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The California Supreme Court will hear oral arguments next week in a case where the State Building & Construction Trades Council of California challenges whether the City of Vista, a charter city, has the right to exempt contractors from complying with state prevailing wage laws.

A charter city, as opposed to a general law city, operates largely under its own set of rules, which trump state laws governing similar topics. A charter can be imposed by public vote or by the decision of elected officials. According to the League of California Cities, 120 of the state’s 478 cities operate under a charter.

The state legislature has adopted a resolution declaring the intention for prevailing wage laws to apply to all public projects, including those undertaken by charter cities. Further, Governor Jerry Brown, while acting as the state’s Attorney General, filed an amicus brief agreeing that prevailing wage laws apply to charter city projects.

Numerous other cities have considered adopting charter status, partially driven by a motivation to cut construction costs by reducing wages. Proponents have said such pay cuts can result in savings of 15-30%, while detractors in the labor industry point to a finding by the U.S. Census Bureau that indicates labor costs comprise less than 22% of the total expenditures on the average California construction project.

El Cajon is one of the cities that will be watching the proceedings closely, as residents there will vote in June on whether to adopt a charter, though they may not know before voting whether they’ll be able to eliminate prevailing wage provisions. A ruling from the Supreme Court on the matter should be issued within 90 days of the court date, scheduled for April 4, 2012.

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Comments

daviddenholm March 26, 2012 @ 8:24 a.m.

I almost wish that the court sided with the unions. That would increase public pressure to repeal this costly, depression era relic the real purpose of which is to keep construction unions on life support. It is without meaning to say that labor costs comprise 22 percent of project costs. That may be true of highway construction where project costs include land acquisition. The labor cost component of most new construction is about 30 percent. The percent of project costs for labor depends on the type of project. For repair and renovation projects, such as roofing or painting, labor costs can be in the neighborhood of 70 percent of project costs. That is where government agencies could save significant amounts of money while getting much needed work done and providing employment to small business contractors who under present circumstances don't even bid on prevailing wage work.

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Dave Rice March 26, 2012 @ 1:36 p.m.

Per the cited Census Bureau stats (which are admittedly dated, but such detailed info on the 2007 Economic Census wasn't readily available), $3.126 billion worth of business was done in the roofing industry in 2002, where the total payroll was about $845 million, or about 27% of costs. Painters were paid $880 million on $2.35 billion in projects, which equates to 37.4% of total costs.

Although these "specialty contractors," as the Census calls them, employ workers whose pay eats more than the average percentage of total job cost (road construction is indeed near the lowest cost-to-pay ratio at 18.5%), labor doesn't approach 70% in any sector. The 22% figure cited in the original post reflects a statewide average of all construction projects covered by the Census.

The suggestion that the case will draw public attention and cause demand for elimination of prevailing wages in general is an interesting one. This should especially be true in cities that have already adopted charters with the hopes of circumnavigating the prevailing wage laws and those, like El Cajon, that will soon consider whether to adopt charters themselves.

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FactChecker23 March 26, 2012 @ 2:28 p.m.

Thank you, Dave Rice, for going and finding a non-anecdotal, transparent, and publicly accountable source!

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SurfPuppy619 March 26, 2012 @ 8:41 a.m.

The CA Supremes will uphold the legislature. I think the "prevailing wage" law needs to be looked at how it is calculated, which currently is not the "prevailing wage" but the union wage.

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FactChecker23 March 26, 2012 @ 2:03 p.m.

Mr. Denholm: please follow the link instead of tossing out unsubstantiated numbers.

See for yourself that: (1) the 22% figure doesn't come from heavy/civil construction; (2) land costs are not included in the Economic Census-derived stat (and since when has the typical highway project entailed land acquisition costs??); and (3) residential remodelers' construction worker payrolls account for under 30% of that sub-industry's total "value added."

The arithmetic is not hard. I'll take statistics based upon the Census-compiled responses of tens of thousands of California contractors over your "in the neighborhood of ..." number any day!

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