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Palo Alto considers 'prevailing wage' experiment
Proposed study would weigh impacts of union wages on local capital projects

by Gennady Sheyner

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 gsheyner@paweekly.com.

Posted by Fred Hirsch, a resident of another community, on Jan 9, 2010 at 11:12 pm

I'm informed by fifty years in construction. Good outcomes occur when contractors respect workers, pay prevailing wages and pay for apprentice and lifetime training, empowering workers with competent, comprehensive craft capability. Cutting corners, low-balling labor costs, and exploiting untrained workers produces shoddy construction, with taxpayers bearing the social costs of construction.

I'm no Palo Alto resident, but I've handled the tools here in hi-tech labs, restaurants, downtown buildings, student housing and the V.A. Hospital. Thousands of construction workers have invested pieces of our lives in your structures. We deserve a voice in the prevailing wage controversy.

Our union apprentice programs equal any in the country. A five-year apprenticeship in my local union equips one to produce safe, efficient, skilled pipe-trades work anywhere on the planet. We work with confident efficiency that can lower the overall cost of construction.

When Palo Alto ducks paying prevailing wages, it disrespectfully denigrates workers. It produces a climate of contractor competition in a dog-eat-dog race to the bottom on workers’ backs. Competition should be based on management skills and a trained, safe, efficient workforce.

The irony of Palo Alto’s low-ball policy is that prevailing wage payment on government-funded projects became law when Palo Alto’s proud resident, President Herbert Hoover, signed the 1931 Davis -Bacon Act. That pen stroke was significant in his effort to backfill the economic ditch we call the "Great Depression." We're back into a similar economic ditch. Palo Alto ought not dig it deeper by shortchanging workers and inviting shoddy construction.

Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Jan 10, 2010 at 3:56 am
Walter_E_Wallis is a member (registered user) of Palo Alto Online

I have long held that the Journeyman ticket was equal in intellectual rigor to an MS and should be recognized as such by State credentialing authorities. It is a pity that non union candidates are denied access to many of the courses needed to become a Journeyman. It is also a pity that unions often play the petty jurisdiction game, where say a painter is not allowed to remove device plates prior to painting a wall, and of course compulsory union membership forces you to support the democrats whatever your personal preference might be.

Posted by John, a resident of the Barron Park neighborhood, on Jan 10, 2010 at 4:42 pm

"Prevailing wages" is a great concept, but, it is difficult to apply to public employees. For many years, it has been customary for public employees to get better benefits and job security in return for lower income. In recent years, some unions, particularly firemen, have been very effective at gaining "comparable wages", while retaining better benefits (I love firemen as much as the next guy -- I wish everyone luck in landing a fireman's slot).

The point is, public employees typically have a very different mix of wages, benefits, and incentives than private employees. So, to "compare", you really have to consider what would, for example, induce someone to switch jobs. At the same time, we all have to consider what is currently affordable -- the cost of health benefits is vastly larger than in the past. I personally know public employees who are only working because they need the health benefits, not the money. If the cost of healthcare has not affected you yet -- it will. So, the value of this benefit is a key ingredient in determining what is comparable.

Posted by Outside Observer, a resident of another community, on Jan 10, 2010 at 8:09 pm

Elimination of illegal workers in construction would accomplish the "prevailing wage" goal, and at the same time remove the burden to society and tax payers of individuals who use social services, but pay no taxes for there support.

Palo Alto could get a "two-fer" if it required all contractors to provide proof of legal ability to work for all of their employees.

Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Jan 11, 2010 at 3:20 am
Walter_E_Wallis is a member (registered user) of Palo Alto Online

Outie, you hit the dichotomy of today's unions. Their symbiotic bargain with the democrats, and the need of the democrats for the unchallenged non-citizen voter make any action against illegals unlikely.