Just as two major California cities declared Chapter 9 bankruptcies in consecutive weeks, the Supreme Court of California ruled that charter cities may avail themselves of substantial savings by circumventing California’s prevailing wage laws for locally funded projects. In a 5-2 decision, the Supreme Court of California upheld a charter city ordinance prohibiting city contracts from requiring payment of prevailing wage. State Bldg. & Const. Trades Council of Cal., AFL-CIO v. City of Vista, 54 Cal. 4th 547, 279 P.3d 1022 (2012). The decision is a huge win for charter cities, which stand to save millions of dollars in construction-related labor costs. Union contractors are those most negatively affected because prevailing wages are effectively union wages.
The case involved the City of Vista in San Diego County, which amended an ordinance to prohibit city contracts from requiring payment of prevailing wages for all locally funded contracts involving municipal affairs. Shortly thereafter, the City approved contracts to design and build two fire stations without requiring compliance with the state’s prevailing wage law. The State Building and Construction Trades Counsel of California, AFL-CIO petitioned San Diego County Superior Court to require the City to comply with California’s prevailing wage law. The trial court denied the petition and the Supreme Court of California affirmed, holding that “the construction of a city-operated facility for the benefit of a city’s inhabitants is quintessentially a municipal affair”. The Court found no convincing basis for the state’s interference in what would otherwise be a merely local affair and rejected arguments that labor standards are statewide concerns as too abstract.
The significance of the decision in California cannot be understated. With cities such as Stockton and San Bernardino already filing for bankruptcy, analysts suggest that these are just the tip of the iceberg. It is likely that many other California charter cities facing significant budget shortfalls will follow the City of Vista’s lead to cut down costs while continuing to construct and remodel city structures.
What about Washington? How will this decision have an effect on Washington’s prevailing wage statue? Do the same arguments apply to the Washington State Constitution?
Although many Washington cities, such as Gold Bar, Normandy Park, and others, are facing serious money woes, it is unlikely that the recent decision by the Supreme Court of California will have any significant effects on Washington’s prevailing wage statue. First, California’s Constitution is more favorable to city ordinances than Washington’s Constitution. Under the California State Constitution, ordinances of charter cities supersede state law with respect to “municipal affairs.” Cal. Const. art. XI, § 5. Under the Washington State Constitution, however, a city has the authority to “make and enforce within its limits all such local police, sanitary and other regulations as are not in conflict with general laws.” Wash. Const. art. XI, § 11. Second, but related, California courts’ test for state preemption is more favorable to city ordinances than Washington courts’ test. In California, a city is preempted from enacting ordinances where the subject of the state statute is one of statewide concern and that the statute is reasonably related to its resolution and not unduly broad in its sweep. In Washington, however, a city is preempted from enacting ordinances where the state legislature expressly or implicitly states its intention to preempt the field.
First enacted in 1945, Washington’s prevailing wage statute expressly preempts cities from enacting ordinances permitting government contractors to pay less than the prevailing wage. RCW 39.12.042. For Washington, this means that the cost of public-works projects will continue to be driven up by ever increasing prevailing wages. A study by Washington Research Council of Spokane-area construction suggests that allowing non-prevailing wage bids for school construction would save taxpayers approximately 27 percent on labor costs and 12.7 percent on overall project costs. With growing demand by voters and tax-payers to stretch every dollar as far as possible, Washington’s prevailing wage law does just the opposite by interfering in labor choice in the marketplace and artificially inflating its own costs.
Stacy Curtin, Three California Cities Bankrupt: ‘This Is The Tip of the Iceberg,’ Says Fmr. Statesman, Daily Ticker, July 13, 2012, available at http://finance.yahoo.com/blogs/daily-ticker/three-california-cities-bankrupt-tip-iceberg-says-fmr-155121281.html
Washington Research Council, Schools Would Benefit From Repeal of Prevailing Wage, Policy Brief, December 21, 1999, available at http://www.researchcouncil.org/docs/PDF/WRCEducation/SchoolsWouldBenefit.pdf