UPDATE: My letter to the editor Kevin Dayton: Redding Needs a City Charter is in the February 4, 2013 Redding Record-Searchlight. Comments in response misrepresent “prevailing wage” as “living wage” just like at the Newport Beach City Council meeting on January 22, 2013. It’s possible that a political consultant has suggested using this strategy to take advantage of public ignorance about the calculation of “prevailing wages” and the resulting rates.
The City of Redding has been hit with a union-instigated obstacle to economic growth and job creation imposed by Senate Bill 975, enacted into law in 2001. This law (described below in greater detail) expanded the state’s definition of “public works” to include many private construction projects, thereby requiring companies working on these projects to pay state-mandated construction wage rates (so-called “prevailing wages”) instead of wages that reflect local market conditions.
On January 27, 2013, the California Department of Industrial Relations reversed an earlier decision from December 27, 2011 and determined that a proposed Sheraton hotel to be built in Redding by the Turtle Bay Exploration Park is a “public works” project after all.
This new decision was sought by three unions: the Plumbers & Pipefitters Union Local No. 228, the International Brotherhood of Electrical Workers (IBEW) Union Local No. 340, and the Sheet Metal Workers Union Local No. 162 (now absorbed into Sheet Metal Workers Union Local No. 104). As a result of a 22-page appeal of the original decision by the law firm of Adams Broadwell Joseph & Cardozo, the state has now decided that the privately-owned hotel would a public works project, equivalent to a courthouse, because the City of Redding waived rental payments on the land where the hotel will be built.
Now the proposed hotel project may be in jeopardy because the anticipated increased cost of construction may compromise the financial success of the hotel. A January 30, 2013 article in the Redding Record-Searchlight newspaper (Fate of Hotel at Turtle Bay in Limbo – Ruling: Park Must Pay Workers Prevailing Wage to build Sheraton Hotel) outlined the current status of the planned 130-room hotel:
…a park spokesman said he could not say when construction will start or whether the project is in jeopardy. Groundbreaking for the hotel had been scheduled this month.
“At this point we still hope to build the hotel, and operate a hotel there,” Turtle Bay’s Toby Osborn said Wednesday. “There is just a lot of uncertainty due to the ruling.”
…“Everybody woke up this morning and it was a different ballgame,” Osborn said. “Now we need to sit down and identify all the knowns and try to identify all the unknowns.”
But don’t worry, magnanimous union officials say they will help:
Andrew Meredith of the International Brotherhood of Electrical Workers Union Local 340 – one of the unions that appealed the ruling – said they were always confident the state would overturn its prevailing wage decision.
“That said, we are still committed to working with Turtle Bay to find a way to get this project off the ground,” Meredith said. “We know this is something that is important to the community.”
Turtle Bay met with the unions Wednesday to discuss how to move forward, including how the ruling will affect costs of building the hotel and restaurant.
What Is Senate Bill 975 and Why Is It an Obstacle to Private Construction Projects?
In 2001, Governor Gray Davis signed into law Senate Bill 975, a bill sponsored by the State Building and Construction Trades Council of California that expanded the definition of “public works” under California Labor Code Section 1720 to include many private projects. Existing law had defined “public works” as various types of construction “done under contract and paid for in whole or in part out of public funds.” Senate Bill 975 added a list of various kinds of non-monetary government assistance that qualified as public funds:
“paid for in whole or in part out of public funds” means the payment of money or the equivalent of money by a state or political subdivision directly to or on behalf of the public works contractor, subcontractor, or developer, performance of construction work by the state or political subdivision in execution of the project, transfer of an asset of value for less than fair market price; fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations that would normally be required in the execution of the contract, which are paid, reduced, charged at less than fair market value, waived or forgiven; money to be repaid on a contingent basis; or credits applied against repayment obligations.
As business groups and Republican legislators predicted, the increased costs of construction labor resulting from prevailing wage requirements triggered by Senate Bill 975 scuttled numerous private commercial projects and private affordable housing projects, especially in the Central Valley, North State region (Redding and Chico), and other rural areas.
In these parts of the state, away from the coastal metropolitan cities, the disparity between state-mandated construction wage rates (so-called prevailing wages but actually based on union collective bargaining agreements) and actual median wages in the local market region is quite significant – as much as 30% or more, depending on the trade. See An Analysis of Market and Prevailing Wage Rates for the Construction Trades in California (2004) and The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing (2005).
Unions Derailed an Easy Local Solution to This Problem in 2011
There has been an ongoing grassroots effort in Redding to ask voters to enact a charter in order to circumvent costly and intrusive state meddling in local affairs. A charter would free the City of Redding from the mandates of the union-controlled California State Legislature, including state-mandated construction wage rates (so-called “prevailing wages”). See Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?
In 2011, various local groups and individuals wanted voters to consider approving a robust charter, but union officials ultimately derailed the movement through a Charter City Exploratory Committee appointed by the city council.
The citizens of Redding need to enact a charter so their city has the same authority as the 121 California charter cities to establish its own prevailing wage policies. Why are the people of Redding acquiescing to the demands of unions and allowing the state legislature and a state agency to determine the fate of this hotel?
News Coverage of the Turtle Bay Hotel Prevailing Wage Saga:
Redding City Council Abandons Charter, Saves Prevailing Wage – State Building and Construction Trades Council web site – June 8, 2011
Cost of Turtle Bay Hotel Rests with Department of Industrial Relations; Prevailing Wage in Dispute – Redding Record-Searchlight – August 18, 2011
Turtle Bay Wins Ruling on Wages; Hotel Plan Not Subject to Prevailing Pay – Redding Record-Searchlight – December 28, 2011
Hotel construction cost estimates range from $13 million to $14.8 million. Total project costs are pegged at $21.2 million. Prevailing wage would have added roughly $1.25 million to that price tag, Osborn has said.
Hotel at Turtle Bay May Break Ground in January – Redding Record-Searchlight – December 12, 2012
Unions Win Prevailing-Wage Case vs. Turtle Bay – Redding Record-Searchlight – January 29, 2013
Fate of Hotel at Turtle Bay in Limbo – Ruling: Park Must Pay Workers Prevailing Wage to build Sheraton Hotel – Redding Record-Searchlight – January 30, 2013
One More Costly Delay on Road to Turtle Bay Hotel – Redding Record-Searchlight (editorial) – January 30, 2013
Turtle Bay Nearing Compromise with Unions Over Hotel Construction – Redding Record-Searchlight – February 7, 2013
Finally, the Redding Employees Association of the Service Employees International Union (SEIU) is now suing the City of Redding for approving a contract with Vertex Business Solutions (Orcom Solutions), a provider of outsourced billing and customer care services to utilities, to take over billing and a call center from the city-owned Redding Electric Utility. It appears this contract would have been umambiguously legal if Redding operated as a charter city. See Union Sues Redding Over Outsourcing REU Call Center – Redding Record-Searchlight – January 18, 2013.