LCPtracker Blog

California Supreme Court Changes Prevailing Wage Rule for Charter Cities

Vista, Oceanside, San Marcos, Carlsbad and more than 100 other California charter cities don’t have to pay union-like wages on construction projects funded by local tax dollars, the state Supreme Court ruled Monday. Vista claims to have saved an estimated $2 million on labor by paying less than “prevailing rates” when it spent $100 million on a new city hall and other projects after voters approved a half-cent per dollar sales tax increase in 2006. State law says governments must pay prevailing wages in government contracts. The California Department of Industrial Relations sets those rates based on collective bargaining agreements throughout the state, meaning prevailing rates are, in essence, union wages.

Although charter cities have more leeway in how they run their government, local authority is limited to “municipal affairs.” At issue was whether wages set in local government contracts funded by local tax dollars was a municipal affair. The Supreme Court agreed it was.

The prevailing wage rule, however, still stands when state money is used on a local project, even in charter cities. Although the state does very little funding of local projects anymore.

Research shows prevailing wages do not increase costs on construction contracts, rather when contractors hire skilled workers being paid union wages, you get fewer on-the-job accidents, greater productivity, and better quality. More local workers are hired when prevailing wages rules are in effect.

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What others have said:

“The Supreme Court settled the legal questions but it only brought the public policy issues to the fore. The economics of prevailing wages are a settled question. Claims that removing prevailing wage will save on total construction costs simply don’t pass the laugh test. Prevailing wages remain the best value for taxpayer money on public works construction.” – Alex Lantsberg, AICP

“As an investigator who spent time in the trenches of a balanced open/union shop area, there was certainly a marked benefit to keeping PW in place.
In any event, the CA Supreme Court seemed to stage that local municipalities can set their rates for their contracts. This is only fair and just. The real meat is whether this municipality can Robson in a means that remains in compliance with the state law thus resulting in the same wages but determined and approved locally.” -Erik Mojica

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