ,: ~ ~ft ,¡ , "'~ ~1t~ .~ ',' ~, ' , ..' , ,"', '-;>.9' ~\.~:~ ~" ,:"""",,~ -, ,~T, '., "" '~'~'" .~~ A~,..,~ ~,' "'," ", -, I ~"<'::'.'»'~"'\:;\~+~ ~~, ~':~ ~~~w, ",~,,' ~J.\ï.t."" ~:<;t.";~,,\~~,', ~~\~;...:.'tk\\i(",,$'}~?~~,t"~'/"A, ,,',w, ,..,;"r~J~~'~<"'\if ~.,."~,,,~~:,' ~è>' ~'\,"'~,- ~,' ~, ,,~ ~$\~ ,~. """'~, ",....~"*~~ ~,'" '~;j¡ìii""",.'"",~,<~~.>. 'i\j~N(";' California Department of Industrial Relations, P.O. 80x 420603, San Francisco, CA 94142 FOR ThHvŒDIA TE RELEASE CaNT ACT:' Friday, January 5, 1996 John Duncan IR# 96-01 (415) 972-8835 Internet: http:/ /W"WVJ.dir.ca,gov Rick Rice (714) 935-2812 Historic Refonn of California's Prevailing \"age Rules Proceeds -- Public Hearings Slated for February In Los Angeles and San Fl'andsco SAN FR.A..~CISCO .. The California Department of fudustrial Relations (DIR), proceeding with Governor Pete Wilson's order to amend the state's prevailing \\'age requirements for the benefit of state and local taxpayers, has ,! scheduled public hearings to be held in Los ,A.l'1gdes andSan Francisco during tJ:te last two weeks of February. "The two changes that we have proposed will bring important components of California's prevailing wage regulations in line with federal requirements and those of all but hvo of the other states which have prevailing wage laws" said DJRdirector Lloyd \V. Aubry, Jr. "FUIthennore, OUI initial economic «naJyses conducted on these issues indicate that the proposed changes have the potential for saving the state and hard-pressed local governments and California ta:J\:payers millions of dollars in the state's infrastructure needs during coming years. " In his January 1995 budget message, the Governor requested that DlR -rnore- :E"':- ,~---- --, Ul u.5' HI5 1.}: 5;; F.'L\ .U5 9,2 ,':i'!-!, VIR :\D)I!:'\ l¡7J nu.} . ',~ 2 96-01 I ; reyiew existing prevailing wage requirements for any needed regulatory or I I \ , . \ 'I legislative changes. In budget documents, the Governor noted, 'Tl¡te state must . I reconsider the requirement that bidders pay prevailing wage. Conlpetition is about getting the best available service at the lowest cost. Artificial barri¿rs to competition, including specified wage requirements, work against government efficiency and eliminate otherv"ise qualified providers --indudLl1.g minority- and women-owned busìn.esses .- hom competing for state contracts." The regulatory reforms to be discussed at tile public hearings include a new method for calculating the prevailing wage and repeal of a rule that requires an. automatic increase in prevailing wages which are not in effect, but only scheduled in UIÚon contracts. The proposed regulatiorys change the method for determining the prevailing ""age from the modal approach to a modified \'l/eighted average, wrÜch is the same approach used by the federal government. In other 'words; the prevailing rate will be the rate paid to a majority of the workers or, if no single rate is paid a majority, a weighted average will be used. This has been the federal rule since the early 1980's. The modal approach required that the most frequently occurring wage rate be considered prevailing, taking no account of wages above and below that rate, even if paid to many more workers. TI1is method often resulted in the wage rate under collective bargaining agreements qualifying as the prevailing wage, even if they were significantly higher than the wages paid to a rilajorit)' of workers in a locality. Other than California, only Minnesota and Wisconsin use the modal method. -more- !) 1 U '0, ';' tì D: 5~ f~X 415 97: N~1T V l!\ :~mll '\ '¿JIll',! , I . - c 3 96-01 " Hearings \vill be held on the dldIlge from the modal to the \Vt~ightt~d averdge method on February 20, 1996 at 9:00 a.m. in the Auditorium of the Public Utilities Conunission Building, 505 Van Ness Avenue in 5;111 firanci$co and on February 26, 1996 'at 10:00 a.m. at tr\l? Auditorium of the Califorrua State Building, 107 South Broadway in Los Angeles. Public hearings conceming repeal of the rule reqllirjng that prevailing wage rates must automatically increase under certain conditions will occur on February 22, 1996 at 9:00 a.m. in the Auditorium of the Public Utilities Commission Buildirtg, 505 Van Ness Avenue in Sí11î Francisco and again on February 27 at 10:00 a.m. in the Auditorium of the California State Building at 107 South Broadvvay in Los Angeles. Anyone 1Nishing to submit \\'ritten comments relevant to the proposed changes to prevailing wage regulations may submit them to: Dorothy Vuksich, Cruet Division of labor Statistics and Research, P.O. Box 420603, San Francisco, CA 94142. ÞJ.1 written comments must be received no later than 5:00 p.m. on February 27, 1996. A copy of the proposed regulatiolL'S and related material may be obtained by writing to the same address. -- ## -- - -- --- -----, -- '. , " ~P' >- TITLE 8. DEPARTMENT OF INDUSlRIAL RELATIONS NOTICE OF PROPOSED RULEMAKING The D~partment of Industrial Relations (ttDIRtt) proposes to adopt the proposed regulations described below after considering all comments, objections or recommendations regarding the proposed acti.on. PROPOSED REGULATORY ACfION The DIR proposes. to adopt the amendments in Group 3, Articles I and 4 in Title 8 of the California Code of Regulations (CCR). These ,articles and sections pertain to the requirements for the payment of prevailing wages upon public works. PUBLIC HEARING The DIR will hold a public hearing on the following dates and locations to receive I public comments on the proposed regulations: On February ,20, 1996 at 9:00 a.m. at the Auditorium of the Public Utilities Commission Building, 505 Van Ness Ave., San Francisco, CA; and On February 26, 1996 at 10:00 a.m. at the Auditorium of the California State Building, 107 South Broadway, Los Angeles, CA WRITTEN COMMENT PERIOD Interested persons wishing to submit written comments relevant to the proposed regulatory action may submit them to: Dorothy Vuksich, Chief, Division of Labor Statistics and Research, P. O. Box 420603, San Francisco, CA 94142. All written comments must be received no later than 5 :00 p.m. on February 27, 1996. AUTHORITY AND REFERENCE Labor Code sections 1773.5 and 1777.1 authorize the Director of Industrial Relations, or his designee, to adopt the proposed regulations to implement, interpret and make specific Labor Code sections J 720 through 1780 and 1810 through 1861. DISCLOSURES REGARDING THE PROPOSED ACfION 1. Mandate on Local Agencies and School Districts In accordance 'with Government Code Section 11346.5(a)(5), DIR has determined that the proposed regulatory changes will not impose a mandate on local agencies or school districts. The existing statutes and regulations mandate that prevailing wages be paid on public works projects. The proposed amendments will. not cause, on average, an increase in the prevailing wage rates determined by DIR and required to be paid by contractors for local agencies and school districts. Unions and other organizations who have filed suit over these proposed changes and similar changes .in the federal regulations have not contended that these changes would have such an effect. The prevailing wage.. is a minimum wage that must be paid on public works projects. While the proposed changes will result in lower rates in some instances, there is no 1 ., I I " I . requirement that such lower rates be paid under any circumstances. Thus, the proposed I ! changes will not impose upon awarding bodies an obligation to require lower rates. 2. Cost or Savings to any state agency. A. Costs are defined in State Administrative Manual 6050 as supplemental financing or additional or redirected staff. DIR estimates that its own costs could increase by approximately $1.2 million per year for additional wages surveys to be done statewide, if federal surveys are not adopted. DIR estimates that the proposed changes will' not cause any other state agencies to incur additional costs, because no additional burdens will be imposed. B. Savings are defined in SAM as actual budget reductions (direct) and freeing up of staff or resources for reassignment (indirect). DIR estimates' that there will be no indirect savings by reassignment, as there will be no change in the administrative burdens impo)sed upon agencies. There will be opportunities for savings not necessarily required by the changes because the changes will only' affect the minimum wages required to be paid in certain circumstances. An agency could enter into a project labor agreement to use only union labor, or could have federal funding which. brings with it a requirement to pay higher Davis-Bacon rates. While state agencies will experience opportunities for savings in construction costs, the extent of such potential savings is subject tQ many variables, and is subject to debate by experts. ' Few studies address all the variables-- such as the wage rates paid, and the productivity associated with different rates-- at the same time, and those which do have reached no consensus. As pointed out in à January 7, 1991 report from the California Legislative Analyst Elizabeth G. Hill' on the potential impact of changing the definition of "prevailing rate" to a modified weighted average to Assembly Member Tom McClintock, I . the legislative analyst states; "Unfortunately" reliable data for measuring the effects of these latter two factors (Labor Productivity and Nonlabor Construction Costs) are simply not available. It is primarily for this reason that economists have been unable to develop meaningful quantitative estimates of the effects of prevailing wage laws." (Hill 1991, P. 6) In this report Ms. Hill further indicates that".... despite general agreement that wage rates under a modal definition of 'prevailing' are higher than rates under a mean' definition, considerable disagreement persists among economists about the net economic costs of prevailing wage, laws." (Hill 1991, p. 5) Professor Steven G. Allen of North Carolina State University discussed the impact of the 'modal rate within the broader context of the impact of federal prevailing wage requirements on construction costs: Davis-Bacon is certain' to increase public construction. costs to some extent because it sets as the minimum wage some measure of the central tendency of the wage distribution. As a result, some public construction projects will not be completed at minimum costs. Since separate minimums exist for each occupation (and sometimes for different categories of work within each occupation), the impact of such constraint is a function of' the degree of variation in wages within such groupings and the position of the minimum in the wage distribution. The distribution tends to, be non-normal because in most cases all uniòn workers in an occupation receive the same rate. If a 2 0" 'i' . majority or a very small minority of workers are covered by a collective bargaining agreement, this presents no problem in defining the appropriate prevailing wage. However, if 30-50 percent receive union scale, it will be adopted as the prevailing rate. In practice this means that the maximum wage in the distribution may become the minimum wage for public construction. If this is frequently the case, the Davis-B~con could have an enormous impact' on public construction costs because union wages are 20-90 percent' higher than non-union labor. 1 (Allen, 1983, JL£,26:707, 709-710) Even though exact estimates have been lacking, there is broad agreement that changes in wage rates are related to the degree of unionization, which is generally higher in urban areas than in rural areas. According to a Congressional Budget Office' study a change in the definition' of "prevailing rate" from a 30 percent to a 50 percent modified weighted average under the Davis-Bacon Act would affect about one-third (33%) of all wage determinations reducing the total wages on federal construction by one to two percent (1-2%) -- with the impact concentrated in, rural and small urban areas. (CBO, 1983) The cumulative reduction for fiscal years 1984- 1988 was estimated at $560 million dollars. (One survey for these counties by DIR has indicated that the proposed changes in its definition of "prevailing" would result in an overall 20% reduction in prevailing rates. (DLSR, 1990) There is general agreement that a change from a pure modal rate to a weighted average when there is no majority rate would result in a reduction in labor costs, although there is disagreement as to the amount of the reduction. Redefining the Federal Davis-Bacon prevailing rate from a 30% rate to a 50% modified weighted average was estimated to result in substantial costs savings on federal and federally assisted construction of at least $120 million in Fiscal Year 1982. (FR 1982, 104: 23644, 23648.) During the federal review process, however, some commentors argued that government estimates were too high. The construction unions, through the Building and Construction Trades Department, estimated the cost savings at 45 million dollars per year. Contractqr Associations (that generally advocated a more drastic revision to the methodology) argued that cost savings ranged from no savings to $50 million dollars per year. (FR 1982, 104: 23644, 23648.) With the direction of change established as toward lower wages in some labor markets, nonetheless the degree of change, and thus the opportunities for savings, can only be addressed as a range. At the outside limit the range could not be greater than the 5% drop in overall wages detected in a study, funded by AFL-CIO unions, which investigated the effects of total abolition of state prevailing wage laws. (Philips et al. 1995 p. 68) The Congressional study also showed that though the total impact of the Davis-Bacon act on federal construction is difficult to assess, the CBO estimates that it might raise costs by approximately 3.7% -- equivalent to an increase in federal construction outlays of about 1 . For citations, see the list of identified documents which is an appendix to the ISOR. The identification is with full, traditional citation form. The list incorporates, as well as cited documents, the location of public records, including reports, documentation, and other materials, related to the proposed action. The agency officer makes availáble this location on. request; here it is provided to all recipients of the initial package. 3 ., ., $1 billion during FY 1982. (CBO, 1983, p. 22) As discussed below, however, some of the data for calculating this impact are limited, so the estimate should be regarded as uncertain. "On the basis of the evidence available the CBO estimates that Davis-Bacon increased the total costs of federal construction by 3.7%, or just $1 billion in FY 1982. Estimates of the three major cost factors-- wages, labor use and compliance costs were added together to derive a total cost estimate. Of course, this estimate is too low to the extent that some costs cannot be quantified and too high to the extent that offsetting factors cannot be concluded..." (CBO, 1983, p. 29) Effects will often \ be local. Within one locality, a survey measurement would have resulted in a 20% change. (Vuksich, 1995 Savings Estimates). A final analysis of the disparity between federal determinations based on Collective Bargaining Agreements (CBA's) and averages showed a lower figure of 8.8% for building construction and 12.7% for residential construction, in areas with modest non-union employme~t rates of 10%. ' (Final regulatory and Impact and Regulatory Flexibility Analysis...N. d.) Estimation, is confined to ranges also because of continuing debates over the amount of total construction costs which are represented by labor costs. Ranges assessed have included 30% (Spry The History, Costs and Effects of' Ohio's Prevailing Wage Law, citing Bureau of Labor Statistics surveys and others); 33%, Kentucky (Capital Construction and Equipment Purchase Oversight Committee, (1981). Although the division has in the past used a figure of' 22% as the proportion of labor to total construction (DLSR, 1995, Percentage of Labor Costs), there are other estimates which show approximately one third (1/3). In testimony on February 17, 1995 before the Senate on the repeal of the Davis Bacon Act, Assistant Secretary of Labor for Employment Standards, Bernard E. Anderson stated that Labor Costs are a "significant component (usually about one third) of project costs (ESA, 1995)." With 33% as the proportion of construction project costs' which represent labor costs, the task then, becomes' to estimate public construction costs. Those have varied, with a figure of $6.5 billion in 1992 rising to $9.05 billion in 1994. (CIRB 1994). The figures include both federal and state funded public works. After subtracting ~4.188 billion in federal and, state matching fi1onies (Vuksich, 1995 Savings Estimates), we have total State monies to be used for'1994 estimates of $4.862 Billion. Applying a conservative estimate of 22% as the proportion of labor costs to' total construction costs, and applying a 20% savings estimate from a change in the method for determining the prevailing rate from surveys of the more rural areas, a savings of approximately $200 million dollars would be generated. However, it is expected that in non-rural areas (where the degree of unionization is higher) the differential produced by a methodology change may be as low as 0%, although more likely a minimum of 2% -5%. Instead of using the conservative estimate of 22%, it is valid to use the 33% estimate for the proportion of labor to total construction costs, along with a midpoint level of labor cost savings at 10%. Ten percent would be based on construction savings extending over both urban and rural areas. This produces a different savings estimate (again, based on 1994 public construction) at approximately $160 million dollars. This rough estimate of 10% is selected in view of the declining unionization of construction overall, as well as the increasing public construction of, for example, prisons, in rural areas. Based on a rough estimate of the future size of the public sector construction market, the ranges of $160 million to $200 million dollars are reasonable e,stimates based on recent and projeqed construction activity. 3. Cost to any local agency or sèhool district which must be reimbursed in accordance with Government Code Section 17561. 4 . , ; DIR has determined that the proposed amendments would not impose a mandate on local agencies or school districts, and for this reason the estimated reimbursable cost for such a mandate is zero. Under the Department of Finance instructions, mandates enacted within the time period covered by section 18500 are addressed. There is no mandate because the proposed amendments would not implement a new requirement or require a higher level of service. In addition, were a local body or school district to seek a legal requirement, the exception to a duty to reimburse such requirements would most likely obtain. The likelihood that local bodies or school districts seek this change is suggested by the public response to the Department's 1988 fact finding. The majority (79%) of public entities responding then, including local agencies and school districts, favored the change in methodology now being considered. 4. Other non-discretionary costs or savings imposed upon local agencies: There is an. opportunity for savings for agencies awarding public works contracts. A change in the definition of prevailing rate is expected to reduce labor costs as referenced above. The monitoring of the prevailing wage requirements would become less burdensome. This could reduce both administrative and construction costs on public works projects. There are. no non -discretionary costs associated with the amended regulation. The new regulation would not require local agencies to expend any additional resources. 5. Costs or Savings in federal funding to the state A. Costs to Federal Government For the reasons set forth in 2 above as to the unlikelihood that this change will increase costs, together with the inapplicability of state public works laws to projects which are . solely federally funded, DIR estimates that there will be no additional costs to the federal government. B. Savings to Federal Government. Federal . are subject to several contingencies, above and beyond those discussed saVIngs above as to savings to state agencies, local governments and school boards. Some federally assisted state public works projects do not involve the contractors' simultaneous compliance with state .prevailing wage laws. Where the state funding is a loan, the project is not subject to state prevailing wage laws. Where a federal grant is one of those specified housing grants as to which federal law preempts state requirements for a higher wage level (FR 1988, 53:154; CPR Prts. 905, 941, 965 and 968) there will be no savings. For federal funding of projects through block grants, the federal amount is fixed, and there is no potential savings. Only where the federal percentage of funds is not limited, and the federal contribution is as a proportion of the total project cost, will there be savings, and. :1 then only when any Davis-Bacon obligations which attach to all wages paid on the I project are at or below the state-required rate. 5 I, I I' , '> 6. There is no potential cost impact of the proposed regulation on private persons or businesses affected, as considered during the regulatory development, process. Potential "cost impact" under Govt. Code section 11346.5(a) (9) is limited to costs that a private person or business necessarily incur in reasonable compliance with the proposed regulation. Private persons do not comply with a regulation regarding the calculation of prevailing wages, nor do businesses. Where an individual works on a job subject to rates calculated under the proposed changes, there are no additional costs to complying with a rate calculated in one manner rather than another. Businesses likewise do not have compliance costs associated with a requirement to calculate prevailing wages under one definition rather than another, because they only need comply with the resulting rates. (Any effects of those possible rates are disèussed elsewhere in this notice.) The only possible costs will be an expansion of the present costs of filling out wage surveys, which may increase (if more are requested.) The cost of filling out voluntary surveys approximates the cost of filling out the schedule A federal tax form, for which the IRS has published a current range of just over an hour. (Form 1040, Privacy and Paperwork Production Notice). However, there is a very different meaning of "cost impact ...on private persons" as understood by private pèrsons who have written in, response to the rulemaking on this subject begun in October, 1995. Although not required to be addressed in this Notice by the terms of the statute, the Division can respond, because it assessed the potential for adverse impact on individuals, and disclosure seems warranted by the level of interest. Where individuals are working under- Collective Bargaining Agreements, a drop of the prevailing wage for that portion of their work which is public works below their CBA rate occurs, only after other actors made a series of decisions,' or a series of factors came into play. Those are that non-union contractors compete for this type of public work; no single rate is being paid to a majority of the workers in that classification and locality; the awarding party would have to be not a charter city, outside the Labor Code's prevailing wage requirements when doing their own projects; the awarding body (charter city or no) must have decided not to require a project labor agreement; the awarding body must have decided against contractual. requirements for rates above the minimum, set by the Department's determinations. Finally, the' signatory contractor for whom these individuals work may competitively bid on a given public works project because the superior efficiency of these private persons' offsets the contractually obligated wages higher than a particular prevailing rate. Of these contingencies, the one most likely to occur is that no single rate would be paid to a majority of the workers, because the U.S. Department of Labor, Bureau of Labor Statistics (BLS) has determined that in 1983, 40.5 percent of California construction workers were unionized but in 1994, 24.2 percent of the construction workers in California were unionized. This is a decline of approximately 40 percent from 1983. However, that risk is concentrated in rural, and non-union areas, based on investigations of Davis-Bacon effects of a similar change in the definition of prevailing. Based on the results of a study (Final Regulatory Impact and Regulatory Flexibility Analysis...at page 65) the DOL determined that in' areas where a ,high percentage of construction workers are unionized, typically urbanized areas, the current rates in the Davis-Bacon determinations would be expected to prevail even under the new methodology. However, in less unionized areas, typically rural localities, the changes in the Davis-Bacon determinations under the new rule were expected to be significant. 6 I I ~---- ; -.' i Individuals working under CBA's may suffer the economic effect of a lower wage rate, but nonetheless be protected from loss of employment on public works, if other contingencies occur. First, the parties to their CBA may agree to a clause in their collective bargaining agreement authorizing the payment of the prevailing wage rate on a public works job when that rate is lower than the otherwise applicable bargained- for rate. Over one third of CBA's currently used as the basis for general prevailing wage rate determinations contain provisions for lowering their rates when prevailing wages are lower than their regular rates. (DLSR, 1995, CBA provision) Second, such private parties' unions and union employers together can use Job Targeting to concentrate the economic power of union contractors from jobs where there is no non-union competition on those where there is such competition. Private persons who do not work under CBAs, to the degree work shifts from those who do, will gain jobs. Where wage rates decline to those paid in the market, elasticity of demand should produce more employment, if that economic phenomena applies to labor. It appears to apply to labor. (Hamermesh, Ashenfelter & Layard 1986, HLE, 1). According to the ~ most severe critics of more radical measures, such as abolition of prevailing wages, those measures would result in overall more emplòyment for private individuals. (Philips et., 1995). The DIR has determined that the proposed regulations will have an effect on small businesses. Small businesses will derive a benefit from the enforcement of the regulation. The regulations written in plain English are available from the agency contact person named in this notice. 7. The agency finds and declares there to be no significant adverse economic impact on business, including the ability of California business to compete in other states. Pursuant to Govt. Code § 11346.5, the facts, evidence, documents, testimony or other evidence upon which the agency relies to support this finding is in the record. The record is the rulemaking file, referred to below. Some of the following discussion is cross-referenced to information also found under paragraph 8, which addresses the assessment required by subdivision (b) of Govt. Code § 11346.3. The significance of the impac! of a change in the definition of prevailing on business is measured against the size of the construction business. Public and private construction in California amounts to $31 billion dollars of business (Vuksich, 1995 Savings Estimates). The change affects the public sector. Federal and state public construction amounts to approximately $9.05 billion; the states share of that is $4.8 billion. (Vuksich, 1995 Savings Estimates). Within that state share, some state contracting agencies are exempt,' or elect to set wage rates over and above minima set by the state prevailing wage. In addition other variations, also discussed above, occur between urban and rural areas, unionized and non-union sectors. Ranges of possible amounts of savings, discussed in paragraph 5, are between $160 million and $200 million, with the highest figure reported at $340 million (Cline 1992). Even the largest of these is not a significant impact, adverse or otherwise, on California construction. Effects on business can be considered at a micro-level as well, and the statute references one subsection of the business community, defined as small business. (Govt. Code Section I 1342(h)(1) and (a)l) subsections (H) and (Hi) exclude general construction, nine' million five hundred thousand dollars ($9,500,000) and special trades construction, 7 . -; $5,000,000 respectively.) The closest study of the effect on small business. was the examination of the 1982 change by the U. S. Department of Labor (DOL) from the 30 percent rule to the 50 percent rule for detennining the prevailing rate under the Federal Davis-Bacon Act, DOL determined that small business would benefit from the changes and produce the greatest cost savings. In this section, the DOL used the 1977 Census Bureau's Economic Census of Construction which indicated that there were 53,665 construction establishments employing fewer than 20 workers. They noted that "... smaller contractors are more likely to pay wages nonnally below Davis-Bacon rates, resulting in relatively larger costs savings for small contractors from any lowering of the Davis-Bacon rates." (Final Regulatory Impact ... at p. 67). The proposal does not differentiate between union and non-union sectors of the business regulated. To the degree that there is a differential effect on union- signatory business, as against non-union, the effects are contingent for the same reasons that effects on private persons working under CBAs, discussed in paragraph 6, are contingent. The effect where wage rates cause a shift to non- union (FR 1982, 104:23644-51) is to shift contracts from one sector of the construction business to another, not to diminish construction. To the degree that changes such as those proposed favor small business, there is a correlation between small size and non-union status in construction. The July 1983 CBO study, notes "Though open shop contractors tend to be smaller than union contractors-- that is, finns employing union member only--their numbers seem to be growing along with their share of the market. Of the largest 400 construction finns in tenns of volume, 24 percent were open shops in 1982, compared with 13 percent in 1979 and 4 percent in 1969." (CBO, 1983) The study also noted that "Recent estimates place the open shop share of contract construction at 60 percent. (BNA 1982: A-2 to A-3) For labor markets where wages decline to the average wage, one response of California construction may be higher profits, which would be a positive effect. Another, more likely effect as competition takes effect over time, would be that the public agencies would get more infrastructure for the same expenditure. More public infrastructure positively affects business competitiveness in California, just as it positively effects priv;lte individuals. 8. Statement of Results of Assessment required by subdivision (b) of Section 11346.3. Note: These results were, in relevant part, also a portion of the general assessment of the economic impact of the rulemaking on businesses. The bases for those other assessments are available in the rulemaking file. The assessment resulted in a conclusion that there would only be a small and unquantifiable effect on the overall amount of the following: (A) The creation or elimination of jobs within the State of California. (B) The creation of new businesses or the elimination of existing ~ businesses within the State of California. (C) The expansion of businesses currently doing business within the State of California. The effect on jobs (also discussed under paragraphs 6 and 7) is principally to affect the allocation between union and non union jobs, and between the public works opportunities for small business and other businesses, but not the creation or elimination of jobs or construction businesses in the aggregate. No such effects were reported from a similar change in prevailing wage methodology under Davis-Bacon, in 1982. The number of jobs involved in state-funded public works which will be affected 8 I . - by a changed wage rate, is so small compared to the overall numbers of jobs, and businesses, within California, that studies can not. sort out that effe,ct from all the others affecting the larger ebb and flow of other economic effects. While the effect on jobs and businesses is not qu;¡ntifiable, the direction of the effects was assessed. In the locations and trades where wages are lowered toward a labor market average, in some trades and in some areas, studies have suggested that the result is to have the same work done with a larger number of lower paid workers, due to training effects on productivity. In those cases, net jobs would increase slightly. In the locations and types of construction where wages are lowered, competition eventually forces contractors to pass those savings back to public entities in the form of lower construction bids and costs. Given governments' fiscal straits during hard economic times, the monies returned should produce an expansion of the extent public works per dollar, which in turn would tend to create new businesses, or expand businesses, which then indirectly creates jo~s. The business and jobs effects are within California, because the rule affects state public works, whose sites are in California. 10. Statement of no significant effect on housing costs. The Division states that the proposal will have no significant effect on housing costs, for the following reason. Pursuant to Govt. Code § 11346.5(a) (11), the agency will make available, on request, as part of the rulemaking file the evaluation of the effect of the proposed action on housing costs. The lack of significant effect is based on the following major factors: The majority of housing in the state is private, not a public works. The cost effect on housing of public works then is not separate from the effect of the cost of local pûblic works, which are tax supported, on any other economic activity--as public works costs contribute to higher taxes, and some of those taxes are property taxes on housing, housing costs rise. This indirect effect is controlled by the limitation on taxes under the constitution. Of the housing which is public, rather than private, federally funded housing has historically occupied a significant share. Some federally funded housing brings with it a preemption of the enforcement of state prevailing rates, if higher. (FR 1988, 53: 154; 24 CPR prts 905, 941, 964 and 968). Thus, if state public works rates arç higher under the present system, they nonetheless have no effect. For the residuum of housing which is both public, and subject to state prevailing rates permitted to be higher than Davis Bacon, or only state rates, information available point in very different directions as to effect. On one hand, residential rates now determined involve a significant input from surveys, and use of federal Davis-Bacon rates, which argues for small dfect in a change towards both. Tending to the opposite conclusion are studies suggesting that prevailing wage requirements (as a whole) add significant. amounts to costs. Both points are discussed in the evaluation to be made available to requesting parties. CONSIDERATION OF ALTERNATIVES In accordance with Government Code Section 11346.5, subdivision (a)(7), DIR must determine that no alternative considered would be more effective in carrying out the 9 --------- I . .1 ; purpose for which the action is proposed or would be as effective and less burdensome to affected private persons than the proposed action. The Division has' considere4 definitions of "prevailing" set out as those of other states (DLSR 1995, States that have prevailing wage laws) such as non-majority rates and, pure averages. It has tentatively rejected those as less compatible with the legal concerns with majority rates which are reflected in the proposal. The DIR invites interested persons to present statements or arguments with respect to alternatives to the proposed regulations during the written comment period. CONT ACr PERSON DIR has prepared an Initial Statement of Reasons for each proposed action, and has available, upon request, both the expressed terms of each proposed action in a strikeout/underline format and the location of the rulemaking file containing all the information upon which the proposals are based. Requests for copies of the proposed text of the regulations, the initial statement of reasons, questions concerning. the proposed action or the hearings, and requ~sts to review the rulemaking file at DIR between 8:30 a.m. and 4:30 p.m. Monday through Friday should be directed to: Raida Kennedy, Division of Labor Statistics and Research, P. O. Box 420603, San Francisco, CA 94142 or at (415) 972-8623 by telephone. . . A Y AILABILITY OF STATEMENT OF REASONS AND TEXT OF PROPOSED REGULATIONS. The DIR will have the entire rulemaking file available for inspection and copying throughout the rulemaking process at its office, please contact the Division of Labor Statistics and Research. at the phone number listed above if you wish to view the rulemaking file. As of the date this notice is published in the Notice Register, the rulemaking file consists of this notice, the proposed text of the regulations, the initial statement of reasons and certain documents and estimates and analyses (listed in Appendix A which are required to be made part of the record. Copies may be obtained by contacting Raida Kennedy at the address or phone number listed above. AVAILABILITY OF CHANGED OR MODIFIED TEXT Following the end of the public comment period, or the hearing if one is requested,' the DIR may adopt the proposed regulations substantially as described in this notice. If modifications are made which are sufficiently related to the originally proposed text, the modified text-- with the changes clearly indicated-- shall be made available to the public for at least 15 days prior to the date on which DIR adopts the regulations. Requests for copies of any modified regulations should be addressed to the agency's contact person identified in this notice. The DIR will accept written comments of the modified regulations for 15 days after the date on which the modified text are made available. 10 ~ . I I INFORMATIVE DIGEST/PLAIN ENGLISH OVERVIEW 1. Article 1. DEFINITIONS Labor Code Sections 1720. tl.~. and sections 16000 tl.~. of the California Code of Regulations specify the State's prevailing wage law requirements for public works projects. Existing regulations state definitions of terms commonly used by DIR, awarding bodies and contractors, in the public works contracting process. Section 16000. Definitions. It is proposed to amend the definition of "Prevailing Wage. Includes:" from the definitions in this Article.. Labor Code Section 1773 requires the Director of Industrial Relations to determine the general prevailing rate of per diem wages and the general prevailing rate for holiday and overtime work in the locality in which the work is being performed for each craft, classification or type of workman needed to execute a public works project. This provision does not include or specify a methodology for determining the general prevailing rate. The statute makes reference to several sources which the Director may consider when determining the prevailing rate. These include the collective bargaining agreements from the locality, the rates published for federal projects and other data from labor organizations and employers or employer associations. This regulatory definition sets forth that the prevailing wage rate is the "modal rate", the single rate paid to the greatest number of workers. The effect of the proposed change will be to alter the basis for determining the general prevailing rate from the modal rate concept to single rate if a majority of workers are paid at one rate or to a weighted average of the rates paid if there is no majority. This will make state methodology consistent with federal Davis-Bacon methodology. The DIR has determined that the proposed regulations will have an effect on small businesses. Small businesses will derive a benefit from the enforcement of the regulation. The regulations written in plain English are available from the agency contact person named in this notice. 2. Article 4. WAGE DETERMINA nONS Labor Code Sections 1773 and existing regulations specify the procedures the Director follows in making prevailing wage determinations. Section 16200. General. Basis for Determining Prevailing Wage Rate. Existing regulations specify as the basis for the Director's prevailing wage rate determination: collective bargainIng agreements; federal rates; data collection; the wage rate factOrs; and other information from interested panies. Section 16200(b) Federal Rates. This subsection is amended to add language providing for the adoption of rates determined for federal projects. 11 ¡ The effect of the proposed change is to provide for the adoption of rates determined for federal projects or where federal law preempts application of state prevailing wage rates, as well as, those determined for specific projects funded by the U.S. Department of Housing and Urban Development, as prevailing for state projects without the need to conduct additional investigations. THE DEPARTMENT OF INDUSTRIAL RELATIONS Lloyd W. Aubry, Jr., Director 12 - - ~ - '. I INITIAL STATEMENT OF REASONS I I I Title 8: Chapter 8, Group 3, Articles 1 and 4 Sections 16000, 16200 and 16204 of the Regulations of the Office of the Director Regarding Payment of Prevailing Wages upon Public Works Problems Addressed by Proposed Action Existing regulations under Title 8, Group 3 regarding the payment of prevailing 'wages are repealed and modified to address specific issues and concerns expressed by the regulated public and to make, the Department's regulations conform more closely with the Code of Federal Regulations. The "predetermined changes" in wages or benefit payments occur only when the determination is based on a collective bargaining agreement. Those predicted changes are not printed in the ,determinations; instead, by putting a double asterisk next to the relevant rates, and a footnote at the bottom or back of the determination, parties who may be involved with the contract are directed to telephone the Division of Labor Statistics and Research to, determine the amount, and timing of the change. In a twelve month period, a minimum of 1,000 calls and, more likely, 1,500 calls, are received seeking this information. (DLSR 1995. Predetermined Waee Increase Calls) Contractors who fail to call, or otherwise do not learn of the rate increase, create liability upon the general contractor for penalties and withholding to enforce the prevailing wage obligations to pay those changes. This law differs from the federal prevailing wage law, and when both' laws apply to the same project, because of mixed funding, the higher requirement must be paid. Federal Davis - Bacon law has no "double asterisk" wage escalation provision. For example, when the public works project is partially federally funded the use of "predetermined" wage rates, not required under the federal regulations, can cause confusion am,ong the awarding body, the contractors and the enforcement personnel. The use and inclusion of what has been referred, to as the "double asterisk" (predetermined wage rate) in the, state prevailing wage system causes confusion and inconsistencies in pay rates if contractors think there is only one government prevailing wage rate applicable for the life of the project. Because predetermined changes are not in effect when determinations issue, the prediction that they will be, based on the collective bargaining agreement, may not be true because the parties to the agreement retain the ability to change their agreement, and this right recently has been more exercised than in the past. Because the State's prevailing wage laws require the contractor awarded the job to pay the rate in effect as of the date of contract award, including any which have been "predetermined," such exercises of collective bargaining rights to rescind or reduce the predetermined change results in the contractor and, ultimately, the awarding body being required to pay a rate that is not paid by any other contractor of purchaser of construction in the labor market. In other instances, the parties to the collective bargaining agreement have diverted the wage increase from the taxable wage to fringe benefits.. The Division knows of these changes only when -1- I . , .. notified by the union or employer association; if not notified, it continues to publish an inaccurate rate. The most recent attempt to ameliorate this difficulty administratively was to promulgate a policy to notify panies when there was a recision, in time for the awarding body,. contractor, and the enforcement arm to take account of the' recision. (Stranberg, 1994, Enforcement of Corrected Predetermined Rates...) As the policy explains, the prevailing wage permit this policy to work only if unions and contractor. associations send notifications in a timely fashion. Eight of the twenty- five CAB changes submitted for modification of the prevailing wage to keep it parallel to the rates actually being paid, between February 1994 and August 30, 1995 either came too late,' or otherwise did not meet the criteria in the memorandum. Thus no Modification Notice could. be issued, and the policy proved. Thus, the policy 'proved ineffective. (DLSR 1995, Double Asterisk Recissions and Changes....) The problems created by contractors or awarding bodies too unfamiliar with state prevailing wage peculiarities to phone; by predetermined changes as to which no notice is sent; and, by the significant level of failure of the administrative policy attempted as of Fèbruary, 1994, each present substantial enforcement problems for the Division of Labor Standards Enforcement, as well as, increasing the cost to the taxpayer for public works projects. Purpose of Proposed Action The purpose of this action is to address the problems enumerated in the "Problems Addressed" statement. Specifically, the proposed regulations will reduce confusion over the appropriate prevailing rate of per diem wages to be paid to a panicular craft, classification or type of worker employed upon a public' works project. The regulated public has encountered difficulty in determining, monitoring and paying the correct prevailing wage rate when the published prevailing wage determination includes a predetermined wage rate change. The proposed changes will clarify the prevailing wage rate for all classifications employed on a public works site for the life of the project. There appears to be no single definitive study which addresses the effect of the change in definition of "prevailing" which is proposed here on an economy with a construction segment and the labor market like California's. For that reason, the Depanment did not rely on any single technical, theoretical, or empirical study, repon, or document in proposing the adoption of these amended regulations. While the Depanment did not rely upon any single document as a basis for the proposed regulations, it did note and refer to pans of them, and so they have being referenced for portions of the facts, analyses, and interpretations discussed in this statement, the Notice, and in the rulemaking file. See Appendix B. Those identified as in the public record are available to the public from the custodian of those records. Those identified as in the rulemaking record are available under the rules for such files. The Depanment proposes to repeal and amend the regulations requiring the inclusion of future wage changes in the prevailing wage determinations. In addition, those .sections defining and clarifying the types of wage changes included and the method by which the changes are referenced in the determinations will also be amended or deleted. In addition to the effects noted above, this change will probably reduce construction costs and cenainly reduce some of the administrative burdens upon the regulated public, while still maintaining that workers employed on a public works project receive the prevailing wage. rate for the type of work in the -2- I , locality at the time the project is put out for bids, in accordance with Labor Code Section 1773. The Department proposes nonsubstantive grammatical changes to several sections and subsections in existing regulations to increase the clarity of these sections and to provide for the renumbering of affected sections. The facts, evidence, documents, testimony, or other evidence upon which the Department relies to support a finding that the rulemaking will not have a - significant adverse economic impact. on business are: A) The references listed in Appendix B which are cited for facts and evidence in paragraphs 2B, 6 and 8 of the accompanying Notice. B) The economic analyses in the rulemaking files. C) The analyses used by the federal government, in finding that adjustment of the - Davis-Bacon measurement to more correctly reflect the labor market( FR 1982, 104:23644-51; [Doe]N.d, Final Regulatory and Impact and Regulatory Flexibility Analysis...: CBO 1983; FR 1988, 53:154; GAO 1979 HRD 79-18:194-275), which the Department believes to be the best predictor of an improved level of competition on public works bidding, which in turn produces beneficial effects on business opportunities as a whole. Article 1. Definitions Section 16000. Definitions. The definitions under thIs section clarify the meaning of a n,umber of terms in existing regulations that are commonly used in public works contracting and would not otherwise be clear to the affected public. - The terms defined in this section are commonly used in public works contracting and are defined in the manner intended by the Department. This benefits the affected public as it clarifies the intent of the terms used. The Department proposes to delete one and amend one of the existing definitions. Predetermined Changes. This definition identified what types of changes to the wage rate would be incorporated by reference into the general prevailing wage determinations when a determination was based on a collective bargaining agreement. The Depanment has proposed repealing the regulations requmng the inclusion of future wage rate changes in the prevailing wage determinations. The removal of these regulations would make this definition irrelevant. Article 4. Wage Determinations The Department proposes the deletion of subsection 16200(a)(3)(B) from the . regulations. This subsection requires the inclusion of wage rate changes in the prevailing wage determinations when a determination is based on a collective bargaining agreement and the changes are definite and predetermined. The regulated public has experienced difficulty in determining the appropriate rate for specific projects. The future changes are not published, as specific requirements on individual projects within the same locality may vary based on a project's advertisement date under the existing system. This has caused confusion. In the -3- ---------- " ~ past, predetermined changes have been rescinded or modified by the parties. This has resulted in c°l!tractors and awarding bodies being required to pay rates which do not prevail. In addition, this proposal will make the Department's regulations more consistent with the Federal regulations governing public works. The repeal of this provision will clarify for the regulated public the prev~iling rate of per diem wages to be paid for all workers employed on a public works project. It will establish the rate of pay for all crafts and classifications of workers for the life of the project. This is intended to reduce problems encountereq by the regulated public during all phases of the construction process including, but not limited ~o, bidding, monitoring and enforcing the prevailing wage requirements. It will also reduce the complexity of enforcement for the Division of Labor Standards Enforcement and awarding bodies with approved labor compliance programs. There will be cost savings to awarding bodies from both the construction and administrative cost reduction on public works projects. The Department has determined that no alternatives considered would be more effective in carrying out the purpose of, or which would be less burdensome to affected private persons, than the proposed regulation. Subsection 16200 (a) (3) (C). This subsection is proposed to be renumbered and amended as a result of the removal of Subsection 16200 (a) (3) (B). This is a nonsubstantive technical change. The I~ removal of the requirement to include predetermined changes in the prevailing wage determinations makes the reference to known predetermined changes excluded from the determinations unnecessary. The inclusion of "prevailing wage" is a grammatical change to add clarity to the regulation and is a nonsubstantive change. Subsection 16200 (a) (3) (D) This subsection is proposed to be renumbered as a result of the removal of Subsection 16200 (a) (3) (B). This is a nonsubstantive technical change. ,Subsection 16200 (a) (3) (E) Holidays. This subsection is proposed to be renumbered as a result of the removal of Subsection 16200 (a) (3) (B). This is a non substantive technical change. Subsection 16200 (a) (3) (F) Overtime.. This subsection is proposed to be renumbered as a result of the removal of Subsection 16200 (a) (3) (B). This is a non substantive technical change. Subsection 16200 (a) (3) (H) Rates for helpers. This subsection is proposed to be renumbered as a result of. the removal of Subsection 16200 (a) (3) (B). This is a nonsubstantive technical change. Subsection 16200 (a) (3) (I) Credit Available For Actual Payment of Fringe Benefit Costs up to the Prevailing Amount. . -4- . õ' - This subsection is proposed to be renumbered as a result of the removal of Subsection 16200 (a) (3) (B). This is a nonsubstantive technical change. Section 16204. Effective Date of Determination and of the Rates Within the Determination. This regulation clarifies the effective date of determinations and the prevailing wage requirements for a project. The determination of the prevailing wage rate for each craft or classification is made pursuant to Labor Code Section 1773. This regulation establishes the individual determination effective for a specific public works project. Subsection (a)(3) is amended to clarify that subsequent determinations reflecting new prevailing wage requirements are not applicable to projects for which the notice to bidders has been published, unless the determination is modified pursuant to the petition to review process in Labor Code Section 1773.4. The petition to review process provides for the Director to issue a new determination for a specific project if it is found that an existing determination does not prevail. This determination is applicable to the petitioned project or projects and any subsequent projects advertised for bids after the effective date of a new general determination issued by the Director. This is intended to avoid confusion over which prevailing wage determination is applicable to a particular project. This will reduce uncertainty over the prevailing wage requirements for a specific project in all areas of the public works' process. Subsection 16204 (b). Modification of Effective Date of Determination by Asterisks. Meaning of single and double asterisks. The Division proposes to amend this regulation. The Director is required to determine the prevailing wage rate of per diem wages for each craft, classification or type of workman needed to execute a public works contract, in accordance with Labor Code Section 1773. Under the current regulations, when the basis of a prevailing wage determination is a collective bargaining agreement, the Director is required to incorporate into the prevailing wage determination any definite predetermined changes to the wage rate contained in the agreement, such as wage increases in subsequent years of the agreement. The predetermined changes are incorporated by reference with a double asterisk notation after the expiration date on the determination. The increases are not published as applicable rates vary depending on the bid advertisement date of a project. The regulated public have experienced difficulty and have expressed confusion over the implementation of this provision. For example, the parties to the collective bargaining agreement may rescind the wage mcreases already incorporated into the Director's determination, but the existing regulation would require the now-rescinded wage increases to be paid. This change will clarify the prevailing wage requirements on public works by providing that the wage rate in existence at the time a determination is issued will remain effective for the life of a project. The purpose of the proposed action is to simplify the prevailing wage requirements on public works projects. . The amended regulation will clarify that the prevailing wage rate of per diem wages are those contained in the determination in effect at the project's bid advertisement date. The Department did not rely upon any technical, theoretical, or empirical studies, reports, or documents in proposing the adoption of this regulation. -5- _m- II \ < ~ II , ! " The Department has determined that no alternatives considered would be more effective in carrying out" the purpose of, or which" would be less burdensome to affected private persons, than the proposed regulation. -6- --- -. ~ I ; "' Appendix B 1. December 21, 1995, Memorandum from DLSR staff with survey results showing a percentage comparison table between detenninations with single and double asterisks and December 22,1995 from DLSR staff to Dorothy Vuksich and Maria Robbins regarding Predetermined Wage Increases callfrom 1112 95-1212195.(DLSR 1995, Percentage comparison Table between determinations,. DLSR 1995 Predetermined Wage Increase calls. . .) 2. February 18, 1994, Memorandum from Robert Stranberg, Chief Deputy Director to . Victoria Bradshaw, Labor Commissioner, DLSE, and Maria Robbins, Deputy Chief, DLSR regarding enforcement of corrected predetennined rates after modi- fication of original predetennined (Stranberg 1994, Enforcement of Corrected Predetermined Rates. ..) 3. March 22, 1995, Memorandum from the Department of Transportation, Legal Division to Maria Robbins, Deputy Chief, DLSR containing a double asterisk study, an escalated wage analysis, a comparison of State versus Federal wages in construction costs and a Federal /State wage rate analysis. (CALTRANS 1995, Double Asterisk Study) 4. Federal Register, Vol. no 104, Friday May 28, 1982, Rules and regulations, 23644- 23651. (FR 1982, 104: 23644-51) 5. Final Regulatory Impact and Regulatory Flexibility Analysis on the Davis-Bacon Related Regulations, obtainable from Adminr. Wage and Hour Div, D.S.DOL, 200 Constitution Ave N.W. Wash D.C. 20210 (Employment Standards Admin., Final Regulatory and Impact and Regulatory Flexibility Analysis. . . N.d.) 6. Congressional Budget Office, July 1983 Study "Modifying the Dávis-Bacon Act: Implications for the Labor Market and Federal Budget. (CBO 1983) 7. GAO Report "The Davis-Bacon Act should be Repealed," Report HRD-79-18 April 27, 1979, pp. 194-275. (GAO 1979 HRD-79-18:194-275) 8. Steve Allen, Much Ado about the Davis-Bacon: A Critical Review and New Evidence," Journal of Law and Economics (26), 1983, 707-736. (Allen, 1983, JLE, 26:707-36) 9. January 7, 1991 report from the California Legislative Analyst Elizabeth G. Hill to Assembly Member Tom McClintock. (Hill 1991) 10. The Economic Impact of the Kentucky Prevailing Wage Law, Capital Construction and Equipment Purchase Oversight Committee, October 1981. (Capital Construction and Equipment Purchase Oversight Committee 1981) I I -7- -~ I " " Page 2 of 2 Appendix B 11. The History, Costs and Effects of Ohio's Prevailing Wage Law, John Spry, pgs 33- 35. (Spry N.d. The History, Costs and Effects of Ohio's Prevailing Wage Law) 12. December II, 1995, 'Memorandum from staff regarding CBA provisions for using Government Rates: Preliminary Information. (DLSR 1995, CRA provisions t. . .) 13. Construction Industry Research Board, California Construction Review, December 8, 1994, Construction Swnmary,ResidentiallNonresidential Building, Heavy Construction and Construction Employment Taþles. (CIRB 1994) 14. U.S. Department of Labor Employment Standards Administration Labor Department Official Testifies Before Senate Comririttee; Administration Opposes Repeal of Davis Bacon Act, Fri, Feb. 17, 1995. (ESA 1995) , 15. November 21, 1995 memorandum from Dorothy Vuksich to Lloyd W. Aubry entitled Savings estimate. (Vuksich 1995, Savings estimates) 16. Percentage of Labor Costs as a Component of Project Value (22% document), prepared by the Division of Labor Statistics and Research. (DLSR 1995, Percentage of Labor Costs as a Component ...) 17. Losing Ground: Lessons from the Repeal of Nine "Little Davis-Bacon" Acts, February 1995, University of Utah. Peter Philips, Garth Mangum, Nonn Waitzman, and Anne Yeagle. (Philips et at. 1995) 18. Bureau of National Affairs, Daily Labor Report, December 3, 1982, pgs. A-2 to A- 3,. (BNA, 1982:A-2 to A-3). , . 19. Federal Register / Vol. 53, No. 154 /Wednesday, August 10. 1988/ Rules and Regulations (F R 1988,53:154) 20. "The California Affordable Housing Cost Study: Initial Comparison of Market Rate and Affordable Projects" prepared in January 1993 by Bay Area Economics/ARCH Research for Local Initiative Support Corporation and the California Tax Credit Allocation Committee and December 28, 1995 memo from DLSR staff member regarding Significant effect on housing costs: (Bay Area Economics/ARCH Research for Local Initiative Support Corporation and the California Tax Credit Allocation Committee 1993; DLSR 1995 Significant effect on housing. . .) -8- - -~--------- -----~----- - " I , EXCERPT FROM CALIFORNIA CODE OF REGULATIONS, TIILE 8 GROUP 3. PAYMENT OF PREY AILING W AGES UPON - PUBLIC WORKS , Article 1. Definitions 16000. Definitions. The following terms are defined for general use in these regulations within Group 3, Payment of Prevailing Wages Upon Public Works and Group 4, Awarding Body Labor Compliance Programs: Predetermined C banges. Definite changes to the basic hourly wage rate, overtime, holiday pay rates,. and employer payments which are known and enumerated in the applicable collective bargaining agreement at. the time of the bid advertisement date. and which are referenced in the general prevailing rate of per diem \.vages as defined in Section 16000 of thése regulations. Contractors are obligated to pay up to the amount that was predetermined if these changes are modified prior to their effective date. . Predetermined changes which are rescinded prior to their effective date shall not be enforced. Authority Cited: Section 1773.5. Labor Code Reference: Sections 1720 et. seq.. Labor Code Article 4. Wage Determinations 16200. - General. Basis for Determining Prevailing Wage Rate. The Director shall follow those procedures specified in Sections 1773 and 1777.5 of the Labor Code and in these regulations when making a prevailing wage determination. (a) Collective Bargaining Agreemen~s or Wage Surveys. (1) Filing of collective bargaining agreements. (A) To enable the Director to ascertain and consider the applicable wage rates established by collective bargaining agreements when making prevailing wage determinations, the representatives' of any crafts, classifications, or types of workers needed to execute 1 - - ---- - ------ I ' ., .. . 'S' . . any public works contracts shall file with the Department of Industrial Relations fully exec~ted copies of all their collective bargaining agreements, including any and all addenda which modify the agreements, within 10 days of their execution and shall be considered as the basis for a prevailing wage determination whenever on file 30 days before the call for bids on a project. (3) Adoption of Collective Bargaining Agreements. (A) If the' Director determines pursuant to Section 1773 of~he Labor Code that the rate established by a collective bargaining agreement is the general prevailing rate of per diem wages for each craft, classification or type of worker and' the Director adopts such rate by referral, the Director will publish such rate. Only those rates and employer payments specifically enumerated in the definition of "general prevailing rate of per diem wages" in Section 16000 shall be included' in the rate adopted. fB) When such rate is adopted, and in the case v¡here the collective bargaining agreement contains definite and predetermined changes during its term which. will affect the rate adopted, the Director shall incorporate such changes in the determination. NOTE: A statement must be filed with the Director for any adjustments made to a contract which are not contained in the agreement currently on file with DLSR. fQ illL When such rate is adopted, and in the case where the collective bargaining agreement contains changes during its term which will affect the rate adopted, ';¡hich are not definite or. predetermined, the changes shall not be adopted. The prior determination will remain in effect until a new determination is issued. Any interested party may request that the Director make a new determination when contract changes become definite and determined by filing a statement as set forth in Section 16200(a)(l) The statement must summarize the amounts and effective dates. of any cost-of-living adjustments, allocations of interim wage increases to wages and employer payments, ànd other relevant changes which will affect the prevailing wage rate adopted by the Director. The statement must be 2 , ~-- ." \ . - signed by an officer or agent of the bargaining representative and certified, under penalty of perjury, as true and correct to the best of his or her knowledge and belief. ~illl When such agreement is adopted as the basis of . the prevailing wage determination, all wage classifications may be considered. fBj illl Holidays. Holidays specifically named in the collective bargaining agreement or determined by wage surveys shall be. included in the wage determination. Overtime pay may be required as provided in Section 16200 (a) (3) (-P-j (In. of these regulations. fFj ill Overtime. Overtime will be paid as indicated in the wage determination. EXCEPTION 1: If a workweek other than Monday through Friday is a fixed business practice or is required by the awarding body, no overtime payment is required for the first eight hours on' Saturday or Sunday. EXCEPTION 2: If the collective bargaining agreement provides for Saturday and Sunday work at straight-time, no overtime payment is required for the first eight hours on Saturday or Sunday. EXCEPTION 3: If the awarding body determines that , work cannot be performed during normal business hours or work is necessary at off hours to avoid danger to life or property, no ove,rtime is required for the first eight hours in anyone calendar day, and 40 hours during anyone calendar week. , EXCEPTION 4: No overtime payment is required for less than 40 hours in a standard work week or for less than eight hours in a calendar workday unless specified in the. collective bargaining agreement used as the basis for the prevailing wage.. determination. {Gj ill Wage rates, training contributions and apprenticeship contributions. Apprenticeship rates will be determined by the Director of Industrial Relations using apprentice wage standards set forth in the collective bargaining agreement and/or approved by the California Apprenticeship Council. A contractor or subcontractor on a public works contract must pay training fund contributions or apprenticeship contributions in one of the following manners: I 3 -- (¡ .' . 'f (1) into the appropriate, craft apprenticeship program I in the area of the site of the public work; or (2) if the trust fund is unable to accept such I contributions an equivalent amount shall be paid to the California Apprenticeship Council (CAC) administered by DAS. (3) If neither of the above will accept the funds, cash pay shall be as provided for in Section 16200(a)(3)(I) of these regulations. fHj illl Rates for helpers. Rates for helpers will be published when the information available to the Director indicates that a practice of using such a subclassification prevails in a particular area, such as contained in a collective bargaining agreement, and within the parameters of the applicable collective I bargaining agreement. In the absence of such determination, the helper classification may not be used as a substitute for a journeyman or apprentice. This section does not exempt the contractor from the 1-5 appren tice- j o~rneyman ratio requirements set forth in Labor Code' Section 1777.5. fB an Credit Available For Actual Payment of Fringe Benefit Costs up to the Prevailing Amount. The contractor obligated to pay the full prevailing rate of per diem wages may take credit for amounts up to the total of all fringe benefit amounts listed as prevailing .in the appropriate wage determination. This credit may be taken only as to amounts which are actual payments under Employer Payments Section 16000 (1) - (3). ,In the event the total of Employer Payments by a contractor for' the fringe benefits listed as prevailing is less than the' aggregate amount set out as prevailing in the wage determination, the contractor must pay the difference directly to the employee. No amount of credit for payments over the aggregate amount of employer payments shall be taken nor shall any' credit decrease the amount of direct payment of hourly wages of those amounts found to be prevailing for straight time or overtime wages. Authority Cited: Section 1773.5. Labor Code Reference: Section 1773. Labor Code 4 ¡; , I , .>' 16204. Efféctive Dates of Determination and of Rates Within Determination. (a) Effective date of determination. (1) All determinations issued will be effective ten (I 0) days after issuance, provided that requests for copies, reprints or reissuance of prior determinations shall not affect the original effective date unless a new effective date is reflected upon the determination (see subdivision (3). below). Any call for bids put out on or after the effective date of the determination must reflect that determination unless the Director determines that subdivision (4) of this section is applicable, after notification and request by an awarding body. (2) Determinations issued by the Director will show an issue date and will ordinarily show an expiration date. (3) All determinations will remain in effect until their expiration date or until modified, corrected, rescinded or superseded by the Director. New determinations are not applicable' to contracts upon which the notice to bidders has been published. unless the determination is issued pursuant to Labor Code Section 1773.4. (4) Determinations modified, corrected, rescinded or superseded on the basis of information contained in copies of collective bargaining agreements filed with the Department. shall not be effective as to any project in which, a call for bids takes place less than 30 days after the filing of the agreement.. . NOTE: See Section 1773.1 of the Labor Code. (5) It shall be the responsibility of the awarding body to ensure that the correct determination is used. (b) Modification of Effective Date of Determination by Asterisks. Meaning of single an d-----tWub Ie asterisks. Pr0yailing wage determinations will a single asterisk (*) after the expiration date \T¡hich are in effect on. the date of advertisement for bids remain in effect for the life of the project. Prevailing Y/age determinations with double asterisks (**) after the expiration date indicate that the basic hourly 'J/age rate, overtime and holiday pay rates, and employer payments to be paid for work performed after this date have been predetermined. If work is to extend past this date, the new rate must be paid and should be incorporated in contracts entered into now. The contractOr should contact the Prevailing "'age Unit, DLSR, or the awarding body to 5 ) '7 -- ----:-:-,---- 1, . , ~. obtain predetermined wage changes. All determinations that do Rot have d9uble asterisks (**) after the expiration date remain in effect for the life of the project. . . 've BareaiWne Aereements. The rate fixed for each craft. , classification. or type of worker as prevailing in a I determination shall remain in effect for the life of the project. When the rate is based on a collective bargaining agreement. it does not include predetermined changes in the basic hourly wages. overtime. holiday pay rates. or amounts of employer payments. even if known and enumerated in the applicable collective bargaining agreement. Authorit Cited: Secti n 1 5 Labor od Reference: Sections 1773. 1773.4 and 1773.6. Labor Code I i 6 -----------__--___n -