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Labor leaders and opponents of Prop A, the initiative to ban project labor agreements in San Diego, are touting a recent report from Fitch Ratings agency warning of negative impacts on the City's finances and bond ratings if the measure is approved.

"...In terms of overall funding for the city's capital needs, Fitch notes that voter approval of a June 5, 2012 ballot measure to prohibit project labor agreements could adversely impact the city's receipt of capital grant funding from the state, thereby creating more need for general fund support of capital projects," read the report from Fitch.

Former councilmember Donna Frye said the measure could have "a direct impact on the city's General Fund and Enterprise Funds. The entire measure is just a a 'solution' looking for a problem."

And while opponents of Prop A use the recent report to show the measure's flaws, supporters accuse the No on Prop A camp of "bullying" and trying "to intimidate San Diego voters into opposing Prop A and accepting union project labor agreements. Overemphasizing the Fitch report is another such scare tactic."

A spokesperson for Prop A says the report failed to mention the exemption allowing the ban on project labor agreements to be lifted when in conflict with state and federal laws. An exemption would also be granted upon the "condition of receipt of state or federal funds."

The spokesperson claims that labor agreements add unneeded costs to City projects and run afoul of the fiscal policies implemented by the current administration.

Fitch also reported on the city’s sound fiscal policies, under the leadership of Mayor Sanders, to demonstrate our City’s commitment to conservative financial management policies, multiyear budget planning, and general fund balance and reserves preservation.

"We believe Prop A’s protections against mandated expensive union construction contracts is in harmony with these sound fiscal policies. We wish Fitch had rated the risk of a Labor Union -backed City Council imposing expensive project labor agreements (which increase costs 15 percent) on general fund projects."

The Yes on A camp says there is evidence that similar measures have worked elsewhere.

"Fourteen states have enacted laws similar to Prop A. We wish Fitch had reviewed the economies of those 14 states and compared it to California’s stagnant economy and commented on the increased job creation that arises when fair and open competition is the norm in the construction industry.

"California state legislators are trying to undermine Prop A because they believe a union-dominated economy is the way to prosperity. We disagree. We believe an economy based on fair and open competition will create more jobs, which will increase our tax base, which will improve our general fund revenues."

Donna Frye shot right back after hearing the response from Prop A spokesperson with this message:

"The law that will withhold state grant funds if Prop A passes, SB 829, does not equivocate: State funding or financial assistance will be withheld if an initiative or ordinance "prohibits, limits, or constrains in any way" project labor agreements. This is why the State Controller and State Treasurer have all warned the city to not pass Prop A and it is singled out specifically by Fitch Ratings in a recent report under the heading, “What Could Trigger a Rating Action.” It states:

“Additional general fund support for debt currently reimbursed by redevelopment monies, the city's storm water program, and construction projects if state funding ceases due to possible voter approval of a ban on project labor agreements, could place downward pressure on the city's bond ratings.”

What Prop A backers are asking voters is to pass Prop A and trigger a multi-million dollar legal battle, on the taxpayers dime, to have the city defend the key provision of their ballot measure, which they now themselves say can't or won't be enforced? This defies reason, is an unbelievable risk to the city's resources and a core argument to oppose Proposition A."

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Comments

YesA June 3, 2012 @ 1:34 p.m.

For the record, on May 14, 2002, Councilmember Donna Frye voted to adopt SDMC §22.3002 to exempt the City from state control of the City's public contracting process. This exemption is permitted under the California Constitution and the California Public Contract Code (CPCC §1100.7).

Since San Diego exercised its charter city exemption - the California Public Contract Code (including the operative parts of SB 829) do not apply to San Diego.

Yes, it’s true that on April 19, 2012, during this election campaign, the State Legislature - on a party line vote- passed a law to try to neuter this constitutional protection for charter cities, but no Court has validated that law. There is nothing in the Fitch report that indicates this law could ever be enforced, it merely cites this as a risk along with the loss of redevelopment funds, depressed real estate market prices, and other contingencies.

In 2002, Frye voted for San Diego's independence from the State Legislature. But now, why does she think the State Legislature should control the City?

For the record, here is current City Law that Frye voted for on May 14, 2002. §22.3002 Relationship to State Law (a) Pursuant to Section 1100.7 of California’s Public Contract Code, the City Council declares that the City’s Public Contracts Code, or any portion thereof, is expressly exempt from the California Public Contracts Code. (b) In the interest of ensuring an expeditious and fair procedure for administering the award of its public contracts, the City in its discretion may follow portions of the California Public Contract Code, but absent a judicial finding that a particular aspect of local public contracting is a matter of statewide concern, the City is not required to do so.

Here is the State law Frye cites when she argues "the Sky is falling!"

Sec. 1100.7. This code is the basis of contracts between most public entities in this state and their contractors and subcontractors. With regard to charter cities, this code applies in the absence of an express exemption [like in San Diego] or a city charter provision or ordinance that conflicts with the relevant provision of this code.

Sec. 2503. If a charter provision, initiative, or ordinance of a charter city prohibits, limits, or constrains in any way the governing board's authority or discretion to adopt, require, or utilize a project labor agreement that includes all the taxpayer protection provisions of Section 2500 for some or all of the construction projects to be awarded by the city, then state funding or financial assistance shall not be used to support any construction projects awarded by the city. This section shall not be applicable until January 1, 2015, for charter cities in which a charter provision, initiative, or ordinance in effect prior to November 1, 2011, would disqualify a construction project from receiving state funding or financial assistance.

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