Legislature(2011 - 2012)

03/09/2011 03:46 PM House L&C


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
              HB 155-PUBLIC CONSTRUCTION CONTRACTS                                                                          
3:46:59 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE  BILL NO.  155,  "An Act  relating  to public  construction                                                               
contracts."                                                                                                                     
                                                                                                                                
3:47:21 PM                                                                                                                    
                                                                                                                                
LARRY SEMMENS,  City Manager, City  of Soldotna, stated  that the                                                               
City  of  Soldotna  strongly   supports  increasing  the  minimum                                                               
threshold for requiring Title 36 wages  to apply.  He offered his                                                               
belief that government has the  responsibility to keep costs low,                                                               
but the public  perception of government is  such that government                                                               
costs greatly exceed  private sector costs.  He  said everyone in                                                               
the business knows  that the Little Davis-Bacon  Act (LDBA) makes                                                               
it impossible for  governments in Alaska to be  cost effective on                                                               
small projects.  He stated  that prevailing wages are significant                                                               
higher in his area.  He related  a scenario in which a local non-                                                               
union  contractor  quoted labor  at  $22  per hour,  whereas  the                                                               
prevailing wage  quote is $42 per  hour.  He said  he understands                                                               
the bill  does not  concern the  prevailing wage,  but prevailing                                                               
wages significantly impact the cost  of small projects.  In fact,                                                               
some projects  would not  get built  when the  LDBA applies.   He                                                               
related  his understanding  that  LDBA  also prohibits  volunteer                                                               
labor  on small  projects such  as trails,  which is  unfortunate                                                               
since youth groups and other agencies benefit.                                                                                  
                                                                                                                                
MR.  SEMMENS  offered  his  belief  that  significant  costs  are                                                               
associated  with  LDBA projects  for  the  contractor and  owner.                                                               
From  the  owner's  perspective,  the  owner  must  evaluate  the                                                               
project  to decide  if Alaska  Statutes Title  36 applies,  which                                                               
contain the LDBA  provision and if so the  contractor must adhere                                                               
to  additional reporting  requirements.   On smaller  projects, a                                                               
contractor may  be discouraged from  submitting a bid due  to the                                                               
additional  costs to  comply  with the  LDBA  while using  larger                                                               
contractors  usually results  in  additional construction  costs.                                                               
However,  the  concern that  out  of  state contractors  will  be                                                               
awarded  jobs  is  mitigated  in Soldotna  due  to  local  bidder                                                               
preferences.  He  assured committee members the  City of Soldotna                                                               
is diligent  in selecting competent  contractors.  When  the LDBA                                                               
applies  on  a  project  the  owner  must  submit  to  additional                                                               
verification,  audits, and  other documentation.   Municipalities                                                               
continue  to  be affected  by  declining  revenue and  increasing                                                               
costs.  This bill would  reduce costs by increasing the threshold                                                               
for when  the LDBA would  apply.  He  offered his belief  that HB
155 would  increase the  number of  small projects  available and                                                               
will  increase the  quality of  life for  Alaskans.   He said  he                                                               
hoped  members  would  pass  HB  155  and  increase  the  minimum                                                               
threshold to at least $50,000.                                                                                                  
                                                                                                                                
3:52:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TAMMIE WILSON,  Alaska  State Legislature  stated                                                               
that she represents 33 percent  of the 109 road service districts                                                               
in the  Fairbanks North Star  Borough (FNSB).  She  reported that                                                               
most of the road service areas  (RSAs) in her district are small,                                                               
ranging from  a half mile  to two miles.   She explained  how the                                                               
LDBA  process applies  in  her district.   In  the  event a  road                                                               
service area  wishes to replace  a sign,  it is categorized  as a                                                               
capital project  and not maintenance  project.  When  three signs                                                               
are needed the cost would be  $500 and could be performed outside                                                               
the LDBA provisions.  However, when  a road service area also has                                                               
a few  potholes that need to  be repaired the overall  cost might                                                               
be  increased to  $1,000.   Once  again, the  project would  fall                                                               
outside the  LDBA provisions.   If the  RSA decided  the culverts                                                               
needed  cleaning  adding  culverts  to  the  project  would  cost                                                               
another $1,000.   Thus,  when the  projects are  lumped together,                                                               
which frequently  happens with LDBA  projects, the total  for the                                                               
three  projects  would  be  $2,500 and  would  trigger  the  LDBA                                                               
provisions.   Consequently  the  earlier projects  would also  be                                                               
charged at  the LDBA rates.   Any new  material placed on  a road                                                               
would be  considered construction and  not maintenance work.   At                                                               
this point the  RSAs cannot afford to have work  done unless they                                                               
increase their mill  rate.  She said she has  nothing against the                                                               
unions,  but most  of the  projects for  the RSAs  are not  union                                                               
projects.   She  suggested the  definitions need  to be  changed.                                                               
She also suggested  the threshold be increased from  $2,000.  She                                                               
agreed that the  $300 to $400 thousand projects  should adhere to                                                               
LDBA  provisions,  but the  RSAs  need  relief from  "maintenance                                                               
work"  that bankrupts  them  in  her region.    She concluded  by                                                               
saying she desperately needs a remedy for her district.                                                                         
                                                                                                                                
3:54:52 PM                                                                                                                    
                                                                                                                                
MIKE  BOVITZ,  Owner,  Metalworks,  LLC,  stated  that  he  is  a                                                               
contractor in  Juneau.   He spoke  in opposition to  HB 155.   He                                                               
related that  much of  his work falls  under the  smaller project                                                               
category, ranging from $50,000-$75,000.   These projects keep his                                                               
two workers employed  year round plus an  additional four workers                                                               
employed for part of the year.                                                                                                  
                                                                                                                                
CHAIR  OLSON  commented that  the  bill  has  been amended  to  a                                                               
$50,000 threshold.                                                                                                              
                                                                                                                                
MR. BOVITZ  stated that some  of his  work falls in  the $10,000-                                                               
$20,000 range  but even  the small projects  in the  $5,000 range                                                               
keep his  workers employed throughout  the year.  He  offered his                                                               
belief that this  bill could adversely impact Alaskans.   He said                                                               
it is  not a union or  nonunion issue so all  workers may suffer.                                                               
It  hard to  live on  $22 per  hour, he  said.   He stressed  his                                                               
opposition to the bill.                                                                                                         
                                                                                                                                
3:57:10 PM                                                                                                                    
                                                                                                                                
GREG FULGHAM,  Owner, Ful  Jenn Tree Service,  stated that  he is                                                               
tree cutter  in Juneau.   He expressed  concern that  cutting the                                                               
wages by  increasing the threshold  for the LDBA  would adversely                                                               
impact him  and Alaskans.   He expressed concern for  his workers                                                               
who risk  bodily harm cutting trees.   He explained that  most of                                                               
his jobs  are under  $50,000 so this  bill would  directly affect                                                               
him.  He concluded by stating he is totally opposed to the bill.                                                                
                                                                                                                                
3:59:10 PM                                                                                                                    
                                                                                                                                
GARY  CONTENTO, Staff,  Alaska Laborers  Training School,  stated                                                               
that he is  opposed to this bill.  He  works with local Fairbanks                                                               
youth and turns down  numerous people due to a lack  of jobs.  He                                                               
expressed concern that lowering wages  will bring in out of state                                                               
workers.                                                                                                                        
                                                                                                                                
4:00:33 PM                                                                                                                    
                                                                                                                                
ALBERTO MORENO,  Member, Laborers  Local 942, stated  he strongly                                                               
opposes HB  155.  He  believes this  bill would encourage  out of                                                               
state companies  to bid  for work  in Alaska  which will  bring a                                                               
lower paid  work force in from  the Lower 48 to  displace Alaskan                                                               
workers.   The current state  law supports a healthy  living wage                                                               
and changes could adversely affect  wages and create the need for                                                               
subsidies.  Please do not pass HB 155 from the committee.                                                                       
                                                                                                                                
4:02:20 PM                                                                                                                    
                                                                                                                                
DAVID LITTLETON,  Member, Laborers Local 341,  stated he strongly                                                               
opposes HB 155.   He has been a resident of  Alaska for 31 years.                                                               
He offered his  belief that raising the  threshold for prevailing                                                               
wages would drive down the wages in  the state.  It would lead to                                                               
crippling  Alaska's  economy by  no  longer  providing a  livable                                                               
income  to the  residents.   It would  force working  families to                                                               
barely make  a living.   It  would lower the  quality of  work by                                                               
attracting substandard  workers to perform skilled  jobs.  Please                                                               
leave  the  law along.    The  proposed  changes  in HB  155  are                                                               
dangerous, unnecessary, and will not  save the state money in the                                                               
long run.                                                                                                                       
                                                                                                                                
REPRESENTATIVE SADDLER asked  how much of his work  has been done                                                               
subject to the LDBA.                                                                                                            
                                                                                                                                
MR. LITTLETON answered  that 60 percent of his work  is under the                                                               
LDBA and the remainder is based on the prevailing wages.                                                                        
                                                                                                                                
4:04:11 PM                                                                                                                    
                                                                                                                                
KEITH  MONTGOMERY,  on  behalf  of  Mr.  LeFebre,  stated  he  is                                                               
representing Mr. LeFebre,  who is hearing impaired.   Mr. LeFebre                                                               
asked  him to  speak  in opposition  to  HB 155.    This bill  is                                                               
unnecessary,  would  erode  the  standard of  living,  and  could                                                               
compromise the safety on public infrastructure.                                                                                 
                                                                                                                                
4:05:14 PM                                                                                                                    
                                                                                                                                
MIKE  HODSTON, Member,  International  Brotherhood of  Electrical                                                               
Workers (IBEW) Local 1547, state that  he has lived in Alaska for                                                               
51  years.    He  said  he  has been  an  active  member  of  the                                                               
community.  He has watched the state  grow.  He has been a member                                                               
of  IBEW for  30  years.   He was  trained  in an  apprenticeship                                                               
program and  has worked exclusively in  Alaska.  He has  raised a                                                               
great  family.    His  father  was part  of  the  industry.    He                                                               
expressed  concern  that  HB  155 would  erode  the  standard  of                                                               
living.  He  understood an amendment would  change the threshold.                                                               
He offered his belief that it  will not save money for the state.                                                               
He thought  this represents a bad  precedent.  He said,  "You get                                                               
what you pay for."  Spending  less by hiring cheaper workers will                                                               
have the  effect of lowering the  wages for the work  force.  The                                                               
employer's profit  is not at  risk.  The  quality of work  in the                                                               
public sector would  not be guaranteed and could  result in lower                                                               
quality public  projects.  The  public deserves a  higher quality                                                               
of work on  projects.  This bill is unnecessary  as the state has                                                               
a large  surplus and there is  not any rational reason  to exempt                                                               
out the LDBA jobs.   He asked the committee not  to vote for this                                                               
bill.                                                                                                                           
                                                                                                                                
CHAIR OLSON  commented that the  threshold has not  been adjusted                                                               
for 75 years since it was adopted in 1935.                                                                                      
                                                                                                                                
4:09:35 PM                                                                                                                    
                                                                                                                                
AMOS HUDSON  spoke in opposition  to HB 155.   He stated  that he                                                               
supports his family  as a fifth year apprentice  electrician.  He                                                               
expressed  concern  that  just  as  he is  ready  to  finish  his                                                               
apprenticeship  changes  could  adversely  affect his  job.    He                                                               
commented that since the state  currently has a surplus this bill                                                               
is unnecessary.   This bill would take money out  of the hands of                                                               
Alaskan workers  and citizens.   He urged  members to  oppose the                                                               
bill.                                                                                                                           
                                                                                                                                
4:11:30 PM                                                                                                                    
                                                                                                                                
GARY PIKUS,  Member, Piledrivers, Bridge, Dock  Builders & Divers                                                               
Local  2520, stated  that raising  the threshold  to $75,000  for                                                               
LDBA would bring in out  of state contractors, who could underbid                                                               
union  contractors.    This  would  make  the  union  firms  non-                                                               
competitive with nonunion  firms.  He expressed  concern that the                                                               
nonunion  contractors  would seek  exceptions.    He thought  the                                                               
practice  of lumping  jobs  together  was a  result  of too  much                                                               
government and less government is  needed, which would help North                                                               
Pole.    He  recalled  earlier testimony  and  pointed  out  that                                                               
workers need  to eat and  make house  payments.  He  related that                                                               
seasonal workers  must save some  money earned during  the summer                                                               
to see them  through the winter.   He said he is  opposed to this                                                               
bill.   He said,  "We need  to keep things  as they  are, support                                                               
less government, and things might move along pretty good."                                                                      
                                                                                                                                
4:14:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT commented that he  did not think the LDBA                                                               
is an issue between union  and nonunion workers but the testimony                                                               
seems to make it an issue.  He  said he has many friends are both                                                               
union  and nonunion.   He  offered his  belief that  just because                                                               
someone  is a  union  worker does  not mean  he/she  is the  best                                                               
person to  do the job or  the only people with  qualifications to                                                               
do  the job.    He knows  people in  nonunion  trades that  could                                                               
compete or  exceed union workers.   He  clarified that he  is not                                                               
drawing a  distinction between  either one.   This bill  does not                                                               
have anything to do with union  versus nonunion labor or pride of                                                               
workmanship.  He asserted that  nonunion people have just as much                                                               
pride in  their work as  any of the union  people.  He  hoped the                                                               
discussion could  move away  from union and  nonunion and  get to                                                               
the crux of the  issue.  He said that the crux  of the problem is                                                               
the threshold  has not been  changed in  75 years yet  wages have                                                               
changed.                                                                                                                        
                                                                                                                                
CHAIR  OLSON offered  that  he hopes  to  provide information  on                                                               
wages  in 1935  for  members  to consider  with  respect to  this                                                               
issue.                                                                                                                          
                                                                                                                                
4:16:33 PM                                                                                                                    
                                                                                                                              
PATRICK  MCDONALD,   Apprentice,  International   Brotherhood  of                                                               
Electrical Workers (IBEW) Local 1547,  stated he is an apprentice                                                               
electrician.  He  testified in opposition to HB 155.   He offered                                                               
his  belief  that  movements  in  the Lower  48  states  such  as                                                               
Illinois, Wisconsin, and Ohio would  lower the standard of living                                                               
for all working  men and women in this country,  whether they are                                                               
union  or nonunion.   He  thought the  sponsor missed  something,                                                               
that  if the  LDBA  threshold is  raised, wages  will  fall.   He                                                               
remarked that if it happens he  would not have money to buy goods                                                               
and services,  such as gas and  diesel fuel.  Everyone  would pay                                                               
less  in federal  taxes.   Ultimately, the  money to  fund public                                                               
projects  and  services  is  derived   from  union  and  nonunion                                                               
workers, he said.  He stated his opposition to HB 155.                                                                          
                                                                                                                                
4:18:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE T. WILSON asked whether  he was familiar with road                                                               
service areas in the Fairbanks area.                                                                                            
                                                                                                                                
MR. MCDONALD  answered yes, noting  that his road was  not plowed                                                               
once this year.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  T.  WILSON  asked   whether  he  thought  workers                                                               
putting gravel  on roads  should be  paid LDB  wages.   People in                                                               
road service  areas essentially tax themselves.   The subdivision                                                               
taxes itself  to maintain  its roads.   She  asked whether  it is                                                               
fair for the  subdivision to pay LDB wages to  have gravel put on                                                               
a mile of road since it would cost more than $2,000 to do so.                                                                   
                                                                                                                                
MR. MCDONALD answered he thought  it was fair because the workers                                                               
deserve to make a living wage.   He said not everyone can go into                                                               
public service or make millions of dollars by being a speaker.                                                                  
                                                                                                                                
REPRESENTATIVE CHENAULT  clarified for  the record that  he makes                                                               
$500 more per year over other legislators.                                                                                      
                                                                                                                                
4:20:33 PM                                                                                                                    
                                                                                                                                
WILLIAM  CLAY, Member,  International  Brotherhood of  Electrical                                                               
Workers  (IBEW) Local  1547, stated  that he  is a  wireman.   He                                                               
spoke against HB  155 since makes it hard  for local contractors,                                                               
union and nonunion, to competitively  bid these jobs.  He thought                                                               
it might result in unsafe conditions.   He also thought this bill                                                               
would hurt the local economy.                                                                                                   
                                                                                                                                
4:21:33 PM                                                                                                                    
                                                                                                                                
ROBERT MITCHELL stated  he is a construction worker.   He offered                                                               
his  belief  that  the  changes   being  considered  to  the  LDB                                                               
threshold are an  attack on himself, union,  and nonunion workers                                                               
that are Alaska  residents.  He thought this bill  would open the                                                               
flood gates  for out of  state workers  to take Alaskan  jobs and                                                               
perform  them  at  minimum  wage.    He  also  thought  the  LDBA                                                               
provisions  level the  playing field  for contractors  to bid  on                                                               
projects  and receive  the prevailing  wage.   He  said, "It  has                                                               
worked  and will  continue to  work.   That's why  I oppose  this                                                               
bill.  Thank you."                                                                                                              
                                                                                                                                
4:22:31 PM                                                                                                                    
                                                                                                                                
GARY SANDERSON,  International Brotherhood of  Electrical Workers                                                               
(IBEW) Local  1547, stated that  he is  a union electrician.   He                                                               
said he  strongly opposes  raising the  threshold from  $2,000 to                                                               
$75,000.  He offered his belief  that the effect is to take money                                                               
out of the pocket  of the worker and shifts it to  the owner.  He                                                               
stated that  given the high cost  of living it makes  no sense to                                                               
lower wages  of workers  who are  trying to make  ends meet.   It                                                               
would also  import less qualified and  less knowledgeable workers                                                               
from other  states and areas  with lower  cost of living  who are                                                               
willing to  take a lower paying  job.  He thought  it would drive                                                               
down Alaska's economy.                                                                                                          
                                                                                                                                
REPRESENTATIVE  SADDLER recalled  testimony that  expanding wages                                                               
would bring  in out of state  workers who would do  a poorer job.                                                               
He  asked for  clarification  on how  much  construction work  is                                                               
being done at LDB wages and how much at non-LDB wages.                                                                          
                                                                                                                                
MR. SANDERSON answered that he did not know.                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER asked how much  non-LDB work is being done                                                               
by out  of state workers.   Essentially, he said he  is trying to                                                               
determine how real the threat is to Alaskan LDB contractors.                                                                    
                                                                                                                                
MR.  SANDERSON   responded  that   he  thought  the   threat  was                                                               
significant.                                                                                                                    
                                                                                                                                
CHAIR OLSON  answered that he  would obtain the  information from                                                               
the Department of Labor for members.                                                                                            
                                                                                                                                
REPRESENTATIVE  SADDLER stated  that  he was  not  trying to  put                                                               
someone  on the  spot but  had  heard the  argument from  several                                                               
people and he wanted to get a better sense of the concern.                                                                      
                                                                                                                                
4:25:00 PM                                                                                                                    
                                                                                                                                
TOM ALEXANDER,  Retired, International Brotherhood  of Electrical                                                               
Workers (IBEW)  Local 1547, spoke  in opposition  to HB 155.   He                                                               
related that  the LDBA promotes  fair wage competition  and works                                                               
to  prevent undercutting.   He  recalled  earlier testimony  with                                                               
respect to  lower paid people  coming in from  the Lower 48.   He                                                               
said, "You  get what  you pay  for and if  you pay  a substandard                                                               
wage, very likely  you're going to get a  substandard quality and                                                               
possibly an  unsafe product."   He  mentioned the  electrical and                                                               
plumbing trades  require licensing.   Licensing must  be enforced                                                               
so it raises the question of  who will enforce the laws.  Several                                                               
years ago,  he monitored  certified payrolls.   He  observed many                                                               
violations of  unscrupulous employers.   Many  employers complied                                                               
but  the  unscrupulous  ones would  hired  non-licensed  or  non-                                                               
citizens, and  would overuse  apprentices.   He pointed  out that                                                               
the Department  of Labor &  Workforce Development, Wage  and Hour                                                               
personnel did  not have enough  staff to enforce and  oversee the                                                               
issues.   He surmised  less staff would  be available  to oversee                                                               
compliance  now.    He experienced  contractors  paying  cash  to                                                               
employees   and  undercut   certified   payroll   jobs.     These                                                               
contractors did  not pay any  benefits or withhold taxes  so they                                                               
pocketed huge profits.   It is difficult for  good contractors to                                                               
compete  against that  type of  person.   He agreed  it is  not a                                                               
union versus nonunion  issue.  The nonunion person  does not have                                                               
an advocate.   "It is  a matter of a  fair standard wage  for the                                                               
living standard of Alaska to be  maintained and be able to afford                                                               
and live in this great state," he said.                                                                                         
                                                                                                                                
4:28:23 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that he  would keep open  public testimony                                                               
on HB 155.                                                                                                                      
                                                                                                                                
[HB 155 was held over.]                                                                                                         

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