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How Unions Undermined the Rights of California's Charter Cities

In recognition that the municipal needs of people in the City of Needles might be different than the needs of people in the City of San Francisco, the California Constitution gives cities the right to control their own municipal affairs through a charter. These charters – approved by voters – are mini-constitutions that allow “home-rule.” Matters of statewide concern remain under the authority of the state.

Since the early 1930s, charter cities have been using their authority over municipal affairs to deviate from costly state mandates regarding so-called prevailing wages and apprenticeship requirements for purely municipal public works projects and private projects that get public funding (only) from the municipal government. Such laws imposed on public works projects effectively establish the wage and training terms and conditions for each trade in each county based on the applicable union Master Labor Agreement.

In other words, unions have quasi-regulatory power in California to determine contract bid specifications for government-funded projects (in most cases, for contracts of $1000 or more), whether built by a government or by a private developer. As a general rule, these specifications tend to disproportionately increase costs for taxpayers as the location of the project gets more distant from California Department of Industrial Relations headquarters in San Francisco.

During the truncated administration of Governor Gray Davis (1999-2003), union lobbyists succeeded in changing the legal definition of public works and the criteria used to calculate prevailing wage rates. This motivated more cities to ask voters to approve a charter with the intent of setting their own policies for purely municipal projects and private developments getting municipal financial assistance. In addition, other cities that already had charters were choosing for the first time to set their own policies.

Studies, anecdotes, and common sense showed that exercising this Constitutional right allowed charter cities to save money for taxpayers and build projects that would otherwise be economically infeasible. More could be built for less.

By the end of 2012, voters of 121 California cities had approved charters. Some charter cities chose to ignore the state mandates in their entirety and allowed construction contractors to choose wages and training practices based on market conditions. Other charter cities required contractors to follow most of the state mandates but set their own policies for some matters. And other charter cities did not exercise their authority at all for public works wages and training and simply included the state mandates in their project bid specifications.

The choice was left to the cities. See a status report of prevailing wage policies for charter cities at the end of 2012 in Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?)

Union Lobbyists and Lawyers Stomp Down the Charter City Rebellion

Obviously construction union leaders had become increasingly concerned about charter cities evading the provisions in their collective bargaining agreements when advertising contracts. In 2007, the State Building and Construction Trades Council of California sued the City of Vista, arguing that prevailing wage was a matter of statewide concern. The California Supreme Court sided with the City of Vista in 2012.

It was time for unions to use political campaigns and the state legislature to undermine the intellectual underpinnings of charter city authority and stop cities from ignoring the laws enacted at the State Capitol for unions. An organization called “Smart Cities Prevail” was created to discourage charter cities from deviating from state law. A new state law was passed to restrict the ability of voters to enact or amend charters. To exert political leverage, unions filed a lawsuit against the City of Oceanside claiming it violated the California Voting Rights Act of 2001 and had to redraw its districts. And unions heavily financed a campaign in the City of Costa Mesa to defeat a proposed charter.

But the strategy that proved completely effective in shutting down charter cities was a new law enacted in 2013, Senate Bill 7. Language in Senate Bill 7 was based on language in two earlier union-backed bills (Senate Bill 922 in 2011 and Senate Bill 829 in 2012) that cut off state funding for construction to any charter city that banned public contracts requiring companies to sign union Project Labor Agreements.

Senate Bill 7 declared that any charter city that deviated from state labor laws for public works contracts (such as prevailing wage and apprenticeship) would no longer be eligible to obtain state funding for construction. Several charter cities filed a lawsuit challenging the constitutionality of this law, but a San Diego County Superior Court judge upheld the right of the state to cut off the cash.

By the end of 2014, almost every charter city (perhaps every charter city) had passed an ordinance proclaiming their adherence to state prevailing wage law. Unions actually had the chutzpah to claim that charter cities had changed their policies because they learned about the value of prevailing wage laws, as if local governments had evolved toward ultimate enlightenment rather than being threatened with losing state funding.


Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

Now in California: Nation's Most Prominent Union-Oriented Prevailing Wage Scholar

A leading intellectual advocate for government policies that favor and benefit construction trade unions is on sabbatical from his home university and spending several months in proximity to one of California’s union-oriented labor institutes, the Institute for Labor and Employment (an affiliate of the Miguel Contreras Labor Program) based at the University of California, Berkeley.

IMG_5333Over the past 20 years, University of Utah economics professor Peter Philips has become the nation’s preeminent academic in support of government-mandated construction wage rates (so-called “prevailing wage”). Construction union leaders appreciate his studies that purport to show that prevailing wage did not increase the cost of school construction in Ohio, Michigan, Kentucky, and other states in the 1990s. In addition, they appreciate his testimony before state legislative committees and local governments throughout the country. His article about prevailing wage in British Columbia was published this month, and his article about prevailing wage (“common wage”) in Indiana is supposed to be published in January 2015.

Some of his recent work has argued that California’s charter cities do not benefit from using their constitutional authority to enact municipal prevailing wage policies that deviate from state prevailing wage law. His study entitled The Effect of Prevailing Wage Regulations on Contractor Bid Participation and Behavior: A Comparison of Palo Alto, California with Four Nearby Prevailing Wage Municipalities was published in Industrial Relations: A Journal of Economy and Society, described as “the Institute for Research on Labor and Employment’s top-ranked academic journal.”

(For a response to this article, see the www.UnionWatch.org article Journal Article on Prevailing Wage Debunked, But Only Outside Academia and my analysis entitled University of Utah Study on Government-Mandated Construction Wage Rate (“Prevailing Wage”) Policies in Five California Cities: Not a Reliable Tool for Policymakers. Also, see Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions? – 4th Edition.)

Professor Philips has also written studies on other construction labor issues. For example, he released The Economic and Environmental Impact of the California Environmental Quality Act (CEQA) in March 2013, when the State Building and Construction Trades Council of California was opposing proposed changes to environmental laws that would hinder their ability to exploit these laws to obtain Project Labor Agreements from developers. This study was reported in www.UnionWatch.org in the article Opponents of CEQA Reform Cite New Study with Union Connections(For examples of this practice of environment permit extortion, or “greenmail,” see the www.UnionWatch.org article Revised List of Union Actions in 2013 Under the California Environmental Quality Act (CEQA).)

Professor Philips reports that his study on the employment impact of solar power plant construction in California will be released in November 2014, in conjunction with a press conference in Oakland featuring the Sierra Club, Obama Administration officials, and construction union leaders. Most solar developers in California have signed Project Labor Agreements with construction unions to avoid delays caused by union objections to the projects under the California Environmental Quality Act. (See the www.UnionWatch.org articles Unions Extensively Interfere with California Solar Photovoltaic Power Plant Permitting and Did Unions Hasten Demise of California’s Solar Thermal Power Plants?)

On October 13, 2014, Professor Philips was the lecturer for a colloquium at the Institute for Research on Labor and Employment at the University of California, Berkeley entitled Prevailing Wage Laws in Construction: Wage Mandates as a Means of Promoting Collective Bargaining. Attendees appeared to be predominately graduate students and labor institute personnel, although a researcher of the union-affiliated organization Smart Cities Prevail was also there.

I reserved a spot in advance for myself, as instructed in the announcement for the colloquium, and no one hassled me about being there. In fact, Professor Philips asked me a question at the end of the colloquium. I was able to make a few remarks at a forum where different views about the fundamental roles of government and unions are probably quite uncommon.

Here are some of my observations from the hour-long presentation on prevailing wage by Professor Philips.

    Labor Institute director Michael Reich introduces Professor Peter Philips.

    Labor Institute director Michael Reich introduces Professor Peter Philips.

  • Professor Philips was introduced by Michael Reich, Professor of Economics and Director of the Institute for Research on Labor and Employment. They met in the 1970s in the very room where this colloquium was held 40 years later. Older generations seem to dominate the fading academic field of what was once called “industrial relations.”
  • Professor Philips genuinely believes in the “virtues” of collective bargaining and supports the concept of government intervention to encourage collective bargaining in the construction industry. He frequently refers to the development and support of “human capital” in a “turbulent” industry and believes unions fulfill that role by providing sustained employee benefits and training. One of his slides appeared to show a “Non-Union” maid throwing bathwater out the window with “human capital” in it. (A slide showing a union official throwing bathwater out the window with “taxpayer money” in it was not included in the presentation.)
  • He emphasized to the PhD students at the colloquium that “being effective” requires speaking and crossing three arenas: economic, legal, and political. This conforms to the contemporary idea of university labor institutes as not merely research operations, but activist programs meant to pursue advancement of society through a progressive political agenda. (Your tax money in action.)
  • He asserted that groups such as Associated Builders and Contractors (my former employer) and conservative think tanks claim to oppose government-mandated prevailing wages because of concern for fiscal responsibility, but in reality are motivated by a desire to eliminate government policies that allow unions and unionized contractors to be competitive. At the same time, he claims prevailing wage does not increase costs of construction. A few students asked about this apparent contradiction: why does government need to impose a prevailing wage to help unions if prevailing wage does not increase costs? In response, Professor Philips hedged his bets and suggested that prevailing wage raises the cost of construction about 5%. Then he claimed that prevailing wage opponents cite higher percentages of savings because 5% does not inspire elected officials to eliminate the policy.
  • He contended that “Merit Shop” was a much better “descriptor” for non-union construction than “non-union,” because in this system workers are paid “variegated” wages based on merit, rather than a common wage based on collective bargaining. (Obviously he does not regard this particular recognition of “merit” as beneficial to human capital.) He briefly discussed the rise of the Associated Builders and Contractors construction trade association from its founding in 1950 through its dramatic expansion in the 1970s as it worked with the Business Roundtable to curb inflation.
  • He contended that class lines were blurred in construction: someone who starts in the industry as an apprentice can become a company owner. This is a challenging statement for union activists and academic advocates of unionism who believe class consciousness is essential to establishing “workplace democracy” through collectivism. It reminded me of claims I’ve heard over 20 years from both union and non-union officials that the ultimate ambition of a union apprentice is to become a union business agent, while the ultimate ambition of a non-union apprentice is to become a company owner.
  • Professor Philips is critical of what he sees as non-union efforts to infect construction with “Taylorism,” that is, breaking the work process down into small distinct responsibilities within a mass production system. He sees “human capital” developed through comprehensive union-sponsored apprenticeship training as a contrast to Taylorism. He also describes the non-union business model as “myopic bidding,” which I took to mean narrow consideration for a specific project without consideration of long-term costs.

It seems that Professor Philips is spending some of his time in California working on a project to describe how the Merit Shop operates, with the intent of contrasting it to the alleged virtues of a collective workforce. Here’s how Professor Philips seems to perceive Merit Shop construction:

  • A large Merit Shop company has a core workforce of very-well-paid, exceptionally talented and motivated long-term employees who travel regionally to work on significant construction projects. Some of these workers participated in or graduated from union apprenticeship programs but ultimately become disgruntled with their unions for ideological reasons or personal grievances. They tend to be zealous backers of the Merit Shop movement.
  • Below these core workers are two systems: (1) workers hired through a traditional process of submitting resumes in order to perform single jobs and then casually released at the end of the project without health insurance or other benefits; and (2) an extensive “highly articulated” network of small non-union subcontractors, either self-employed or with a small number of loyal, closely-tied employees.
  • For training, Professor Philips claims that the Merit Shop wants government to provide subsidies to train workers in vocational programs, as opposed to choosing to fund worker training themselves through employer payments to formal apprenticeship programs.

While Professor Philips is in California, he would like to talk with some Merit Shop contractors about their business practices. Keeping in mind that Professor Philips has some presuppositions about labor relations (as all people have), you may contact me as an intermediary if you are interested in talking to him about your business.


Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

 

4th Edition Released: California Charter City Prevailing Wage Policies

California city council members who believe local government authority spurs economic growth and job creation more effectively than centralized state control now have access to the newly-published 4th edition of Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?

In 2009, an organization now known as the California Construction Compliance Group published the first edition of this comprehensive research report. It reviews the status of so-called “prevailing wage” policies at California state and local governments and explains how California’s 121 charter cities take advantage of their constitutional right to exercise local control by setting their own prevailing wage policies.

Needless to say, special interests that advocate for more intrusive centralized government detest this report. Union-instigated state laws have been enacted in an attempt to hinder its publication and circulation and neutralize the power of its information and arguments.

If you live or work in an incorporated city in California, you may want to consider providing this report to your elected city council members, top city administrators, and leaders of your city’s business and taxpayer organizations. That simple act can subvert millions of dollars spent on lobbying at the California state capitol.

Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions? – 4th Edition – April 2014


Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

Journal Article on Prevailing Wage Debunked, But Only Outside Academia

A survey of academic journal articles in the fields of labor relations, labor economics, and labor history reveals scholarly consensus: union-backed public policies are good for the economy!

No one ever rebuts these journal articles, so they must be true. And why would anyone assume otherwise? As a union official said about one of these studies at a city council meeting in the San Francisco Bay Area many years ago, “It’s from a college. Written by a doctor!”

Public deference to college professors can be a powerful political weapon. For example, union lobbyists and elected officials across the country frequently cite a recent article published in an academic journal when arguing for policies that impose or expand “prevailing wage” laws on public works construction projects. It was written by a University of Utah economics professor and two other researchers and appeared in October 2012 in Industrial Relations: A Journal of Economy and Society.

This journal is published under the auspices of the Regents of the University of California by the Institute for Research on Labor and Employment, an affiliate of the University of California Miguel Contreras Labor Program. This is one of the numerous taxpayer-funded labor institutes at state universities that produce studies meant to advance the union political agenda.

Slapping the university logo on such studies provides instant credibility that cannot be attained from the logo of an openly union-affiliated organization such as “The California Labor Federation Institute for Policy Research.” After all, the California Labor Federation does not have the scholarly cachet attained from faux-Gothic buildings, cap-and-gown graduations, or sports teams playing in bowl games or “March Madness®.”

Coasting on the reputation of the University of California, this highly-cited journal article “The Effect of Prevailing Wage Regulations on Contractor Bid Participation and Behavior: A Comparison of Palo Alto, California with Four Nearby Prevailing Wage Municipalities” claims to prove that government-mandated wage rates on construction contracts have not negatively impacted bidding for public works projects in the San Francisco Bay Area.

It sounds like the economics is settled on government-mandated prevailing wage rates. Or is it?

You will not find many college professors who specialize in investigating and debunking the claims of university-based labor institutes. And the concept of “peer review” seems tenuous in an intellectual field where every expert necessarily holds the same enlightened ideology.

I don’t have any graduate degrees hanging on the wall or the honor of being called “Professor” by my community, but I pretend expertise on government-mandated prevailing wage laws in California. For example, I have written four editions of an influential but detested report on the issue, entitled “Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?

With this feeble credential, I decided to take a closer look at what people with doctorates say about prevailing wage policies in California. In my first scan of the article, I saw numerous statements worthy of rebuttal, or at least quibbling. But one item caught my attention.

The study claims that the five cities used for comparison purposes – Palo Alto, San Jose, Sunnyvale, Mountain View, and San Carlos – are in Santa Clara County. But San Carlos is actually in San Mateo County.

Why does this matter? The California Department of Industrial Relations determines prevailing wage rates by obtaining the applicable union Master Labor Agreements for each construction trade or construction professional service occupation. It adds up all of the employer payments indicated in the union agreement, and the total of those payments becomes the prevailing wage.

This means prevailing wage rates are based on the geographical jurisdictions of each local union. While some construction trade unions have large geographical jurisdictions (some as large as the entire State of California), other unions have jurisdictions as small as one county. As a result, prevailing wage rates will differ for some trades even when job sites are only a mile apart, simply because they are in different counties.

Apparently the Utah-based authors of the study actually believed the union rhetoric that claims California determines prevailing wage rates by region based on surveys of employers. Actually, the state has not conducted surveys of employers to ascertain dollar amounts of prevailing wage rates in at least 25 years, if ever. (A few surveys have been conducted to determine which construction trade union has jurisdiction of a disputed job classification, such as installation of metal roofs or off-site hauling to-and-from a job site.)

This geographic error ended up as one of many identified mistakes. In the end, I outlined 17 problems with the journal article. Even the raw data set for the key city of Palo Alto appeared to be inaccurate and incomplete. If someone had the time and money to replicate the entire study, the whole thing would probably be exposed as false.

My report, entitled University of Utah Study on Government-Mandated Construction Wage Rate (“Prevailing Wage”) Policies in Five California Cities: Not a Reliable Tool for Policymakers,” should create appropriate concerns about the study as policy guidance for state and local governments.

Will I seek to have the editors of Industrial Relations: A Journal of Economy and Society retract the faulty article? Of course not!

Even if I possessed academic credibility with a PhD and a professorship at a well-known secular liberal arts college, professors and administrators associated with university labor institutes are in cahoots with the union movement, sometimes explicitly through boards of directors, advisory committees, and funding sources. In academic circles nowadays the definition of truth is malleable, especially when progressive principles of social justice are at stake.

They’ll keep publishing, and maybe once in a while a layman will expose a flawed study or two.


Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

Opponents of CEQA Reform Cite New Study with Union Connections

A broad coalition opposing any changes to the California Environmental Quality Act (CEQA) held a press conference today (March 12, 2013) that included the findings of a newly-released study, The Economic and Environmental Impact of the California Environmental  Quality Act.

The study was written by a University of Utah professor with a long history of academic work biased toward the construction union agenda. It was funded by the union-affiliated California Construction Industry Labor-Management Cooperation Trust. Study results were summarized at the press conference by Bob Balgenorth, chairman of the California Construction Industry Labor Management Cooperation Trust and the former head of the State Building and Construction Trades Council of California.

This March 11, 2013 Associated Press article Coalition Forms to Defend California Environmental Law reports on what happened:

Common Ground, the new coalition group opposing reforms, commissioned a report as part of its effort to emphasize the importance of the law.

The study by Peter Philips, a University of Utah economics professor, points to the state’s record in building alternative-energy projects and maintaining construction jobs as evidence that the law is working.

“Has CEQA actually hindered construction? Far from it,” said Bob Balgenorth, chairman of the California Construction Industry Labor Management Cooperation Trust. “If anything, it’s facilitated greater construction, a cleaner environment and a better quality of life for Californians.”

Brown and the Legislature’s Democratic leaders are negotiating changes after an attempt to pass a bill failed last year.

The governor’s office had no comment on the report, but Brown has advocated for more consistent standards in reviewing development projects.

It’s unlikely that Governor Brown is ever going to comment on the report. And the business coalition in support of CEQA reform appears to be strategical avoiding any references to unions and their abuse of CEQA to obtain labor agreements and other economic concessions. So far I haven’t seen any news reports taking a critical look at this study or its origins.

So here’s the scoop about this study, courtesy of www.UnionWatch.org:

The Author of the New CEQA Study

The Economic and Environmental Impact of the California Environmental  Quality Act was written by Peter Philips, Professor of Economics at the University of Utah. Professor Philips has specialized in research on construction labor issues, with particular attention to California.

For example, in 2012 Professor Philips had his paper The Effect of Prevailing Wage Regulations on Contractor Bid Participation and Behavior: A Comparison of Palo Alto, California with Four Nearby Prevailing Wage Municipalities published in Industrial Relations: A Journal of Economy and Society. This journal is published by the Institute for Research on Labor and Employment at the University of California, an affiliate of the University of California Miguel Contreras Labor Program. It is hosted on the web site of the union-backed California Construction Academy, a project of the UCLA Labor Center established within the Institute for Research on Labor and Employment, which (as stated earlier) is an affiliate of the University of California Miguel Contreras Labor Program. If this tangle of programs at the University of California confuses you, that’s probably the intent.

This paper is part of an ongoing lobbying campaign of the Santa Clara-San Benito Building and Construction Trades Council and a union-affiliated organization called www.SmartCitiesPrevail.org to convince the Palo Alto City Council to repeal its own policy concerning government-mandated construction wage rates (so-called prevailing wages) on purely municipal construction projects. This is a right granted under Article XI of the California Constitution to Palo Alto and 120 other California cities that operate under their own charters. For more information on this home-rule right, see Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?

As shown in his curriculum vitae, Professor Philips was the keynote speaker at the California International Brotherhood of Electrical Workers (IBEW) conference in 2012. He has spoken repeatedly at conferences about Project Labor Agreements, including the State Building and Construction Trades Council of California annual conference in 2008.

While this background doesn’t necessarily mean that Professor Philips has inaccuracies in his research and reports, one should be aware that he holds certain presuppositions and biases about economics and labor relations that may be reflected in his work.

The Sponsor of the New CEQA Study

Page 2 of The Economic and Environmental Impact of the California Environmental  Quality Act indicates that “This study was sponsored by a grant from the California Construction Industry Labor Management Cooperation Trust.” This mysterious group was described last year in www.UnionWatch.org (see Mysterious Union Slush Fund Spends $100,000 Against Costa Mesa Charter).

This is an arcane type of union-affiliated trust authorized by the obscure Labor-Management Cooperation Act of 1978, a law signed by President Jimmy Carter and implemented by the Federal Mediation and Conciliation Service. Inspired by the decline of unionized manufacturing in the Northeast, this federal law was meant to help industrial management and union officials build better personal relationships and cooperate against the threat of outside competition. There are no federal or state regulations specifically addressed toward these trusts, and these trusts do not have any reporting requirements to the U.S. Department of Labor’s Office of Labor-Management Standards. This is an ambiguous and forgotten law that’s ripe for abuse.

Here are some of the recent top recipients of funding from the California Construction Industry Labor Management Cooperation Trust:

  1. $1,095,000 – Taxpayers to Preserve Community Jobs, No on Measure A, sponsored by labor and management organizations (June 5, 2012 election in City of San Diego)
  2. $770,000 – UCLA Labor Center (aka UCLA Center for Labor Research and Education), part of the University of California Miguel Contreras Labor Program
  3. $250,000 – No 98/Yes 99 – A Committee of City and County Associations, Taxpayers and Environmental Groups, League of California Cities, Californians for Neighborhood Protection, Coalition of Conservationists
  4. $164,550 – “Other” (?)
  5. $100,000 – Committee for Costa Mesa’s Future – No on V, sponsored by labor and management organizations (November 6, 2012 election in City of Costa Mesa)
  6. $100,000 – Apollo Alliance
  7. $100,000 – Paxton-Patterson Construction Lab/Shop in San Joaquin County
  8. $50,000 – Taxpayers to Preserve Community Jobs, No On Measure G, sponsored by labor and management organizations (June 8, 2010 election in City of Chula Vista)

But what’s more interesting is the source of at least some of this money, if not all of it.

It’s Not Union Members that Give the Money to the California Construction Industry Labor-Management Cooperative Trust: It’s Utility Ratepayers and Contractors Working for Extorted Power Plant Owners

Since the 1990s, whenever an energy company or public utility submits an application to the California Energy Commission seeking approval of a new power plant, an organization called California Unions for Reliable Energy (CURE) often “intervenes” in the licensing process. Represented by the South San Francisco law firm Adams Broadwell Joseph & Cardozo, CURE submits massive data requests and environmental objections to the California Energy Commission. The applicant by law is required to answer CURE’s submissions, at significant cost and delay. The chairman of California Unions for Reliable Energy (CURE) was Bob Balgenorth (see above).

If the power plant owner agrees to require its construction contractors to sign a Project Labor Agreement with the State Building and Construction Trades Council of California or its regional affiliates, CURE’s objections fade away and the power plant proceeds unhindered through the licensing process. If the company or utility does not surrender to CURE’s demand, then CURE’s interference and lawsuits continue.

This racket – sometimes called “greenmail” because it’s the use of the California Environmental Quality Act (CEQA) and federal environmental laws to pressure developers to sign Project Labor Agreements – is well-known to the energy industry in California and has been extensively reported in the news media over the past dozen years. (For example, see Labor Coalition’s Tactics on Renewable Energy Projects Are Criticized – Los Angeles Times – February 5, 2011 and A Move to Put the Union Label on Solar Power Plants – New York Times – June 18, 2009.) It is also documented in www.PhonyUnionTreeHuggers.com.

For cases in which the power plant applicant succumbs to CURE’s harassment, the Project Labor Agreement that the power plant owner signs usually contains a provision requiring the owner or its contractors to make a lump-sum payment or series of payments to the California Construction Industry Labor-Management Cooperative Trust.

For example, the Project Labor Agreement signed by the Northern California Power Agency (a conglomerate of publicly-owned utilities) for the construction of the Lodi Energy Center required the agency to shell out $90,000 to the California Construction Industry Labor-Management Cooperative Trust. That amount was dutifully mailed to Bob Balgenorth on August 17, 2010. (For more on this payment, see High Energy: Lodi Center Designed to be a Powerhouse for Chunk of State – Stockton Record – October 4, 2011; also, the union rebuttal on the California Building Trades Council web site – ABC Falsehoods Refuted in Letter to Stockton Record.)

And Section 13.1 of the Project Labor Agreement signed by the Southern California Public Power Authority (another conglomerate of publicly-owned utilities) for the construction of the City of Anaheim’s Canyon Power Plant required the agency to shell out $65,000 to the California Construction Industry Labor-Management Cooperative Trust.

The California Construction Industry Labor-Management Cooperative Trust reports these payments as “membership dues” to the Internal Revenue Service. Which brings up a question: are the local elected officials who serve as commissioners for the Northern California Power Agency and the Southern California Public Power Authority exercising their responsibilities as “members” to approve its expenditures?

It’s a tangled conspiracy. Especially intriguing is that one union official was the head of the State Building and Construction Trades Council of California, the California Construction Industry Labor-Management Cooperative Trust, and California Unions for Reliable Energy. For more information, see the investigative report of the Coalition for Fair Employment in Construction at this September 23, 2011 post at www.TheTruthaboutPLAs.comA Genuine California Union Conspiracy: Senate Bill 790 and the California Building Trades Council’s Ratepayer Funded Political Slush Fund

Confused about the Conspiracy? Here’s a Chart.

A public utility or private energy company applies to the California Energy Commission for approval to build a power plant.

California Unions for Reliable Energy (CURE) uses its “intervenor” status at the California Energy Commission to submit massive data requests and environmental complaints about the proposed power plant, as a result gumming up the licensing process and causing costly and lengthy delays for the applicant.

 ↓

Applicant for prospective power plant surrenders and agrees to sign a Project Labor Agreement with the State Building and Construction Trades Council of California or its regional affiliates. California Unions for Reliable Energy releases its grip of legal paperwork and the project moves forward unimpeded and acclaimed as environmentally sound.

 ↓

The Project Labor Agreement contains a required payment or payments to the California Construction Industry Labor-Management Cooperative TrustCalifornia Public Utilities Code Section 3260 – enacted by Senate Bill 790 in 2011 – allows public utilities to pass costs through to ratepayers.

 ↓

The California Construction Industry Labor-Management Cooperative Trust reports those payments to the IRS as “Membership Dues,” creating questions about the rights inherent for dues-paying members.

 ↓

The California Construction Industry Labor-Management Cooperative Trust makes contributions to political campaigns and studies, including The Economic and Environmental Impact of the California Environmental Quality Act.

Solutions

Is there any way this racket can be stopped? Yes. The U.S. Department of Labor’s Office of Labor Management Standards could promulgate regulations that establish restrictions and reporting guidelines for committees authorized by the Labor-Management Cooperation Act of 1978. Even better, Congress could pass legislation amending or repealing the law, and the President could sign it. Neither solution is viable for the next four years.

Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

With Senate Bill 7, California Unions Advance Plot to Neuter City Charters

More than 30 California cities are likely to defy top union officials by asking their citizens in 2014 to vote on enacting a “home rule” charter for local control.

Cities want to free their purely municipal affairs from costly union-backed state mandates, for reasons revealed in these recent articles:

Unions Rise to Defense of “Prevailing Wage” Rates Jeopardizing Hotel Project in Redding – www.LaborIssuesSolutions.com – February 15, 2013 and Redding Needs a Charter to End Nonsense Definition of Private Hotel as a “Public Works” Project – www.LaborIssuesSolutions.com – January 31, 2013.

Stanford Professor Warns Costa Mesa about Pension DebtOrange County Register – February 27, 2013 and City’s Pension Outlook Called ‘Stark’ – Newport Beach/Costa Mesa Daily Pilot – February 27, 2013. (With the failure of the Measure V charter in November 2012, Costa Mesa is now in the union paradigm with a proposed solution to raise taxes.)

A Former Mayor of a Southern California City Provides an Intellectual Argument for City Charters and Local Government Authority – www.LaborIssuesSolutions.com – February 19, 2013 (a commentary on Reasons to Consider Becoming a Charter City – San Diego Union-Tribune – February 19, 2013).

For a powerful example of how charter cities are saving money and being more cost-effective in their city operations and services, see Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions? Cities recognize that exercising the power of a charter can free their municipal affairs from the grip of the state legislature and the special interest groups entrenched at the capitol. A staff report about city charters to the Murrieta City Council for its October 2, 2012 meeting was blunt about the need for cities to enact charters:

…a knowledgeable, involved electorate should both propel and constrain the direction of its own city. Local control has always been a paramount matter of residents, businesses and the Murrieta City Council. Yet state legislators and previous gubernatorial administrations continue to impose far greater mandates, while at the same time hindering the ability of local governments to operate successfully. With little ability to protest, local governments have watched as the state government continues to balance its budget deficits on the backs of fiscally responsible local jurisdictions…The voice of cities in Sacramento has become mute due to a combination of special interest groups, influential political campaign contributions and tone-deaf lawmakers passing unfunded mandates. This process has left cities with little ability to petition the state government…

A city charter is a unique document that acts like a constitution for a city adopting it. Overall, this puts more control into the hands of the residents instead of state legislators and gives a community greater independence to determine its own destiny. Cities typically enter the process to become a charter city to become more autonomous. A charter city has more flexibility and has ultimate authority over municipal affairs. The charter city provision of the state Constitution, commonly referred to as the “home-rule” provision, is based on the principle that a city, rather than the state, is in the best position to know what it needs and how to satisfy those needs. The home-rule provision allows charter cities to conduct their own business and control their own affairs. Therefore, a charter maximizes local control. Such benefits of a charter city are greater flexibility on public works contracts and other changes in the procurement process, more control over economic development practices, and less reliance on the state.

Right now there are 121 charter cities in California, up from 107 in 2007. But there are aggressive opponents who regard cities’ exercise of their charter authority (as cited above from the Murrieta staff report) to be an attack on their hegemony. In 2011 and 2012, unions spent jaw-dropping amounts per voter on campaigns to convince voters to reject reasonable proposed charters.

Charters were defeated in Rancho Palos Verdes, Auburn, Costa Mesa, Escondido, and Grover Beach, to the dismay of civic leaders whose local grassroots efforts were rolled over by well-funded union-backed professional campaign operations. Unions are now ready to crush California’s federalist rebellion once and for all in 2013 and 2014.

As one strategy, they are infiltrating and trying to neutralize the League of California Cities as an organization that provides information to cities looking at charters. A union-affiliated group called www.SmartCitiesPrevail.org is trying to influence the League of California Cities through sponsorship, partnership, and participation in the League’s Transportation, Communication & Public Works Committee.

Unions are aggressively opposing charters when proposed on the local level and are trying to derail proposals through charter review commissions (a strategy that worked for unions in Elk Grove, Redding, and other cities). See the newspaper articles listed below for evidence.

Union lobbyists also have a bill now in the California State Legislature (Senate Bill 7) introduced by Senate leader Darrell Steinberg and a Republican State Senator, Anthony Cannella. It will cut off state funding for cities that use their constitutional charter authority to establish their own policies concerning state-mandated construction wage rates. (See Bill Introduced in State Senate to Suppress Authority of California’s Charter Cities to Establish Their Own Policies on Government-Mandated Construction Wage Rates – www.LaborIssuesSolutions.com – February 20, 2013.)

This bill adopts the same concept of crushing charter city authority as did the union-backed Senate Bill 922 in 2011 and Senate Bill 829 in 2012 (two bills pushed by Senator Michael Rubio, who just resigned to take a lobbying position with Chevron). These two laws cut off state money to charter cities that adopt policies prohibiting those cities from requiring construction contractors to sign a Project Labor Agreement with unions as a condition of work.

Threatening to withhold money as a tactic to force a government to submit to centralized authority may remind you of warnings in the dissent in the U.S. Supreme Court decision in June 2012 concerning the constitutionality of Obamacare:

Structural protections – notably, the restraints imposed by federalism and separation of powers – are less romantic and have less obvious a connection to personal freedom…The fragmentation of power produced by the structure of our Government is central to liberty, and when we destroy it, we place liberty at peril…[The] practice of attaching conditions to federal funds greatly increases federal power…This formidable power, if not checked in any way, would present a grave threat to the system of federalism created by our Constitution…Coercing States to accept conditions risks the destruction of the “unique role of the States in our system.”

While the same principles would seemingly apply to the relationship of state and local governments, forces at the state capitol seem to prefer an overbearing centralized government that can solve problems with broad strokes of alleged social justice.

With bills such as SB 922, SB 829, and SB 7 deemed as acceptable modes of governance by the legislative supermajority and the governor, I anticipate a union-backed effort in the future to repeal outright the section of the California Constitution (Article XI, Section 3) that allows cities to govern their own municipal affairs under a charter. It would be an effective way to eliminate another one of the diminishing number of checks and balances that interfere with utopian schemes planned under the benevolent and enlightened one-party state.

Then there is the strange case of Republican Senator Anthony Cannella, who is so proud of undermining local control and raising costs for taxpayers that he used the Senate Republican Caucus communications operation to proclaim his legislative achievement to a gullible press. Here’s a Tweet:

It didn’t go unanswered. I responded with this Tweet:

Senator Cannella may not realize (or may not care) that he represents two cities – Modesto and Merced – that use their charter authority to set their own policies concerning government-mandated construction wage rates (so-called “prevailing wages”). Here is the Modesto policy, set by a 1995 resolution: Modesto Prevailing Wage Policy and Staff Report. Here is the Merced practice: Merced Exempts Rental Housing Preparation from State-Mandated Government Wage Rates (Prevailing Wage). Oh well, sometimes the union lobbyists in Sacramento are a more important constituency than the people back home in the Central Valley.

With the help of Senators Steinberg and Cannella, union lobbyists intend to direct their legislative puppets from Los Angeles and San Francisco to suppress the small and medium-sized cities trying to determine their own financial destinies. To protect union power, these cities must submit to centralized power exercised by the state legislature and Governor Jerry Brown.

In the meantime, the local federalist rebellion continues. In addition to the cities of Temecula and Murrieta, the following California cities are now publicly moving forward on asking their citizens to approve a charter in 2014 (with several more soon to begin public discussion):

Costa Mesa

Outsourcing Back in for Costa MesaOrange County Register (editorial) – February 6, 2013

…passage of Measure V would have made the privatization task easier. But the union outspent Measure V proponents by more than seven-to-one. However, Mr. [Councilman Jim] Righeimer said he hopes a new charter measure will be put on the June 2014 ballot…Within 60 days the council will hold a study session on how to set up the independent committee for the new charter measure.

Escondido

Escondido Mayor Touts Urban Renewal, Embracing DiversitySan Diego Union-Tribune – February 20, 2013

Delivering his annual State of the City address to nearly 300 residents and business leaders gathered at the city’s arts center… [Mayor Sam] Abed said he also wants the city to take another shot at becoming a charter city, which would increase Escondido’s independence from Sacramento and reduce the cost of some city construction projects.

Moreno Valley

Moreno Valley: City to Explore Becoming Charter City – Riverside Press-Enterprise – February 26, 2013

The Moreno Valley City Council on Tuesday, Feb. 26, unanimously approved establishing a subcommittee that would explore becoming a charter city and appointing two council members to it.

Moreno Valley: Charter City Committee Could Be Created  – Riverside Press-Enterprise – February 25, 2013

The Moreno Valley City Council on Tuesday, Feb. 26, is to follow through on plans to determine whether to become a charter city. The council is set to vote on whether to establish a charter exploratory subcommittee and appoint two council members to it.

Buellton

Buellton Continues “Home Rule’ Talk – Santa Ynez Valley News – February 7, 2013

The idea of changing Buellton to a “home-rule” city is on hold again after City Council members decided to set up a workshop for more discussion about a draft plan…City Manager John Kunkel said the committee wants voters to be comfortable with the measure and, if the council wants to have a dialogue with unions, there is no rush.

Charting Best Path to Buellton’s Future – Santa Ynez Valley News (editorial) – February 7, 2013

…being a charter city does mean that local elected officials and voters can make more of their own decisions, and are therefore better able to tailor policy to fit specific local needs…Being a charter city also lets local government off the hook for paying a prevailing wage. Labor unions don’t like that possibility…

Arroyo Grande
Arroyo Grande Considering City Charter – www.CalCoastNews.com – January 28, 2013

The Arroyo Grande City Council has created a committee to explore the idea of becoming a charter city in order to cut costs…Many union members oppose city charters because they allow exemptions from state-mandated prevailing wage agreements. City staff says adopting a charter could save Arroyo Grande $50,000 to $300,000 annually.

Study Under Way to Find Out if Arroyo Grande Should Try to Become a Charter CitySan Luis Obispo Tribune – January 27, 2013

A committee has been convened to study whether Arroyo Grande should try to become a charter city, a move that officials say could save money and give it more local control. The idea, however, faces stiff opposition from local union members…

California cities have two choices about their financial futures: enact a charter as an way to become more cost-efficient, or raise taxes. Guess which choice the unions want?

Kevin Dayton is the President and CEO of Labor Issues Solutions, LLC and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.

Charter Proposals for California Cities Continue Provoking Union Opposition

California Governor Jerry Brown claimed in his State of the State address that California now has “a solid and enduring budget.” His Finance Department even predicts state budget surpluses.

Despite the jubilation at the state capitol inspired by tax increases and one-party rule, California cities seem skeptical, as shown by their continued efforts to exercise their state constitutional rights to govern their own municipal affairs, free of costly and burdensome state mandates. And unions remain determined to undermine them.

The elected council of the Central Coast city of Arroyo Grande has appointed a committee to determine if it should ask voters to approve a home-rule charter, and union officials are interfering through “stiff opposition.” The elected council of the Central Coast city of Buellton is going to hold a workshop on a proposed charter, as union officials fight the proposal there too.

Meanwhile, on January 22, 2013, the Newport Beach City Council voted 7-0 to exercise its home-rule power as a charter city to establish its own policy concerning government-mandated construction wage rates (so-called “prevailing wages”). See the text of the resolution below.

RESOLUTION NO. 2013-6

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH EXEMPTING LOCALLY FUNDED PUBLIC WORKS PROJECTS FROM PREVAILING WAGE

WHEREAS, the California prevailing wage law requires contractors on public works projects to be paid the general prevailing rate of per diem wages for work of a similar character in the locality in which the work is performed;

WHEREAS, under the California Constitution, Article XI, Section 5, the laws of charter cities supersede state law with respect to municipal affairs of the city;

WHEREAS, the California Supreme Court has held that the wage levels of workers constructing locally funded public works are a municipal affair, and therefore a charter city’s prohibition on the payment of prevailing wage supersede state law; and

WHEREAS, the City of Newport Beach (“City”) is incorporated as a charter city, and thus the City may exempt locally funded public works projects from prevailing wage to conserve the City’s limited resources.

NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows:

SECTION 1: The City of Newport Beach exempts locally funded public works projects from prevailing wage, unless: (1) prevailing wage is compelled by the terms of a federal or state grant or is otherwise funded from a source that requires prevailing wage; (2) the public work is a matter of statewide concern; or (3) the payment of prevailing wage is separately authorized by the City Council, because the project is of a complexity and nature that the public interest would be served by requiring prevailing wage.

SECTION 2: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting this resolution.

ADOPTED this 22nd day of January, 2013.

The January 22, 2013 staff report to the Newport Beach City Council recommended that it establish its own government-mandated construction wage rate policy:

…the City of Newport Beach, as a charter city, is not required to pay prevailing wage for locally funded public works projects. The City may adopt either an ordinance or a resolution to affirm its municipal autonomy and conserve valuable financial resources by exempting itself from the prevailing wage requirement for locally funded public works contracts. In the absence of an ordinance or resolution, the City may exempt itself from the payment of prevailing wage through the insertion of language into individual contracts (i.e., creation of an “actual conflict” through explicit contract terms). However, to ensure consistency staff recommends the adoption of the attached resolution. The attached resolution provides an exemption for public works projects, unless: (a) prevailing wage is compelled by the terms of a federal or state grant, or other funding source; (b) the public work is a matter of state-wide concern; or (c) the payment of prevailing wage is separately authorized by the City Council due to a project’s complexity or nature that the public interest would be served by requiring prevailing wage” to the third type of project for which the City might wish to pay prevailing wage.

Before the vote, the city attorney pointed out that the state’s definition of “public works” is ridiculously broad and recommended that the city council ensure flexibility and adopt a policy to “opt-in” to state-mandated construction wage rates. Councilman Michael Henn had the courage to state publicly that “prevailing wage” is a unique “anachronism of the construction industry” and noted that most business in America is done without government-mandated prevailing wage rates.

Study Session: Applicability of Prevailing Wage to City Projects

As a prelude to the agenda item, the Newport Beach City Council convened earlier in the day for what the city attorney described as a “fairly long study session” (Discussion Regarding the Applicability of Prevailing Wage to City Projects) to discuss exercising its right as a charter city to establish its own policy concerning government-mandated construction wage rates (so-called “prevailing wages”) on purely municipal construction projects.

A leader of the Los Angeles/Orange County Building and Construction Trades Council [no web site] led off the public comment by showing a professionally-produced video called “Right the First Time” that promotes state prevailing wage laws through anecdotes and interviews with union-backed politicians. It neglects to mention the state’s absurd methods of calculating prevailing wage and defining public works. In addition, the video claims that prevailing wages are set by the free market, even though California Labor Code Section 1773 directs the state to set prevailing wage rates based on the applicable union collective bargaining agreements.

Other speakers represented union-affiliated groups such as Smart Cities Prevail and unionized construction trade organizations such as the Fire Sprinkler Advisory Board of Southern California, the Western Wall & Ceiling Contractors Association, the National Electrical Contractors Association (NECA) – Orange County Chapter, and the Western Steel Council. A few unionized contractors (locked into multi-year collective bargaining agreements) also spoke in defense of state-mandated construction wage rates.

Evening Meeting: Unanimous Approval of the Resolution

At the evening meeting, a collection of union representatives, unionized construction trade associations, and unionized contractors once again asked the city council to keep state-mandated construction wage rates. They again cited the usual union arguments about cheap, unskilled, out-of-town labor by uninsured and unlicensed contractors.

Notice how this letter from the National Electrical Contractors Association (NECA) says that quality construction requires “living wages and benefits,” as if the alternative to state-mandated construction wage rates is the California minimum wage of $8.00 per hour. Actually, state-mandated prevailing wages are typically four to six times higher than “living wage” rates set by local governments. For example, the “living wage” for the City of Irvine (in Orange County, near Newport Beach) is currently $13.13 per hour including benefits. The median wage (not including benefits) for an electrician in Orange County is $27.15, according to the California Economic Development Department. But the state-mandated total straight time “prevailing wage” for an inside wireman electrician in Newport Beach is $54.83 per hour, including fringe benefit payments and payments to “other” trust funds that do not directly benefit the employee.

A staff representative of Smart Cities Prevail (a union-affiliated labor-management cooperation committee) argued against the resolution, claiming the policy could result in economic “uncertainty and insecurity.” A representative of the unionized Fire Sprinkler Advisory Board of Southern California noted that prevailing wage contractors offer quality. A leader of the Los Angeles/Orange County Building and Construction Trades Council encouraged the city council to continue requiring its contractors to abide by the state-mandated wage rates and warned of cheap labor from out of the area. A representative of the National Electrical Contractors Association (NECA) claimed that construction workers are “part-time workers” that work eight months a year and don’t get vacations or sick days. A union contractor said “we can afford it in Newport Beach” and noted many sections of the California Labor Code would be nullified. Also speaking against the policy was a union-oriented consultant formerly involved with labor relations for the Bay Area Chapter of the Sheet Metal & Air Conditioning Contractors National Association (SMACNA).

All that needs to be said in response: In 2012, the City of Newport Beach entered into a $5,880.00 maintenance contract for “abatement of algae around the Grand Canal beaches of Balboa Island” that included the requirement for the contractor to pay state-mandated construction wage rates (prevailing wage). Is it really the business of the state legislature to impose such a requirement on the City of Newport Beach for $6000 in algae clean-up?

News Coverage of Newport Beach City Council Vote:

Newport Triggers Dock-Fee Increases, Cost-Saving Labor Contracts – Orange County Register – January 23, 2013

City Eschews Prevailing Wages: The City Council voted to exempt Newport Beach from a state requirement that compels cities to pay workers prevailing wages – Newport Beach/Corona Del Mar Patch – January 24, 2013.)

Council Closes Book on Dock Fee Increases (In other business…) – Newport Beach/Costa Mesa Daily Pilot – January 23, 2013

For More Information:

Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions? – 3rd Edition

List of California’s 121 Charter Cities

California Supreme Court Affirms State Prevailing Wage Requirements Do Not Apply to Charter Cities – League of California Cities – July 2, 2012

Kevin Dayton is the President and CEO of Labor Issues Solutions, LLC and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.

Mysterious Union Slush Fund Spends $100,000 Against Costa Mesa Charter

As explained by the League of California Cities, the California Constitution gives cities the authority to enact “charters” and thereby manage their purely municipal affairs without interference from the state. Cities have been increasingly eager to seek charters in recent years in order to free themselves from costly state mandates. Since 2007, voters have increased the number of charter cities from 107 to 121, and voters in three more cities will have the opportunity to consider approving charters on November 6, 2012.

Here are web links to the three proposed charters and the support and opposition web sites for the three proposed charters:

1. City of Escondido (San Diego County) – population 146,032

2. City of Costa Mesa (Orange County) – population 111,600

3. City of Grover Beach (San Luis Obispo County) – population 13,275

  • Charter Proposal as Presented on City Web Site: Measure I-12
  • Yes on I-12 Web Site: Vote Yes on Measure I-12
  • No on I-12 Web Site: http://www.protectgroverbeach.com

The most aggressive opponents of proposed charters are unions, particularly construction trade unions. (See Who Defeated the City of Auburn’s Proposed Charter, and How Was It Done? Answer: Three Union Entities, by Spending $56.40 Per NO Vote.) As confirmed by a California Supreme Court decision in July 2012 (State Building and Construction Trades Council of California, AFL-CIO v. City of Vista), charter cities have the right to establish their own policies concerning government-mandated construction wage rates (so-called “prevailing wages”).

In almost all cases, the state determines the wage rate by adding up all of the employer payments (including payments that are not employee compensation) indicated within the union collective bargaining agreement that applies to a specific trade within the specific geographical region that falls within the jurisdiction of the union agreement. The state does not survey contractors or workers to determine an average or median wage, nor does it consider regional wage statistics calculated by the California Economic Development Department. As a result, state-mandated construction wage rates in California are often much higher than the actual wage rates in a locality. But with a charter, a city can set its own rates for its own projects.

For a comprehensive 92-page guide about government-mandated construction wage rates in California and the status of prevailing wage policies in California’s 121 charter cities, see the recently-published 3rd edition of Are Charter Cities Taking Advantage of State Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?

As listed above, voters in the City of Costa Mesa have the opportunity on November 6, 2012 to consider Measure V, which would enact a charter. Mailboxes are stuffed daily with slick full-color productions telling the citizens of Costa Mesa how awful life will be if the city frees itself from the benevolent California State Legislature and adopts its own mini-constitution.  (See some of these mailers below.)

ONE entity has spent $100,000 against Measure V as of September 30. (At the rate those mailers are pouring in, it’s likely much more has been spent in October.)

The donor is the California Construction Industry Labor-Management Cooperative Trust. Have you ever heard of it?

The secretive California Construction Industry Labor-Management Cooperative Trust is the sole direct contributor (of at least $100,000) to the No on V campaign in Costa Mesa.

What is the California Construction Industry Labor-Management Cooperative Trust? Where does it spend its money? How does it get its money?

If you want a more detailed but still shadowy idea of how this group spends its ill-gotten money, you can read my May 31, 2012 article Where the California Construction Industry Labor-Management Cooperative Trust Spends Its Money: Now We See How Unions Spread It. But here is a list of the top recipients:

  1. $1,095,000 – Taxpayers to Preserve Community Jobs, No on Measure A, sponsored by labor and management organizations (June 5, 2012 election in City of San Diego)
  2. $770,000 – UCLA Labor Center (aka UCLA Center for Labor Research and Education), part of the University of California Miguel Contreras Labor Program
  3. $250,000 – No 98/Yes 99 – A Committee of City and County Associations, Taxpayers and Environmental Groups, League of California Cities, Californians for Neighborhood Protection, Coalition of Conservationists
  4. $164,550 – “Other” (?)
  5. $100,000 – Apollo Alliance
  6. $100,000 – Paxton-Patterson Construction Lab/Shop in San Joaquin County
  7. $50,000 – Taxpayers to Preserve Community Jobs, No On Measure G, sponsored by labor and management organizations (June 8, 2010 election in City of Chula Vista)

But what’s more interesting is the source of at least some of this money, if not all of it.

A Mysterious Union Slush Fund, Authorized by an Obscure 1978 Federal Law to Encourage Better Relationships Between Unions and Manufacturers, Gave $100,000 to No on Measure V

The California Construction Industry Labor-Management Cooperative Trust contributed a total of $100,000 to the No on Measure V campaign. This is an extraordinarily high amount for a political contribution from one entity, especially concerning a local ballot measure! The head of the California Construction Industry Labor-Management Cooperative Trust is Bob Balgenorth, who is also head of the State Building and Construction Trades Council of California, based in Sacramento.

This is NOT a traditional Political Action Committee. It is an arcane type of union trust authorized by the obscure Labor-Management Cooperation Act of 1978, a law signed by President Jimmy Carter and implemented by the Federal Mediation and Conciliation Service. Inspired by the decline of unionized manufacturing in the Northeast, this federal law was meant to help industrial management and union officials build better personal relationships and cooperate against the threat of outside competition. There are no federal or state regulations specifically addressed toward these trusts, and these trusts do not have any reporting requirements to the U.S. Department of Labor’s Office of Labor-Management Standards. This is an ambiguous and forgotten law that’s ripe for abuse.

It’s Not Union Members that Give the Money to the California Construction Industry Labor-Management Cooperative Trust: It’s Utility Ratepayers and Contractors Working for Extorted Power Plant Owners

Since the 1990s, whenever an energy company or public utility submits an application to the California Energy Commission seeking approval of a new power plant, an organization called California Unions for Reliable Energy (CURE) often “intervenes” in the licensing process. Represented by the South San Francisco law firm Adams Broadwell Joseph & Cardozo, CURE submits massive data requests and environmental objections to the California Energy Commission. The applicant by law is required to answer CURE’s submissions, at significant cost and delay. The chairman of California Unions for Reliable Energy (CURE) is Bob Balgenorth (see above).

If the power plant owner agrees to require its construction contractors to sign a Project Labor Agreement with the State Building and Construction Trades Council of California or its regional affiliates, CURE’s objections fade away and the power plant proceeds unhindered through the licensing process. If the company or utility does not surrender to CURE’s demand, then CURE’s interference and lawsuits continue.

This racket – sometimes called “greenmail” because it’s the use of the California Environmental Quality Act (CEQA) and federal environmental laws to pressure developers to sign Project Labor Agreements – is well-known to the energy industry in California and has been extensively reported in the news media over the past dozen years. (For example, see Labor Coalition’s Tactics on Renewable Energy Projects Are Criticized – Los Angeles Times – February 5, 2011.)

For cases in which the power plant applicant succumbs to CURE’s harassment, the Project Labor Agreement that the power plant owner signs usually contains a provision requiring the owner or its contractors to make a lump-sum payment or series of payments to the California Construction Industry Labor-Management Cooperative Trust.

For example, the Project Labor Agreement signed by the Northern California Power Agency (a conglomerate of publicly-owned utilities) for the construction of the Lodi Energy Center required the agency to shell out $90,000 to the California Construction Industry Labor-Management Cooperative Trust. That amount was dutifully mailed to Bob Balgenorth on August 17, 2010. (For more on this payment, see High Energy: Lodi Center Designed to be a Powerhouse for Chunk of State – Stockton Record – October 4, 2011; also, the union rebuttal on the California Building Trades Council web site – ABC Falsehoods Refuted in Letter to Stockton Record – a denial that the California Construction Industry Labor-Management Cooperative Trust is used for political contributions.)

And Section 13.1 of the Project Labor Agreement signed by the Southern California Public Power Authority (another conglomerate of publicly-owned utilities) for the construction of the City of Anaheim’s Canyon Power Plant required the agency to shell out $65,000 to the California Construction Industry Labor-Management Cooperative Trust.

The California Construction Industry Labor-Management Cooperative Trust reports these payments as “membership dues” to the Internal Revenue Service. Which brings up a question: are the local elected officials who serve as commissioners for the Northern California Power Agency and the Southern California Public Power Authority exercising their responsibilities as “members” to approve $100,000 in political contributions to the No on Measure V campaign in Costa Mesa?

But Wait a Minute…Is It Legal to Have Utility Ratepayers Fund a Mysterious Union Trust Fund that Contributes to Political Campaigns, Such as No on Measure V in Costa Mesa?

In 2009, an internal committee of the Northern California Power Agency discussed whether or not a payment to the California Construction Industry Labor-Management Cooperative Trust was an illegal gift of public funds. (Note the original amount to the California Construction Industry Labor-Management Cooperative Trust was supposed to be $150,000, but aggressive opposition to the Project Labor Agreement forced the unions to cut it down to $90,000 in order to win approval from the board of commissioners.)

To solve this uncertainty, in May 2011 State Senator Mark Leno (D-San Francisco) added a cryptic amendment at the request of union lobbyists and lawyers to the end of a large unrelated public utilities bill (Senate Bill 790) regarding “community choice aggregation.” It added Section 3260 to the Public Utilities Code: “Nothing in this division prohibits payments pursuant to an agreement authorized by the National Labor Relations Act (29 U.S.C. Sec. 151 et seq.), or payments permitted by the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Secs. 173, 175a, and 186). Nothing in this division restricts any use permitted by federal law of money paid pursuant to these acts.”

No one in the California State Legislature – apparently not even Senator Leno – initially knew what this strange new provision meant. In the end, a few legislators such as Assemblywoman Shannon Grove (R-Bakersfield) came to understand and reveal in floor debate that it authorized public utilities to pass on the costs of payments to labor-management cooperation committees to ratepayers. Governor Brown signed the bill into law with the language tacked on the end.

It’s a tangled conspiracy. Especially intriguing is that one union official is the head of the State Building and Construction Trades Council of California, the California Construction Industry Labor-Management Cooperative Trust, and California Unions for Reliable Energy. For more information, see the investigative report of the Coalition for Fair Employment in Construction at this September 23, 2011 post at www.TheTruthaboutPLAs.comA Genuine California Union Conspiracy: Senate Bill 790 and the California Building Trades Council’s Ratepayer Funded Political Slush Fund

Confused about the Conspiracy? Here’s a Chart.

A public utility or private energy company applies to the California Energy Commission for approval to build a power plant.

California Unions for Reliable Energy (CURE) uses its “intervenor” status at the California Energy Commission to submit massive data requests and environmental complaints about the proposed power plant, as a result gumming up the licensing process and causing costly and lengthy delays for the applicant.

 ↓

Applicant for prospective power plant surrenders and agrees to sign a Project Labor Agreement with the State Building and Construction Trades Council of California or its regional affiliates. California Unions for Reliable Energy releases its grip of legal paperwork and the project moves forward unimpeded and acclaimed as environmentally sound.

 ↓

The Project Labor Agreement contains a required payment or payments to the California Construction Industry Labor-Management Cooperative TrustCalifornia Public Utilities Code Section 3260 – enacted by Senate Bill 790 in 2011 – allows public utilities to pass costs through to ratepayers.

 ↓

The California Construction Industry Labor-Management Cooperative Trust reports those payments to the IRS as “Membership Dues,” creating questions about the rights inherent for dues-paying members.

 ↓

The California Construction Industry Labor-Management Cooperative Trust makes contributions to political campaigns, such as $100,000 to fund 100% of the No on Measure V anti-charter campaign (Committee for Costa Mesa’s Future, No on V, sponsored by labor and management organizations) in the City of Costa Mesa in 2012.

Solutions

Is there any way this racket can be stopped? Yes. The U.S. Department of Labor’s Office of Labor Management Standards could promulgate regulations that establish restrictions and reporting guidelines for committees authorized by the Labor-Management Cooperation Act of 1978. Even better, Congress could pass legislation amending or repealing the law, and the President could sign it.

In the meantime, enjoy some of the No on V mailers below, brought to you by the California Construction Industry Labor-Management Cooperative Trust!

Is this a photo of a typical meeting of the board of directors of the California Construction Industry Labor Management Cooperative Trust?

If the union officials running the California Construction Industry Labor-Management Cooperative Trust had read Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?, they would have known that Mammoth Lakes is NOT a charter city.

They should have used a photo of Los Angeles and a photo of the state capitol to show who calls the shots when a California city doesn’t operate under a charter.

Is this the joint in Sacramento where the board of directors of the California Construction Industry Labor Management Cooperative Trust goes for drinks after deciding to spend more money against the proposed Costa Mesa charter?

OK, I get it. If you’re concerned about crushing debt, government mismanagement, and lack of public accountability, vote against the charter and leave your municipal affairs to the prudent and responsible leaders of the California State Legislature.

Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.