Report details the costs of wage law

Prevailing wage rules cost city more than $1 million a year; unions support the law.Huntington Beach could save more than $1 million annually if it stopped requiring private contractors to pay a prevailing wage on city contracts, a report by the city’s finance committee found.

Current city law requires workers on outsourced city projects, like street sweeping or landscaping, be paid according to a complicated wage scale that tends to drive salaries up. Opponents of the system say high union salaries unfairly inflate incomes and increase costs for local cities. Supporters say the wage system protects middle class employees’ quality of life.

Often, the city is paying 20% more than private businesses would pay for the same services, the report found. For labor-intensive projects with few capital costs, the gap is even larger: This year the city is expected to pay $35,000 to paint the Joint Powers Training Center; the same project would cost a private entity only $7,000, finance board chairman Charles Falzon said.

“Our feeling from the study was there wasn’t any extra benefit of paying the prevailing wage,” he said.

The prevailing wage is still required for projects funded by the state and federal government, Falzon said, but not for services paid exclusively out of the general fund, such as street sweeping, channel clearing and janitorial services. As of 2002, the city was requiring contractors to pay street sweepers more than $40 per hour -- about $85,000 a year.

“We’re trying to limit circumstances where prevailing wages are used,” said labor and employment attorney Andrew Weiss, who also sits on the finance committee. “This is only in local cases, and only where we believe we can save money.”

The city would save $525,000 if it paid competitive wages for sidewalk repairs and tree removal, the report found. The city now pays 15% more for sidewalk work than cities like Irvine, which don’t have prevailing wage laws.

While prevailing wage does add costs to city projects, it also adds to the quality of life of people working on city projects, union officials have said at past council meetings.

Unions have long been vocal supporters of the city’s prevailing wage ordinance. In April 2002, when the city considered overturning the law, hundreds of union members filled City Hall to protest the change. The council unanimously approved a plan to keep the prevailing wage in place.

That was a big disappointment, said Councilman Dave Sullivan, who was on a two-year hiatus when that decision was handed down. Sullivan said he and others are considering bringing the issue back to council for a second look.

“I may first ask for further study on this issue,” he said. “I think it will save the city considerable money, and I think the calculation of the prevailing wage is improper, and therefore it’s vastly inflated.”

Since that unanimous 2002 decision, six of the seven council seats have changed hands, giving Sullivan a chance to garner enough votes to overturn the ordinance. Councilman Don Hansen said he is generally opposed to economic mechanisms that dictate worker salaries and said he is considering bringing his own resolution forward to stop the prevailing wage.

“I’ve always been a big believer in free and open competition,” he said. “I don’t believe it’s necessary to dictate how much private employers pay their employees.”

City Councilwoman Debbie Cook said she had some reservations about doing away with prevailing wage and was waiting for a more complete presentation on the issue.

“Of course we have a responsibility to look at the bigger picture, not just find the cheapest way,” she wrote in a recent e-mail. “It is about finding a balance. Cheap is not necessarily better.”

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