Palo Alto considers 'prevailing wage' experiment
Proposed study would weigh impacts of union wages on local capital projects
Palo Alto may soon become a laboratory for studying the impacts of union-level wages on local capital projects.
A City Council committee has recommended a pilot study that would split certain upcoming projects — including street maintenance, sidewalk resurfacing and sewer-main replacement — into two different contracts. One of these would require contractors to pay their workers a union-equivalent "prevailing wage," while the other would not.
The study should help the City Council determine whether to adopt a prevailing-wage policy for local capital projects, members of the council's Policy and Services Committee said at a Dec. 15 committee meeting. Most California cities are already obligated to have such a policy, but Palo Alto is exempt from the requirement because of its status as a charter city.
Some members of the council have long argued that the city is morally obligated to make sure contractors on public projects provide adequate training, health insurance and retirement packages for their workers — factors that are typically integrated into union wages. Councilman John Barton, whose term concluded in December, has been the council's most vehement advocate for a prevailing-wage policy.
The pilot study, which the committee endorsed by a 3-0 vote, could serve as a powerful tool, Barton said, particularly if the city collaborates with Stanford University statisticians and other local experts to carefully evaluate the gathered data. The full council would have to approve the study before it's initiated.
Among the most critical questions the study would evaluate is the cost of requiring a prevailing wage. Staff from the Public Works Department estimated that requiring a prevailing-wage would raise the costs of local capital projects by 5 to 10 percent. This would add about $1 million total to capital projects in the city's General Fund and about $2.8 million to those in the city's Enterprise Fund.
But Neil Struthers, chief executive officer of the Building and Construction Trades Council of Santa Clara and San Benito counties, disputed these numbers. At previous meetings, staff has also acknowledged the existence of various studies on the subject, some of which reached conflicting conclusions.
Struthers, whose group represents construction workers, argued that the best way to determine the cost impacts of a prevailing-wage requirement in Palo Alto is through real, empirical data.
"I disagree with the fact — until we prove it — that there is a cost associated with (prevailing wage)," Struthers said.
Committee members also argued that staff estimates were based on unproved assumptions and said the pilot study should give the city a more accurate picture of the costs and benefits associated with prevailing wages. The committee has been considering adopting a prevailing-wage policy for more than a year — a debate that has pitted its members' moral considerations against their fiscal responsibilities.
Palo Alto is already wrestling with a $5.8 million deficit in the current fiscal year, and the council is expected to institute service cuts in the coming months to ward off wider budget gaps in future years.
"If we find almost no or little difference in costs, I'd assume that Palo Alto will be very happy to go in the direction of prevailing wages," said Councilwoman Yoriko Kishimoto, who is also on the Policy and Services Committee.
Mike Sartor, assistant director of the Public Works Department, said the pilot study would include specific projects the city expects to ask for bids on in the spring.
Sartor said the city also plans to mail out surveys to the various bidding contractors to determine what types of wages, benefits, training and work environment they offer their workers.
If adopted, the prevailing-wage policy could affect local projects such as Greer Park improvements, library renovations and storm-drain rehabilitation.
Staff Writer Gennady Sheyner can be e-mailed at firstname.lastname@example.org.