In a long-awaited decision, last week the California Supreme Court held that charter cities are not bound by the state’s laws requiring the payment of prevailing wages on public works. The decision in State Building & Construction Trades Council v. City of Vista finally closes an issue that had lain dormant for years.
The decision is important in several respects. First, for contractors, paying “prevailing wages,” which, in practice, is the local union wage level, increases the cost of public works considerably. Second, charter cities – those with their own local quasiconstitutions, which tend to be larger cities such as San Diego and Chula Vista – have more public works projects; this decision will allow them to reduce their costs. Charter cities may, under this decision, require payment of prevailing wages, but the charter cities in our region generally do not.
Most importantly for the primary business of our clients, this decision can have a significant impact on development projects. State law, as interpreted by the courts, can result in developers having to pay prevailing wages when they build infrastructure to satisfy development conditions. This decision allows charter cities to elect not to impose a prevailing wage requirement in such situations; however, developers may still need to negotiate with a charter city to get this benefit.
Richard Schulman of Hecht Solberg co-taught a seminar sponsored by the Building Industry Association of San Diego on this issue, and has been tracking the court case. As it now stands, the law is subject to numerous ambiguities and uncertainties. To help ensure your project is profitable, these ambiguities need to be addressed in everything from improvement agreements for minor subdivisions up to and including development agreements for larger projects.
If you have any questions about how this may affect your project, please contact Richard Schulman or Neil Hyytinen at 619.239.3444.