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Project Labor Agreements - Why the Clamor Pro and Con? (continued from Home Page)


o   Prevailing Wages – Not really prevailing

"Prevailing wages" in the context of federal and state labor laws do not mean the market wage rate for similar jobs in a locality.

"All workers employed on public works projects must be paid the prevailing wage determined by the Director of the Department of Industrial Relations, according to the type of work and location of the project. The prevailing wage rates are usually based on rates specified in collective bargaining agreements." (California Department of Industrial Relations-Prevailing Wage Requirements)

Therefore, prevailing wages are union wages, perpetrated by the method by which such wages are determined.

o   Prevailing Wage Effect on the Local Construction Workforce

Smaller construction firms are typically not unionized, lack the personnel to deal with the cumbersome procedures of Davis-Bacon and other prevailing wage laws, and do not have the financial resources that can support inflated wages. Therefore, these firms usually do not bid for public works contracts.

A major criticism of prevailing wage laws came from one of the federal government’s own agencies, the Government Accountability Office. In an often-cited study that goes all the way back to 1979, the GAO said,

"When Labor's rates were higher than those prevailing locally, it was found that nonlocal contractors worked on most of the projects, indicating that the higher rates may have discouraged local contractors from bidding." (U.S. Government Accountability Office, The Davis-Bacon Act Should be Repealed)

A similar argument came from members of the 104th U.S. Congress who introduced a bill to repeal the Davis-Bacon Act. Although the bill died in the Senate, an accompanying Congressional report describes the effects of Davis-Bacon in detail, including,

"… One original purpose of Davis-Bacon--to prevent outside contractors from undermining local firms--has been turned on its head. Rather than protecting local firms, Davis-Bacon's inflated wage schedules disadvantage local firms and increase the likelihood that outside contractors will successfully bid for Federal projects… In addition, Davis-Bacon significantly limits job training opportunities for those on the lower rung of the disadvantaged." (Report to accompany Senate Bill 141 104th Congress)

It is important to remember that a local construction workforce - union or not - is made up of residents of a city, county or state. Construction workers pay the same taxes and depend on the same basic services as everyone else. If public works costs are high, it is their inflated cost too. Labor is a major cost in any endeavor, and inflated wages paid under public works contracts significantly raise the overall cost of these contracts. Obviously, it would not be fair to compare the cost of building a residential community with the cost of building a major dam without taking into account complexity and dangers involved. Therefore, responsible studies do consider type of project and other variables. Even so, public works costs under prevailing wages and PLAs prove more expensive. Numbers vary depending on locale, type of work, etc. Forbes says 10%:

"Researchers have determined that the Davis–Bacon Act raises the cost of federal construction projects by nearly 10 percent. States that have repealed their prevailing wage laws have also experienced large savings in construction costs."

It is also important to remember that union workers are only around 11 – 13% nationwide, and around 15-19% in California -- a case of the tail wagging the dog.

o   Project Labor Agreements (PLAs)

PLA’s are a good way to achieve the goals Davis-Bacon and the Prevailing Wage Law, but are a separate and additional prerequisite that public works projects usually require. They are also more complicated, less transparent to the general public, and their need more difficult to defend. PLA’s are a backroom deal entered into by the project owner and various unions. For example, here is some wording on the PLA drafted for construction of the Transbay Transit Center located in San Francisco. 

"2.1 This Project Labor Agreement is made and entered into this _____ day of __________, 2011 by and among the following parties with respect to Transbay Transit Center Program public work construction projects: (1) the Transbay Joint Powers Authority (the TJPA), (2) the unions (collectively, the Unions), (3) the San Francisco Building and Construction Trades Council (Council or Local Council), and (4) the Contractors (as defined in Article 3 below) who agree to be bound by this Agreement through a Letter of Assent."

2.2 Construction work covered by this Agreement shall be contracted exclusively to Contractors who agree to be bound by the terms of this Agreement by executing a Letter of Assent, attached as Appendix B."

This PLA is signed by the Transbay Joint Powers Authority and 28 unions. Contractors are requested to sign a "Letter of Assent," indicating they will abide by the PLA signed by the TJPA and the unions.

The above example of a PLA was designed to achieve, among other objectives, "timely and economical completion of these projects safely and without costly delays." We note that at its meeting of May 3, 2016, the San Francisco Board of Supervisors approved a $260 million bailout (from borrowed funds) for the Transbay project to cover costs overruns of 90% of original estimate. The project’s estimated cost was $1,189,000,000, but due to lack of economic bidders and incorrect assessments of costs, the new estimate is $$2,259,400,000.  Perhaps a more open and inclusive bidding process might have prevented the lack of economic bidders; especially since a 90% cost overrun seems evidence that a PLA is no guarantee of efficient work.

Non-union contractors can bid for projects, but must abide by the terms of PLAs, as well as deal with as much paperwork. Again a reminder of the tail wagging the dog.

o   Davis-Bacon and Prevailing Wages – Here to Stay?

Government funds that pay for public works are not produced like magic (except perhaps at the federal level); they are paid by fresh money from taxes, old money shifted from other projects and services, or borrowed money to be repaid in one way or another by our children. Also, there is a basic wrong when the 85% or so non-union workers are negatively affected by the 15% or so union workers. Therefore, unsurprisingly, although they must abide by federal Davis-Bacon mandates, some states have chosen not to have their own prevailing wage laws.

18 states without prevailing wage laws: Alabama - repealed in 1980. Arizona - repealed 1984. Colorado - repealed in 1985. Florida - repealed in 1979. Georgia – never had any. Idaho - repealed in 1985. Iowa – never had any. Kansas - repealed in 1987. Louisiana - repealed in 1988. Mississippi – never had any. New Hampshire - repealed in 1985. North Carolina - North Dakota - never had any. Oklahoma - invalidated by 1995 court decision. South Carolina – never had any. South Dakota – never had any. Utah - repealed in 1981. Virginia – never had any.

Also, states' prevailing wage laws are not all created equal - some are more onerous than others.  California's are particularly biased toward union jobs.  Therefore, if reform is desired, there is no need to throw away babies with bath waters by repealing all vestiges of prevailing wage requirements at all levels of government.  Changing the way prevailing wage is calculated at the state level to reflect the market rate of the locality in which jobs are performed might be a good way to start positive reform. 

o   How About PLA's - Are They Here to Stay?

As noted previously, Project Labor Agreements are a separate prerequisite, but seem bundled with prevailing wages in the minds of union advocates.  Detrimental effects of mandatory artificially inflated wages are the bane of prevailing wage laws, but that could be avoided by common sense determination of prevailing wages.  The effects of PLAs cannot be tweaked with a few common sense alterations.  The purpose of PLAs is simply to limit construction public works jobs to union members.  Unions are powerful political forces in some states, California included, and public officials are not generally inclined to offend them.  But, union membership has been dwindling, now standing at 11% - 13% nationwide.  There could come a day when non-union workers realize that this is a case of the few making rules for the many.  And there could come a day when union workers realize they are part of the same ecosystem as non-union. Then, PLAs might end of their own accord.

o   Union Workers Are Part of the Ecosystem

Union workers are part of the same ecosystem as non-union. If they inflate wages and benefits, they suffer the consequences like everybody else.  To support high-cost public projects, union members pay the same taxes as every other taxpayer.  Housing that becomes prohibitively expensive because of the high cost of production is as unaffordable to union as non-union workers.  Cost of living pushed up by artificially inflated wages makes putting food on the table harder for everyone, not just non-union. 

In this 1979 movie Norma Rae stands up for what is right.  We should all do the same today.

In this 1979 movie Norma Rae stands up for what is right.  We should all do the same today.

Labor unions have played a significant part in improving conditions for workers. No one wants to go back to the days of child labor or the 61-hour week. No one wants to go back to the days when a factory worker or a miner went to work at his own peril. However, it is time now to level the playing field once again, stop robbing Peter to pay Paul, bring on prosperity via healthy markets not mandated wages for a selected few.

We can start to choose fairness, equity, and prosperity for everybody by encouraging a more open bidding process in our cities, counties, and states.

Question Whether Joe Voter is Out of Luck (continued from Home Page)

“As with most people in the region, we cherish the Bay Area and seek to assure its beauty, livability, economic strength, and the opportunities it affords those who live here. We have concluded, however, that these qualities are in jeopardy because we have no effective means for addressing the problems that cross city and county boundaries. Only by some changes in the structure of government in the region can we tackle increasing traffic congestion, long commutes between home and job, shortages of affordable housing, loss of valued open space to urban sprawl, predictable air pollution, and deterioration of our economic base.” Ira Michael Heyman

Professor Heyman, member of many land use boards and at the time recently retired Chancellor of UC-Berkeley, headed the Vision 2020 Commission.  The above quote was his introduction to the commission's strategy report, as quoted in a 2015 article, How We Got Into This Mess.

Where Does Joe Voter Stand Today?

Advocates of regionalism would not bat an eyelash at Professor Heyman’s comment.  However, some folks might question whether “some changes in the structure of government” is indeed the sole solution, or might even question why the commission chose to lump together those diverse challenges.  Perhaps yet to come is lumping in of banking, since bank loans are useful to finance housing and commerce; or education, because children need to grow up fitting into the new order of things?  Also to be questioned is the role of Joe Voter in all this regional planning.  How will he express his wishes for what happens in his community?

A Roadmap for Economic Resilience, a strategy report produced by the Bay Area Council, might serve to provide answers regarding how all-encompassing the new kind of regionalism wants to be, as well where Joe Voter stands.  The 55-page report was created in 2012 “thanks to generous funding from the MTC and in-kind support from the Bay Area Council.” 

The report notes that even if all current efforts to address housing challenges were implemented,

“the region would still not get to the point where the amount of new units produced would be sufficient to stabilize home prices or bring them down to a level where they would be affordable to the majority of Bay Area residents. For that to happen, there needs to be a paradigm shift in how new housing is planned and permitted in the Bay Area. This would likely require limiting the ability of local jurisdictions to deny new housing starts if they have not met or are not on track to meet their RHNA obligations. That may take the form of a regional “by right” or ministerial approval process for all plan-compliant projects or the creation of a regional review body that has approval powers and is free from parochial politics and pressures.”

A Manual for Bypassing "parochial politics"

A Roadmap for Economic Resilience lays out very detailed proposals, some of which have already been accomplished or attempted since 2012 (think passage of the regional Measure AA, largely as a result of a campaign heavily funded by the Bay Area Council, and the failed attempt of California's Governor Brown to pass his housing “by right” legislation).  Here is a brief summary of the proposals:

A.  Secure regional infrastructure financing

1.  Give agencies power to go before voters to obtain tax revenues.
2.  Lower the threshold for county infrastructure tax measures from 2/3 to 55%.
3.  Create new fees, such as vehicle miles and user fees.
4.  Exempt infrastructure from environmental impact review.

B.  Implement new a housing approach

1.  Don’t plan, build, and severely penalize cities who fail to build its allocated share.
2.  Allow “in law units” in all residential districts.
3.  Share sales tax dollars across current jurisdictions to counter effects of Prop. 13.
4.  Lower the cost of building by streamlining processes.
5.  Reduce or eliminate parking requirements to leave more room for housing.

C.  Find new mechanisms to fund infrastructure and housing

1.  Adopt a financing plan legislatively, instead of requiring voter approval.
2. Issue bonds secured by tax increment financing on 55% voter approval.

B.  Create the “Bay Area Economic Development Partnership”

1.  Prevent parochial interests at the county level to stunt economic growth.
2.  Create a regional economic development partnership with businesses.
3.  Identify underused public land and use it for housing, commercial, industrial purposes.
4.  Obtain state grants, regionally-pooled taxes, and contributions from local governments.

C.  Workforce development

1.  Establish the “Bay Area Collaboration on Workforce Development”
2.  Identify skills needed, and inform job seekers, employers, and educators.
3.  Identify regional workforce issues, strategic solutions, and outcome metrics.

D.  Drive Greater Efficiency in Regional Transportation

1.  Unite regional transit.
2.  Implement regional management of traffic signals.
3.  Fund and expand multiple-ridership plans, such as carpooling.
4.  Implement new transportation technologies across current jurisdictions.

Is Paying Up and Shutting Up the Only Option?

These regional strategies, being developed since the 1940's, do in fact create changes in the structure of governments.  By empowering regional agencies to devise, fund, and implement policy, these strategies also deliberately leave Joe Voter without means to determine the future of this neighborhood, his city, or his county.  In essence, Joe Voter could find himself without a neighborhood, city or a county-- only a region to which he must adapt.

However, some of us do not subscribe to the idea that efficient systems can only be accomplished through all-powerful regional agencies. Efficient systems are created by efficient people, regardless of the structure of the entity for which they work.  The reverse is also true, poor systems are the result of incompetent people, whether they are unelected bureaucrats or elected city or county officials.  The difference is that people have a chance to deal with incompetent elected officials by simply throwing them out of office.

Therefore, if you are happy with what regionalists derisively call "legacy government structures," you do not have to pay up and be quiet, you can,

1.  Vote for people who have good plans to improve systems without destroying current jurisdictions.
2.  Vote NO on any proposal that funds regional agencies created to replace city and county-level decision making.
3.  Oppose enabling legislation, such as the recent housing “by right” proposal by Governor Jerry Brown.

Most of Us Are The 99% (continued from Home Page)

Public banks

There is only one in the United States, the Bank of North Dakota, owned by the state of North Dakota. Established in 1919, this bank operates pretty much independently. It holds state funds and finances state infrastructure, agribusiness, commerce, home mortgages, and higher education.  BND has operated profitably since inception, providing net inflows into state coffers.  The National Information Center lists BND not as a member or non-member of the Federal Reserve, but as “Domestic Entity-Other.” 

Although the Bank of North Dakota is a model bank, the conservative environment in which this bank operates largely accounts for its success.  Research by the Boston Federal Reserve says,

"The available analysis and anecdotal evidence indicate that BND puts a high priority on managing public funds prudently. BND is said to operate conservatively within an overall environment in North Dakota that favors conservatism. The formal separation between the financial accounts of BND and those of the state’s housing finance and economic development agencies serves as evidence that a key priority for BND is to maintain a strong and stable balance sheet.”

Would that be the case in California?  The Boston Fed visualizes what would happen in a progressive state,

“An alternative mission for a state owned bank might be to emphasize loans and investments that serve a social purpose but that the private sector would find too risky.”

Cash and Barter:  Always an option since time immemorial!

AB2492 and the Makings of a Perfect Storm (continued from Home Page)

The bar for considering a community "blighted" has been significantly lowered with AB2492, as indicated by the current required conditions for blight.

1.  An annual median household income less than 80% of the statewide, countywide, or citywide median income.  The authority gets to pick which metric to use.  In 2014 dollars, median statewide income is about $50,000.

2.  Three of the following four conditions,

a.  An unemployment rate of at least 3% higher than the statewide average unemployment rate.

b.  A rate of violent or property crime offences of at least 5% higher than the statewide average based on records kept by the law enforcement agency that has jurisdiction over the area.

c.  Deteriorated or inadequate infrastructure, including streets, sidewalks, water supply, sewer, and parks.

d.  Deteriorated commercial or residential structures

It appears that all that has to happen for the formation of a CRIA is for government to neglect a community enough that its infrastructure crumbles, policing disappears, and residents can’t find jobs nearby (possibly no adequate transportation provided for travelling to jobs elsewhere). 

A crucial tool of urban renewal is eminent domain.  Traditionally, eminent domain was limited to the taking of private property by governments for public development for the common good, such as building highways, for example.  However, in 2005, the U.S. Supreme Court decided under Kelo vs. the City of New London that governments could exercise eminent domain for private development also. 

Are we seeing a perfect storm yet?  We have newly created mini redevelopment agencies, “blight” easily manufactured, the exercise of eminent domain permitted for private development, an economy that at present offers great economic incentives for development, and “public-private partnerships” eager to acquire land at bargain-basement prices. 

It will be a miracle if our private homes and businesses survive the onslaught!  Unless residents who prefer to live in their own home, rent from people unencumbered by government deals, or own their businesses join forces in groups of like-minded folks.

By Right Approval Process - Why the Clamor (continued from Home Page)

Key parts of Governor Brown’s proposed Streamlining Affordable Housing Approvals are summarized below, and the text can be found here 

The legislature finds that there exists a severe shortage of affordable housing. 

There is an immediate need to encourage the development of new housing, not only through the provision of financial assistance, but also through changes in law designed to expedite the development process, assure that local governments zone sufficient land at densities high enough for production of affordable housing, and assure that local governments make a diligent effort to significantly reduce housing development costs.

There is also a need to “facilitate significant actions designed to affirmatively increase fair housing choice, furthering the objectives of the Federal Fair Housing Act.” *

Developments that satisfy certain criteria “shall be a permitted use by right.” By right approval “applies to projects that are consistent with objective general plan and zoning standards,” but are not subject to “discretionary local government review for qualifying” as affordable housing projects.

The criteria for by right approval of development projects are,
Attached housing located in urban sites and land-use restricted for at least 30 years or more.  Not located in farmlands, wetlands, very high fire hazard zones, hazardous waste sites, delineated earthquake fault zones, or flood plains.

If projects are within a transit priority area, at least 10% of total units reserved for lower-income households, and at least 5% of total units reserved for very low income households.

If projects are not within a transit priority area, at least 20% of total units reserved for individuals with incomes of 80% or less of area median gross income.

“If the applicable city, county, or city and county determines that the development is inconsistent with objective general plan and zoning standards, then it must provide the development proponent written documentation of which standard or standards the development is not consistent with, as well as explain why the development is not consistent with that standard or standards, all within thirty (30) calendar days of submittal of the development to the local government pursuant to this section.” 
“Any design review of the development shall not exceed ninety (90) days from the submittal of the development to the local government pursuant to this section, and shall not in any way inhibit, chill, or preclude the ministerial approval provided by this section and the effect thereof.”

“The Legislature finds and declares that this section shall be applicable to all cities and counties, including charter cities, because the Legislature finds that the lack of affordable housing is a matter of vital statewide importance.”