|
DATE: |
February 8, 2022 and March 1, 2022 |
17 |
SUBJECT
Title
NOTICED PUBLIC HEARING: REGIONAL ECONOMIC ANALYSIS AND IMPACT REPORT ON PROPOSED WORKING FAMILIES ORDINANCE AND ADOPTION OF ORDINANCE AND BID PREQUALIFICATION POLICY (DISTRICTS: ALL)
Body
OVERVIEW
On July 13, 2021 (21), the County of San Diego (County) Board of Supervisors (Board) directed the Chief Administrative Officer (CAO) return within 90 days with a draft Working Families Ordinance for consideration that will amend the County Administrative Code pertaining to employment on County construction projects and County-owned real property. Additionally, the Board also requested a prequalification policy and proposed amendments to existing policies to require prospective bidders and proposers on public works projects to prequalify prior to submitting a bid or proposal. The Board also directed the CAO to estimate the impact of the implementation of the Working Families Ordinance on County construction projects and County-owned leased property. Lastly, the Board directed the CAO to update relevant contracting and leasing processes and templates for County construction projects and County-owned leased property to implement the Working Families Ordinance.
On October 5, 2021 (24), the Board accepted a staff-developed report summarizing stakeholder feedback regarding potential impacts of the draft Working Families Ordinance and directed the CAO to engage a consultant to develop a regional economic analysis and impact report. The Board also directed the CAO to return in February 2022 with a draft ordinance for the Board’s consideration. Additionally, the Board directed the CAO to bring the draft bid prequalification policy for consideration by the Board in February 2022.
Incorporating the data and analysis received from the County consultant (Consultant), DTA, and the information gathered by County staff, the draft Working Families Ordinance was revised to include creation of a threshold for skilled and trained workforce that is consistent with several other Southern California jurisdictions and agencies with similar ordinances. This threshold would require contractors and subcontractors on County construction projects valued over $1,000,000 to utilize a skilled and trained workforce. The draft Ordinance was also revised to include sick leave for all employees and contractors working on or from County-owned leased property to match State of California law, a clarification about the application of the Ordinance, the establishment of a wage floor requiring employees and contractors working on or from County-owned real property to be paid no less than a certain hourly wage set by the County, and adding exemptions to the Ordinance aligned with jurisdictions across the state. These exemptions include other government agencies or public utilities, employees or contractors providing services ancillary to business purposes and working on County-owned property for an average of fewer than eight hours per week in the prior twelve months, tax exempt organizations under section 501(c)(3) of the Internal Revenue Code, and any firms (parent and subsidiary entities included) with 20 or fewer employees. Additionally, County staff recommend that exemptions be made for those new leases or contracts with a federally certified Disadvantaged Business Enterprise/Airport Concession Disadvantaged Business Enterprises, and when a collective bargaining agreement is in effect.
The proposed revision to the Board of Supervisors Policy F-41: Public Works Construction Projects, modifies the wording from “may” to “shall” relating to the requirement that prospective bidders prequalify for any public works project.
Today’s recommendations are that the Board of Supervisors accept the regional economic analysis and impact report developed by a consultant, select an option related to the Working Families Ordinance, and adopt amendments to Board of Supervisors Policy F-41 to implement a bid prequalification policy.
RECOMMENDATION(S)
CHIEF ADMINISTRATIVE OFFICER
1. Accept the attached regional economic analysis and impact report that evaluates the cost impact to County construction projects and employment wage standards for workers on County-owned leased property.
2. Select Option 2a, 2b, or 2c:
2a. Approve the introduction (first reading), read title and waive further reading of the Ordinance:
AN ORDINANCE AMENDING THE COUNTY CODE OF ADMINISTRATIVE ORDINANCES RELATING TO EMPLOYMENT ON COUNTY CONSTRUCTION PROJECTS AND PROPERTY AND ESTABLISHING A WAGE FLOOR
OR
2b. Approve the introduction (first reading), read title and waive further reading of the Ordinance:
AN ORDINANCE AMENDING THE COUNTY CODE OF ADMINISTRATIVE ORDINANCES RELATING TO EMPLOYMENT ON COUNTY CONSTRUCTION PROJECTS AND PROPERTY
OR
2c. Decline to adopt an ordinance.
3. Adopt the amendments to Board of Supervisors Policy F-41 implementing a bid prequalification policy.
If, on February 8, 2022, the Board takes the action of Recommendation 2a or 2b, then on March 1, 2022:
4. Consider and adopt the Ordinance amending the County Code of Administrative Ordinances (second reading).
EQUITY IMPACT STATEMENT
County staff and Consultant engaged stakeholders during the past five months through community outreach, including inviting stakeholders from construction projects, lessees of County-owned property and the public, including business, industry, and labor organizations, to participate in virtual forums or provide feedback through written correspondence and surveys. In total, staff and the Consultant reached more than 882 businesses and community members. Feedback in recent surveys is consistent with feedback that was reported to the Board on October 5, 2021 (24).
The Consultant’s report (Attachment A, County of San Diego Impact of Working Families Ordinance (EAI Report)) details that the net effect of the proposed ordinance will depend on the relative strength of the increase in income for workers residing in San Diego County and higher labor costs impacting business operations and disincentivizing businesses to hire employees. Further information about the potential impact to workers in the region and the business community are detailed in this letter and the EAI Report.
Community input regarding the proposed Ordinance was important as a portion of the businesses on County-owned property are small businesses and in areas that have been considered SB535 Disadvantaged Communities. The burden of increased costs due to implementing a wage floor and increased benefit costs, may cause some businesses to close or relocate off County-owned property. This could result in the unintended consequence of employees being laid off, which could potentially have a disproportionate impact on low income and/or black, indigenous people of color (BIPOC). However, if the businesses were able to pay the wage floor and associated benefits, this could increase the standard of living for those same low income or BIPOC employees meeting the intended purpose of the Ordinance in helping to adequately provide for themselves and families.
In preparing the recommendations before the Board, staff analyzed community input, practices of other municipalities, and the EAI Report to provide options for the Board’s consideration related to the implementation of a Working Families Ordinance.
FISCAL IMPACT
Funds for this request are partially included in the Fiscal Year 2021-22 Operational Plan in the Department of General Services (DGS), Department of Public Works (DPW), DPW Airport Enterprise Fund, and the Department of Parks and Recreation (DPR). If approved, this request will result in additional costs to implement as well as projected decreased revenue in the departments as noted below. The County’s costs are $2.0 million in projected revenue losses associated with expiring leases within the first two years of adoption and $0.4 million to implement the Ordinance; the total ongoing County costs are projected to be $2.4 million. The County’s projected revenue loss of $2.0 million is a part of the overall negative net economic impact of $22.6 million as described below in the Business Impact Statement. The projected revenue loss and economic impact are based on the EAI Report, which provides an analysis using certain assumptions; while these assumptions are reasonable, there is inherent uncertainty in forward-looking studies. The actual fiscal impact resulting from actions taken today will be based on actual conditions, which will differ to some degree from the assumptions used in the EAI Report.
The County of San Diego Impact of Working Families Ordinance report (EAI Report) also noted that new personnel and benefit requirements on County construction projects could potentially result in fewer bidders and increased bid prices. The EAI Report was unable, however, to quantify the potential effect.
Department of General Services
If approved, this request may result in projected decreased revenue associated with leases administered by DGS of $1.8 million. To mitigate these potential losses, DGS will track lease renewal trends on a quarterly basis for two years and propose a strategy to negate actual lease revenue shortfalls; this strategy will include identification of a funding source to replenish actual lost revenue due to adoption of the Ordinance. The funding source for additional costs in future fiscal years will be charges to client departments. There will be no change in net General Fund cost and no additional staff years.
Department of Public Works, Airport Enterprise Fund
If approved, this request may result in projected decreased revenue of $0.2 million. The DPW Airport Enterprise Fund anticipates being able to absorb this decrease. DPW Airports will track lease renewal trends on a quarterly basis for two years and propose a strategy to negate actual lease revenue shortfalls; this strategy will include identification of a funding source to replenish actual lost revenue due to adoption of the Ordinance. The funding source for the additional costs in future fiscal years will be included, pending identification, in future Operational Plans.
Department of Public Works, Road Fund
If approved, this request may result in Fiscal Year 2022-23 costs of $121,577 and 1.00 additional staff year to manage and monitor the Skilled and Trained Workforce requirements for the 12 to 18 new construction contracts valued over $1.0 million that DPW manages annually due to the adoption of the Ordinance. The monitoring of all contract requirements is a key responsibility for the departmental Contracting Officer Representative. The funding source for the additional costs in future fiscal years will be included, pending identification, in future Operational Plans.
Department of Parks and Recreation
If approved, this request may result in Fiscal Year 2022-23 costs of $121,577 and 1.00 additional staff year to manage and monitor the Skilled and Trained Workforce requirements for the 28 new construction contracts valued over $1.0 million that DPR manages annually due to the adoption of the Ordinance. The monitoring of all contract requirements is a key responsibility for the departmental Contracting Officer Representative. The funding source for the additional costs in future fiscal years will be included, pending identification, in future Operational Plans.
Overall, there will be no net change in General Fund cost and 2.00 additional staff years in future fiscal years.
BUSINESS IMPACT STATEMENT
The net economic impact described in the Consultant’s report is a negative $22.6 million by the end of 2022; it is comprised of three major components as outlined in Table 15 of Attachment A and as shown below: 1) revenue lost from expiring leases, 2) wages for employees relocated, and 3) wage increases on County property.
|
Regional Impact Category |
End of 2022 |
|
Revenue Lost from Expiring Leases |
($7.0 million) |
|
Wages for Employees Relocated |
($21.9 million) |
|
Wage Increases on County Property |
$6.3 million |
|
Net Regional Economic Impact |
($22.6 million) |
It is worthwhile to note that the anticipated revenue lost from expiring leases category includes both a business impact and a County impact. The County impact is noted above in the Fiscal Impact Statement. The business impact is on revenue projected to be received from subleases; the impact to ground lessees (agreements in which a tenant can develop a property during the lease period) and anticipated to be $5.0 million by the end of 2022. Recognizing that this ordinance may impact the value of County leaseholds, staff will consider any such impacts during rental rate negotiations and renegotiations.
Additional details of the anticipated net regional economic impact, its major components, and its impact on businesses are outlined in Attachment A, the EAI Report. This Report uses certain assumptions that have been deemed reasonable, although there are uncertainties inherent in forward-looking economic analyses. The actual impact to business and the regional economy of today’s recommendations, may differ from those in the EAI Report.
Details
ADVISORY BOARD STATEMENT
On September 15, 2021, the Gillespie Field Development Council recommended, by a vote of 4 Ayes, 0 Noes, and 0 Abstentions, with 1 absent and 0 vacant seats, that the Board of Supervisors oppose the proposed Working Families Ordinance as written.
On September 16, 2021, the Palomar Airport Advisory Committee recommended, by a vote of 9 Ayes, 0 Noes, and 0 Abstentions, with 0 absent and 0 vacant seats, to encourage the Board of Supervisors to not adopt the proposed Working Families Ordinance due to negative impacts on working families, local businesses, and loss of County revenue.
On January 19, 2022, the Gillespie Field Development Council recommended, by a vote of 5 Ayes, 0 Noes, and 0 Abstentions, with 0 absent and 0 vacant seats, that the Board of Supervisors table the Working Families Ordinance pending direct discussions with the San Diego County Leaseholders Association.
BACKGROUND
On July 13, 2021 (21), the Board of Supervisors (Board) directed the Chief Administrative Officer (CAO) to return with a draft Working Families Ordinance and the impact of implementing such ordinance on County construction projects and County-owned leased property for consideration. In addition, the Board directed the CAO return with a prequalification policy and proposed amendments to existing policies to require prospective bidders and proposers on public works projects to prequalify prior to submitting a bid or proposal. Lastly, the Board directed the CAO update relevant contracting and leasing processes and templates for County construction projects and County-owned leased property to implement the intent of the Working Families Ordinance through binding contractual obligations with counterparties.
On October 5, 2021 (24), the Board accepted a staff-developed report summarizing stakeholder feedback regarding potential impacts of the ordinance and directed the CAO to engage a consultant to develop a regional economic analysis and impact report and return to the Board in February 2022 with a draft ordinance for the Board’s consideration.
The County engaged a public finance consulting firm, DTA (Consultant), to prepare a regional economic analysis and impact report (EAI Report). The goal of the EAI Report was to evaluate the cost impact of the Working Families Ordinance (Ordinance) to County construction projects and employment wage standards for workers on County-owned leased property. The final report is attached to this Board Letter as Attachment A - County of San Diego Impact of Working Families Ordinance. The Consultant’s report was based on a review of literature on living wage policies implemented in other jurisdictions and a series of surveys distributed to the lessees on County-owned leased property administered by the Department of General Services (DGS) and the Department of Public Works/Airports (DPW/Airports), and contractors eligible to bid on County construction projects. The EAI Report includes wage categories and calculations, an overview of other ordinance requirements, case studies where living wage has been implemented, a living wage proposal within the case study area, economic impact evaluations, and potential impacts on contractors and lessees. The EAI Report concludes with attachments that detail the impact model and references used to create the EAI Report. The models and assumptions were based on (i) information provided to DTA by the County and information obtained from certain data sources, and (ii) information from a sample of contractors and businesses potentially impacted by the Ordinance (based on the surveys sent out by DTA and the County).
The proposed ordinances for Board consideration (Attachments B and C) are based on the July 2021 draft ordinance and reflect alignment with State of California law and employment standards found in cities and counties throughout California, stakeholder and staff recommendations, and consultant findings and recommendations. Both versions of the Ordinance would implement employment standards for County construction projects with County contracts valued over $1,000,000 and for lessees and sublessees on County-owned leased property. These standards include requiring contractors and subcontractors on County construction projects valued over $1,000,000 to utilize a skilled and trained workforce as defined in Public Contract Code 2601(d), requiring employees and contractors working on or from County-owned real property to be paid no less than a wage floor set by the County, requiring employees and contractors performing construction work on a project on County-owned property valued over $1,000,000 to be paid prevailing wages set by the California Department of Industrial Relations (DIR). It also requires accumulation of sick leave to match California State Law AB 152 for County construction contracts, and all employees and contractors working on or from County-owned leased property. The Ordinance in Recommendation 2a establishes a wage floor of $16.50 per hour with annual increases based on the Consumer Price Index. The wage floor would be based on the hourly rate calculated based on an employee’s or contractor’s total compensation. The option 2b version of the Ordinance does not establish a wage floor, but instead refers to a wage floor established separately by the Board.
County staff recommend additional exemptions be included in the Ordinance that align with other jurisdictions. These exemptions include other government agencies or public utilities, employees or contractors providing services ancillary to business purposes and working on County-owned property for an average of fewer than eight hours per week in the prior twelve months, tax exempt organizations under section 501(c)(3) of the Internal Revenue Code, and any firms (parent and subsidiary entities included) with 20 or fewer employees. Additionally, County staff recommend that exemptions will need to be made for those new leases or contracts with a federally certified Disadvantaged Business Enterprise/Airport Concession Disadvantaged Business Enterprises, and when a collective bargaining agreement is in effect. These additional exemptions will ensure that the County remains committed to the strategic initiatives within the 2022-2027 Strategic Plan.
If the Board selects Recommendation 2a or 2b, the proposed ordinance would become effective thirty (30) days after adoption by the Board at the second hearing. Once adopted, several Board of Supervisors policies may need to be updated during policy sunset review. These include A-81 (Procurement of Contract Services), A-87 (Competitive Procurement), B-29 (Fees, Grants, Revenue Contracts - Department Responsibility for Cost Recovery), F-47 (Procuring Professional Services to Assist with County Acquisition and Leasing of Real Property) and F-51 (County Real Property Asset Management).
Staff has also drafted amendments to Board of Supervisors Policy F-41 (Public Works Construction Projects) in response to the Board’s direction to return with a prequalification policy to require prospective bidders and proposers on public works projects to prequalify prior to submitting a bid or proposal. Staff recommends that the prequalification requirements only apply to low bid procurements and not to best value procurements because best value procurements already provide for the evaluation and scoring of a proposer’s qualifications and the statutory authority for some best value procurements (such as design-build) prescribes a more specific qualifications procedure. Staff is also recommending that the County’s prequalification questionnaire(s) be modeled after DIR’s “Labor Commissioner’s Model Questionnaire dated March 2019,” or any successor, but that changes to these forms be permitted with the approval of County Counsel and the Director, Department of Purchasing and Contracting. Finally, staff recommends that the prequalification requirements not take effect until July 1, 2022, to allow staff time to prepare the questionnaires, modify procurement templates, and implement the new policy.
Today’s recommendations are that the Board of Supervisors accept the regional economic analysis and impact report developed by a consultant (Attachment A) that summarizes potential impacts of approving the ordinance, consider approving the introduction of a Working Families Ordinance (Attachment B & C), and adopt the bid prequalification policy (Attachment D & E). If the Board takes action as recommended in Recommendations 2a or 2b on February 8, 2022, the Board is requested to approve the ordinance on March 1, 2022.
LINKAGE TO THE COUNTY OF SAN DIEGO STRATEGIC PLAN
Today’s proposed actions to accept the Regional Economic Analysis and Impact Report, adopt the Working Families Ordinance and adopt the bid prequalification policy supports the Sustainability and Equity Strategic Initiatives in the County of San Diego’s 2022-2027 Strategic Plan by creating policies to reduce and eliminate poverty, promoting economic sustainability for all and advancing opportunities for economic growth and development to all individuals and the community.
Respectfully submitted,
HELEN N. ROBBINS-MEYER
Chief Administrative Officer
ATTACHMENT(S)
Note: Due to the size of the attachments, the documents are available online through the Clerk of the Board’s website at www.sandiegocounty.gov/content/sdc/cob/bosa.html <http://www.sandiegocounty.gov/content/sdc/cob/bosa.html>.
Attachment A - County of San Diego Impact of Working Families Ordinance (EAI Report)
Attachment B - AN ORDINANCE AMENDING THE COUNTY CODE OF ADMINISTRATIVE ORDINANCES RELATING TO EMPLOYMENT ON COUNTY CONSTRUCTION PROJECTS AND PROPERTY AND ESTABLISHING A WAGE FLOOR
Attachment C - AN ORDINANCE AMENDING THE COUNTY CODE OF ADMINISTRATIVE ORDINANCES RELATING TO EMPLOYMENT ON COUNTY CONSTRUCTION PROJECTS AND PROPERTY
Attachment D - Amendments to Board Policy F-41 (Clean)
Attachment E - Amendments to Board Policy F-41 (Informational)