PURPOSE:

The purpose of this report is to consider repealing the Burbank Redevelopment Agency�s prevailing wage policy on the payment of prevailing wages by private developers or owner-participants for certain redevelopment activities.

BACKGROUND:

On January 14, 1997, the Redevelopment Agency Board (Agency) adopted a prevailing wage  policy on the payment of prevailing wages by private developers or owner-participants for certain redevelopment activities. (Exhibit �A�).  The policy requires developers to pay state prevailing wages on many types of redevelopment activities and projects. To balance the desire of organized labor and others to pay prevailing wages on all projects, while not over burdening other more limited projects, the Agency�s policy provided several exemptions for certain types of projects, such as:  housing and commercial rehabilitation projects which involve less than $250,000 of net Agency assistance;  activities defined as �programs� where general qualifying criteria exist; and all projects involving non-profit entities. In addition, the Agency retained the right �in its sole discretion� to waive or modify the policy with respect to any project �upon a showing that the interests to be served by this policy and the purposes generally of the Community Redevelopment Law will not be adversely affected by such waiver.�

Subsequently, the State Legislature adopted Senate Bill (SB) 975, which amended California�s prevailing wage law to codify interpretations by the Director of Industrial Relations that prevailing wages are applicable not just to construction of works of improvement for use by the public but also to private works of improvement that receive the benefit of public funds. SB 975 (which became law on January 1, 2002) effectively superceded the Burbank Redevelopment Agency�s local prevailing wage policy by defining the term �public funds� very broadly.  SB 975 preempts much of the Agency�s policy and SB 975 provides its own set of exemptions which are very specific and different that those in the Agency�s policy (see Matrix Exhibit �B�). The penalties that are imposed on developers for non-compliance are the same as the Agency�s policy, and was not changed by SB 975.

Having both a state and local prevailing wage policy can be confusing.  For example, the construction of the Cottages Childcare Center is currently exempted under the Agency�s policy, since the facility is owned by the non-profit Burbank Housing Corporation (BHC).  Thus, the Agency neither requires nor monitors the payment of prevailing wages.  However, since SB975 is also applicable, which does not have an exemption for non-profit entities, BHC is required to pay prevailing wages.  In this case, the Agency does not monitor the payment of prevailing wages, nevertheless BHC still pays the prevailing wages and is subject to the same state penalties if it does not comply.   

ANALYSIS & CONCLUSIONS:

Because SB 975 supercedes the local policy, there is no longer a need for the Agency policy. The policy was adopted before any law provided guidance to agencies to define which types of private redevelopment activities would be subject to prevailing wages. Over the past year, it has become evident that the differences between the Agency�s and State�s prevailing wage requirements creates much confusion and some duplication. 

State law requires the payment of prevailing wages in certain projects or activities that cost $1000 or more, with very specific exemptions. The Agency�s policy requires the payment of prevailing wages in all agreements with the Agency for the development of property, but then exempts all programs, certain rehabilitation under $250,000, and any agreement with a non-profit developer as well as work defined as tenant improvements (unless those improvements are specifically required to be constructed by or on behalf of an owner or developer in accordance with an agreement with the Agency.). The Agency�s policy allows the Agency Board to make exemptions on a case-by-case basis, while the state law does not offer such flexibility. The state law does not provide blanket exemptions for non-profits, or tenant improvements.   Both the Agency�s policy and state�s law allows for different types of exemptions, including affordable housing projects, yet each have their own specific requirements. Each provide the same penalties for non-compliance.

Additionally, the Agency�s policy requires the Agency to monitor the payment of prevailing wages. State law does not require the Agency to conduct such monitoring obligations;  the strict penalties, and informal monitoring by unions, construction workers and others should be sufficient to ensure compliance.  By law, any person or entity can request evidence from developers and contractors that they are paying prevailing wages, if required.

At the time the local prevailing wage policy was considered, staff indicated that the Agency�s monitoring of the prevailing wage policy would require additional staff time to inspect payroll records, interview workers and investigate claims.  The amount of staff time would depend on the number and complexity of the projects.  Subsequently, the Agency hired a firm who specializes in such work to administer compliance requirements.  The costs for these services vary by project depending on several factors such as the number of subcontractors working on the project.  For the Burbank Entertainment Village project (AMC), the Agency spent approximately $40,000 to monitor the payment of prevailing wages. 

Due to the State�s budget problems and its potential affects on cities and redevelopment agencies, staff has looked at various ways to curtail expenses.  Since the new amendments to the state prevailing wage law supercedes the Agency�s local prevailing wage policy, and because enforcement penalties are the same, it is recommended that the local policy be repealed.

FISCAL IMPACT:

Repealing the Agency�s prevailing wage policy will result in savings related to the payment of monitoring services.  The amount will vary by the type and number of projects that are constructed each year.  However, if the local policy is repealed, immediate savings of approximately $70,000 will be realized this Fiscal Year, as prevailing wage monitoring services will not be required for the two projects slated for the �old police block.�

RECOMMENDATION:

Staff recommends that the Agency Redevelopment Board adopt the resolution repealing the Burbank Redevelopment Agency�s State Policy on the payment of prevailing wages by private redevelopers or owner-participants for certain redevelopment activities.

EXHIBITS:

A         Agency�s Prevailing Wage Policy

B          Prevailing Wage Matrix