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Agenda Report - May 17, 2017 C-14
TM CITY OF LODI COUNCIL COMMUNICATION AGENDA ITEM C-/4 AGENDA TITLE: Receive Report Regarding Communication Pertaining to AB 1250 (Jones -Sawyer) — Counties and Cities: Contracts for Personal Services MEETING DATE: May 17, 2017 PREPARED BY: City Clerk RECOMMENDED ACTION: Receive report regarding communication pertaining to AB 1250 (Jones -Sawyer) — Counties and Cities: Contracts for Personal Services. BACKGROUND INFORMATION: The City received a request for communication from the League of California Cities regarding AB 1250 (Jones -Sawyer) — Counties and Cities: Contracts for Personal Services. There was a need to send a letter of opposition immediately in light of a pending hearing. AB 1250 would place substantial burdens on local agencies by adding onerous, over prescriptive, and unnecessary requirements that impede on local control and have significant impacts on local governance. Specifically, AB 1250: • Creates significant cost and workload requirements by eliminating local agency hiring discretion in limiting a local agencies' ability to utilize a contract for the sole purpose of cost savings through salaries and benefits; • Creates a series of new and burdensome reporting requirements prior to entering or renewing a contract by requiring a city to perform a full economic analysis of the potential impacts of outsourcing, including the impact on local businesses if consumer spending power is reduced; and • Increases litigation to local agencies by applying joint and several liability for employment law violations arising from performance of the contractor, as well as torts committed by the contractor or any of its subcontractors in the course of providing services under the contract. The attached letter, electronically signed by the Mayor, was sent out on April 27, 2017. A copy of the initial request, along with the text of the bill, is also attached. This report is provided for informational purposes only, pursuant to policy. FISCAL IMPACT: FUNDING AVAILABLE: Not applicable. Not applicable. _AA 111Tuvvikea. nifer M. erraiolo ity Clerk APPROVED: �Zt, City Manager N:Administration\CLERK\Council\COUNCOM\LeagueReceiveReportMaster.doc CITY COUNCIL DOUG KUEHNE, Mayor ALAN NAKANISHI, Mayor Pro Tempore MARK CHANDLER BOB JOHNSON JOANNE MOUNCE CITY OF LODI CITY HALL, 221 WEST PINE STREET P.O. BOX 3006 LODI, CALIFORNIA 95241-1910 (209) 333-6702 / FAX (209) 333-6807 www.lodi.gov cityclerk©Iodi.gov April 27, 2017 The Honorable Reginald Jones -Sawyer, Sr. California State Assembly State Capitol Building, Room 2117 Sacramento, CA 95814 VIA FAX: 916-319-2159 STEPHEN SCHWABAUER City Manager JENNIFER M. FERRAIOLO City Clerk JANICE D. MAGDICH City Attorney RE: AB 1250 (Jones -Sawyer) — Counties and Cities: Contracts for Personal Services Notice of Opposition (as amended 04/07/17) Dear Assembly Member Jones -Sawyer: The City of Lodi respectfully opposes your Assembly Bill (AB) 1250, which effectively eliminates almost all contracting services for cities and counties. Local governments have a long history of addressing service delivery challenges with creativity, self-reliance, and innovation. Unique local challenges and limited budgets continue to fuel innovative efforts to obtain expertise and provide high-quality services. City employees provide many services, while others such as refuse collection and specialized services are provided on a contract basis. Law enforcement services may also be provided via contract with the sheriff and fire and park services by a special district. As amended, AB 1250 places substantial burdens on local agencies by adding onerous, over prescriptive, and unnecessary requirements that impede on local control and have significant impacts on local governance. Specifically AB 1250: Creates Significant Cost and Workload Requirements: AB 1250 eliminates local agency hiring discretion by limiting a local agencies' ability to utilize a contract for the sole purpose of cost savings through salaries and benefits. This creates a significant hurdle as many local agencies continue to struggle financially and have not achieved the same level of economic prosperity compared to pre -2008 recession levels. Unemployment rates remain high in certain areas, agencies are at a near breaking point on their unfunded actuarial liability (UAL), and normal pension costs and some communities remain in significant financial difficulty. Moreover, AB 1250 requires that the agency provide an orientation to contracted employees. Last year, AB 2835 (Cooper), which mandated that public employers must provide an orientation to their own employees, was tagged at $350 million in ongoing costs by the California department of Finance. Having a local agency provide an additional orientation to non -city employees create significant cost and logistical concerns. Additionally, there are real and significant privacy concerns about posting full names, job titles and salaries of non -city employees. AB 1250 would require a city to create a new, fully searchable database that must be posted on the city website, which will include substantive and sensitive information including the names, job titles, salary of each contracted employee (and subcontractors), services of the contract, and the name of the agency department or division of the city who manages the contract. Creates a Series of New and Burdensome Reporting Requirements Prior to Entering or Renewing a Contract: AB 1250 would require a city, before entering a contract or renewing a contract, to perform a full economic analysis of the potential impacts of outsourcing, including the impact on local businesses if consumer spending power is reduced (among other factors). AB 1250 mandates a city to conduct a full environmental impact analysis caused by contracting for the services. Further, the measure forces a city to conduct an annual audit of each contract and prohibits a city from renewing or granting a new contract before the report is released and considered by the council. Increased Litigation to Local Agencies: AB 1250 applies joint and several liability for employment law violations arising from performance of the contractor, as well as torts committed by the contractor or any of its subcontractors in the course of providing services under the contract, which would place overly restrictive requirements on cities and potentially open that agency up to litigation. Cities continue to face difficult budget conditions, which have been compounded by recent state takeaways including the loss of redevelopment and expanding pension and retiree health care obligations. This measure compounds existing constitutional limitations on local agencies to raise additional revenue. Thus, local agencies are in no position to have their flexibility further curtailed. The workload, privacy concerns, costs, and litigation created by this measure places an overwhelming and significant burden on nearly every city department and would create a de facto ban on virtually all contracting services. For these reasons City of Lodi opposes Assembly Bill 1250. Sincerely, Doug �uel2He Doug Kuehne Mayor, City of Lodi cc: Senator Cathleen Galgiani, Fax: (916) 651-4905 Assemblymember Jim Cooper, Fax: (916) 319-2109 Michael Bolden, Chief Consultant, Assembly Committee Public Employees, Retirement, and Social Security, michael.bolden@asm.ca.gov Joshua White, Consultant, Assembly Republican Caucus, joshua.whiteasm.ca.qov Camille Wagner, Legislative Secretary, Office of Governor Edmund G. Brown Jr., camille.wagner@gov.ca.gov Stephen Qualls, League of California Cities, squalls@cacities.org Meg Desmond, League of California Cities, mdesmond@cacities.org Jennifer Ferraiolo From: Steve Schwabauer Sent: Tuesday, April 25, 2017 10:23 AM To: squalls@cacities.org; dhutchings@cacities.org Cc: JoAnne Mounce - External; ccoleman@cacities.org; Jennifer Ferraiolo; Janice Magdich Subject: FW: AB 1250 (RJS) Possible Amends Attachments: image001.png; AB 1250 April 20 Draft Amendments.docx Stephen: I am glad to see the League took an oppose position to this bill. The revisions do not remove my concerns. It is a complete disaster for cities and could not come at a worse time. This bill ostensibly allows cities to contract out services but sets the conditions so high that it effectively bans it. In order to qualify a city must show that all of its employees remain employed and that the contract employees make roughly the same salary as the city employees. It then compels economic and environmental analysis. I struggle to imagine how a city could ever show cost savings if the contract workers employment costs must be similarly paid to direct employees and if the employees that used to perform the service must continue to be employed by the city. Even more devastating is the timing of this legislation. Cities are facing crushing burdens from CalPers. Lodi's story is no secret. Our $47.5 million general fund faces a PERS increase from $6 million/year to over $13 million/year over the next five years. Our only option to meet this increase is to reduce costs for other services. With the majority of costs concentrated in employees, some of the necessary savings will have to come in the form of work force reductions. This bill effectively forecloses cities any opportunity to continue to provide services on a contract basis at a lower cost. For example, if a city concluded that it could maintain its parks cheaper with a lower paid contract landscape workers, it could not. Leaving the City no option but to shutter its parks to save the costs necessary to meet the PERS bill. Cities are on fire and the only thing the Legislature can seem to do is close and lock the doors. I have not seen an opposition letter come through on this one though I may have missed it. IF there is one, could I please get a copy. Steve Schwabauer Lodi City Manager Original Message From: Stephen R. Qualls [mailto:squalls@cacities.org] Sent: Monday, April 24, 2017 1:00 PM Subject: Fw: AB 1250 (RJS) Possible Amends For those of you who are familiar with AB 1250. We were able to stop it in committee last week but it was granted reconsideration. The League is concerned about the amendments that were made and have asked for cities to have their attorneys review the amendments (which are attached) and reply by tomorrow morning. If you could please assist us and respond in time, I'd appreciate it. Thank you, Stephen Qualls Central Valley Regional Public Affairs Manager League of California Cities 209-614-0118 Fax 209-883-0653 1 squalls@cacities.org<mailto:squalls@cacities.org> [Description: Description: LCC_Logo_SM] [https://mail.cacities.org/owa/attachment.ashx?id=RgAAAACy8fHTR2LKSbH7v1WA%2bKroBwCJ I FBQxE1YR5pVkCgOVZ7 pAAAGc5DHAACi1U1kD4vzS51QTLjAf8aNAAAyvLINAAAJ&attcnt=1&attid0=BAABAAAA&attcid0=image002.png%4001CF9 F55.154BCF00] Strengthening California Cities through Advocacy and Education To expand and protect local control for cities through education and advocacy in order to enhance the quality of life for all Californians. <https://mail.cacities.org/owa/redir.aspx?C=9balcebeda914a8d8b298c0154b06ac0&URL=http%3a%2f%2fwww.cacities .org%2fAC> PLEASE DO NOT distribute political campaign advocacy information from public (city hall) computers, on city time, or using public resources, even if it's from your personal email account. If in doubt, check with your city attorney.?? ***Disclaimer***Please Note: Please take the following precautions if this email is about a CITIPAC event. Though it is not illegal for you to receive this notice via a city e-mail address, you should not respond to it or forward it using public resources. You may however forward this message to your non-public e-mail account for distribution on non-public time. If you have questions about the event or need additional information, please contact Mike Egan at (916) 658-8271 or egan@cacities.org From: Dane Hutchings Sent: Monday, April 24, 2017 12:00 PM To: #Regional Reps Cc: Nicholas Romo Subject: AB 1250 (RJS) Possible Amends Reps, I know the timing on this is tight, but I am very much hoping I can get your/ city attorneys feedback by EOD or by 11:OOam tomorrow. I have a meeting with the opposition again at 1:30 tomorrow and need to be prepared. Here are the issues that I have still identified. The term "Currently and customarily": Still is very broad and contract cities will still be liable virtually all services. Orientations for non -municipal employees * The database. The amends lift the threshold from $100,000 to 5 million but we still have to list every employees name and salary There is significant ambiguity to what a "cost benefit analysis is" * The entire first section of the bill Section 1 (Lower third of page 2 through page 4). Proponents say that's all existing law for state contracts. But The initial feedback I received was these requirements would be incredibly problematic. 2 At the EOD the proponents are saying that this is a priority and that they will be pushing "something"... It's my hope that if we simply can't get there that I can let the opposition know by tomorrow and then begin activating our folks on a full oppose strategy. If you can send to me and Nick that would help me organize all of the comments -so nothing falls through the cracks. Thanks all. DH Dane Hutchings?Legislative Representative Governance, Transparency, Labor Relations [cid:image002.png@01D14877.8D353E80] 1400 K Street Sacramento, CA 95814 0:916-658-8200 C:916-230-6935 F:916-658-8240 E:Dhutchings@cacities.org 3 AMENDED IN ASSEMBLY APRIL 17, 2017 AMENDED IN ASSEMBLY APRIL 4, 2017 California legislature -2017-18 regular session ASSEMBLY BILL No. 1250 Introduced by Assembly Member Jones -Sawyer February 17, 2017 An act to add Sections 31000.10, 31000.11, 37103.1, and 37103.2 to the Government Code, relating to local government. legislative counsel's digest AB 1250, as amended, Jones -Sawyer. Counties and cities: contracts for personal services. Existing law authorizes the board of supervisors of a county to contract for special services on behalf of various public entities with persons who are specially trained, experienced, expert, and competent to perform the special services, as prescribed. These services include financial, economic, accounting, engineering, legal, and other specified services. Existing law also authorizes legislative bodies of cities to contract with any specially trained and experienced person, firm, or corporation for special services and advice in financial, economic, accounting, engineering, legal, or administrative matters. This bill would establish specific standards for the use of personal services contracts by counties and cities. Beginning January 1, 2018, the bill would allow a county or county agency, or a city, city or city agency, to contract for personal services currently or customarily performed by county employees, as applicable, when specified conditions are met. Among other things, the bill would require the county or city to clearly demonstrate that the proposed contract will 97 AB 1250 —2— result 2— result in actual overall costs savings to the county or city and also to show that the contract does not cause the displacement of county or city workers. The bill would require a contract entered into under these provisions to specify that it may be terminated upon material breach, if notice is provided, as specified. Additionally, the bill would require the county or city to provide an orientation to employees of the contractor who would perform services pursuant to the contract, and would establish liability provisions for employment law violations and torts committed in the course of providing services under contract, among other conditions. The bill would impose additional disclosure requirements for contracts exceeding $100,000 annually, would exempt certain types of contracts from its provisions, and would require each county or city to maintain on its Internet Web site a searchable database of all of its contracts exceeding $100,000. By placing new duties on local government agencies, the bill would impose a state -mandated local program. The bill also would provide that its provisions are severable. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above. Vote: majority. Appropriation: no. Fiscal committee: yes. State -mandated local program: yes. The people of the State of California do enact as follows: 1 SECTION 1. Section 31000.10 is added to the Government 2 Code, to read: 3 31000.10. The purpose of this section and Section 31000.11 4 is to establish standards for the use of personal services contracts 5 by counties. 6 (a) If otherwise permitted by law, a county or county agency 7 may contract for personal services currently or customarily 8 performed by county employees when all the following conditions 9 are met: 10 (1) The board of supervisors or county agency clearly 11 demonstrates that the proposed contract will result in actual overall 97 — 3 — AB 1250 1 cost savings to the county for the duration of the entire contract 2 as compared with the county's actual costs of providing the same 3 services, provided that: 4 (A) In comparing costs, there shall be included the county's 5 additional cost of providing the same service as proposed by a 6 contractor. These additional costs shall include the salaries and 7 benefits of additional staff that would be needed and the cost of 8 additional space, equipment, and materials needed to perform the 9 function. 10 (B) In comparing costs, there shall not be included the county's 11 indirect overhead costs unless these costs can be attributed solely 12 to the function in question and would not exist if that function was 13 not performed in county service. Indirect overhead costs shall 14 mean the pro rata share of existing administrative salaries and 15 benefits, rent, equipment costs, utilities, and materials. 16 (C) In comparing costs, there shall be included in the cost of a 17 contractor providing a service any continuing county costs that 18 would be directly associated with the contracted function. These 19 continuing county costs shall include, but not be limited to, those 20 for inspection, supervision, and monitoring. 21 (2) Proposals to contract out work shall not be approved solely 22 on the basis that savings will result from lower contractor pay rates 23 or benefits. Proposals to contract out work shall be eligible for 24 approval if the contractor's wages are at the industry's level and 25 do not significantly undercut county pay rates. 26 (3) The contract does not cause the displacement of county 27 employees. "Displacement" includes layoff, demotion, involuntary 28 transfer to a new class, involuntary transfer to a new location 29 requiring a change of residence, and time base reductions. 30 "Displacement" does not include changes in shifts or days off or 31 reassignment to other positions within the same class and general 32 location. 33 (4) The contract does not cause vacant positions in county 34 employment to remain unfilled. 35 (5) The contract does not adversely affect the county's 36 affirmative action efforts. 37 (6) The savings shall be large enough to ensure that they will 38 not be eliminated by private sector and county cost fluctuations 39 that could normally be expected during the contracting period. 97 AB 1250 — 4 — 1 (7) The amount of savings clearly justifies the size and duration 2 of the contracting agreement. 3 (8) The contract is awarded through a publicized, competitive 4 bidding process. The county shall reserve the right to reject any 5 and all bids or proposals. 6 (9) The contract includes specific provisions pertaining to the 7 qualifications of the staff that will perform the work under the 8 contract, as well as assurance that the contractor's hiring practices 9 meet applicable nondiscrimination, affirmative action standards. 10 (10) The potential for future economic risk to the county from 11 potential contractor rate increases is minimal. 12 (11) The contract is with a firm. "Firm" means a corporation, 13 partnership, nonprofit organization, or sole proprietorship. 14 (12) The potential economic advantage of contracting is not 15 outweighed by the public's interest in having a particular function 16 performed directly by county government. Before executing a 17 contract for personal services under this section, the county shall 18 demonstrate that outsourcing the particular functions at issue is in 19 the public interest, addressing the cost of the contract, the cost of 20 administering the contract, the effect on the quality of services 21 provided to the public, and any other relevant circumstances. 22 (13) The contract shall provide that it may be terminated at any 23 time by the county without penalty if there is a material breach of 24 the contract and notice is provided at least 30 days before 25 termination. 26 (14) The county shall provide an orientation to employees of 27 the contractor who will perform services pursuant to the contract. 28 The orientation shall include, but is not limited to, all of the 29 following: 30 (A) A description of the services to be provided pursuant to the 31 contract. 32 (B) A description of the function and goals of the public agency 33 responsible for providing the services in the absence of the contract. 34 (C) Any applicable rules governing provision of the services 35 and how the employee may report violations of applicable rules 36 or contractual requirements. 37 (15) The county shall be jointly and severally liable with the 38 contractor and any of its subcontractors for: 97 — 5 — AB 1250 1 (A) Employment law violations arising from performance of 2 the contract, unless otherwise provided by a bona fide collective 3 bargaining agreement covering the affected employees. /I (B) Torts committed by the contractor or its subcontractors in 5 the course of providing services under the contract. 6 (16) If the contract is for personal services in excess of one 7 hundred thousand dollars ($100,000) annually, all of the following 8 shall occur: 9 (A) The county shall require the contractor to disclose all of the 10 following information as part of its bid, application, or answer to 11 a request for proposal: 12 (i) A description of all charges, claims, or complaints filed 13 against the contractor with any federal, state, or local administrative 14 agency during the prior 10 years. 15 (ii) A description of all civil complaints filed against the 16 contractor in any state or federal court during the prior 10 years. 17 (iii) A description of all state or federal criminal complaints or 18 indictments filed against the contractor, or any of its officers, 19 directors, or managers, at any time. 20 (iv) A description of any debarments of the contractor by any 21 public agency or licensing body at any time. 22 (v) The total compensation, including salaries and benefits, the 23 contractor provides to workers performing work similar to that to 24 be provided under the contract. 25 (vi) The total compensation, including salaries, benefits, options, 26 and any other form of compensation, provided to the five highest 27 compensated officers, directors, executives, or employees of the 28 contractor. 29 (vii) Any other information the county deems necessary to 30 ensure compliance with this section. 31 (B) Prior to entering into the contract, the county shall conduct, 32 and make public, a cost benefit analysis considering study of the potential impact of outsourcing the work covered by the contract, the analysis shall include: including, but not limited te: 34 (i) The potential loss of employment opportunities within the 35 county and resultant loss of income to workers. 36 (ii) The economic impact on local businesses if consumer 37 spending power is reduced as a result of reduced wages under the 38 contract. 97 AB 1250 —6- 1 6- 1 (iii) The impact on the county's ability to provide social services 2 and the effect of any reduction in social services on county 3 residents. 4 (iv) Potential impacts on the environment, if any.Any- environmental impact causcd by contracting for the 5 services at issue. Prospective contractors shall reimburse the county for the cost of the economic benefit analysis. 6 (C) The contract shall provide that the county is entitled to 7 receive a copy of any records related to the contractor's or any 8 subcontractor's performance of the contract, and that any of those 9 records shall be subject to the California Public Records Act 10 (Chapter 3.5 (commencing with Section 6250) of Division 7 of 11 Title 1). In furtherance of this subdivision, contractors and any 12 subcontractors shall maintain records related to performance of 13 the contract that ordinarily would be maintained by the county in 14 performing the same functions. 15 (D) The county shall include in the contract specific, measurable 16 performance standards and provisions for a performance audit by 17 the county, or an independent auditor approved by the county, to 18 determine whether the performance standards are being met and 19 whether the contractor is in compliance with applicable laws and 20 regulations. The county shall not renew or extend the contract prior 21 to receiving and considering the audit report. 22 (E) The contract shall include provisions for an audit by the 23 county, or an independent auditor approved by the county, to 24 determine whether and to what extent the anticipated cost savings 25 have actually been realized. The county shall not renew or extend 26 the contract before receiving and considering the audit report. The contractor shall reimburse the county for the cost of the audit. 27 (b) This section does not preclude a county from adopting more 28 restrictive rules regarding the contracting of public services. 29 (c) When otherwise permitted by law, the absence of any 30 requirement of subdivision (a) shall not prevent personal services 31 contracting when any of the following conditions are met: 32 (1) The contract is for a new county function and the Legislature 33 has specifically mandated or authorized the performance of the 34 work by independent contractors. (2) The contract is between a county and other government entity for services to be performed by employees of the other government entity. 35 (2) The services contracted cannot be performed satisfactorily 36 by county employees, or are of such a highly specialized or 37 technical nature that the necessary expert knowledge, experience, 38 and ability are not available among county employees. 39 (3) The services are incidental to a contract for the purchase or 40 lease of real or personal property. Contracts under this criterion, 97 — 7 — AB 1250 1 known as "service agreements," shall include, but not be limited 2 to, agreements to service or maintain office equipment or 3 computers that are leased or rented. 4 (4) The legislative, administrative, or legal goals and purposes 5 cannot be accomplished through the utilization of county 6 employees. Contracts are permissible under this criterion to protect 7 against a conflict of interest or to ensure independent and unbiased 8 findings in cases where there is a clear need for a different, outside 9 perspective. These contracts shall include, but not be limited to, 10 obtaining expert witnesses in litigation. 11 (5) The nature of the work is such that the standards of this part 12 for emergency appointments apply. These contracts shall conform 13 with Section 31000.4. 14 (6) Public entities or officials need private counsel because a 15 conflict of interest on the part of the county counsel's office 16 prevents it from representing the public entity or official without 17 compromising its position. These contracts shall require the written 18 consent of the county counsel. 19 (7) The contractor will provide equipment, materials, facilities, 20 or support services that could not feasibly be provided by the 21 county in the location where the services are to be performed. 22 (8) The contractor will conduct training courses for which 23 appropriately qualified county employee instructors are not 24 available, provided that permanent instructor positions in academies 25 or similar settings shall be filled by county employees. 26 (9) The services are of such an urgent, temporary, or occasional 27 nature that the delay incumbent in their implementation by county 28 employees would frustrate their very purpose. 29 (d) All persons who provide services to a county under 30 conditions constituting an employment relationship shall -by be 31 employed directly by the county. 32 (e) (1) Except as provided in paragraph (2), this section shall 33 apply to all counties, including counties that have adopted a merit 34 or civil service system. 35 (2) This section does not apply to a charter county formed 36 pursuant to Section 3 of Article XI of the California Constitution. 37 (f) (1) This section does not apply to any contract for services 38 described in Section 4525 or 4529.10. 97 AB 1250 — 8 — 1 (2) This section does not apply to any contract that is subject 2 to Chapter 1 (commencing with Section 1720) of Part 7 of Division 3 2 of the Labor Code. 4 (3) This section does not apply to a contract for public transit 5 services, including paratransit services, if the county's transit 6 services are fully funded by Federal Transit Administration 7 assistance and the county is thereby subject to the guidelines 8 established in FTA Circular 4220.1F or any subsequent guidelines 9 or revisions issued by the Federal Transit Administration. 10 (g) This section shall apply to personal services contracts entered 11 into, renewed, or extended on or after January 1, 2018. 12 SEC. 2. Section 31000.11 is added to the Government Code, 13 to read: 14 31000.11. (a) Each county shall maintain on its Internet Web 15 site a searchable database of all contracts of an annual value in 16 excess of $5 million one hundred thousand dollars ($100,000) entered into 17 pursuant to Section 31000.10. The database shall include, but is 18 not limited to, the following: 19 (1) A description of the services provided under the contract. 20 (2) The name of the agency, department, or division responsible 21 for providing the service in the absence of the contract. 22 (3) The name of the contractor and any subcontractors providing 23 services under the contract. 24 (4) The effective and expiration dates of the contract. 25 (5) The annual amount paid pursuant to the contract to the 26 contractor in the past three fiscal years and the current fiscal year, 27 including the funding source for all amounts paid. 28 (6) The annual amount expected to be paid pursuant to the 29 contract to the contractor in the next three fiscal years. 30 (7) The total projected cost of the contract for all fiscal years 31 and the funding source for all amounts to be paid. 32 (8) The names of the employees of the contractor and any 33 subcontractors providing services pursuant to the contract and their 34 hourly pay rates, and the total number of full-time equivalent 35 positions involved in performing the services under the contract. 36 (9) The names of any workers providing services pursuant to 37 the contract as independent contractors and the compensation rates 38 for such workers. 39 (b) The information identified in subdivision (a) shall be 40 compiled in an annual service contractor expenditure budget 97 -9— AB 1250 1 accompanying the county budget, reflecting all spending on 2 personal services contracts by the county. 3 SEC. 3. Section 37103.1 is added to the Government Code, to 4 read: 5 37103.1. The purpose of this section and Section 37103.2 is 6 to establish standards for the use of personal services contracts by 7 cities. 8 (a) If otherwise permitted by law, a city or city agency may 9 contract for personal services currently or customarily performed 10 by city employees when all the following conditions are met: 11 (1) The city council or city agency clearly demonstrates that 12 the proposed contract will result in actual overall cost savings to 13 the city for the duration of the entire contract as compared with 14 the city's actual costs of providing the same services, provided 15 that: 16 (A) In comparing costs, there shall be included the city's 17 additional cost of providing the same service as proposed by a 18 contractor. These additional costs shall include the salaries and 19 benefits of additional staff that would be needed and the cost of 20 additional space, equipment, and materials needed to perform the 21 function. 22 (B) In comparing costs, there shall not be included the city's 23 indirect overhead costs unless these costs can be attributed solely 24 to the function in question and would not exist if that function was 25 not performed in city service. Indirect overhead costs shall mean 26 the pro rata share of existing administrative salaries and benefits, 27 rent, equipment costs, utilities, and materials. 28 (C) In comparing costs, there shall be included in the cost of a 29 contractor providing a service any continuing city costs that would 30 be directly associated with the contracted function. These 31 continuing city costs shall include, but not be limited to, those for 32 inspection, supervision, and monitoring. 33 (2) Proposals to contract out work shall not be approved solely 34 on the basis that savings will result from lower contractor pay rates 35 or benefits. Proposals to contract out work shall be eligible for 36 approval if the contractor's wages are at the industry's level and 37 do not significantly undercut city pay rates. 38 (3) The contract does not cause the displacement of city 39 employees. "Displacement" includes layoff, demotion, involuntary 40 transfer to a new class, involuntary transfer to a new location 97 AB 1250 —10 — 1 requiring a change of residence, and time base reductions. 2 "Displacement" does not include changes in shifts or days off or 3 reassignment to other positions within the same class and general 4 location. 5 (4) The contract does not cause vacant positions in city 6 employment to remain unfilled. 7 (5) The contract does not adversely affect the city's affirmative 8 action efforts. 9 (6) The savings shall be large enough to ensure that they will 10 not be eliminated by private sector and city cost fluctuations that 11 could normally be expected during the contracting period. 12 (7) The amount of savings clearly justifies the size and duration 13 of the contracting agreement. 14 (8) The contract is awarded through a publicized, competitive 15 bidding process. The city shall reserve the right to reject any and 16 all bids or proposals. 17 (9) The contract includes specific provisions pertaining to the 18 qualifications of the staff that will perform the work under the 19 contract, as well as assurance that the contractor's hiring practices 20 meet applicable nondiscrimination, affirmative action standards. 21 (10) The potential for future economic risk to the city from 22 potential contractor rate increases is minimal. 23 (11) The contract is with a firm. "Firm" means a corporation, 24 partnership, nonprofit organization, or sole proprietorship. 25 (12) The potential economic advantage of contracting is not 26 outweighed by the public's interest in having a particular function 27 performed directly by city government. Before executing a contract 28 for personal services under this section, the city shall demonstrate 29 that outsourcing the particular functions at issue is in the public 30 interest, addressing the cost of the contract, the cost of 31 administering the contract, the effect on the quality of services 32 provided to the public, and any other relevant circumstances. 33 (13) The contract shall provide that it may be terminated at any 34 time by the city without penalty if there is a material breach of the 35 contract and notice is provided at least 30 days before termination. 36 (14) The city shall provide an orientation to employees of the 37 contractor who will perform services pursuant to the contract. The 38 orientation shall include, but is not limited to, all of the following: 39 (A) A description of the services to be provided pursuant to the 40 contract. 97 -11— AB 1250 1 (B) A description of the function and goals of the public agency responsible for providing the services in the absence of the contract. (C) Any applicable rules governing provision of the services and how the employee may report violations of applicable rules or contractual requirements. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 contractor and any of its subcontractors for: (A) Employment law violations arising from performance of the contract, unless otherwise provided by a bona fide collective bargaining agreement covering the affected employees. (B) Torts committed by the contractor or any of its subcontractors in the course of providing services under the contract. (16) If the contract is for personal services in excess of one hundred thousand dollars ($100,000) annually, all of the following shall occur: (A) The city shall require the contractor to disclose all of the following information as part of its bid, application, or answer to a request for proposal: (i) A description of all charges, claims, or complaints filed against the contractor with any federal, state, or local administrative agency during the prior 10 years. (ii) A description of all civil complaints filed against the contractor in any state or federal court during the prior 10 years. (iii) A description of all state or federal criminal complaints or indictments filed against the contractor, or any of its officers, directors, or managers, at any time. (iv) A description of any debarments of the contractor by any public agency or licensing body at any time. (v) The total compensation, including salaries and benefits, the contractor provides to workers performing work similar to that to be provided under the contract. (vi) The total compensation, including salaries, benefits, options, and any other form of compensation, provided to five highest compensated officers, directors, executives, or employees of the contractor. (vii) Any other information the city deems necessary to ensure compliance with this section. 97 AB 1250 —12- 1 12- 1 (B) Prior to entering into the contract, the city shall conduct, 2 and make public, a cost benefit analysis considering stud y of the potential impact of outsourcing 3 the work covered by the contract, including, the analysis shall include: but not limited to: 4 (i) The potential loss of employment opportunities within the 5 city and resultant loss of income to workers. 6 (ii) The economic impact on local businesses if consumer 7 spending power is reduced as a result of reduced wages under the 8 contract. 9 (iii) The impact on the city's ability to provide social services 10 and the effect of any reduction in social services on city residents. 11 (iv) Potential impacts on the environment, if any.Any environmental impact causcd by contracting for the 12 services at issue. Prospective contractors shall reimburse the city for the cost of the economic benefit analysis. 13 (C) The contract shall provide that the city is entitled to receive 14 a copy of any records related to the contractor's or any 15 subcontractor's performance of the contract, and that any such 16 records shall be subject to the California Public Records Act 17 (Chapter 5 (commencing with Section 6250) of Division 7 of Title 18 1). In furtherance of this subdivision, contractors and any 19 subcontractors shall maintain records related to performance of 20 the contract that ordinarily would be maintained by the city in 21 performing the same functions. 22 (D) The city shall include in the contract specific, measurable 23 performance standards and provisions for a performance audit by 24 the city, or an independent auditor approved by the city, to 25 determine whether the performance standards are being met and 26 whether the contractor is in compliance with applicable laws and 27 regulations. The legislative body shall not renew or extend the 28 contract prior to receiving and considering the audit report. 29 (E) The contract shall include provisions for an audit by the 30 city, or an independent auditor approved by the city, to determine 31 whether and to what extent the anticipated cost savings have 32 actually been realized. The city shall not renew or extend the 33 contract before receiving and considering the audit report. The contractor shall reimburse the county for the cost of the audit. 34 (b) This section does not preclude a city from adopting more 35 restrictive rules regarding the contracting of public services. 36 (c) When otherwise permitted by law, the absence of any 37 requirement of subdivision (a) shall not prevent personal services 38 contracting when any of the following conditions are met: 97 -13 — AB 1250 1 (1) The contract is for a new city function and the Legislature 2 has specifically mandated or authorized the performance of the 3 work by independent contractors. (2) The contract is between a city and other government entity for services to be performed by employees of the other government entity. 4 (2) The services contracted cannot be performed satisfactorily 5 by city employees, or are of such a highly specialized or technical 6 nature that the necessary expert knowledge, experience, and ability 7 are not available among city employees. 8 (3) The services are incidental to a contract for the purchase or 9 lease of real or personal property. Contracts under this criterion, 10 known as "service agreements," shall include, but not be limited 11 to, agreements to service or maintain office equipment or 12 computers that are leased or rented. 13 (4) The legislative, administrative, or legal goals and purposes 14 cannot be accomplished through the utilization of city employees. 15 Contracts are permissible under this criterion to protect against a 16 conflict of interest or to ensure independent and unbiased findings 17 in cases where there is a clear need for a different, outside 18 perspective. These contracts shall include, but not be limited to, 19 obtaining expert witnesses in litigation. 20 (5) The nature of the work is such that the standards of this title 21 for emergency appointments apply. These contracts shall conform 22 with Section 45080. 23 (6) Public entities or officials need private counsel because a 24 conflict of interest on the part of the city attorney's office prevents 25 it from representing the public entity or official without 26 compromising its position. These contracts shall require the written 27 consent of the city attorney. 28 (7) The contractor will provide equipment, materials, facilities, 29 or support services that could not feasibly be provided by the city 30 in the location where the services are to be performed. 31 (8) The contractor will conduct training courses for which 32 appropriately qualified city employee instructors are not available, 33 provided that permanent instructor positions in academies or similar 34 settings shall be filled by city employees. 35 (9) The services are of such an urgent, temporary, or occasional 36 nature that the delay incumbent in their implementation by city 37 employees would frustrate their very purpose. 38 (d) All persons who provide services to a city under conditions 39 constituting an employment relationship shall—by be employed 40 directly by the city. 97 AB 1250 —14 — 1 (e) (1) Except as provided in paragraph (2), this section shall 2 apply to all cities, including cities that have adopted a merit or 3 civil service system. 4 (2) This section does not apply to a charter city formed pursuant 5 to Section 3 of Article XI of the California Constitution. 6 (f) (1) This section does not apply to any contract for services 7 described in Section 4525 or 4529.10. 8 (2) This section does not apply to any contract that is subject 9 to Chapter 1 (commencing with Section 1720) of Part 7 of Division 10 2 of the Labor Code. 11 (3) This section does not apply to a contract for public transit 12 services, including paratransit services, if the county's transit 13 services are fully funded by Federal Transit Administration 14 assistance and the county is thereby subject to the guidelines 15 established in FTA Circular 4220.1 F or any subsequent guidelines 16 or revisions issued by the Federal Transit Administration. 17 (g) This section shall apply to personal services contracts entered 18 into, renewed, or extended on or after January 1, 2018. 19 SEC. 4. Section 37103.2 is added to the Government Code, to 20 read: 21 37103.2. (a) Each city shall maintain on its Internet Web site 22 a searchable database of all contracts of an annual value in excess 23 of $5 million one hundred thousand dollars ($100,000) entered into pursuant 24 to Section 37103.1. The database shall include, but is not limited 25 to, the following: 26 (1) A description of the services provided under the contract. 27 (2) The name of the agency, department, or division responsible 28 for providing the service in the absence of the contract. 29 (3) The name of the contractor and any subcontractors providing 30 services under the contract. 31 (4) The effective and expiration dates of the contract. 32 (5) The annual amount paid pursuant to the contract to the 33 contractor in the past three fiscal years and the current fiscal year, 34 including the funding source for all amounts paid. 35 (6) The annual amount expected to be paid pursuant to the 36 contract to the contractor in the next three fiscal years. 37 (7) The total projected cost of the contract for all fiscal years 38 and the funding source for all amounts to be paid. 39 (8) The names of the employees of the contractor and any 40 subcontractors providing services pursuant to the contract and their 97 -15— AB 1250 1 hourly pay rates, and the total number of full-time equivalent 2 positions involved in performing the services under the contract. 3 (9) The names of any workers providing services pursuant to 4 the contract as independent contractors and the compensation rates 5 for such workers. 6 (b) The information identified in subdivision (a) shall be 7 compiled in an annual service contractor expenditure budget 8 accompanying the county budget, reflecting all spending on 9 personal services contracts by the county. 10 SEC. 5. The provisions of this act are severable. If any 11 provision of this act or its application is held invalid, that invalidity 12 shall not affect other provisions or applications that can be given 13 effect without the invalid provision or application. 14 SEC. 6. If the Commission on State Mandates determines that 15 this act contains costs mandated by the state, reimbursement to 16 local agencies and school districts for those costs shall be made 17 pursuant to Part 7 (commencing with Section 17500) of Division 18 4 of Title 2 of the Government Code. 0 97