Ruling: Projects funded by charter cities don’t require prevailing wages

The state Supreme Court on Monday ruled that a charter city does not have to pay state-mandated wages for construction and other projects funded entirely by cities.

The decision was closely watched in Costa Mesa, where a proposed city charter would not require the city to pay so-called “prevailing wages,” formulas based on rates set by labor and other factors, when it seeks bid for work. That element of the proposed charter is favored by the City Council’s conservative majority, but opposed by organized labor.

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“I’m happy to see that charter cities can keep control of their spending,” said Mayor Pro Tem Jim Righeimer, who wrote the original version of the charter slated for the November’s ballot. “[The ruling] makes it clear as day that charter cities do have control, and the state can’t take it away from them and that’s why cities need to be a charter.”

In a 5-2 ruling with justices Kathryn Werdegar and Goodwin Liu dissenting, the court ruled that Vista, a city in northern San Diego County, does not have to pay prevailing wages for public projects when it using only city money. Vista claims to have saved millions through the practice.

“It is apparent from our analysis ... that the construction of a city-operated facility for the benefit of a city’s inhabitants is quintessentially a municipal affair, as is the control over the expenditure of a city’s own funds,” Justice Joyce Kennard wrote for the majority. “For state law to control, there must be something more than an abstract state interest, as it is always possible to articulate some state interest in even the most local of matters.”

The two dissenting justices argued that construction wages today are more regional than local, so when one city undercuts unionized workers, it depresses wages for the entire area.

“Every government, state or local, naturally has an interest in conserving public funds,” Werdegar wrote. “Vista must point to more than a ledger sheet to justify its contention that its ordinance falls within the municipal affairs doctrine.”

The State Building and Construction Trades Council of California (SBCTC), representing some 300,000 state construction workers, challenged Vista’s use of non-union labor for several public buildings paid for by a local half-cent sales tax.

Prevailing wages — a standardized local wage rate set by the director of California’s Department of Industrial Relations — are required on state- and federally-funded projects and any public project for a general law city. A general law city follows the state constitution while a charter city has its own constitution that sets the law for municipal affairs — like zoning, elections and public contracts. Costa Mesa currently is a general law city but neighboring Newport Beach has a charter.

The construction union was critical of the decision.

“The fight against prevailing wage is part of a larger effort by the super-rich ruling class to fatten their own wallets by forcing everyone else to sacrifice,” the SBCTC said in a written response to the ruling. “We will continue to fight at every turn.”

joseph.serna@latimes.com

Twitter: @JosephSerna