California charter cities have had another area of municipal financial control returned to the local level, after the California Supreme Court ruled that charter cities have the power to set their own prevailing wage rates.

The issue arose in 2007 after City of Vista voters approved a charter for the city. City officials then approved an ordinance that prohibited the city from paying prevailing wages on purely locally funded construction projects. The ensuing lawsuit, State Building and Construction Trades Council of California, AFL-CIO v. City of Vista, claimed that prevailing wages were intended to protect statewide wages, and therefore were not a municipal matter. The Court found in favor of the local authority.

According to the decision, “no statewide concern has been presented justifying the state’s regulation of the wages that charter cities require their contractors to pay to workers hired to construct locally funded public works.”

John Loudon, the Executive Director of the Associated Builders and Contractors California Cooperation Committee said, “The spirit of the law is that contractors compensate workers fairly and compete on factors other than wages and benefits. The court’s decision is another instance of taxpayers trying to bring some balance to the extreme positions coming out of state government.”

There are 121 charter cities in California and many approach the issue of prevailing wages, municipal finance, and local authority to varying degrees.

The City of Costa Mesa will place a charter on the November ballot. That charter contains language that prohibits prevailing wage from being paid on local projects. It does not, however, ban a policy known as Project Labor Agreements. The decision to not include language regarding PLAs is an example of a local government deciding how – and in that case – how not to exert its local authority.