A state court has reversed a decision that could have added millions of dollars in costs to construction projects financed with bonds issued by municipal authorities.
- The ruling last week by Commonwealth Court revolved around interpretations of the state’s prevailing-wage law, which sets a minimum wage for workers on projects funded by public money.
- The case arose in the context of a $29 million project at Ursinus College in suburban Philadelphia but it drew in a variety of other parties, including the Pennsylvania Chamber of Business and Industry, the Pennsylvania Economic Development Association, Dickinson College, Elizabethtown College, and Associated Builders and Contractors, a construction industry trade group.
What’s the issue: Whether the prevailing wage should apply to projects funded by bonds issued by municipal authorities. The prevailing wage is typically set at levels higher than what workers would otherwise earn.
- The Department of Labor & Industry initially ruled that prevailing wages would not apply to the Ursinus project, which was funded by bonds issued by the Montgomery County Higher Education and Health Authority.
- But the decision was appealed by a Philadelphia labor union, the International Brotherhood of Electrical Workers Local 98.
- An administrative appeals board sided with the union in a June 2021 ruling, arguing that the bond funds would not have been available to Ursinus in the absence of the authority, thus making the funds public
- Ursinus appealed to Commonwealth Court, which reversed the board’s ruling in a 21-page ruling written by Judge Michael Wojcik.
- The college had argued that the Montgomery County authority never touched any of the money. It simply facilitated the bond issuance.
- “We received the opinion and believe the Commonwealth Court correctly reversed the Prevailing Wage Board’s decision,” a college spokesperson wrote in an emailed statement. Ursinus was represented by West Shore law firm Bybel Rutledge.
- “Had the Board’s decision been permitted to stand, it would have changed the face of public/bond financing in PA by converting private construction projects to public projects simply because a public body is involved and regardless of whether a penny of public funds was used,” attorney Catherine Walters of Bybel Rutledge wrote in an email. “This would add approximately 25%-45% to the benefits and wage costs of the project.”
- A spokesperson for Labor & Industry declined to comment.
Why does it matter: Municipal authorities float bonds for a wide range of private-sector projects, including hospitals, university buildings and senior-living facilities.
- The Pennsylvania chamber and others had argued that applying the prevailing wage to such projects would boost costs and possibly reduce the volume of projects.
- The initial ruling by the appeals board prompted some nonprofit colleges and universities to seek financing through out-of-state issuers, resulting in higher interest rates, according to an analysis of the court decision by Lancaster law firm Stevens & Lee.
What’s next: IBEW Local 98 is considering its options, including an appeal to the Pennsylvania Supreme Court, according to union spokesperson Frank Keel.
- “Everything is on the table,” he wrote in a text message.
Editor’s note: This story has been updated from its original version to include the correct name of the law firm — Stevens & Lee — providing an analysis of the ruling.