Prevailing Wage Law Applies to Construction Project Where Lease Provided Baseline Rent Reduced by "Rent Credit."
On July 26, 2011, in
Hensel Phelps Construction Co. v. San Diego Unified Port District (California Courts of Appeal – 4th District, No. D057277) the San
Diego Unified Port District (SDUPD) entered into a lease agreement with
One Park Boulevard (OPB). OPB granted a 66 year lease to SDUPD, where
SDUPD was to provide a rent credit for the first 11 years of the lease.
The Department of Industrial Relations concluded that the project of constructing
a hotel was a public work and therefore subject to prevailing wage law
in California. The trial court granted a writ of mandate finding that
the project was not a public work.
The appeals court reversed due to the fact that public funds were used for the project. The contract between OPB and SDUPD stated that the lease required exacting specifications. Further, the rent was diminished by a rent credit and construction was partially paid for out of public funds. Prevailing wage law states that a prevailing wage "shall be paid to all workers employed on public works." In addition the prevailing wage law states that a project is public works if "paid for in whole or in part out of public funds."