Pennsylvania State Building & Construction Trades Council v. Prevailing Wage Appeals Board

Citations: 767 A.2d 605; 2001 Pa. Commw. LEXIS 15

Court: Commonwealth Court of Pennsylvania; January 10, 2001; Pennsylvania; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The Pennsylvania State Building and Construction Trades Council, AFL-CIO, and the Central Pennsylvania Building Trades Council sought review of an April 14, 2000 order from the Pennsylvania Prevailing Wage Appeals Board, which had denied their grievance filed in September 1994. The court reversed the Board's decision. In late 1991, Pennsylvania National Mutual Casualty Insurance Company (PNI) considered relocating its headquarters and up to 900 employees from Harrisburg to a suburban site. The City’s mayor proposed various incentives to PNI to remain, ultimately leading to a deal that included tax increment financing for a downtown office tower and parking garage. The City and the Harrisburg Redevelopment Authority (HRA) were tasked with providing the project site to PNI as 'bare ground.'

The City acquired properties using a $1.5 million Economic Development Partnership Grant (EDP Grant) but allocated all funds for land acquisition and administrative costs rather than site demolition. After preparing the site, the City conveyed it to PNI, which financed construction partly through tax increment financing authorized by the Tax Increment Financing Act (TIF Act). Local taxing bodies approved the tax increment district and HRA issued tax increment bonds exceeding $10.5 million, which PNI purchased. The bond proceeds were held in trust and disbursed to Pennsylvania National Realty Trust (PNRT) for construction costs, secured by a mortgage arrangement.

As the project owner, PNRT was responsible for real estate taxes and tax increments resulting from the property improvements, which were collected by the taxing bodies and remitted to PNC Bank for debt service on the tax increment bonds. On September 9, 1994, the Pennsylvania Department of Labor and Industry determined that the PNI project was not subject to the Pennsylvania Prevailing Wage Act. However, the trades councils argued that the project should be covered by the Wage Act due to public funding used for a prior asbestos removal project, which the Board initially supported. The court ultimately affirmed the Board's decision.

The decision affirms that once the City accepted funds from Pennsylvania National Insurance (PNI) for an asbestos removal contract, these funds effectively became public money, categorizing the project as a public work under the Wage Act. Although the state supreme court recognized the asbestos removal as a public work, it found that the entire PNI project was not public because the asbestos removal occurred before the City transferred the project site to PNI. The court required an assessment of whether public funds financed the PNI building project, remanding the case for further examination of its financing under the Tax Increment Financing (TIF) Act and other laws.

Upon remand, the Board determined that the Wage Act did not apply to the PNI project, asserting it was not funded by public money. However, the trades councils contested this conclusion, arguing that the project was partially funded by public funds through tax increment financing, where public entities collect and redistribute tax increments to pay construction costs. They emphasized that the TIF Act allows for public spending on public works and that funds collected as taxes should be considered public funds while held in public treasuries, regardless of subsequent distribution. The argument was made that once the taxing bodies allocated tax increment dollars for the TIF project, the PNI project should be classified as a public work under the Wage Act, leading to the conclusion that the Wage Act indeed applies in this case.

The order of the Pennsylvania Prevailing Wage Appeals Board dated April 14, 2000, is reversed as of January 11, 2001. The City received an EDP Grant from the Pennsylvania Department of Commerce under the Housing and Redevelopment Assistance Law. The HRA adopted a commercial and industrial redevelopment program for the City area related to the PNI project. A municipality can create a tax increment district and approve a project plan per the TIF Act, allowing taxing bodies to either participate in the district or opt out. The tax increment district is defined as a contiguous geographic area created by the municipality's governing body. The municipal assessor establishes the tax increment base, which includes various taxes applicable at the time of district creation. The tax increment arises from increases in property values or commercial activity due to the project. Project costs can be funded through general funds or tax increment bonds, which can be secured by a lien on public improvements. These bonds mature within twenty years and are payable from positive tax increments in the tax increment fund, which consists of all tax increments and revenues from bond sales. The PNI project cost totaled $32.4 million, primarily financed by a $23.5 million loan from PNI to PNRT, secured by a mortgage. Participating taxing bodies collect both the base real estate tax and the tax increment based on property value improvements.

The Tax Increment Financing (TIF) Act mandates that taxing bodies disburse tax increments to the issuing authority on the next legally specified settlement date (Section 7(b), 53 P.S. 6930.7(b)). These positive tax increments continue to be allocated annually until the issuing authority fulfills all monetary obligations, at which point the tax increment district is dissolved (Sections 7(a) and 8, 53 P.S. 6930.7(a), 6930.8). 

The Wage Act requires that all workers on public works receive at least the prevailing minimum wage (Section 5, 43 P.S. 165-5). A public work is defined as demolition done under contract and funded in whole or in part by a public body (Section 2, 43 P.S. 165-2). The only pertinent element of the 'public work' test considered is whether public funds were used for the work. The Board concluded that the construction was not performed under a public contract; however, the supreme court did not request the Board to evaluate this aspect. Instead, it remanded the case for the Board to determine if the Wage Act applies to the entire PNI building project based on its financing under the TIF Act, the Urban Redevelopment Act, and/or the Housing and Redevelopment Assistance Law (Pennsylvania National II, 552 Pa. at 399, 715 A.2d at 1075). The supreme court previously confirmed that the construction work was conducted 'under contract,' satisfying the definition of a 'public work' (Pennsylvania National II, 552 Pa. at 397, 715 A.2d at 1074). Taxing bodies can allocate funds from their general fund for the project (Section 7(c), 53 P.S. 6930.7(c)), and some taxing bodies may choose not to participate in the tax increment district (53 P.S. 6930.5(a)(7)).