MINUTES OF THE
SENATE Committee on Government Affairs
Seventy-second Session
March 10, 2003
The Senate Committee on Government Affairs was called to order by Chairman Ann O'Connell, at 2:07 p.m., on Monday, March 10, 2003, in Room 2149 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Ann O'Connell, Chairman
Senator Sandra Tiffany, Vice Chairman
Senator Terry Care
Senator Warren B. Hardy
Senator William J. Raggio
Senator Dina Titus
Senator Randolph J. Townsend
STAFF MEMBERS PRESENT:
Michael Stewart, Committee Policy Analyst
Scott Wasserman, Committee Counsel
Tara DeWeese, Committee Secretary
OTHERS PRESENT:
Terry Johnson, Labor Commissioner, Office of the Labor Commissioner, Department of Business and Industry
John L. Wagner, Lobbyist, Burke Consortium of Carson City, The Nevada Republican Assembly
Richard Daly, Lobbyist, Laborers International Union of North America Local 169
John E. Jeffrey, Lobbyist, Southern Nevada Builders and Construction Trades Council
Daniel J. Costella, International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, Machinery Movers and Riggers, Local Union No. 118
Richard Houts, Lobbyist, Building and Construction Trades Council of Northern Nevada, Northern Nevada Central Labor Council
Debbie J. Smith, Lobbyist, Operating Engineers Local No. 3
Danny L. Thompson, Lobbyist, Executive Secretary-Treasurer, Nevada State American Federation of Labor and Congress of Industrial Organization
Mary E. Henderson, Lobbyist, Northern Nevada Economic Development Association, Nevada League of Cities and Municipalities
Don Stoker, Council Seat 5, Winnemucca
Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association
Robert H. Erickson, Lobbyist, City of Fallon
Steve Muchicko, Lobbyist, Southwest Regional Council of Carpenters
Jeffrey C. Fromm, Plasterers and Cement Masons
David Kersh, Carpenters Contractors Cooperation Committee
James E. Sala, Lobbyist, Southwest Regional Council of Carpenters
Thomas A. Morely, Lobbyist, Laborers Union Local No. 872
Chairman O’Connell:
We will open the hearing on Senate Bill (S.B.) 114.
SENATE BILL 114: Revises provisions governing manner of determining prevailing rate of wages to be paid on public works. (BDR 28-401)
Senator Warren B. Hardy II, Clark County Senatorial District No. 12:
Let me review for the committee the reasons why I introduced S.B. 114. The contracting and construction industries do not particularly care about setting the prevailing wage for their purposes of bidding, as long as there is some wage set. There should not be a lot of opposition from those industries on S.B. 114, but I believe it needs to be addressed; for the record this is my bill and not the Labor Commissioner Terry Johnson’s. The labor commissioner is in charge, by statute, with annually determining the prevailing wage in this State. The statute references the Nevada Administrative Code (NAC) where the regulations are laid out to establish the prevailing wage. In the regulations, it says there are a couple of different ways in which the labor commissioner can determine prevailing wage.
The first one is, if there is a wage based on the surveys or if there is a wage exactly the same in a majority of cases, then that wage is deemed to prevail. It also says if that does not occur, then he can look at 40 percent; it used to be 30 percent, which is where I got involved in this legislation. Two years ago we approached the labor commissioner about revisiting these regulations and moved the 30 percent to 40 percent. The federal law is 50 percent; 50 percent of the wages have to be exactly the same in order for it to be determined prevailing wage. The problem is unless you are in a labor union or in an organization which turns in those surveys on your behalf, there is no way you can accomplish any kind of unanimity in the number.
The private sector or the open-shop industry, which turns the surveys in on a company-wide basis, shows the rate for any given laborer or any given craftsmen might be $23, give or take a few cents. But those are not exactly the same. So the only way to get that kind of unanimity and achieve that 50 percent number is if the bargaining units are turning in those wages on your behalf. What my legislation is intended to do is bump the number to 50 percent, but if we really want to get to the problem, we need to take an average of the rate of all the wage surveys submitted. The problem is the open-shop industry does not submit the wage surveys. And the reason they do not submit the surveys is historically their wage surveys have no impact in the discussion or in the process because of the portion of the regulations which allows the labor commissioner to take the 50 percent or 40 percent as it currently exists in law. So, the net effect is we are essentially setting the prevailing wage in this State based upon what the prevailing wage currently is and so there is really no way for it to go down or to be impacted by fluctuations in the market.
The private sector work that occurs does not have any impact or any bearing on the prevailing wage as determined in this State. The reason for this legislation is to simply get at a prevailing wage that actually prevails using both the prevailing wage and the private sector and using both the work done by union and nonunion contractors to get a more accurate read for what prevails. It is not my intent or my purpose here today to eliminate prevailing wage, but simply to get a more accurate reading on what actually prevails.
Terry Johnson, Labor Commissioner, Office of Labor Commissioner, Department of Business and Industry:
I want to thank Senator Hardy for clarifying the intent of S.B. 114. I do have some comments about the proposed legislation. My biggest concern is the language pertaining to the survey. Looking at section 3, right now it clearly sets forth in order to determine the prevailing wages, the labor commissioner shall survey contractors who have performed work in a county. This language is being proposed for deletion and my concern is in its absence it may create some ambiguity as to how the labor commissioner is going to determine the prevailing wage if not through a survey of contractors. A second cause of concern is there are some other bills before this Legislature which will be trying to expand prevailing wages. I think eliminating this language would go in hand with that effort. There are a number of people who believe the labor commissioner should survey beyond contractors and not be limited to contractors. By deleting this specific reference, there is some concern the resulting ambiguity may give some credence to that school of thought.
Section 3, subsection 2(c), talks about if there is no construction performed in the county for a recognized class of workmen in the immediate preceding year, the labor commissioner shall consider rates paid in other areas. Right now, the administrative regulations say if the labor commissioner has not been able to determine the prevailing wage in a county, he goes to the nearest similar project of construction in the neighboring county. I think this might be too broad for what I believe the intent is; it deserves clarification as to what is contemplated by other areas, but my primary concern is the proposed elimination of the survey contractors language.
Page 5, line 32, of S.B. 114 lists the types of information the labor commissioner can consider in determining prevailing wages. Page 6, line 1, says the labor commissioner will consider bargaining agreements on file on or before September 1. This language mirrors the administrative regulations I adopted a few years ago. My concern is if we incorporate this date into the statute, it precludes any future flexibility I might have in case I wanted to modify the year, so maybe we publish the rates on July 1 as opposed to September 1. I am concerned putting a date into the statute limits my flexibility to determine when to publish rates.
Mr. Johnson:
I think probably the crux of Senator Hardy’s proposal is to revise the method of calculating the prevailing wage. I looked at that; he was correct in representing the 40 percent alternative currently in place, which is one of the means the labor commissioner can determine the prevailing wage. First I look to see what was paid to the majority of workers. If that does not yield a prevailing wage, then I look to what was paid to at least 40 percent of the workers as an alternative. If a prevailing wage is not produced, then I look to see what was paid on average to all workers in a class. Now the 40 percent threshold was recently increased about 2 years ago from 30 percent. The degree of the 40 percent threshold actually has a material effect on the prevailing wages, but is not that significant. In Clark County, 20 percent of the time the 40 percent threshold determined the prevailing wage rates. In Washoe County, only 17 percent of the time did the 40 percent threshold determine the prevailing wage rate. I looked at those two counties further to see where the 40 percent threshold determined the prevailing wage rates and what the effect would be if it were deleted. In Washoe County it dropped the average prevailing wage from $30.76 down to $29.88, a difference of 88 cents. So in other words, I looked at the data we already have on file for the survey period and took this bill into consideration for what the effect on the wage rates would be if S.B. 114 is enacted in its current form with this formula. In Clark County the average prevailing wage is currently $32.73 when the 40 percent threshold sets the rates. Without the 40 percent threshold, the average rate drops to $32.39, a difference of 34 cents. So, I will leave it to you to determine to what degree this would have an effect in accordance with the policy you are pursuing.
One key thing Senator Hardy touched on, and it deserves emphasizing in every sector, is that contractor participation is the key. We initially set the wage rates based on the survey data received. We send out 12,000 to 13,000 surveys each year to every licensed State contractor; every contractor has an opportunity to participate fully and fairly in the survey. Senator Hardy is right, a lot of open shop and nonunion contractors do not participate in the survey, the key is contractor participation. The committee might want to consider creating measures to increase contractor participation. I think the public wants to be convinced on what is determined as prevailing wages and if they are reflective of wages being paid in the community. We have made great strides to try to meet those needs the public has. It really is incumbent upon contractors participating and I think, short term, we need to develop strategies, possibly in statute, to increase participation. If necessary, even make it mandatory that contractors who are awarded public works contracts comply with a condition where, in order to receive the contract, they need to participate in the wage survey. I think it is a short-term solution which should be examined.
Long term, I think we need to look at the State labor commissioner’s office to collect data or use data already collected. Certainly somewhere in the State of Nevada, there is payroll information being submitted, either through the Employment Security Division (ESD), or the Department of Taxation. We are already collecting this information and it does not make good fiscal sense each year to go back and ask people for information the State of Nevada should already have. We should look for some strategies which would utilize data already being collected. That way you do not have to rely on what people say they paid, you can rely more accurately on what they actually did pay. In my view, contractors should be required to participate fully and accurately in the survey. At the amount Nevada does public works construction, there is a compelling public policy interest in ensuring those wages are based on accurate data, full and complete. Last year we did $1.2 billion in public works construction projects between the State of Nevada and all of its political subdivisions.
Chairman O’Connell:
Does that include the schools?
Mr. Johnson:
It does include the schools. It was 679 projects in total. That includes all schools, buildings, and Nevada Department of Transportation (NDOT) projects. Per capita, if you look at our population size, we spend more on public works than any other state in the nation on jobs subjected to prevailing wages. So I think there is a compelling public policy interest to ensure contractors participate in the survey and there is no mandate to require them to participate. Right now, the labor commissioner is required to survey contractors, but contractor participation is the key.
Chairman O’Connell:
Mr. Johnson, do you have any recommendations to the committee as to where you could get the most updated information?
Mr. Johnson:
Possibly from the ESD because they collect data based on wages employers already pay. It is the first area I would go to look at, and I know there are at least two or three other examples where the State of Nevada is already collecting wage data from businesses out there. We should be able to find a way to incorporate the prevailing wage determination process into that.
Chairman O’Connell:
Have you tried to get information from them by any chance?
Mr. Johnson:
What I did, Madam Chairman, was an introductory meeting. I had not met with any of those people before, and I told them I just wanted to come and introduce myself, get a feel for how they do things. I met with the research division on that particular date. I got a feel for what kinds of data they collect, how they collect it, etcetera. I think we had a good preliminary conversation, but at a minimum it laid the foundation in case there is a need for some further conversations. I think in terms of the labor commissioner’s office, it would be helpful because the expenses associated with conducting a wage survey are very significant. With the budget reductions for this current fiscal year, I honestly cannot tell you whether we will have the money to conduct the survey as it has been traditionally conducted in the State of Nevada. So, that also further necessitates the need for us to look at alternative methods at gathering wage data.
Senator Hardy:
Madam Chairman, if I could just touch on a couple of things the commissioner said. Encouraging participation is precisely the reason I brought this legislation forward. Currently, contractors feel disenfranchised; they feel like all they are accomplishing by sending in the wage data is making it more difficult for the unions to achieve the 40 percent unanimity. So, it is precisely what we are trying to accomplish and I can assure you, if we had a system in place in this State to take an average of all the wage rate surveys turned in, you would get significant participation in the wage rate. I want to commend Labor Commissioner Johnson and his staff for the work they have done to try to encourage contractor involvement, but it is a difficult sell because you cannot make a case that their input is really going to make a difference.
With regard to the elimination of the language, I think it was done because we are codifying in statute what is currently in regulation. The current language says the way the labor commissioner is to establish prevailing wage in each county, and then he does so through regulation. We are not doing it in statute, so they removed the language. I think the assumption would be, he would do it through a survey and so our intent would not be to remove the language of “survey contractors”. I think that was done as an assumption. With regard to the first comment, I think we could certainly include the language. I do not remember what your other comments were exactly, but certainly what he spoke to was not intended in the crafting of the language.
Senator Raggio:
I have been hearing this issue for a good number of years and I think this is the first time I really understood the prevailing wage. I was always under the impression you took all of these wages and you averaged them out. So you are not doing this? You are not allowed to do that under the regulation?
Mr. Johnson:
Correct. I conduct a survey and look at the rate paid the majority of the time, or 50 percent or more.
Senator Raggio:
But, if it is not the same exact amount, then you do not consider that wage?
Mr. Johnson:
Correct.
Senator Raggio:
Who thought that up?
Mr. Johnson:
I do not know.
Senator Raggio:
That is always how I understood it. Now the second thing, you know this whole law was put into effect for several reasons. One initially, was to make sure on a public work, there was a fair, prevailing wage equivalent to what took place in other types of construction and that was how you determined the prevailing wage for a public work. Also, it was to make sure that the people who are paying the bill were getting the best use of their money for a public work. That seems to me pretty obvious, those two things. When you do the survey to determine a prevailing wage on a public work, do you include in that survey the wages paid on other public works? You see, it has never made any sense at all. If you are trying to determine the prevailing wage on a public work, the initial concept was you look at the prevailing wage not on other public works because that is what you are trying to establish. You look at the prevailing wage on other construction, not public works. Which seems to me, if you deviate from that, you get a distortion as to what the prevailing wage ought to be on a public work. If you keep including, pretty soon you’ll have 90 percent of the survey public works, and you are really not getting what the prevailing wage is in the community to determine what the wage ought to be on a public work. This ends up a complete distortion, the longer you do it, the worse it gets.
Mr. Johnson:
About 2 years ago, I modified the survey form so we could get a feel for how much public works were being included in the survey. At that time, we were looking and weighing whether or not to continue the practice of having public works projects as part of the wages. So what I did was modify the survey so when contractors submit it, they will indicate whether or not a particular project was a public works project. That gave me the ability to be able to gage to what degree public works projects are affecting the prevailing wage rate. I can tell you the highest number of instances I found in a county was 26 percent of the time, the prevailing wage rate determined using a prevailing wage rate. That is the first point, the second point I wanted to make is the bill before us here does not, in my view, deviate from that practice.
Senator Raggio:
I know it does not. It just does not make sense if you are trying to determine what the prevailing wage ought to be on a public work, you should be looking at the construction projects otherwise, not other public work projects. That is my point. I do not know if it would make it more or less. It just seems to me a way to do it. Now, I do not know if you ever looked at private construction, would the prevailing wage be higher or lower? Have you ever done something like that to determine what the prevailing wage would be?
Mr. Johnson:
I have not directly looked at just the private construction arena. As I said, in about one out of four instances will the prevailing wage rate be the prevailing wage rate.
Senator Raggio:
Even if it is one out of four, it still distorts it.
Senator Hardy:
It is almost always the collective bargaining rate, because the nonunion guys are not putting in the wage surveys. This is why I said at the beginning of my testimony, if we really want to address this problem we need to require the labor commissioner to determine the prevailing wage rate by taking an average of the rate. I was trying to deal with political reality by leaving the 50 percent in there, but to really address this problem, we need to require the labor commissioner take an average of all wage rate surveys submitted. That is the only way to get a true picture of what is prevailing out there.
Senator Tiffany:
We talk with Division of Employment, Training and Rehabilitation (DETR) and the ESD a lot, particularly about what type of data they collect. If these new taxes come into place, we also have to work with the Employment Security Division too, because we are extracting data from them all the time. I do not see this as any different. Now here is the question, if you want to extract the data from ESD, do they actually hold the hourly salary of someone or do they just report the entire paycheck?
Mr. Johnson:
I have seen the research division of DETR publish it in both gross wages as well as the hourly pay. I have to acknowledge, it is not necessarily a perfect plan. It is just something for consideration.
Senator Tiffany:
It is electronic and something which cannot be manipulated.
Mr. Johnson:
I guess one of the downsides you would have to address is whether to include public and private projects in there, because they are just looking at wages paid. The other thing is fringe benefit packages. I do not think the data they collect includes fringe benefits and a lot of the wages reported in a prevailing wage survey do include fringe benefits. So at a minimum, I think there should be a serious discussion on whether we can derive this data from existing sources, so we do not have to go through the expense of collecting it again, but also so we do not have to subject ourselves to those instances where the data is being manipulated or just does not appear to represent a sufficient level of participation.
Senator Tiffany:
Assuming the data is there at the hourly wage on a construction project and we wanted to move forward once these policy decisions were made, then would the employers still have to give you the names of the people working for them and their social security numbers? Would there have to be something for them to identify who the worker is?
Mr. Johnson:
Yes, there would. There is a presumption they are reporting the data on the individual worker. We assume they are not reporting phantom workers.
Senator Tiffany:
Yes, but there are some employers who are not participating at all, and if you had the names or the social security numbers, some way to identify the person, then maybe the people in the open shops would feel there was more of a level playing field for participating.
Mr. Johnson:
As I said, it would take a serious review, but I think it’s doable and I think, given how much we spend on public works projects, at a minimum it is worth the examination.
Senator Titus:
Would you give me a definition of prevailing wage?
Mr. Johnson:
There was some discussion about if we should just take a straight average or use the majority wage, it depends on your definition of “prevailing”. I think a dictionary definition of prevailing might say something to the effect of that which occurs most often with frequency, with prevalence and it is subject to interpretation as to how you want to define prevailing. If you want to define at 50 percent or above, you can. If you want to define it at a straight average, I do not know if it will give you a prevailing wage, it will give you an average wage for certain, but I do not know if it will give you what you are looking for. It just depends on your definition on what prevailing is.
Senator Titus:
I suspect if you looked up “prevailing” the definition is not the same as “average” in the dictionary. So, if we are going to talk about average wage, that is different from prevailing wage. And to say 679 projects, $1.2 billion, and we were one of the highest in the country per capita, I do not see how you could talk about a wage which exists in a community without taking into account all these projects paying wages. To exclude these would make no sense, if you were looking at what is being paid out there in the community.
Mr. Johnson:
Again, it comes down to some philosophical and policy positions. Because if you feel you want to get an assessment of what wages are being paid, you will include all wages paid, both public and private. You want to have an assessment as to what the economy is currently paying. You can argue it either way. It just depends on your policy perspective and some philosophical position as to whether to include those in there. When the first survey was done, in 1983 when the statute was passed, it said the labor commissioner will determine the wages and survey contractors. But the prevailing wage laws were actually going back to 1937, and you also have to figure between 1937 and even further back to 1864, we still had public works projects. I think sometimes people assume public works, the prevailing wage law, and the prevailing wage survey, all three of those milestones, came into existence on the exact same day at the exact same time. That is not the case. They were staggered, and in some cases, by 40, 50 and sometimes 60 years.
Senator Hardy:
I do not disagree with you on that. I think the point Senator Raggio is making is accurate and it is we are trying to determine what to pay on public works jobs and to include that wage. But certainly to include the collective bargaining wage rate makes perfect sense. So we have in regulation, as directed by statute, a public policy which has a net effect of eliminating 70 percent of the wages out there in the market. So yes, I think all wages should be included.
Vice Chairman Tiffany:
Are there any other questions from the committee? Any other comments either in support or opposition for S.B. 114?
John L. Wagner, Lobbyist, Burke Consortium of Carson City, The Nevada Republican Assembly:
As far as I am concerned, prevailing wage means union wage. I am generally against government being involved in setting wages for anybody. I think wages should be determined between the employer and the employee, and government getting into the middle of it and then asking for a bunch of regulations and statistics and so forth, basically drives up the cost of doing business. Someone has got to sit down and figure all these things out, send all these reports into Carson City or Washington, D.C., and so forth. Looks to me like California companies can come in here and set the prevailing wage. They basically are higher wages because the standard of living over there costs more. I think it affects Nevada companies adversely. Small companies are having a problem along these lines, they buy a lot of equipment and are probably still paying for it. If the prices are driven up on construction costs, then the government agency who is paying for it must, therefore, get the money from the taxpayers. Then the taxpayers are the ones who end up basically paying for this. If you are going to take all the wages from one end to the other and then average it up as to being the prevailing wage, this would be a plus, but if they are just going to take union wage only, particularly California wages, then I would say it is a big minus. The small counties could also be adversely affected, the way I see it.
Richard Daly, Lobbyist, Laborers International Union of North America Local 169:
We are opposed to Senate Bill 114. Most of the measures mirror what are in regulation already, but there are subtle changes I think would allow for a less precise survey and more manipulation. Some of what Senator Hardy said about contractors not participating, it is their choice and it does not exclude them, there is no provision in there which says they can not put in their numbers of what they actually pay. I think some of my concerns with the actual language proposed, “a recognized class of workman,” means a workman recognized by the labor commissioner; I think it would be better if it said what is recognized in the construction industry. If the survey is going to be eliminated and it says the labor commissioner will determine the wages, how would he do it if he did not have the survey? I think it would yield less accurate information. Averaging the wages tends to lower the wages all the way across the board and if that is the true intent of this bill, to lower the wages for the construction workers in the State of Nevada, I cannot imagine an elected official would want to do that. So we are opposed to the bill across the board.
Senator Hardy:
First of all, this legislation is not intended to lower the wages of construction workers in this State. My intent is to provide a wage that is, in fact, fair and equitable. In many cases, we are not talking about the difference between $5 an hour and $22 an hour, we are talking about the difference between $48 and $32 an hour. I fail to understand why the same worker with the same skill is worth $12 an hour more when he is working on a public works job. That just escapes me, as a taxpayer and as an advocate for my district and my constituents. But I am interested to know how my proposal will provide a less precise wage rate. It certainly will provide a different wage rate than currently being established, but how is it going to be less precise than what is actually in there in the market if it includes everybody? Because right now, 70 percent of the wage rates being paid on construction in Nevada are being excluded, not intentionally, but in practice.
Mr. Daly:
I did not say that, but if I did, I misspoke. I meant the process would be less precise and more subject to manipulation.
Senator Hardy:
I do not understand what you mean. It seems like a random comment to me that this would be less precise. I think it would be more precise and more accurate in determining what the actual wage is out there.
John E. Jeffrey, Lobbyist, Southern Nevada Builders and Construction Trades Council:
First of all, I think we need to talk a little bit about the history of prevailing wage. Prevailing wages were instituted, originally by the Davis-Bacon Act of the 74th Congress in the 1930s, in the depression years. An area would put a job out to bid, usually because they needed infrastructure, but in some cases to try to provide jobs for people who were suffering through the depression. What was happening was the contractors were coming in from out of the area, working at a lower rate than what prevailed in the local area, and when the job was finished, workers were left to their own devices within the area they moved to. Instead of helping the local workers, it just put a further burden on local government and that was the original reason behind the Davis-Bacon Act. I think the philosophy of prevailing wage should still be to employ local workers where possible. What happens is if the prevailing wage does not apply, workers tend to come from out of the area. I have spoken with government officials down in Clark County and they support prevailing wage because they have a better chance of getting qualified workers. The local government, in general, is not allowed to negotiate a price for the contractor. They have to take the lowest responsive and responsible bidder and prevailing wage is somewhat of an insurance to those entities that let contracts to get skilled workers and to get what they are paying for.
I have to disagree with Senator Hardy when he talks about 70 percent of the wages being excluded. Residential wages are not and should not be considered in the prevailing wage because State and local government do not build residential housing unless it is group housing and those generally come under a commercial rate in the private sector as well as on a prevailing wage project. The housing in Clark County has a very high percentage of nonunion workers. I would say 90 percent. But commercial and industrial construction does not come near that percentage. If you use an average rate, it is going to tend to favor the nonunion contractor because some nonunion contractors pay above the negotiated rate, but as a rule they do not. So if the average rate is used, it will tend to drive the price down and once the competition is started in that direction, I believe the wages will continue to go down. That is what has happened in areas which have severely weakened or abolished the prevailing wage law. The first thing to happen is the training comes to a stop and the wages are reduced. When you talk about classes of workman, we have a problem because, at the present time, the labor commissioner represents jurisdictional arrangements which have taken place over the last 50 to 75 years. If you just put workers in a class and say a low-paid worker can do part of a job that a high-paid worker ordinarily does, then the higher paid worker could be put in a class with a lower paid one. I think it defeats the prevailing wage philosophy entirely. Senator Titus was accurate when she talked about the rate that prevails is one most often used. If you use the average wage and the wage is reduced, the contractor who pays the signatory rate with the union is put at a disadvantage in that project. I do not think the government should be in a position to favor one group over another. It needs to be as fair as possible. For those reasons, we oppose S.B. 114.
Senator Hardy:
Mr. Jeffrey is right. The residential housing industry is not currently included. That is what I was speaking to specifically when I said the 70 percent, so he is right about that. I would like to clarify, I am not talking about eliminating prevailing wage; it is not my intent. I am just looking for a way to more accurately determine what is being paid out there on the street.
Mr. Jeffrey:
If prevailing wage is severely weakened, it might as well be eliminated because the purpose is gone. That is our point.
Daniel J. Costella, International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers, Machinery Movers and Riggers, Local Union No. 118:
I would like to add to what Mr. Jeffrey said. Iron workers are opposed to this bill also.
Richard Houts, Lobbyist, Building and Construction Trades Council of Northern Nevada, Northern Nevada Central Labor Council:
I want to go on record as opposed to S.B. 114.
Debbie J. Smith, Lobbyist, Operating Engineers Local No. 3:
We echo the concerns others have expressed. We have major concerns with the idea of the recognized classes of workmen being referred to throughout S.B. 114, and having one person responsible for defining those classes of workmen, already defined in history over a long period of time. For example, our trade of the operating engineers has over 170 classifications within the scope of work. In addition, we want to go on record saying we have major concerns about the prevailing wage being determined without some type of a survey. I have actually been doing these surveys since 1983 and know it really is not fair to the one person responsible for having to determine prevailing wage without a survey. In section 3, subsection 3(a), paragraphs (1) through (3) refer to the same type of information now collected on the surveys which are currently required, but deleting the survey requirement would make the result unfair and the information would be too vague because it would not be consistent.
Senator Hardy:
Can I just clarify in case everyone did not hear me when I was testifying, my intent is not to remove the survey portion. That is not my intent for the legislation at all.
Danny L. Thompson, Lobbyist, Executive Secretary-Treasurer, Nevada State American Federation of Labor and Congress of Industrial Organizations (AFL‑CIO):
I would like to go on record as opposing S.B. 114. We have numerous concerns about the bill removing the survey. In fact, the survey was adopted in 1985 when a bill was introduced in the Assembly; the survey was a compromise at that time. We believe the net effect of averaging the rate will make the rate go down. For all the other reasons previously stated, we oppose this bill as well.
Chairman O’Connell:
We will close the hearing on S.B. 114 and open the hearings on S.B. 170 and S.B. 195.
SENATE BILL 170: Exempts contracts for public works for school facilities in certain counties from prevailing wage. (BDR 28-61)
SENATE BILL 195: Expands exemption from requirements concerning payment of prevailing wage for certain contracts for public works. (BDR 28-341)
Mary E. Henderson, Lobbyist, Northern Nevada Economic Development Association, Nevada League of Cities and Municipalities:
Senate Bill 195 has been either coming to the Legislature through the Nevada Association of Counties (NACO) or the Nevada League of Cities for the last six sessions. What it primarily does is not an elimination of the prevailing wage, but an allowance for us to raise the project limit from $100,000 to $300,000. That limit was put in place back in the mid-1980s and there is no indexing provision or any way for that limit to increase. What we have found consistently over the last several years is, as time has gone on, inflation has as well, so the cost of doing these types of public works projects has increased, but the limit has not.
What is happening with the rural counties and cities in particular is an issue of how those wages are being set. It is very difficult under the survey to get an accurate reflection of what the prevailing wage would be within those cities. An almost rolling effect occurs, so if you cannot get a prevailing wage in Elko County, then it rolls to the next county. So many times for the smaller cities, the prevailing wage is really coming out of Washoe County or Clark County. Our intent has absolutely nothing to do Washoe or Clark County, again it is a 100,000 population cap, but we are experiencing anywhere from 8 percent to 30 percent cost increases right now with some of these public works-type projects. In many respects we are chasing our own tail. I am not hearing from the cities I am here representing that they want to take the jobs out of the community. In fact, what I am hearing is they want to keep the jobs in the community. Many of them would really prefer to be able to contract versus using their own crews. But, they can do so many of these jobs for less cost using city crews, so they are just not going to the private sector, or they are not building projects, or they are not doing the types of things that need to be done just to keep the basic infrastructure in place. I do not think this is what anybody really intends to have happen here. While we are trying to protect on one side, I think it has a self-defeating effect on the other. Either projects are not being done or we are doing them in-house, which does not keep the economy moving. And for many of these small cities, these are some of the major construction projects really done out there. So, we sort of view it as an economic piece of our well-being and our health too. I brought examples of jobs where several cities have actually requested two bids to see what it would be under prevailing wage and what it would be without prevailing wage. They are finding anywhere from 20 to 30 percent cost increases when the job is bid at the prevailing wage limit. Those cities are Fallon, Winnemuca, and Elko. The desire is to keep those taxpayer dollars at home, keep workers working within the local economy, and give us a little more flexibility. This thing has not been changed for 20 years and we are just finding the cost of doing business has gone up considerably since then. I know Elko, for example, is in its fifth year of decline with its general fund revenues. They have forgone salaries for their elected officials and a few other not-so-nice things have happened to their department heads on a voluntary basis, just to keep their budget balanced. So, they want to do the projects, they want to make sure they are doing the work the public needs, and protect the infrastructure they have. They have just requested a bit more flexibility. What we are asking is the limit be increased from $100,000 to $300,000.
Don Stoker, Council Seat 5, Winnemucca:
I was a 16-year member of the Humboldt County school board and I am now a 14-year member of the City Council in Winnemucca. I am here today in complete support of raising the exemption of $100,000 to $300,000 for the counties with populations under 100,000 people. We cannot talk about raising the exemption limit without talking about prevailing wages. I often wonder, why does a man on one side of the street make $15 an hour, and then across the street, the same man could make $30 to $35 an hour because it is a public works project? That has never made good sense to me. All I can say is we, as counties and cities, could save millions of dollars per year if we did not have the prevailing wage we have now. I am not against prevailing wages, but I am against unrealistic wages. We have to come to our senses. We owe this to the taxpayers in the State of Nevada.
Three years ago I asked the city manager of Winnemucca, Stephen West, to see if he could get documentation of what it costs to do a job without prevailing wage and with prevailing wage. It is difficult to get contractors to bid them both ways. I have three projects the city has been involved in, first was a skateboard park, which the engineers estimated between $90,000 to $100,000. When we went out to bid, we got two bids, one was for $87,000 and the other was for $119,000. The $87,000 bid was a local contractor and the other bid was from a Reno contractor. We asked the Reno contractor about the difference between the $87,000 and the $119,000; he said it was because of the $100,000 threshold, when he went over $100,000 he had to pay prevailing wage. The one at $87,000 did not require prevailing wage, cost savings of $32,000.
We had a street project done by Honeywell Construction of Winnemucca, we asked him to bid a reconstruction of 1 mile of pavement both ways and he accepted the challenge. Low bid with prevailing wage was $883,000, without prevailing wage, the bid was $729,000. The difference of that particular project was a $154,000 savings to the taxpayers. A third example was a small retaining wall added to a project under prevailing wage. The cost of the retaining wall was $6047; we did it with another contractor and it came in at $4995, which is a difference of $1052. My final example is a big project done in Winnemucca and Humboldt County, the Winnemucca Event Center is a convention space, similar to the Reno Livestock Events Center except on a smaller scale, completed a year and a half ago. We had several bids on the project and a local contractor, Sheppard Construction, won the bid for $4.5 million. I asked the contractor to make a comparison between non‑prevailing and prevailing wages; he did so and has written a letter which states the Winnemucca Event Center, as a prevailing wage job, cost the taxpayers of Humboldt County an extra $750,000.
I have another letter from Michael Clay Constructors verifying what prevailing wages cost a public works project, and he says, in just wages alone, it approximately doubles the cost of the same work. In the city of Fallon in the last 10 years, they did $9 million worth of projects, $2 million was federal projects, so subtract the $2 million from the $9 million which was $7 million worth of projects, a savings of 10 percent which would have been $700,000 to the city of Fallon. Kathleen Foley wrote in the Nevada Business Review, December 2002, about commercial construction and the challenges it has to meet today. The article talks about prevailing wages and what it means to construction companies, 11 of the biggest companies in Nevada, who also substantiate the findings we have in Humboldt County and Churchill County. They say it costs 25 percent more for the project using prevailing wages. Just using wages only, it could be 100 percent, not including the full project. In summary, we as councilmen, commissioners, and Legislators have to do something in times like these, when everybody is trying to crunch numbers. Cities, counties, school boards, and the State, as of this year, cannot imagine government not looking at the prevailing wage as one of the solutions and options. Again, I do not mind prevailing wage, but let us be realistic. We need to get a wage that fits, remember this is a right-to-work State and has always been. Only the Legislature can change this; we cities, counties, and school districts count on you. You as Legislators would be remiss if you did not look at the savings, it could be multimillions of dollars. So we need a little help to raise the exemption from $100,000 to $300,000, and then maybe we can take a look at the prevailing wage.
Senator Tiffany:
This would be purely speculation unless you know the numbers, but if we raised it to $300,000, as opposed to $100,000, how many more projects do you think we would pick up in a smaller county?
Mr. Stoker:
I will give you a couple of examples. We do slurry sealing every year in Winnemucca for prevention of deterioration to our roads. Most of those projects run $150,000 to $200,000 to $250,000 and are run under prevailing wage. So it is costing the taxpayer more because of that wage. I think in small communities like the cities of Winnemucca, Lovelock, Battle Mountain, Wells, Wendover, Jackpot, and Elko, there are a lot of projects in the $100,000 to $300,000 range we could do that would not come under the prevailing wage act.
Ms. Henderson:
Let us use Fallon as an example. They have a $5-million operating budget, sometimes they spend upwards to $2.5 million, if they have the money on these types of projects. They estimated over the last 10 years they could have saved $700,000 to $800,000 on projects. That is basically a year’s worth of some of their capital projects paid out over a 10-year period. So I think you could feel very comfortable saying they could assume anywhere from 10 to 20 to possibly 30 percent more projects at the local level if they had this flexibility, just because of the differential.
Senator Titus:
I am just reminded of the commercial, “pay me now or pay me later, but pay me more if you pay me later.” You say they would have saved so much money, but you are not really calculating how much you save in the long run for having better quality construction; maybe you save by not having deterioration or upkeep or accidents. Things that might have cost if you had skimped on the front end. So when you talk about those savings, you do not really calculate all that do you?
Mr. Stoker:
I will give you an example of the Winnemucca Event Center, constructed by Sheppard Construction, who has been a contractor in Humboldt County for almost 50 years. He used the same people he uses today to construct that particular project. Nobody came in, no different person, the only thing is the person went from one side of the street to the other side. The same person worked on one side of the street for $15 an hour, then worked on the other side of the street at the Winnemucca Event Center for $32 an hour. So the quality and construction itself and the workmanship did not change by having the same group do that particular project.
Carole A. Vilardo, Lobbyist, Nevada Taxpayers Association:
We are speaking in support of S.B. 170 and S.B. 195. When you look at the rural communities where this is being addressed, particularly in times when there are construction booms down in Clark County taking a great deal of the workers down there, you have more chances for the local person to prevail with bidding on and getting those jobs. I think it is important at this time to realize, because there is no inflationary index, the amount in the bill is totally unrealistic. If you look at the local governments we are talking about right now, you are talking about park projects and renovations to buildings; I would like to see this go to a million dollars for the rural counties. Now you might not do it on road‑building projects, but their projects are nowhere near the size of the projects in Clark or Washoe County. In addition, we know there are additional costs, and there may be absolutely no change whatsoever, as was just previously explained, in the person who is doing the work.
But what we do know about the rural counties is most of them are butting up against the property tax cap. They bond on these types of projects. In effect, because of the interest rates, it doubles the amount of money. They have to be able to maximize the use of their dollars without having the State do additional subsidies. I do not know if it might be more palatable to restrict this to certain types of projects and say it is for facilities, buildings, and parks, so they are not involved on road projects and leave the road projects at $100,000 or less. I really would like to see this go upwards to $500,000 to $1 million. I will tell you, in a state like Minnesota, my counterpart did a study on prevailing wage and I use Minnesota because they are not a right-to-work state. In Minnesota, I think it was 4 or 5 years ago, schools, kindergarten through twelfth grade, were exempted from the provisions of prevailing wage. When schools were added into prevailing wage, they found a 10 percent increase on the cost of building the schools. I have a major concern, again, because of what this does to the taxpayers. In Clark County and Washoe Counties, for the most part, you are going to find the contractual wages and the prevailing wages, because of the level of unionization, almost one in the same. It is not a difference in those counties, but it is a major difference in the rural counties. It is also interesting because Mr. Johnson, shortly after he became commissioner, heard testimony by the attorney from Nye County who expressed serious concerns because we were taking wages out of contracts for positions that, in effect, were not really in use for the county or on that type of job, but were being stretched out.
I realize it is a difficult situation and it is not the intent to reduce wages. It is the intent to be able to utilize what you have available in a particular area without having it indexed based on a standard not within your own community, because you did not have sufficient data.
Chairman O’Connell:
Ms. Vilardo used the example of schools, which is really what prompted S.B. 170. I was part of an interim committee traveling around this State getting testimony specifically about competition versus the public sector, and the committee was asked to submit a bill. The committee’s BDRs had already been requested, and so I had submitted S.B. 170 as a personal bill, but this is a very serious problem for the smaller counties. Mr. Johnson have you had much contact with the smaller counties over this issue?
Mr. Johnson:
I have had some contact with just about all the counties in some way, shape, or form. As you know, I have held a number of hearings revising the regulations and looking at a number or issues. You heard about why one man, on two sides of the street, earns different wages and it goes back to my earlier comment about participation being the key. In the testimony given here today, every time I heard a contractor’s name, I looked at my recent report of surveyed contractors; not one was on that list of those participating in the wage survey. It really comes down to participation by the contractors.
Chairman O’Connell:
Some of the testimony we received from many of the contractors the last time we heard this issue voiced their concern about sending in a prevailing wage survey was due to the competitive situation. They felt they lost their edge and that was the reason they testified to the committee. I do not know exactly how we get around that issue, but it was the major reason for them not participating in the survey.
Mr. Johnson:
I, too, have heard a number of reasons, some legitimate, some not, as to why contractors are not participating in the survey, but it probably underscores the need to look at an alternative method of gathering data. In other states, they make the wage surveys confidential once they have been submitted. There are some pros and cons to that as well, but it may go to provide assurances to contractors that the information will remain confidential.
With regards to projects under $300,000, I did not look at the entire State by project, but my staff looked at the number of projects awarded during the fiscal year, which was 679, and the number of projects from $100,00 to $300,000 was 296. So roughly, a little fewer than half the projects awarded in fiscal year 2002 fell in the range of $100,000 to $300,000.
With regard to the rolling effect, where there were no wages reported in one county so you keep going to another county to look for wages, my staff looked at the percentage of time a county had to use another county’s wage rate besides its own. When you go into rural counties, those numbers get very high. In Eureka County, 77 percent of the time they had to go to another county to get a prevailing wage rate. Esmeralda and Lincoln Counties both had to go to other counties to get prevailing wage rates 94 percent of the time. It does happen in the rural jurisdictions, especially.
But there is a key point, I have talked a lot about participating in the survey on the front end, but on the back end, once the wage rates are determined, you have 30 days to object to a wage determination. If the wage comes out at $25 and you believe the prevailing wage rate in your jurisdiction is $18, you can file an objection with the labor commissioner. If there is evidence to substantiate a different rate prevails in your locale, a hearing is held, you get a decision entered by the labor commissioner, and it is subject to judicial review. You can take it up to the Supreme Court if you feel the labor commissioner has made an error of law. In 3 ½ years, I have only received one objection saying the rate was not the prevailing rate in their locale. If they feel it is not the prevailing wage, then they can file an objection, but we will continue to look at the prevailing wage.
Mr. Stoker:
Just for the record, a statement from Michael Clay Constructors says:
We currently pay carpenters an average $16 an hour and 100 percent of their health care and insurance at a cost of $2 per hour. This will increase to $3 per hour in April if we can continue to maintain the current plan in our economic situation. They get 1‑week paid vacation, equating to 30 cents per hour. Our direct payroll burden, FUTA (Federal Unemployment Tax Act), FICA (Federal Insurance Contribution Act), and workers’ compensation are 20 percent. Direct labor costs to this are $21.50 per hour. The current carpenter prevailing wage is $32 an hour with direct payroll burden; the direct prevailing wage is thus $40.70 per hour, approximately doubling the cost of the same work. In rural Nevada, millions of dollars and thousands of headaches would be saved if the prevailing wage was realistic.
So when people attempt to improve their area of lifestyle or make a community more appealing so there can be growth, they are penalized somewhere between $20,000 to $25,000 on a $100,000 job.
Robert H. Erickson, Lobbyist, City of Fallon:
I will not reiterate all the points already made, but in a community like ours, we were founded in 1908, a good portion of our community has infrastructure which is 50, 60, 70 years old. In today’s environment, $100,000 to $300,000 is not a major construction project, that is a repair and maintenance project. On our aging streets, if we do not do slurry sealing, if we do not do periodic overlays, the deterioration multiplies on the streets and then fairly often you have to do an entire street block or more. As Mary Henderson alluded in her testimony, our public works go from $1 million to $2.5 million a year, sometimes a little bit higher. The reason we do not do a million dollars a year is we have to save up our gasoline tax until we have enough money to do a block of street, and we try to do the slurry sealing once every 3 years to extend the life of those streets by 10 and 15 years. That is what these projects are under $100,000, as in 1985, repair and maintenance projects. Today we can do about a third of that or maybe even less, because the $100,000 just does not get much done. So there is more than the detriment of paying more for the project, it means we can get less work done, and it has a multiplying effect in the accelerated deterioration of our streets.
Vice Chairman Tiffany:
Is there anyone here who wishes to testify in opposition on S.B. 170 or S.B. 195?
Steve Muchicko, Lobbyist, Southwest Regional Council of Carpenters:
I would like to oppose S.B. 170 and S.B. 195 concurrently as they relate to the prevailing wage statutes as they stand in our State. The prevailing wage law states construction contractors on public works must pay their workers the local area prevailing wage. There was a lot of discussion earlier on, maybe some people do not agree with what the prevailing wage rates are or whether or not a worker is getting a fair shake. It seems like what we are discussing here is if a worker can make a decent standard of living out there. I have heard testimony on people making $15 an hour versus people making $30 per hour, but can anyone in this room think about trying to support a family of four, provide healthcare for their family, and a retirement program at $15 an hour? I agree there should be one rate and it should be closer to $30 an hour, so we can raise the standards of our communities.
The local prevailing wage is determined by one thing, the annual survey, county by county, of wage rates in that local community. A requirement of prevailing wage protects all workers, union and nonunion, as well as minority workers. It is in place to discourage out-of-State contractors with lower standards from bringing in cheap, nonlocal workers to undermine the local standards. Without the minimum wage floor, contractors would be forced to bid down the price of labor to match the lowest common denominator. It becomes a spiraling downturn of wages and the standards within the community suffer.
Prevailing wage law mandates efficient use of tax dollars by attracting the most qualified skilled workers for projects, which in the long term cuts waste and gets the job done right for long-term maintenance costs in the community. It also enables the skilled workers to make a local standard of living to support the families and businesses in our community so they can prosper. The prevailing rates in most of the areas includes a retirement program, health care benefits, and if the union rate prevails, a training program. People do not understand construction workers are not just born with those skills. There needs to be some type of training.
Basically we believe, regardless of the size or the dollar amount or type of public project, the public entity should be attempting to attract the most skilled worker for the interest of the public. The advantages are a well-built project with less shoddy work, training that would go into the skills for the future, long-term less maintenance costs, a more professional project with fewer delays, and workers able to support their families and their communities. Basically, we urge you to reject S.B. 170 and S.B. 195. The State should be part of the solution, not contributing to part of the problem.
Senator Hardy:
Not to disagree with anything you are saying, but we are talking about the same individuals. What makes them worth $12 an hour more when they are doing a prevailing wage job as opposed to not doing a prevailing wage project? They are the same people, they have the same skills. You know I applaud the union apprenticeship programs, they are great programs, but do they reserve a special set of skills when they go on public works jobs? I am having a difficult time understanding the difference between $42 an hour and $30 an hour just because one is working on a government-funded project. If you could tell me why this worker is worth more, I would appreciate it.
Mr. Muchicko:
I talk with contractors quite frequently and you are absolutely right. If I am a contractor and I have to pay my worker $30 an hour, I am going to be looking for the most-skilled worker out there who knows his business and the industry and can put out $30-plus worth of efficient work for my company. The $12 an hour worker, sometimes maybe he is only worth $12 an hour, but if in fact he is worth $30, then he deserves $30 an hour.
Senator Hardy:
So your testimony is, you reserve your better workers for these public works jobs, is that what I understood you to say?
Mr. Muchicko:
I would say contractors look for the most skilled and qualified worker for public works jobs when prevailing wage is enacted because they are in fact paying for skilled workers.
Senator Hardy:
That is very interesting, thank you.
Jeffrey C. Fromm, Plasterers and Cement Masons:
These bills could make us work for half of what we are worth and you expect the same quality for what you would get for a higher price. So, you want to pay a teacher at the going rate, but you are not willing to build your schools at the same going rate. I am not understanding the thinking here.
David Kersh, Carpenters and Contractors Cooperation Committee:
I am here to speak against S.B. 170 and S.B. 195. We hear all these percentages, 15 percent, 20 percent, 30 percent; I think a problem with all the percentages is that they are one dimensional, they say you cut costs and nothing else is affected. I think if you were to cut costs, to begin with you have an issue of worker productivity that is going to be affected. You are going to have other larger issues, of health care, issues awarding agencies will have in terms of the different types of contractors they will have to deal with, and the public is going to be affected because you will have a less skilled workforce, projects are going to take longer to be completed, and also the quality will be lower. I think those issues are often overlooked because it is easy to cut 10 percent and everything is solved. I do not think it is as simple as that. A study carried out last year by a professor of economics in Utah (Exhibit C. Original is on file in the Research Library.) studied whether it would be cheaper to save costs for more construction, and that is not necessarily true. In studies where they look at the repeal of prevailing wage, the only thing they keep finding is cost overruns and less training. I think there are larger factors to consider when it comes to cutting 10 percent.
James E. Sala, Lobbyist, Southwest Regional Council of Carpenters:
I am here to oppose S.B. 170 and S.B. 195. I will not restate all of the opposition. All of the points were made well and the most salient comments about all three of these bills were made by the labor commissioner. He pointed out many of the problems are with lack of participation by contractors submitting the surveys, by using the appeal process, and by actually using the data and material put into place. While we do not always agree with the labor commissioner, the one thing you cannot disagree with is he has tried to do a very thorough job and I would never want to argue with the facts he presents. If you look at the numbers he has thrown out and the avenues, 2 years ago there was a compromise. There were contractors in the room, the labor commissioner’s office, labor, union, and open shop; we came to some compromises about prevailing wages.
What is in the Nevada Administrative Code right now, as well as the Nevada Revised Statutes, is a result of those compromises. It seems to be working well, the only thing that does not seem to be working well at this point is the contractors’ participation in the survey. I want to quote Senator Hardy and I have heard twice in the past two weeks, the open shop does 70 to 75 percent of the work, but if they actually do and they do the survey, then that would be the prevailing rate. I think the best legislation comes from consensus, not from one side or the other. I think we achieved it last time and it seems to work pretty well. I would urge this committee not to adopt these bills, but to take a look at the survey process during the interim and come back with some industry recommendations to include workers, contractors, and the labor commissioner’s office.
Senator Hardy:
I did say 70 to 75 percent, and I was including residential, but your point is not accurate unless I can figure out a way, or unless the open shop industry can figure out a way, to get the contractors to submit exactly the same rate. That is not going to prevail and that is the point. You know I have sat through a lot of hearings like this and one person after another gets up and speaks about the better quality of work, the safety and all those sorts of things, yet I have not in my entire career seen one piece of evidence to substantiate that, it goes unchallenged every time. This is not an issue I want to have a fight on, but I am not going to sit on this committee and allow those kinds of comments to be made without some substantiating evidence, because it belittles and minimizes the work of good people in the construction industry who ply their trade outside of the union, as they are allowed to do by law, and simply choose not to join a union. After listening to some of this testimony I am afraid to send my kids into the schools because nonunion workers did them. I want to see some facts and some evidence, because I just have not seen it.
Senator Townsend:
Is it possible, at least based on S.B. 170, to get a matrix of the county populations currently and perhaps the last 5 years of the projects in each one of those counties, so we have a little bit of perspective on this?
Chairman O’Connell:
Terry,
do you have any records on the current projects?
Mr. Johnson:
Of the public works projects for the last 5 years in all of the counties? I would have to check with staff; all the data I have given you today was based on fiscal year 2002. I have not been there more than 3 ½ years, so I do not know what all is there and I do not want to speak out of turn and say we do have it. I would be happy to speak with the committee and see what we do have, but I do not know if we have 5 years’ worth of data.
Chairman O’Connell:
We can certainly talk to Mr. Daniel K. O’Brien, Manager, State Public Works Board, and see what he has on hand.
Thomas A. Morely, Lobbyist, Laborers Union Local No. 872:
Just wanted to go on record as being opposed to these bills. I have a report Exhibit C, by Professor Peter Phillips, Ph.D., Department of Economics, University of Utah, looking at nine states in intermountain and southwest communities. The reason why we chose this study to bring in front of you today is because we are on the same guidelines as the rest of these states as far as rural population goes. We have just commissioned Dr. Phillips to conduct a study for Utah, Arizona, New Mexico, and California for new comparisons as to this information from 1996 and was submitted to New Mexico state legislators. This study compares public square-foot construction costs in the nine states. Five states have prevailing wage laws, those would be New Mexico, Texas, Oklahoma, Wyoming, and Nevada. And the four who do not have prevailing wage laws are Arizona, Utah, Idaho, and Colorado. In this study you will find in the five states with prevailing wage laws, elementary schools cost $6 less per square foot, middle schools cost $11 less per square foot, high schools cost $11 less per square foot, and warehouses cost $35 less per square foot. This study shows that overall there is an 8 percent cost advantage in states with prevailing wage laws. We know construction costs are sensitive to regional differences and cost of living as well as prevailing wage law regulations, build, design, and other factors. The conclusion of this study finds it benefits and regenerates the tax dollar in a more efficient fashion.
Mr. Costella:
I want to be on record as opposed to S.B. 170 and S.B. 195. I would like to state there was a school in Silver Springs that fell down before it was completed. In answer to Senator Titus’s statement about cost in the long term, you have indigent care for workers with no pensions or health plans, so these do cost the community in the long run.
Mr. Daly:
I want to go on record as being opposed to these bills for most of the same reasons stated here before. The whole assumption that these bills are going to save money comes at the expense of workers. I do not know how we can afford to put the brunt of these problems on the workers’ backs in this State.
Ms. Smith:
I am opposing both of the bills. I am also looking at opening the door. When we start chipping away at some of these issues, I think it is going to be very detrimental to our workers. But the one point I want to make is when we talk about the wages we heard about, the person on one side of the street or the other, we have to make sure we are comparing the same rates. Often in prevailing wage packages, you have health benefits, vacation, life insurance; those need to be factored in if you are going to compare what people are making.
Ms. Henderson:
I think where we are kind of losing a little bit of perspective on this is with the rural counties where there is a finite amount of money to be spent on these types of projects. So whether we do one or we do three, there is a limited amount of money out there. So what the local governments are asking is to get a little bit of relief from the $100,000 to 300,000 cap, so we might be able to do a little bit more work than we currently do. Again, it is not an attempt on our part to go against the prevailing wage laws of this State, it is to give us relief from a statute put into place in the 1980s that never had an inflationary indexing done on it. We want to keep those jobs in our community, we want to work with our community, those folks are taxpayers as well. I think we need to keep it in perspective, this is only for those counties of 100,000 or less who are already tightly stretched in terms of the projects they can currently do. The intent is to do a little better job for all of our taxpayers out there, to bring this limit up to a level that is a little bit more reflective of doing business today.
Mr. Johnson:
Let me reiterate a point already made. Participation is the key, on the front end by contractors, the back end by those who do not believe the wage rates published by the labor commissioner’s office reflect the community. The problem is not the dollar threshold or the formula used to determine the prevailing wage rates or the nature of the project. The biggest challenge facing this system is the degree to which we can gather data to tell a community what the prevailing wage rate is. The problem is ensuring an adequate amount of data of a qualitative nature to allow reasonable determinations of the prevailing wages.
Right now the law says survey contractors, but we send out 13,000 surveys and get back 1500, and maybe 600 are ultimately used. People need to participate. I still believe contractors should be required to participate in the public works survey if they are going to bid on and receive public works projects. If they are going to benefit, they should participate in the process from beginning to end and not selectively participate when it is time to give out those public works awards. That is where I think the problem is, not the formula, not the dollar threshold, not the nature of the project, but being able to tell the citizens these rates are, in fact, reflective of those being paid. I have no problem with saying we do our wage determination in strict accordance with the law, but we do need participation from all levels. We need to be cognizant of the fiscal effect dramatic changes in the prevailing wage scheme can have on those businesses and the working families they employ. Keep in mind these types of decisions have real world implications on businesses and working families out there.
Chairman O’Connell:
Mr. Wasserman, I wonder if you, as Committee Counsel, could do some investigating for us to find out if there is any reason why the labor commissioner could not be able to get salary information from the Employment Security Division, and if we could find out from other states if there is anything to prohibit the information from being confidential. Those are the only suggestions I remember coming to us along with what the other states are doing as to the collection of the information to make sure we are hitting the target as far as what is the prevailing wage in those communities.
Chairman O’Connell:
Does anyone have anyone questions or testimony for S.B. 170 or S.B. 195? We will close the hearing at 4:04 pm.
RESPECTFULLY SUBMITTED:
Tara DeWeese,
Committee Secretary
APPROVED BY:
Senator Ann O'Connell, Chairman
DATE: