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Bill Threatening Local Contracting Authority Awaits Action on the Assembly Floor

May 24, 2013
The League has been lobbying members of the Legislature to vote no on AB 1333 (Hernández).
This bill threatens decades of longstanding authority entrusted to local governments to contract for services by imposing unnecessary and unreasonable requirements. It is now ready to be taken up by the full Assembly after passing out of the Assembly Local Government Committee on May 8. Assembly Member Marc Levine (D-San Rafael) was the sole Democrat on the committee to vote no. Also voting no were Assembly Member and Chair Katcho Achdadian (R-San Luis Obispo) and Assembly Member Melissa Melendez (R-Lake Elsinore).

Specifically, AB 1333 requires local governments to review contracts with a total value of $250,000 or more that have an automatic renewal clause, also referred to as an “evergreen” clause. Local agencies must then make findings about whether the contract meets the needs of the agency, whether the service provider is paying prevailing wage and will retain employees of a prior contractor for 90 days.
According to the Assembly Member Roger Hernández (D-West Covina), AB 1333 “simply provides elected officials, charged with the duty to oversee the fiscal well-being of a city or county, with an opportunity to … review the terms of an evergreen contract, as well as the level of service provided and employer-employee relations of the contractor.”
The American Federation of State, County and Municipal Employees (AFSME) supports AB 1333, arguing that automatic renewal clauses "do not always serve the best interests of the people of a city, county, or district, especially when the private party does not pay their employees adequately."
AB 1333 is based on the false premise that local governments do not review their service contracts and that state intervention is needed because locals are incapable of managing their own affairs. The League is particularly concerned about the effect on local government contracting for solid waste and recycling.
Current law was written to give local government broad discretion in this area and for good reason. Cities have ever increasing waste diversion goals that require a great degree of flexibility to reach them. The statute states: “the provisions in existing law that confer broad discretion on local agencies to determine aspects of solid waste handling that are of local concern have significantly contributed to the statewide diversion rate exceeding 50 percent, and further progress toward decreasing solid waste disposal requires that this essential element of local control be preserved.”
AB 1333 assumes contracts are not reviewed. This is simply untrue. An annual rate review is the standard practice at the local level and often precipitates a review of the service provider. Local governments strive to provide their residents with the best services at the most reasonable cost. City councils have to answer to residents who are displeased with the quality and cost of their services and existing law already outlines a framework for ensuring service levels are met by the service provider. Contracts can be revisited at any time and can be revoked if problems arise and are not addressed.  
Additionally, lending institutions have indicated that this bill inserts uncertainty into waste hauling service contracts and as a result puts short-term low-rate financing in jeopardy. Without reasonable financing from lending institutions, waste haulers will be unable to build out needed infrastructure in order to meet increasing diversion requirements and recycling goals.
The Legislature strongly encourages the solid waste enterprise. The statute declares that “it is in the public’s best interest to foster and encourage solid waste enterprise so that, at all times, there will continue to be competent enterprises willing and financially able to furnish the needed solid waste handling services.” AB 1333 directly conflicts with this goal by imposing onerous standard and creating a negative perception of solid waste franchises.
The Legislature has historically recognized the importance of local government contracting authority and the need to foster solid waste enterprise. This bill unnecessarily impends on that very important local affair.

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