Wage Reform Prevails in Truckee;
Other Prevailing Wage Reforms Pending

Apparently frustrated by the Legislature's slowness to reform prevailing wage requirements, the Sierra town of Truckee has exercised its right as a municipality to repeal the prevailing wage on local projects.

In a June 6 special election, Truckee voters approved a measure to incorporate the town as a charter city. Truckee, like most cities in California, had been a general law city.

According to the town clerk's office, the measure received 811 votes in favor, or 71.6 percent, to 322 votes, or 28.4 percent, opposed. Turnout was 19.7 percent of the town's 5,731 registered voters.

In California, cities incorporate either as charter cities or as general law cities. Charter cities are governed by a charter akin to a constitution, under which cities create their own government structure and adopt their own rules governing municipal affairs. In contrast, general law cities are governed by general laws enacted by the Legislature.

On public works projects, general law cities are obligated to pay prevailing wages set by wage scales adopted by the Director of Industrial Relations. Charter cities, however, are free to exempt themselves from prevailing wage requirements for projects funded by local funds and may establish their own standardized wage rates for contracted public works projects.

Any public works projects also involving state funds, however, would be subject to state prevailing wage requirements since they are not entirely within the realm of municipal affairs. Likewise, public works projects involving federal funds are subject to federal Davis-Bacon Act prevailing wage rules.

In Truckee's case, the charter city ballot measure was initiated for the purpose of exempting the town from state prevailing wage requirements. Over the next three to five years, the Town of Truckee plans a major repair and restoration project of its streets. Town officials estimate that the charter city exemption will save the town $3.2 million on a project that had been estimated to cost a total of $19.1 million.

With the addition of Truckee, 88 of California's 470 cities are chartered cities.

Truckee is not the only local government to consider prevailing wage reform. In November, San Francisco voters will vote on Proposition D. This initiative would amend the charter of the City and County of San Francisco to allow the Board of Supervisors to suspend prevailing wage requirements when public works are performed by a non-profit organization that provides job training and work experience for disadvantaged individuals. In addition to the involvement of a non-profit organization, one of two circumstances must be present: the organization has a board of directors appointed by the mayor or the organization exists primarily to design and build urban gardens, yards, and play areas.

Prevailing wage reform has gained increasing visibility in Congress and in the Legislature. In Washington, committees in both the House and the Senate voted to repeal the federal Davis-Bacon Act. In the Legislature, DIR is sponsoring Assembly Bill 138, as reported in the May-June edition of DIR Bulletin.

AB 138, sponsored by Assemblymember Jan Goldsmith and supported by Governor Pete Wilson, would conform California's more generous prevailing wage laws with the federal Davis-Bacon Act. AB 138 would change the method for calculating the prevailing wage in California from a modal method to the weighted average method used under Davis-Bacon. It also would require payment of prevailing wages on projects over $100,000 rather than the current $1,000 threshold, eliminate the "double asterisks" automatic escalation of wage rates which automatically increases prevailing wages if the wages used as the prevailing wage are based on collective bargaining agreements that include wage increases, limits prevailing wage coverage to workers directly employed on the public works worksite, eliminates the inclusion of travel and subsistence payments to covered workers under the prevailing wage, and, under specified conditions, authorizes a local agency to adopt a resolution exempting its public works projects from prevailing wage requirements.

DIR's analysis suggests that AB 138 would save state and local taxpayers between $200 million and $250 million annually. AB 138 failed on a 4-4 vote in the Assembly Labor and Employment Committee, but the sponsor has continued the legislation as a two-year bill for consideration next year.

Two of the reforms in AB 138 -- changing the methodology for setting the prevailing wage and eliminating the so-called "double asterisk" rule -- may be changed through the regulatory process. Changes through this process are under review and may be taken by DIR should the legislative route prove unsuccessful.