Charter Cities Side-Step State Mandates to Maintain Budgets

Library hours are being cut. Police are renegotiating contracts. Cities throughout California are struggling with a significant reduction in revenue.

Are those the only ways to save money? Not necessarily…

Charter cities in California are able to assert their authority to establish public works contracting policies for purely municipal construction. One of the most obvious ways to cut public works construction costs is to side-step the state mandated prevailing wage laws.

In July 2009, the Associated Builders and Contractors – California Cooperation Committee (ABC-CCC) released the first ever report detailing how charter cities have the ability to operate more efficiently than general law cities. The report generated a great deal of interest and debate, garnering over 4,000 hits and 450 downloads. At that time, of California’s 480 cities, 115 of them were operating under local charters. 

Today, there are 120 charter cities. The Association has just revised and released a new edition of the widely read and referenced survey.  The 2011 Charter Cities Report presents an updated look at how each of these cities have used their ability to operate under local control by exempting themselves from costly prevailing wage mandates. The report identifies 37 charter cities with a full exemption from state prevailing wage mandates, 13 charter cities with a partial exception and 70 that have not yet taken advantage of that flexibility.




California consists of both general law cities and charter cities. A charter city can take advantage of its “home rule” rights found in the CA constitution to sidestep the convoluted and distorted prevailing wage law. Charter cities asserting their own authority over local public works contracting recognize that they are in the best position to know what rules could apply to projects that are funded by their own citizens.

One of the most prominent critics of how the state determines prevailing wages is Associated Builders and Contractors.

“When voters choose to give their city a charter, they obtain the freedom to avoid costly state laws imposed by the state legislature and the special interest groups that control it,” said Associated Builders and Contractors Government Affairs Director, Kevin Dayton.

“Local governments know best what is right for their own communities.”

The report assists charter cities by providing background information to help local governments better understand the process through which they can fully exercise their rights as charter cities.  Exemption from state mandates can help a city get the most for each dollar it invests in a variety of capital improvement and public works projects.  Instead of conforming to a statewide prevailing wage rate, charter cities can enact a local prevailing wage policy that more accurately reflects local market conditions, benefitting both taxpayers and workers.

According to Dayton, the report promotes a meaningful way for charter cities to adopt a policy that saves money without cutting services. “This guide to the prevailing wage status of charter cities is an important resource for anyone frustrated by the outdated and costly state contracting laws. This is the first report of its kind and we’re committed to keeping it up to date and making it accessible to local government officials throughout California,” Dayton continued.

Dayton predicts that many general law cities will adopt charters in the next few years to wrest control of their local affairs from a state legislature unwilling to buck special interest groups, and he’s not alone.

“At a time when the public needs services and the government is lacking funding, agencies must look for ways to be more efficient,” said Doug Sain, the Executive Director of San Diego’s chapter of the New Majority. “The savings associated with becoming a charter city accomplishes that objective; they can deliver more bang for your buck because they don’t have that waste in all of the public works projects.”

Why are Charter cities able to save a significant amount of money by establishing their own prevailing wage policy? While the term “prevailing wage” insinuates that the state mandated wage is an average or median wage for a specific area, a state does not actually survey workers or contractors to determine what the wage rates are.  Rather, the California Department of Industrial Relations attains union collective bargaining agreements and uses them as the basis to determine the prevailing wage.  As a result, these wages are often drastically higher than the actual market rate, which leads to unnecessary inflated costs for nearly every public works project.

For King City, approving a charter was hardly an easy process, according to the City’s Attorney, Roy Hanley. However, due to the meticulous effort and long time spent in the preparation process, voters passed it overwhelmingly without any organized opposition.

“I first brought up the idea of a charter many moons ago,” he said. “The City Council created an ad hoc committee to investigate the idea, and came back with a specific set of items they would like to see a charter address.”

The resulting charter was short and targeted to specific needs of the community. For example, the city has opted to exempt itself fully from state prevailing wage law, protect the city from state raids of local funds, allow the city’s parks department to comingle professional and volunteer staff, and empower local workers to do more significant maintenance.

“Under general law, you can’t mix volunteer and paid work for parks,” continued Hanley. “If you have a parks project that is 100 percent volunteer, you can be exempt from prevailing wage. However, now that we are charter city, we can mix forces. This was done a few years ago in Solvang and as a result, a beautiful park was constructed that would not have been possible if we had stayed a general law city.”

When it comes to the city’s maintenance, Hanley thinks his city’s public works department is up to the task. “We wanted to do in-house what would otherwise have needed to be contracted out,” said Hanley. “Maintenance crews can now do things like repaint buildings, and in the future may even start fixing roads.”

The King City Manager, Michael Powers, describes how he reached his decision to support the charter: “We looked at it from the perspective of ‘what can we do to save money or stretch our dollars?’ For me, the ‘ah ha’ moment arrived when I received quotes for a City Hall painting project for $20,000, while my staff was able to do the job for just under $5,000.”

That kind of “ah ha” moment is exactly what Councilman Jerry Kern, a proponent of Oceanside’s charter, experienced when his city re-bid jobs without state mandated prevailing wage requirements.

“Since the charter was passed in June, we’ve rebid three of our contracts,” said Councilman Kern. “We’ve seen cost reductions of nearly 20 percent on those projects and have saved $970,000.”

“We spend an average of $30 million per year on contracts for public works projects. If we see the ten to twenty percent savings we project, that’s three to six million saved tax dollars per year,” Kern said.

Councilman Kern expects many more California cities to consider adopting charters that vigorously assert home rule rights:

“I can’t imagine any city in California choosing not to receive the savings and benefits associated with becoming a charter city.”

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