Will a change of one line in a contentious labor bill quell the uproar of homebuilders?

AB 199 was supposed to be a piece of legislation that cleared up a loophole and help construction works. Instead, it galvanized an industry and led to condemnations from conservative politicians and liberal newspapers.

Assemblyman Kansen Chu (D-San Jose) thought he was just cleaning up some legal language with AB 199. He wanted prevailing wage rages on public workers projects, which is already state law, to continue despite the closure of redevelopment agencies five years ago. But the semantics of the bill created a collaborative effort among the building and construction industries, pitting them against labor and the legislative process.

In the latest version of the bill released earlier this month, one line has been changed to narrow what divisions of government a prevailing wage would apply to.

Under state law, workers under most public works projects are paid a prevailing wage rate, a mandated scale of how each worker should be paid, as determined by the Department of Industrial Relations. The construction industry says that can increase labor costs up to 46%, according to a Beacon Economics report.

In 2011, under a budget crisis, Governor Jerry Brown and the state legislature ended local redevelopment agencies. As California Watch explained, the function of local government allowed cities like Fresno…

…the ability to capture a greater share of property taxes. After an area was declared a redevelopment project area, the share of property taxes that goes to schools and other local agencies was frozen. All of the growth in property taxes from that point until the redevelopment area expired – usually 50 years – went back to the redevelopment agency.

In the place of redevelopment agencies, “successor agencies” popped up to work on the slow process of selling off property. They act as an oversight board.

Most private home projects on private property are exempt from prevailing wage rate, unless it has an agreement with a public agency. The law in question is Labor Code 1720 (c)(1). It says that projects built in an agreement with “a state agency, redevelopment agency or local public housing authority” would be required to pay the prevailing wage rate.

So, what about the successor agencies, since they are not specifically mentioned in the law? That was the loophole Chu thought he was solving. When AB 199 was introduced in January, it changed the language to read agreements with “the state or a political subdivision.”

The argument against that change went that “state or political subdivision” would apply to city projects. And, a city project could be considered “public works” if a private home builder received any kind of subsidy, say a fee credit for building a park or sewer line. Thus, that would trigger the prevailing wage rate.

At a March 16 Assembly Labor & Employment committee hearing, nearly a hundred people from the building and construction industries traveled to Sacramento to voice their opposition. Nevertheless, the committee forwarded the bill by a 5-1 vote. Members, though, expressed their hopes to further negotiate the bill to clear industry concerns. Committee chairman Tony Thurmond (D-Richmond) later became a co-sponsor of AB 199.

Many cities, including Clovis (but not Fresno), formally opposed the bill. Assemblyman Jim Patterson (R-Fresno) held a news event at a Clovis home development flanked by dozens of builders. “It will essentially put home ownership out of the realm of possibility for literally millions of Californians,” Patterson said at the March 31 event.

The language change, revealed on April 6, clarifies a line that incensed the home builders. It removed the vague “state or political subdivision” and replaced it with a more concise “a state agency, a redevelopment agency, a successor agency to a redevelopment agency when acting in that capacity, or a local public housing authority.” As of now, the specific language in question would amend Labor Code 1720 (c)(1) to read:

Private residential projects built on private property are not subject to the requirements of this chapter unless the projects are built pursuant to an agreement with the state or a political subdivision. a state agency, a redevelopment agency, a successor agency to a redevelopment agency when acting in that capacity, or a local public housing authority.

The “requirements” referred to are that private residential projects built on private property are exempt from state mandated prevailing wage rate. But they would be under the rate if they are built with any type of public money.

The new language makes sure it does not include “cities” from agencies that would still enact a prevailing wage rate. But, it does not clarify the other concerns about what interactions with a city could constitute a public works project.

The changes are being accepted by a coalition group that formed to oppose AB 199. The Coalition for Affordable, Reliable and Equitable Housing sent GV Wire this statement:

“California is struggling with an extraordinary housing crisis – not enough homes are being built to meet the demand. This has resulted in escalating housing prices, forcing millions of Californians to live miles away from their jobs, increasing longer commute times and traffic, and threatening to push many families further into poverty.

As originally introduced, AB 199 would have effectively eliminated the residential exemption, potentially subjecting nearly all housing projects in California to a government mandated prevailing wage and increasing home prices and rents.  As a result of a groundswell of opposition from social justice advocates, affordable housing advocates and hundreds of respected organizations throughout the state, AB 199 was recently amended to reflect existing law and significantly narrowed to only apply to successor agencies to redevelopment agencies.  As a result of the amendments, the Coalition for Affordable, Reliable and Equitable Housing has removed its opposition and will closely monitor the bill’s progress to ensure that changes are not made that would either make California’s affordability crisis or housing shortage worse.”

The bill will be heard next on April 26, 9 a.m. in the Assembly Appropriations Committee in Sacramento.

Contact David Taub

Phone: 559-492-4037 / e-mail

This story was not subject to the approval of Granville Homes.

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