Tuesday, June 19, 2012

Questioning "we pass the savings on to you."

A California appeals court on Friday ordered a housing nonprofit to pay prevailing wage to its construction workers. I don't know if the decision itself is a good one. Maybe it is. What's more interesting is the sense it gives of several systems out of whack.

Friday's decision is Housing Partners I, Inc. v. Duncan, from California's Fourth District Court of Appeal. The question before the court was whether the Vista Del Sol Senior Complex in Redlands, California was a "public work" invoking a requirement that publicly financed construction projects must pay prevailing wage. The court's opinion says Vista Del Sol has 71 units, of which 53 are "designated for occupancy by low- and very low-income seniors." The financing took the form of three low-interest loans from public entities: a housing authority, a city redevelopment agency, and the County of San Bernardino. And the court's decision was, c'mon, guys, that's public money, so pay up.

(Who the developer pays at this point is a funny question, not answered in the opinion though I'm sure it will get sorted out some way. The actual Vista Del Sol project seems to have opened two years ago. Here's a local news report describing how new resident Lorene Neal "cried tears of joy" on moving into her own apartment at the complex after two years of precarious doubling-up with relatives. There's a picture of the place in the news article. It looks lovely. I'm sure it has brightened many lives. But that's not really the issue in the case decided Friday.)

The case involved more hairsplitting than you might think because there really are exemptions from prevailing wage requirements for several types of subsidized low-income or otherwise publicly purposed housing.  (If you are so moved you can look them up in Sec. 1720 of the California Labor Code, available on the CA legislative site here.)

So why doesn't an affordable housing development nonprofit want to pay prevailing wage? The people doing the work to build this seniors' building should themselves have been comfortably paid, and not, potentially, forced to look for low-income housing of their own -- right?

Prevailing wage would seem like the public-spirited way to go, especially in a case like this, where the developer, Housing Partners I, is a nonprofit with apparently very close ties to the San Bernardino County Housing Authority. That is, the agency's Web site refers to Housing Partners I as an "affiliate nonprofit." And, per Cal. Secretary of State business lookup, the nonprofit's official address is 715 East Brier Drive in San Bernardino, same as the main address of the housing authority itself.

Except, again, hairsplitting, because "prevailing wage" rates are high compared with the pay that unfortunately many workers get.

The opinion doesn't state what actual wage rates were involved, and if it did that might be morally clarifying. The state prevailing wage coverage determination, posted here, mentions the amounts of money involved in financing the project (not actually huge) but not the differences between the actual wages paid and the official prevailing wages for the trades involved. As with many legal and policy documents, these have the fault of decorously not mentioning the exact small amounts of money that matter the most to the people involved.

Current Southern California prevailing wage schedules here show basic hourly rates for the "laborer" classification ranging from $27.29 to $30.29. With pension, training and other payments, that runs to between $44.68 and $47.68 in "Total Hourly Rate," plus more for overtime. So, yes, a person could make less money than that per hour and still be more than satisfied with the arrangement. See, for example, my previous item about the private contractor offering $8 per hour plus overtime for long hours of heavy labor on a military base last summer. (Yeah, and shouldn't that count as a "public work" too?) But we don't know how much actual money the actual builders of Vista Del Sol were paid. That would be good to know.

Several oddnesses pile up here: a high "prevailing wage" pay scale -- though one that is probably a good idea given the high cost of living -- and terribly low wages in the less regulated and informal labor markets -- and a government-affiliated and presumably public-spirited developer of low-income housing that fought a state regulator's order to pay prevailing wage on its project. Remarkably or not, the developer found it reasonable and worthwhile to fight the state on the question through four layers of proceedings: administrative determination, administrative appeal, trial court, and, most recently, state appellate court.

This is where the "We pass the savings on to you" problem comes in. Really this was a publicly funded project's attempt to subsidize the low-income tenants' apartments out of the construction workers' wages. Maybe circumstances drove that choice in ways that would sound reasonable when explained. But it's sad that, economically, the workers and tenants at the same project were pitted against each other. Aren't there richer people out there to tax?

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