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State's high court rules charter cities don't have to use prevailing wages

California charter cities now have the power to set their own construction wages on municipal projects, as the state Supreme Court ruled Monday that charter cities will not have to comply with state mandated prevailing wages.

In a 5-2 decision, the Supreme Court did not overturn the state’s Court of Appeals ruling that allows the city of Vista to exercise control over its "municipal affairs," including whether a charter city should pay prevailing wages on contracts funded with local revenues.

“While we have been confident throughout this petition that the Supreme Court of California would uphold the Constitution of the state of California and the unique powers that it confers on local citizens who adopt charters, we are more than pleased with today’s ruling, as it acknowledges Vista’s right to exercise prudent fiscal controls resulting from its charter status,” said Vista City Attorney Darold Pieper.

The State Building and Construction Trade Council of California, comprised of 131 trade unions, was the group that brought the lawsuit against Vista, claiming that construction workers’ pay would go down substantially if the city did not have to comply with prevailing wages and thus hurt residents’ standard of living and the local economy.

“We had hoped that the court would understand that the downward pressure on wages in an entire region resulting from cities’ exempting themselves from the prevailing wage is very much a matter of statewide concern,” said State Building and Construction Trade Council of California spokesperson Sandy Harrison.

The city of Vista says it has saved approximately $2 million on its community construction projects because of the cost differential between prevailing wages and industry standard wages since becoming a charter city.

Supporters of prevailing wage regulations say they are an important element in ensuring that public construction projects do not destabilize the local construction industry and advance other priorities, such as work force development and sustainable building.

The city of Vista became a charter city in July 2007 after a 67 percent vote from residents.

The State Building and Construction Trade Council of California filed a lawsuit in December 2007 with the San Diego County Superior Court. This motion was denied, and the trade council was advised to take it to the state’s Court of Appeals. In April 2009, the court ruled Vista did not have to comply with California’s prevailing wage law since it was a charter city.

City officials say Vista became a charter city because it wanted more local control.

Any contractor may bid on city projects. However, the city has the right to look at the cost of what it will take to get the job done and award the bid based on that information.

Silvestre Rojas, research manager for the California department of Industrial Relations, said prevailing wages are based on wages from the private sector. Wages vary based on trade, labor market and type of construction project. The most frequent pay rate is used.

California enacted the state’s prevailing wage law in 1931 to require contractors on public works projects to pay “the general prevailing rate of per diem wages for work of a similar character in the locality,” according to the opinion.

The law was intended to prevent government contractors from undercutting the local labor market by importing cheap labor from other areas, according to the court.

There are 121 charter cities in California, including the two largest cities in the county, San Diego and Chula Vista.

-- Bloomberg News contributed to this report.

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