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HomeMy WebLinkAboutR01-Redevelopment Agency REDEVELOPMENT AGENCY -RlEQUEST FOR CO_ISSION/COUNCIL ACTION ~'om: Glenda Saul, Executive Director Subject: PREVAILING WAGE RATES POLICY uept: Redevelopment Agency Date: January 7, 1986 Synopsis of Previous Commission/Council action: 11/18/85 Hearing set for January 13, 1986, 6:00 p.m., to consider Prevailing Wage Rates. Recommended motion: (COMMUNITY DEVELOPMENT COMMISSION) That the Redevelopment Agency staff is instructed to include prevailing wage requirements in appropriate documents only when such are mandated by State or Federal statutes. d~/d~i! Signature Contact person: Glenda Saul Supporting data attached: YES Phone: 383-5081 All FUNDING REOUIREMENTS: Amount: $ N/A Ward: All Project: No adverse I mpact on City: !Be~~ 1-21-86 January 21, 1986 ncil Notes: AQfmrl~ ltF!m Nn /L-I CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION STAFF REPORT On November 18, 1985, the Council/Commission set a hearing for January 13, 1986 to consider Prevailing Wage Rates. Federal and State dollar support to cities is declining. The recent Gramm-Rudman deficit reduction law will reduce such aid even further and this will only sharpen the already keen competition, between cities, for new revenue from commerce and industry. We compete for new development or redevelopment mainly with monetary inducements. If a company can build the same plant or store in San Bernardino, Ontario, Rialto or Loma Linda, it will usually opt for the lowest cost. San Bernardino has been successfully competitive with its mixture of tax rebates, low cost loans, tax increment financing, beautification assistance, job linkage, etc. (specific examples are appended). Any action which would offset the dollar value of these inducements would put us at a competitive disadvantage. Like all other agencies, we require compliance with Davis-Bacon Act wage provisions when Federal funds of more than $2,000 are involved. Similarly, we require payment of prevailing wages when we use tax increment revenues or reimburse a contractor with such funds for public improvements. This is required by the California Health and Safety Code and the Labor Code. It affects all agencies equally. We have been instructed to continue using the customary, more restrictive languages until a further determination is made. The use of this prevailing wage language was required int he early days of Redevelopment when Federal funds were used almost exclusively. It has been continued through inadvertence or inertia. However, if we unilaterally insist on prevailing wages when it is not required by State or Federal statute, we would sharply reduce the attractiveness of our proposals. This could result in fewer new businesses coming to San Bernardino, with a concomitant loss of fees, taxes and jobs. It could be a serious set-back to our proposed Enterprise Zone. In addition, the need to monitor or audit contractor/sub-contractor payroll records to assure compliance with prevailing wage provisions would require additional staff and expenditures. The quality of the work performed, whether the contract contains a prevailing wage provision or not, should be the same, since they must meet code requirements and inspection criteria. Staff recommends that prevailing wage requirements contracts where mandated by Federal and State Law. our capability to attract new business and jobs by unilaterally. continue to be included in Further, that we not reduce requiring such provisions, Staff has attached several reports regarding this issue as follows: a) Memorandum from Tim Sabo regarding legal requirements dated July 9, 1985. b) Current language. c) Prevailing Wage Rate Memorandum. 223G/MT ,.._n.,,,,,, MEMORANDUM To: Redevelopment Agency of the City of San Bernardino; Allen R. Briggs, Esq. From: Timothy J. Sabo Date: July 9, 1985 Re: Prevailing Wage Rate Requirement Owner Participation Agreements and Disposition and Development Agreements (collectively, the "Agreement") which provide for reimbursements by the Redevelopment Agency of the City of San Bernardino (the "Agency") to a developer from the tax increment revenues of the Agency are subject to competitive bidding requirements as should be set forth in the Agreement and as required under California law in addition to the requirements set forth in Health and Safety Code Section 33423, et seq., pertaining to payment by contractors of prevailing wage rates. This Memorandum concerns the manner by which prevailing wage rates are determined pursuant to Health and Safety Code Section 33423, et seq. The required general prevailing rate of per diem wages must be set forth in all advertisements for bids for the construction or installation of public and private improvements under the Agreement where the developer is to be reimbursed from tax increment revenues. Any contractor to whom a contract is awarded and any subcontractor thereunder must pay not less than the specified prevailing rate of wages to all workers in any craft or trade under the contract. Each contractor and subcontractor must maintain accurate records showing compliance with these statutory requirements, and any contractor violating the law must pay a statutory penalty to the Agency. The general prevailing rate of per diem wages is determined by the Director of the Department of Industrial Relations of the State of California (the "Director") based upon data set forth for each applicable trade or craft in collective bargaining agreements filed with the Director. The Director makes the determination of prevailing wage rates for each county in the State. Although the determination of prevailing Page 2 wage rates for each trade or craft is generally based upon collective bargaining agreements (i.e., union wage rates which then become the prevailing wage rate), there are certain limited exceptions where the Director has made the determination based upon non-union wage rates. In addition, any public entity awarding a contract or any contractor may appeal the Director's determination of prevailing wage rates for any trade or craft and upon appeal, the Director may consider evidence unrelated to collective bargaining agreements, including, but not limited to, data submitted by employers or employer associations and data pertinent to federal public works projects. In any event, the final determination by the Director is based upon the single prevailing wage rate paid to the greatest number of workers in that trade or craft in the applicable geographical area. Health and Safety Code Section 33423, et seq., sets forth requirements for the payment of prevailing wage rates to workers under contracts pertaining to redevelopment projects. Health and Safety Code Section 33423 requires a redevelopment agency to ascertain the general prevailing rate of per diem wages in the locality in which work is to be performed on a redevelopment project and to specify in the call for bids on the contract that such wages be paid. Health and Safety Code Section 33424 requires that a contractor to whom the contract is awarded and any subcontractor thereunder must pay not less than the specified prevailing wage rate to all workers under the contract. Health and Safety Code Section 33425 requires the forfeiture by any contractor in violation of statutory requirements of the sum of 'ten. dollars ($10) for each calendar day for each workman paid less than the required prevailing wage rates. Health and Safety Code Section 33426 requires that each contractor and subcontractor maintain accurate records showing the name, occupation and actual per diem wages paid to each workman employed under a contract. Labor Code Section 1720, et ~., sets forth requirements generally appl icable to public works contracts. In particular, Labor Code Section 1770, et~., sets forth procedures for the determination of prevailing wage rates. Labor Code Section 1770 requires that the Director determine the general prevailing rate of per diem wages in accordance with Labor Code Section 1773. Labor Code Section 1773 provides, in pertinent part: .. .' In determining such rates, the Director of the Department of Industrial Relations shall ascertain and consider the applicable wap;e rates established by collective barp;aininp; ap;reements and such rates as may have been predetermined for federal public works within the locality and the nearest labor market area. Where such rates do not constitute the rates actually prevailinp; in the locality, the director shall obtain and consider further data from the labor orp;anizations and employers or employer associations concerned, including the recognized collective bargaining representatives for the particular craft, Page 3 classification or type of work involved. The rate fixed for each craft, classification or type of work shall be not less than the prevailing rate paid in such craft, classification or type of work. "If the director determines that the rate of prevailin~ wa~e for any craft, classification or type of workman is the rate established by a collective bar~ainin~ a~reement, the director may adopt such rate by reference as provided for in such agreement and such determination shall be effective for the life of such agreement or until the . . . director determines that another rate should be adopted (emphasis added)." Therefore, pursuant to Labor Code Section 1773, the Director generally is authorized to determine prevailing wage rates based upon collective bargaining agreements (i.e., union wage rates which then become the prevailing wage rate) applicable to each craft or trade within the applicable geographical area. In the event that the Director determines that such collective bargaining agreements do not reflect the prevailing wage rates for that geographical area, then the Director may consider other data including, but not limited to, data submitted by employers and employer associations. Pursuant to Industrial Relations of prevailing wage "prevailing rate" as Labor Code Section 1770, et seq., the Department of has adopted regulations concernin~the determination rates. 8 Cal. Admin. Code 16011 defines the term follows: "The term meaning: 'prevailing rate' shall have the following (a) When applied to the bas ic hourly rate of pay, the term means the rate being paid to a majority of workers engaged in the particular craft, classification or type of work within the locality and within the nearest labor market area, if a majority of such workers be paid at a single rate; if there be no single rate being paid to a majority, then the single rate being paid the greater number.. " Pursuant to 8 Cal. Admin. Code Section 16011, the determination of the Director is generally based upon a statistical mode in which the Director determines that certain single rate being paid to the largest group of workers in any craft or trade in the applicable geographical area. Pursuant to Labor Code Section 1773.4, any prospective bidder for a public works contract, any representative of a craft or trade, or the body awarding a contract may, within twenty (20) days following the commencement of advertising the call for bids for a public works contract, file with the Director a verified petition seeking review of Page 4 the determination of prevailing wage rates. Thereafter, the Director may reconsider the determination of prevailing wage rates, may perform any necessary investigations, and may even conduct a hearing in order to determine whether the previously determined prevailing wage rates are accurate. In order to confirm the previous determination of prevailing wage rates, the Director will generally conduct a survey of collective bargaining representatives and employers in the applicable geographical area. Thereafter, the Director will consider the results of the survey, which are based solely upon the submissions of the parties who have responded to the Director's questionnaire. " In addition to the foregoing appeal procedure, a public entity may request from the Director, even prior to advertising by a public entity for bids on a public works contract, a "special determination" of prevailing wage rates applicable solely to residential projects. In this case, the Director will make a determination based upon a survey concerning prevailing wage rates for each craft or trade on a project by project basis. However, this procedure is unavailable with regard to any project other than a residential project. Finally, the requirements set forth in Health and Safety Code Section 33423, et seq., and in Labor Code Section 1770, et seq., are in addition to and are unrelated to any and all requirements set forth in the federal Davis-Bacon Act, as set forth in 40 U.S.C. Section 276a. The Davis-Bacon Act generally requires that in every contract in excess of two thousand dollars ($2,000) to which the United:-S:t:a:res is a party pertaining to the construction, alteration or repair of public buildings or public works, there must be a requirement that mechanics and laborers be paid certain minimum wages determined by the Secretary of Labor to be prevailing for corresponding classes of laborers and mechanics employed on projects of a character similar to the subject contract in the locality in which the work will be performed. Although reference must be made to the requirements of the Davis-Bacon Act for any work in which federal funds may be used,' the requirements of Health and Safety Code Section 33423, et ~., and Labor Code Section 1770, et ~., are instead applicable to other contracts involving a redevelopment agency concerning a redevelopment project. In summary, all contracts pertaining to the construction and installation of public and private improvements under the Agreement where the developer is to be reimbursed from tax increment revenues are subject to the requirements for the payment of prevailing wage rates as set forth in Health and Safety Code Section 33423, et seq., and Labor Code Section 1770, et seq. The Director is authorized to determine prevailing wage rates for each applicable geographical area based upon collective bargaining agreements filed with the Director. In the event that the Director determines that such collective bargaining agreements do not contain prevailing wage rates for the applicable geographical area, the Director may consider other data including, but not limited to, data submitted by employers and employer associations. A potential contractor, a representative of any craft or trade, or the public entity may appeal the determination of the Director, at which time the Director Page 5 may undertake further investigations and conduct a hearing in order to determine the accuracy of previously determined prevailing wage rates. Following the award of a contract, all contractors and subcontractors must pay the prevailing wage rates, must maintain accurate records concerning such payments, and shall be liable for penalties upon violation of statutory requirements. Our office has requested that the Department of Industrial Relations forward to uS the current determinations of prevailing wage rates, for each craft or trade applicable to the geographical area in which the City of San Bernardino is located. Upon our receipt of this material, we shall forward it to you for your review. Please feel free to contact me if you have further questions regarding this matter. " MEMORANDUM To: Redevelopment Agency of the City of San Bernardino; Allen R. Briggs, Esq. From: Timothy J. Sabo Date: July 24, 1985 Re: Prevailing Wage Rate Requirement By memorandum dated July 9, 1985, our office advised you, among other matters, that pursuant to the requirements of Health and Safety Code Section 33423, et seq., and Labor Code Section 1770, et seq., certain improvement projects undertaken with public- fmrds pursuant to an owner participation or disposition and development agreement (collectively referred to as the "Agreement") entered into by the Redevelopment Agency of the City of San Bernardino (the "Agency") with a developer require the payment by contractors and subcontractors of the prevailing rate of per diem wages for the locality in which the work is to be performed. You have subsequently inquired whether public b~dding and the payment of prevailing wage rates are required for certain improvement projects undertaken pursuant to an Agreement where the Agreement does not provide for reimbursement of funds by the Agency to a developer for such projects but, instead, provides for other forms of reimbursement, such as general incentive payments, land cost write-down payments and the like. You have further inquired specifically whether beautification projects sponsored by the Agency with the use of Agency funds are subject to public bidding and prevailing wage rate requirements. For the reasons set forth hereinafter, you are advised that the statutory requirements for public bidding and the payment by contractors and subcontractors of prevailing wage rates do not pertain to improvement projects undertaken by a developer pursuant to an Agreement where the Agreement does not provide that Agency funds shall be used specifically for reimbursement for the costs of such projects, even though the Agreement may otherwise provide that the Agency shall pay to a developer Page 2 certain other forms of payment, such as general incentive payments or land cost write-down payments. You are further advised that any and all contracts awarded pursuant to a beautification program undertaken by the Agency with the use of Agency funds are subject to the requirements for public bidding if such work entails grading, clearing, demolition or construction and the cost exceeds the sum of five thousand dollars ($5,000), pursuant to Public Contract Code Section 20688.2. Furthermore, the requirements for the payment of prevailing wage rates apply to projects undertaken pursuant to such a beautification program where the cost of any such project exceeds the sum of one thousand dollars ($1,000), pursuant to Labor Code Section 1771. Agreements Which Do Not Provide for Project Cost Reimbursement by the Agency I The Agency may enter into an Agreement with a developer pursuant to which the Agency shall reimburse the developer for certain costs incurred by the developer in constructing or installing public improvements. As set forth in our July 9, 1985 memorandum, although the developer will be responsible for assuring the construction or installation of such improvements under the Agreement, the use of Agency funds triggers the application of public bidding and prevailing wage rate requirements to the award of contracts for such work. See Public Contract Code Section 20688.1, et seq.; Labor Code Section 1720, et seq. On the other hand, the Agency may enter into an Agreement with a developer pursuant to which the Agency may be 'required to pay only certain general incentive payments or land cost write-down payments to the developer. If such an agreement does not specifically provide for reimbursement by the Agency to a developer for any costs of the construction or installation of public improvements, and if payments otherwise made by the Agency to the developer are not calculated based upon costs incurred by the developer for such construction or installation, then the construction and installation of such improvements are undertaken solely by the. developer and not by the Agency either directly or indirectly. Therefore, such work is not subject to the public bidding requirements applicable to the Agency, or to prevailing wage rate requirements applicable to public works, as set forth by statute. Work Undertaken Pursuant to a Beautification Program A. Bidding Requirements The Agency may from time to time make available certain funds for purposes of loans or subsidies to property owners within redevelopment project areas in order to beautify their property. A property owner may thereafter either contract with other parties or seek the assistance of the Agency in awarding a contract for purposes of accomplishing the beautification of property. In order to determine whether work undertaken as part of such a beautification program requires public bidding pursuant to statute, it must first be determined whether Page 3 the type of work involved constitutes "construction", as that term is used in Public Contract Code Section 20688.1, et seq.* Public Contract Code Section 20688.1, et seq., requires that any work of grading, clearing, demolition or construction undertaken by a redevelopment agency shall be performed by contract following the receipt of competitive bids if the cost of such work exceeds that set forth in former Government Code Section 37902, now Public Contract Code Section 20162. Public Contract Code Section 20162 sets forth the sum of five thousand dollars ($5,000) above which a city is required to proceed with competitive bidding for a public project. I" The competitive bidding requirement clearly pertains to the clearance or removal of buildings, structures or other improvements from real property owned by a redevelopment agency, pursuant to Health and Safety Code Section 33420. The bidding requirement also pertains to any work undertaken by a redevelopment agency to develop a building site and to cause the installation or construction of streets, utilities, parks, playgrounds and other public improvements pursuant to Heal th and Safety Code Section 33421. If Agency funds are used by a private party to contract for the performance of this work as part of a beautification program, the statutory bidding requirement pertains to such work; provided, however, that the cost of such work exceeds the sum of five thousand dollars ($5,000). However, there is no statutory provision requiring competitive bidding by a redevelopment agency for work other than grading, clearing, demolition or construction. Although work performed pursuant to a beautification program may well involve grading, clearing, demolition and construction, such work may also separately involve work of maintenance and repair of structures. It is not entirely clear under statutory law whether expenditures in excess of five thousand dollars ($5,000) for the maintenance and repair of structures as part of a beautification program require competitive ,bidding after notice. Since the work of maintenance and r~pair of structures' clearly does not fall within the purview of grading, clearing and demolition, such work would have to fall within the * This memorandum does not address any requirements for public bidding or purchasing which may be set forth in any ordinance or regulation adopted by the City of San Bernardino, California, or by the Redevelopment Agency of the City of San Bernardino. Instead, this memorandum is intended to address only statutory bidding requirements as set forth in Public Contract Code Section 20688.1, et seq. Page 4 defini tion of the term "construction" bidding by a redevelopment agency Section 20688.2.** in order under to require competitive Public Contract Code The term "construction" is not defined either in Health and Safety Code Section 33000, et seq., or in Public Contract Code Section 1100, et seq. In City and County of San Francisco v. County of San Mateo (1941) 17 Cal. 2d 814, 819, 112 P.2d 595, the term "construct" was held to import the creation of something new and original that did not exist before. See also City of Pasadena v. County of Los Anl(eles (1951) 37 Ca1.2d 129, 132, 230 P.2d 801. The terms "erect" and "construct" have been held to be synonymous. Watson v. Greely (1924) 69 Cal. App. 643, 651, 232 P. 475. Thus, the maintenance or repair of existing structures may be deemed not to constitute "construction", pursuant to the view that construction encompasses the erection or creation of an entirely new structure. \- On the other hand, it has been held that the terms "constructionlt and "maintenance" are synonymous in certain circumstances. See McMahan's v. City of Santa Monica (1983) 146 Cal. App. 3d 695, 696, 194 Cal. Rptr. 582 (an inverse condemnation action resulting from the "construction" of governmental improvements). As set forth in Streets and Highways Code Section 29, for example, the definition of the term "construction" includes reconstruction, replacement and improvement, and specifically excludes maintenance. The term "maintenance" is defined in Section 27 of the Streets and Highways Code, for example, as among other matters, the preaervation and keeping of a s~ructure in the safe and usable condition to which it has been improved or constructed, but does not include reconstruction. Although statutory and case law have not clearly settled for each and every case whether there is a distinction between work of construction and work of maintenance and repair in order to assist in determining what items of construction require competitive bidding under Public Contract Code Sect'ion 20688.2, it is .reasonable to conclude, based upon the foregoing case and statutory law, that any work of which the primary purpose is the alteration of the basic composition or framework of a structure, including replacement thereof, constitutes construction. On the other hand, any work of which the primary purpose is simply the preservation of the existing basic composition or framework of a structure, such as painting or keeping in a neat condition, constitutes maintenance. Competitive bidding is required for the former, but not for the latter work, under Public Contract Code Section 20688.2. ** Although it is not applicable to redevelopment agencies, other than the minimum expenditure requirement for bidding set forth therein, Article 4 of the Public Contract Code requires competitive bidding for "public projects" undertaken by cities, which include not only the erection or improvement, but also the painting or repair, of public buildings. See Public Contract Code Section 20160, et seq. Page 5 In summary, a redevelopment agency and any other party using Agency funds for purposes of a beautification program must proceed with competitive bidding for grading, clearing, demolition or construction having a cost in excess of five thousand dollars ($5,000). A redevelopment agency is not required by statute to proceed with competitive bidding for maintenance or repair work which includes merely the preservation of the existing composition or framework of a structure, such as painting. However, the replacement of or alteration to the basic composition or framework of a structure, or a portion thereof, pursuant to a beautification program constitutes construction for which competitive bidding is required. Since this memorandum is intended only to address general guidelines concerning the statutory requirement for competitive bidding, a case by case determination will be necessary in order to determine whether proposed work constitutes construction for which bidding is required, or instead constitutes maintenance or repair for which bidding is not required by statute. l' B. Prevai1in~ Wa~e Rate Requirements Separate and apart from the requirements for public bidding set forth in Public Contract Code Section 20688.1, et seq., are the requirements for the payment of prevailing wage rates for public works as set forth in Labor Code Section 1720, et seq. Labor Code Section 1771 specifically requires that the generally prevailing rate of per diem wages be paid for all public works exceeding the sum of one thousand dollars ($1,000). Labor Code Section 1720 defines the term "public works" in pertinent part as follows: "As used in this chapter 'pub1ic works' means: (a) construction, alteration, demolition or repair work done under contract and paid for in part or in whole out of public funds . . . . (emphasis added)" Therefore, in order to constitute a "public work", the work must simply be funded by the Agency, even if the work is undertaken by another party. Furthermore, the term "public work" is broadly defined to include not only construction and demolition, but also alteration and repair work, unlike the more limited definition of the term "public project" set forth in pertinent bidding statutes, including Public Contract Code Section 20161. Pursuant to Labor Code Sections 1720 and 1771, it must be concluded that for any contract awarded pursuant to a beautification program which requires construction, alteration, demolition or repair having a cost in excess of one thousand dollars ($1,000) and for which Agency funds are used, any and all contractors and subcontractors for such work must pay the prevailing rate of wages for the locality in which such work is to be performed, as set forth in our July 9, 1985 memorandum. This requirement is applicable even if the contract was not awarded after competitive bidding, and even if the contract is entered into by a party other than the Agency, provided that Agency funds are used. Page 6 Swmnary For the foregoing reasons, you are advised that statutory bidding requirements apply solely to an Agreement which provides specifically for reimbursement by the Agency to a developer for costs incurred by the developer in the construction or installation of improvements. Statutory bidding requirements do not apply simply because an Agreement otherwise provides for certain other forms of payment by the Agency to a developer unrelated to the costs of completing improvements. ~ Statutory bidding requirements also apply to any and all contracts for a beautification project involving grading, clearing, demolition or construction where Agency funds are used for the project and the cost of the project exceeds the swn of five thousand dollars ($5,000). However, statutory bidding requirements do not apply simply to the maintenance or repair of a structure as a part of the beautification program where the work includes merely the preservation of the existing composition or framework of a structure, such as painting. A case by case determination will be necessary in order to determine whether proposed work constitutes construction for which bidding is required, or instead constitutes maintenance or repair for which bidding is not required by statute. Finally, notwithstanding the requirements pertinent to bidding, prevailing wage rate requirements are applicable to all work of construction, alteration, demolition or repair undertaken as part of a beautification program in which Agency funds are utilized where the cost of the specific project exceeds the swn of one thousand dollars ($1,000). Please feel free to contact me if you have further questions concerning this matter. ~i Mt:MORANDUM h~. 118 Jan. 1984 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, CALIFORNIA DATE November 19, 1985 Redevelopment Committee TO Glenda Saul FROM SUBJECT Prevailing Wage Rates At the Commission Meeting of November 18, 1985, Staff and Agency Counsel were instructed to continue using the customary, more restrictive, Prevailing Wage Rate language in all future agreements, until further determination is made. A hearing was set on this subject for January 13, 1986, at 6:00 p.m. For your information, a copy of the customary language is attached. For clarification, staff needs to assure that the motion of November 18th did not include agreements for Beautification Funds, Employment Linkage Agreements and/or Owner Participation Agreements for the sale of Sewer Capacity Rights. ~k~ ~~jJ Glenda Saul Executive Director GS:SL:s:0099G Attachment .tl 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 require the Agency to enter into such litigation to protect its interest. 10. Minimum and Prevailing Wage Rates for Laborers and Mechanics and Penalty. All laborers and mechanics employed upon the work covered by this contract shall be paid unconditionally and not less often than once each week, and wi thout subsequent deduction or rebate on any account (except such payroll deductions as are made mandatory by law and such other payroll deductions as are permitted by the applicable regulations issued by the Secretary of Labor, United States Department of Labor, pursuant to the Anti-Kickback Act, the full amounts due at time of payment computed at wage rates not less than those contained in the wage determination decision of said Secretary of Labor, plus all fringe benefits payable under any contract between an employer and unions representing comparable trades in the area, regardless of any contractual relationship which may be alleged to exist between the Contractor or any subcontractor and such laborers and mechanics. Redeveloper further agrees that this section shall inure to the benefit of the Agency and all laborers and mechanics employed upon the work covered by this contract as third party beneficiaries and that the Agency or any aggrieved employee may file an action in any court of competent 21 22 23 24 jurisdiction against the Redeveloper or any of its contractors or subcontractors for the recovery of the difference between the 2b wage rates actually paid and the wage rates legally required to 26 be paid under the provisions of this section and any applicable 27 regulations, statutes and laws and further agrees to pay 2U -14- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 reasonable attorney fees and court costs if the Agency or employee prevails. 11. Prohibitions Against Assignment and Transfer. (a) Representations as to the Redevelopment. The Redeveloper represents and agrees that its acquisition of the Property, and its other undertakings pursuant to this Agreement, are and will be used, for the purpose of redevelopment of the Property and not for speculation in landholding. The Redeveloper further recognizes: r~7 (1) the importance of the redevelopment of the Property to the general welfare of the community; (2) that the qualifications and identity of the Redeveloper are of particular concern to the community and the Agency. (b) Prohibition Against Transfer of Property and Assignment of Agreement. The Redeveloper represents and agrees for itself, and its successors and assigns, that ( 1) Except onl y (a) by way of security for, and only for (i) the purpose of obtaining 'financing necessary to enable the Redeveloper or any successor in interest to the Property, or any part thereof, to per form its obligations with respect to making the improvements under this Agreement, and (ii) any other purposes authorized by this Agreement, and (b) as to any individual parts or parcels of the Property on which the improvements to be -15- 2e COMMISSION WESLEY B. JEFFERSON CHAIRMAN RIALTO RICHARD PADILLA VICE CHAIRMAN BARSTOW HELEN L. JAMES SAN BERNARDINO FRANK A. HOOVER UPLAND PEDRO S. FERNANDEZ REDLANDS LORETTA R. GUILLEN COLTON HAROLD M. HAYES MONTCLAIR ~OUSInG HUT~ORITY Of T~f COUnTY Of SHn HfRnHRDlNO CENTRAl OFFICE 1053 NORTH D STREET TELEPHONE (714) 884.1811 SAN BERNARDINO, CALIFORNIA 92410 January 7, 1986 ALBERT A. HARKINS EXECUTIVE DIRECTOR WAL TEA A. McCULLOUGH ASSISTANT EXECUTIVE DIRECTOR TO: Glenda Saul FRCM: 1\.1 Harkins SUBJECT: Inpact of the Prevailing Wage Requirenent We have contacted Lewis Harres, Nick Tavaglione Construction and C & B Enterprises to get their input as to the cost impact of the prevailing wage requirenent. They indicate the requirenent increases the total contract cost between 15 and 22 percent depending on the size of the contract and the administrative capability of the contractor. C & B Enterprises is currently building a senior citizen canplex for the Housing Authority in the City of ~ntclair which is 95% canplete. The contractor informs Ire conservatively that 60% of the contract cost for multifamily housing is for labor and that prevailing wages established by HUD/State exceeds by 35% the rates paid to workers on jobs not required to pay prevailing wages. Our ~ntclair project is a $1,200,000 project. Using the above percentages and criteria, the prevailing wage requirenent added $252,000 to the labor cost for the project excluding the cost for administrative overhead. I\s discussed by telephone, we made an effort to avoid paying prevailing wages for our M::mtclair project, however, our legal counsel indicated there was no way to cirCUIlllTent the State Labor Cbde as it applies to public agencies and public works projects. I hope the above cannents are of sorre assistance to you. ,l~ AAH/ dw if -j~' lR? UEllfE ~ JAN 8 1986 fY) R~p#,~~O:~~~~g~~fY OF THE ~~. MEMORANDUM No. 118 Jan. 1984 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, CALIFORNIA DATE January 10, 1986 TO Community Development Commission FROM Glenda Saul, Executive Director Redevelopment Agency SUBJECT PREVAILING WAGE RATE Over the last several years, many enterprising cities have turned to recycling their public funds in financing city projects and business expansion. This approach has been quickly adopted by municipal officials who recognize that recycled public dollars can leverage private investment into a successful project without excessive cost. More importantly, the initial public dollars are kept working in the future, rather than being expended in a one-shot venture. A prime example of this technique was used in the Schurgin Development whose major tenants include the Best and Marshal's stores. The Agency made a $690,000 deferred loan to Schurgin in order to offset a cash-flow problem and enabled this $15,000,000 development to go forward. As a result of the successfull completion of this project, the city will realize $150,000 in tax imcrement revenues annually and commensurate increases in sales taxes, utility taxes and city fees. In negotiating this agreement, Schurgin representatives made it clear that the payment of prevailing wages on this development would significantly hinder the development's capacity to go forward. Thus, Agency staff and Schurgin negotiated a loan that is secured by a deed of trust on the property with notes from the sellers assumed by the Agency. By structuring the loan agreement in this fashion, there were no federal or state requirements to pay prevailing wage rates. Alfred Moran, Assistant Secretary, Department of Housing and Urban Development (HUD), recently wrote that cities "are entering a new era of public entrepreneurship." Their level of success "will be determined by how effective they can be in using scarce public resources asnd in leveraging private resources in their urban development efforts." Presently, the city utilize8 funds derived from its Community Development Block Grant (CDBG) for economic development, capital improvements, housing rehabilitation, employment linkage and other eligible activities. We are required by law and regulation to pay prevailing wage rates when CDBG funds are used to finance the construction component of a particular project. However, in an effort to participate in more projects and leverage the federal dollar, CDBGfunds are used for the acquisition of land, architectural and engineering services and working capital. In financing aspects of a development other than construction, we avoid the payment of prevailing wages. In recognition of the impact payment of prevailing wages would have on low and moderate income households, HUD doea not require the payment of prevailing wagea for the rehabilitation of single family dwelling units. Nor does HUD require payment of prevailing wages on the rehabilitation of seven (7) apartment units or less (for the Rental Rehabilitation Program (RRP), this figure rises to eleven (11) apartment units or less). The payment of prevailing wage rates on CDBG or RRP-assisted rehabilitation projects would without a doubt make the Agency's loan programs inoperable. During the latter part of 1985, the Mayor and Common Council, various Council committees and staff expended a great deal of time and money developing the city's Enterprise Zone application and adopting various resolutions and ordinances related to the establishment of an Enterprise Zone. The most important aspect of the implementing legislation was the adoption of the Enterprise Zone incentive ordinance, MC-485, which delineates certain fee exemptions and rebates available to new or expanding designated areas. The payment of prevailing wages on all new projects in the Enterprise Zone would offset totally the incentives for development, the Mayor and Common Council have adopted. It is for these and other reasons that staff urges the adoption of the Agency item to which this memorandum is appended. Thank you. GLENDA SAUL El:~ C;.E~~ Kenneth J. Henderson, Ma~r Community Development Division GS:KJH:lo:548L JOINT PUBLIC HEARING CITY OF SAN BERNARDINO Prevailing Wage Rate A public hearing,before the Mayor and Common Council will be held 11onday, January 13, 1986 at 6:00 p.m., to consider a policy relative to the application of prevailing wage rates, as defined by California Labor Code, Part 7, Chapter 1, Article 2, Sections 1770, 1773 and 1773.1, to public works projects and redevelopment activities. Said hearing will be conducted in the Council Chambers of City Hall, 300 North "D" Street, San Bernardino, Ca., where all interested persons are invited to be present. Written comments may be submitted to the Redevelopment Agency, 300 No. "D" St., 92418. //.7 ,/,/ ,/ ; ~'2?(/,/:"d ~/Y{.d/~!'( / / City Clerk