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.]