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HomeMy WebLinkAboutStaff Report 236-09TO: FROM: DATE: POLICY AND SERVICES COMMITTEE CITY MANAGER JUNE 29, 2009 DEPARTMENTS: PUBLIC WORKS UTILITIES CMR:236:09 REPORT TYPE: RECOMMENDATION SUBJECT: Policy and Services Committee Review and Request for Recommendation on Prevailing Wage Issues Related to City Capital Construction Projects RECOMMENDATION Staff recommends that the Council Policy and Services Committee recommend that City Council retain its current prevailing wage policy, allowing City "public works" projects to be bid without prevailing wage requirements unless prevailing wage is required for the project pursuant to state law, in light of the City's economic difficulties and to avoid additional cost impacts to the City's General and Enterprise Fund Capital Improvement Programs (CIPs). Staff also recommends a pilot study of potential prevailing wage impacts be conducted on selected CIPs where prevailing wage would be required, to determine whether the prevailing wage requirement impacts the number of bids, project costs, change orders and other factors. EXECUTIVE SUMMARY This report responds to the December 9, 2008 and March 10, 2009 discussions by the Council Policy and Services Committee and Ad Hoc Committee on Prevailing Wage regarding prevailing wage issues related to City capital construction contracts. At the December 9 meeting, the Policy and Services Committee (comprised at that time of Chairperson Kishimoto and Council members Barton, Drekmeier and Espinosa) indicated a strong interest in requiring prevailing wage on City capital construction contracts and directed staff to come back with additional information on possible exemptions to the proposed Council policy. At the March 10th meeting the Ad Hoc Policy and Services Committee (Chairperson Kishimoto and Council members Barton, Drekmeier and Espinosa) reviewed staffs proposed exemptions to the prevailing wage policy and recommended Council approve exemptions for projects involving volunteers and low income housing projects. The Ad Hoc Committee also directed staff to come back to the full Coun<;il with the proposed prevailing wage policy and with further information on possible exemptions for maintenance projects and projects involving public-private partnerships. On June 15th, the City Council adopted the 2010 budget which included several dramatic and unavoidable cuts to the City's operating and capital budgets. The adopted budget reduced spending in the Infrastructure Reserve by $2 million. In addition, the 2010 budget assumes additional reductions in staffing costs which have not yet been identified. Due to on-going budget challenges, staff recommends that Council retain the current prevailing wage policy, for CMR:236:09 Page 1 of7 now and direct staff to perfonn a pilot study where prevailing wage would be required on selected CIPs that are not subject to prevailing wage under the current policy. This will allow staff to collect "real-time" data on Palo Alto construction to better assess potential costs and quality impacts on projects where prevailing wage is a requirement. Although staff is not recommending a change in the City's prevailing wage policy at this time, this report provides additional infonnation as requested by the Ad Hoc Committee on Prevailing Wage regarding possible exemptions from a possible prevailing wage requirement for maintenance projects and projects involving public-private partnerships. BACKGROUND As a charter city, Palo Alto is not required to pay prevailing wages on "public works" projects, so long as the projects are within the realm of "municipal affairs", funded entirely by local funds, and no other statutory exceptions apply. This "home rule" principle allows decisions on expenditure of local funds to be made by locally elected officials. In 1981, Palo Alto passed a resolution to pay prevailing wage "only when required by federal or state grants and on other jobs considered to be of statewide concern." (see Attachment A, Resolution). Recently, charter cities' power to opt out of state prevailing wage law was upheld by California's Fourth District Court of Appeal in State Building and Construction Trades Council of California v. City of Vista, (2009) D052181. In 2007, the City of Vista, a charter city like Palo Alto, adopted an ordinance under which City contracts generally would not require payment of the prevailing wage. The Court held that state prevailing wage laws were intended "to keep state contracting from undermining what local markets have established." However, because an ordinance like Vista's would not materially interfere with the stability of the area's labor market, the effect of ordinances like Vista's were not a matter of statewide concern. Therefore, the court held that charter cities, like Vista and Palo Alto, retain the power to opt out of the state's prevailing wage law. The State Building and Construction Trades Council of California intends to petition the California Supreme Court to review this case. In the meantime, the Vista decision is still good law, and it affinns the City of Palo Alto's right to opt out of paying prevailing wage. Also relevant is SB 9EX, which the Governor signed on February 20, 2008, noting the (then) ongoing litigation in Vista. SB 9EX narrowed potential prevailing wage obligations for charter cities involving work on water, sewer, or stonn drain systems that have previously been extended to disadvantaged communities. Amid the recent debate over charter cities' prevailing wage requirements, on December 9,2008, staff presented to the Council and the Policy and Services Committee a recommendation that Council not change current prevailing wage policy, allowing City capital construction ("public works") projects· to be bid without prevailing wage requirements unless prevailing wage is required for the project pursuant to state or federal law, due to potential cost impacts to the City's General and Enterprise Fund Capital Improvement Programs (CIPs) (CMR 443:08, Attachment B). The Committee carefully reviewed this recommendation and decided it was in the best interest of the City to recommend to the full Council that a resolution be adopted requiring prevailing wage on all City capital construction contracts. The Committee also instructed staff to recommend types of construction contracts that could be considered for exemption from a CMR:236:09 Page 2 of7 prevailing wage requirement. Minutes of the December 9th meeting are attached (Attachment C). On March 10, 2009, staff presented to the Council Ad Hoc Committee on Prevailing Wage proposed exemptions from the possible prevailing wage policy discussed at the December 9, 2008 Policy and Services Committee meeting. The possible exemptions reviewed with the Ad Hoc Committee were: 1. Maintenance projects under $250,000 as defined by Section 22002 of the California Public Contract Code; 2. Projects using public-private partnership funding; 3. Projects that construct/rehabilitate affordable housing for people with low or moderate incomes; and 4. Projects where the work is performed either entirely or partially by volunteers. A detailed discussion of the above staff recommended exemptions can be found in the attached CMR:150:09 (Attachment D). At the March 10th meeting the Ad Hoc Committee on Prevailing Wage recommended that Council approve the staff recommended exemptions for projects where the work is performed entirely by volunteers, and low and moderate income housing projects. Minutes of the March 10th meeting are attached (Attachment E). The Ad Hoc Committee asked staff to come back to the full Council with additional information on possible exemptions for maintenance projects and projects involving public-private partnerships, as well· as clarification that the proposed exemption for affordable housing would apply unless otherwise required by law. Specifically, the Committee asked staff to present justification for the proposed $250,000 threshold for maintenance projects that is reflective of the dollar value of most maintenance contracts and not tied solely to the $250,000 threshold cited in Section 2.30.210 of the City's Municipal Code for Public Works projects requiring City Council approval. The Committee also asked staff to develop criteria for exempting public-private partnership projects that reflects the amount of City funding in these projects and addresses project administrative responsibilities. This information is discussed below for consideration by the Council Policy and Services Committee. DISCUSSION In its December 9, 2008 report (CMR 443:08, Attachment B) staff presented its research into the possible impacts requiring prevailing wage on City General and Enterprise Fund construction projects. This research indicated that prevailing wage could increase the cost of construction by up to 10%. Staffs research was based on surveys of other California cities, contractors working in the Palo Alto area, and review of the many studies conducted on this subject. This research also showed that there are additional administrative costs associated with prevailing wage contracts. Any further increase in contracting costs will limit the City's ability to address the growing $400 million plus infrastructure backlog and increase the cost to rehabilitate existing infrastructure, much of which is already well past its life expectancy and in a deteriorated condition. The 2010 budget adopted by the City Council includes several cuts in both the City's operating and capital budgets. Included in these cuts was a funding reduction of $2 million to the city's Infrastructure Reserve. Cost increases in Utility (Enterprise fund) projects could also result in the need for user rate increases. Because of potential for cost impacts, the City's continued CMR:236:09 Page 3 of7 overall budget challenges, and economic challenges in the region as a whole, staff believes that this is an inopportune time to change the City's current prevailing wage policy. To better assess the potential impact prevailing wage may have on construction cost and quality staff proposes to conduct a pilot study. The pilot study will select a few Capital projects where one of the bid requirements will be the payment of prevailing wage on the project. The bids received on these projects will be analyzed to determine: • If the imposition of a prevailing wage requirement had an impact on the number of bids received • If the prevailing wage requirement increased the project cost • If the number of change orders were increased or decreased by the prevailing wage requirement • If quality of construction was impacted by the prevailing wage requirement Staff proposes to return to the Council Policy and Services Committee next year with the results of the pilot study and further recommendations on the prevailing wage issue. Discussed below is the additional information on possible prevailing wage exemptions requested by the Ad Hoc Committee on Prevailing Wage at their March 10th meeting. Maintenance Proj ect Exemption Attachment F is a table listing all of the maintenance CIPs included in the 2009 Adopted five Year Capital Budget with their associated budgets and project category. The listed projects are budgeted at a level of $222,000 or less and all meet the definition of a maintenance project under Section 22002 ofthe California Public Contract Code (see page 3 of 6, CMR: 150:09, Attachment D). Many of the maintenance CIPs listed in Attachment F are annual projects where the budget is often carried from year to year. The construction contracts associated with annual CIPs are . typically $250,000 or less. Staff recommends that if the Council were to require prevailing wage on "public works" construction contracts they should also approve an exemption for City maintenance CIP contracts valued at $250,000 or less to ensure the City of having the broadest pool of bidders on these routine projects. This would keep bids competitive and will likely reduce costs for these critical building, parks, and utility system maintenance activities. Public-Private Partnership Exemption Staff met with representatives of the Friends of the Palo Alto Junior Museum and Zoo on March 30th and with representatives of the Friends of Lytton Plaza and the Palo Alto Art Center Foundation on April 1, 2009. Each of these groups has an ongoing public-private partnership with the City supporting their projects. At these meetings the proposed prevailing wage policy was presented and the potential impacts of prevailing wage on their projects was discussed. The upcoming planned projects at both the Junior Museum and Zoo (proposed 2009-10 CIP AC- 10000 New Bobcat Habitat) and Lytton Plaza Renovation (CIP PE-08004) will be managed by the respective private entity while the Art Center Improvement project (CIP PF-07000) will be managed by the City once design work is completed. The Friends of the Palo Alto Museum and Zoo are funding all oftheir project with donations (totaling over $505,000) while the City will be contributing $70,000 for resurfacing of zoo pathways. The Council approved letter of intent with the Friends of Lytton Plaza provides for a maximum City contribution of $350,000 for Lytton CMR:236:09 Page 4 of7 Plaza improvements with the Friends of Lytton Plaza responsible for 50 percent or more of the additional funding that will be needed for this project. The City will be funding more than 50 percent of the Art Center project. The private groups that will be funding the majority of their projects and also managing project design and construction (Junior Museum and Zoo and Lytton Plaza) are very concerned about the potential of prevailing wage requirements increasing the cost of their projects. They are also concerned that the administrative requirements associated with ensuring contractor compliance with prevailing wage requirements would likely impose a burden on private entity project managers that they are not prepared to undertake. On the other hand, the Palo Alto Art Center Foundation indicated that they would be in a better position to comply with the proposed prevailing wage policy since the City will be contributing over 50 percent of project funding and managing project construction. Attached is a letter from the Friends of the Palo Alto Junior Museum and Zoo and two emails from the Friends of Lytton Plaza asking that their projects be exempt from the proposed prevailing wage policy (Attachments G and H respectively). Staff recommends that if the Council were to require prevailing wage on "public works" construction contracts they should also approve a Public-Private Partnership exemption that would exempt Public-Private Partnership projects where the private party is the lead entity managing the project design and construction and the private entity funds at least 50 percent of the project cost. RESOURCE IMPACT The Adopted FY 2010 Capital Budget includes an estimated $56.1 million in General Fund construction and $32.1 million in Enterprise Fund construction that would require prevailing wage in their construction contracts if Council were to change the City's prevailing wage policy. These amounts can be seen in Attachments J and K and do not include total project costs such as design services contracts which would not be subject to prevailing wage in most cases. The construction costs of maintenance projects under $250,000 and Public-Private partnerships where the private entity funds at least 50 percent of project cost and manages the project, are not included in the above totals (see footnotes 1, 2, 3 and 5 of Attachment J). The FY 2010 General Fund projects include $50.5 million for Mitchell Park and Downtown Measure N Library bond projects and the FY 2010 Enterprise Fund projects include $22.5 million for the Utility Department Emergency water supply project. The remaining four years (FY 2011 through FY 2014) of General and Enterprise Fund projects included in the Adopted Capital Budget are also included in the attached tables. Both total project and construction costs for these projects are shown in the attachments. Attachments J and K also show the potential increased cost impacts on the City's ClP project if the City's prevailing wage policy is changed. As discussed above, staffs research indicates that prevailing wage may increase construction costs by up to 10 percent. While other studies have been conducted which indicate no such impact on project costs, based on the study conducted by staff, one can see that the FY 2010 General Fund construction costs may increase by $2.8 million if prevailing wage caused a 5 percent increase and by as much as $5.6 million if prevailing wage caused a 10 percent increase in construction costs. Similarly, the FY 2010 Enterprise Fund construction costs may increase by $1.6 million at 5 percent and $3.2 million at 10 percent. Attachments J and K also show the possible construction costs increases in the FY 2011 through CMR:236:09 Page 5 of7 FY 2014 General and Enterprise Fund CIP's at both the 5 percent and 10 percent levels. Again these data would be re-evaluated upon completion of the proposed prevailing wage pilot study. POLICY IMPLICATIONS To require prevailing wage to be paid on City capital construction projects Council would need to adopt a resolution rescinding resolution 5981 and codifying the new prevailing wage policy and any exemptions Council chooses to include. A sample resolution is attached as Exhibit I. ENVIRONMENTAL REVIEW The Council Ad Hoc Committee on Prevailing Wage review of the prevailing wage policy issues presented in this report does not represent a project under the California Environmental Quality Act (CEQA), pursuant to Section 21065 of the Public Resources Code, thus, no environmental review is required. ATTACHMENTS Attachment A: Resolution 5981 Attachment B: CMR: 443:08 Attachment C: Minutes of December 9,2009 Policy and Services Committee meeting Attachment D: CMR:150:09 Attachment E: Minutes of March 10, 2009 Ad Hoc Committee on Prevailing Wage meeting Attachment F: Table of Maintenance Capital Improvement Projects Attachment G: Letter for Friends of Palo Alto Junior Museum and Zoo Attachment H emails from the Friends of Lytton Plaza Attachment I: Draft Resolution -Requiring the Payment of Prevailing Wage on City Capital Construction Contracts with Certain Exemptions Attachment J: City of Palo Alto 2010-2014 CIP Plan General Fund Attachment K: City of Palo Alto 2010-2014 CIP Plan Enterprise Fund PREPARED BY: MIK SARTOR Assistant Public Works Director ~ ~Iwttf~ DEPARTMENT HEADS: CMR:236:09 TOMM MARSHALL Assistant Utilities Director JLl11,J-J GLENN ROBERTS . Director of Public Works Director of UtI ltles Page 6 of7 CITY MANAGER APPROVAL: CC: Neil Struthers, Santa Clara and San Benito Building and Construction Trades Council Nicole Goehring, Associated Builders and Contractors, Golden Gate Chapter Aletha Leong Coleman, Friends of the Palo Alto Junior Museum and Zoo Barbara Gross, Friends of Lytton Plaza Leland D. Levy, Friends of Lytton Plaza CMR:236:09 Page 7 00 • • ORIGINAL AT RESOLUTION NO. 5981 RESOLL~ION OF THE COUNCIL OF THB CITY OF PALO ALTO ESTABLISHING POLlcr REGARDING PRBVAILING WAGES FOR PUBLIC PROJECTS WHEREAS, in the recent case of Vial v. City of San Die';1o (175 Cal.Rtpr. 647, July, 1981), the California Court of Appeal determined that the subject of ·prevailing wages" is a municipal affair and that Charter cities are not subject to the prevailing wage requirements for public works projects set forth in the California Labor Code; and WHEREAS, it is in the Ci ty' s best interest to obtain the lowest responsible bid for public projects; NOW, THEREFORE. the Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. It is approp~iate to use the Davis-Bacon Act or State Department of Industrial Relations Wage Determinations only when re- quired by federal or state grants and on other jobs considered to be of statewide concern. SECTION 2. The Council finds that this is not a project under the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: December 14, 1981 AtES: Bechtel, Eyerly, Fletcher, Henderson, Klein, Levy, Renzel. Witherspoon NOES: None ABSTENTIONS: None ABSENT; Fazzino Ci~erk·i APPROVED AVTO FORM: ~b,.~ ~Attorney APPROVED: v'i~or~ CHMENTA TO: ATTN: FROM: DATE: ATTACHMENT B CITY COUNCIL POLICY AND SERVICES COMMiTTEE CITY MANAGER DECEMBER 9, 2008 DEPARTMENTS: PUBLIC WORIKS UTILITIES CMR: 4413:08 lREPORT TYPE: lRECOMMENIDATION SlIJBJECT: Revnew and Requestt :!for Recommendation on PrevaHiDllg Wage Issues ReRattedto City Capitan Construdnon Projects lRECOMMEN])A TION Staff recommends the Council Policy and Services Committee recommend that Council not change current prevailing wage policy, allowing City "public works" projects be bid without prevailing wage requirements unless prevailing wage is required for the project pursuant to state law, due to potential cost impacts to the City's General and Enterprise Fund Capital Improvement Programs (CIPs). EXECUTIVE SUMMARY At City Council's request, staff reviewed many of the issues surrounding prevailing wage rates and summarized the findings below. Staff recommends, due to potential cost impacts to the General and Enterprise Fund Capital Improvement Programs (CIPs), Council not change the City's current prevailing wage policy. This recommendation is made primarily due to the costs needed to address the current General and Enterprise Fund infrastructure program backlog and the additional cost of funding 'a new Public Safety Building and a new Library and Community Center at Mitchell Park and Library improvements at Main and Downtown Libraries as Ii result of recent passage of Measure N. Any further increase in costs will impact the City's ability rehabilitate existing infrastructure, much of which is already well past its life expectancy and in a deteriorated condition. In addition, a prevailing wage requirement could also apply to the many private/public partnerships the City is involved in such as Lytton Plaza, Art Center and possibly the Junior Museum ~d Zoo. The California Court of Appeal is currently hearing an appeal in the City of Vista case, where the City of Vista, a charter city like Palo Alto, is defending its' choice not to pay prevailing wage on its locally funded "public works" projects. BACKGROUND On September 17, 2007; City Council approved a contract with Anderson Pacific for a Water Quality Control Plant (WQCP) pump station upgrade related to the reclaimed water pipeline project running from the WQCP to Mountain View (CMR:364:07). Council approved the contract contingent on the contractor assuring the City they would pay their employees prevailing wage on the project. In a related motion Council directed staff to bring the prevailing CMR:443:08 Page 1 of8 wage discussion to the Council Policy and Services Committee (see Attachment B, minutes of September.J 7,2007 Council meeting). What are Prevailing Wage Rates? The intended purpose of prevailing wage law is to ensure that public construction projects do not lower local wages by allowing contractors to pay wages below the local standard. In 1931, Congress passed the Davis-Bacon Act, which mandated the payment of prevailing wages on all construction projects that receive more than $2,000 of Federal funds -an amount that has remained unchanged today. In subsequent years, especially during the Great Depression, many states and localities passed similar prevailing wage laws; Most states, including California, now have such laws. Prevailing wages are determined in many different ways across the country. The Federal and California Prevailing Wage calculations are similar because if more than 50% of the workers make the same wage this becomes the prevailing wage for the trade. They differ in the calculation when less than 50% of the workers have the same wage. The Federal Law determines the prevailing wage by averaging all the wages, whereas in California the most common wage occurring becomes the prevailing wage. California's calculation method usually results in a slightly higher wage than the Federal calculation method. . California passed its prevailing wage law in 1931, the same year the federal Davis-Bacon Act was passed. California Labor Code § 1771 requires that any "public works" project that receives more than $1,000 in state funding pay prevailing wages. The Labor Code defines "public works" to include construction, alteration, most demolition, installation or repair work done under contract and paid for in whole or part out of public funds. All capital improvement projects done by the City, including those managed by the Community Services, Utilities or the Public Works Departments are considered "public works" under this law. Although California's prevailing wage law applies to all of California's "general law" cities, charter cities are permitted to elect whether to pay prevailing wage on locally funded public works projects that qualify as municipal affairs. DISCUSSION Prevailing Wages in Charter Cities The California Labor Code requires that public agencies pay prevailing wages, as determined by the California Department of Industrial Relations, on most public works projects. As a charter city, Palo Alto is not required to pay prevailing wage rates on "public works" projects, so long as the projects are within the realm of "municipal affairs," are funded entirely by local funds, and no other statutory exceptions apply. This "home rule" principle, grounded in the California Constitution, allows decisions on expenditure of local funds to be made by locally elected officials. Utilities Enterprise Fund projects are often deemed to be "public works" projects in this context. Since no precise definition of what constitutes a "municipal affair" has been judicially settled, courts consider the issue on a case by case basis. The expenditure of city funds on local projects and the rates of pay of the workers the City hires to carry out such projects has been held to be a municipal affair. In 1981, Palo Also passed a resolution to pay prevailing wage "only when required by federal or states grants and on other jobs considered to be of statewide concern." (See Attachment A: Resolution 5981). Page 2 8 Recently, courts have blurred the issue of whether a charter city may elect not to pay prevailing wage. For example, in 2004, the California Supreme Court in City of Long Beach v. DIR, declined to decide whether prevailing wage law is such a matter of statewide concern that it should override the ability of charter cities to conduct their municipal affairs. Since then, labor unions have mounted a statewide campaign to overturn existing law and declare prevailing wage a matter of state concern. The charter city of Vista is currently defending its choice not to pay prevailing wages in a lawsuit brought by the State Building and Construction Trades Council. Although the trial court reluctantly ruled in favor of Vista in December 2007, the case is pending on appeal. A detailed summary of the case is included in this report's discussion below. These recent judicial developments led the City Attorney to recommend that Palo Alto pay prevailing wages on regional projects that transcend the city's geographic boundaries, even if these projects could be considered municipal affairs. Capital improvement projects related to the City's Water Quality Control Plant (WQCP) fall into this category. Some Charter Cities have created special categories where they do not pay prevailing wages on low-income housing and maintenance type projects, but do pay prevailing wage on construction projects. To date, Palo Alto has not made this distinction. Summary of Staff Research Staff found that there is considerable disagreement on the impacts of prevailing wage rates on project quality found in studies cited by the union groups and builder trade groups. Studies by government agencies, however, concluded that paying prevailing wage rates do not significantly change the quality of construction on most projects. In a survey of contractors, it was reported that requiring the payment of prevailing wage rates could reduce the quantity of bidders on projects by about 20% percent. Most contractors that are not paying prevailing wages, which make up about 50% of the contractors responding to the survey, will bid prevailing wage contracts. In the majority of cases, the makeup of their workforce does not change to accommodate prevailing wage requirements. In its surveys of both contractors and other cities, staff found that implementing prevailing wage rates in construction contracts may increase construction costs on City capital improvement contracts by up to 10%. This increase would also affect projects involving private/public partnerships. The following sections present a summary of the studies related to prevailing wage reviewed by staff and the results of surveys of other cities and contractors. The pending City of Vista case related to the charter city exemption from prevailing wage is also discussed below. Studies on the Effects of Prevailing Wage A number of academic and government studies have examined the . costs and benefits of prevailing wage. Generally, these studies fall into three different camps: Pro-prevailing wages studies, issued by University-level academics, and construction trade organizations. Anti-prevailing wage studies, issued by University-level academics, and various policy institutes. Government studies, issued by the States of Ohio and Kentucky legislative commissions. CMR:443:08 Page 3 of 8 Staff reviewed seventeen such studies, both pro-prevailing wage and anti-prevailing wage, and studies prepared by government organizations. Summaries of these studies are included in the attached memorandum dated February 15,2008 (Attachment C). Studies by government organizations provide some of the most interesting insight into the issue of prevailing wage. These studies should, in theory, have no agenda beyond uncovering what is in the best interest of taxpayers. All of the studies examined indicated that prevailing wage laws do not save money. Some studies did, however, equivocate about whether the benefits of prevailing wage once other unquantifiable factors were taken into account .-may be higher than the costs. The two most-referenced government studies are both studies conducted by state legislative research offices, in Kentucky and Ohio. In Ohio, its Legislative Service Commission issued a study analyzing the effect of a 1997 bill that exempted school districts from being forced to require prevailing wage. The study, which asked contractors for bids under and not under prevailing wage conditions, found that repeal did save money -especially on smaller projects. It asserts that the exemption yielded 1.2 percent in total cost savings in new construction, 10.7 percent savings on building alteration projects and 19.9 percent savings on building additions. This conclusion seems to strongly support the notion that the smaller projects have greater savings when prevailing wages are not required. Furthermore, the study surveyed school districts to discover if they had noticed any decrease in the quality of construction. Six percent of respondents said that they had noticed higher quality construction since the exemption, 91 percent noted no change and 3 percent said quality had decreased. In one very unique case, the survey discovered that one school district had put a project out to bid under prevailing wage conditions and then rebid the project without such requirements. The winning bidder in the second case, without prevailing wage, was 5.8 percent lower, yielding a cost savings of more than $500,000. In Kentucky, the legislature also ordered its research arm to study the issue of prevailing wage. The study made a notable number of findings, including learning that 60 percent of workers surveyed were paid more on prevailing wage jobs than on market-rate jobs; the average increase for prevailing wages was 24 percent over the workers' market rates. Among the 141-page report's other findings were: II 90.7 percent of non-union and 24.4 of union contractors said prevailing wage laws raise construction costs. II 55.4 percent of small firms (10 or fewer employees) said prevailing wage laws have a negative effect on their business, compared to 73 percent of large firms. II 95.7 percent of cities and 83.3 percent of municipal utilities that responded believe prevailing wage laws increase construction costs, while, respectively, 7 and zero percent believe laws increase quality. II More cities believed prevailing wage legislation decreases -not increases -quality of construction. It is worth noting that the report did not call for the abolishment of prevailing wages in Kentucky. The report did not take an opinion on the issue. Its main overall conclusion on the effectiveness of the legislation, however, is as follows: To the extent that quality is increased, prevailing wages are an inefficient method to increase quality. The wage requirement results in contractors paying higher wages with no guarantee that these additional wages will result in quality improvements. Aside from the Kentucky and Ohio reports, there are a number of smaller government reports on the topic. The Federal Congressional Budget Office (CBO) and General Accounting Office (GAO) have both issued reports on prevailing wage, with the GAO asserting that repealing the Davis-Bacon Act would save $1.2 billion annually. The CBO study, written during the early 1980's, was likely the impetus that caused the Reagan Administration to change the definition of prevailing wage to the wage earned by 50 as opposed to 30 -percent of local wage earners. It found that repeal of Davis-Bacon would save $13 billion (2007 dollars) over five years and that some 20 percent of open shop contractors have no interest in bidding on prevailing wage contracts. It also recommended raising the threshold at which the prevailing law is triggered, as the $2,000 trigger was set in 1931 and has never been increased. The final government study of note is another state legislative study -Maryland in this case - conducted in 1997. Maryland's Department of Fiscal Services, which issued the study, asserted that repeal of the prevailing wage law then on Maryland's books would save the state between 5 and 15 percent on public works construction. Survey of California Cities To further examine the policies of other California municipalities regarding prevailing wage law, staff surveyed dozens of other cities on the topic. The survey was sent out to all members of the Association of Bay Area Governments, as well as to all Charter Cities that had email addresses available. Forty-eight municipalities responded to the survey. Usually, the respondents were public works officials, though a few city managers replied as well. A short summary of the findings follows and the more detailed results are included in' Attachment C. • 42 of 48 cities surveyed pay prevailing wage rates. " 26 out of 32 Charter Cities pay prevailing wage rates. It Based on the survey results, staff estimates that paying prevailing wages may increase construction costs in the range of 5% to 10%. • A large majority of the respondents believe that paying prevailing wages does not increase quality of the work. • Most believed that requiring prevailing wages decreases the number of bidders on projects. • Some cities have exceptions to paying prevailing wages for certain types of contracts. The responding cities were also asked tq provide comments on the positive and negative effects of paying prevailing wages. These are summarized below: Positive Effects •. Supportive of labor • Evens the playing field • Assures that workers are being treated and paid fairly • Higher wages allow people to live closer to work • More professional bidding pool CMR:443:08 Page 5 o Higher-quality work Negative Effects <II Higher costs i!I Fewer projects can be built It Need for extra staffing and paperwork for compliance monitoring (II Smaller pool of bidders Survey of Contractors The Staffs research on prevailing wage did provide a number of insights into the views of construction contractors on the topic of prevailing wage legislation. In addition, staff conducted a survey of contractors bidding work in Palo Alto to best judge the impact a change in Palo Alto's prevailing wage policy would have on construction projects in Palo Alto. A summary of the survey results follows: • Approximately 50 % of the c;ontractors responding pay prevailing wages on all contracts. .. Most contractors that do not typically pay prevailing wage rates will bid prevailing wage contracts. (t 70% of the contractors not paying prevailing wage rates use the same labor force when bidding prevailing wage contracts. It The average of the estimated increase to construction costs associated with paying prevailing wage rates was approximately 8% according to the contractors responding to the survey. City of Vista Court Case As discussed previously, the Charter City of Vista is currently defending its decision not to pay prevailing wages in a lawsuit brought by the State, Building and Construction Trades Council. The outcome of this case will be very important, as it could determine whether charter cities can continue to exercise their ability to locally determine whether to pay prevailing wages on local projects. Some background on the case is illustrative. In June 2007, Vista became a Charter City. Before the election, the City prepared a fact sheet discussing common questions regarding the Charter City proposition, including questions and answers regarding the potential tax savings on local public works projects should the City chose to forego prevailing wages on municipal projects. 67% of Vista voters approved the decision to become a Charter City. Vista plans on completing about $100 million in public improvements in the near future; projects which would traditionally be considered within the. realm of "municipal affairs" and paid from local revenues. The State Building and Construction Trades Council of California, a labor union, challenged Vista's assertion that it was exempt from prevailing wage law, arguing that the prevailing wage statute is of statewide concern. Although the trial court reluctantly found in favor of Vista, in issuing his ruling, the Superior Court judge stated that were he not bound by a preceding case, Vial v. City of San Diego, he would have been inclined to grant the union's petition. The Vial decision stated that prevailing wage law does not apply to public works projects of a chartered city, "as long as the projects in question are within the realm of 'municipal affairs.'" CMR:443:08 Page 6 The judge in Vista, however, contended that instead of focusing on the project, a more appropriate analysis would involve whether the prevailing wage statute is a matter of statewide concern. Had the court not been obligated to follow Vial, the court acknowledged that it would have found that the prevailing wage law is a matter of statewide concern and that Vista was therefore bound to follow the law in relation to its pending public works projects. The petitioner's appeal is currently pending before the California COUli of Appeal and oral argument was heard on Friday, November 14,2008. A decision is expected in the next two months. Should the court frame the question as suggested by the superior court, and ask whether the prevailing wage statute is a "statewide concern," it is possible that the Court will answer that question affirmatively, thereby overruling or limiting the Vial decision. The California Legislature has previously declared that the prevailing wage statute addresses two important statewide concerns: (1) it prevents public projects from driving down area labor standards and (2) it ensures training opportunities for apprentice construction workers. Even if Vista wins on appeal, observers expect this case will eventually be appealed to the California Supreme Court. A California Supreme Court decision would not be expected on this case for at least another year. The City Attorney's Office will keep Council informed on the status of this case. RESOURCEIMPAC1' The Adopted 2009 Capital Budget includes about $11.5 million in General Fund projects and about $28 million in Enterprise Fund projects that are not now or will not require prevailing wage in their construction contracts. The Enterprise Fund projects include those under the electric, water, gas, wastewater collection, storm drainage and refuse fund programs. Projects constructed by the Wastewater Treatment Fund already require prevailing wage as discussed above and would not be impacted by a change in Council policy. If staff research proves correct, the costs of the 2009 General Fund projects could increase by as much as $1 million and the 2009 Enterprise Fund projects could increase by as much as $2.8 million if Council were to adopt a policy requiring prevailing wage rates be paid on all capital construction projects contracted by the City. It also should be noted that any private/public partnership agreements entered into by the City for capital construction would also require payment of prevailing wage rates on these construction projects (e.g. Art Center, Lytton Plaza, Junior Museum and Zoo). POLICY IMPLICATIONS The recommendation does not change existing policy. If Council were to change policy and require prevailing wage be paid on all City capital construction projects, Council would need to adopt an ordinance codifying such a requirement. ENVIRONMENTAL REVIEW Policy and Services Committee review of the prevailing wage policy issues presented in this report does not represent a project under the California Environmental Quality Act (CEQA), pursuant to Section 21065 of the Public Resources Code. CMR:443:08 Page 7 of8 ATTACHMENTS Attaclunent A: City of Palo Alto Resolution 5981 Attaclunent B: Minutes of September ·17, 2007 City Council meeting Attaclunent C: Prevailing Wage Rate Issues Memorandum of February 15,2008 PREPARED BY: DEPARTMENT HEADS: CITY MANAGER APPROV AL: CMR:443:08 Assistant Utilities Director hL~,' GLENN ROBERTS Director of Public Works Page 8 of8 ATTACHMENT C POLICY AND SERVICES COMMITTEE Regular Meeting December 9, 2008 Chairperson Kishimoto called the meeting to order at 7:01 p.m. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Barton, Drekmeier, Kishimoto (chair), Espinosa Absent: None 1. Oral Communications None. 2. Review and Request for Recommendation on Prevailing Wage Issues Related to City Capital Construction Projects Assistant Public Works Director, Mike Sartor presented a staff research report related to the prevailing wage issue and City Capital projects. He stated prevailing wages pertain to Public Works contracts which include Utilities, Capital Improvement Projects and Public Works General Fund and Enterprise Fund Projects. He explained that as Palo Alto was a Charter City, it was not required to pay prevailing wage unless the project involved Federal or State Grant funding, Gas Tax Funds or other non-local funding sources. Council Member Barton asked whether the potential' for cost increase was at the bid process or the total at the end of a project. He stated there were bid numbers and the true cost of a project. He stated he would not be supporting the recommendation. Mr. Sartor stated the study was based on the review of completed projects. 12/09/2008 P&S 1 Vice Mayor Drekmeier asked whether the income levels of prevailing wage were that of a medium income versus average income. Mr. Sartor stated the State determined the prevailing wage based on individual labor categories. For example carpenters in Santa Clara County, the State takes a look at wages for carpenters throughout tl1e entire County then take fifty percent of the highest wages being paid and establish that as the prevailing wage. Vice Mayor Drekmeier clarified the breakdown of wages was by county. Mr. Sartor stated yes, by the Department of Industrial Relations. Vice Mayor Drekmeier asked whether Palo Alto currently had policy on union wages. Mr. Sartor stated no. Vice Mayor Drekmeier asked whether there was a forum to view municipality rating systems for contractors. Mr. Sartor stated the purpose of the survey was to verify any quality impact. Vice Mayor Drekmeier asked how to determine whether a contractor had poor quality of work. Mr. Sartor stated reference checks and checking with other municipalities. The bid process require statements of qualifications and experience of similar types of projects. Vice Mayor Drekmeier asked the impact of the economy on the timeline for moving forward with the prevailing wage. Mr. Sartor stated direct impact of quality in work were protected by performance specifications and plans prepared. He stated when a contractors' performance was not adequate the contract could be terminated or the contractor could be given the opportunity to correct any performance issues. Vice Mayor Drekmeier asked how frequently the prevailing wage was reca Icu lated. Mr. Sartor stated he had no actual data however, he anticipated an annual review would be probable. 12/09/2008 P&S2 Vice Mayor Drekmeier asked whether there was data on prevailing wage contractor's not bidding in Palo Alto because of the possibility of low-balling by non-prevailing wage entities. Mr. Sartor stated in 11is research the non-prevailing wage contracts attracted more bidders than prevailing wage contracts. Council Member Espinosa asked how employees being treated or paid fairly was factored in to the calculations of whether to recommend prevailing wage or not to. Mr. Sartor stated staff's primary consideration was fiscal. He stated an expected increase in cost of up to ten percent would occur during smaller and or maintenance type projects. Research revealed on major projects the contractor usually paid prevailing wage already. Mr. Keene stated if the adoption of prevailing wages did increase costs the question to Council would be what the consequence would be in absorbing the costs. Council Member Espinosa stated his agreement. The City as a whole needed to weigh the two challenges between increase in cost toa project versus ensuring fairness and fair payment for employees working on projects. lV1r. Keene stated the basis of the decision being requested was not quality against cost but an overall combination of reaching a higher level of them together. Council Member Barton asked for a comparison of both prevailing wage and non-prevailing wage bidders against projects in Palo Alto for 2007 and 2008. Chair Kishimoto asked whether the increase in cost of going with prevailing wage was transferred to the worker or administrative fees. Mr. Sartor stated the study being viewed was a study compiled by the State of Kentucky of contractors in their region. Chair Kishimoto stated it appeared the higher cost of the project went to more administrative fees which was against the object of going forward with prevailing wage. She stated her process was for the higher cost to translate to better wages for the worker. 12/09/2008 P&S3 Mr. Sartor stated the administrative costs were incurred by the owner. Chair Kishimoto asked whether the employees' benefits and healthcare were included in the cost. Mr. Sartor stated no. He stated the benefits and healthcare costs were included in the rates. For example a thirty dollar per hour job would cost forty-five dollars. Chair Kishimoto asked whether the rates changed by skill level or category. Mr. Sartor stated the rates tended to be geared towards the level of skill for the person in a particular category. Chair Kishimoto asked how flexible the categories were as in filling-in. If person A from category one was outcould person A from category two fill-in or was it job specific. Mr. Sartor stated his understanding was there was no cross trading without experience. Council Member Espinosa asked how quality and safety played a role together. Mr. Sartor stated there were standard quality controls and safety measures in place and monitored by the contractor in charge of the project. The inspector's checks ensure appropriate operators for the specific duties on each project. Nicole Goehering, 4577 Las Rositas Rd, Unit C, Livermore, spoke of flexibility under prevailing wage work. She stated within Palo Alto the flexibility of metal roofing could be covered by sheet metal workers or roofers and underground utility work could be covered by utilities or laborers. Kevin Dayton, 4577 Las Rositas Rd, Unit C, Livermore, spoke of the increase in cost not necessarily coming from the prevailing wage but the specifics of how prevailing wage was determined by the state. Neil Struthers, 2102 Almaden Road, San Jose, spoke of how qualification implied quality. He stated the more experienced worker would turn out a better and quicker product than one of less skill. The hourly wage does not determine the quality. He noted statistical data on percentages of prevailing wage versus non-prevailing wage bids in Palo Alto. 12/0912008 P&S4 Peter Philips, Economics Department, University of Utah, Salt Lake City, stated the staff report data was built on impressions from first principles rather than natural experiments or empirical observations. He stated there was' no statistically significant difference in the number of bidders 011 Palo Alto jobs· compared to the four surrounding cities. In the sample examined, there were 140 projects, 19 of which were in Palo Alto with 450 bidders. He continued to spea k of the study he provided. Council Member Barton stated one of the supporting factors for the prevailing wage rule was the majority of the workers had come up though some sort of union training program. The people would be well trained in their trade, have quality standards and efficient. He stated Council had an obligation to be morally efficient in the expenditure of public dollars. MOTION: Council Member Barton moved, seconded by Council Member Espinosa, that the Committee make a recommendation to the Council to impose a prevailing wage requirement for all City Capital Projects. Mr. Keen asked for clarification as to the relativity to City Capital Construction Projects. Council Member Barton stated yes. Chair Kishimoto asked whether the Motion covered all capital projects. Council Member Barton stated in the beginning to incorporate them all and at a later date discussions could be brought forward as to the necessity of each project. Council Member Espinosa stated the treatment of workers in any function or capacity as workers for the City needed to be treated with fairness and payment equality. Vice Mayor Drekmeier stated the Water Treatment Plant project brought about concern whether the City needed to provide prevailing wage or not. The lowest bidder chosen was paying prevailing wage. He noted the importance of fairness in treatment of employees' payment and benefits. AMENDMENT: Chair Kishimoto moved, seconded by Council Member XXX to incorporate parameters of exclusion for maintenance and smaller projects, and to add a financial threshold where prevailing wage would not apply to a project below $XXX. 12/09/2008 P&S5 Amendment failed for lack of second. Mr. Sartor stated staff was prepared to return with exclusionary criteria for maintenance projects from the prevailing wage requirements. Chair Kishimoto asked whether the matter should be moved forward without adequate information or revisited at a later date. l"1r. Keene stated the language could incorporate the exclusion of routine maintenance contracts. He noted a more specific concern would be public/private partnerships. Chair Kishimoto asked whether the exclusion of public/private partnerships would cause any legal matters. Deputy City Attorney, Amy Bartell stated the current statute reads if a project was receiving public funds in whole or part it was subject to prevailing wage law in General Law Cities. She noted currently, Palo Alto remained in the Charter City category, pending the outcome of the City of Vista's court case. Chair Kishimoto clarified General Law Cities were required to pay prevailing wage when entering into a public/private partnership. Ms. Bartell stated yes. She clarified the requirement for a Charter City to pay prevailing wage included the receipt of public funds in any amount. Mr. Keene stated not to overlook the possibility of a group or non-profit organization offering to accomplish a capital project that the city may nor have planned to move forward with and they request a contribution or matching funds. The question would be how prevailing wage would affect that situation. Vice Mayor Drekmeier asked whether there was a recommendation ready for Councilor if the matter would go before Council with further information 'from staff. Chair Kishimoto stated staff would return to Policy and Services for further review prior to going to Council. Council Member Espinosa stated he would prefer staff return to Policy and Services with information detailed to the concerns coming from this meeting. He noted a set timeline should be outlined to avoid prolonging unresolved matters. 12/0912008 P&S6 Council Member Barton noted the current committee panel would not meet again. IVlr. Keene stated with there being a general consensus on the concept of prevailing wage in regards to capital projects, he suggested the Committee recommend the full Council review what had been accomplished with the understanding of staff's return in early February with suggestions for further resolutions to minor, maintenance, and public/private partnership projects. Chair Kishimoto asked to have a definition of resource impacts between small and large projects. IVlr. Sartor stated other Charter Cities have excluded smaller projects such as roofing and painting contracts. He noted the report currently includes all projects as part of the $11.5 million from the Capital General Fund projects. Chair Kishimoto asked how the $28 million dollars was divided for projects. IVlr. Sartor stated he was unfamiliar with the number of routine maintenance contracts Utilities had, however the majority of contracts consisted of Capital Improvement Projects which had prevailing wage impacts. Chair Kishimoto clarified that most of the City contract work was on a larger scale and therefore the contractor's paid prevailing wage. IVlr. Sartor stated yes. For example, Anderson Pacific was a large non-union underground construction contractor who pay prevailing wage. The recommended exemptions from prevailing wage requirement would be maintenance projects and public/private partnership such as Lytton Plaza and the Art Center. Chair Kishimoto stated her concern regarding the flexibility and calculation in the process of prevailing wage. Council Member Barton suggested forwarding the recommendation as it was with a parallel recommendation that the Committee was unsure about the thresholds and that staff would return to Council with recommendations. Mr. Sartor mentioned living wage and prevailing wage were completely separate topics. He stated he understood the Committees' concern for tl1e wellbeing of workers, however a living wage was a local jurisdiction and a prevailing wage requirement was a state mandate. 12/09/2008 P&S7 Chair Kishimoto suggested requesting the new Mayor extend the current Committee panel for a one month term therefore allowing staff time to gather the detailed information needed to complete a recommendation for Council. Mr. Keene stated he concurred and stated staff would be prepared to return with adequate information. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER, to request the Mayor allow the current Committee panel to meet an additional time in January to finalize a recommendation to the City Council. Council Member Barton withdrew the Motion. The Committee recommended that the Mayor direct staff to return to the current Committee panel in late January of 2009 with threshold discussions so the current Committee could return a recommendation to Council on prevailing wage requirement. 3. Discussion for Future Meeting Schedules and Agendas-Last meeting- another in January ADJOURNMENT: Meeting adjourned at 8:38 p.m. 12/09/2008 P&S8 TO: CITY COUNCIL ATTACHMENT D City of Palo Alto City Manager's Report ATTN: AD-HOC COMMITTEE ON PREVAILING WAGE FROM: CITY MANAGER DATE: MARCH 10,2009 REPORT TYPE: RECOMMENDATlON DEPARTMENTS: PUBLIC WORKS UTILITIES CMR:150:09 SUBJECT: Review and Recommendation on Proposed Prevailing Wage Policy for City Capital Construction Projects RECOMMENDATION Staff recommends that the Council Ad-Hoc Committee on Prevailing Wage recommend that the City Council adopt a Resolution Requiring the Payment of Prevailing Wage on City Capital Improvement Project Construction Contracts with exemptions for maintenance projects under $250,000 as defined under Section 220002 of the California Public Contract Code, projects involving public-private partnerships, projects where the work is performed either entirely or partially by volunteers, and low and moderate income housing projects. EXECUTIVE SUMMARY This report responds to the December 9, 2008 discussion by the Council Policy and Services Committee on prevailing wage issues related to City capital construction contracts. Attachment B contains minutes of that meeting. At the December 9 meeting, the then Policy and Services Committee indicated a strong interest in requiring prevailing wage on City capital construction contracts and directed staff to come back with additional information on possible exemptions to the proposed Council policy. Discussed in this report are staff recommended exemptions for maintenance, public/private partnership, volunteer and low and moderate income housing projects. BACKGROUND As a charter city, Palo Alto is not required to pay prevailing wages on "public works" projects, so long as the projects are within the realm of "municipal affairs", funded entirely by local funds, and no other statutory exceptions apply. This "home rule" principle allows decisions on expenditure oflocal funds to be made by locally elected officials. In 1981, Palo Alto passed a resolution to pay prevailing wage "only when required by federal or state grants and on other jobs considered to be of statewide concern." (See Attachment A Resolution 5981). Recently, charter cities' authority to opt out of prevailing wage law has been subject to challenge. The charter city of Vista, California is currently defending its decision not to pay Page 1 6 prevailing wages in a lawsuit brought by the State Building and Construction Trades Council. Further, on February 20, 2008, the Governor signed SB 9EX, noting the ongoing litigation in Vista and narrowing potential prevailing wage obligations for charter cities involving work on water, sewer, or storm drain systems that have previously been extended to disadvantaged communities. Amid the recent debate over charter cities' prevailing wage requirements, on December 9, 2008 staff presented to the Council Policy and Services Committee a recommendation that Council not change current prevailing wage policy, allowing City capital construction ("public works") projects to be bid without prevailing wage requirements unless prevailing wage is required for the project pursuant to state or federal law, due to potential cost impacts to the City's General and Enterprise Fund Capital Improvement Programs (CIPs) (CMR 443:08, Attachment B). The Committee carefully reviewed this recommendation and decided it was in the best interest of the City to recommend to the full Council that a resolution be adopted requiring prevailing wage on all City capital construction contracts. They also instructed staff to recommend types of construction contracts that could be considered for exemption from a prevailing wage requirement. DISCUSSION Following the December 9, 2009 meeting, staff reviewed four areas that the Council Ad-Hoc Committee on Prevailing Wage could consider for exemptions to the prevailing wage requirement it may recommend to the full Council. The possible exemptions reviewed were: 1. Maintenance projects under $250,000 as defined by Section 22002 of the California Public Contract Code 2. Projects using pUblic-private partnership funding 3. Projects that construct/rehabilitate affordable housing for people with low or moderate incomes 4. Projects where the work is performed either entirely or partially by volunteers In staff's research on the prevailing wage issue, 48 general law and charter cities responded to a survey examining the policies of other California municipalities regarding prevailing wage law. Of the 48 survey respondents, 25 were charter cities that have a prevailing wage policy in place. As noted, charter cities have a policy choice of paying prevailing wage or not on "public works" construction contracts, so long as the projects are municipal affairs and no federal or state funds are involved. Half of the 25 charter cities responding, that already pay prevailing wage, have prevailing wage exemptions for maintenance projects. This exemption is applied to smaller projects where prevailing wage requirements may discourage many contractors from bidding due to restrictions on the ability of contractors to move workers from one trade to another or simply due to the additional administrative costs of producing Certified Payrolls as required by prevailing wage law. Exemption for Maintenance Projects Although as a charter city, Palo Alto is free to craft its own definition of "maintenance" in a proposed prevailing wage exemption policy, referring to a definition already present III CMR: 150:09 Page 2 California law is a helpful starting point. Section 22002 of the California Public Contract Code defines maintenance as shown: • Routine, recurring work for the preservation or protection of any publicly owned or publicly operated facility • Minor repainting • Resurfacing of streets at less than 1 inch • Landscape maintenance including mowing, watering, trimming, pruning, planting, replacement of plants, and servicing of irrigation and sprinkler systems • Work performed to keep, operate, and maintain publicly owned water, power, or waste disposal systems Since the City's Street Maintenance program receives funding from State Gas Tax and other State and Federal grant funding, prevailing wage is already required on these projects, and the proposed maintenance exemption category of resurfacing streets at less than 1 inch would not apply. For the other maintenance categories defined above, staff recommends that any projects in these categories that fall under the City's Purchasing Ordinance threshold of $250,000 (the City Manager has the authority to award "Public Works" construction contracts under $250,000 without Council approval, pursuant to Section 2.30.21O(a) of the Palo Alto Municipal Code) be exempt from any Council adopted prevailing wage policy. This will ensure the City of having the broadest pool of bidders on these routine maintenance projects, keeping bids competitive and likely reducing costs for these critical building, parks, and utility system maintenance activities. Staff has received suggestions that a lower threshold should be considered. The Committee may wish to discuss that. Exemption for Public-Private Partnerships Staff also recommends that Council consider an exemption for City projects that are funded through public-private partnerships. The purpose of offering this exemption is to maximize the use of private funding in joint projects with the City. Because many public-private partnership projects are administered by the private entity in the partnership, exempting prevailing wage requirements from these contracts could make participating in such projects more attractive to private funders by reducing restrictions on potential contractors and reducing administrative work for the private entity. Some background on public-private partnerships is helpful, as there are several types. A public- private partnership is an agreement between the City and a nonprofit or private organization to provide services or to assist in funding of public facilities and programs. Public-private partnerships typically fall into one of three categories: co-sponsorship, alliances or joint ventures. CMR: Co-Sponsorships: In this common type of public-private partnership, an organization furthers the mission of the City by supporting a City activity or program in conjunction with pursuit of that organization's own mission or program. Some examples include the Page 3 of6 Palo Alto Tennis Club use of City courts to provide a youth tennis program and American Youth Soccer Organization's use of space in a City facility to train referees. Co-sponsorships are entered into by staff and normally have no or minimal financial impact. • Alliances: This type of public/private partnership involves organizations that have been created for the sole purpose of supporting a City program(s). The organization does not expect to receive any direct financial benefit or to alter City policy and/or operations, but undertakes to· work cooperatively with staff to implement City goals. Alliance organizations include the Recreation Foundation, the Art Center Foundation (Project Look or Cultural Kaleidoscope), the Library Foundation and the Friends of the Palo Alto Library (financial assistance with the renovation and expansion of the Children's Library). Alliances are approved by the Council if there are any staffing or budgetary implications to the partnership. • Joint Ventures: This type of public-private partnership involves organizations which have programs or missions independent of the City and involve the City entering into a contractual relationship with the public or nonprofit organization with both parties contributing to the partnership for their mutual benefit. Each joint venture is uniquely negotiated by the staff and approved by the City Council. Examples of Joint Ventures include TheatreWorks, Palo Alto Players and West Bay Opera's use of the Community Theatre and use of the former police station by older adult service provider, Avenidas. The applicability of an exclusion to the requirement to pay prevailing wages on contracts which arise out of a public-private partnership will depend on the details and goals each project, the financial requirements, assets, and capabilities each the party brings to the partnership and how each contract is structured. Because the characteristics of each partnership will be unique, the proposed decision to exempt pUblic-private partnerships from prevailing wage requirements may not be suitable for every project. For example, if Palo Alto, as a charter city, is involved in a public works project which would not normally require the payment of prevailing wages, and the City becomes involved in a public-private partnership, the partnership could trigger prevailing wage requirements if the funding sources are unclear or the partnership causes the project to become more regional in nature. Without fully knowing the details of a future relationship between partners, it will be difficult to draft exclusionary prevailing wage language broad enough to cover all potential partnership scenarios, and narrow enough to meet the key statutory elements of whether the contract is "paid for in whole or in part out of public funds", and whether the project is a "municipal affair." The application of these legal requirements to the unique facts in each case will be needed to determine if the City'S Prevailing Wage Policy exclusions will apply. Thus, it would be wise to avoid trying to establish a single all encompassing exclusion on this point. Instead, staff recommends that the City'S proposed prevailing wage policy simply state that the City'S intention is that prevailing wage law will not apply to public-private partnerships. However, the applicability of the prevailing wage requirement to any public-private partnership Page 4 project will be individually evaluated in light of the facts and the applicable legal requirements in place at the time the partnership is established. Of course, construction contracts administered by a private entity in any City approved public- private partnership agreement would still need to comply with City public contract codes including required bidding procedures, contractor bonding and insur,ance requirements. Exemption for Work Performed by Volunteers Although the California Labor Code Section 1720.4 already exempts the payment of prevailing wages for work performed by volunteers, staff recommends that the City formally codify this exemption in its own prevailing wage policy. Recent changes to Labor Code Section 1720.4 (AB 2537 -signed by the Governor in September 2008 and effective January 1, 2009) extended the prevailing wage exemption for volunteers, volunteer coordinators, and conservation corps members who work on public works contracts from January 1, 2009 to January 1, 2012. In short, the City need not pay prevailing wages for work performed by a volunteer, defined as "an individual who performs work for civic, charitable, or humanitarian reasons for a public agency or corporation qualified under Section 501(3)(c) of the Internal Revenue Code as a tax-exempt organization, without promise, expectation, or receipt of any compensation for work performed." This exemption applies only to volunteers as defined in the statute. It does not apply to wages paid to any paid worker who may also be working along with volunteers on a public works contract which requires the payment of prevailing wages by a charter city. In cases where the work under a public works contract is performed by both volunteers and paid workers, the prevailing wage exemption applies only to the volunteers and to any paid· volunteer coordinator(s). The exemption does not apply to the paid workers on that same contract. Exemption for Construction and Rehabilitation of Affordable Housing Lastly, although the California Labor code already exempts some affordable housing construction from prevailing wage requirements, staff recommends that Council consider formally including an exemption for such construction in the proposed prevailing wage policy. The State Labor Law on prevailing wage already exempts construction and rehabilitation of affordable housing for low and moderate income residents provided that the projects: • are paid for solely with money from a "Low and Moderate Income Housing Fund" established pursuant to the Health and Safety Code, or • are paid for by a combination of private funds and funds available from taxation of redevelopment projects. In addition, low-income housing projects that are allocated Federal or State low-income housing tax credits pursuant to the I.R.S Code are not subject to prevailing wage law. RESOURCE IMPACT The Adopted 2009 Capital Budget includes about $11.5 million in General Fund projects and about $28 million in Enterprise Fund projects that are not now or will not require prevailing wage in their construction contracts. The Enterprise Fund projects include those under the electric, water, gas, wastewater collection, storm drainage and refuse fund programs. Since the City already pays prevailing wage on projects constructed by the Wastewater Treatment Fund these would not be impacted by a change in Council policy. CMR:150:09 Page 5 of6 Staff estimates that the costs of the 2009 General Fund projects could increase by as much as $1 million and the 2009 Enterprise Fund projects could increase by as much as $2.8 million. These additional expenditures would be funded by reserves or by reducing the scope of the projects under consideration and will be presented to Council in the capital budget approval process. The upcoming Library Bond and Emergency Water Supply projects may see some cost impacts due to prevailing wage requirements but staff does not believe they would be significant since contractors bidding large complex projects such as these typically pay prevailing wage anyway. POLICY IMPLICATIONS To require prevailing wage to be paid on City capital construction projects Council would need to adopt a resolution rescinding resolution 5981 and codifying the new prevailing wage policy and any exemptions Council chooses to include. ENVIRONMENTAL REVIEW The Council Ad-Hoc Committee on Prevailing Wage review of the prevailing wage policy issues presented in this report does not represent a project under the California Environmental Quality Act (CEQA), pursuant to Section 21065 of the Public Resources Code, thus, no environmental review is required. ATTACHMENTS Attachment A: Resolution 5981 Establishing Policy Regarding Prevailing Wage for Public Projects Attachment B: Minutes of December 9, 2009 Policy and Services Committee meeting Attachment C: CMR: 443 :08 PREPARED BY: DEPARTMENT HEADS: CITY MANAGER APPROVAL: CMR:150:09 MIK Assistant Public Works Director Assistant Utilities Director f ~f.LERIE O. ONG \ .yirector of Utilities Page 6 of6 Attachment A OlPdG~NA!L RESOLUTION NO. 5981 RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO ESTABLISH.ING POLICY REGARDING PREVAILING WAGES FOR PUBLIC PROJECTS WHEREAS, in the recent case of Vial v. City of San Die9o(175 Cal. Rtpr. 647, July. 1981). the California Court of Appeal determined that the subject of Q~revailing wages» is a municipal affair and that Charter: cities are not subject to the prevailing wage requirements for: public works ;projects set forth in the California Labor Code: and WHEREAS. it is in the City's best interest to obtain the lowest responsible bid for public projectsl NOW. THEREFORE. the Council of the City of Palo Alto does RESOLVE as follOWS: SECTION 1. It is approp't'iate to use the Davis-Bacon Act or State Department or Industrial Relations Wage Determinations only when re- quired by federal or state grants and on other jobs considered to be of statewide concern. SECTION 2. The Council finds that this is not a project under the California Environmental Quality Act and, therefore. no environmental impact assessment is necessary. INTRODOCED AND PASSED; December 14, 1981 AxES: Bechtel. Eyerly, Fletcher, Henderson, Klein, Levy, Renzel. Witherspoon NOES: None ABSTENTIONS: None ABSENT: Fazzino APPROVED A~TO FORM: ~h·?6ex Cl. ty Attorney APPROVED: ~-~ Attachment B POLICY AND SERVICES COMMITTEE Regular Meeting December 9, 2008 Chairperson Kishimoto called the meeting to order at 7:01 p.m. in the Council Conference Room, 250 Hamilton Avenue, Palo Alto, California. Present: Barton, Drekmeier, Kishimoto (chair), Espinosa Absent: None 1. Oral Communications None. 2. Review and Request for Recommendation on Prevailing Wage Issues Related to City Capital Construction Projects Assistant Public Works Director, Mike Sartor presented a staff research report related to the prevailing wage issue and City Capital projects. He stated prevailing wages pertain to Public Works contracts which include Utilities, Capital Improvement Projects and Public Works General Fund and Enterprise Fund Projects. He explained that as Palo Alto was a Charter City, it was not required to pay prevailing wage unless the project involved Federal or State Grant funding, Gas Tax Funds or other non-local funding sources. Council Member Barton asked whether the potential for cost increase was at the bid process or the total at the end of a project. He stated there were bid numbers and the true cost of a project. He stated he would not be supporting the recommendation. Mr. Sartor stated the study was based on the review of completed projects. 12/09/2008 P&Sl Vice Mayor Drekmeier asked whether the income levels of prevailing wage were that of a medium income versus average income. Mr. Sartor stated the State determined the prevailing wage based on individual labor categories. For example carpenters in Santa Clara County, the State takes a look at wages for carpenters throughout the entire County then take fifty percent of the highest wages being paid and establish that as the prevailing wage. Vice Mayor Drekmeier clarified the breakdown of wages was by county. Mr. Sartor stated yes, by the Department of Industrial Relations. Vice Mayor Drekmeier asked whether Palo Alto currently had policy on union wages. Mr. Sartor stated no. Vice Mayor Drekmeier asked whether there was a forum to view municipality rating systems for contractors. Mr. Sartor stated the purpose of the survey was to verify any quality impact. Vice Mayor Drekmeier asked how to determine whether a contractor had poor quality of work. Mr. Sartor stated reference checks and checking with other municipalities. The bid process require statements of qualifications and experience of Similar types of projects. Vice Mayor Drekmeier asked the impact of the economy on the timeline for moving forward with the prevailing wage. Mr. Sartor stated direct impact of quality in work were protected by performance specifications and plans prepared. He stated when a contractors' performance was not adequate the contract could be terminated or the contractor could be given the opportunity to correct any performance issues. Vice Mayor Drekmeier asked how frequently the prevailing wage was recalculated. l"1r. Sartor stated he had no actual data however, he anticipated an annual review would be probable. 12/09/2008 P&S2 Vice Mayor Drekmeier asked whether there was data on prevailing wage contractor's not bidding in Palo Alto because of the possibility of low-balling by non-prevailing wage entities. IVlr. Sartor stated in his research the non-prevailing wage contracts attracted more bidders than prevailing wage contracts. Council Member Espinosa asked how employees being treated or paid fairly was factored in to the calculations of whether to recommend prevailing wage or not to. Mr. Sartor stated staff's primary consideration was fiscal. He stated an expected increase in cost of up to ten percent would occur during smaller and or maintenance type projects. Research revealed on major projects the contractor usually paid prevailing wage already. Mr. Keene stated if the adoption of prevailing wages did increase costs the question to Council would be what the consequence would be in absorbing the costs. Council Member Espinosa stated his agreement. The City as a whole needed to weigh the two challenges between increase in cost to a project versus ensuring fairness and fair payment for employees working on projects. Mr. Keene stated the basis of the decision being requested was not quality against cost but an overall combination of reaching a higher level of them together. Council Member Barton asked for a comparison of both prevailing wage and non-prevailing wage bidders against projects in Palo Alto for 2007 and 2008. Chair Kishimoto asked whether the increase in cost of going with prevailing wage was transferred to the worker or administrative fees. Mr. Sartor stated the study being viewed was a study compiled by the State of Kentucky of contractors in their region. Chair Kishimoto stated it appeared the higher cost of the project went to more administrative fees which was against the object of going forward with prevailing wage. She stated her process was for the higher cost to translate to better wages for the worker. 12/0912008 P&S3 Mr. Sartor stated the administrative costs were incurred by the owner. Chair Kishimoto asked whether the employees' benefits and healthcare were included in the cost. Mr. Sartor stated no. He stated the benefits and healthcare costs were included in the rates. For example a thirty dollar per hour job would cost forty-five dollars. Chair Kishimoto asked whether the rates changed by skill level or category. Mr. Sartor stated the rates tended to be geared towards the level of skill for the person in a particular category. Chair Kishimoto asked how flexible the categories were as in filling-in. If person A from category one was out could person A from category two fill-in or was it job specific. Mr. Sartor stated his understanding was there was no cross trading without experience. Council Member Espinosa asked how quality and safety played a role together. Mr. Sartor stated there were standard quality controls and safety measures in place and monitored by the contractor in charge of the project. The inspector's checks ensure appropriate operators for the specific duties on each project. Nicole Goehering l 4577 Las Rositas Rdl Unit C, Livermore, spoke of flexibility under prevailing wage work. She stated within Palo Alto the flexibility of metal roofing could be covered by sheet metal workers or roofers and underground utility work could be covered by utilities or laborers. Kevin Day toni 4577 Las Rositas Rd l Unit C, Livermore, spoke of the increase in cost not necessarily coming from the prevailing wage but the specifics of how prevailing wage was determined by the state. Neil Struthers, 2102 Almaden Road, San Jose, spoke of how qualification implied quality. He stated the more experienced worker would turn out a better and quicker product than one of less skill. The hourly wage does not determine the quality. He noted statistical data on percentages of prevailing wage versus non-prevailing wage bids in Palo Alto. 12/09/2008 P&S4 Peter Philips, Economies Department, University of Utah, Salt Lake City, stated the staff report data was built on impressions from first principles rather than natural experiments or empirical observations. He stated there was no statistically significant difference in the number of bidders on Palo Alto jobs compared to the four surrounding cities. In the sample examined, there were 140 projects, 19 of which were in Palo Alto with 450 bidders. He continued to speak of the study he provided. Council Member Barton stated one of the supporting factors for the prevailing wage rule was the majority of the workers had come up though some sort of union training program. The people would be well trained in their trade, have quality standards and efficient. He stated Council had an obligation to be morally efficient in the expenditure of public dollars. MOTION: Council Member Barton moved, seconded by Council Member Espinosa, that the Committee make a recommendation to the Council to impose a prevailing wage requirement for all City Capital Projects. Mr. Keen asked for clarification as to the relativity to City Capital Construction Projects. Council Member Barton stated yes. Chair Kishimoto asked whether the Motion covered all capital projects. Council Member Barton stated in the beginning to incorporate them all and at a later date discussions could be brought forward as to the necessity of each project. Council Member Espinosa stated the treatment of workers in any function or capacity as workers for the City needed to be treated with fairness and payment equality. Vice Mayor Drekmeier stated the Water Treatment Plant project brought about concern whether the City needed to provide prevailing wage or not. The lowest bidder chosen was paying prevailing wage. He noted the importance of fairness in treatment of employees' payment and benefits. AMENDMENT: Chair Kishimoto moved, seconded by Council Member XXX to incorporate parameters of exclusion for maintenance and smaller projects, and to add a financial threshold where prevailing wage would not apply to a project below $XXX. 12/0912008 P&S5 Amendment failed for lack of second. Mr. Sartor stated staff was prepared to return with exclusionary criteria for maintenance projects from the prevailing wage requirements. Chair Kishimoto asked whether the matter should be moved forward without adequate information or revisited at a later date. Mr. Keene stated the language could incorporate the exclusion of routine maintenance contracts. He noted a more specific concern would be public/private partnerships. Chair Kishimoto asked whether the exclusion of public/private partnerships would cause any legal matters. Deputy City Attorney, Amy Bartell stated the current statute reads if a project was receiving public funds in whole or part it was subject to prevailing wage law in General Law Cities. She noted currently, Palo Alto remained in the Charter City category, pending the outcome of the City of Vista's court case. Chair Kishimoto clarified General Law Cities were required to pay prevailing wage when entering into a public/private partnership. Ms. Bartell stated yes. She clarified the requirement for a Charter City to pay prevailing wage included the receipt of public funds in any amount. Mr. Keene stated not to overlook the possibility of a group or non-profit organization offering to accomplish a capital project that the city may nor have planned to move forward with and they request a contribution or matching funds. The question would be how prevailing wage would affect that situation. Vice Mayor Drekmeier asked whether there was a recommendation ready for Councilor if the matter would go before Council with further information from staff. Chair Kishimoto stated staff would return to Policy and Services for further review prior to going to Council. Council Member Espinosa stated he would prefer staff return to Policy and Services with information detailed to the concerns coming from this meeting. He noted a set timeline should be outlined to avoid prolonging unresolved matters. 12/09/2008 P&S6 Council Member Barton noted the current committee panel would not meet again. Mr. Keene stated with there being a general consensus on the concept of prevailing wage in regards to capital projects, he suggested the Committee recommend the full Council review what had been accomplished with the understanding of staff's return in early February with suggestions for further resolutions to minor, maintenance, and public/private partnership projects. Chair Kishimoto asked to have a definition of resource impacts between small and large projects. Mr. Sartor stated other Charter Cities have excluded smaller projects such as roofing and painting contracts. He· noted the report currently includes all projects as part of the $11.5 million from the Capital General Fund projects. Chair Kishimoto asked how the $28 million dollars was divided for projects. Mr. Sartor stated he was unfamiliar with the number of routine maintenance contracts Utilities had, however the majority of contracts consisted of Capital Improvement Projects which had prevailing wage impacts. Chair Kishimoto clarified that most of the City contract work was on a larger scale and therefore the contractor's paid prevailing wage. Mr. Sartor stated yes. For example, Anderson Pacific was a large non-union underground construction contractor who pay prevailing wage. The recommended exemptions from prevailing wage requirement would be maintenance projects and public/private partnership such as Lytton Plaza and the Art Center. Chair Kishimoto stated her concern regarding the flexibility and calculation in the process of prevailing wage. Council Member Barton suggested forwarding the recommendation as it was with a parallel recommendation that the Committee was unsure about the thresholds and that staff would return to Council with recommendations. Mr. Sartor mentioned living wage and prevailing wage were completely separate topiCS. He stated he understood the Committees' concern for the wellbeing of workers, however a living wage was a local jurisdiction and a prevailing wage requirement was a state mandate. 12/0912008 P&S7 Chair Kishimoto suggested requesting the new Mayor extend the current Committee panel for a one month term therefore allowing staff time to gather the detailed information needed to complete a recommendation for Council. Mr. Keene stated he concurred and stated staff would be prepared to return with adequate information. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER, to request the Mayor allow the current Committee panel to meet an additional time in January to finalize a recommendation to the City Council. Council Member Barton withdrew the Motion. The Committee recommended that the Mayor direct staff to return to the current Committee panel in late January of 2009 with threshold discussions so the current Committee could return a recommendation to Council on prevailing wage requirement. 3. Discussion for Future Meeting Schedules and Agendas-Last meeting- another in January ADJOURNMENT: Meeting adjourned at 8:38 p.m. 12/0912008 P&S8 TO: ATTN: FROM: DATE: CITY COUNCIL ATTC"lI. '-"L.a..!. City of Palo Alto City Manager's Report POLICY AND SERVICES COMMITTEE CITY MANAGER DECEMBER 9, 2008 DEPARTMENTS: PUBLIC WORKS UTILITIES CMR: 443:08 REPORT TYPE: RECOMMENDATION SUBJECT: Review and Request for Recommendation on Prevailing Wage Issues Related to City Capital Construction Projects RECOMMENDATION Staff recommends the Council Policy and Services Committee recommend that Council nbt change current prevailing wage policy, allowing City "public works" projects be bid without prevailing wage requirements unless prevailing wage is required for the project pursuant to state law, due to potential cost impacts to the City's General and Enterprise Fund Capital Improvement Programs (CIPs). EXECUTIVE SUMMARY At City Council's request, staff reviewed many of the issues surrounding prevailing wage rates and summarized the findings below. Staff recommends, due to potential cost impacts to the General and Enterprise Fund Capital Improvement Programs (CIPs), Council not change the City's current prevailing wage policy. This recommendation is made primarily due to the costs needed to address the current General and Enterprise Fund infrastructure program backlog and the additional cost of funding 'a new Public Safety Building and a new Library and Commpnity Center at Mitchell Park and Library improvements at Main and Downtown Libraries as a: result of recent passage of Measure N. Any further increase in costs will impact the City's ability rehabilitate existing infrastructure, much of which is already well past its life expectancy and in a deteriorated condition. In addition, a prevailing wage requirement could also apply to the many private/public partnerships the City is involved in such as Lytton Plaza, Art Center and possibly the Junior Museum and Zoo. The California Court of Appeal is currently hearing an appeal in the City of Vista case, where the City of Vista, a charter city like Palo Alto, is defending its' choice not to pay prevailing wage on its locally funded "public works" projects. BACKGROUND On September 17,2007, City Council approved a contract with Anderson Pacific for a Water Quality Control Plant (WQCP) pump station upgrade related to the reclaimed water pipeline project running from the WQCP to Mountain View (CMR:364:07). Council approved the contract contingent on the contractor assuring the City they would pay their employees prevailing wage on the project. In a related motion Council directed staff to bring the prevailing CMR:443:08 Page 1 of8 wage discussion to the Council Policy and Services Committee (see Attachment B, minutes of September ·17, 2007 Council meeting). What are Prevailing Wage Rates? The intended purpose of prevailing wage law is to ensure that public construction projects do not lower local wages by allowing contractors to pay wages below the local standard. In 1931, Congress passed the Davis-Bacon Act, which mandated the payment of prevailing wages on all construction projects that receive more than $2,000 of Federal funds -an amount that has remained unchanged today. In subsequent years, especially during the Great Depression, many states and localities passed similar prevailing wage laws·. Most states, including California, now have such laws. Prevailing wages are determined in many different ways across the country. The Federal and California Prevailing Wage calculations are similar because if more than 50% of the workers make the same wage this becomes the prevailing wage for the trade. They differ in the calculation when less than 50% of the workers have the same wage. . The Federal Law determines the prevailing wage by averaging all the wages, whereas in California the most common wage occurring becomes the prevailing wage. California's calculation method usually results in a slightly higher wage than the Federal calculation method. . California passed its prevailing wage law in 1931, the same year the federal Davis-Bacon Act was passed. California Labor Code § 1771 requires that any "public works" project that receives more than $1,000 in state funding pay prevailing wages. The Labor Code defines "public works" to include construction, alteration, most demolition, installation or repair work done under contract and paid for in whole or part out of public funds. All capital improvement projects done by the City, including those managed by the Community Services, Utilities or the Public Works Departments are considered "public works" under this law. Although California's prevailing wage law applies to all of California's "general law" cities, charter cities are permitted to elect whether to pay prevailing wage on locally funded public works projects that qualify as municipal affairs. DISCUSSION Prevailing Wages in Charter Cities The California Labor Code requires that public agencies pay prevailing wages, as determined by the California Department of Industrial Relations, on most public works projects. As a charter city, Palo Alto is not required to pay prevailing wage rates on "public works" projects, so long as the projects are within the reahn of "municipal affairs," are funded entirely by. local funds, and no other statutory exceptions apply. This "home rule" principle, grounded in the California Constitution, allows decisions on expenditure of local funds to be made by locally elected officials. Utilities Enterprise Fund projects are often deemed to be "public works" projects in this context. Since no precise definition of what constitutes a "municipal affair" has been judicially settled, courts consider the issue on a case by case basis. The expenditure of city funds on local projects and the rates of pay of the workers the City hires to carry out such projects has been held to be a municipal affair. In 1981, Palo Also passed a resolution to pay prevailing wage "only when required by federal or states grants and on other jobs considered to be of statewide concern." (See Attachment A: Resolution 5981). CMR:443:08 Page 2 of8 Recently, courts have blurred the issue of whether a charter city may elect not to pay prevailing wage. For example, in 2004, the California Supreme Court in City of Long Beach v. DIR, declined to decide whether prevailing wage law is such a matter of statewide concern that it should override the ability of charter cities to conduct their municipal affairs. Since then, labor unions have mounted a statewide campaign to overturn existing law and declare prevailing wage a matter of state concern. The charter city of Vista is currently defending its choice not to pay prevailing wages in a lawsuit brought by the State Building and Construction Trades Council. Although the trial court reluctantly ruled in favor of Vista in December 2007, the case is pending on appeal. A detailed summary of the case is included in this report's discussion below. These recent judicial. developments led the City Attorney to recommend that Palo Alto pay prevailing wages on regional projects that transcend the city's geographic boundaries, even if these projects could be considered municipal affairs. Capital improvement projects related to the City's Water Quality Control Plant (WQCP) fall into this category. Some Charter Cities have created special categories where they do not pay prevailing wages on low-income housing and maintenance type projects, but do pay prevailing wage on construction projects. To date, Palo Alto has not made this distinction. Summary of Staff Research Staff found that there is considerable disagreement on the impacts of prevailing wage rates on project quality found in studies cited by the union groups and builder trade groups. Studies by government agencies, however, concluded that paying prevailing wage rates do not significantly change the quality of construction on most projects. In a survey of contractors, it was reported that requiring the payment of prevailing wage rates could reduce the quantity of bidders on projects by about 20% percent. Most contractors that are not paying prevailing wages, which make up about 50% of the contractors responding to the survey, will bid prevailing wage contracts. In the majority of cases, the makeup of their workforce does not change to accommodate prevailing wage requirements. In its surveys of both contractors and other cities, staff found that implementing prevailing wage rates in construction contracts may increase construction costs on City capital improvement contracts by up to 10%. This increase would also affect projects involving private/public partnerships. The following sections present a summary of the studies related to prevailing wage reviewed by staff and the results of surveys of other cities and contractors. The pending City of Vista case related to the charter city exemption from prevailing wage is also discussed below. Studies on the Effects of Prevailing Wage A number of academic and government studies have examined the. costs and benefits of prevailing wage. Generally, these studies fall into three different camps: Pro-prevailing wages studies, issued by University-level academics, and construction trade organizations. Anti-prevailing wage studies, issued by University-level academics, and various policy institutes. Government studies, issued by the States of Ohio and Kentucky legislative commissions. CMR:443:08 Page 3 of8 Staff reviewed seventeen such studies, both pro-prevailing wage and anti-prevailing wage, and studies prepared by government organizations. Summaries of these studies are included in the attached memorandum dated r:ebruary 15,2008 (Attachment C). Studies by government organizations provide some of the most interesting insight into the issue . of prevailing wage. These studies should, in theory, have no agenda beyond uncovering what is in the best interest of taxpayers. All of the studies examined indicated that prevailing wage laws do not save money. Some studies did, however, equivocate about whether the benefits of prevailing wage once other unquantifiable factors were taken into account -may be higher than the costs. The two most-referenced government studies are both studies conducted by state legislative research offices, in Kentucky and Ohio. In Ohio, its Legislative Service Commission issued a study analyzing the effect of a 1997 bill that exempted school districts from being forced to require prevailing wage. The study, which asked contractors for bids under and not under prevailing wage conditions, found that repeal did save money especially on smaller projects. It asserts that the exemption yielded 1.2 percent in total cost savings in new construction, 10.7 percent savings on building alteration projects and 19.9 percent savings on building additions. This conclusion seems to strongly support the notion that the smaller projects have greater savings when prevailing wages are not required. Furthermore, the study surveyed school districts to discover if they had noticed any decrease in the quality of construction. Six percent of respondents said that they had noticed higher quality construction since the exemption, 91 percent noted no change and 3 percent said quality had decreased. In one very unique case, the survey discovered that one school district had put a project out to bid under prevailing wage conditions and then rebid the project without such requirements. The winning bidder in the second case, without prevailing wage, was 5.8 percent lower, yielding a cost savings of more than $500,000. In Kentucky, the legislature also ordered its research arm to study the issue of prevailing wage. The study made a notable number of findings, including learning that 60 percent of workers surveyed were paid more on prevailing wage jobs than on market-rate jobs; the average increase for prevailing wages was 24 percent over the workers' market rates. Among the 141-page report's other findings were: II 90.7 percent of non-union and 24.4 of union contractors said prevailing wage laws raise construction costs. II 55.4 percent of small firms (10 or fewer employees) said prevailing wage laws have a negative effect on their business, compared to 73 percent of large firms. • 95.7 percent of cities and 83.3 percent of municipal utilities that responded believe prevailing wage laws increase construction costs, while, respectively, 7 and zero percent believe laws increase quality. II More cities believed prevailing wage legislation decreases not increases quality of construction. It is worth noting that the report did not call for the abolishment of prevailing wages in Kentucky. The report did not take an opinion on the issue. Its main overall conclusion on the effectiveness of the legislation, however, is as follows: CMR:443:08 Page 4 of8 To the extent that quality is increased, prevailing wages are an inefficient method to increase quality. The wage requirement results in contractors paying higher wages with no guarantee that these additional wages will result in quality improvements. Aside from the Kentucky and Ohio reports, there are a number of smaller government reports on the topic. The Federal Congressional Budget Office (CBO) and General Accounting Office (GAO) have both issued reports on prevailing wage, with the GAO asserting that repealing the Davis-Bacon Act would save $1.2 billion annually. The CBO study, written during the early 1980's, was likely the impetus that caused the Reagan Administration to change the definition of prevailing wage to the wage earned by 50 -as opposed to 30 -percent of local wage earners. It found that repeal of Davis-Bacon would save $13 billion (2007 dollars)over five years and that some 20 percent of open shop contractors have no interest in bidding on prevailing wage contracts. It also recommended raising the threshold at which the prev~i1ing law is triggered, as the $2,000 trigger was set in 1931 and has never been increased. The final government study of note is another state legislative study -Maryland in this case - conducted in 1997. Maryland's Department of Fiscal Services, which issued the study, asserted that repeal of the prevailing wage law then on Maryland's books would save the state between 5 and 15 percent on public works construction. Survey of California Cities To further examine the policies of other California municipalities regarding prevailing wage law, staff surveyed dozens of other cities on the topic. The survey was sent out to all members of the Association of Bay Area Governments, as well as to all Charter Cities that had email addresses available. Forty-eight municipalities responded to the survey. Usually, the respondents were public works officials, though a few city managers replied as well. A short summary of the findings follows and the more detailed results are included in' Attachment C. ~ 42 of 48 cities surveyed pay prevailing wage rates. @> 26 out of 32 Charter Cities pay prevailing wage rates. • Based on the survey results, staff estimates that paying prevailing wages may increase construction costs in the range of 5% to 10%. • A large majority of the respondents believe that paying prevailing wages does not increase quality of the work. • Most believed that requiring prevailing wages decreases the number of bidders on projects. • Some cities have exceptions to paying prevailing wages for certain types of contracts. The responding cities were also asked tq provide comments on the positive and negative effects of paying prevailing wages. These are summarized below: Positive Effects •. Supportive of labor • Evens the playing field • Assures that workers are being treated and paid fairly • Higher wages allow people to live closer to work • More professional bidding pool Page 5 8 1.1) Higher-quality work Negative Effects &> Higher costs e Fewer projects can be built It Need for extra staffing and paperwork for compliance monitoring I'D Smaller pool of bidders Survey of Contractors The Staff's research on prevailing wage did provide a number of insights into the views of construction contractors on the topic of prevailing wage legislation. In addition, staff conducted a survey of contractors bidding work in Palo Alto to best judge the impact a change in Palo Alto's prevailing wage policy would have on construction projects in Palo Alto. A summary of the survey results follows: • Approximately 50 % of the contractors responding pay prevailing wages on all contracts. e Most contractors that do not typically pay prevailing wage rates will bid prevailing wage contracts. (\) 70% of the contractors not paying prevailing wage rates use the same labor force when bidding prevailing wage contracts. 8) The average of the estimated increase to construction costs associated with paying prevailing wage rates was approximately 8% according to the contractors responding to the survey. ' City of Vista Court Case As discussed previously, the Charter City of Vista is currently defending its decision not to pay prevailing wages in a lawsuit brought by the State, Building and Construction Trades Council. The outcome of this case will be very important, as it could determine whether charter citie~ can continue to exercise their ability to locally determine whether to pay prevailing wages on local projects. Some background on the case is illustrative. In June 2007, Vista became a Charter City. Before the election, the City prepared a fact sheet discussing common questions regarding the Charter City proposition, including questions and answers regarding the potential tax savings on local public works projects should the. City chose to forego prevailing wages on municipal projects. 67% of Vista voters approved the decision to become a Charter City. Vista plans on completing about $100 million in public improvements in the near future; projects which would traditionally be considered within the. realm of "municipal affairs" and paid from local revenues. The State Building and Construction Trades Council of California, a labor union, challenged Vista's assertion that it was exempt from prevailing wage law, arguing that the prevailing wage statute is of statewide concern. Although the trial court reluctantly found in favor of Vista, in issuing his ruling, the Superior Court judge stated that were he not bound by a preceding case, Vial v. City of San Diego, he would have been inclined to grant the union's petition. The Vial decision stated that prevailing wage law does not apply to public works projects of a chartered city, "as long as the projects in question are within the realm of 'municipal affairs.'" Page 6 8 The judge in Vista, however, contended that instead of focusing on the project, a more appropriate analysis would involve whether the prevailing wage statute is a matter of statewide concern. Had the court not been obligated to follow Vial, the court acknowledged that it would have found that the prevailing wage law is a matter of statewide concern and that Vista was therefore bound to follow the law in relation to its pending public works projects. The petitioner's appeal is currently pending before the California Court of Appeal and oral argument was heard on Friday, November 14,2008. A decision is expected in the next two months. Should the court frame the question as suggested by the superior court, and ask whether the prevailing wage statute is a "statewide concern," it is possible that the Court will answer that question affirmatively, thereby overruling or limiting the Vial decision. The California Legislature has previously declared that the prevailing wage statute addresses two important statewide concerns: (1) it prevents public projects from driving down area labor standards and (2) it ensures training opportunities for apprentice construction workers. Even if Vista wins on appeal, observers expect this case will eventually be appealed to the California Supreme Court. A California Supreme Court decision would not be expected on this case for at least another year. The City Attorney's Office will keep Council informed on the status of this case. RESOURCE IMPACT The Adopted 2009 Capital Budget includes about $11.5 million in General Fund projects and about $28 million in Enterprise Fund projects that are not now or will not require prevailing wage in their construction contracts. The Enterprise Fund projects include those under the electric, water, gas, wastewater collection, storm drainage and refuse fund programs. Projects constructed by the Wastewater Treatment Fund already require prevailing wage as discussed above and would not be impacted by a change in Council policy. If staff research proves correct, the costs of the 2009 General Fund projects could increase by as much as $1 million and the 2009 Enterprise Fund projects could increase by as much as $2.8 million if Council were to adopt a policy requiring prevailing wage rates be paid on all capital construction projects contracted by the City. It also should be noted that any private/public partnership agreements entered into by the City for capital construction would also require payment of prevailing wage rates on these construction projects (e.g. Art Center, Lytton Plaza, Junior Museum and Zoo). POLICY IMPLICATIONS The recommendation does not change existing policy. If Council were to change policy and require prevailing wage be paid on all City capital construction projects, Council would need to adopt an ordinance codifying such a requirement. ENVIRONMENTAL REVIEW Policy and Services Committee review of the prevailing wage policy issues presented in this report does not represent a project under the California Environmental Quality Act (CEQA), pursuant to Section 21065 of the Public Resources Code. CMR:443:08 Page 7 8 ATTACHMENTS Attachment A: City of Palo Alto Resolution 5981 Attachment B: Minutes of September}7, 2007 City Council meeting Attachment C: Prevailing Wage Rate Issues Memorandum of February 15,2008 PREPARED BY: DEPARTMENT HEADS: CITY MANAGER APPROV AL: CMR:443:08 Assistant Utilities Director hL1. GLENN ROBERTS Director of Public Works VALERI L-+-_/ Page 8 of8 ATTACHMENTE CITY OF PALO ALTO City Council Ad Hoc Committee on Prevailing Wages Special Meeting Tuesday, March 10,2009 The meeting ofthe City Council Ad Hoc Committee on Prevailing Wages was called to order at 6:01 p.m. Present: Barton, Drekmeier, Espinosa Absent: Kishimoto 1. Oral Communications None 2. Review and Recommendation on Proposed Prevailing Wage Policy for City Capital Construction Projects. City Attorney, Gary Baum reviewed the City's Prevailing Wage policy. Assistant Public Works Director Mike Sartor reviewed the PowerPoint presentation in follow-up of the December 9, 2008 meeting. His presentation included a summary of that meeting, the Prevailing Wage exemptions and Staff s recommendations. Neil Struthers, 2102 Almaden Road, San Jose, thanked Staff for incorporating information from meetings held prior. He questioned why $250,000 was listed as a threshold for the prevailing wage. He stressed more thought should be given to the public-private partnership aspects of the policy. He spoke regarding affordable housing and requested further research be completed on Staffs recommendation and how the policy affected the General Fund. Lindsay Byers, 4577 Las Positas Blvd., Livermore, Associated Builders and Contractors Union, in representation of non-union members, stated they would continue to work in the City of Palo Alto whether or not prevailing wage was opposed. She gave an overview of prevailing wage calculations and the wide variety of areas that the wages cover beyond employee compensation. She suggested raising maintenance project wage thresholds to allow smaller community businesses to remain competitive with regional and statewide contractors. Aletha Coleman, 296 Bay Road, Atherton, from the Palo Alto Friends of the Junior Museum and Zoo spoke in support of Staffs recommendations from a public-private partnership viewpoint. Molly McAuliffe, 1554 Cowper Street, from the Palo Alto Friends of the Junior Museum and Zoo spoke in support of Staffs recommendations. Council Member Barton stated it was his understanding that the $250,000 threshold was consistent with what the City Manager brought forth to Council for authorization and approval. Mr. Sartor stated that was correct. Council Member Barton asked how many projects fit within this $250,000 threshold per year. Mike Sartor stated the amount pertained to Capital Improvement Projects (CIP) and maintenance type projects, with several projects projected for the year within that threshold. He gave the example of parks and maintenance type projects. Council Member Barton stated maintenance was defined under California Code and State Law exemptions. Mr. Sartor stated many maintenance projects exceed the threshold. He gave the example of the Utility Department's gas main replacement project, which was considered a maintenance project and routine work and repair of an existing system. He stated Staff is mindful that larger projects should be included, but they did not want to restrict the smaller maintenance-type projects. Council Member Espinosa stated Staffs current report was concise and covered all the options available. He asked for further clarification on the different dollar points ($50,000, $100,000 to $250,000 and above). He asked for further information on the scale and scope of projects within each threshold. Mr. Sartor stated there were $10-12 million contracts each year in the CIP. Smaller projects made up less than one million, or 10 percent, of the total for projects. Most of the CIPs greater than $250,000 are major projects. The types of small range projects included annual roofing, interior finishing and landscaping contracts for buildings and parks. The total value of maintenance-type projects was likely less than one-tenth of the overall CIP. Assistant Director of Utilities, Tom Marshall stated there were not a lot of contracts in the under $250,000 range. Projects that fell into this range included annual Roto-Rooter service contracts for sewer maintenance, as one example. City Manager, James Keene reviewed various projects from the 2008-09 Adopted Budget for CIP. He listed projects that fit underneath the $250,000 threshold which included the Bayland Athletic Center's fencing, dugout and trailhead park projects as one example. He listed several other projects of the same caliber. Council Member Espinosa asked how each specific project was cast as a recipient of these budgeted amounts within the CIP budgeting. He stressed they were making the effort to create a policy around what these projects were exactly. Mr. Sartor gave an overview of what projects are considered as maintenance projects. Maintenance projects specifically include such items as annual roofing projects or interior projects such as carpeting and painting. Park trail projects were also included within this realm. He stated many of these projects were already defined in the Public Contract Code as Maintenance projects and separate from the Public Work projects. He stated these types of contracts typically attract the smaller contractors. Mr. Keene stated one of the goals is to spread the work around, from these smaller projects, to smaller contractors that might not otherwise be considered. He stated this brought with it social equity value. He asked what the results were in areas where there were no prevailing wage policies. Mr. Sartor stated when compared to what other cities are doing, a broader range of bids come through with smaller contractors when prevailing wage policies did not exist. Council Member Espinosa stated this was an area where he felt he did not have sufficient data with which to form a decision. Council Member Barton asked whether Staff might consider modification of the public- private partnership funding exemptions to the point at which the private-partner became the managing partner. He understood that there could be bookkeeping issues and volunteers may not be able to do this. He stated that public funds should be spent in ways that cover external costs associated with living in this area. Mr. Keene stated the goal was to move projects forward and keeping costs to a minimum. In some cases, when volunteers took the lead on a project, they were not considered under the prevailing wage guidelines. Council Member Barton stated the assumption was that prevailing wages drove up the costs for a project. He was not of this mind. When you build in externalities it is better all around. He doesn't want to go down the road of implied incentives. Mr. Keene stressed taking a look at future emerging public-private partnerships where there may be a situation wherein the City may want the lead on the project. He noted civil liability issues came into play in this case. Council Member Espinosa hoped for clarity around defining the public-private partnership aspects of this proposed policy. He agreed with the policy in concept but was worried about these pUblic-private partnerships working against the policy. He stated he felt that clarity was needed on this policy as it pertains to public-private partnerships. Mr. Baum stated there were different standards in the public-private partnership where the private party is the majority contributor but is not the managing partner. Council Member Espinosa stressed there were instances where further clarity was necessary when private parties were donating money for these projects within the confines of the proposed policy. Mr. Keene pointed the Committee towards Page 4 of the Staff report on regarding exemptions and exclusions. He gave examples and applications of what was proposed on Page 4 ofthe proposed policy. Council Member Espinosa stated this was a good start. He hoped for more clarity on the criteria and an outline of this prior to taking it to Council. Mr. Baum stated under the Committee's general direction this was adequate for them to forward on to Council. The presumption of paying prevailing wage in public-private partnerships and if not then under what circumstances. Council Member Espinosa stressed the needs for more specifics. Mr. Baum stated ironing out the specifics may require another meeting. Council Member Barton suggested deleting the complicated language on Federal Tax Credits on Page 5 of the proposed policy. Council Member Espinosa asked for clarification on what he specifically wanted excluded. Council Member Barton wished to delete bullet point 3, on Page 2, which refers to affordable housing projects. Council Member Espinosa stated it was included at this point more for clarity than policy based on information Mr. Sartor and Mr. Baum gave in address to this point. Council Member Barton stated ifthe inclusion was for clarity's sake, it should be worded to include affordable housing projects that would otherwise be exempt. Mr. Sartor stated the extent of the exemption was an attempt to clarify and specifically note the other two bulleted items. Council Member Barton stated this did not matter in either direction and was merely semantics. Mayor Drekmeier asked for further clarification on the prevailing wage. He asked what causes fluctuations in the prevailing wage. Mr. Sartor stated fluctuations were tied to union bargaining agreements and labor rates. He was not familiar with any recent bargaining agreements which cut these wages and rates. Mayor Drekmeier asked if they went with prevailing wage, would the prevailing wage go up a notch with the addition of their City coming on board. Mr. Sartor stated it would not go up. The wages are set by the County and State. Council Member Espinosa asked if there was a way to move forward but also get clarity on how decisions were made and what the different dollar amounts meant with regard to the number of projects. Mr. Sartor stated in projects less than $250,000, prior Council was comfortable in providing the City Manager with the authority to award those types of contracts. Council Member Espinosa stated the issue was not about the dollar amount of the contracts but the kind of contracts we are setting up in terms of whether we would have more bids, different kinds of companies, workers doing different levels of work. The decision making would be based on the types of contracts, companies, skill levels of employees and that would drive prevailing wage Mr. Sartor stated the difference remained in what was considered a maintenance versus construction project in that maintenance projects were of a recurring nature on existing structures. He stressed these projects were typically significantly smaller in scope. He stated they were not suggesting that a new building project under $250,000 would be exempt. A new building project would still require prevailing wage parameters. Mr. Keene stated moving forward meant getting something on the Consent Calendar and . then they could return with more definitive data. ' Council Member Espinosa stated it was important to understand who these companies are, and understand why the dollar amount is what it is for these smaller projects. Mr. Keene stated the dollar amount was not at issue. They were not vetted to any particular dollar amount at this point. Council Member Espinosa agreed it was more important how they arrived at their final conclusions rather than the actual fmal numbers. Mayor Drekmeier stated recent Request for Proposals brought in lower bids. He asked if wages were the same, how or where costs were rising within this bidding process. Mr. Sartor stated product costs were the primary reason for any extra or higher costs above and beyond what may have been seen in the past. Also material costs have gone down. Council Member Barton stated it was not labor rate, per se, of a project, but the number of people working on that project that also played a role. MOTION: Council Member Barton moved, seconded by Mayor Drekmeier to recommend to the City Council to adopt: 1) Paying Prevailing wage for City Capital Improvement Projects with exemptions for; a) maintenance projects between $100k~ $250k to be determined by the Council after further investigation by Staff, b) projects worked entirely by volunteers, c) public-private partnerships unless otherwise exempted by Council. Mayor Drekmeier asked how many projects would be heard by Council. Council Member Barton stated it would not be each and every project. It would be prevailing wage, unless the private funding is greater than City funding. Mayor Drekmeier stated it was suggested that the City is in a better position to manage prevailing wages than a private group. He asked if they were suggesting that the City would manage all or most of the projects. Council Member Barton asked how many public-private partnership projects have been done where the City has not been the hiring agent. Mr. Sartor stated it was his experience that the private partners have managed more than the City has managed in the past. Council Member Barton asked by what percentage has the private partner provided more than 50 percent of the funds for a project. Mr. Sartor stated the Heritage Park project received more private partner funds. Mayor Drekmeier stated he did not want his vote to be a recommendation at this point. He remained neutral until more information was available. He agreed that if more than 50% of the funds came from private partner that it could fall into one category, but in fairness it would make it easier to be the same across the board .. Chair Espinosa clarified Staffs return at a later date with delineation of the decision- making criteria for public-private partnerships. Council Member Barton was comfortable with Staff making the decision to modify the Motion. Chair Espinosa asked for clarification of what exact information they would return with for further discussion. Mr. Baum stated what he heard was they should bring back more information on the presumption and concerns over paying prevailing wage for public-private partnerships unless specific exemptions are met. INCORPORATED INTO THE MOTION WITH CONSENT OF THE MAKER AND SECONDER to change the language to read "public-private partnerships needed to meet specific exemptions in order to receive payment of prevailing wage." Council Member Barton asked the number of yes votes required to take action. Mr. Baum stated the in the absence of a member there would not be a unanimous vote and the Chair had the discretion to provide their own Motion. Chair Espinosa asked why there needed to be a specified dollar amount in order to qualify for prevailing wage. Council Member Barton stated the dollar amount was not necessary. Chair Espinosa had a concern about the affordable housing aspect and he did not have a concern how Staff had written it. He wanted the inclusion of the wording on page 2 and page 5 ofthe Staff report. Mr. Baum stated the language "unless otherwise required by law" would be added. INCORPORATED INTO THE MOTION WITH CONSENT OF THE MAKER AND SECONDER to add "unless otherwise required by law." Mayor Drekmeier asked how the situation would be handled if both the affordable housing and public-private partnership entities were vying for the same project. Mr. Keene stated there would be qualifying factors of exemption and one entity would be less qualified than the other. Mr. Baum stated the public-private partnership was not designed to apply to affordable housing projects. MOTION PASSED : 3-0, Kishimoto absent Meeting Adjourned at 7:14 p.m. CIPNo. PF-01003 PF-02022 PF-05003 PF-09002 PF-10001 PF-00006 PF-06006 OS-09002 PG-06003 PE-07004 PE-07001 OS-09001 OS-00002 OS-00001 PG-09002 PG-09003 PG-98001 PE-06011 PG-06001 CC-09001 AC-09002 AC-09001 GS-09000 GS-10000 GS-03009 WS-80014 Maintenance Capital Improvement Projects Adopted 2008-09 Capital Budget Description Budget Building System Improvements $100,000 Facility Interior Finishes $80,000 Foothills Park Interpretive Center $210,000 Lucie Stern Community Center and Theatre Exterior Paint $80,000 Rinconada Pool Plaster $200,000 Roofing Replacement $150,000-$250,000 Alma Street Landscape Improvements $156,000 Baylands Emergency Access Levee Repair $175,000 Parks Benches, Sinage, Fencing, Walkways, and Perimeter Landscaping $50,000-$150,000 Cogswell Plaza Improvements $130,000 Hopkins Park Improvements $67,000 Off-Road Pathways Resurfacing and Repair $100,000 Open Space Lakes and Ponds Maintenance $50,000 Open Space Trails and Amenities $80,000-$150,000 Park and Open Space Emergency Repairs $75,000 Park Maintenance Shop Remodel $150,000 School Playing Field Irrigation $85,000-$125,000 Street Median Improvements -Landscape $156,000 Tennis and Basketball Court Resurtacing $55,000-$130,000 Dimmer Replacement and Lighting System Replacement -Cubberley $145,000 New Sound System for Lucy Stern Community Theatre $200,000 Replacement of Children's Theatre Audio and Visual Monitoring System $200,000 Gas Station #1 Rebuild $201,000 Gas Station #3 Rebuild $207,000 Gas System Extensions (replacements) $192,000-$215,000 Water Service Hydrant Replacement $206,000-$222,000 ATTACHMENT F Category Annual Annual One-time One-time One-time Annual One-time One-time Annual One-time One-time Annual Bi-annual Annual Annual One-time Annual Annual Annual One-time One-time One-time One-time One-time Annual Annual J. Michael Sartor Assistant Director of Public Works Engineering Division, 6th Floor City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 Dear Mike: ATTACHMENT G ..... Friends of the Palo Alto ...-.. Junior Museum & ZOO I. 1451 Middlefield Road Palo Alto CA 94301 (650) 326-6338 iii www.friendsjmz.org April 16, 2009 On behalf of the Board of Directors of the Friends of the Palo Alto Junior Museum & Zoo (FPAJMZ), I am writing to support City Staffs recommendation that private funding raised from public-private partnerships be exempt from proposed prevailing wage policy for City capital construction projects. As you know, the FPAJMZ was founded in 1962 as a non-profit volunteer organization dedicated to supporting and enhancing the Palo Alto Junior Museum & Zoo. Through memberships, annual giving, special events, foundation and corporate grants, we are able to fund new exhibits, provide free science classes to elementary students in East Palo Alto, and implement capital improvements for the zoo and museum facilities. Our donors trust the FP AJMZ with their precious donation dollars because we have proved to be a lean, efficient, and highly effective charity. As a non-profit 50 1 (c)(3) organization, the FPAJMZ is governed by a volunteer Board of Directors. These community members donate significant time to serve and govern the FPAJMZ. The Board has established policies and internal controls regarding our investments, contracts, and cash disbursements. Currently, we hire only one employee who is responsible for the day-to-day operations of the FPAJMZ and is supervised by the Board. Additionally, our last fiscal year was reviewed by a CPA who commended our record-keeping and procedures for handling donations and expenses. As a public-private partnership approved by the City Council, the FP AJMZ complies with other City policies regarding insurance requirements, indemnity, and liability. However, we are concerned that the proposed prevailing wage statue will adversely affect our organization and our ability to assist the Junior Museum and Zoo for several reasons. First, we are concerned about the administrative burdens and cost implications of implementing a prevailing wage policy. Since we only employ one staff member who is already over-worked with fundraising, donor relations, and bookkeeping tasks, we are hesitant to add certified payroll and City reporting requirements to her workload. We find these extra respons\bilities inefficient Pg2/3 and not necessary to achieve our mission at best and at worst it will impede our ability to invest in the new exhibits that are so critical to the mission of the Museum and Zoo. After all, small projects are more at risk because they experience the largest percent increase in cost. Second, we are concerned about donor reaction to this new policy and its effect on our ability to fundraise and leverage private donations. The FP AJMZ is an unique position to solicit private community funding to better serve the Palo Alto community. Our donors are willing to invest in Palo Alto and trust us to leverage their dollars for the maximum benefit. One of the reasons the FPAJMZ is so successful is our ability to recruit skilled labor for its capital projects at discounted and/or volunteer rates because of our non-profit status. The contractors we hire support our mission and have the flexibility to allocate a small labor pool for multiple tasks in order to get the job done at a discounted rate. ' We are also concerned that the certified payroll requirement will interfere with our ability to work with skilled specialty fabricators and artists that design and build the exhibits; the exhibits that form the core of the public experience in the Museum and Zoo. The fabricators and artists often work in several media or trades -and consequently the trade unions are confounded as to which union or unions the artist or fabricator should represent and frequently conflicts can arise that affect the quality, timeliness and cost of the work. These challenges have caused some cities that require prevailing wage to pull exhibits from publicly bid contracts and fund them privately. If this ordinance requires privately funded projects to certify payrolls, the option to privately fund exhibit work specialty fabricators and artists will be constrained in Palo Alto. We realize that the City has a right to set policy regarding its funding, but we ask that the City not impose policies on private funds raised by non-profit organizations. We feel that if this new policy is implemented there will be a chilling effect on our current donors and our ability to grow and fund capital projects for the museum and zoo. We are happy to discuss our concerns with you or any other City staff. We look forward to working together to grow and better Palo Alto and implement necessary capital improvements to the Palo Alto Junior Museum & Zoo. Sincerely, -Attl.a celIO", eo!.1IUm Aletha Leong Coleman President, Board of Directors cc: FPAJMZ Board of Directors Annette Bialson, Secretary Courtenay Corrigan, Vice President Wendy Dransfield Leonard Ely III Lisa Buese Gani Hilary Grant-Valdez Ed Miller, Treasurer Cynthia Neuwalder RoxyRapp David Wright, Vice President cc: Palo Alto City Council John Barton Patrick Burt Peter Drekmeier, Mayor Sid Espinsoa Y oriko Kishimoto Larry Klein Jack Morton Greg Schmid Yiaway Yeh cc: Palo Alto City Staff James Keene John Aikin Greg Betts Linda Craighead Pg 3/3 ATTACHMENT H From: Levy, Leland [Ieland.levy@wachoviasec.com] Sent: Thursday, April 02, 2009 7:16 PM To: Sartor, Mike Cc: BIJAN, Sherry (SherryBidManagement@Gmail.com); Chop KEENAN (chopkeenan@yahoo.com); Gary LAYMON (glaymon@TGP-INC.com); GROSS, Barbara (Barbara@GardenCourt.com); RAPP, Roxy (Roxy@RoxyRapp.com); Sunny Dykwel (sdykwel@aprcom) Subject Proposed Prevailing Wage Policy City of Palo Alto Mike, As you know, the Friends of Lytton Plaza will shortly request Council authorization to proceed with the Plaza renovation. Initial bids indicate that costs will run between $800,000 and $900,000, with the city share amounting to approximately 40%. At this time we'd like to state our concern that overseeing a prevailing wage policy will impose difficulties on project managers who are volunteers, and will discourage their involvement. Considerable effort will be required to learn and keep up with the processes and records which an ordinance requires. The result will be to put a damper on the private sector's ability to enlist community volunteers ... We would be grateful, therefore, if an exemption can be available for Public-Private Partnerships where the private entity manages the project and provides over fifty percent of the funding. Sincerely, Leland D. Levy Friend of Lytton Le~1illlnd D. Levy Senior Vice President -Investment Officer CA I nsurance License #OA45735 1950 University Avenue, Suite #300: East Palo Alto, CA 94303-2280 ph: (650) 330-3820 I fax: (650) 322-7381 I t-f: (800) 423-1736 leland .Ievy..@wachoviasec.com ATTENTION: Please be aware that the confidentiality of Internet e-mail cannot be guaranteed. Instructions having financial consequences such as trade orders, funds transfer, etc., should not be included in your e-mail communications to us as we cannot act on such instructions received bye-mail. If you are a current Wachovia Securities client and wish to unsubscribe from marketing e-mails from your Wachovia Securities financial advisor, reply to one of his/her e-mails and type "Unsubscribe" in the subject iine. 'Thisaction will not affect delivery of important service . messages regarding your accounts that we may need to send you or preferences you may have previously set for other e-mail services. If you are not a client, please go to: https://www.wachovia.com/email/unsubscribe For additional information regarding our electronic communication policies please go to: http://www.wachoviasec.com/gotoemaildisclosure 4/6/2009 ", "\,. From: Barbara Gross [Barbara@gardencourtcomJ Sent: Wednesday, April 15, 2009 5:17 PM To: Sartor, Mike SlUIbject: Prevailing Wage Waiver Dear Mike, The 'Friends of Lytton Plaza' are urging the city to exclude our public private partnership from the prevailing wage requirement. The signed letter of intent from the city predates this requirement and should exempt us from this burden. The 'Friends of Lytton Plaza' will be running this project. We do not have the expertise nor the additional funding to manage this process. We are quite concerned about how this may negatively affect future 'Friends' projects ... Please confirm our exemption. Thank you, Barbara Gross Friends of Lytton Plaza 411612009 ATTACHMENT I NOT YET APPROVED Resolution No. Resolution of the Council of the City of Palo Alto Repealing Resolution 5981 and Requiring the Payment of Prevailing Wage on City Capital Construction Contracts with Certain Exemptions WHEREAS, on December 14, 1981, the City Council resolved, in Resolution 5981, to use the Davis-Bacon Act or State Department of Industrial Relations Prevailing Wage Determinations only when required by federal or state grants and on other jobs considered to be of stare wide concern; and WHEREAS, on December 9, 2008, the City of Palo Alto Policy and Services Committee recommended that a resolution be adopred requiring prevailing wage on all City capital construction contracts; and WHEREAS, on December 9, 2008, the City of Palo Alto Policy and Services Committee also recommended that staff present types of construction contracts that could be considered for exemption from a prevailing wage requirement; and WHEREAS, on March 10, 2009, staff presented a proposed prevailing wage policy to the Ad Hoc Committee on Prevailing Wage which proposed that the City pay prevailing wage on City construction contracts, except in the following four situations: 1) Maintenance projects under $250,000 as defined by Section 22002 of the California Public Contract Code, 2) Projects using public-private partnership funding, 3) Projects that construct/rehabilitate affordable housing for people with low or moderare incomes, unless otherwise required by law, and 4) Projects where the work is performed either entirely by volunteers, and WHEREAS, at their March 10,2009, meeting, the Ad Hoc Committee on Prevailing Wage recommended that Council approve the staff recommended policy in general, but proposed minor modifications to three of the proposed exemptions. WHEREAS, after the March 10, 2009 Ad Hoc Committee meeting, Mayor Drekmeier referred this item back to the Council's current Policy and Services Committee for further consideration. The Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. Resolution 5981 is hereby repealed. SECTION 2. The City will pay prevailing wage as determined by the Department of Industrial Relations Wage Determinations when required by law, and on City capital construction contracts with the following exemptions: 1 090624 syn 0111152 NOT YET APPROVED 1. Maintenance projects under $250,000 as defined by Section 22002 of the California Public Contract Code 2. Projects using public-private partnership funding, where the private party: a. is the lead entity managing the project's design and construction, and b. funds at least 50 percent of the projectcost. 3. Projects that construct/rehabilitate affordable housing for people with moderate incomes, unless otherwise required by law. 4. Projects where the work is performed entirely by volunteers. SECTION 3. The Council finds that the adoption of this resolution does not represent a project under the California Environmental Quality Act (CEQA), pursuant to Section 21065 of the Public Resources Code, thus, no environmental review is required. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: APPROVED: City Clerk Mayor APPROVED AS TO FORM: City Manager Deputy City Attorney Director of Public works Director of Utilities 2 090624 syn 0111152 City of Palo Alto 2010-2014 CIP PLAN Proj No. Proj Name AC-09001 Children's Theatre R (Note 1) AC-09002 Community Theatre So (Note 1) AC-10000 JMZ New Bobcat Habit (Note 5) AC-86017 Art in Public Places A5-08000 Acquisition of Los A (Note 4) AS-10000 Salaries and Benefit (Note 4) AS-10001 Sustainability Conti (Note 4) CC-09001 i Dimmer Replacement a (Note 1) CC-10000 . Replacement of Cubbe FD-09001 Fire Apparatus Equip (Note 4) OS-OOOO1 Open Space Trails & Amenities (Note 2) OS-00002 Open Space Lakes/Pon (Note 2) OS-07000 Foothills Park Road 05-09001 Off-Road Pathway Res (Note 2) OS-09002 Baylands Emergency A (Note 2) PD-07000 Mobile Command Vehic (Note 4) PE-00104 San Antonio Rd. Medi PE-06006 Alma Street Landscap PE-06007 ·Park Restroom Instal PE-06010 City Parks and Open (Note 2) PE-06011 Street Median Improv (Note 2) PE-07001 Hopkins Park Improve (Note 1) PE-07004 Cogswell Plaza Impro (Note 1) PE-08001 Rinconada Park Impro PE-09003 City Facility Parkin (Note 2 PE-09005 Downtown Library Imp PE-09006 Mitchell Prk Library PE-09010 . i Library & Com Center PE-10002 Ventura Community Ce PE-10006 Bridge Rail, Abutrnen (Note 3) PE-11000 Main Library New Con PE-11003 Monroe Park Improvem PE-11004 Scott Park Improveme PE-86070 Street Maintenance (Note 6) PF-00006 Roofing Replacement (Note 2) PF-01002 Civic Center Infrast PF·01003 Building Systems 1m (Note 2) PF-02022 Interior Finishes Co (Note 2) PF-05002 Municipal Service Ce PF-05003 Foothills Park Inter (Note 1) PF-06001 ,Ted Thompson Garage (Note 1) PF·06002 Ventura Buildings 1m PF-06004 Cubberley Restroom R PF-07000 Art Center Electrica PF·07002 Baylands Interpretiv Project Costs 2010 2011 2012 100,000 ---200,000 - 575,000 -- 50,000 50,000 50,000 2,216,439 -- 3,478,545 3,480,758 3,538,665 400,000 -- 145,000 -- 56,350 -- 69,000 -- 116,000 116,000 136,000 50,000 -50,000 -125,000 150,000 -100,000 100,000 175,000 -- 300,000 -- 40,000 630,000 ---316,000 -220,000 220,000 --I 330,000 --156,000 -95,000 --150,000 - -7.15,000 --100,000 100,000 3,500,000 -- 47,000,000 -- 75,000 -- 200,000 135,000 - 300,000 ---1,400,000 16,900,000 -250,000 --100,000 - 1,939,148 1,803,635 1,803,635 150,000 165,000 150,000 4,176,000 1,546,000 1,460,000 100,000 100,000 100,000 -80,000 80,000 -641,000 --210,000 - 67,000 ---90,000 600,000 -300,000 --2,600,000 --267,000 - AlTACHMENT J Construction Costs 2013 2014 2010 2011 2012 2013 2014 ----------------.. i ---- 50,000 50,000 50,000 i 50,000 50,000 50,000 50,000 I ------- 3,644,825 3,754,170 ---------- -----------56,350 - -- ---- - --- 150,000 164,000 ------60,000 -- ---_ i - -125,000 150,Q()0 -- 100,000 100,000 --------- ----------- - - 630,000 -------316,000 i 220,000 220,000 -200,000 200,000 200,000 200,000 440,000 200,000 ----- 156,000 156,000 ----------------------725,000 --- 100,000 100,000 ----- .. 1 -3,500,000 ' --1 ----47,000,000 ------75,000 ---i ------I -------------14,600,000 -----250,000 - -----100,000 --- 1,803,635 1,803,635 ----- 150,000 150,000 ------ - 4,176,000 1,546,000 1,460,000 -- 100,000 100,000 . -. -- 80,000 80,000 -. -. -- - -641,000 ------. -. ---67,000 ---- --. -600,000 ---300,000 ------2,600,000 ------267,000 -I -- Page 1 of2 City of Palo Alto 2010·2014 CIP PLAN Proj No. Proj Name PF-09000 Children's Theater I PF-10000 Civic Center Chiller (Note 1) PF-10001 Rinconada Pool Plast (Note 2) PF-10002 Lot J Cowper Webster (Note 1) PF-93009 Americans with Disab PG-06001 Tennis and Basketbal (Note 2) PG-06003 Benches,signage,fenc (Note 2) PG-09002 ! Park and Open Space (Note 2) PG-98001 School Site Irrigati (Note 2) PL-00026 Safe Routes to Schoo PL-04010 Bicycle Blvds. Imple PL-05003 College Terrace Traf PL-05030 Traffic Signal Upgra PL-11000 Highway 101 Pedestri PO-05054 Street Lights Improv (Note 2) P0-10002 Downtown Tree Grates P0-89003 Sidewalk Repairs Total Notes: 1. Maintenance project, one time 2. Maintenance project, recurring annually 2010 ~ -'"--"-- 125,000 200,000 75,000 75,000 55,000 100,000 ! 75,000 100,000 - 50,000 50,000 - 100,000 120,000 , 300,000 i 717,642 67,421,124 ATTACHMENT J Project Costs 2011 2012 2013 2014 ~O,OOO 500,000 ------ ! -------- 150,000 150,000 100:000 100,000 55,000 55,000 55,000 55,000 100,000 150,000 150,000 . 150,000 75,000 75,000 75,000 ! 75,000 85,000 100,000 100,000 125,000 100,000 100,000 100,000 100,000 50,000 50,000 ! 50,000 50,000 ---- 155,000 160,000 165,000 170,000 ---- 125,000 130,000 135,000 1:40,000 --.. i - 716,781 695,278 674,419 654,187 17,441,174 28,405,578 8,598,879 8,556,992 Estimated Prevailing Wage at 5% Estimated Prevailing Wageat10% J:IJI1cl.in.!!lSources:(at 5%} Development Impact Fees Measure N Bonds ! General Fund I Gas Tax I Infrnstructure Reserve Total I £unding Sources:(at 10%) Development Impact Fees .... ~ -Measure N Bonds General Fund I Gas Tax i ------- Infrnstructure Reserve Total I 1 3, Maintenance project, one time and multiple contracts below $250K 4. Not a construction project 5. Public-private partnership 6. Project already includes prevailing wage Page 2 of 2 Construction Costs 2010 2011 2012 2013 2014 . - -500,000--------- -------------------75,000 150,000 150,000 100,000 100,000 ---i --------------------------. -100,000 100,000 100,000 100,000 50,000 50,000 50,000 50,000 . 50,000 50,000 -----155,000 160,000 165,000 170,000 --, -----_ i -- 300,000 ---- 717,642 716,781 695,278 674,419 654,187, 56,116,992 8,605,781 19,031,278 1,339,419 1,324,187 • 2,805,850 430,289 951,564 66,971 66,209 i 5,611,699 860,578 1,903,128 133,942 132,419 i I -10,000 10,000 10,000 10,000 2,525,000 ' -730,000 -- 5,000 2,500 2,500 2,500 2,500 -5,000 5,000 5,000 , 5,000 275,850 412,789 204,064 49,471 ' 48,709 2,805,850 430,289 951,564 66,971 66,209 -20,000 20,000 i 20,000 20,000 5,050,000 -1,460,000 -- 10,000 5,000 5,000 5,000 5,000 . 10,000 10,000 10,000 _. 10,000 551,699 825,578 408,128 98,942 97,419 I 5,611,699 860,578 1,903,128 133,942 132,419 City of Palo Alto 2010-2014 CIP PLAN Enterprise Funds Proj No. Proj Name EL·02010 SCADA System Upgrade (Note 1) EL-02011 Electric Utility GIS (Note 1) ~~~ EL-06002 UG District 45 EL-08000 E. Charleston 4/12kV (Note 1) EL-08001 UG District 42 Embar EL-08002 E. Meadow/Alma!Loma EL-09000 Middlefield Undergro (Note 1) EL-09002 Middlefield / Colora EL-09003 Rebuild UG Dist 17 (Note 1) EL-10006 Rebuild UG Dist 24 (Note 1) EL-10008 AMR/AMI -Feasibilit (Note 1) EL-10009 Street Light System EL-11000 SealelWaverley 4/12k EL-11001 ITorreya Court Rebuil (Note 1) EL-11002 1St. Francis Oregon 4 EL-11003 'Rebuild UG Dist 15 (Note 1) EL-11004 Hewlett Subdivision (Note 1) EL-11005 Rebuild UG Dist 22 (Note 1) EL-11006 Rebuild UG Dist 18 (Note 1) EL-11007 Rebuild Greenhouse C (Note 1) EL-11008 Rebuild UG Dist 19 (Note 1) EL-11009 UG District 43 Alma! EL-12000 Rebuild UG Dist 12 (Note 1) EL-12001 UG District 46 -Cha EL-13000 EdgewoodlWildwood 4/ EL-13002 Relocate OR/HO 60kV EL-14000 ColeridgelCowperlTen EL-89028 Electric Customer Co (Note 1) EL-89031 COmmunications Syste (Note 1) EL-89038 Substation Protectio (Note 1) EL-89044 Substation Facility (Note 1) EL-98003 Electric System Imp (Note 1) Total F0-10000 Fiber Optic Customer (Note 1) FO-10001 Fiber Optic Network (Note 1) I--I Total GS-02013 Directional BOring M (Note 1) GS-03007 Directional Boring E (Note 1) GS-03008 Polyethylene Fusion (Note 1) GS-03009 Sys Ext Ops -Unreim (Note 2) GS-09002 GMR -Project 19 GS-10000 Gas Station 3 Rebuil (Note 2) GS-10001 GMR -Project 20 2010 25,0001 400,000 [ 1,000,000 100,000 0 500,000 75,000 20,000 500,000 500,000 210,000 100,000 0 0 0 0 0 300,000 0 0 500,000 0 0 0 0 01 01 1,800,000 110,000 240,000 155,000 2,000,000 8,535,000 200,000 200,000 400,000 40,000 0 0 158,000 0 207,000 644,000 ATTACHMENT K Project Costs 2011 2012 2013 30,000 250,000 40,000 0 0 0 150,000 0 0 450,000 0 0 0 0 150,000 500,000 0 0 550,000 0 0 150,000 250,000 0 0 0 0 750,000 0 0 0 0 0 800,000 800,000 800,000 35,000 350,000 0 100,000 0 0 450,000 0: 0, 350,0001 400,000 0 400,000 0 0 0 0 0 350,000 0 01 150,000 350,000 0 0 0 0 150,000 2,000,00Q' 500,000 0 80,000 1,000,000 0 150,000 2,000,000 0 0 50,000 0 0 100,000 0 01 0 1,900,000 2,000,000 2,100,000 115,000 120,000 125,000 250,000 250,000 260,000 160,000 165,000 170,000 2,100,000 2,200,000 2,300,000 9,890,000 ' 9,365,000 9,595,000 200,000 200,000 200,000 200,000 200,000 200,000 400,000 400,000 400,000 185,000 0 45,000 60,000 0 64,000 32,000 0 34,000 162,000 167,000 172,000 5,800,000j 0, 0 OJ 0 0 01 5,970,000 0 Page 1 of 3 Construction Costs 2014 2010 2011 2012 2013 2014 45,000 0 0 0 0 0 0 0 0 0 0 0 0 1,000,000 150,000 OJ 0 0 0 0 0 1 0 0 2,000,000 0 0 0 0 2,000,000 0 500,000 500,000 0 0 0 0 0 0 0 0 0 0 150,000 250,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 800,000 100,000 800,000 800,000 800,000 800,000 0 0 0 350,000 0 0 0 0 0 0 OJ 0 0 01 450,000' 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,000,000 500,0001 0 200,000 0 0 0 0 0 150,000 0 0 0 2,000,000 150,000 300,000 0 0 0 0 300,000 750,000 0 0 0 0 750,000 40,000 0 0 0 0 40,000 2,205,000 0 0 01 0 0 130,000 0 0 0 0 0 270,000 0 0 0 0 0 175,000 0 0, 0 0 0 2,400,000 OJ 0 0 0 0 9,465,000 1,600,000 ' 2,050,000 3,400,000 3,300,000 4,040,000 200,000 0 0 0 0 0 200,000 0 0 01 0 0 400,000 0 0 0 0 0 250,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 178,000 0 0 0 0' 0 0 0 5,800,000 0 0 0 0 0 0 0 0 ----0 0 0 0 5,970,000 0 0 City of Palo Alto 2010·2014 CIP PLAN Enterprise Funds Proj No. Proj Name GS·10002 General Shop Equipme (Note 1) GS-10003 Cathodic Current Int --------------------GS-11000 GMR -Project 21 GS·11001 Gas Station 4 Rebuil (Note 1) GS-12001 GMR -Project 22 GS-13001 GMR -Project 23 GS·14000 GMR -Project 24 GS-80017 Gas System Extension (Note 1) GS-80019 Gas Meters and Regul (Note 1) Total RF-10002 FLARE RELOCATION PRO RF-10003 DRYING BEDS, MATl ST RF·11001 landfill Closure Total SD-06101 Storm Drain System R SD-11101 Channing Ave/Lincoln SD-13002 Matadero Crk Strm Wt Total WC-09001 WC Reh/Aug. P~ 22 WC-09002 Root, Sediment, Dew (Note 1) WC-10002 WC Reh/Aug. Prj 23 WC-11000 WC Reh/Aug. Prj 24 WC-12001 WC Reh/Aug. Prj 25 WC-13001 WC Reh/Aug. P~ 26 WC-14001 we Reh/Aug. P~ 27 WC-80020 Sewer System Extensi {Note 1) WC-99013 Sewer Manhole Rehabl (Note 1) Total WQ..Q4011 Facility Condition A (Note 3) WQ-10001 iPlant Master Plan (Note 3) WQ-80021 Plant Equipment Repl (Note 3) WQ-80022 System Flow Meter (Note 3) Total WS-02014 W-G-W Utility GIS Da (Note 1) WS-07001 Water Recycling Faci WS-08002 Emergency Water Supp WS-09000 Seismic Water Tank V WS-09001 WMR -Project 23 WS-10001 WMR-Project 24 (WS-1 WS-11000 WMR-Project 25 (WS-1 ATTACHMENT K Project Costs 2010 2011 2012 2013 64,000 0 0 0 300,000 0 0 0 ° 457,000 0 6,150,000 0 215,000 0 0 0 0 468,000' 0 0 0 0 482,000 0 0 0 0 690,000 700,000 710,000 720,000 286,000 297,000 306,000 315,000 2,389,000 7,908,000 i 7,621,000 7,982,000 0; 200,000 0 0 0 750,000 0 0 0 6,700,000 0 0 0 7,650,000 ° ° 550,000 567,000 584,000 601,000 820,0(J(J 895,000 1,590,000 1,680,000 0 0 0 0 1,370,000 1,462,000 2,174,000 2,281,000 i 2,675,0()(Ji 0 0 0 30,000 30,000 30,000 33,000 280,000 2,750,000 0 0 0 290,000 2,829,500 0 0 0 300,000 2,912,000 0 0 0 310,000 0 0 0 0 ;'21,000 330,000 340,000 350,000 640,000 560,000 565,000 570,000 3,946,000 3,960,000 4,064,500 4,175,000 0 1,000,000 1,000,000 1,050,000 "inn nnn 0 0 0 1,100,000 1 ,45(J,(J()0 1,550,000 1,550,000 100,000 100,000 100,000 100,000 1,700,000 2,550,000 2,650,000 2,700,000 100,000 100,000 100,000 0 265,000 500,000 750,000 2,000,000 22,500,000 3,500,000: 0 0 550,000 01 0 0 2,845,000 0: 0 0 292,000 2,950,000 0 0 0 292,0001 3,060,000 0 Construction Costs 2014 2010 2011 2012 2013 2014 0 0 0 0 0 0 0 300,000 0 0 0 0 0 0 0 01 6,150,000 0 0 0 0 01 0 0 3,200,000 0 0 0 0 3,200,000 0 0 0 0 0 0 492,000 0 0 0 0 0 730,000 0 0 Q 0 0 325,000 0 0 0 0 0 5,175,000 300,000 5,800,000 5,970,000 6,150,000 3,200,000_ 0 0 200,000 0 0 0 0 0 750,000 0 0 0 0 0 6,700,000 0 0 0 0 ° 7,650,000 0 0 0 619,000 550,000 567,000 584,000 601,000 ~~ 1,430,000 820,000 895,000 1,590,0001 1,680,000 1,430,000 315,000 0 0 0 0 0 2,364,000 1,370,000 1 ,46~!()1!0 2,174,000 2,281,000 2,049,000 0 2,675,000 0 0 0 0 33,000 0 0 0 0 0 0 0 2,750,000 0 0 0 0 0 0 2,829,500 0 ----0 0 0 0 01 2,912,000 0 3,000,000 0 0 0 0 3,000,000 320,000 0 0 0 0 0 361,000 0 0 0 0 0 617,000 0 0 0 0 0 4,331,000 2,675,000 2,750,000 2,829,500 2,912,000 3,000,000 1,100,000 0 0 0 0 0 0 1,550,000 100,000 2,750,000 -. • ! --, 0 0' 0 0 0 0 1,150,000 265,000 500,000 750,000 2,000,000, 1,150,000 0 22,500,000 3,500,000 0 0 0 0 550,000 0 0 0 0 0 2,845,00(J 0 0 0 0 0 0 2,950,000 0 0 0 0 0 0 3,060,000 0 0 ----- City of Palo Alto 2010*2014 CIP PLAN Enterprise Funds Proj No. Proj Name WS-12001 WMR-Project 26 WS-13001 WMR-Project 27 WS-14001 WMR-Project 28 -add WS-80013 Water System Extensi (Note 1) WS-80014 Water Service Hydran (Note 1) WS-80015 Water Meters (Not~ 1) Total Notes: 1. Project exempt from prevailing wage since projects will be done by in-house staff (City staff) 2. Maintenance project ATTACHMENT K Project Costs 2010 2011 2012 2013 0 0 305,000 3,150,000 0 0 01 314,000 0 01 0 0 400,000 410,000 420,000 430,000 259,000; 212,000 217,0001 222,000' 203,000 209,00Q -::-11~00O 222,000 27,414,000 8,173,000 5,067,000 6,338,000 Total ~- Estimated Prevailing Wage at 5% Estimated Prevailing Wage at 10% F~llding Sources: (at 5%) Electric Fund Distribution Rate Stabilization Reserve Gas Fund Distribution Rate Stabilization Reserve 1 Refuse Fund Rate Stabilization Reserve Storm Drain FundRate Stabilization Reserve WWC Fund Rate Stabilization Reserve Water Fund Rate Stabilization Reserve T()~I--1 -------- Funding Sources: (at 10%L Electric Fund Distribution Rate Stabilization Reserve Gas Fund Distribution Rate Stabilization Reserve Refuse Fund Rate Stabilization Reserve Storm Drain FundRate Stabilization Reserve WWC Fund Rate Stabilization Reserve Water Fund Rate Stabilization Reserve ----- Total I 3. Regional facility and implements prevailing wage Page 3 of3 2014 0 3,245,000 324,00Q 41~ 229,000 229,000 5,617,000 ------- ----- Construction Costs 2010 2011 2012 2013 2014 0 01 0 3,150,000 0 0 0 0 0 3,245,000 0 0 0 0 0 0 0 01 0 ~ -------Or Oi 0 0 0 ----- 0 0 0 0 0 26,160,000 6,950,000 3,810,000 5,150,000 4,395,000 32,1()~~_26,662,000 18,183,500 19,793,000 16,684,000 1,605,250 1,333,100 909,175 989,650 834,200 3,210,500 2,666,200 1,818,350 1,979,300 1,668,400 80,000 102,5001 170,000 185,0001 __ 202,000 15,000 290,000 298,500 160,000 307,500 -- 0 363,750 0 0, 0 ~ _ 7~ 108,700 114,050 102,450 ------ 133,750 156,250 141,475 145,600 150,000 1,308,000 347,500; 190,500 257,500 219,750 --------- 989,650I_u .... I134,200 i 1,605,250 1,333,100 909,175 160,000 205,000 340,000 330,000 404,000 30,000 580,000 597,000 615,000 320,000 0 727,5001 0 0 0 137,000 146,200 217,400 228,100 204,900 ------ f-----_267,500; 312,500 282,950 291,2001 300,000 2,618,000 895,000 381,000 515,000 439,500 3,210,500 2,666,200 1,818,350 1,979,300 1,668,400