HomeMy WebLinkAboutAgenda Report - June 1, 2011 C-15AGENDA ITEM CW%45
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AGENDA TITLE: Receive Report Regarding League of California Cities Communications Pertaining
to Senate Bill 474
MEETING DATE: June 12011
PREPARED BY: City Clerk
RECOMMENDED ACTION: Receive report regarding League of California Cities (League)
communications pertaining to Senate Bill 474.
BACKGROUND INFORMATION: The City received a request for communication from the League on
May 16, 2011 pertaining to SB 474. A letter of opposition to SB 474,
signed by the Mayor, was needed immediately as the bill was
being heard in the State Legislature that week.
As you may be aware, SB 474 (Evans) would provide, for certain construction contracts, that provisions
in a contract purporting to indemnify, hold harmless, or defend another person against actual or claimed
liability or damage, from the negligence, willful misconduct, defective design, violation of law, or other
fault of that person or that person's agents, employees, independent contractors, subcontractors, or
representatives is against public policy and is void and unenforceable. These provisions are standard in
various municipal contracts. In addition, the bill would require that California law be applied to these
contracts regardless of any choice -of -law rules and would provide that waiver of these provisions is
contrary to public policy, void, and unenforceable. For these reasons, the League is adamantly opposing
the bill.
The letter was sent as requested on May 18, 2011 and this report is provided for informational purposes
only.
FISCAL IMPACT: None.
FUNDING AVAILABLE: Not applicable.
R
City Clerk
APPROVED: I'
Bartlam, City Manager
CITY COUNCIL
BOB JOHNSON, Mayor CITY OF L O D I
JOANNE MOUNCE,
Mayor Pro Tempore CITY HALL, 221 WEST PINE STREET
LARRY D. HANSEN P.O. BOX 3006
PHIL KATZAKIAN LODI, CALIFORNIA 95241-1910
ALAN NAKANISHI (209) 333-6702 / FAX (209) 333-6807
www.lodi.gov citvclerkaalodi.gov
May 18,2011
Senator Tom Berryhill
California State Senate
State Capitol Building, Room 3076
Sacramento, California 95814
Via Facsimile: (916) 327-3523
KONRADT BARTLAM,
City Manager
RANDI JOHL, City Clerk
D. STEPHEN SCHWABAUER
City Attorney
SUBJECT: SB 474 (Evans). Commercial Construction Contracts: Indemnity
(As Amended May 2,2 011) —Notice of Opposition
Dear Senator Berryhill:
The City of Lodi opposes the current version of Senate Bill (SB) 474, which would prohibit
indemnification provisions in contracts between cities and contractors. This will limit a city's ability
to negotiate contract terms and ultimately result in increased costs to the public. We understand
that Senator Evans has committed to amending SB 474 so that it does not impact the public
agencies. We encourage you to vote no on the bill if it is taken up on the Senate floor before such
amendments are made.
California public agencies face substantial challenges in the efforts to maintain and expand
infrastructure. In order to develop infrastructure projects, public agencies enter into written
contracts that establish the scope of the project and allocate the risks associated with the particular
projectthrough some type cf indemnity or "hold harmless" provision.
The nature, scope and magnitude of risks are unique to each project. The parties who are in the
optimal position to fairly allocate the unique risks of a particular infrastructure project are the public
agency and the contractors with which it negotiates. These parties know the site conditions, project
specifics, schedule, and capabilities and capacities of each party to effectively manage the project.
SB 474, as currently written, would be detrimental to the City of Lodi because in the typical lawsuit,
it will result in refusal by the contractor or its insurance carrier to provide a legal defense for the
public agency prior to a full trial. The net effect would be to shift to taxpayers legal defense costs
that should be borne to varying degrees by contractors and their insurance carriers. The
negotiation of terms between public agencies and contractors should be left to the free -play of
market forces. SB 474 would preclude negotiation of broader protection, even where the public
agency is willing to pay extra for such protection.
For these reasons, the City of Lodi opposes SB 474.
Sincer
BobJoh
Mayor t.
C: Senator Noreen Evans (916-323-6958)
Tara Welch, Consultant, Senate Judiciary Committee (916-445-8390)
Jennifer Whiting, Legislative Representative, League of California Cities (916-658-8240)