The D.C. government and the developers behind the CityCenterDC project have filed suit against the U.S. Department of Labor in an effort to reverse a wage ruling that could have profound financial implications for the District.
In June 2011, the Department of Labor ruled that the big downtown development project is subject to the 1931 Davis-Bacon Act, which requires “prevailing wages” for construction workers on public buildings or public works projects funded by the federal or D.C. government. The District appealed, arguing that the development, led by Hines Interests LP, is being privately built, financed, and operated, and that the ruling could cost the city $20 million in unanticipated wages, since D.C. would be required to reimburse the developers for the extra costs. But the Labor Department’s Administrative Review Board upheld the earlier decision on April 30, 2013.
So yesterday, the District filed suit against the Department of Labor in the U.S. District Court for the District of Columbia, and CCDC Office LLC, representing the developers, followed with a similar suit today.
The Labor Department’s 2011 ruling, which itself overturned an earlier Labor Department determination that the project was not subject to Davis-Bacon, found that the federal law did apply because the District retains “direct authority” over the project and the development constitutes a “public work” because the public will benefit from it. In the lawsuit, the city strenuously objects to this logic, arguing that no public funds are being spent on the project, the public spaces—-a park and plaza owned and operated by private entities—-comprise “less than two percent of the Project’s total square footage,” and the developers will “own all of the buildings on the site for the 99-year term of the lease.”
The city’s lawsuit alleges that the Labor Department “ignored or rejected” arguments by the city and the developers that the criteria for Davis-Bacon were not met and “erroneously refused to apply the standard found in judicial and administrative precedent that a project must primarily benefit the public to be a public work.”
If the Labor Department’s ruling is upheld, city officials and developers worry, it would presumably also apply to any developments on District-owned land containing public spaces—-including the big St. Elizabeths and Walter Reed projects that the city is beginning to undertake now.
“This unprecedented decision by the Labor Department is contrary to 80 years of jurisprudence and poses a very serious danger to many other construction projects in the District,” D.C. Attorney General Irv Nathan said in a statement. “There are many projects in D.C. that are privately financed that may result in incidental tax and employment benefits for the city , but that does not convert them into public buildings or public works. We had no choice but to sue; the Labor Department’s decision must be set aside.”
A Labor Department spokeswoman tells The Washington Post that the Labor Department will defend its decision and that “contracts entered into by the District of Columbia for the development of the CityCenterDC project, a mixed-use project on prime real estate owned by the District of Columbia, constitute contracts for construction of a public work under the Davis-Bacon Act because they call for substantial construction under the District’s authority that will benefit the general public.”
I’m awaiting more details on the case, but it seems important to draw a distinction here. This is not a question of whether construction workers should be paid better wages; in general, most people would agree, they should be. It’s a question of what standard should be applied to the District. The attorney general’s office confirms* that this wage law applies to the District but to no other city in America, since the Davis-Bacon Act refers to contracts “to which the Federal Government or the District of Columbia is a party, for construction, alteration, and/or repair, including painting and decorating, of public buildings and public works of the Government or the District of Columbia.” It’s also a question of incentives: If removing public spaces, for example, from development projects on city land would exempt the projects from a higher wage requirement, the city will see fewer public spaces in new developments. And if leasing public land triggers Davis-Bacon but selling it to developers does not, we might start to see more handovers of land to private developers. That seems fundamentally unfair and counterproductive—-even if higher wages are a good cause.
*This post has been updated following confirmation from the attorney general’s office.
Photo by Darrow Montgomery