Friday, February 09, 2001

New city housing in peril

Ruling on wages means less building

By Ken Alltucker
The Cincinnati Enquirer

        Downtown housing will be cut off at the knees if the city of Cincinnati is forced to pay higher wages to construction workers who build residential projects, city officials warned Thursday.

        Ohio has ordered the city to pay more than $187,000 in fines and back wages for allegedly violating the state's prevailing wage law on two construction projects.

        If the state's ruling stands, the city says it will amount to a 57 percent pay increase for construction workers on future projects, leaving little money in a pot set aside to spur downtown housing.

    At issue is whether workers should be paid the state's prevailing wage for commercial projects even if they are working on housing projects.
    Commercial construction pays an average $26.81 an hour in wages and benefits; housing construction pays $17.04 an hour.
        Developers warn that would make Mayor Charlie Luken's vow to build or start 1,000 housing units within a year little more than a shallow promise.

        “It would definitely drive up your construction costs and it would be harder to pass that on to the consumer,” said Rob Clawson, vice president and chief financial officer of JFP Properties.

        The International Brotherhood of Electrical Workers filed a complaint last September with the Ohio Department of Commerce Division of Labor and Worker Safety, alleging that two city-funded housing developments — the Hale-Justis building on Central Parkway and the Baker Shoe building in the 600 block of Race Street — failed to pay the commercial prevailing wages.

        The state, siding with the union, ordered the city on Jan. 25 to pay $93,817.97 in back wages to 16 employees and an equal amount as a fine. The projects violated prevailing wage laws on two fronts, according to Gordon Gatien, superintendent of the state's Department of Commerce Division of Labor and Worker Safety.

        The state relies on a federal statute that counts any building taller than four stories as a commercial development. Also, buildings with any retail are considered commercial even if the majority of the building is residential.

        As is typical with downtown housing, both city-funded renovations have retail space at street level.

        The state's prevailing wage laws kick in only if public funds are used on a project.

        “This won't affect any of the owners, but it will affect the city,” said Hale-Justis developer Chris Frutkin.

        City Manager John Shirey didn't alert council members to the situation until Thursday, after being contacted by The Cincinnati Enquirer.

        In a letter to council members, Mr. Shirey said the state ruling has “absolutely no merit” but would have a “significant financial impact” on future housing projects.

        He added that the ruling would drain the city's housing funds. A typical $1 million renovation would include $500,000 in construction wages. The state's ruling would jack up wages to $780,000.

        The ruling would impact any housing projects funded citywide. The city set aside $8 million in 2001 to help pay for housing projects.

        But the ruling would most directly impact downtown housing because most buildings being considered for renovation are at least four stories high.


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