Charter Cities Can Exempt Themselves From Prevailing Wage Requirements For Locally Funded Projects

By William W. Abbott

In a notable decision narrowing the potential application of prevailing wage requirements, the California Supreme Court ruled that charter cities may exempt themselves from paying prevailing wages for locally funded projects. The case involves the City of Vista which, by voter approval, enacted a .5 percent sales tax to fund construction and renovation of several public buildings. At the time, Vista was a general law city. In 2007, the City Attorney advised the City Council that in the event that the City converted to charter city status, then the city would have the potential option of exempting itself from prevailing wage requirements for projects funded with the sales tax proceeds on the basis that locally funded projects were not matters of statewide concern, and pursuant to charter law authority, the city was not obligated to follow general statutory requirements. The City Council authorized a special election for the purpose of putting the vote before the electorate of conversion to charter city rule. The impartial analysis for the ballot identified, among other points, that charter city status would give the city the option to exempt itself from prevailing wage requirements. Similar points were made in the ballot arguments in favor of the ballot measure. The matter passed with 67% of the vote. Following passage of the measure, the City Council amended city procedures providing for an exemption from prevailing wages unless otherwise required by law.

In October of that year, the City approved construction contracts for locally funded projects, and no requirement for prevailing wage was included in the contracts. The state Building and Construction Trades Council filed suit seeking to enforce the prevailing wage requirements. The legal question turned on whether or not locally funded public works projects constituted municipal affairs which would not be subject to statewide general laws. The trial court rejected the union’s argument, as did the court of appeal in a 2-1 decision. The California Supreme Court granted a petition for review. Justice Kennard, writing for the majority, ruled for the City, concluding that there was an insufficient showing to support the argument that payment of prevailing wages on locally funded projects was a matter of statewide concern. Accordingly, the City of Vista, as a charter city, was not bound by the prevailing wage requirements for locally funded projects.

How this will play out remains to be seen. A significant portion of the state’s population is within the boundaries of charter cities. As union influence varies from city to city, it cannot be assumed that every charter city will immediately position itself as exempt from prevailing wage projects. Finally, projects funded with blended (state or federal and local funds) will not qualify, inviting charter cities to pursue structured projects, with locally generated funds separately earmarked and contracted out. State Building and Construction Trades Council of California, AFL-CIO v. City of Vista (July 2, 2012, S173586) ___Cal.4th ___.

William W. Abbott is a partner at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.

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