Charter cities are organized under and governed by a charter adopted by local voters rather than the general laws of the State. By way of their local charter, charter cities may adopt their own procedures for matters that are considered “municipal affairs.” Charter cities’ ability to regulate their own municipal affairs is frequently referred to as their “home rule” authority.
One of the advantages of being a charter city is the ability to proscribe their own public bidding requirements for local public works projects. While general law cities must abide by the general laws of the State governing local public works projects, which include requiring contractors to pay prevailing wage, charter cities may follow the procedures set forth in their charter. The California Supreme Court confirmed this in the 2012 case of State Building and Construction Trades Council of California v. City of Vista. In the Vista decision, the Supreme Court ruled in favor of the City of Vista, a charter city. The Court concluded that no statewide concern was presented that would justify the State’s regulation of the wages that charter cities require their contractors to pay to workers hired to construct locally funded public works projects. The ability of charter cities to avoid paying prevailing wages on projects funded entirely with municipal funds greatly reduces construction costs.
In reaction to the Vista decision, in 2013, the California Legislature devised a new way to require charter cities to pay prevailing wages for local projects. The Legislature adopted Senate Bill 7 (“SB 7”). SB 7 punishes charter cities that do not require prevailing wages to be paid on all public works projects. Commencing January 1, 2015, charter cities will no longer be eligible for State funding for public works projects available to other cities unless the charter city adopts requirements that prevailing wages be paid on all public works projects whether or not the project is being financed with state funding.
In response to SB 7, six charter cities (El Centro, Carlsbad, El Cajon, Fresno, Oceanside and Vista) filed a lawsuit in February of this year in the San Diego Superior Court against the State, challenging SB 7. The challenge is based in part on the Vista Court’s decision that prevailing wages are not a matter of statewide concern and previous court decisions prohibiting the Legislature from limiting municipal authority where it is constitutionally protected.
Undoubtedly, charter cities will be keeping a close watch on the lawsuit against the State, which will likely have greater implications on charter cities than simply prohibiting them from receiving State funding for local construction projects. The case may also provide guidance as to the State’s ability to withhold other forms of funding based on the proper exercise by charter cities of their home rule authority.
San Luis Obispo is the only charter city in San Luis Obispo County. However, many cities, including Arroyo Grande and Grover Beach are considering adopting their own charters in order to have more control over their municipal affairs.
Heather Whitham is a partner at Carmel & Naccasha, LLP. Heather’s practice focuses on representing municipal clients. Heather is a Deputy City Attorney for the City of Arroyo Grande. Heather can be reached at firstname.lastname@example.org or 805-546-8785.