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Council moves to require prevailing wage on contracts

Facing the growing likelihood of a Sacramento-imposed deadline, members of the San Diego City Council have begun laying the groundwork for a proposal that would require all city contractors to pay prevailing wage rates to their workers.

The City Council’s rules committee this week asked the City Attorney’s office to prepare a draft ordinance for the prevailing wage by as quickly as possible, accompanied by an analysis by the independent budget analyst on how such an ordinance might affect project costs.

The goal is to present the ordinance to the council at the end of June.

The action comes a month after the State Senate’s Appropriation Committee unanimously approved SB 7, which would prohibit the state from providing funding for any construction project to a charter city -- which includes San Diego -- that allows contractors’ workers to pay less than the prevailing wage, which is meant to reflect the wage a majority of workers in a particular area get paid.

“SB 7 is a very real factor…,” Councilmember Marti Emerald said, urging that the rules committee create rules to comply with it as quickly as possible. “It’s pretty reasonable to assume that the state will impose restrictions for cities that do not pay prevailing wage. They will not open their wallets to us.”

Councilmember Kevin Faulconer said before he supports the bill, he would like to see how it would affect the city’s budget.

“I don’t look at Sacramento as a model on a variety of things for what we would be doing,” he said. “But the unfortunate reality is that Sacramento does things that affect us, often in a negative way.”

Paying the prevailing wage would likely involve a raise for many workers, especially in a big city like San Diego, where wages are pushed higher because of union contracts.

Currently, the only contracts in San Diego that require a prevailing wage are for water and sewer projects above $10 million, although it can also be imposed on other projects on a case-by-case basis.

Critics of the prevailing wage say it can raise labor costs by as much as 20 percent.

The Associated Builders and Contractors, a nationwide group that represents building companies, argues that one of the clearest ways for city governments to cut their spending “is to exempt contractors from paying costly state-mandated prevailing wage rates.”

But a string of speakers before the rules committee -- mostly representing labor unions -- cited studies showing that the impact on project costs is minimal and that the higher wages can have a positive impact on the overall economy.

For one thing, they said, labor costs typically represent only 20 percent to 30 percent of the entire cost of the contract.

And they argued that the cost of the higher wages would be offset by savings from greater productivity and greater skills among the higher paid workers.

"Research indicates that prevailing wage requirements reduce cost overruns," said Peter Brownell, research director for San Diego's Center on Policy Initiatives. "So you're not faced with the trade-off of doing the right thing for one group of workers at additional costs to taxpayers. Instead, you've got a smart policy that protects job quality and stimulates the local economy without increasing the cost to taxpayers."

Councilmember Mark Kersey, said he supported the concept of paying workers a fair wage, saying there was some merit to the arguments that “paying workers well leads to more quality work with fewer absences and sick days, meaning projects could potentially get done much quicker. As chairman of infrastructure committee, getting projects done quicker is something I would definitely be behind.”

But he said that before voting for the measure he would want to get a clearer idea of the overall costs involved.

In addition, studies suggest paying a prevailing wage will result in more hiring of local workers.

A study of contracts in the San Jose area showed that in Palo Alto, which had no prevailing wage requirement, only 12 percent of the jobs on a library contract were hired locally.

Instead, they were brought in from lower-wage communities. But in Gilroy, which requires prevailing wages, 70 percent of the workers on a similar library contract were hired locally.

Faulconer said that the idea of creating more local jobs is something he could support.

“We’ve spent a lot of time on the question of how we can promote policies that will give our local residents the ability to work on these contracts more,” he said.

Faulconer said he hopes that the Independent Budget Analysis can provide more information on that idea.

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1 UserComments
kristin wright 1:34pm May 17, 2013

Once again there is a lot of misinformation..We are a small manufacturer of cabinets and countertops for public works, mostly..I pay prevailing wages on ALL P.W.'s It is untrue the it is for just water and sewer..Once again this is strictly for the Unions who want to have a contract with any monies provided by the Bonds that people have voted in....It is not true that it is more cost effective..If I come in late on a porject I am subject to a fine of no less than 2500.00 per day..We have used Union people and they are not more qualified than my in house workers, quit the opposite..and by the way 20 -30% is not small..We pay p/r taxes plus Workmens Comp. Health Insurance and General Liablilty which is based on payroll...