City Council Report
City Council Meeting: December 16, 2014
Agenda Item: 7-B
To: Mayor and City Council
From: Martin Pastucha, Director of Public Works
Subject: Conformance of Prevailing Wage and Apprenticeship Ordinance with SB 7
Staff recommends that the City Council approve on first reading the attached ordinance revising certain provisions of Chapter 7.28 of the Santa Monica Municipal Code to ensure full consistency with the requirements of Senate Bill No. 7 governing wages paid on locally-funded public works contracts.
As a result of the passage of Senate Bill No. 7 ("SB 7") in 2013, effective January 1, 2015, a charter city may not receive or use state funding or financial assistance for a construction project if the city has a charter provision or ordinance authorizing contractors’ noncompliance with the State's prevailing wage and apprenticeship provisions on any public works contract, even if the contract is funded solely with local funds. This bill has been codified as Labor Code section 1782.
The City's prevailing wage and apprenticeship ordinance, codified as Chapter 7.28 of the Santa Monica Municipal Code ("SMMC"), currently requires the payment of prevailing wages and compliance with apprenticeship requirements for projects that receive federal, state or local assistance or are built on land leased by the City to private parties; however, the ordinance allows certain exemptions for local projects that fall below minimal thresholds (based upon the amount of assistance or size of the project) and authorizes the City Manager to exempt projects if the City Manager finds that the payment of prevailing wages results in a lack of bids, increases project costs above 20 percent, or makes a project financially infeasible to develop.
While the California Labor Code also allows certain exemptions to payment of prevailing wages and imposition of apprenticeship requirements, the exemptions in SMMC Chapter 7.28 do not exactly match the exemption criteria or minimum thresholds under the Labor Code. Therefore, after consultation with the City Attorney's Office, staff now recommends amending Chapter 7.28 to more closely align the City's prevailing wage and apprenticeship ordinance with the Labor Code.
The California Labor Code requires that, except as specified, not less than the general prevailing rate of per diem wages, determined by the Director of Industrial Relations, be paid to workers employed on public works projects. Existing law defines “public works” to include, among other things, construction, alteration, demolition, installation, or repair work done under contract and paid for, in whole or in part, out of public funds, which may include both direct financial and indirect financial assistance. SB 7 requires compliance with the Labor Code except for projects of $25,000 or less when the project is for construction work, or projects of $15,000 or less when the project is for alteration, demolition, repair, or maintenance work.
A 2012 California Supreme Court decision (State Bldg. & Constr. Trades Council v. City of Vista (2012) 54 Cal. 4th 547) held that a charter city may exempt itself from the state's prevailing wage requirements on locally funded projects because the wage levels of contract workers constructing locally funded public works are a "municipal affair." SB 7 was passed by the State legislature to mitigate the effects of this judicial decision.
Unlike other charter cities, the City has not exempted itself from State prevailing wage requirements. Furthermore, the City stands to benefit in the future from State funding for several of its projects. Therefore, staff recommends the proposed clean up changes to Chapter 7.28 of the SMMC to more closely align the City's prevailing wage and apprenticeship ordinance with the State Labor Code and thereby protect the City’s ability to obtain state funding for public work projects.
In summary, the proposed clean-up changes consist of:
· including a definition "public works" that matches the definition of "public works" in the Labor Code;
· substituting the minimum exemption thresholds to match the minimum exemption thresholds in the Labor Code; and
· eliminating the City Manager's authority to exempt certain projects based upon currently authorized findings of feasibility
Staff is conducting an analysis of the potential financial impacts for the implementation of the State's prevailing wage and apprenticeship provisions for public works contracts including repair and maintenance projects greater than $15,000 and new construction projects greater than $25,000. Staff will return to Council if specific budget actions are required in the future.