Firms win prevailing wage ruling

7/1/2009

COLUMBUS - In an Ottawa County case that could affect economic development projects across the state, the Ohio Supreme Court yesterday ruled unanimously that private developers do not have to pay prevailing wages when they use public dollars.

"This is a victory for the Ohio taxpayers," said Ryan Smith, president of the Northern Ohio chapter of Associated Builders and Contractors. "Private development creates jobs, and the government should not impede these opportunities."

Critics have argued that the prevailing wage, typically the regional union wage, inflates the cost of construction.

Labor organizations like the Northwestern Ohio Building Trades Council argue prevailing wage must apply whenever public funds are used.

"[The] argument that any spending of public funds by an institution would require payment of the prevailing wage would unjustifiably expand the scope of prevailing wage to include projects that are not public improvements, that are not constructed by a public authority, or that do not benefit a public authority," wrote Justice Evelyn Lundberg Stratton.

Amanda Wurst, spokesman for Gov. Ted Strickland, said he had not yet reviewed the decision to know what impact it might have on his recent attempts to change state rules to apply the prevailing wage more often to private projects such as the taxpayer-financed cleanup of polluted, privately owned industrial sites.

At issue before the Supreme Court was a project by Fellhauer Mechanical Systems, of Port Clinton, a private electrical, heating, air-conditioning, and plumbing contractor that also sells security systems, audio and video equipment, and home theater systems.

The company received a $300,000 federal grant issued through the Ohio Department of Development and a $36,750 loan from the Ottawa County Improvement Corp. to buy the building it had previously leased, as well as office equipment. The owner also spent $40,000 of his own money and secured $308,250 in private funding to renovate the property.

The trades council argued that the involvement of public money made it a public improvement project. The court disagreed, holding that, regardless of the involvement of public funds, the Fellhauer project remained private. It also agreed with the Toledo-based 6th District Court of Appeals that the government funds involved were earmarked for property and equipment purchases, not construction.

The trades council's Toledo attorney, Joseph M. D'Angelo, was unavailable for comment yesterday. But in court documents he argued this case would allow governments and contractors to circumvent prevailing wage law.

"First, the decision allows public funds to be funneled through a community improvement corporation and thereby avoid application of [the law]," he wrote. "Second, by merely labeling public sources of project funding as purchase of equipment, property, or any other creative nonconstruction sounding categories, prevailing wage may be avoided."

He noted that government involvement in the project amounted to 48.5 percent of the project's total $695,000 cost.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.