HomeMy WebLinkAboutR02-Redevelopment Agency
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R~T AQI!NCY'-IIEGUEST FOR COMMISSION/COUNCIL ACTION
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Subject: PREVAILING WAGE RATE STUDY
Glenda Saul, Executive Director
Redevelopment Agency
Date: October 1, 1986
Synopsis of Previous Commiaion/Council lCtion:
1/13/86
2/17/86
3/3/86
3/17/86
4/7/86
5/5/86
Open Hearing - Directed agency staff to seek proposals for study and to
ascertain practices of their redevelopment agencies.
Received City Administrator's report. Received two proposals for
prevailing wage study. Continued to 3/3/86. Instructed staff to confer
with State College to propose a prevailing wage study.
Continued to March 7, 1986.
Continued to April 7, 1986.
Continued to May 5, 1986.
Commission authorized agreement with Data Gathering Center, California
State University for consultant services to present report within 90 days.
Recommended motion:
(COMMUNITY DEVELOPHBIlT COMIIISSIOIi)
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Hove that the Redevelopment Agency is instructed to include Prevailing Wage
Requirements in appropriate documents only when such are mandated by State or Federal
statutes.
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Signature
Contact person:
Glenda Saul
YES
Phone: 383.5081
ALL
Ward:
Project: ALL
Date: OCTOBER 6, 1986
Supporting data attached:
FUNDING REQUIREMENTS:
No edvene Impact on City:
OCil Notes:
Amount: S
Agenda Item No.
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Proal Glenda Saul, Ezecutive Director
PREVAILING WAGE RATE
STUDY
October 1, 1986
Synop&1s of Previous Coaa1ssiOD/Couucll Action:
(continued frOll page 1)
7/18/86 Data Gathering Services request for 30 day extension presented to
Redevelopment Committee - ColBll1ttee unanimously recouended denial.
8/4/86 Commission agreed to extend submittal time 4S days to 9/23/86.
8/18/86 Resolution #4916 amended agreement - e~tending submittal date to 9/23/86.
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10/06/86
. CI'IO OF SAN BERNARDIa:>> - REQUEQ FOR COUNCIL AC'IGN
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STAFF REPORT
Background
Before you today is Cal State University's study on the short and long range
effects of requiring Prevailing Wage Rates to be paid on Agency/City related
agreements.
In November of 1985, the Council/Commission set a hearing for January 13, 1986 to
consider Agency staff's recommendation that the requirement for the payment of
Prevailing Wage Rates be omitted frOlD Agency developmental agreements in all
cases, but those mandated by State and Federal statutes. California State
University was contracted to perform a study that would include, among other
things, the following:
1. The effect on fam1ly income and standard of living of contractors and
workers in the trade.
2. The effect on the multiplier effect and other econOlll1c considerations of
the community.
3. The effect on Redevelopment Agency and City budgets.
4. The effect on the City's ability to attract development.
5. The effect on m1nority, women and small businesses.
The Study
Dr. Thomas Pierce, Principal Investigator, will be available on October 6, 1986 to
address the study and snswer any questions.
The study does not offer any recommendation, but does instead offer various
options for consideration. These options sre set forth on pages 5-8.
Staff's analysis of the study indicates a confirmstion of its own support for
repealing the e%isting policy directive. In reviewing Option D - Repeal of the
E%isting Policy, the only two sdverse impacts cited are also well qualified - i.e.:
1) Adverse affect on Unions and Union contractors.
The University goes on to e%plain that this option would result in the
grestest amount of MincOlDe redistribution from unions to open shopM.
2) Repeal may adversely affect overall quality of construction.
The University suggested and we agree, that every effort should be made
to insure high quality of construction. Performsnce bonds could be
required on all developmental agreements.
The positives to the repeal of the current policy directive includes:
1. Agency would have a better cOlDpetitive edge (pages 31, 32).
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10/06/86
. CI-R OF SAN BERNARDI~ - REQUEQ FOR COUNCIL ACT~N
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75-0264
STAFF REPORT
2.
Overall local economic growth would tend to increase (pages 28, 29, 31).
3.
Minority/wQlllen and open shop firms and workers would then have improved
opportunities for participation (pages 28, 34-38).
Staff recently conducted a sampling of public works CDBG projects over the past
si:l: years. The results indicate that approxill8tely 18% of empolyees hired on
these projects were San Bernardino.residents, 42% lived in our outlining cities
(20 mile radius) and 40% live beyond the 20 mile radius.
The Uuviersity points out in the Economic Analysis section (pages 15-31) of their
study, that staff's proposal to drop prevailing wage requirements where not
mandated would only affect a small portion of the local construction activity
(page 19). They explain further that while dropping the policy would, in itself,
cause a negative short-term influence on construction incQllle, it is not
necessarily the case that aggregate union construction incQllle would decline. In
the long run, the impact would appear to be modestly positive (page 27).
Staff supports the elimination of the policy directive.
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10/06/86
0 0 0 0
SAMPLING OF EMPLOYEE ADDRESSES
ON CDBG PROJECTS - 1982-1986
0
TOTAL
PROJECT SAN BERNARDINO 20 MILES 60 MILES EMPLOYEES
NIcholson 8 27 3 38
1/86-8/86
RIo VIsta 0 6 7 13
7/86-8/87
HUD #6433 0 0 39 39
6/84-7/84
Lytle Creek Comm. 14 16 10 40
10/83-2184
Guadalupe FIeld 3 6 14 23
3/84-7184
SanItary Sewer &
Pump StatIon 0 5 3 8
10/83-1/89
0 Waterman WIdenIng 2 5 2 9
7/83-7/83
MIll Center 1.1 29 lQ 53
11/82-
41 94 88 223
18'7. 42'7. 40'7.
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~ORANDUM
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REDEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
DATE
September 30, 1986
TO
Chairman and Community Development Commission
FROM
Glenda Saul
Executive Director
SUBJECT
PREVAILING WAGE RATE STUDY
Attached for your review Is a copy of Cal State University's Study on the
short and long range effects of requiring Prevailing Hage Rates to be paid
on City/Agency related projects.
This study will be placed on the October 6, 1986 Agenda.
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Glenda Saul
Executive Director
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cc: Sandy Lowder
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RESOLUTION NO.
RESOLUTION OF THE CITY OF SAN BERNARDINO ESTABLISHING A
POLICY THAT PREVAILING WAGES SHALL BE REQUIRED ON CITY PUBLIC
WORKS CONTRACTS ONLY WHEN REQUIRED BY STATE OR FEDERAL LAW, AND
REPEALING RESOLUTION NO. 12846.
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY
OF SAN BERNARDINO AS FOLLOWS:
SECTION 1. Recitals.
A. The City of San Bernardino has previously required,
pursuant to its Resolution No. 12846 adopted June 20, 1977, that
all public works contracts include a prevailing wage clause.
B. The City has now received a detailed studY.~',~."..~,..w..::le!;~p.~. by
1"" f-;;~""'~'''~
the Research and Data Gathering Center, California s~.t.l~.~~'~~~
;i'{."l'~~'~;r((.
University, San Bernardino, from which it appears ttiat~requirfng
i.\;,.-t ".~ .
prevailing wage provisions increases costs of public~works
projects to the City, without offsetting benefits. ~~~ ~~~i[~
SECTION 2. Implementation.
A. The Mayor and Common Council of the City of San
Bernardino do hereby direct that the provisions of a "prevailing
wage clause" in public works contracts issued by the City shall
no longer be included, except in those contracts where such
provisions are required by state or federal law.
B. ReSOlution No. 12846 is hereby repealed.
I HEREBY..CERTIFY that the foregoing resolution was duly
adopted by the Mayor and Common Council of the City of San
Bernardino at a
day of
meeting thereof, held on the
, 1986, by the following vote, to
wit:
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AYES:
Council Members
NAYS:
ABSENT:
City Clerk
The foregoing resolution is hereby approved this
day
of
, 1986.
Approved as to form:
Mayor of the City of San Be~~ard1n~~,
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t-~"l.rl~~7'
City Attorney .
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PREVAILING WAGE: FINAL REPORT
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P repa red by
Research and Data Gathering Center
September, 1986
Principal Investigator:
Co-Investigators:
Thomas Pierce, Ph.D.
Sheldon Bockman, Ph.D.
Donald Lindsey, Ph.D.
Barbara Sirotnik, Ph.D.
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TABLE OF CONTENTS
PAGE
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . 2
General ~indings . . . . . . . . . . . . . . . . . . . . 2
City Public Works Projecu . . . . . . . . . . . . . . . . . . . 2
IDA Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Compliance with IDA and City prevailing wage policy . . . . . . . . 2
Comparative project costs - open ahop versus prevailing wage . . . 3
Economic impacts of dropping the prevailing wage requirement. . . . . 3
Budgetary Impacts of Removing the Prevailing Wage Clause from
City and IDA Contracts . . . . . . . . . . . . . . . . . . . . . 4
OPTIONS AVAILABLE TO THE CITY FOR ACTION ON PREVAILING WAGE . . . . . 5
Option A: Maintain Current Policy - Prevailing Wage and
Reactive Enforcement . . . . . . . . . . . . . . . . .
. . . .
Option B: Active Enforcement of Prevailing Wage Requirements
Option C: Raise Minimum Threshold Below Which the Prevailing
Wage Policy Does Not Apply and Above Which There Would Be
. .
Strict Enforcement . . . . . . . . . . . . . . . . . . . .
. . . . .
Option D:
Repeal EEisting Policy . . . . . .
. . . . . . . . . . . .
PREVAILING WAGE LEGISLATION:
POLICY. ACTION AND REACTION
. . . . . . .
Federal Legislation . .
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State LegislatioD . . . . . . .. . .. .
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Prevailing Wage Policy Resolution: City of San Bernardino
Prevailing Wage Policy: The San Bernardino Redevelopment Agency
. . .
Policy Implementation: The IDA . . . . . . . . . . .
.
Policy Implementation: The City of San Bernardino. . .
Compliance with Prevailing Wage Legislation and Policy ....
ECONOMIC ANALYSIS
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Prevailing Wage Work" in Local Perspective ..... 15
Comparative Project Costs - Open Shop versus Prevailing Wage 20
Short-Run and Long-Run Impacts of Dropping the Prevailing Wage Req. 22
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ECONOMIC ANALYSIS (Cont'd)
Budgetary Impacts of Removing the Prevsi1ing Wage Clause from
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City and IDA Contracts . . . . . . . .. .......
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PREVAILING WAGE AS IT EFFECTS MINORITY GROUPS
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Historical Perspective ....
Union/Nonunion Representation .
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Training . . . . . . . . . . . . . . . . . . . . . .
Ability to Bid Projects Appropriately . . .
Job Opportunities . . . . . . . . . . . . . . . .
.
Discouragement of Bidding on Prevailing Wage Projects
Competition . . . . . . . . . . . . . . . . . . . . .
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APPENDICES:
Appendix 1:
Appendix 2:
Appendix 3:
Appendix 4:
Appendix 5:
Appendix 6:
Santa Ana Policy on Payment of Prevailing Wages
Los Angeles Policy on Payment of Prevailing Wages
Resolution '12846
RDA Policy on Payment of Prevailing Wages
5-1 Legal Requirements
Summary of Interview Data
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SAN BERNARDINO CITY PREVAILING WAGE ASSESSMENT
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INTRODUCTION
At the present time, aeparate City and RDA policies require that prevailing wages be paid
on mOlt City IAgency public works contracU, even when DOt required to do 10 by either federal
{Davis-Bacon) or Itate Qitde Davis-Bacon) statutes. The lOA baa requeued that current policy
be changed t~ OIle which would require contractora to pay prevailq wage payments only when
auch payments are obliaatory under alate or federal law. In May 1986, the City of San
Bernardino qaged the Raearch and Data Gathering Center to analyze the .hort/laaa run effects
that such a policy chlll8e would have on:
A. Family income and uandard of living of union/nonunion construction workers in the
City.
B. The City's ability to attract new devdopeu and to promote additional projects by
those developers already situated in the community.
C. Minority Iwomen participation in the construction induatry
D. Small contractors and subcontractors
E. City/Agency budaets
F. The social and economic well-being of the general community
In this report the Re.earch and Data Gatherq Center evaluates the RDA proposal for its
probable effect on varioua segments of the construction induatry, and on the City u a whole.
Alternative options from various sources are also reviewed for their probable conaequences, if
implemented. The general findings, concluaions, and evaluation of options offered rcprelent the
culmination of an extenaive and systematic relearch effort to provide the City Council with
additional dau in iu efforta to find an equitable and economically juatifiable aolution to the
City'a prevailins wage controver.y. This research effort included a careful review of relevant
academic and professional literature, interviews and meetings with local government officials and
local RDA staff, as well u RDA Agencies outside the area, numerous meetings and discussions
with Union represenutives, union contractors and subcontractors, minority and women contractors
and subcontractors, open shop contractors and subcontractors, and developeu. In addition,
tdephone interviews were conducted with two nationally reCOllnired expert., generally considered
to hold different view. of the prevailill8 wage issue. The molt vigorous aspect of the research
effort, however, involved an in-depth economic analysis of the RDA propoaal for its probable
effect on those research objectives specified early in this report.
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EXECUTIVE SUMMARY
Cten~ral Pindirw.
This uecutive aummary il longer than one would normally expect. Not only are the
general findi....,. of wa Itudy articulated in lummary fashion, but the options available to the
City for reaolving the prevailq wage controversy are preaented and examined for their relative
merit.
City Publit: W.k Prqie~t.
1. The average annual inflation-adjusted volume of City public works projecu from
1976-198'5 has been '4.7 million, but on average only '1.15 million of the projects have required
payment of prevailins wages soldy on the basis of City policy. This '1.15 million represents less
than one percent of the averllle annual conatruction activity within the City.
2. Ul'ioni"..d firms presendy account for approzimatdy 70 perccot of the total dollar
volume of City public works projects. Since labor COlts typically account for about 30 percent of
total construction costs, the maximum short-run annual loss of union conatruction income on city
projects, if the prevailq wage requirement is repealed, would be in the neighborhood of '256,000
(holding the volume of public works projecu constant).
RDA Acti"it"
1. The average annual inflatico-adjusted volume of prevailq wage RDA projects Q976-
84) has been '12.5 million of which approximatdy '9.7 million has required payment of prevailing
wage u the result of RDA policy only. Adjusting for the proportion of labor colt to total project
(conatructinn) COlt, the likely maximum short-run annual loss of union conatructico income, if
the prevailing wage requirement is repealed, is estimated at approximatdy ~.3 million annually.
2. RDA-mandated prevailing wage projects, on average, account for about 10 to 11
percent of annual total construction within the City. Since, therefore, only a relativdy small
portion of local construction activity would be affected by a change in current RDA prevailing
wage policy, such a change would likdy have a modest, but positive, impact on the local economy
as a whole.
r.nmpliance with RDA and City prevailinv wqe policy
1. While the RDA and City have different prevailins wage policies with reapect to
monitoring compliance, there is a general consensus that prevailing wage compliance is low--
perhaps no better than 50% at best.
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2. Various sources suggest that a vIgorous cash economy currently exists 10 the City's
construction industry-accounting for perhaps as much as one-third of all wage payments. Low
compliance with prevailing wage requirements may provide a supportive climate for cash
transactions which increuu the economic vulnerability of workers who are not covered by
unemployment benefits, worker's compensation, or minimum wage law. and regulatinns.
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rllmparativ&! prqjut t:OJtl-cmen .),~ verlus prevaililHf W.He
Adjuating for labor COlt u a percentage of total contract (construction) COlt, and adjusting
for the prevailins wage/open ahop wage rate differential and possible productivit y differences
amDII8 union and nonunion workeu, a reasoaable estimate of the differential between open ahop
and prevailing wage project (construction) costs ia 10 percent. The exact percentage, of course,
will vary from project to project according to type of construction, state of labor market, and the
particular terms of local union contracts.
E"''''omic imp..:!. of drqppu. the prev.tUna _..-e reauir&!ment
1. Academic and profuaionalliterature, as well u an analysis of San Diego'. prevailins
wage structure (where the prevailing wage requirement was repealed), suggelt that the repeal of
this City's prevailq wage requirements would not lead to a collapse in the local wage rate
structure, as is sometimes claimed by prevailing wage advocates.
2. Should the prevailing wage c1auae be repealed, the estimated abort-run annual
income redistribution from union to open ahops would be approzimatdy '1.5 million. However, if
San Bernardino growa at its currently projected rate, total union conltruction income may DOt
decline in an abaolute sense. Inltead it may continue to rise, but less rapidly than would be the
cue if the present policy were maintained.
3. The preponderance of the available evidence auggeau that minority/women/small
businesses have greater job opportunities in open .hops than they presently have in unions.
Therefore, the income redistribution which would result from repealing the prevailins wage should
have a positive effect on the income of these groups.
4. If the prevailing wage requirement were repealed, the relative price of devdopment
would be reduced by approximatdy 10 percent (if it can be assumed that present compliance to
the policy is reasonably high), thus increasq the l::i1U relative attractiveness for additional
devdopment.
5. When compared to the overall volume of construction activity expected to occur in
an era of high population and income growth, the likdy increue in RDA development resultq
from the repeal of prevailing wage requirements would exert a positive, but modest effect on the
local econom y as a whole.
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6. While open shop firms would have greater access to ROA and Cit y projects, the
growth in opeD shop activity due to dropping the prevailq wage clause would be relatively small
in comparison to the overall increue in open shop volulDe expected to result from community
income and population growth.
7. Open shop wage rates may increue but only marginally if the RDA propoaal is
adopted, since the amount of local construction activity to which the RDA propoaal appliu is
limited.
8. . After nperiencing a ahort-run 101S0f income (likely muimum lOll in the
neighborhood al 1.5 million dollau annually), Ul1inni...ed firms would likely make the necellary
adjust menta 10 as ro remain competitive in biddi118 for projects DO longer aubject to prevailins
wage. Since the acope of thele adjustments would be narrow, necesaarily applying only to specific
City and RDA projects, and since the adjustments would be made in the context of strong regional
economic growth, the overall local wage structure would not be substantially affected. The lack
of substantial chlll8e in the San Diego wage structure in the aftermath of droppq the prevaili118
wage clause carroboratea to thia point.
Budtletarv IlQpacts of Removintl th~ Prev.ili~ W.e Clause from City and IDA Contracts
1. Dropping the prevailq wage requirement would have an overall positive effect on
the RDA budget. Ita revenues would likdy increase given the City's greater ability to attract
developera and any given amount of redevdopment project area fund revenue would usist more
developers u reduced project costa would allow individual developers to be attracted with amaller
financial asaistance packages.
2. The basic budgetary effects on San Bernardino City Government of droppi118 the
prevailins wage requirement would be ro produce aavqa on public works projecu--an annual
average aavinga of about , 115,OOO-and to uert a small positive effect on City revenues over
time.
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OPTIONS AVAILABLE TO THE CITY FOR ACTION ON PREVAILING WAGE
In this aection, the followq options for resolvq the City's prevailing wage controveuy
are reviewed and analyzed for their relative merit:
Option A: Maintain current policy
Option B: Maintain current policy with active enforcement
Option C: Raise minimum project threshold
Option 0: Repeal current policy aa it appliea both to the City and RDA.
Before proceeding with a review and diacullion of these options, a few introductory
remarks are in order. Regardless as to which option is ultimately exercised by the City Council,
the findings, as preaented and discussed in the body of this report, suggest that none of the dire
consequences or glowq predictions offered by advocates of one side or another will occur.
Regardless of the option sdected for implementation, the City willlikdy grow at a rapid rate inro
the 21st Century. Nor will one option be a death-knell for the union, or another deatroy
competition in the marketplace. And, regardless of the option sdected, the equitable participation
of minorities and women in the construction industry will remain a pressing concern.
Qptiaa A!. u.......... r...rr.nt pftl~, _ p.....,... ._e ...d ~...,...._.. Rnl-.............t.
At the present time City Council reaolution #12846 requirea that prevailq wagea be paid
on all City public works projecu, even when not required to do 10 by either the Davia-Bacon or
Little Davis-Bacon Acts. Since the RDA is a separate entity from the City, resolution #12846
doea not apply to agency contracts. However, in the past, the Agency has often included a
prevailq wage clause in its contracts, even when DOt required by federal or state atatutes. Thua
in effect, the RDA haa, on the buis of hiatorieal practice, adopted an unwritten prevailins wage
policy.
There is an old adage that has become a guiding principle in consulting and applied
research: if it works, don't fiz it. Unfortunately, prescot policy, in large measure, does not
work. On the basis of numerous interviews, it is abundantly clear that none of the relevant
parries to the prevailing wage controveuy is aatisfied with the current policy and/or its
implementation. RDA staff fed they are in the position of having to operate under a policy that
they have neither the personnd nor, perhaps, the inclination to enforce. In addition, even if an
active enforcement policy were pursued, the RDA and City suff would confront the aame
enforcement problems that currently prevent cities, states, and the federal government from
meaningfully enforcing Davis-Bacon and little Davis-Bacon Acts.
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The problem of enforcing prevailing wage policy is clearly evidenced by relatively low
compliance-reports generally indicate no better than 50% at best. (Unfortunatdy, hard data for
empirically determining the actual rate of compliance are not available.) As a result, there
~arendy exists a wide discrepancy between prevailq wage policy and implementation.
Unions and union contractors dearly support a auong prevailq wage policy, bwevq it
hdps to prevent exploitation of workera, atabilizu the wale atructure, and enaures quality
conltruction. Yet, they are dissatiafied with the preaent policy as implemented, calling for much
auonger coforument. Open ahop contractors and devdopera, on the other hand, are lenerally
opposed to prevailinl wage requiremenu, believing that the present policy inhibits fair
competition in the marketplace, incrcuea project COIU for the contractor and developeu--cos u
that are at least partially passed on to the tupayer-and reduces the City's ability to maximire
its growth potential. Minorities and women tend to oppose the present policy on the grounds that
it forces small contractors to pay wages and to maintain administrative practices which go well
beyond their financial resources. In addition, minorities and women maintain that the present
policy, in its tacit support of unions, limits their participation in the consuuction industry in
that uniona, they argue, have historically discriminated against Blacks, Hispanics, and women.
Based on our analysis, one probable consequence of continuing the present policy would be
that the strife, confusion, and dissatisfaction associated with the present policy would continue
unabated. Other consequences of continuing the present policy include:
A re1ativdy low rate of compliance;
A lower rate of ",en ahqp participation in RDA and City conUacts than would occur
if the policy were repealed;
A somewhat higher rate of uninn participation in RDA and Agency conuacts than
would occur if the policy were repealed;
The City and lOA projects would continue to COlt lIIlltt under present policy than
would be the cue if the policy were repealed;
Minorities, women, and small businessea would have fewer opportunitiea than would
be the cue if the policy were repealed; and
The relative attractiveness of San Bernardino to developers would be less than ifcthe policy were repealed.
Qpt'inn B!! Art.we Rnlftl",-.nent DE. Pr~~'~'" W-.e RemUrf!lllenU.
This aption would require the City and RDA staff to engage in active enforcement. (A
review of carrent policy reveals that uiatinl policy statements which address enforcement
requirements would have to be more clearly specified if enhanced prevailing wage enforce men t
efforts were to prove ar all effective. Two examples of more complete policy statements employed
6
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. Cb; the cities of Santa Ana and LosC?ngdes are pre$ente.R Appendices 1 and 2.) For eumPl?
similarly to Davis-Bacon, weekly payroll certification could be demanded from all contractors in an
effort to enforce prevailins wage requirements. City and RDA employecs would have to be
assigned to cloady monitor contracts (for example, conductq random aurveys of City and RDA
jobs) in order to ensure compliance with prevailins wage policy. However, regardless of efforu to
enforce prevailing wage requirements, numerOUl profelliaoal and academic atudiea suggest that
complisnce to Davis-Bacon and little Davis-Bacon legislation in general is rdativdy low.
Assuming that RDA and City .taffs vigorously attempt to enforce prevailing wage
requirements, the probable conaequences of such a policy are as followa:
A aomewhat higher rate of compliance to City and Agency policy than ia presently
the case;
An increase in RDA personnd devoted specifically to enforcing and monitoring
prevailq wage compliance;
An elaboration of administrative and bureaucratic procedures designed to enforce
compliance;
An increase in union involvement in City and RDA ptojecu--thus greater
employment for union membeu and greater construction activity for union
contractors than is the cue under the currcot policy;
A decrcue in open shop activity in RDA and City projects as compared with
present policy and enforcement practice;
A alight incrcue in the cuh economy in the local construction induatry as compared
with the preaent policy;
A decrease in minoritylwomen and small contractor's involvement in RDA and City
projects from what is presently occurill8;
An effective increase in RDA-mandated prevailins wage project coats;
A alight decreue in the relative competitiveness of the City in attracting
devdopment.
The above liat of consequences stemming from this option should be viewed in light of the
general findqs that City and RDA projects account for only approximatdy 11-12 percent of the
City's total construction activity. That is, the effect of the income redisuibueion to the
unionized aector and away from the open shop sector (includq minority /women/small business)
would be mitigated, to some degree, by the increase in total local construction activity projected
to occur over the next several years.
Neverthdess, this policy in comparison to the other qptiona does repreaent the worst case
scenario for ensuri118 open shop participation and minority involvement in RDA and City contracts.
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In addition, if exercised, this
developers to the City.
o
also be the worse case
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option would
scenar io for
0,.... c- D.c... llmi....... "I1H...J.nId ........... WhVh the .......3.... W.~ P..l~1 Dad Mat ~l, .nd
AhDwe 1IrI.LoIt ~ ....Id . Strid Rnl.........f!Ilt..
Thia approach has beco takco by a number of citiea, includq Sanu Ana and Los Angdes
(lee Appendicea 1 and 2 for the policy aUtements developed by those citiea). The major
advantage of 'this optico is that it providea the best middle ,round aolution to the prevaililll wage
controveuy. Increuing the project COlt (coaatruction cost) threahold for activatq prevailing
wage requirementa to IOme aubatantial amount would reduce the number of prevailing wage
projects to adminiater but would neverthdeaa prelerve the applicability of the prevailq wage
requirement for many RDA projecta. Ilxamination of projects subject to the RDA's unwritten
prevailq wage policy from 1976-84 revealed an average (mean) inflation-adjusted project sire (in
terms of conatruction COlt) of '1.25 million, with median project sire of about '825,000. For an
incrcue in the threshold to have more than a token effect on open abop accessibility to RDA and
City projecta, the threahold would have ro be raised to at lealt the neighborhood of median
project size. The degree to which income would be redistributed in the short run from the
unionired to the open shop lector would vary directly with the increase in the threshold.
Regardless, however, there would be less redistribution than if the prevailq wage requirement
were repealed altogether. By incrcuq open ahop acceasibility, thia option alao would provide for
greater minority lamall busineaa participation in RDA and City projecta than would be the cue if
current policy were continued or strictly enforced.
Under this option, larger projects would continue to be subject to prevailing wage
requirements. Thus, other thinss coaatant, the City could be at lOmewhat of a disadvantage vis-
a-via other citiea in the Inland Empire in ita efforta ro attract development projects valued in
excesl of the threshold figure.
Finally, as with Option B, both City and RDA atlff would have to lcod increased attention
to enforcement matters (in this cue, on proiecta above the threshold levd.)
~tilm D! R~1 H~istim! Pftl~~_
This option was chosen by the City of San Diego which repealed ita prevailing wage policy
in 1981. Under such a scenario, the City and RDA would DO longer be required to adhere to a
prevailq wage requirement which is inherently difficult to enforce. The City would realize
slight budgetary savings on public works projecta. The RDA would be in the best position (among
the options discussed) to attract developers to the area. As a result, overall local economic growth
would tend to increase slightly over what it would otherwise have been. This would exert
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farther favorable, though probably modest. influence on both City and RDA budgets.
Minority /women and open shop firms and workers would benefit from such a change in policy as,
through competitive project biddilll, they would have improved opportunities for participating in
RDA and City projects.
Repealill8 the prevailq wage requirement would, however, have an adveue effect on
union. and union conuactou. Among the options discusaed, this option would relult in the
greatest amount of income redistribution from union. to open ahopa, but would DOt be expected to
cauae a coIlapae of the local construction induauy wage atructure. Anecdotal data, u well u
lOme data derived from the academic and profeasional literature, alao indicate that repeal may
adver.dy affect the overall quality of construction. If this policy is adopted, the RDA and City
ahould make every effort to ensure that the quality of construction is high and that ultimate
project (construction) costs approximate bid price. Performance bonds, for example, should be
required (and enforced) of all contractou engaged in RDA or public works projects. Also,
contractors should be hdd responsible for any changes in project costs that occur u a result of
their negligence. A final probable adverse conaequence of repeal may be an increue in the local
construction industry's cuh economy, with an attendant rise in the number of workers DOt
covered by workman'a compensation and unemployment benefits.
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PREVAILING WAGE LEGISLATION: POUCY, ACTION AND REACTION
Federal ~i.l.timl
Prevailins wage laws are intended to regulate government procurement of goods and
aervicea from the private aector. At the federal levd there are three auch law.. The coocern of
this Itudy, of course, is only with the Davis-Bacon Act which appliea to the conauuction
industry.
The federal Davis-Bacon Act became law in 1931. The prime rationale for the enactment of
thia legialation was to protect local COOUactora and local labor from potential abuaes by itinerant,
low wage contractors. Fear. existed at the time that itinerant contractor a were likdy to enter
local areas and underbid local contractors thereby continuing to maiotaio or even exacerbate the
severe conditions of earlier depression yeara. The federal Davis-Bacon Act has changed little since
1931, with the exception of . 1964 amendment that added fringe benefits to prevailq wage
packages; Recently, severu minor regulatory changes were made but have DO import for this study.
State 1,.,ist.tion
At the uate level including the District of Columbia there are 35 jurisdictions that
currently have prevailing wagc legislation ("little" Davis-Bacon Acts). Some of theae laws were
enacted well before the federal act. A number of Itates includq Californis puaed .uch legisl.tion
in 1931, with a number of other .tates followq .uit between 1931 and WWII. Nine atates have
never passed auch legislation; aeven of these are located in the South. Seven Itatea have repealed
their prevailq wage lawa (Florida, 1979; Alabama and Utah, 1981; Arizona, 1984; Idaho, Colorado
and New Hampshire, 1985).
An examination of little Davis-Bacon Acts reveals that the nature of the legialation varies
widdy from state to state. Only a few atatel have .tatutes that incorporate coverage u broad as
the federal law. California is amons these exceptions. Ita little Davis-Bacon Act is DOt only quite
different from all other states, its coverage in some reapects is alao greater than the federal act.
For example, whereas the federal government set a threshold of $2,500 before contractors arc
required to meet prevailing wage standards, California law holds that "...except for public works
of one thousand ('1,000) or leas, DOt Ie.. than the general prevailing rate of per diem for work of
a similar character in the locality in which the public work is performed...shall be paid to all
workers employcd on public works."l
1. 1 State of California Labor Code. Part 7, Chapter 1, Article 1, Section 1771.
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Prevailing wage rate determiQons are made by t~irector of the State's Departlr.ent l;)
Industrial Rdations in accordance with Section 1770&1 Kll. of the State of California LiIllu. ~
Basically, the prevailq wage paid any particular crah is that locality's modal wage rate, i.e., the
single hourly wage rate (to the penny) paid more ohen than any other single rate to workeu in a
specifieally defined craft.2 Since oaly union wage agreements apecify wage rate; to the penny for
large numbeu of workers, prevailing wage rates tend to approximate union rates. If, for example,
50 union carpenteu in . particular locality earn '23.05 per hour, while 500 non-union carpenteu
in the aame locality earn between '15 and '20 per hour but their rates are diapeued 10 that DO
more than 10 non-union carpenteu earn the aame hourly wage rate to the penny, the prevailq
wage determination will J.ikcly be '23.05 per hour.3 Given Qle of the .tatistical mode, therefore,
prevailq wage ratea tend to mirror the union wage acale.
11-"
Prevailit\J WMe Palicy Re.a1ution. City of San IH:rnardino
The City of San Bernardino, as a charter city, is not subject to either little Davis-Bacon or
federal Davis-Bacoo provisions, unless its public works projecta are funded in lOme amount by
state or federal monies. Neverthdess, in June 1977, the City Council palled Reaolution No.
12846 (appendix 3) requiring that prevailing wage rates be paid on all city public works projecu
in accordance with current wage determinations made by the Director of Industrial Relations
(DIR). The resolution contains no further prescriptions or guidance for ita implemenution or
adminiatratioo of the policy. The limited nature of the reaolution, dealt with later in this report,
has direct implicationa concerning matters of implementation and compliance. The reaolution
applies JmU to the City of San Bernardino public worka projecu, and not at all to the
Redevelopment Agency - City of San Bernardino (RDA).
P~evail~ W.e Palicy. 'I'he San Bet:na.rdina Redev.lqpment Afeney
The IDA, an entity separate from the City of San Bernardino, baa routinely written a
prevailq wage clause (appendix 4) into most but not all of its contracU even when .tate or
federal fundq is not an issue. In the RDA's early years many more of its projects received
2. 8 Cal. Admin. Code 16011 atates: "The term 'prevailill8 rate' shall have the followq
meaning: (a) When applied to the basic hourly rate of pay, the term means the rate being
paid to a majority of workers engaging in the particular craft, clusification or type of work
within the locality and within the nearest labor market area, if a majority of auch workeu
be paid at a single rate; if there be DO single rate being paid to the majority, then the
single rate being paid the greatest number..."
3. The accuracy of this example was confirmed in conversation with Department of
Industrial Rdations personnd.
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federal assistance than in recent years, thereby mandating the payment of prevailing wages as
prescribed by law. It was merely by inertia, according to RDA officials, that a "boilerplate"
prevailing wage clause has appeared in molt RDA contracu when neither aute nor federal
uaistance wu received. In effect, the RDA aimply adopted an unwriuen, lk. faa2 prevailing
wage policy. More recently the RDA baa tcoded to write contracts permiuq the agency to avoid
prevailing wage constraints when thought legally permiaaible and conaidered practicable by the
agency.4 Furthermore, it hu proposed to the Community Development Commisaion that the agency
DO longer req;.ire payment of prevailq wagu unless required by Itate and federalltatutes.
Palky Impl~ml!nt.tiOll! The RDA
As indicated the RDA hu no written adminiatrative policy governi118 prevaililll wage
requirements. Interviews with RDA officials reveal that what policy implementation they do have
calls for inserting their "boilerplate" prevailing wage clause into most of its contracts with
owners or devdopera. Beyond thia the only other indication of a potential policy action is found in
that portion of their contract which reads:
Agency and any aggrieved employee are each authorized to file an action in any court of
competent jurisdiction against Participatq OWDer and any of its contractors or sub
contractors for the recovery of the difference between the wage rates actually paid and
wage rates legally required to be paid under the provisions of this aection...
Thus, the agency is authorired to be reactive in posaible cues of non-compliance ahould it
be inclined to enter into formal judicial proceedinas. Since the City and the RDA report no
apecific caSel of DOn-compliance in aituations when only local policy prevails, it cannot be Itated
here what action if any might be undertaken in those situations.
Policy LQplementation. The City of g.n Bernardino
In implementq administrative policy and practice the City of San Bernardino goes
somewhat beyond the two prescriptive mcuurea in the 1977 prevailq wage reaolurion i.e., to pay
4. Generally, RDA conuacU pertaining to construction and installation of public and private
improvements where the devdoper is to be reimbursed from ta:r increment revenues are
subject to the requirements for payment of prevailing wage ratea u aet forth in little
Davis-Bacon. On the other hand, if 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 UPOD costs incurred by the developer for such construction and
installation of such improvements, the construction and installation of such improvements
are undertaken solely by the developer and not by the RDA directly or indirectly.
Therefore, such work is DOt subject...to prevailing wage rate requiremenu applicable to
public works, as set forth by statute." Sources: Memos from Mr. Timothy Sabo to Allen R.
Briggs, Esq., July 9 and July 24, 1985.
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prevailing wage when local funding is to be used for public works or improvements and to use
state wage determinations provided by California's DIR. Also, there is some difference between
San Bernardino City administrative policy and practice and that of the lOA. The City'a Public
Worka/EDgineerq Department uaea a aet of legal apecifications in iu contrac,ta quite different
from chat appearq in lOA contracu.5 The city apecificationa (Appendix 3) are written to
cover contracU that come under California'a little Davia-Bacon Act as well as the reaolution. The
language in ~ese apecifications indicates a proactive posture in matten of eDlurq a degree of
compliance with Itate law and city policy. In particular, the City reaerves "~.. the right to
interview any craft oc workman 011 the project aite in order to verify payment of prevailins wage
ratu..." and clear demands are made on contractou to keep "accurate" payroll records for
inspection and to file certified copies of auch recorda on a weekly buia with the Elllineer. In
addition, the City Engineer'a "Notice Inviti118 Bids" document sent out to various contractors
includes two paragraphs calling attention to city policy under the 1977 resolution.
Interviews with city officials indicate that there ia close compliance with state regulations
most notably in the area of obtainq and inspectiog payroll records when Davia-Bacon or little
Davia-Bacon is in effect. However, until very recently (the last few jobs prior to September 16,
1986), it does not appear that all aspects of provisions peuainq to payroll records have been
givco close attention.
r~pHsnt'e With Prl!v..il~ Wue t~i.l.tinn .And Polky
Estimates of compliance with San Bernar.dino'a prevailing wase legislation or policy
presents a mind picture. Interviews with San Bernardino City and lOA officials, local unico
leaders, devdopen, contractors, women and minority group workers in the construction industry
produce eltimates of local compliance rlll8q from a low of Z 0'Ji to a high of 80'Ji. The modal
estimates rlll8e between 40-60'Ji. A broad aurvey of the research literature fails to reveal
estimates that are much more precise for other areas of the country. The best estimate appeara to
be that made in a 1985 United States Inspector General's report of Region IX which includes all of
California.6 In this report, compliance with the provisions of the federal Davia-Bacon Act
where a proactive enforcement prCll!ram exiats, ia estimated ro be no higher than 50%. Specifically
focusing on conditions in California, the audit cites conclusions reached after an investigation
into the underground economy rdated to prevailq wage violations. The California Assembly
Committee on Labor and Employment reported:
5. SECTION 5, 5-1 UlGAL REOUlREMENTS (See Appendix 5)
6. Internal Audit Monitorin~ Enforcement Of I.hor Standards. Region IX, 85-SF-179-003,
January 16, 1985.
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After talking to hundreds of individuals throughout the state---workers, contractors,
labor representatives, and government enforcement personnel---we are now finding out
that the wage and tu law violations are rootine and occurring everywhere. on every
type of construction work, both public and private. (Emphasis added)
For California and the re.t of the region the report goes on to observe' that .pecW tu
audit investigations by the IRS and Itate agencies indicate that a. many u 50.. of the c:ontractors
are now ea,.,i", in same farm af ille,.lity (e... paying worker. in cub without withholdins
federal and .\ate income tues, aocW lecurity paymenu and unemployment premium.). Further,
in California the report Itates, "We found a direct relaticoahip between labor standard. violations
and conltruction deficicncie...." (emphalia added).
Without clear, comprehen.ive adminiatrative directivea and contractual prOVJJlon. for
making clear the rights, dutie., obligations and expectations of parties that include monitorq
compliance, enforcement and sanctions, a high noncompliance rate should be expected. To the
extent that an effective proactive policy is implemented there .hould be some proportional
reduction in the rate of DOncompliance. OoiDs Ie.. than thi., at the leut, invites a thriving
underground cuh economy and hdps to put honest COIltractors at a diaadvantage.
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ECONOMIC ANALYSIS
"Prevwi"f W.-,e Work" in t ~al Per4Pet:tive
It is important to keep in mind that the iDA'. proposal to drop the prevailing wage
applie. only to thole inltances where neither atate nor federal .tatutea mandate payment of
prevailinl ~agea. Conaequently, ahould the RDA propo.al be adopted by City Council, the
prevailq wage would atill apply to many City and lOme lOA projects. Furthermore, when the
local construction industry u a whole (as opposed ro the public lector alone) ia considered, the
proposed policy chanae ia aeen to affect only a amall portion of overall local coaatructico activity.
(a) City Public Worka Projects
In an attempt to place City public works activities in peupective, Table 1 ahows the
annual dollar volume of public works projects undertaken under the auspicea of the Departmen t
of Public Works in both nominal and ioflation-adjulted terms.
While the average annual vol~e of public works over the paat decade haa been '4.7
million, just '1.15 million worth of these projects on average have required payment of the
prevailq wage aoldy on the basia of City policy. Prevailq wages apply to molt public works
activity because state or federal project usiatance triggers either little Davis-Bacon or Davis-
Bacon provisions, respectivdy. Consequently, should City policy continue to affect only a small
fraction of public work. activity (about '1 million annually), adoption of the lOA's proposal
would DOt diminate the prevailq wage provision from projects accountq for the major portion
of City public works.
Furthermore, City public works activity accounts for just a small portion of construction
activity undertaken within the City of San Bernardino as a whole. Buildq permit dau in Table
2 make thia point dearly. Comparq CIlllumn Z of Table 1 with CIlllumn Z of Table 2 shows that
the annual value of City public works projects requirq paymcot of the prevaililla wage by virtue
of City polky only most often accounts for leu than 1" of the annual value of buildq permiu
issued in the City of San Bernardino.
Summing up, while the prevailing wage issue is an important one, the RDA proposal
pertains only to about '1.15 million of City prevailing wage work annually. Viewed in terms of
overall local conatruction activity, then, the aggregate impact of dropping the prevailing wage
requirement on City public works projects would be small.
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1976
1977
197.
197!1
1980
1981
U8Z
U'J
198..
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Table 1
City Public Works Projecta:
AuDualllzpenditlUa
o
City Palicy-Kaadatcd
foI-;...1 Jafl-Adj
(19"-100)
Totll Projectl
Namilll1 Jafl-Adj ,
(19.,.100)
(1)
'J72,OOO
'10,000
"47,000
Z7Z,OOO
757,000
J,'75,OOO
8"5,000
'''J,OOO
1,120,000
60Z,OOO
(..)
'Z,....O,OOO
6,5"7,000 .
810,000
......5,000
",005,000
8,0...,000
2,Z12,OOO
1,56",000
U,029,OOO
J,8J2,OOO
Source: Non>inal ezpenditura data were provided by the Department of Public Works, City
oi San BenwdiDO.
(2)
'62Z,OOO
1,2 56,000
626,000
)45,000
''',000
",26J,OOO
90",000
'76,000
1,1"2,000
60Z,OOO
(J)
'1,"61,000
",ZZ",OOO
579,000
J,'15,OOO
J,42",OOO
7 ,Jl6,OOO
2,067,000
1,50",000
U,77",OOO
J,8J2,OOO
Note: Nominal dollar figures are adjuated for ioflatiao with the Producer Price Indn-
Conuruction Materials and Componenu. Table B-60, llc=oDomic= Report of
the Preaidcot. February 1986, p.UZ.
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1976
1977
1978
1979
1980
1981
1982
1983
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1985
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Table 2
City of San BernardiDO
Total AnnuI1 ...W", Permiu
(lnm.,. of tIoI1ar.)
~....1
lIIf1-Mj
(1985=100)
(2)
'35.05
73.62
117.33
103.62
102.00
'3.72
63.03
106.24
142.60
131.50
(1)
'20.95
47.51
'3.64
'1.33
.6..2
76.39
58.73
101.72
140.38
131.50
Source: ~in.1 building permit data were provided by the City of San BernardiDo,
Department of Buildina and Safety.
Note: The Producer Price Indn - CODltruction Materiala and Componentl ia Uled to
convert _in.1 tIoI1ar figurCl inro inflstion-adjUlted term..
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(b) RDA Activity
The volume of RDA activity affected by the prevailing wage is significantly greater than
that subject to City public works.7 Column 4 of Table 3 indicates the annual volume of RDA
project activity requirq payment of prevailq wages, while column 2 ahowa prevailing wage
activity mandated aoldy on the buil of the RDA's unwritten prevailina wage policy. The average
annual inflation-acljulted volume of prevailing wage RDA projecu (1976-84) hu beeo '12.5
million, appro:rimatdy '9.7 millioo of which has required payment of prevailins waga as a result
of lOA policy only. The rdativdy amall difference between thue two figurea reveals that atate
and federal asaistance have been meager over the put decade. liven more DOtably, the difference
between columns 4 and 6 lhow that a aignificant portion of RDA-rdated activity has been of a
nature which hu DOt required paymcot of prevailq wagea.
Despite the fact that the volume of RDA activity is much greater than that of City public
works, the amouot of Agency activity which would be affected by the RDA'a proposal to drop the
prevailing wage requirement, although a aubstantial percentage of total RDA activity, appears
nominal when considered in the context of total local construction activity. Viewq the figures
in column 2, Table 3 in conjunction with column 2, Table 2, it ia evident that RDA-mandated
prevailing wage projects, on average, accounted for only about 10.691>8 of annual local construction
activity.9 While not insignificant, it is dear that the lOA proposal affects only a amall portion
of local construction activity and that, if adopted, would likdy uert only minor influence on the
local <<O"O"'y U a whole.
7. The dau reported in Table 3 for 1976-1984 were collected through uamination of the
RDA's 1984 Annual Ro:port which lists estimated construction COlt, U recorded on building
permits, for each RDA project. Since building permits had DOt yet been filed for several
new projects listed in the 1985 Annual Rq)"rt, data for that year could DOt be compiled.
Determinatinna of whether projects were aubject to prevailina wage requirements and,
if 10, whether prevailq wages were required u a result of federal or atate atatute or ,local
RDA policy were made 00 the buis of diacussinna with lOA officw. and by uamining
project __tract., where oecea...y and feaaib1e. While examination of all project __tract.
would have been preferred, the complex nature of RDA activities and tranaactiona, and the
associated pooderous system of recordkeepill8, precluded that possibility.
Given the oecessity of employq less than optimal data collection techniques, the
dollar figure. reported in Table 3 should be viewed IS approximations, not precise estimates,
of the volume of RDA activity.
8. This figure is ealculated by dividing the average annual inflation-adjusted dollar value of
RDA-mandated prevailq wage projectl (1976-84) by the average annual inflation-adjusted
dollar value of City of San Bernardino buildq permits over the same time period.
9. As previously noted, building permit data understate actual construction COlts. Since,
however, this downward bias is present in both Tables 2 and 3, the 10.6S figure is a
reasonable estimate of RDA-mandated prevailing wage activity as a percentage of total local
construction activity.
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Table J
SUl Beruudino Redevdapmcot Aacuc1
Prcvai!ial W... Projectl TocaIlDA
RDA-Muadatccl Total. Actint".
l\L-~...1 IDfl-Aclj ~~".1 IDfl-Aclj l\L-~".1 IDfl-Aclj
(lBillw.. of dollara)
-
(1) (2) (J) (4) (5) (6)
1976 'J.66 '6.11 '4.14 '6.92 '4.14 '6.9%,
1977 4.13 7.34 6." ,oJ, 6.01 '.U
-
197. 7.44 10.41 10.19 14.26 Z4.18 n.'5
1979 11.36 14.43 14.76 18.74 18.19 n.l0
1980 10." U.7J 10." U.7J %7.19 n.1l
'.16 .
1981 4.21 4.63 6.44 14.67 16.14
1982 10.86 11.62 10.16 11.62 14.68 15.70
198J 6." 7.21 17.tJ 18.65 Z4.'0 Z4.96
1984 U.87 !J.U !J.47 !J.74 11.14 18.50
Sources: Redevelopment A.ency Annual Rl:part Q984); buildi." permit data, City of SUl
Beruudino, Departmcot of Buildi118 aDd Safety; aDd uamination of individual lOA
project files.
Note.: (1) Inflation-adjuated figurea are Itated in terma of 1985 dollau; aDd (2) DO dollu
value cuuld be e.tabliahed for the 1984 PIau Buildq renovation or for the SUl
Beruudino City Unified School District b"ildi.. (19801)
· Figurea include project activity where payment of prevailins wages wu required u a result
of state or federal usistIDce or u a CllIldition of project financq with UDion penaion fUDda.
.. Includes dollu yalue of IDA projects where payment of preyailins Wiles wu DOt required,
.uch u projectl receivina IDB or Mortll8C Revenue IloDd f~".fV"i... These fialuea, however, do
DOt include the dollu yalue of project a UDdertakea wichin lOA project areu f~""""'" aoldy with
private fUDd. (or thole projecta andertakea by either the Cit1 or Count1 of SUl Bernardino in
which the IDA wu DOt in9alyed).
OYerall, while the prevailinc wage iaaue ia an important _ when Yicwed in the broader
_text of recent initiatiya to repeal Davia-BaaID type lqislatiaa &UOIa the -tl1, it appeara
that adoptiaa of the IDA'. propoaalto drop the prevai!ial Wile requiremcot where DOt mandated
by atate or federal atatuta would affect oaly a amall portiGa of the local coaatructiaa activity.
.
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Comparative PrQject Costs - Ooen Shqp Y5. Prevailinv W.e
While data on open shop wages are scant, the Congressional Budget Office recently
estimated that total hourly compenaation, including frqe benefits, is 54 percent hiaher for union
constructico employees than for nonunion employeu.10 Union wage rates, on. the other hand,
while DOt neceasarily identical to prevailq wllea, do approximate prevailq wages in California
due to the methodology employed by the Department of Induatrial Relations in makins prevailing
wage rate de~erminatioDS.l1 Consequently, it ia reuonable to asaume that prevailing wage rates
(total hourly ratea) exceed open ahop wage ratu by about 54 percent.
Considerq thia wage rate differcotial in conjunction with an eltimale of labor COlts u a
percentage of total project (conatruction) coau conatitutea a fiut Itep in making open
ahop/prevailing wage COlt comparisons. Since the labor COlt proportion of Davia-Bacon joba baa
been estimated at 31.1~,12 a preliminary approximation of the open shop/prevailing wage project
cost differential is 16.8~ (that is, .54 timea .311).13
Accounting for the wage rate differential, however, ia only part of the picture. Some
authors contend that union construction workeu are more productive than nonunion employeel.
Consequently, they claim that higher union Wile ratu are offset at lealt partially by greater
union productivity. If, for example, union employees were 54 percent more productive than
nonunion workers, there would be no difference between prevailing wage and open shop total labor
costa.
UnfortUDItdy, there are DO definitive atudies of union/nonunion productivity differencea.
A 1982 Oregoo Sute University comparilOD of 215 Oavis-Bacon and privatdy funded projecu for
nonresidential buildill8s in nonmetropolitan areas of the United States14 inferred that nonunion
10. Coogre..iooa1 Budact Office, Mftdifyi.nr the D.vi.-B.~ftft Af:t! Implkatiotu far the t...hor
Mark..t .n<! the Fed..ral Bu~et <washinston, D.C.: U.S. Government Printq Office, July
1983).
11. To confirm thia point, a telephone aurvey of five union locala (p1umbeu, carpenters,
plasterers, painters and dectricians) revealed DO inatance in which the prevailq wage for a
particular job claasification was less than 94~ of the current union total hourly rate.
12. This figure was used in association with a University of Pennsylvania aurvey of
contractors in 1974 as reported in A.J. Thieblot, Jr., The David-B..,on Act (Wharton School,
Industrial Research Unit: Philadelphia, 1975).
13. Since both the 54 perccot and 31.1 percent figures are national averages, the 16.8
percent differential ahould be considered only a ballpark eltimate for local labor market
conditions.
14. Results of the study are reported in M. Fraundorf, J. Farrell and R. Mason, ''The Effect
of the Davis-Bacon Act on Construction Costs in Rural Areas," R..view of Economics and
Statistics. February 1984, pp. 142-46.
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firms' greater flexibility in making work assignments enhanced the cost-effectiveness of private
projects. On the other hand, a more recent study15 found a union productivity prClnium which
completely offset the union/DOnunion wage rate differential for a aample of commercial office
buildings. In the .ame atudy, however, DO productivity differential was clearly identified for
achool coaauuction. Neverthdeu, that author concluded that hia findi118s ". . . ahould eliminate
any doubts that in at leut lOme inatitutional aeuqa productivity can be .ipificandy higher
under unionis!" . . ."16
Why might labor productivity be higher in the unionired sector? Hiaher union wage ratel,
it ia amtended, encourage union amuactora to: (1) .creen workera more carefully to obtain higher
quaJity labor; (2) aubatitute other inputs <auch as machinery and prefabricated materiala) for
relatively expensive labor whenever pOllible; and (3) manage projects with greater acrutiny.
Contractors" . . .may chlll8e organizational practicea such as materials management, quality
control, colt estimating or work schedulq methods in an attempt to aqueeze more output out of a
given quantity of nonmanagerial inpuu."17 In addition, union institutiona auch as the formal
apprenticeahip program and the hirq hall also are viewed as enhancq productivity: the former
by improvq job akills and ultimatdy demandq leu on-the-job .uperviaion, and the latter by
assuring adequate supplies of labor on short DOtice for large-scale projects. However, other union
institutions, such as work rulea and the craft jurisdictional ayltem, sometimes reduce union
contractors' internal flexibility in making work assignments and may, therefore, hinder
productivity.
While evidence ia insufficient to determine conduaivdy whether union or nonunion workers
are more productive, the very existence of this debate suggeau that eltimatea of potential colt
savings associated with dropping the prevailing wage requirement should be conservative,
recognizing the possibility that, should union workers be more productive, the wage rate
differential viewed in isolation would oveutate prevailins wagelopen ahop total project colt
differentials. Under theae circumltancea, a reasonable estimate of the differential is 10",
realixing that the euct percentage may vary from project to project according to type of
amltruction, state of the labor market, and the particular terms of local union contracts.
15. Steven G. Allen, "Unionintion and Productivity in Office Building and School
Construction," Industrial on.! 1..1v.. Rdations Review. January 1986, pp. 187-201.
16. Allen, p. 199.
17. Allen, p. 189. This general view of union productivity is also presented in C. Bourdon
and R. Levitt, Union and Qpen-Sh'lP Construction (Lexington, MA: D.C. Heath and Co.,
1980.)
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Short-Run and Lolli-Run Impacts of Droppin2 the Prevailine W3$e Requiremen.1.
(a) The Specter of Downwardly Spirallq Wage Rates
Aa DOted previously, an original rationale for Davis-Bacon legislation was the prospect of
contractora choppq wage rates to achieve low bids on government contracu. Sbould the RDA
propolal be adopted, therefore, would the abaence of a prevailq wage clauae in particular lOA
contracu reault in downwardly apirallina wage ratea in the local conuruction induauy? Both
atandard ecolllllllic theory and limited available empirical evidence aUBBelt otherwiae.
The .puallq wage argument is bued on the asaumption that monopaony exiau in the local
conuruction market. Monopsoniuic conditions exilt when a .ingle employer dominatea a local
labor market, e". a one-company town. In the cue at hand, the allumption of monopaony
requires that the JIDlx IOOrce of local construction employment ia RDA-City public works projecu.
If this were the cue, contractors might well chop wage rates in the bidding procell, forcing
employees either ro accept lower wage rates in the ahort run or to aeek employment outside the
construction industry.
As noted earlier,however, RDA and City-mandated prevailins wage work accounts for only
about 11 or 12" of local conauuction activity. Hence, if wage ratea were initially chopped on
these projects, employeea would soon leave their relatively low-paying positions in search of
employment in the remaining 88-89" of the local construction market. In ahort order, therefore,
wage-rate-chClpping-contractors would experience aoortages of qualified labor and would be forced
to offer wages comparable to those available in the local conatruction market u a whole.
Consequently, while the initial respooJe of aome contractora to droppq the prevailins wage clause
may be to auempt to chop employee wage ratea, auch a Urategy would quickly fail in a
construction market where workers have numerous employment opportunities.18
In addition to this theoretical refutation of the spirallins wage hypothesia, empirical
1
18. Intereltingly, two prominent economiau aometimes considered to hold oppoaing viewa on
prevailins Wile legialatico do IIree, u argued above, that there ia little credibility to the
apirallins wage hypotheais. Armand Thieblot IPrevailin9' Wille Lq:islation. 1986) autes that
ehe fallq wage scenario "...neglects the evidence that 75 percent of the (nationsl) industry
is not covered by prevailing wage requirements." Similarly, Steven Allen ("Much Ado About
Davia-Bacon: A Critieal Review and New Evidence," Journal of Law and "rtmnmics. October
1983) DOtes .while it is conceivable that such an argument might be valid if the government
had monopaony power, it is doubtful that it will ever have that power aince it must
compete in a labor market with private construction."
During the Great Depreuion, the monopaony power argument made more sense. In
1933, for example, public construction'a ahare of total conltruction was 51". In certain
communitiea, therefore, the local government may have been virtually the aole aource of
construction activity. In such instance, a wage spiral may have occurred in the absence of
prevailing wage legislation. (See Berg 81 Erickaon, II An Evaluation of the Imp.ct of the Davia-
Bacon Act" Government Union Review, Summer 1985, pp. 1-32.)
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evidence also questions the falling wage scenano. In 1981. the City of San Diego dropped the
prevailing wage clause from project contracts not subject to state and federal Davis-Bacon
.tatutea. If the falling wage rue hypothesi. were .ccurate, one would have npected, all other
thinga constant, San Diego wage utes to decline both abaolutdy and in relatioo 10 San Bernardino
County wage utes for particular job c1usifications. Such a pattern ahould be apparent in a
OOIIlpariaon of prevailq wage determinationa before and after San DielO altered ita policy.
However, examination of Table 4, which comparel San Bernardino and San Diego County prevailing
wage rate determinations in 1976, 1981 and 1986, reveals that the rdalionship between San Diego
and San Bernardino County utea has DOt changed substantially over the put 10 years and that
San Diego wage rata have DOt decreaaed aince 1981. Some contractora may well have attempted
to chop wage ratea soon after San Diego dropped its prevailing wage c1au.e, but the economic
forces of the private construction market in conjunction with the continuq requirement that
prevailing wages be paid on City of San Diego projects subject to sute and federal Davis-Bacon
atatute., have precluded the possibility of a co1lap.e in the local wage atructure.19
Should, therefore, the lOA proposal to drop the prevailing wage clause be adopted, it is
highly unlikdy that downwardly spirallq wage utes would enaue.
(b) Short Run
Should the RDA's proposal to drop the prevailing wage be adopted, the short-term impact
would be to redistribute income from the union sector to the open shop sector in the commercial,
industrial, and Cll8ineerq aectors of the local CODItruction market. Thia redistribution would
occur because the estimated 10" project COlt differential would manifest itadf in contract bids
for City public works and RDA projects, increasing the likelihood of open shop contract awards.
19. Part of the original rationale for the Davis-Bacon Act was that the likelihood of
downwardly spirallq wagu would be increued by itinerant contractora brinsi118 _local,
low wage workera to Ioca1 CODItructioo aites. If this were a aerioua problem, ODe miaht
auspect that the large illegal alien population in the San Diego area would have precipitated
a collapse with local wage ute atructure. DaU prescoted in Table 4, however, do not
.upport that contention. Furthermore, a Itudy by the Center to Protect Workers' Riahts
("The GAO on Davis-Bacon: A Fatally Flawed Study," 1979), one of Davis-Bacon'. .trongeat
supporters, indirectly suggests that the non-local worker problem is DOt pervasive, DOting
that in contrast to the contractor, the typical employee is generally discouraged from seeking
work far afidd by a number of factora, includins family and community tie., investment in
a home, limited knowledge about opportunitiea dsewhere, and the fact that any employment
i. likely to be too temporary to warrant relocation." (p.7) Finally, the Oregon State
University Itudy mentioned earlier in thia report concluded that "there appeara to be lOme
validity to the charge that the way the Davis-Bacon Act ia DOW administered puts local
contractora at a disadvantage instead of ensuring local firms and residents their ahare of the
jobs, as the law apparently intended." This seems to suggest that if the use of non-local
workers is a substantive issue, prevailq wage legislation may be part of the problem, DOt
the solution.
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Table 4
PrevailiDg Wqea for Selected Crafu
San Ber_diDO UId SUI DiqD Countica
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Total HourI, lata
1976 1911 1"6
Craft QGUIIICJ') U. S.D. S.I. S.D. S.I. S.D.
Brickla,er 'U.., ,u.n 'ZO.,. 'ZO.6I U4.45 ,zz."
- -
Sbect.a11 lZ.47 15.22 ZO.'7 ZZ,l6 Z5oJ7 ".N
wClfIrer
IIoalCl lL" IJ.Z4 21." 11.61 ZJ.75 1 a.;"
Plutcrer u.n U.'J ZI.7' Z.... ,.." ZJ.Jl
l:I.ft~r U.4' u.n ZO." 1'.1l 15.61 15.0'
ll1ectrician
(inaidc wireman) U."* u.n ZI.'5 zz.ZJ 24.21** Z2.44
(cable aplicer) 22.H 22.70 24.7)" ZZ.,.
Carpet Layer .10.'4 11.01 19.14 18.12 n.'z 2Z.n
Tile Setter ,U.I0 u.n 19." 18.70 24.JO 15."
Sources: State of Califoraia, Bu.iness, Tranaportatioo UId Houaq Apnc" Departmcot of
Tranaportatiaa, r_.at Prevailinlr WaRe RatQ_ Augult 111I1 and March 1986 and
BuiJdi_ Tnd",. W.", Rata. ~tember 1976.
* In the available 1976 dau, DO diatinctioo wu made between the inside wireman and cable
.plicer categorie..
.. For projects of $2,000,000 or leas.
An estimate of the short-run redisuibution of income from the unionired to the opeo shop
sector on projects whete pavment of ptevailq w"lle is mandated by the RDA's unwritten policy is
calculated as follows:
'9.7 mill;""
aver. aDDUallevd of inOatiaa-adjuated RDA project activit, (1976-
14) requiriDc payment << prevailiDc waaa u a rault of unwrittco
RDA polic,.
:t .42
1914 uniaa market ahare<< pDUal b,,;ld... coaatructiaa activit,
in San BematdiDO Count".
,
:t .Hl
aver. labar ~t << ptcvailina waae project CIIlIU.
= '1,267,000
appro:timate ahart-run annual Iou of union coaatructioa income CIIl
RDA projects if prevailina w. dauae ia dropped.
* Source for market ahare data ia CoaaUuctiaa lDduatr, laearch IIoud, Data R...e l!p<f_t"':
~,..lwrll C"...JiIMfti. r~tr.Kt A.am.. September 19", Table 10, p. 1'.
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This dollar estimate assumes that the union's share of general building activity associated
with RDA-mandated prcvaili118 wage projects would immcdiatdy decline froD) 42% to zero, if the
RDA dropped its current unwritten policy.
It is highly unlikely, however, that the union share would fall to zero. One reason is that
union firm. are generally viewed a better able than open ahop firma to perform large acale jobs.
Thia ia becauae union firm. tend to be larger, more experienced, and have eay accesa to large
uternal pool~ of quality workeu through the hirq hall.20 The fact that in 1984 the average
.ire an dollars) of general buildq projects undeuaken by union firms in San Bernardino County
waa 76" greater than that of nonunion firmaZl lenda credence to thia view.
Furthermore, it ia possible that unions would make conce.sions to enable unico contractors
to maintain thcir market ahare.22 It is important to DOte, however, that such conceuions may
not be necessary on large acale projects, where unions appear to possess a comparative advantage
and that concessions would DOt be necessary on the vast majority of local construction projects,
which would DOt be affected by adoption of the RDA policy proposal.
Overall, dropping the prevailing wage clause on RDA projecu where payment of such is DOt
mandated by state or federal statutes would reault, all other things constant, in a short-run loss
of union income in the general buildq sector. That annual loss, however, would probably be less
than '1,267,000, if unionized firms ponell a comparative advantage on large-scale jobs and
concessions are made on particular RDA project.23
20. Bourdon and Levitt (Union and Qpen Shqp Conatruction) reported that, in their
interview. with amtractora, "in many cues, open ahop contractors fdt .everdy constrained
without access to a common labor pool. Some did DOt bid on larger contracU because of the
risk of not being able to obtain enough men at a given wage; converady, others repoued
they could DOt keep too many skilled men on the payroll for fear of DOt having contracts to
employ them." (p. 63)
ll. Source: Data Rue Update! ~lItheJ:n California l"nntract Awards, p. 15.
22. Bourden and Levitt (Un;,," and, ~-~~ C.tlftctruction, p. 120) DOte that ODe recent
pattern of union response to an open shop growth ha represented "man evolution of union
policy...from the goal of maintaini118 re1ativdy common wages and conditicoa acrosa many
subsections of the industry toward a strategy of greater differentiation of contract terms to
fit the competitive conditions in different product markeU." This permits the union to
"...maintain higher levds of employment...by establishins differentiated wages, skills, and
contract conditions."
23. The union market ahare of rovernment general building projects in the 11 county
Southern California region was 68" in 1984 (the market ahare in San Bernardino County
alone wu DOt available). If one argues that 68" ia more indicative of the union market
share of prevail~ w~e general building construction activity in San Bernardino than the
42'J( figure used above, the estimated Ion of union construction income increases from
n,267,OOO to '2,051,000, i.e. ('9.7 million :r .68 lit .311). Thia estimate, however,
assumes that the union market share would decline from 68% to zero, if the RDA dropped
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An estimate of the short-run redistribution of income from the unionized to the opell shop
aector if the prevaili118 wage requirement were dropped on City public works projects is calculated
) as follows:
'1.15 million average annual levd of inflation-adjuated City public worka activity
(1976-85) requiring paymeot of prevailq wagu aoldy as a result of
City haolutico # 1284 6.
l ~
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.715
1984 union market ahare of San Bernardino County enaineering lector
conatruction activity..
x
.311
average labor component of prevailq wage project COlt.
= '255,720
approximate mazimal annual aholt-run lOll of union conatruction
income on City projecu if the City'a prevailing wage clau.e ia
dropped.
. Source for the engineerq market share is D,u Base UJ'date. ~,thern California Contract
Award_.
This Cltimate ia considered muimal because it allumu that the union'a share of
cogineerq CIIIIstruction activity would immedistdy be diminated, i.e. drop from 71.5~ to zero, if
the City'. preyailing wage clsuse were dropped.
As noted previously, unionired firms tend to perform larger jobs than nonunion firms. It
is unlikely that the union's apparent advantage in performq larger scale work would be eroded
completely in the event that the City'a prevailins wage policy were dropped. Potential union wage
conceuiona would abo mitigate against a drastic reduction in the union market ahare of City
public works. Hence, the .bort-run 10&1 of union construction income on City public works
projects is likdy to be considerably less than '255,720.
Combining the estimates of RDA and City-related income redistribution ('1,267,000 +
'255,720), the total .bort run, annual redistribution which could be caused by droppi118 RDA and
City prevailils wage clsuses where DOt mandated by atate and federal Itatutes is estimated at
'1,522,720.24 For reaaona ezplained above, this eatimate may oventate actual income
its current de facto policy. For reasons atated previously, it is highly unlikely that such a
dramatic 10Sl,of market share would be experienced. Furthermore, for even a '1,267,000
income loss to occur, union market share would have to decline from 68~ to 26%, i.e. a 42
percentage point reduction. Giveo the poasible productivity advantage of union firms on
large-scale projecu and the pouibility of project COlt conceaaions, '1,267,000 may yet
overstate the short-run annual loss of union construction income even if an initial 68~ union
market share is asaumed in maki118 this eatimatico.
24. To provide a context for this poasible income lou, a rough estimate of the number of
union members (in 24 different trades) residing in the City of San Bernardino ia 9400.
This estimate was provided by Mr. Joe Perez, Executive Secretary-Buainess Manager of the
Riverside a San Bernardino Counties Building and Construction Trades Council. He feels
this estimate may be undersuted.
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redistribution. In addition to the points regarding scale of project and possible union wage
concessions, the actual amount of redistribution would be affected by how quickly unions respond
to the potcotwloss of market share. If unions are willing and able to make market adjultmcots
rapidly (in less than ODe year), the Anmul rediatribution figures would be leas than estimated. If
the market adjustment is alower, however, the short-run adjultment and uaociated rediatribution
of income coulcI .pill over into year two. Furthermore, it ahould be DOted that while dropping
City and RD~ prevailins wage dauae. would, in iudf, exert a negative abort-term influence on
overall local lInion conatruction income, it if DOt necessarily the cue that aggregate union
coaatruction income would decline ahould this policy be implemented. The generally strong
eCODOlllic and papulation growth e:IpCcted in the Inland Empire through the year 200025 bode well
for the construction industry u a whole, union and open ahop alike. Therefore, the short-term
redistributive effecu of dropping the prevailq wage may cause WJl union construction income
to rise less rapidly than it otherwise would, as opposed to causing an abaolute reduction in total
union construction income.
Finally, it .hould be emphuired that aince the proposal to drop the prevailill8 Wille would
result in short-run redistribution of income, there is esaentially DO multiplier effect on the local
economy as a whole. The multiplier notion is relevant to situations in which there is a
.ubstantw net increue (decrease) in income which ripples through the economy causing increases
(decreues) in consumer spending and, therefore, further increases (decreases) in community
income. In the context of the prevailing wage proposal, aggregate income is ellentially
redistributed from union ro open ahop firms in the .hort tun. Consequently, what is lost by
unions is gaioed by the open .hop, with DO net impact on the overalllevd of construction income.
With the two opposq forces on total construction income canceling out one another, there is no
net effect on local community income as a whole. The .hort-term income multiplier is zero. In
esaence, if the proposal to drop the prevailins wage were adopted, iu short-run effects would be
CIODfined largely to the local construction industry.
(c) Lolli Ron
Given the generally rapid growth anticipated in the Inland Empire through the yeu 2000
and the relatively small portion of local construction activity affected by the proposed policy
mlll8e, the ovcrall lOlli-run impact of dropping the prevailq wage clause on the affected subset
of RDA and City public works projecrs would appear to be modestly positive.
25. Security Pacific National Bank projects that "...the Inland Empire will be a state and
national frOllt rUDDer in growth of real (inflation-adjulted) peuonal income" through the
year 2000. The average annual growth rate is expected to be 3.5%, a rate which ties with
Orange Count)' and Sacramento as highest among California's large metropolitan areas.
Source: Southern California'. Inland Empire. May 1986.
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The reduction in RDA-related project costs which would occur in the absence of the
prevailing wage clause would reduce the relative price of RDA related development in San
BerDardino by about 10%, thereby attracting additional projects to the City. Even if, however,
the annual dollar volume of RDA projectl, which otherwise would have required payment of
prevailq wages on the buia of the RDA'. unwritten policy ahould double, thia increase would
be modeat wheo compared to the overall volume of CODItruction activity which ia ezpected to
occur in an era of high income and population growth. Furthermore, it would be unreasonable to
attribute the c:rpected Irowth in RDA activity aoldy to dropping the prevailq wage requirement.
The aame factor a which propel the local economy u a whole, income and population growth, will
be the main factora aerving to ezpand RDA activity. Certainly, droppinl the prevailinl wage
where DOt mandated by state or federal Itatute would facilitate RDA efforu to attract developers,
and would signify a pro-devdopment philosophy in San Bernardino City government, but adoption
of the RDA proposal in iudf would be just one factor contributing to the City's growth.
In terms of City public works projectl, dropping the prevailq wage clause where possible
would generate budget savqs for the City as specified later in thia atudy. These savings would
accrue to the general fund. Lower public works project COItI, therefore, would DOt necessarily
translate into increased lOlli-run public works construction expenditures. Use of the projected
fiacal savings would be a matter of budgetary priorities.
The long-run impact of adoptq the RDA's proposal on open shop firms would be to
increue their acccllibility to what previously had been prevailq wage work.26 Their market
ahare would increue at the expcoae of union firms and the volume of open .hop work would
likdy be further increased by the enhanced ability of the RDA to attract development to San
Bernardino. Again, however, the growth in open shop activity due to dropping the prevailing
wage clause would pale in comparison ro the overall increase in open shop volume expected to
result from community income and population growth.
Open ahop wage .uKa. may incrcue, but only marginally, if the RDA proposal is adopted.
The ahilt of union/open shop market ahares noted above cotaila increued demand for open ahop
labor. The extent to which this increased demand raises open shop wage ratea in particular job
classifications depends on the supply of available labor rdative to the magnitude of the increase
in demand. If, for example, the available supply of laborers is plentiful and the increase in
demand for laborers on rdevant RDA and City projects raisea the local demand for laborers only
slightly (as would likdy be the cue), there would be little or no increue in open shop laborer
26. Since molt minority-owned and amall businesses tend to be open shop, adoption of the
RDA proposal would likdy inncrease the accessibility of these groups to City public works
and RDA projects.
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, Owage rates. In job categories whereQe available supply 9labor is limited relative to increaseS>
demand, possibly in Dlore specialized trades, wage rates would increase more perceptibly. Overall,
then, dropping the prevailina wage clause would increase local demand for open ahop labor but
only marginally since the amount of local construction activity to which the RDA proposal applies
ia limited. Consequently, any aeneral increase in open .hop wage ratea would be minimal. This ia
DOt to laY that open .hop Wile rates won't increase over the nellt aeveral yeara. Indeed, they
likdy will. Hisher open ahop wage ratel, however, would likely be larady attributable to the
aeneral incre.ae in demand for CODItructico labor asaociated with anticipated regional economic
arowth and, at beat, oaly marginally related ro droppina the prevailq wage clause on certain lOA
and City projecu.
After experiencing a .bort-run loss of income in the neighborhood of '1-1.5 million, unions
would likdy make the necessary concessinns to enable unionized firms to remain competitive in
biddi118 for projects DO 10000er subject to the prevailins wage. It is important to note that such
conceasinns would necessarily have to be extcoded to only a rdativdy small group of projects, i.e.
those previoualy requirq payment of prevai!i118 wages aoldy on the buis of RDA de facto policy
or City Resolution #12846. liven among this subset of RDA and City public works projects,
conceasions would not be required on large scale projects where unioni:red firms posseas a
comparative .dvantage. Since the scope of these concessinns would be narrow and would be made
in the context of strong regional economic growth, the overall local union wage rate structure
would DOt be aubltantially affected. The lack of substantial chlll8e in the San Diego prevailing
wage structure in the aftermath of droppq the prevailins wage clause corroborates this point.
(c) Consideration of Related Short-Run and Long-Run bsues
While lOme concern has been raised over the possible impact of dropping the prevailing
wage on union retirees' pension., it is unlikely they would be jcopardired by adoption of the
RDA's proposal. It is aenerally true that paymcot of union retirees' penainns is linked partially to
retirement fund CUltributinns made by or OIl behalf of currcotly employed union member.. Given,
however, that the eltimated '1 - 1.5 million .bort run annual losa of union income would be
apread over many trades (and, therefore, many different pension plans) and that evco this income
loss would occur in the context of strong local economic growth, it seems highly unlikely that any
particular pension plan could fail on the basis of this income redistribution alone27.
.
27. Local union pensions are covered by the Employee Retirement Income Security Act of
1974 (ERISA), the overall thrult of which is to assure retirement income to participanu in
pension programs. AmOll8 other means, this objective i. aought through atatutory provisions
on early vesting of penaion righu and through eltablishment of the Pcoaion Benefit Guaranty
Corporation (pBGC), a non-profit government corporation which administers plan-termination
insurance. Vesting aives an individual a non-forfeitable right to a pension at retiremcot age,
with 100% vesting typically earned after ten years' aervice. (Under ERISA regulations, there
are also two other, more gradual vestina schedules). Should a pension plan terminate, the
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Related to pensions, it .hould be noted that union firms have historically offered larger
fringe benefit packages to employeu than have their open shop counterparts. Union fringe
benefits are eltimated to be in the neighborhood of 17-20% of total hourly compensation. While
there are DO directly comparable figures for open ahop frqe benefiu, the little evidence which
does uilt strongly auggeau that average open ahop fringe benefiu account for aipificantly less
than lK of total hourly compcnaation.28 Aa the open ahop market ahare continuea to increase,
therefore, a ~arger percentage of local construction employees will be without penaion and health
and welfare plans unlen they arrange for theae programa on a private basia. This trend, as
evidenced in Table 5, wu e.tablished well before the prevailq wage controveuy aurfaced in San
Bernardino. Still, if the RDA proposal ia adopted, the aliaht inueue in the open market .hare of
total local construction activity which resulu will reinforce the current trend toward smaller
fringe benefit packages as a percentage of total hourly compensation. In the longer run, however,
open shop construction workeu may demand greater fringe benefits, as the utility of such
packages is increasingly recognired.
The trend toward open ahop construction, to which adoption of the lOA proposal would
contribute alightly, may also affect workq conditions. While union work rules are lOmetimes
viewed as onerous, many authors contend that these rules". . . eatablish safer, cleaner, and more
duirable working conditiona . . ."29 While there is DO manner of determini118 the extent to
which the.e contentions are true, pro-active governmental attention to working conditions in the
local construction industry would aerve the community well in an era of anticipated rapid growth.
Similarly, attention to construction quality alao is warranted. While union contention.
that prevailq wage legialation enhances product quality have limited empirical support, usertions
of others that open ahop quality is just as high as that of union work becsuse all construction
must meet the lame in.pection Itandards are suspect in light of the fact that City personnd
describe their inspection atandard. u minimal. Again, with construction activity likdy to be
briak through the end of the century, it is imperative that attcotion be paid DOW to construction
quality. Minimal inspection atandarda could translate into a deteriorating commercisl and
industrial building inventory over time.
PBGC insurea the velted pension benefits (up to a muimum of '750 per month) of
participants and beneficiaries of defined-benefit pension plan..
28. Sce Herbert R. Northrup, Qpen Sh~ ("""'struction Revisited (Philaddphia: University of
Pennsylvania, 1984), Chapter 11.
29. Bourdon and Levitt, p. 53.
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Table 5
San Bernardino County Construction Market Sharea*
Commercial Induatrial
UnWo NonunWo Unico Nonunico
1977
72"
79"
21"
28"
1981
49"
63"
37"
51"
Note: By 1984, the San Bernardino County market abarea in the general buildins aector
were: union, 42"; nonunico, 58".
* Market abares are defined in terms of the dollar value of construction.
Sourcea: Construction Industry Research Board, A Survey of the Construction Industry:
Trend. in the Eleven-County ~nnthern California RqUmr January 1983 and Qua.
Base U.pdate, September 1985.
Bu~et.r)' lrqpactl of Removw the Prev.n~ W.e Claule fram City and RDA rnntractl
(a) RDA
When a redevelopment project area is established, the asseued value of property within the
area is fro:ren. Any increase in property tax revenue resulting from .ubsequent revaluation of
property accrua ro the project area'. revenue fund. Thia increued property tax revcoue over the
frClZC:ll bue valuation conatitutes the tax increment, the buic IOUrce of RDA fundins.
With this in mind, the general impact of the proposed diminatico of the prevailing wage
requirement for RDA projects, where sute or federal assiltance is DOt involved, is clear. The
earlier-discus.ed proximate open .hop/prevailing wage project coat differential (adjulted for
productivity difference.) would effectively reduce the price of project development in San
Bemardino RDA project arcu by approximatdy 10". Jlcono...ic theary indicates that, all other
thinga constant, San Bernardino would become a relativdy attractive location to developers,
thereby increuing the quantity of RDA projects demanded. That increased development would
raise assessed property values in the RDA's various project areas and, accordingly, add to the tax
increment. Every additional '100 of assessed valuation adds ~l to a project area's tax increment.
While a preciae estimate of the increased dol.lar value of tax increment depends on the
responaiveness of developers to the reduced rdative COlt of development in San Bernardino and on
land values in particular redevelopment areas, an increase in RDA revenue can be safdy predicted.
Furthermore, the Inland Empire'a favorable lolli-term economic outlook and concomitant population
growth provide an environment in which the probability of declining property values in San
Bernardino's redevelopment project areas as a whole is virtually nil.
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Dropping tbe prevailing wage clause also would likely have a favorable effect on the
expenditure side of the RDA's budget. Expenditures would DOt necessarily decline, but any given
amount in project area revenue funds could finance a greater volume of RDA activity UDder open
abop than prevailq wage conditiona. Thia ia ao because RDA financial a.aiaunce on any
particular project dependa on the amount of aubaidization neceaaary to make the project at leau II
profitable for the developer la it would be if undertaken in another locality. Since I recent RDA
aurvey revealed that DO other Inland Empire redevelopmcot agenciea30 require prevailing wage
payment when DOt neceaaitated by virtue of Itate or federal project uaistance, the San Bernardino
RDA, other thinsa equal, has been at a disadvantage in auracting developen. Accordingly, it
would have had to offer relatively large .ubaidiea to remain competitive with other localitiea
auempting to auract development projects. Tbe project cost diaadvantage imposed by the
prevailing wage requirement, therefore, limiu the volume of projecu which can be financially
usisted with a project area revenue fund of given sire. Conversdy, open shop conditions should
reduce developers' project COIU and enhance project viability, neces.itati118 a lesser degree of RDA
usiuance on any particular project.
Overall, then, droppq the prevailq wage requirement would DOt negatively affect the
RDA budget. In fact, iu Ux increment revenues would likely increue given San Bernardino's
greater ability to aUract developers and any givco amount of project area fund revenue would
usist more developers as lower project costs would allow individual developers to be auracted
with smaller financial uaiatance packages.
(b) City
The overall impact on the City budget of dropping the prevailins wage clause would alao be
beneficial, but alightly more complicated than the expected effect on the lOA budget. . In the
.hort run, City revenuea would be affected slightly by the fact that local union cons uuction
income would likely decline if the prevailq wage clause were dropped. At the outaet, union
contractors would have difficulty competing with nonunion contractor. and would auffer a lOll in
market ahare. Since more contracu would be awarded to lower wage, nonunion contractors, the
immediate reduction in income auffered by union workers may DOt be offaet completely by the
increase in nonunion income. This is because the overall level of City public works projects
would nill be limited by the Department of Public Works' budget allocation, and the response of
RDA-rdated developera to open shop wages rather than prevailq wages may not be instantaneous.
Consequendy, in the very abort run, nonunion construction income may not rise to the extent
that union construction income declines, so that the overall levd of "public works" construction
3 O. The following communities responded to the survey: Colton, Fontana, Ontario, Rancho
Cucamonga. Riverside and Upland.
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incolf,e in San Bernardino may decline marginally immediately aher removal of the prevailing wage
clause. This, in turn, would slightly depress retail sales and, therefore, City sales tax revenue.31
Neverthdess, this effect would likely be dwarfed by the generally positive economic
envirooment in the Inland Empire, 10 that aales tu revenue overall would aurdy continue to riae,
thouch poasibly at a alightly alower pace than otherwiae would have occurred durq the firlt aix
months or 10 after removal of the prevailing wage clauae. Over the longer term <2.5 yeara), the
ability of San Bernardino ro attract more development will have been enhanced, thereby slightly
increasing ec~nomic growth and therefore aaIea ta:r, utilit y UleU tn, and fee generation.
Consequently, dropping the prevailing wage claule will contribute positively, but probably
unapectacularl" to the City'. growth and ro City revenue. in the loog run.32
On the expense side of the City budget, the basic effect of droppq the prevailins wage
would be to generate aavqs on public works projects. Recall from Table 1 that average public
works expenditures affected by City prevailing wage policy total about '1.15 million annually in
real terms. If thia work could be completed 10~ lea. expcnsivdy under open ahop amditions than
under prevailq wage conditiona, the City would realize an average annual saving of about
'115,00033. Since this savq would revert to the City'a general fund, the Department of Public
Works would DOt necellarily benefit directly from lower public works costa.
While other ezpenditurCl and revenue categories may be affected to a minor degree, the
basic budgetary effects of dropping the prevailq wage re'luirement would be to produce savings
on City public works projecta and to exert a small poaitive effect on City revenues over time.
31. The City receives 1~ of the 6% sales tu for retail .alea generated within the City.
32. It's important to reiterate that the impact of droppq the prevailins Wille c1auae would
be just one factor, and probably a minor OIIe, UDCJrII many contributq to a poaitivc local
economic climate. As DOted earlier, even in the abscoce of a chqe in local prevailins wage
policy, the City (and RDA activity) willlikdy grow substantially through the year 2000.
33. This savq is measured in 1985 dollars and entaila the implicit asaumption that City-
mandated prevaili118 wage projects will continue to average '1.15 million annually.
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PREVAILING wQ AS IT EFFECTS QORITY GROUPS
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fiistorical Per'Pective
Hiltorica1ly, the conatruction induatry baa beco an important source of employment for
minoritiea, yet there has alwaya been a ai8nificant degree of diacrimination involved in the
induatry. In the early 1900'a this diacrimination rook the form of refuaal ro admit minority
group membera to apprenticeahip programs, inadequate teachq of tradea in .egregated vocational
achools, and amtractors' refuaal to train minority Iroup members. Special programs were
inatituted durq the Rooaevdt administration to provide joba for unemployed Black construction
warkera. Quotu were established and prellure wu applied to contractora and unions to brq
about chlll8e. The reault wu &Ome improvement in Black employment and a amall increase in
minority unioo membership. In aome crafts, however, Blacks were still excluded from the unions.
34
As union .uength grew in the 1930's and 1940'S, efforU to enhance employment
opportunitie. aDlOII8 Blacka met with limited aucceu. From the late 1940's until the early
1960's civil rights groups attacked the racial policies of unions. The changes effected by this
agitation, however, were slight."
Since the Civil Rights Act of 1964, the federal government has attempted to expand
minority participation in skilled construction jobs by taking legal means to end discriminatory
practicea and through aupport of apprenticeahip and training programs. Until recently the
training program. focuaed on uniona; formal trainin8 in the nonunion lector appear. to be
expanding but remaina limited. As a reault of increaaed training, .ome mitigation in
diacrimination, and an expansion of job opponunitiea in the construction industry, Blacks,
Hispanica, and female. are now represented in increased proportions in the construction labor
force.36
Iln-inntNnnnftinn Rcpr~.ent.tiDn AIDOM' Mtftftl'itie.
Participation by women in the con.truction induauy baa been historically low. Although
their rate of participation varies according to craft, the greatest proportional representation of
women in any trade is 6.1 'lIi37 (in the category including painting, paperhlll8ing, and gluing).
34. Marc Kruman, "Quatu for Blacks: The Public Works Administration and the Black
Construction Worker," I."", History. Vol. 16, pp. 37-51, 1975.
35. Ray Marshall, The N..,ro and Orroni~ed lohor, 1965.
36. Herbert R. Northrup, <:!pen Sh~ Construction Revisited, Philaddphis, PA, University of
Pennsylvania, 1984.
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Within all crafts, however, there seems to be little difference in relative union/nonunion
participation among women.
This may oot be the cue, however, with members of other minority groupa, for some
literature auggesu Wthough there are DO definitive studiea) that minority membeu are found -
more ohen in open.hop aettqa than in uninos. This may be partially due to the hiatorical
rductance of unions to admit minoritie. into their ranks. In addition, minoritiea may fed there
is little possi~ility to achieve jouroeyman ltatUl in a akilled unice trade. Pinally, minority group
leaders have atated that they favor nonunioo ahop. becauae of the "uceuive" (to their
perspective) time it take. to complete union apprenticeship programa.
Within anion., lllin<<ity membeu are disproporticoatdy found in the laborer cluaification.
Accordq to a 1977 Bureau of Labor Statistic. report38, minority group members compoaed a
disproportionate share of the laborer classificatioo wheo compared to the skilled crahs. This
same trend was found in another Bureau of Labor Statistica study published in 1980.39 These
national findings are mirrored in a 1985 atudy of the union apprenticeship program in San
Beroardino prepared by Richman and Rcich.40 This Itudy indicatea that minority participation
. varies widdy among specific tradea. Table 6 .ummarires that apprenticeship data.
37. U.s. Ccnaus of Populatioo, 1980, PC8D-SI-8, "Detailed Occupation and Yeara of School
Completed by Age, fOl: the Civilian Labor Force by Sell:, Race, and Spanish Ori&in", Table 1.
38. U.S. Bureaau of Labor Statistica, "Earninga and Other Characteriatics of Organized
Workera", May 1977, Report 556 (Wuhington, D.C.: Government Printq Office, 1976),
Tables 17 and 18, pp. 50-51.
39. U.S. Bureau of Labor Statistics, "Earnings and other characteristics of Organized
Workers, May 1980", Bulletin 2105 (Washington, D.C.: Government Printing Office, 1981).
40. Liooel Richmao, LL.B., N.A.A., and Julius Reich, J.D., "The Prevailins Wage Law-A
Profitable Community Inveatment", unpublished report. Of the 15 program. reported, most
were limited to San Bernardino Ccunty. However, the Inland Briddayera' plan includes both
San Bernardino and Riverside Ccunties. The Operati118 Elllineera' plan coveu all of Southern
California, as doea the Irooworkera' Plan. The Orange Belt Paintera' Plan coven San
Bernardino, Riverside and Orange Countiu. The Laboren' and Teamsteu' Plans cover
Southern California.
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Table 6
San Bernardino Apprenticeship Programs
Apprenticelhip Program Total Apprentices " Black , "Hi.panics
Inland Brick 24 0" 16.7"
SB-Riv Carpenter. 216 3.2 18.1
SB Cement MUCIO. 23 8.7 56.5
58 Electriclma 71 1.4 14.1
Opcratq Enaineera 648 5.2 20.5
IronworkeJl 141 1.4 17.7
SB Millwrights 17 5.9 0
SB Plastereu 10 0 50.0
58 Plumbeu 47 2.1 10.6
58 Roofers 46 4.3 21.8
SB Sheet Metal 30 0 U.3
Orange Belt Painters 245 4.5 21.6
Laborers 813 U.2 57.9
Teamsters 86 8.1 57.2
Surveyors (City of SB) 10 0 30.0
Total 2,427 175.0 807.0
(7.2") (33.2")
Source, Richman and Reich, "The Prevailq Wage Law-A
Profitable Community Investment", Ezhibit II
While the uninns are making lOme attempt to increuc minority participation, Blacks
are w>derrepresented in those apprenticeship programa for the .killed craft..
Extensive diacussions were hdd with minority leaders in an effort to ascertain
their views toward the prevailing wage issue. The following represents a summary of the
iaaues raised during those interviews as well u thoae raised in some salient academic
literature._
Tr.ll;nino:
Union repreaentativea have Itated that if the prevailing wage ordinance is dropped
from City projects, the construction industry will e:rperience an instability which will hurt
apprenticeship programs and the minority groups which are so strongly represented in those
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programs. Nonunion sources, however, Dote that the percentage of minorities 10
apprenticeship programs don DOt necessarily reflect the percentage which will be employed
.iDce aomeof thOle people may drop out of the programs. They also note that
apprcoticeship may exclude other avenuel of trainiJls, auch as thoae employed by open shop
workers. The concluaion of theae respondents if that even if apprenticeahip program. JalIIlli
be hurt, other avenuea are open for the minority group member ro learn a trade.
AbRilV' to S,id' Prq,juta Ap,prqpriatel y!
It baa been 'Ulles ted that ooe poIsible CODIeq1lCDce of droppq the prevailins wage
dauae if that without a apecific .a1ary atandard, CIllIltractora and aubCllllltractora may "cut
COlts" to create the lowelt bid. Union reprelentativel predict that the quality of the
product will suffer in thia attempt ro cut COltS. Opponents of prevailq wage allege that
the quality issue is handled by building code controls, however others have auggested that
inapections are only pused after workera are forced to repair problem areas pinpointed in
inspections. One minority subcontractor .tated that the aubcontractor often beara the
responsibility of paying for this improvement and may eventually go out of businell
because of his/her inability to appropristdy bid jobs. He acknowledged that this can occur
whether the .ubcontractor is union or DCIIlunion, however in thia opinion the union trainq
programs and the standard prevaili118 wage rate may help to avoid aome of these problems.
Jab Qppart'unttie&!
Opponents of Davis-Bacon laY that the law impoae. arbitrarily high wage rates
which reault in decreued job opportunities for minorities attempting to enter the
CODItruction industry. They state that prevailins wage laws tend to discriminate against
non-union ahop., and minocities tend ro bear the heavielt burden of this discrimination. 41
They DOte that if a contractor is forced to pay prevailq wage, he/ahe would tend to hire
experienced people rather than nuke a chance" on ine:rpericnced ooe.. In moat tradea,
uniona (and the resulting wage atructure) do DOt make allowance for hdpera,
therefore do not provide opportunities for persons auempting to enter the industry.
Minority leaders suggested in interviews that there are many young and/or
inexperienced minority group members who would be willing to earn leas than the prevailq
wage in order to gain entry into the lsbor market. The feeling amOll8 those leaders is that
41. These statements were made by Dr. Walter Williams, Professor of F"ftft()ft\i,.s at Temple
and George Mason Univeraities, as quoted in a May 18, 1981 article in the Washington Polt
entitled "Davis-Bacon Hurts Minority Groups, Economist Declares". Dr. Williams is one of
the few black economists to take a stand on this issue at the time the article was written.
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~h: opportunity to work and to learRrom skilled tUde2en is worth a relatively low
starting salary. They state that the short term goal of increasing employment, which they
fed ia most effectivdy accomplished in open ahops, is more important than the !0118 term
advantagea of higher aalary and beuer benefiu under the union and prevailq wage.
Accordina to aome minority members, if the prevailq wage wuae were dropped for
City projectl, there would be an increllC in low levd job apportunitiea and a relultq
decrcue in the minority unemploymcot rate.42 Thua, they contend, aociety would bcoefit
from thia ahift aince tall: revenuea would be collected as opposed to welfare paymenu
diabursed.43
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Distouru~ment of Bidd~ an Prevaililur W.I! PrtVe~t.
Since the prevailing wage tends to approximate union wage, open shop contractors
report that they have been discouraged from bidding on prevailq wage projecu. According
to those interviewed, this results in fewer opportunities for open ihops and the minority
groups which tend to lravitate toward those shops.
Competitiftn-
William Keyes of the Joint Economic Committee Staff DOted in 198244 that young
blacks need to retain the negotistion of wages as a tool for competition against older, more
experienced warken. He alao DOtes that Davia Bacon baa the greateat negative effect GO
those most li1rcly to receive the lowest wage, indudina members of minority poups who
have hiatarically been diacriminated againat in the labor market.
In summary, the overwhdmq opinion expressaed in the literature and in interviews
with NAACP officials and minority contractors is that the prevailq wage wuae should be
dropped for City projectl. They acknowledge that the !0118 term pis of increased benefits
and beuer aa1aries are commendable, but not .. important.. the short term goal of
creatq joba (at any level) for minoritiea.
42. The Economic Forccut and Survey Center of the U.S. Chamber of Commerce estimated
in 1979 that employment would increase by as much u 150,000 jobs nationwide if Davia-
Bacon were repealed.
43. William Keyes, "The Minimum Wage and the Davis-Bacon Act: Employment Effectl on
Minorities and Youth", Journal of , .h.,r Research, Volume m, Number 4, 1982.
44. Ibid.
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APPENDIX I
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THE COMMUNITY SEDEVELOr:1ENT AGENCY OF IRE CITY
OF SANTA ANA, CALIFORNIA
,
POLICY ON PAYME~lr OF PREVAILING WAC"S BY P~.!V"TE
REDEVELOPERS OR W:.n-PART!r:IPAl'!'fS
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Introduction
Under the Community Redevelopmant Law of the State of California, the
Community Redevelopment Agency of the City of Santa Ana may enter into
contracts or' other agreements with developers of property to assist in the
acquisition or the improvement of such property to eliminate blight. The
Agency is also empowered to enter into agreements with owners of property in
redevelopment project areas to develop their property pursuant to the
requirements of adopted redevelopment plans. In all such agreements, the
Agency may require the private owner or developer to comply with conditions
which the Agency deems necessary to carry out the purposes of the Community
Redevelopment Law.
Under certain circumstances, the Agency may provide funding which has
been obtained from the Federal G07ernment for use by private developers or
owners in the development of their property. In such cases, the federal grant
or loan or mortgage assistance program m~y require that construction work
performed in such projects comply with the requirements of the Davis-Bacon Act
(40 U.S.C. 276 !! seq.), which requires the payment of wages to laborers and
mechanics at a rate not less than the minimum wsge specified by the Secretary
of Labor in periodic wage rate determinations.
In addition, whenever the Agency contracts directly for public works
improvements, the contractor is required by pertinent State law provisions to
pay not less than the prevailing rate of wages to workers employed on the
public work.
The public purposes which underlie both the Davis-Bacon Act and the
State prevailing wage requirements apply no less to work performed on a
project which is the subject of an agreement between the Agency and a private
developer or owner. Those purposes include protecting the employees of
contractors on public projects from Gubstandard wages, promoting the hiring of
a local labor force, and ensuring, to the ~xtent possible, that the quality of
the work to be performed will not be compromised by the payment of less than
the prevailing rate of wages. That is, developers who s~ek Agency assistance,
or property owners who wish to develop the.ir property pursuant to en owner
participation agreement, should not be permitted to pay, or to allow their
contractors or subcontractors to psy, less thsn the prevailing rate of wages
for work performed pursuant to an agreement with the Agency.
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The Legislature has declared that the redevelopment of blighted areas
and the provisions for appropriate construction policies in them constitute
public uses snd purposes and sre governmental functions of state concern in
the interest of health, safety an~ welfare of the people of the State and of
the communiti~s in which the blighted areas exist. The Legislature has
further declared that genuine employment opportunities for all the people of
the State are vital to the State's peace and prosperity, and that a
fundamental purpose of redevelopment is to expand employment opportunities for
jobless, underemployed and low-income persons. Therefore, the Agency has
determined that the application of prevailing wage requirements to private
developers or owners of property who enter into agreements with the Agency for
the development of auch property is a necessary condition in carrying out the
purposes of the Community Redevelopment Law.
I. Statement of Policy
It is the policy of the Agency that any developer or owner of property
who enters into an Agreement with the Agency for the development of such
property shall payor cause to be paid to all workers employed in connection
with the development of such property, not less than the p;evailing rates of
wages, as provided in the statutes applicable to Agency public works
contracts, including without limitation Sections 33123-33426 of the California
Health and Safety Code and Secti~ns 1770-1780 of the California Labor Code.
This policy shall not apply to Agreements in which the total sggregate cost of
construction does not exceed $500,000. However, in the case of an Agreement
with the Agency which involves the us~ of federal funds, such use shall be
subject to the prevailing wage requirements, if any, mandated
program legislation by which such funds are authorized.
construction work financed in whole or in part with assistance
the Community Development Block Grant ("CDBCn) program of
Department of Housing and Urban Development, the Davis-Bacon
any Agreement with the Agency which involvcs CnBG funds in the amount of
$2,000 or more. However, this CDBG requirement a~plies to the rehabi:i:ation
of residential property cnly if such property is designed for residential use
of eight or more families.
by the federal
In the case of
provided under
the United States
Act applies to
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2. Construction of Terms and Phrases
For purposes of implementing this policy, the following shall apply:
\
(a) .The phrase "developer or owner" means any person, corporation,
partnership, joint venture, association or entity regardless of form, whether
public or private, for-profit or not-for-profit, which enters into an
Agreement with the Agency, as hereinafter defined.
(b) The phrase, "an Agreement with the Agency" means any disposition and
development agreement, owner participation agreement, development agreement,
loan agreement, rehabilitation agreement, agreement for the sale of land or
any other agreement to which the Agency is a party, regardless of form or
title, whereby a developer or owner of property in the City of Santa Ana
agrees to develop or cause the development of such property. An Agreement in
which the Agency agrees to subsidize or guarantee a rehabilitation loan to be
made to a developer or owner by a lending institution shall be deemed "an
Agreement with the Agency" for purposes of this policy. However, to the
extent that an Agreement with the Agency provides for the use of federal
financial assistance, this policy is not intended to supersede the prevailing
wage requirements, if any, mandated by the federal grant, ioan or mortgage
insurance program legislation by which such assistance is authorized, but
shall be deemed to be supplementary to such requirements.
(c) The phrase "the development of such property" means ,any demolition,
construction, rehabilitation, reconstruction or other work of improvement to
be performed by or on behalf of an owner or developer in accordance with an
Agreement with the Agency.
(d) The phrase "all workers employed in connection with the development
of such property" shall mean and refer to each craft, classification or type
of worker, as determined by the rules and regulations of the California
Department of Industrial Relations, actually employed by the developer or
owner, or by a contractor or subcontractor, to perform labor or services in
connection with the development of the propert7. In the case of a
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family members, who
family members shall
the development of
have an ownership
not be deemed to be
such property" for
family-owned ~usiness which employs
interest in such business, such
"workers employed in connection with
purposes of this policy.
(e) The phrase "prevailing rates of wages" means the general prevailing
rate of per diem wages in the locality in which the work is performed, for
each craft or type of worker needed to perform the work, and the general
prevailing rate for regular, holiday and overtime work in the locality, for
each craft or type of worker needed to perform the work, as provided to the
Agency by the California Department of Industrial Relations pursuant to
Section 1773 of the Labor Code.
(f) The phrase "total aggregate cost of construction" means the total
sum of costs incurred by the developer or owner in connection with the
development of property which is the subject of an Agreement with the Agency,
excluding the cost of acquiring the property and also excluding the cost of
tenant improvements which are not paid for by the developer or owner. The
"total aggregate cost of construction" includes, without liJllitation, the cost
to the developer or owner of contractors' services, architectural and
engineering services, materials, direct labor and all other costs which are
customarily considered to be costs of construction. In the case of multiple
projects which are functionally or substantively related, Agency staff shall
deter~ine whether the purposes to be served by this policy require that the
costs incurred with respect to such projects must be combined in determining
the "total aggregate cost of construction."
3. Implementation of Policy
This policy shall be implemented and enforced by Agency staff as follows:
(a) Every Agreement with the Agency to which this policy applies shall
contain a provision whereby the developer or owner shall agree to psy or cause
to be paid to all workers employed in connection with the development of the
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property, not less than the prevailing rates of wages, as provided in the
statutes applicable to Agency public works contracts, including without
limitation Sections 33423-33426 of the California Health and Safety Code and
Sections 177o-1780 of the California Labor Code. Every Agreement with the
.
Agency to which this policy applies shall also contain a provision
incorporating this policy by reference.
(b) Every owner or developer entering into an Agreement with the Agency
to which this policy applies shall include, in all contracts for work relating
to the development of the property to which the Agreement applies, a provision
whereby the contractor shall agree to pay and shall cause its subcontractors
to pay all workers employed in connection with such contract or subcontract
not less than the prevailing rates of wages, as provided in the statutes
applicable to Agency public works contracts, including without limitation
Sections 33423-33426 of the Californis Health and Safety Code and Sections
1770-1780 of the California Labor Code.
(c) Prior to the execution of any Agreement with the Agency to which
this policy applies, Agency staff shall provide a copy of this policy to the
owner or developer. It shall be the obligation of the developer or owner to
provide copies of this policy to its contractors and subcontractors.
(d) Prior to the commencement of construction, a~ as soon as
practicable, Agency staff shall ho~j an orientation meeting with any owner or
developer who enters into an Agreement with the Agency to which this policy
applies, and with the General Contractor of such owner or deyeloper in order
to explain such matters as the specific rates of wages to be paid to workers
employed in connection with the development of the property, preconstruction
conference requirements, record-keeping and reporting requirements necessary
for the evaluation of an owner or developer's compliance with this policy.
4.
Enforcement
(a) Every owner or developer entering into an Agreement with the Agency
to which this policy applies shall maintain or cause its contractors and
subcontractors to maintain an accurate record showing the name, occupation and
actual per diem, regular, overtime and holiday wages paid to each worker and
fringe benefits (as appropriate) Faid to or on behalf of each worker employed
in connection with the development of the property, the hours worked by such
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workers and amounts withheld pursuant to law. It shall be the responsibility
of the owner or developer to maintain such records in the event that its
contractors or subcontractors do not maintain such records. Such records
shall be open for inspection by Agency staff at reasonable hours.
(b)' Agency staff shall periodically monitor compliance with this policy
by inspecting payroll records, interviewing workers at the construction site
or by other similar means. Any owner or developer entering into an Agreement
with the Agency to which this policy applies shall cooperate with Agency staff
in carrying out this poliCY.
(c) Agency staff shall promptly and thoroughly investigate any claim
made by a worker that less than prevailing wages were paid for work performed
in connection with the development of property to which this policy applies.
Any owner or developer entering into an Agreement with the Agency to which
this policy applies shall cooperate with and cause its contractors and
subcontractors to cooperate with Agency staff in carrying out such
investigation, and shall promptly payor cause its contractors or
subcontractors to pay any amount determined by Agency staff to be the
difference between the applicable prevailing wage for the number of hours
worked by the claimant and the amount actually paid to the claimant. At the
request of Agency staff, an owner ~r developer shall with~old funds from its
contractor, or cause its contractor to withhold funds from a subcontractor,
prior to the completion of such investigation, to ensure that the amount of
such restitution, if required, is available.
(d) In the event that the ~~ency staff determines that a contractor or
subcontractor has violated any provision of this policy, the developer or
owner and Agency staff shall agree on appropriate measures, in addition to
restitution, to ensure that such contractor or subcontractor complies with
thia policy. Such measures may include, without limitation, a requirement
that during the contract period the owner or developer withhold funds from the
contractor or cause the contractor to withhold funds from the subcontractor,
or that the contractor or subcontractor post a bond or provide a letter of
credit or other security in an amount sufficient to ensure that workers
employed in connection with such contract or subcontract receive the
prevailing rates of wages for the work to be performed. Any owner or
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developer entering into an Agreement with the Agency to which this policy
applies shall include in its contracts and require its contractors to include
in subcontracts, appropriate provisions by which the provisions of this
paragraph .ay~e carried out.
(e) 'In the event of a dispute between the owner or developer, or its
contractors or subcontractors, or a claimant, and the Agency staff with
respect to an Agency staff determination, the owner or developer, or its
contractors or subcontractors, or the claimant, as the case may be, shall have
the opportunity to bring the dispute before the Agency Board for review. The
Agency Board may take such action as it deems appropriate, including: (i)
affirming the Agency staff determination; (ii) referring the matter back to
Agency staff for further investigation; (iii) reversing or modifying the
Agency staff determination; (iv) directing the Agency staff to appoint an
independent hearing examiner for further investigation; or (v) such other
action aa the Board may deem appropriate under the circumstances.
S. Sanctions
Any developer or owner determined by the Agency to have paid less than
{
prevailing wages for work performed i~ connection with the devel~pment of
property to which this policy applies, or whose contractors or Gubcontractors
have been found to have paid less than the prevailing rate of wages, shall
promptly payor csuse its contractors or subcontractors to pay restitution to
any worker to whom wages less than the prevailing rate have been paid. The
amount of such restitution shall be the difference between the applicable
prevailing wage rate for the numer of hours the claimant was found to have
worked and the amount actually paid to the vorker. In the event that such
restitution is not promptly made, Agency staff may refer the matter to the
State Department of Industrial Relations or other appropriate governmental
agency or licensing board for further action. In the event that the Agency
staff determines that there is a pattern of noncompliance with this policy by
any owner or developer, or its contractors or subcontracto~s, the Agency staff
may refer the matter to the State Department of Industrial Relations or o~her
appropriate governmental agency or licensing board for further action.
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Moreover, in the event thst the Agency Agreement involves. any direct
Agency assistance to the developer or owner, including without limitation,
financial asslstsnce, or discretionary Agency action such as the grant of a
variation ,from requirements of the redevelopment plan, or other Agency
consideration, the failure by the developer to comply with this policy shall
be deemed to be a breach of contract, authorizing the Agency to take all
appropriate action, including rescission of the Agreement, or to seek judicial
relief for damages or injunctive relief.
6. Waivers
The Agency Board reserves the right, in its sole discretion, to waive or
modify any provision of this policy with respect to any project, upon a
showing that the interests to be served by this policy and the purposes
generally of the Community Redevelopment Lsw will not be adversely affected by
such waiver or modification.
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APPENDIX II
. .
TNE COMMUNrry REDEVELOP!O(El\IT AGENCY OF THE Crry
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OF LOS ANGELES, CAlnORNlA
....:
, .
POUCY ON PAYMENT OF PREVAILIIfG WAGES BY PRIVATE
" - REDEYELOPERS'.OR OWNEIf-'.ARnCIP AIfTS
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(November. 19l~ J
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"'I_lion
U_ 1IW c-m...II, ._v.l_enl I.e. of lho Sial. of Callf....iI. lho
Commllllil' ._......_1 Ar-, 01 tho, CIt, of Loa Anr.l.. ma, ....1. inlO
eontral!U or o\IlIt arroom"lI wllll dov.lopen of propon, 10 ..isl in 1IW acquisillon
or tho I............. fII ...... pnlp Il'tJ to .UIIIl...I. IIU",," ",. Ac-r II aIao
...po..,ed to ..lor ...... .........11 wllll 0...... 01 propert,. rodovo/aplll_1 pnlJoel
It... to dovolop IIIoIr .....pon' pcnuant to tho .oqulr.....1I 01 a~ed
._val__t....... .. aD ...... ..........11, tho Aeon.., ma, ..... 1IW prI..t.
-- or do..1Dpor to eo..pl, .itll eoncIlU... .1IId1 tllo Ar."", de.... nee -.., to
ean, out 1IW purpoaoa of tho Comllllallt, ._votopmenl I.e..
U_ eono'" eltcumst_ tllo Ar-1 "'0' .....vlde f....siftc .Nell .... _
otltolnod fro.. \110 '....01 eo.....m...t for ... bJ prI..l. do..1opers or ow,*, in lho
dev.lopmenl of tllolr propert,. In 'ucll _ tllo f.de.oI rnnt or loon or mortcace
a..l,toneo pI'OII'a" ..., require IIlat _I... .ork performed ... _ pnljoets
eoml'll wllll t... roqul..mOllIl of tllo Dovls-~eon Act (40 U.s.c. 211 !1 !!S.l, .lIlcll
'..quI.... IIla po,ment of ..,.. tol.baron lAd meclla"j... 01 0 ral. _ 1_ tIIoa tile
....:
1Ili"lmum .aco opoclfied bJ tllo SocroIorJ of l.ebar In poriodlc .0CO ral.
dol..ml...U.....
',,). .
In odlRllGft, ._... tho Acone1 _lroCII "recU, f.. pubUc .or'"
im.......m."II. 1110. _tractor Is required bJ portlllo,,1 Slol. 10. .....vlli... to po, nol
1_ thoft tho pre..Dine rat. of ..... to worlcon emplo,ed ... tho public worIc.
".. publlc purpclHB .lIlell _00 both tllo DoYb-Boeon Act lAd tho Slot.
r'
pnvaUine .... requlre."1I 0lllI1J no 1_ to IIcIrtc porformed on . .....Joet wIIIell is
tho _ject 01 .. ......._ 1101._ tllo 4coneJ' lAd . prlvalO de~ or _.
",... purpoIOS _1_ .....tecline tile .1IIOlo,... 01 eontroeton on pubUc pro~
f...... _t_ .a_. _llIoli.... tile llIrlnc of 0 loca1 lobar foree, lAd ~. to
1110 .xtont ~Io, lllat tho ~1J 01 tho _ to ... potfOl'.ed wID _ ...
,
, eo_m_ bJ tho POJIII- of 1_ tIIoa tho pr."1Iinc rat. 01 ..... Thot Ie,
de..lopon .... _ .\ptIe7 assistoneo. or prapert, 0....... .... ..... to de..lop thoi.
prapert, pursuant to .. 0....... ponlclpotlon acreemont, IIlould !lOt ... per..itted 10
PO,. or to aDow ilia" _tractors or _tractors 10 poY 1_ IIlOIIIIIo proyomne ral.
of .ar.. for wort! performed purs..."IIO 1ft arroo..onl .;tll t... Ar-J.
".. Lorislol.... .... declared tllal tho rodo..lop..onl of llIir"lad ..... lAd Ilia
.....vIsi... for appl'O\lriat. constrUClion policies I" I..... constllulO pubUc .... lAd
purposes and are pvemmental (unctions of state OOfteem in tbe inletest of "'alth.
,.f.I, lAd ..If... of tllo peopl. of 1110 St.I. lAd 01 lho eom..IIlliU.. in .lIlc" 1110
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".. LecI.Ia.ur. Ilu 1Ilrt.... dee"r~ ..... ,..IIiN ....pIo,.......
--,...,U. I. .. .... peopl. .r .... SI... ... wi.., to .... 5...... ....... .....
_it,. ..... lIla. . 1_",en'a1 ,..... 01 .....IopcD... Ia to upend ."'plo,,,,....
-'unlU. I.. JolII_. -.....p...,.., ..... Io...n..."'....__ .n...o/.......
~ Ilu de.....1ned lIlat .... .ppUe.tlon or preY.lll", .... requ!r.",onllto prI....
deYalopen .. 0- ., Pf"OPU17 _ ...tlt Into .........nll "'1II .... ~ I.. t...
de..lopao..t 01 - Pf"OllOrl,Ia . ne. ." condition .. -.,Inc ... .... JIU1T.... 01
.... eo....unlt, ...,...Iopno...t r.... .
1. St...",..t 0' PolIC!Y
It II .... POIIeJ of .... AI....., tho. iii, de..1opor or 0._ 01 propert, .ho ",'on
In'" on "","mOlll "'1Il tho AI....., I.. .... de..IopcD.... or IUeIl propert, ..... pa, ..
-- '" be pold '" aD ..kltS ....pIoJOclln _Ion "'1Il .... de..lopcD..t 01 _
Pf"Opol'l,. ... ... lIlon .... prevolUnr rot. 0' ..,.. os proYlclocl In tho .t,'uta
.ppUeoblo to AI....., pubUe ._ _.r.ell. lnelucli", .Ilbout U",ll.tlon Seetl_
33 :22-33421 01 'ho c",U/arni. H..lth ..... Sol'" Code ..... Sootl_ 177..17.. 01 tho
CalIfornia Labor Code.. ".. pOlin shaD nol _8ft'- Ie AnN__lIta wlllo the total .
......... eoet 0' ......_lIon cIoa 110' ."eeocl $250.001. R..._. In .ho .... ., on
",".",... "'1Il .... Aleney .hleh In...l... .... _ of lodoroJ IuncIs, _ _ ....D be
.uIIjoet to .ho prevolUnr .... ..quI"",.nll. II on,. ",.ncIo..., .., tho lecIoroJ pro...",
leclslalion .., .hlch - r_ ora .uthotfaocl. ...... COSO 01 .....truetion ._
n_ In ....1. or in port with UliItonee proYlclecl ....,.. tho Com"'unI',
t'.......p _..t IJoeIc Grant l"CD8G") Pf"OCI'am 01 lIla I1nl..., -'t. Deport.....t 01
r'
HOUIinr oncI Ortlon Dovo.........t, lIla De... Ioddol AeI oppU. to ..., "","..ona "'th
"
tho AI'lftCY .- !a....... CD8Q .flnlI In lIla .......t 01 $2,000 or....... Ro......
...
thil CD8G requi....ona .ppUa to lIla .....llWlatlon 01 raldontloJ pI"Oporl, ani, II
- property Ia ....,.- ,.. raI~1oJ _ of ",t or ..ora ,."'U..
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2. c-truetlon 01, T-. oncI ""'-
For ~ oIlmpl......tJnc .hIs poDey. 'ho 1.110"'''1 llIoll.pp'"
IoJ The phrue 'de..1opor .. 0_ "'UftI on, ....-. ~'ion.
portnen/lip, joint -...., _.lIon or .nllt, ropnII_ 01 lorm. _t.... pubUe ..
privot.. I...-pront or --,..-pront. .hleIl on'on into 1ft "","",...t with .ho AI.....,.
os ..ino/... dennocl.
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CbJ The phrue .... A...."'...t with .ho Aloney" m_ on, cIiopaoi.lon .....
de'.lopment ......"'ont. ....... participation ......m...t. de..IopmOlll .........nt. ......
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"'''11II''''_ r.MblU"Uon acr..ment. ..,...mnt 'or ,he sal. 0' llnet or M, other
....."'_ to .11I<* I'" Acene, It a part,. ..carcll_ 01 I..... ... IItlo. ........, a
doYOI....... . 0...... 01 pl'VIl<<t, In I'" City 01 ~ Anc.l..,..._ to dov.lop ... .._
t... dov.lopftl_ 01 _ propert,. All "",ee",ont in .hi..1I I'" ACItlllJ acr'. to
.uIlIlcl.. . .......,.. a ......bIUtallon loan to be ..ado to a dovelopar . 0_ '" a
IondInr InoUtlltloa IMII be _..od '11I "",.o"'ent willi t... Ac-r" I. purpoIOI 01
'1lII poU..,. ".,_. to tile utlllt tIlet an Acr.......1 willi tile AC....., pro>1d. I...
t... _ 01 ladorol tInanelal UlIslIlleo. t.... poU.., II not Intendod to superwdo t...
Pre-Dine ... requi........, If an" ..andatod .., t... loderal crut, loan ... -C,P
I........... ........... \eel.lall.., '" .11I..11 ....... .....tanee It autllorlzed, but IIIeII be
do...od to be .....1e....I..,. to ....... requI..........
Ie) ,.... pIlrue ..... do"lopaI...t 01 ....... propert1" .._ Ill' ~lIlolltion,
.....truellon, ......bIUtat1oft, ._trueIlOll . ot.... work 01 l..proYOlIllllt to be
.....formlCl '" or 0lI be/lalf 0111I o....r or dev.loper In aeeordanee .ltlllll ""'eem...t
willi tile AC'''''''
lell ,.... pIlrue 'aU wor..... a..pJo,1CI In ......ee'ion .11II t... de..lopaIllIt 01
....... propert1"1halI ...... oneS ..fer to ..ell ...n, ......ifi...t1oft or IJIII of work.., u
det.rmlned '" tile rules ond ....laUOlII of t'" California Depart...nt 01 __trial
R.lallo.., ...tuall, ...pla,.., '" t... deYOloper or o.nor, or .., a .....Ira..tor .
._tr...'., to .....,or.. labor or _vi.., In eonneeUOlI wltlltlle dov.I.,......t 01 tile
proper\J. III t... _ 0' . '.mily owned busin_ .hi.... ...pJo,. familJ ...m...... .110
...". on oW1llnhip ........, 1ft _ .....i...... ....... 'o..OJ ",a..ban IMlllIOllle dee..ee1
r'
10 be ..ortc_ ...pIoJecI III ..........tlOlI willl"'t\'" developal...t 01 ....... pl'VIl<<t1" f.
J
purpoaes of lIIII poIIeJ.
(0) ,.... pllrao "PnftOInc rates 01 ...... .._ tile c-al prevaDJnr rato 01
..... cI... .'C. In tile IoeaUty in .1Ii.... t... .ork is performed, for ..ell eran . tJlll
of wor..... IlIecIad to perfor.. tile ....... oneS tM C.....al praval1inC rat. f. recuJar.
IIoUdly oneS 0_1_ .ork in t... Joeallty, f. ..ell ""t . type 01 _.. -.led to
.....form tile -. u provldod to tile Apney .., tile California Ileput.....t 01
Industrial.mU... punuant to SeeIlOll 1713 0' t... Lebor Codo.
In ,.... pIlrue "tolal ....'11 t. _, 01 _,......t..... .._ tile total ... 01
_ts ineurred by tile de..1oper or 0...... In _1I0l1 witll tM dov.lopal...t of
proper'y .1Ii.... is tile subjec' 0114 Acre''''''1 .itlltlle "laney. ....luclinC tile _, or
4 "'~rinC tile propet'tJ ~ aloo ....Iudinc tile _t 01 I_nt i..pro.....nts .lIiell ar.
f
.
not pel4 for by the developer .. vwrwr. 1M liIItotal aareca'e cost or construction
lnel,.ses. wI'_ n..it.liOll, t... ..... to tM doveloper or 0...... of eont....to'"
,.
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-yjea, Vet.llftl....1 ...., ..."neerilll _yj~ ..Ol..la....reet..~...., all _
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_to orIlicll .,. ....I_ua' .....iclerecl '" lie _to or .....tr.uelioft. .. 1110 _ or
....Uplo JlI'OJoeta WNcIl .,. rIlllCI~, or IUlloIMIlytl, ....I.... AcOftCJ ..." IIlaII
dolorllll... ....1.... IIla ,..,.... to lie _ II)' lNo poa", ........ lllol lllo _
' ....... od Wltlt ~ to - JlI'OJoeta _... lie eotnIlinooI .. dotor_lllI. lllo "IacaI
......to _ 01 ~_.
a. - fnlplelll..tatt... 01 PoOqr
TIlIa polleJ IhaII bo IlIIp/om"led ...., ..roreod II)' AcOftCJ .10" u roGo...
(0) EyOl'J Acro.m..c wltlltlla At....., 10 wIlIoIlllliJ JlOIICJ oppII_ IhaII _1011I
"
r a JlI'OYIsI... w""'lI)' IIla do...1opor or 0_ IhaII ... to po, .. eo_ to bo po", to
011 ........ o..pJo,.ci Ia _Cloft willi tile do...Iop....c 01 tile JII'OPert" 1101 1_
.C.... IIla .......m. .OC. 01 wo,.., U JlI'OYIdod .. tho .talaC. oppUeobJo Co Ar.....,
pubU. worb _Cra"lI. l""IUdI... wllllout Umltall... S."11oM U4U-U428 01 lllo
CoIJtomJo aeaJlIl ...., s.r.l, Code ...., Soellono 117..1110 01 IIla CoII'ornIo La.....
CocIo. Ewwy Acr"III...1 wlCII lIlo Ac....., to will"" CIliJ pon", .ppU_ ....U .....
_tala a JlI'OYIsI... IftCOrporoU.IIIII poU", II)' '.'.'_.
, Cb) Eyor, 0_ or do...'-r ..Ierl.... Inlo ... Acr..m...t willi IIla Ar.....' 10
wllloll lIlJa POlley oppU. ..... InclUde. In all -tra"ta 'or wark relotJnr to lIlo
do...lGpm..c 0' tile jlrOpert, to will"" lIlo Acree....1 eppU.... a JlI'OYIsI... wiler., tile
-lraetor '1loIJ ocroo to po, ...., IIloIJ ...... Ita ........traetors to po, all _kon
.mploy*! fa _I..... willi - -tra"l or -'-'~I IIOC -. lIlu lllo pro-11Inr
ral. 01 ...., U JlI'Ovldod .. tile Itol1lt. appUeollIe to Aconey JIUblJo __
-........ Incl.... wllIlout U.ltau.. Soeu..... 3342J-JUzI 01 tile CoIl1om1.t1 RoUlIl
and s.rot, CocIo..... Seet.I_ 171"1710 011... Coutoml.tl Labor Code,
Cel Prior to lIlo ............ 01 ..., Acree...c wllIl lIlo Aconey to WIlIeIl ...
pou.., appU-. A......, .ton IIloII JlI'Owfdo a oapy 01 lIlJo 1IoU", to I'" o....or or
....Iopor. It.".U 1M lIlo obUpl_ 01 tile doYeI_ or 0_ to II'Owfdo eopi_ 0'
tllU POll", to ita -tra"lors ...., lubeont.."t......
(,I) Prior to lIlo ..o1ll__III...t of """",",,,lion, ...., u _ u ....etleolllo.
Ar-y sto" ....U IloId ... Ori...tollon III..U.... tOilll..., 0_ or do...ioper wllo "Iors
into III Acr......., wllIl lIlo Ai....., to .1Ii,," tllU POlicy .ppU.... ...., willi lIlo ~aJ
CoIIt.."tor or .a"" o....er or do...ioper in order to ellpJoin sUell ...tt.rs u I'" _in"
rat.. 0' ..r.. to lie pold to -on omplo,ed in _lion witll 'Ile dey.lopm"'l 0'
I'" ""'Port" ,...e..o..traeU... ~......... requirem.nll, ..eotdkeepi... ...., ..po.tine
........m.... .........., ror lIlo ........lIon 01... _r or doYOIoper', .....p1ianee wltIt
lIlJJ poU",.
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Ia) I..., 0..... or *..1_ ..Iorinr inlO on ""......I willi II!O AcIMJ to
.- IIlia pollcJ .pplle _0 ...ointain or eo_ ita eonl..etM .... _troetorl to
.ointoill on oceuroto r-.s lI!O.inr tile ...... oe..ti.. .... .etllOl .... ...,
....... .....u.o - 1loIIda, .... pekl to ..ell ...... .... frlnp llononta fu
'If ... "tel pokI to .. .. Ilellall 01 ..ell wartor ...pIe,.. .. -u. willi tile
developnl-.t 01 tho Po ~ "'" tho ....... ....od bJ' ,I""" _kon .... ...__ wI~
pumant to 10.. It....n be tile rosponslbl1lt, of II!O o.nor or developer 10 ....tala
IUdl r_ In tile ._ tllat ita eontroet,," or _lraetM do not lIIOIlIloIII _
....... SueIl -.10 ....U be opol\ for Inspoetlon bJ' Ac....., ltaft .t nuonablo
-..
CllI Ar-7 ItaIf ..... porlodl..u, _tor ~.... wlUt tIlIt'poUer bJ'
JllIpOetlnc pe,...a ~ '.torvt.wtnr ....... .t tho eonotruetJon lito or .., othor
-lImllAr........ Ita, 0..... 01' deve!oae. .",1..".. Into an Acr..m..t willi the Acenc1
10 .lIiell tItls poD.., .pplles .haD eoapor.t. wltII ",.ne, .taft .. -.,Inr out lIllI
...,uCJ.
---
le) Ac....., ltafr ....n pro..ptl, and 1/loroucIlI, In...tlr.l. on, elol.. .... by
· .ork.. Illat 1- then """11I", ..re .... peld ror .... puror...od in _tloll
.JUt tile deV.lopmenl or propert, to .Illell tills polle, applies. An, 0..... or deve'-
ont.rine i.to on ""....-.t willi tile Ar....., 10 .hiell tItls pon.., oppne IIlaII
eoopor.l. wlUt.... eo_ its .....1..etorsandlulleontr...l.... to "'.~_.to wlUt Acenc1
staff in eorrylnc OUllUdl in..lIpli.... and IhoI1 gro...ptI, pe, ... ..... ill .....troetorl
r:il
or _troetorslo pe, on, ..._t dot.....lnod .., Acenc1ltoff 10 be tIto d1tf........
botw_ tile .~bIo JII'eVaIIInc ..,. for tIto _ 01 ........ worIl.s .., II!O
elol_t - tile ...._t aet..u, pekl to tile eIolmont. AI tile ...-st 01 Acenc1
stort. .. 0"'" or deveJopor .Itall wltllllold r.... rro.. Ita eontroetor. .. eo_ ita
_',ftetor to wI"""'llI r.... fro.. 0 -traetor. prior to tho OOIIIplotloe 01 _
i._tlpti.... to ....... tllat tile a.._ 011""" r.tituti.... it roqul..... is ...1IobIo.
loll .. tile .....t II!Ot tIto "'....., .tarr *I..ml_ that . eontroetor ...
_troetor .... vlo"tod on, provisi... of IIlls poO..,. IIle de..1opor or 0._ ....
Ar-7 .taft....a _ OIl rvp'.....ta.._ In _ltiooI to rostltut;., to_
lhat IUdl eontroelor ... _tro"'... ....pll.. willi this poll..,. SueIl me....... mOJ
lnel... wi_I n..iloti.... . ooqulr.ment tItol clurinr I"" eonlraet period lha 0_ ...
deve'- wllIlIlohl r.... r.... lho .....Ir.etor ... el_ lho eont..",... to wllIlIloIll
r.... rro.. II!O _Iroet.... or lhat I"" eonlreet... or subcontractor post a bond...
---
provlde. a Ion.. 01 erodIl ... otllor ..euril, In on amo...t sutnei_ 10 ....... lhat
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prn.W.. r.l. of ..C. for the _ 10 lie porfor..ed. All, owner . cIo..\opel'
onterine Iftto ... Acr.......t .illl the "c...." \0 .IIiell \Ills polle, .ppllesslloU iftelucle
in II. _eraell IIIId ...... III _tr.eIOl'l \0 iftelucle ia _Inets, .ppropri.l.
prow\II_ \If ....ellthe provlll_ 01 \Ills poracrlIpIl ..., lie .mecI .a-
Cel .. the .....t ot . ...... lIe'._ the ._ . cIo........... . II.
_troelOl'l . _erae'- or . elal....." 0IId the "c...." .taIr wi'" r-' 10 ..
"'....., stafr cIol....I...II.... the 0_ << c1e..loper. . Its _tr.elors or
.-..tr.e'_ . the eIaIm...'. os the _ ..., lie. nD ho... tho oppor'lIIlit, to
brine ,... "'put. before the "'....., Boord for ..vt... ",. "'....., &0.", ..., I....
_ .eUOft u II deem. .pproprI.I., lneluclilll' III .tnr..... the ",."", .I.ff
cIol...I...'IOftIIO) ..r_l.. ,... ...lter boek 10 "'....,. .I.rr f. f""'llor 1lI...,Ic.UOft;
llIl) rev....... or ..odIf".... the ",."",st.rr cIolerml...UOA; 0.1 dlr..'''' tho "c.....,
lIaCf ta oppolftl III Indepelldent hearlne .lIO... for furlller In_lic.IiOft; or 1.lsuell
ot.... .eUOft OS ,he lIoord m., dee.. .pproprI.l. ...cIer I'" clr......I........
,
S. Softetl_
Ally cIo..\opw or owner cIolermlllOd '" tho ...,...., '0 ..... paid Jes \hoft
prevalll.. ..C. for .ork perfor..e4 ill _11011 wi'" I'" cIovelopnlen' ot property
10 whIe1l IIllI poU..,. .ppll... or ._ .....tr.eIOl'l or ._tr.elOl'l ..... be.n t_ 10
..... paid 1_ tlloft the prevoiIinC ..,. ot ..C" IIlaIl promptly pa, or ..... its
.....lnetors or IUbc:oIltr.elOl'l \0 pa, resUtJI\lOII to OIl' __ ta .lIom .aces Ie..
'.'"
\hoft ,... ........1IIac ..,. ho.. _ paid. ",.' OI\lOunI of _ r.U'utiOft IIlaIl be I'"
dlrr._ bel__ the appUeollle prevolllac -ace ral. tor tho _bar ot ~ the
elah....t wu t_ ta ho.. .orke4 IIIId I'" ._1 .",uaI1y paid ta the work.. lit the
.....1 the, _ rostl'u\lOft Is _ prompU, ..ado. "'....., .laCt ma, ..ter the m.tter
to I'" St
1l.latiOM << otller .pproprI.l. p_...101
....., or 11"-;.. IloorcI tor furtller action. lit IIle ....., \he, I'" "'....., .10
cIol.rmi.... lila' ,..... Is . pattern of ,*""""pU.nee .illl IIIis poU..,. '" OIl' owner or
c1e~loper, or III _tr...1OI'I or _Irael_ IIIe "c....., .larr ..., ..r.r tho m.lter
ta t'" SIOI. o.p.rtmenl ot _trial Il.tall_ 01' oilier .ppropriat. p.....ment.1
..
ac....., or lIeonsine IloorcI tor furtller .etl.....
:l(oroo_. in the .....1 1!lOI IIIe "'1t' ,'\cr.......1 iftWOIves 111I' direct Aloney
,. ... '-
usin...... 10 the cIo..\opel' or owner, ibe1udine .11_ IImil.IiOft, n...aeiaJ
..ill...... or dlsereli_, ,'coney aeli... _ OS I'" .....' ot . ..ri.UOft trom
requlr.mon" 011... r.cIo..1opm...1 plaft. 01' olller "'...." ........cIer.U.... lho t.n.... b,
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.uU-lzinr lIIe "ltIIlCJ to lake 011 'ppropri.te ."li..... i""ludinr ......baiOll Dr tho
Acr-_. ar 10 _t judJ"loJ r.lI.r rar .""1. or inJ......u". r.lI.r,
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"'" ........... Dt tIIIa pou.., .11II I'eIpoCt to an, project, upon . .....wlnr thot tho
Int.._ to be -..... IIJ tIIio pou.., _ lIIe ~ I-.u, 01 tile eo"..lUIlt,
lloclneJupmOllt La. .m not be '4"_1, IUoetoclllJ 1_ ..1_ ar mDCIlnealloft.
110131-11
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APPENDIX III
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F.ESOLL'TION NO. ~;;..f40
RESOLUTION OF THE CITY OF SAN BE~~ARDINO ASCERTAINING THE
GENE?AL PR-~AILING RATES OF WAGES FOR PUBLIC PROJECTS OF SAID
CITY.
BE IT RESOLVED BY THE MAYOR AND C~~ON COUNCIL OF THE CITY
OF SA.."i BERNARD INO AS FOLLOWS:
SECTION 1. That under and pursuant to Section 1770 of
the Labor Code of the State of California, the Director of
Industrial Relations of the State of California has determined
the general prevailing rates of per diem wages in the City of San
Bernardino for each craft or type of workman or mechanic; and
the ~ayor and Common Council 0= the City of San Bernardino do
~akc said rates applicable to contracts fo= pu~lic projects
of said City, and do hereby find that the attached document,
r.arked Exhibit "A" and incorporated herein by reference as fully
1S though set forth at length, contains such general prevailing
rates of per diem wages for each craft and t~7e of workrr.an and
~=chanic; to wit:
Exhibit "A", "General Prevailing Wage Determination maae
by the Director of Industrial Relations", filed June I, 1977,
in the office of the City Clerk.
SECTICN 2. The provisions of this resolution are
A?plicable to contracts a",arc.ed by the ~::'or a.."ld Common Ccu-"1cil
of the City of San Bernardino for the construction of public
p=oj~cts, except ~ai~ten:nce wc:k.
: H~RE3Y CER~:FY t~a~ t~e :oregci~g resclu~icn ~~s d~ly
ac.':;~ed ~y the ~-a:.or a::d CC'L~O~ C.:'Iun,:il cf the City cf S~n
Ee=::3=:::'1:':O at. a
_/'L~L.~"~~
meeting ~~ereo= ~~ld C~
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....... c -- c.ay 0: /'
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fOllowing vote, to wit:
AYES:
p c...7'",< j) -.J / ~
CouncilJnen C"~ -Y~~ :...1<.?~......___ /""d.<~
;!q,A7>:?.-L-~ 'd~ x....&..v<./
NAYS:
ASSENT :
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The foregoi~resolution
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.~. . '-- ".~ ....,.../
....'. ~....~ ~ , _ - ,~. ~~.~-_~ -c...-
o City/Clerk
, -1 ?"IJ
is hereby approved this 7'....._
A~f~~~ 0
/ q.r~~~V
C ty At rney
F-I LED
JlJ~ 2" $11
Cuca.t.E ~1l'I., Ct;.~
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5. Por all construction of tbe facilities contemplated
hereunder, all laborers and mecbanica employed by tbe
Participating Owner and by any of ita contractors,
subcontractors, or other entities working directly upon tbe
project covered by tbis agreement aball be paid
unconditionally and not less often tban once each week, and
without subsequent deduction or rebate on any account the full
amount due (except auch payroll deductions as are made
mandatory by law and such other payroll deductions as are
permitted by tbe applicable regulations issued by tbe Director
of Industrial Relations of tbe California of Labor. Tbe full
amount due at tbe time of payment sball be computed at wage
rates not less tban tbose contained in tbe published wage
determination decision of the Director of Industrial Relations
applicable to San Bernardino Co~nty, regardless of any
.
contractual relationsbip wbicb may .be alleged to eslst between
the Participating Owner, any contractor or subcontractor, and
any sucb laborers and mecbanica. Participating Okner further
agrees tbat tbis section shall inure to tbe benefit of tbe
Agency and for tbe benefit of all laborers and mecbanica
employed upon tbe work covered by tbis agreement as tbird
party beneficiaries. Agency and any aggrieved employee are
eacb authorized to file an action in any court of competent
jurisdiction against tbe Participating Owner and any of its
contractors or subcontractors for tbe recovery of tbe
difference between the wage rates actually paid and tbe wage
rates legally required to be paid under tbe provisions of this
4
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section and any applicable regulations, statutes and laws,
together with any otber aaounts autbori.ed to be collected as
a r.sult of sucb action. Participating Owner agrees for
itself, ,its contractors and subcontractors, to pay re..onable
attorney fees and court costs if tbe Agency or employee
prevails in any sucb action. Tbe participating Owner agrees
tbat tbis provision sball be inserted in any contract between
Participating Owner and any contractor, and tbat all SUGb
contracts sball also contain a provision tbat any contractor
must aake tbe same provisions applicable in any of its
subcontracts witb subcontractors on.tbis project.
6. No member, official or employee of tbe Agency shall
bave any financial interest, direct or indirect, in tbis
agree.ent or in tbe Property described in Exbibit A, nor sball
any 88mber, official or employee participate in any decision
.
relating to tbis agreement or to tbe Property wbicb affects
bis or ber financial interests or tbe financial interests of
any corporation, partnersbip or association in wbicb be or sbe
is, directly or indirectly, interested.
7. participating Owner agrees tbat no officer, employee
or agent of tbe Agency sball be personally liable to tbe
Participating Owner for any obligations under tbe terms of
tbis agreement. Any obligations undertaken are those of the
Agency, and not of tbe individual officers, employees or
agents tbereof.
8. Tbe development covered by tbis agreement is a
private undertaking of tbe participating Owner, and tbe
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APPENDIX V
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SECTION 5
5-1 LEGAL REQUIREMENTS
5-1.01 LIABILITY INSURANCE -. The Contractor's attention is directed
to Section 7-3, "Liability Insurance,'; of the Standard Specifications, providing
that the Contractor shall furnish the City with a policy or certificate of
liability in~urance as prescribed therein, prior to executio~ of the contract.
5-1.02 WORKMEN'S COMPENSATION INSURANCE -- The Contractor's attention
is di rected to Section 7-4, "Workmen' s Compensation Insurance." of the Standard
Specifications, providing that the Contractor shall file a signed certification
Certificate of Workmen's Compensation Insurance before execution of the,contract.
5-1.03 PAYMENT OF PREVAILING WAGE RATE --' The Contractor and all sub-
contractors shall pay each craft or workmen employed on this project not less
than the prevailing wage rates specified in Resolution No. 12846 of the Mayor
and Common Council of the City of San Bernardino. The Engineer shall have the
right to interview any craft or workman on the project site in order to verify
payment of prevailing wage rates in accordance with Resolution No. 12846.
5-1.04 PAYROLL RECORDS -- The Contractor's attention is directed to the
following provisions of Labor Code Section 1776 (Stats. 1978, Ch. 1249). The
Contractor shall be responsible for the compliance with these provisions by
his subcontractors.
(a). The contractor and all subcontractors shall keep an accurate payroll
record, showing the name address, social security number, work classification.
straight time and overtime hours worked ea~h day and week, and the actual per
diem wages paid to each journeyman, apprentice, worker, or other employee employed
by him or her in connection with the public work.
(b). The payroll records enumerated under subdivision (a) shall be certified
and shall be available for inspection at all reasonable hours at the"principal
office of the contractor on the following basis: .
(1). A certified copy of an employee's payroll record shall be made
available for inspection or furnished to such employee or his or her authorized
representative on request.
(c). Each contractor shall file a certified copy of the records enumerated
in subdivision (a) with the Engineer on a weekly basis. It will be the Contractor's
responsibility to submit the records enumerated in subdivision (a) for all of
his subcontractors, in addition to his own employees. Failure to submit the records
enumerated in subdivision (a) on a timely basis shall constitute good and sufficient
reason for withholding the partial payments for work accomplished.
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Engineer's Estimate $ 113.375.00
NOTICE INVITING BIDS
NOTICE IS HEREBY GIVEN that the' City of San Bernardino will receive bids
or proposals for:
PAVEMENT REHABILITATION OF 40TH STREET BETWEEN KENDALL
DRIVE AND ELECTRIC 'AVENUE. IN ACCORDAICE WITH SPECIAL
PROVISIONS NO. 7047 01 FILE II THE OFFICE OF THE CITY
EIGIIEER. ROOM 405. CITY HALL.
Deliver all bids to the City Engineer's Office, Room 405, City Hall, 300
North "D" Street, San Bernardino, California, with the specification
title and number clearly marked on the outside of the envel~pe.
Said bids or proposals will be received up to the hour of 2:00 p.m.
October 7 , 1986, at which time all of said bidS or
proposals will be publicly opened, examined and declared in the City
Engineer's Conference Room, 405.
No bid will be received unless it is made on a proposal form furnished
by the City. All bids or proposals shall be signed, sealed and
accompanied by cash, cashier's check, certi fied check or bid bond made
payable to the City of San Bernardino, in the amount of ten percent
(10S) of the bid. Such cash, check or bond shall be given as a
guarantee that the bidder will enter into the contract if awarded to
him. In the event the bidder refuses to execute said contract, the use
by the public of the improvements will be delayed, and the public will
suffer great damage. From the nature of the case, it would be extremely
difficult and impractical to fix said afllount of damage. Therefore, the
City and the bidder agree that the above sum of 10S shall be paid to the
City upon the condition above set forth as liquidated damages and not as
a forfei ture. All bonds furni shed pursuant to thi.s nofi ce must be
underwritten by a surety company having a rating in Best's most recent
Insurance Guide of "A" or better.
Pursuant to law, the Mayor and Conimon Council of the City of San
Bernardino, by Resolution No. 12846 and any and all amendments thereto.
which are hereby referred to and made a part there of by reference as
fully as though set forth at length herein, have acertained and
determined the general prevailing rate of per diem wages, and of per
diem wages for legal holidays and over-time work for each craft or type
of workman needed in the execution of contracts under Jurisdiction of
said Mayor and Common Council.
Said prevailing rates of wages shall conform to "General Prevailing Wage
Determination made by the Director of Industrial Relations," filed in
the Office of the City Clerk, which are made a part of said Resolution
No. 12846 and amendments thereto. .
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It shall be mandatory upon the contractor to whom the contract is
awarded and upon any sub-contractor under him to pay not less than said
specified rates to all laborers. workmen, and mechanics employed by them,
in the execution of the contract. and to prevent discrimination in the
employment of persons because of race. cre~d. color. or national origin,.
IS set forth in the provisions of Resolution No. 7414 of the Mayor and
Common Council of the City of San Bernardino.
No bid will be accepted. from a contractor who is not licensed in
accordance, wi th the pro1(i sions of Chapter 9. 01 vision II I of the
Business and Professional Code.
The City of San Bernardino reserves the right to
bids. No bidder may withdraw his bid within 30
the date of the bid opening.
Plans and specifications may be obtained from the Cit~ Engineer's
Office. Room 405, City Hall. 300 North "0" Street. San Bernardino.
California 92418. upon a non-refundable payment of $ 10.00 for each
set.
reject any and all
working days from
The contractor shall possess a Class A or C-32 license at the time
the contract is awarded. A contract w111 De awarded at the next regular
meeting of the Mayor and Common Council after the bids are opened.
CITY OF SAN BERNARDINO
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SHAUNA A K. City erk
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NOTICE TO ADVERTISE
SPECIFlCAnON NO. 7047
SIIAI.L APPEAR IN ARST ISSUE NOT LATER THAN.
DAP' 9/11 /86 and 9.Ll.61.8.6___"...
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~pendi:r 6
Summary of Interview nata
Thia appcDdi:r hiCl>IiaJ>ts (1) interviews with union representatives from the BuildinC
and Trades GJunci1, union dcvelopen, and union cenetal cootracton and subcootracton in a
vuiety of traclcs; and (2) interviews with DODunion developen, Ceneul contracton, and
aubcootracton in a variety of trades.
Duality of Work
Union representatives arcue tbat the Davis-Bacon act (and specifically the prevailinC
wage clause presently under discullioo) leads to hiaher quality construction work since it
prevenu contract on from preparinc bids based On "cut ute labor" which is "all too
often...asaociated with shoddy work." Union representatives predict that if the prcvailinC
wage clause is dropped from City and RDA projecu, more jobs will CO to nonunion shops
which do not have e:rtensive training procums.12 This was confirmed by Robert Thomas,
Assistant Business Manacer for an dectrician's union in Utah (a state which repealed iu
prevailing Wile lsw in 1981), who stated during an interview in August that there are
definite problems with poor quality work being performed now that unorganized labor has
been able to increase ita share of work in the public sector.
As opposed to union worken who coosider the construction industry to be a career,it
is contended that open shops employ some people who treat the industry as a "summer
fill-in" or interim job. Unions point to the fact that "you cet what you pay for." They
feel that it is impossible to hire the best, committed, fully trained and e:rpericnced people
if the wagca are not set at an acceptable ute. Almost by definition, then, unions coosider
that the quality of open shop projectl is below that of union shop..
Nonunion representative. stated that the quality of workmanship may indeed be
better on jobs contracted to non-union shops since in order to compete with union shops
they must maintain the reputation of completing hiah quality work. They .tated that if
they find sloppy work, they can talk to the worker and, if neccllary, fire him or her. In
contrast, OIle non-union representative .tated that the union memben trust their union to
protect them from being fired. Thus, he suggesu, they are lell cooperative than non-union
worken, yet there are few means by which to improve the employees' attitude and
performance.
12. Nonunion representatives have reported present plans for such programs.
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Another point made in interviews with non-union representatives is that the quality
of a construction project is ensured by standards and building codes (and the inspections
which supposedly enforce the codes).
Rrnftftl'l'lK Vultwt'ability of Warkl!r.
UDioo representatives IIlqe that aon-unioo .hopI ezploit the worker by paying a
.ubltandard wary which docs DOt include retirement bcaefita. ICll1g term medical inlurance.
etc. They point to the fact that lOCiety will cventually bear the burden of .upporting
worken (e.g. aub.idizcd housina, food stamps) who are employed without the advantage of
certain bcaefiu.
Nonuniao .hop., on the other hand, ezpres.ed the feclin& that a perIOD .hould be
paid a wage ClOIDmcnaurate with the work beina performed and the uperience brought to
the job. In term. of the benefit package, DOnunion representatives .tated that the worker
hu diaability inlurance while on the job, and is therefore adequatdy protected from any
employment-rc1ated miahap.. Social .ecurity and the employee'. own personal financial
planning provides for their retirement benefita.
Cuh EI'IVV\I'nY
Union representatives, in interview., .trelled the increllina pre'CDce of a cash
camomy in the local ClODltfUCtion indu.try i.e., a .ituation in which employee. receive
payment in cuh and DO record of their employment ia kept. They feel that low prevailina
wage compliance creates an environment conducive to thU cub eCODOllly and argue that repeal
of local prevailing policy would uacerbate the problem. Further, worken involved with the
cuh eCOtlOllly eventually are placed at a disadvantage by DOt being able to obtain credit
(since they have DO way of documentina their employlDCDt and salary lcvel) and having DO
retirement plan. UDioo official. estimate the magnitude of the cllh eCODOlDY to be II high
II 33".
The DDD-union perspective on this problem ia that the underground economy __
indeed erist and that it is an important problem. They lIlege, however, that the cllh
economy may be equally II prevalent in union shop. II in the non-union sector.
Say~. to thr T.~.yer
Non-union repre.entatives lIlege that prevailing w.ge legislation raises wages to
lnds significantly higher than those which would prevail under market competition. They
predict that if the prevailing wage clause were dropped, the large livings in construction
costs would be paned on to the taxpayer. Union officials disagree, stating that the
increased productivity of the "better trained" union worker lIIore than compensates for the
increased Wille rate.
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Union officials also alleged tbat tbere would be little saving to the taxpayer SInce
the cost differential would be shifted into increased profits to developers. They pointed to
the bct thst unions have not been heavily involved in residential work for the past five
years, yet housing costs are quite high.
Hi.tari~al R..lIftft. No I ~,.r B1ri.t
Nonunion representatives allege that the historical ratiooale for the Davis-Bacon Act
DO longer enata. Present minimum WISe laws and the free enterprise system, they CClIltend,
now serve to protect the worker from unfair WISe practices. They also feel that the
argument CODcerniDg itinerant CClIluactors c1isruptini local markets is DO laaaer relevant.
They claim that even if the contractor comes from outside of the San Bernardino area, the
contractors usually make use of local labor to avoid transportation costa.
Union representatives clearly disliree, maintaining that dropping prevailing wage
would risk serious social and economic costs, particularly for women and minorities. They
predict that if one were to drive to various City construction projects and look at the
license plates on the cars, many of the plates would be from out of state, indicating that
the need to protect the local worker still enats.
Prevailin2 W.,e (".J\fttract Biddu.r
It. is often the cue that prevailing wage closely approzimarea union wages.
Nonunion representatives perceive this a discrimination lSainat the nonunion segment of the
industry which does not have an appropriate role in determining the wage. Bven most
union representatives admitted that the union probably does have more than a proportional
share of input into the proceu due to the fact that most nonunion shops refuse to
participate in the process.13 NonUDiao representatives state that prevailing WISe "wreaks
havoc" on nonunion CXIIltractorS who are "forced to pay their employees double what they
would normally pay on other jobs." Several stated that they keep two roarers of employees
- one roster for prevailing Wille jobs, and one for the remainder of their contracta. In
this way, the contractor or subcontractor is not forced to constantly raise and lower a
person's pay which, they claim, causes morale problems for their employees.
The sdded administrative requirements on prevailing Wille jobs and the complication
of having a dual standard of Willes lead to the conclusion among nonunion CClIltractors that
they are leu competitive than union contractors when bidding on City contracts.
Considering this perspective, it is fascinating to note that the unions state that ~ are
13. Nonunion representatives indicated that they often fail to fill out the surveys which
provide the informstion for determining prevailing wage because the information is not
confidential and may be released to the union.
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less competitive than nonunion contractors who are able to submit lower bids and thus
win the cootract.
1.Idol of. ('"lIInstnu:tian Sa.irx.. to Other Are..
Nonunioo repreaentative. cited .everal time. durins interview. that .everal citiea in
the area .uuoundins San Bernardino do not require that prevailins wille be paid. They
project that i! prevailing wage i. required in Sill Bernardino, devdopen will .impl y take
their conatructioo projecU to thOle .urrounding areu and the city of San Bernardino will
be the employment opportunitie. and taz revenua which would bave been created by
thoae projecU.
Union Membl!r.hw and UOeDlplo.yment
Over the put .everal year., unioo memhenhip hu declined, IIld according to unioo
representative., union unemployment ba. increued. They fear that if the prevailing Wille
dauae ia dropped, theae trend. will continue at III ever ezpandins rate.
Nonunion repre.entative. do not bdieve that this fear i. warranted. Their bdief
i. that the only unioo worun who sre unemployed are those worun whose work is not of
.ufficicntly high quality to be placed OIl a job. They alao believe that the reuon union
membenhip has declined is that the union is not meeting the needs of iu memben.
Finally, me non-union cootractor .peculated that if the present unemployment .ituation
wu really u severe among unioo worun u wu .ulle.ted by unioo officiah. me would
hear of picketing and of union memben tryins to interview worun OIl varioua jobs to try
to convince them to become uniooizcd (so u to .trengthen the union). The fact that this
ia not occurring melll., to hi. perception, that there i. preaently enough work for all
membera who wi.h to and are qualified to work. Mia opinioo ia that the conatruction
industry i. booming, therefore the union. .hould not have to be concerned about
unemployment in the near future.