A recent decision from the Pennsylvania Prevailing Wage Appeals Board (the “Board”), if affirmed, would have dramatic consequences for private, nonprofit colleges and universities that rely on bonds issued by public entities to finance their construction projects. The decision, In Re: Grievance filed by International Brotherhood of Electrical Workers, Local No. 98, Docket No. PWAB-1G-2018, was recently appealed to the Pennsylvania Commonwealth Court.

In the case, the Board determined that the Pennsylvania Prevailing Wage Act (the “Prevailing Wage Act”), applies to construction projects at Ursinus College (the “College”), a private, nonprofit college, because the projects were financed by bonds issued by the Montgomery County Higher Education and Health Authority (the “Authority”), a municipal authority and public instrumentality of the County of Montgomery organized under the Pennsylvania Municipality Authorities Act (the “Authorities Act”).

Because the Prevailing Wage Act was determined to apply, the College is required to pay workers at its construction sites at least the prevailing minimum wages in the region. Generally speaking, this means that the College’s construction costs for the projects will be much higher than it originally estimated.

The Board in announcing its decision took the position that the construction projects at the College were “public work” under the Prevailing Wage Act because of the Authority’s involvement in the transaction. This despite the fact that no public dollars will be spent on the projects, and the sole source of repayment for the bonds issued by the Authority will be the loan payments made by the College.  Essentially, the Board’s decision turned on the fact that the issuer of the bonds was a public entity, and therefore the funds, for a brief moment, were funds of the public entity before being assigned to the College.

While the Board’s decision is technically limited by its facts to bonds issued by a municipal authority to finance projects of a private, nonprofit college, its reasoning is so broad that it could potentially be applied to any bond issued in Pennsylvania by any public entity, such as a housing authority, redevelopment authority, or economic development authority, to name a few. And, the decision might be extended to bonds issued for other types of private projects, not just projects involving a college or university.

For any business or nonprofit organization that has relied on bonds to finance their construction projects, the decision is troubling, as it would mean substantially higher construction costs if the Prevailing Wage Act applied. In certain situations, the markup could be as high as 30%.

If your business or nonprofit organization will be affected by the Ursinus College decision, the construction and finance attorneys at McNees are here to help. Please contact us today.