Ursinus Coll. v. Prevailing Wage App. Bd.

310 A.3d 154

URSINUS COLLEGE

v.PREVAILING WAGE APPEALS BOARD

Appeal of: International Brotherhood of Electrical Workers, Local No. 98

No. 18 MAP 2023

Supreme Court of Pennsylvania.

Argued: September 14, 2023

Decided: February 21, 2024

Appeal from the Order of the Commonwealth Court dated August 4, 2022 at No. 828 CD 2021, Reversing the decision of the Prevailing Wage Appeals Board dated June 25, 2021 at No. PWAB-1G-2018.

Thomas Richard Davies, Esq. Harmon & Davies, P.C., for Amicus Curiae Keystone Chapter of Associated Builders and Contractors.

Kandice Kerwin Hull, Esq., McNees Wallace & Nurick LLC, for Amicus Curiae Bucknell University, et al.

Karl Stewart Myers, Esq., Stevens & Lee, for Amici Curiae Pennsylvania Economic Development Association, Chester County Industrial Development Authority.

Joshua L. Schwartz, Esq., Barley Snyder LLP, for Amicus Curiae Pennsylvania Chamber of Business and Industry, et al.

William Daniel Feehan III, Esq., Stephen J. Holroyd, Esq., Holroyd Gelman, P.C., for Appellant International Brotherhood of Electrical Workers, Local No. 98.

Ashley Brooke Goshert, Esq., Robert C. Schramm, Esq. Pennsylvania Department of Labor & Industry, 651 Boas Street,for Appellee Department of Labor and Industry.

Eric G. Preputnick, Esq., Commonwealth of Pennsylvania, Prevailing Wage Appeals Board, for Appellee Prevailing Wage Appeals Board.

Catherine Walters, Esq., Bybel Rutledge LLP, for Appellee Ursinus College.

TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

JUSTICE BROBSON

This discretionary appeal calls upon us to decide whether a construction project undertaken by Ursinus College (Ursinus) constituted a "public work" as defined by the Pennsylvania Prevailing Wage Act (PWA),¹ thereby requiring workmen on the project to be paid prevailing minimum wages, where the Montgomery County Health and Higher Education Authority (Authority) provided conduit financing for the project.² Upon careful review, we agree with the conclusion reached by the Commonwealth Court that the project does not constitute a "public work" within the meaning of the PWA based upon a plain reading of the statute and the economic reality of the specific financial transaction at issue. Accordingly, we affirm.

I. BACKGROUND

A. Relevant Law

[1] The General Assembly enacted the PWA with the primary purpose of "protect[ing] workmen employed on public work projects from substandard pay by ensuring that they receive prevailing minimum wage." Pa. Nat'l Mut. Cas. Ins. Co. v. Dep’t of Lab. & Indus., 552 Pa. 385, 715 A.2d 1068, 1072 (1998) (Penn National I); see also Section 5 of the PWA, 43 P.S. § 165-5 ("Not less than the prevailing minimum wages as determined [under the PWA] shall be paid to all workmen employed on public work."). The PWA defines "[p]ublic work," in relevant part, to "mean[ ] construction, reconstruction, demolition, alteration and/or repair work other than maintenance work, done under contract and paid for in whole or in part out of the funds of a public body where the estimated cost of the total project is in excess of twenty-five thousand dollars ($25,000)."³ Section 2(5) of the PWA, 43 P.S. § 165-2(5). In view of the statutory definition, this Court has explained that a project will qualify as a "public work" when the following four conditions are satisfied: "(1) there [is] certain work; (2) such work [is] under contract; (3) such work [is] paid for in whole or in part with public funds; and (4) the estimated cost of the total project [is] in excess of $25,000." Penn National I, 715 A.2d at 1074. As discussed in further detail below, this matter concerns only the third element—i.e., whether the project at issue was "paid for in whole or in part with public funds." Id.

In various instances relevant hereto, our courts have analyzed the definition of "public work" and whether certain projects were "paid for in whole or in part with public funds," thus subjecting the projects to the PWA’s provisions. To begin, in Penn National I, this Court held that the construction of a new headquarters for Pennsylvania National Mutual Casualty Insurance Company (PNI) in the City of Harrisburg did not constitute a "public work" in toto simply because public bodies funded an initial phase of the project in a manner that met the four elements set forth above. Penn National I, 715 A.2d at 1074-75 (explaining that "[n]othing in [S]ection 5 of the [PWA] mandates that an entire construction project be covered by the [PWA]," that coverage was limited to "work which satisfies the four[-]element definition of ‘public work,’ " and that, "under the distinct facts [presented,] the entire PNI building project [wa]s not covered by the [PWA] simply because asbestos removal was deemed to be public work").

[2] Thereafter, in a subsequent appeal following remand, this Court held that PNI’s use of tax increment financing⁴ to fund part of the same project at issue in Penn National I rendered the project a "public work" subject to the PWA. Pa. State Bldg. & Constr. Trades Council, AFL-CIO v. Prevailing Wage Appeals Bd., 570 Pa. 96, 808 A.2d 881, 882 (2002) (Penn National II). The specific financing mechanism at issue in Penn National II, accomplished through utilization of the Tax Increment Financing Act (TIF Act),⁵ is of particular import to the instant matter. First, the City of Harrisburg and certain other public "taxing bodies approved the creation of a tax increment district[ ] and agreed to participate therein by adopting resolutions to that effect." Penn National II, 808 A.2d at 886. Next, the Harrisburg Redevelopment Authority (HRA) issued tax increment bonds,⁶ which PNI purchased. Id. The bond proceeds "were held in trust under an indenture and were disbursed by PNC Bank, [as] trustee, to" PNI's wholly owned subsidiary, as the owner of the project buildings, "to pay a portion of the construction costs of the project." Id. Moreover, as owner of the project buildings, PNI's subsidiary paid the base real estate tax and the tax increment on the property to the public taxing bodies, which "were required to pay over to … HRA[ ] that portion of the collected tax monies that represent[ed] the tax increment." Id. "[T]hese monies [we]re then used to pay off the tax increment bonds." Id. at 886-87. Notably, the taxing bodies received and held for a time the positive tax increments before depositing them into a tax increment fund, which contained "all tax increments and all revenues from the sale of tax increment finance bonds or notes and from which money [wa]s disbursed to pay project costs for the district or to satisfy claims of holders of tax increment bonds or notes." Id. at 886.

Upon review of the above financing structure, the Court held "that the work, i.e., the cost of construction, … was ‘paid for in whole or in part with public funds.' " Id. at 889. The Court reasoned:

[T]he taxing bodies actually collect the tax increment dollars in question. Although the taxing bodies only retain the monies paid on the property’s tax base and the tax increment dollars are paid over to the trustee to be used to pay off the tax increment bonds, nevertheless, … for a time these monies do rest in the public coffers. Significantly, the statutory financing at issue here is not a tax abatement, where the taxing authority agrees to forego receiving property taxes on a certain property for a certain time. To the contrary, the tax money is actually collected by the taxing bodies, and, in turn, these dollars are used to pay off the tax increment bonds that are used to pay the cost of construction on the project.

Id. (footnote omitted). As such, the Court concluded that "[t]he monies paid to the taxing authorities as tax increments, which, in turn, are used to pay off the bonds that are used to pay the cost of construction[,] are public funds for purposes of the [PWA]."⁷ Id.

[3] In 500 James Hance Court v. Pennsylvania Prevailing Wage Appeals Board, 613 Pa. 238,33 A.3d 555 (2011), this Court considered whether the PWA applied to a developer’s construction of a "building shell" that was to be fitted out by a charter school, where the charter school entered into a predevelopment lease with the developer for the building premises.⁸

500 James Hance Ct., 33 A.3d at 557-58. In addressing this scenario, and particularly "whether the stream of rental payments required [from the charter school to the developer] under the … lease arrangement [we]re tantamount to construction financing," the Court explained that "the labels appended to transactional documents do not exclusively determine the applicability of regulation under the [PWA], as the potential for evasion and artifice is too great. Rather, as in other settings, the economic reality of the transaction should control," Id. at 572. The Court further indicated "that risk allocation should be a prominent consideration in assessing the economic reality of a business transaction," particularly for purposes of analyzing the applicability of the PWA. Id. at 573. Ultimately, the Court concluded that the nature of the lease arrangement at issue did not implicate the PWA’s coverage. Id. at 574-77.

Turning to Commonwealth Court precedent, in Lycoming County Nursing Home Association, Inc. v. Department of Labor & Industry, 156 Pa.Cmwlth. 280, 627 A.2d 238 (1993), that court addressed whether the construction of a nursing home and personal care facility undertaken by Lycoming County (County) and the Lycoming County Nursing Home Association, Inc. (Association), was a "public work" covered by the PWA. Lycoming Cnty. Nursing Home Ass’n, Inc., 627 A.2d at 240. The Lycoming County Commissioners (Lycoming Commissioners) established the Association as a private, nonprofit entity for purposes of constructing and operating the new facility, and they served as members of the Association’s Board of Directors, initially in their official capacity and later as private citizens. Id. During this time, the County loaned the Association...