HomeMy WebLinkAbout05/18/1993, 4 - PREVAILING WAGE LAW MEETING DATE:
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Sam COUNCIL AGENDA REPORT rrew NUMBER
FROM:
Mike McCluskey, Director of Public Works
Prepared by: Wayne A. Peterson, City Engineer
SUBJECT:
Prevailing Wage Law
RECOMMENDATION:
By motion, pass to print ordinance establishing when prevailing wages should be paid on public
works contracts
DISCUSSION:
As a part of the CAD's eight point budget plan, staff investigated various ways to lower the cost of
constructing capital projects. One of these ways, elimination of the "prevailing wage rate requirement",
was presented at the special Council meeting on March 13, 1993. Following the favorable reception by
the Council, staff is now proposing to implement this cost saving measure.
Current Situation
All public works construction contracts are governed by Municipal Code, Section 3.36.010, as follows:
"in every contract for the performance .of labor on public works, eight hours shall
constitute a day's work, and the contractor and all subcontractors under him shall pay their
employees on the work a salary or wage at least equal to the prevailing salary or wage for
the same quality of service rendered to private persons, under similar employment in the
city".
Staffs application of this regulation has been to require each contractor to comply with the State Labor
Law and to pay each employee in accordance with wage rates established by the State Department of
Industrial Relations and to comply with related reporting requirements. These wage rates are probably
higher than the rates required in the Municipal Code. State "prevailing wage rates" are used because it.
is difficult for a small agency to establish what is the local-wage paid for each and every type of trade
that might be used on each job. The "prevailing wage" is typically the same as the "union wage". For
non-union contractors, this may mean paying employees at a higher rate during the time they work on
our projects, as compared to the wage they earn when they work for others in the community.
Prevailing wage payment is currently required on all City projects funded by Federal, State, or local
funds. By Federal and State law, the prevailing wage must be paid whenever either of those sources fund
a particular project. However, most of the City's building, water, and sewer projects are paid for with
local money, and fall under the jurisdiction of our local code and thus do not need the prevailing wage
requirement.
Crty OF San e..JS OBISPO -
MIG COUNCIL AGENDA REPORT
Prevailing Wage
Page Two
Proposal
Staff proposes to modify the Municipal Code to require prevailing wage payment only on those projects
required to do so (Federal and State) and eliminate the requirement from locally funded projects. The
City of San Luis Obispo is a Charter City and, as such, it has the authority to establish whether or not
the "Prevailing Wage" is a requirement of public works projects which are clearly within the realm of
"municipal affairs". By eliminating the need for local wage verification, staff will spend less time
reviewing, and the contractor less time preparing paperwork, in addition to the overall cost of the project
being lower.
Has this been done before? Yes, in 1980 the City of San Diego, also a Charter City, adopted a resolution
which rescinded its previous prevailing wage resolution and declared that prevailing wages would be
required to be paid only when required by Federal and State grants and on other projects considered to
be of State concern. The resolution was challenged and upheld by the courts.
The effect of San Diego's resolution was that contractors bidding projects which did not require the
payment of prevailing wages could bid the projects,knowing they did not have to pay their employees any
more on the public project than they did on private ones. It also relieved them of reporting wage costs
to the City. (San Diego has no requirement to report wages paid). In the eight years following the
change, San Diego staff reports that there have been few problems. Of significance the quality of the
work has not decreased, and San Diego's staff feel the overall cost of the projects has decreased.
PROBLEMS:.
A change to the requirement to pay prevailing wages would make it more difficult for union contractors
to compete. A review of the list of bidders of recent City projects reveals that 12 of 47 contractors are
union contractors. The experience in San Diego was that the number of union contractors decreased.
FISCAL IMPACT:
Staff has discussed the issue with local contractors. From the feedback received, staff feels the City
could potentially save 20-25 percent of the cost of the related projects. Recent discussion with the
directors of public works of other charter cities that have dropped the requirement to pay prevailing
wage, indicates the savings may be less, more in the range of 10-15%. All savings realized accrue to
the funds of the City, i.e. general, water, and sewer funds, which become available for additional projects
or priorities as acted upon by the Council.