HB 155-PUBLIC CONSTRUCTION CONTRACTS  4:04:37 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 155, "An Act relating to public construction contracts." 4:08:03 PM REPRESENTATIVE JOHNSON made a motion to adopt Amendment 1, labeled 27-LS0249\B.3, Bannister, 2/22/11, which read as follows: Page 1, line 5: Delete "$75,000" Insert "$50,000" Page 4, lines 8 - 9: Delete ", except for a school district of a municipality or a regional educational attendance area" REPRESENTATIVE HOLMES objected for purpose of discussion. 4:08:44 PM JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State Legislature, stated that Amendment 1 would reduce the threshold from $75,000 to $50,000. The second change is in proposed Section 8, on page 4, lines 8-deleting except for a school district. Initially, the draft inadvertently exempted school districts, but it was not the sponsor's intent to exempt school districts. Thus, Amendment 1 will correct that error and brings school districts under the umbrella so they are subject to the provisions of the bill, including the proposed $50,000 cap. REPRESENTATIVE HOLMES removed her objection. There being no further objection, Amendment 1, was adopted. 4:10:26 PM MAX MIELKE, Business Manager, Plumbers & Pipefitters Local 262, stated that he is a 56 year Juneau resident. He said he is the Business Manager for the Plumbers and Pipefitters with about 100 members. He stated that he strongly oppose HB 155. He related that in the 80s and early 90s members had a tough time. He said that at times a plumber might be laid off for several months and small contracts helped members survive. He said this is not a union versus non-union issue. He also said he was glad to see the amendment added for the school districts. He characterized the bill as a form of right to work legislation and "is a start to the race to the bottom." 4:13:03 PM REPRESENTATIVE MILLER asked whether there was any figure his organization would feel comfortable with given that the Little Davis-Bacon applies to contracts over $2,000. MR. MIELKE answered that several carpenters are working in the union hall on small projects, probably under $12,000. He stated that during his career the small projects kept members going. He expressed concern on the limit. 4:14:28 PM CHAIR OLSON clarified that the $2,000 figure was set in 1935 and has not been adjusted since then. He recalled that if the figure was adjusted for inflation the amount would be about $32,000. MR. MIELKE offered that construction work has not changed that much. He maintained members' work for small projects provides the "bread and butter" for contractors. 4:15:13 PM MATHEW MIELKE stated he grew up in Juneau. He said his father worked in the construction industry but has also worked in the industry. He agreed with his father's testimony. He further said small jobs have made a difference to him. He offered his belief that he often would not have been able to "put food on my own table if it wasn't for a $5,000 job that my boss got." He was unsure how low the minimum limit for Little Davis-Bacon would affect him. He feared he would be unemployed, drawing unemployment, and someone from out of state would be awarded the bid on a job. He expressed concern that raising the contract limit from $2,000 to $75,000 before the Little Davis-Bacon Act (LDBA) would apply would attract Lower 48 contractors who will low bid contracts, perform subpar work, and leave. He said, "They don't really care if they get a bad reputation for it." The current requirement for LDBA allows local trained and skilled workers to work on construction jobs. The workers do good jobs, maintain their reputations, and are proud of the work they perform in the communities in which they live. He stressed that this is very important to him. He concluded by saying, "I look around the room and I don't really fit in here..." CHAIR OLSON commented that everyone fits in this room. He remarked that at least one person sitting at the table has employed union and non-union people. REPRESENTATIVE CHENAULT agreed. 4:17:37 PM JON SMITH, Member, Carpenters Local 2247, stated that he was raised in Dillingham and has lived in Juneau the past 11 years. He spoke in opposition to HB 155. He shared some quotes he found. He read, "The proponents of prevailing wage legislation wanted to prevent government from using its purchasing power to undermine wages of its citizens. It is believed that government should set an example by paying the wages prevailing in a locality for each occupant hired to government contracts and building code projects." He said that rings true to him since it sets an example by paying the prevailing wage of the area as the standard. He related that it is not inexpensive to live in Alaska. It is especially expensive to live in rural Alaska. He grew up working construction and liked working the Little Davis- Bacon jobs because he knew what he'd be paid. It said it was important to him growing up and working in the construction industry. He read, "The purpose of the Davis-Bacon Act is to protect its employees and government contractors from substandard wages and to promote the hiring of local labor rather than the cheap labor from distant places." He characterized the Little Davis-Bacon Act (LDBA) as the "level playing field." He further related that when out of state contractors come to Alaska on a Title 36 project, they are aware of the specific labor costs, whether the labor is union or nonunion labor. Removing the requirement for Little Davis-Bacon means an out of state contractor will bring in his own crew and pay whatever wage he wants to pay. He offered his belief that most Alaskans cannot afford to work for less. The standard of living is less in the Lower 48 so the wages are less. In closing, he said the cost of a $50,000 is just that, but the Department of Labor & Workforce Development (DLWD) will have a certified payroll, and wages are set. He said if this bill passes the same project will cost $50,000, but the DLWD will not have a certified payroll, and the employees would not be guaranteed a good wage. The contractor will still bill out $50,000 but the workers could be set at the minimum wage. 4:21:09 PM MARVIN YODER, Deputy Administrator, City of Wasilla, asked to speak in support of HB 155. He recalled prior testimony. He offered his belief that this bill would affect mostly state and local government. He reviewed the Governor's proposed budget and very few projects for his community are listed under $100,000. He predicted the percentage of people affected would be low. He acknowledged that an out of state contractor might mobilize for a $50,000 contract in Anchorage or Fairbanks, but he did not think it was likely contractors would bid on projects in Fort Yukon for the same cost. He related he has frequently worked in bush Alaska on small projects. He pointed out that it is not just the wages people are concerned about but the paperwork required. He said it should be good for the small rural communities to bid on the small projects. He concluded that this is not a big change, considering it represents 70 years of inflation. It makes it much easier for municipal or state government to have this threshold and efficiency. 4:23:43 PM SHANE LINSEY expressed his concern with the language in HB 155. He asked, "If it's not broke why fix it?" The state has done well with its finances and has about a $12 billion surplus. He offered his belief that this bill would not benefit the state, but would allow lower wages to be paid while lowering the quality of work. He said, "As the saying goes, you get what you pay for, and this Davis-Bacon allows an even playing field for all the contractors when they are bidding on these contracts." He stated his opposition to HB 155. 4:24:39 PM LORI DAVEY, Member, Board of Supervisors, South Goldenview Rural Road Service Area, stated that her rural road service area is 17.5 miles off the Rabbit Creek and Goldenview area of Anchorage hillside. She offered the South Goldenview Rural Road Service Area's support for HB 155. She stated her fellow board member, Robert Johnson, is also with her today. She related the struggle the road service area has had grappling with requirements on any project of $2,000 or more when the Little Davis-Bacon Act (LDBA) "kicks in." She related that $2,000 of materials is a very low threshold for road improvement projects. A culvert replacement or pothole material can easily go over $2,000 and trigger the Davis-Bacon rates, she said. She further related that the Little Davis-Bacon provisions significantly raise the cost of any roadwork. The rate has been in place without any adjustment since 1935, that even the basic rate of inflation would raise the rate to $32,000, using an average inflation rate of 3.78 percent. She stated that Little Davis- Bacon wages are much greater than the prevailing wage. She said that her road service area pays almost double wages. It adversely impacts residents since they cannot fix as many roads. These funds directly impact property taxes. She explained the residents pay 1.8 mils per hundred thousand dollar valuation on their homes. These are not just big companies affected by the Little Davis-Bacon provisions, but homeowners. The increased threshold and more clearly defining the different between maintenance and construction, residents will be able to maintain and improve our roads more cost effectively. The basic buying power with inflation corrections will double and more roads will be able to be improved. She urged members to pass HB 155 to better utilize public monies, create efficiencies, and accomplish more road work. 4:26:49 PM NANCY M. PETERSON, Public Works Director, City of Unalaska, stated her strong support for HB 155. She stated that she is a manager of rural public construction projects and supports raising the threshold for the application of the Little Davis- Bacon Act. She related that many small projects have increased in cost to the point the projects are no longer viable and do not get built due to the wage requirement. She also has worked with small contractors who chose not to bid on projects due to the added reporting requirements for the jobs. She has served on the Alaska Municipal League (AML) public works and infrastructure legislative subcommittee for the past eight years. She has listened to small communities and villages discuss projects that were lost due to the extra wage costs required. These communities have limited resources. When project costs increase from $15,000 to $20,000 can affect whether the project is feasible. Many of the rural projects are "quality of life projects" rather than the projects driven by life safety issues. These projects are good projects but cannot be justified when costs escalate. She recalled testimony from a prior hearing in which one speaker mentioned the small number of projects this bill would affect based on the number of state projects under $75,000 in its database. She asked members to also consider all the projects that were not built because the cost of the project increased so communities could no longer support them. She offered her belief that HB 155 would create new opportunities for all of Alaska's communities. She strongly urged members to pass HB 155. 4:29:24 PM SHIRLEY MARQUARDT, Mayor, City of Unalaska; Vice President, Alaska Municipal League (AML), offered her strong support for HB 155. She stated that AML is on record with its resolution of support for the bill including the $50,000 threshold. She explained at the last AML membership meeting, its membership voted to increase the threshold for Little Davis-Bacon wages from $2,000 to $50,000 on public construction projects and an exclusion for maintenance contracts be added. She said she thinks this is a reasonable and responsible adjustment after 76 years of the status quo for the wage threshold while the construction and maintenance costs have maintained a steady increase. With a long overdue adjustment and the exclusion of maintenance contracts, the legislature will provide opportunities to municipalities that currently forego projects or maintenance due to the cost. She said that this is a significantly positive change for all communities in rural Alaska. Jobs and updated infrastructure as smaller projects become a reality provide a "win-win" with the passage of HB 155, she also said. 4:30:53 PM BRET HELMS, Training Director, United Association of Plumbers and Pipefitters, Local 375, stated his opposition to modifications to Little Davis-Bacon proposed in HB 155. The proposal to raise the threshold limit for construction contracts will not necessarily lower construction costs but may increase the number of out of state employers who bid on construction projects. Currently, employers are required to pay Little Davis-Bacon journeyman prevailing wages unless the employer has a federally registered apprenticeship program. He predicted that if HB 155 is passed, employers will not be required to have a registered apprenticeship program and wages will be subjective to the employer. He expressed concern that apprentices trained in programs will not have the opportunity to work on these projects. These are good jobs and jobs that allow Alaskan men and women to support their communities, raise families, and remain in Alaska. He feared they may be replaced by a cheap nonresident, low skilled work force brought in from the Lower 48. He concluded by stating this proposal would diminish wages and would also lower the standard of living across Alaska, in communities that are already suffering in the depressed economy. He thanked members for listening to his comments. 4:32:21 PM ZEBULON WOODMAN, Member, Laborers Local 942, said he has lived in Alaska his entire life. He said, "Leave this law alone." He offered his belief that exempting the Little Davis-Bacon Act (LDBA) from jobs up to $50,000 would have affected hundreds of projects last year. With many projects being awarded to nonunion contractors, this proposal attacks wages for many nonunion workers who do not have an advocate. The Little Davis- Bacon wages provide a level playing field for all bidding contractors. It helps to ensure a quality wage and is not "a race to the bottom by contractors who are willing to pay workers less." This bill would take dollars away from the worker to allow municipalities to obtain more work for less money. No one suggested taking "a dime from a contractor or limiting rental rates on equipment, or limit the profit on the sale of material." He related he heard considerable discussion on the onerous paperwork, which was too much for the contractor. He said, "If we take money out of the workers pocket it will make life better for the contractor." He expressed concern for the working family. He said that raising the threshold may not reduce the cost of bids, since contractors may "pocket more money" while workers are paid less. He urged members to oppose HB 155. 4:34:07 PM JEAN TRAINOR, Member, Alaska Public Employees Association (APEA), stated she is speaking as an APEA member and also as a long-term nonunion and union worker in Alaska. She stated she has lived in Alaska for over 35 years. She urged members to oppose HB 155. She characterized HB 155 as "a race to the bottom." She said she has repeatedly heard stories about low paid workers from the Lower 48 taking Alaskan dollars and sending outside, which does not help Alaska's communities. She suggested supporting our communities is accomplished by paying a fair wage to Alaskans. She said she is especially bothered by Lower 48 workers driving down wages. She suggested that 1,400 projects were in the $2,000 to $50,000 range. Small "bread and butter" projects provide wages that bridge the big projects for workers. Alaska has a boom and bust economy. There are times when fair wages paid under Little Davis-Bacon projects provide income that helps see the families through the leaner times. 4:36:31 PM REPRESENTATIVE THOMPSON asked whether she lived in a road service area. MS. TRAINOR answered yes. In response to Representative Thompson, she said even though she lives in a road service area in the Goldstream Valley, she still supports HB 155. REPRESENTATIVE THOMPSON pointed out that Little Davis-Bacon has the potential to double road service area fees added to her property taxes. MR. TRAINOR emphasized she is fully supportive to have the people grading her road obtain a fair wage. 4:37:43 PM JIM LAITI, Business Representative, Plumbers and Pipefitters Local 375, stated he is a lifelong Alaskan. He has worked in the construction industry since the 1970s. He related that the work is seasonal and cyclical. He recalled years in which he worked for eight or so contractors. He worked on day, week, or monthly jobs, all of which help support local contractors who must maintain their facility and staff. Additionally, he and his friends must also maintain their homes during the winter months as compared to those who live in the Lower 48 and just work during the construction season. He asked members not to advance HB 155, which will negatively impact Alaskan workers as well as contractors. He stated that using a skilled highly trained worker can make all the difference on a renovation project or maintenance project in terms of the overall cost over time. 4:40:20 PM JASON ALWARD, Business Agent, International Union of Operating Engineers Local 302, stated that he is a lifelong Alaskan. He is speaking on behalf of himself. He asked whether a problem exists in terms of the very old statute pertaining to construction contracts over $2,000 should be covered under prevailing wages. He offered his belief that a problem does not exist with the status quo. Seven or eight states currently have lower threshold on contracts. This ensures that Alaska Hire is a priority. He offered his belief that using the Little Davis- Bacon will "level the playing field" for contractors by eliminating employers from the ability to "get jobs on the backs of their employees." He stated that raising the threshold does not guarantee jobs will cost less. It only guarantees that workers paid less and even more importantly, the worker may not be an Alaskan worker. He characterized this bill as a "race to bottom" which he did not believe is necessary at a time when the state has $12 billion in surplus funds. He concluded by stating that diminished wages for Alaskans for mostly seasonal occupations is not the answer. He said, "I oppose HB 155. Thank you." 4:42:27 PM RON AXTELL, Representative, Laborers Union Local 942, stated that he helps represent over 2,000 Alaskan union laborers in Southcentral Alaska. He also speaks for small business workers who are entitled to earning a living wage. He asked how to stretch workers and improve Alaska when this bill has the potential to move Alaska backwards. He offered his belief that by raising the threshold on paying the prevailing wage for projects it also would lower the standard of many workers who count on prevailing wage work. He stated that if the wage is inadequate it is possible jobs will not be available. He related that a higher ceiling makes it more likely outside bidders will bid successfully on jobs. There is no guarantee these contractors will hire Alaskans. The state subsidizes programs. He asked whether paying less will result in subsidizing more programs. He urged members not to change the current limit. 4:44:10 PM KEITH MONTGOMERY, Business Representative, Carpenters Local 1281, stated he is a 28 year resident of Alaska. He said he is glad to see the amendment to the bill was adopted. He offered his belief that HB 155 does not provide a mechanism to develop the workforce or the standards set forth in prevailing wage jobs. 4:45:38 PM JOHN GARRETT, Member, Sheet Metal Workers Local 23, stated he is an 18 year Alaskan. He spoke in opposition to HB 155. He recalled prior testimony and commented with respect to raising thresholds. He said that jobs can be divided into phases. A person could have large jobs divided into many phases, which is just one way to game the system. He agreed with the comments that this bill is a "race to the bottom." He thought it might lead to the situation in which people cannot afford to live in the state. He reminded members that health care and utility costs have increased exponentially. He said, "This is not a union or nonunion issue. This is a worker issue." He did not understand why the burden is placed on the worker. He understood that costs need to be considered but this is not the way to do it. He thought the approach attacked workers. 4:47:28 PM BRONSON FRYE, Member, Painters and Allied Trades Union, Local 1959, stated that he is a lifelong Alaskan and is a journeyman drywall, finisher, and painter by trade. He has worked union and nonunion jobs. He currently represents painters, drywall finishers, floor coverers, and glaziers. He has been in commercial construction for ten years. The Davis-Bacon or prevailing wage jobs provide the financial lifeblood for many construction workers in Alaska. He said he bases this on his experience and comments by many others in the construction industry. He emphasized that this is not a union versus nonunion issue. The wages paid to union and nonunion workers on Davis-Bacon projects promotes the growth of the middle class and boosts the state's overall economy. Since the state has a $12 billion surplus, it would be a travesty to pass a bill that would devastate the income of thousands of construction workers in Alaska. He explained that "race to the bottom" has a real and tangible meaning. When a contractor bids on a project, the three main variables in construction are material cost, overhead, and labor cost. Of those, the material cost and overhead are approximately the same, but the labor cost is the only real variable. Construction contracts are awarded to the lowest bidder. Having a standard, such as Little Davis-Bacon helps the worker. It also ensures the construction contract is awarded to a responsible contractor and is not a "race to the bottom." He urged members to please oppose HB 155. 4:50:58 PM LARRY BELL, Representative, International Brotherhood of Electrical Workers (IBEW) Local 1547, stated he has three kids and is a second generation Alaskan. He is a resident of Wasilla. He represents almost 8,000 active and retired members of the IBEW. He stated his opposition to HB 155. He said that this bill is not good as a measure of the "floor" wage for Alaskans. It is not good for local hire. It is not good for seasonal workers in Alaska. It is not good for the quality or ensuring quality of construction on state-funded projects. He implored members to leave this bill alone. He offered his belief that HB 155 ensures employment on public funded jobs will focus on efficiency and the ability to do the job right and effectively. 4:52:01 PM SHAWN CROSS, Apprentice, International Brotherhood of Electrical Workers (IBEW) Local 1547, stated that he was testifying in support of his local union. He asked committee members to oppose HB 155. [HB 155 was held over.]