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Housing Partners I, Inc v. John C. Duncan

June 15, 2012

HOUSING PARTNERS I, INC., PLAINTIFF AND APPELLANT,
v.
JOHN C. DUNCAN, AS DIRECTOR ETC., DEFENDANT AND RESPONDENT.



APPEAL from the Superior Court of San Bernardino County. W. Robert Fawke, Judge. (Super.Ct.No. CIVDS1007934)

The opinion of the court was delivered by: Codrington J.

CERTIFIED FOR PUBLICATION

OPINION

Affirmed.

I INTRODUCTION*fn1

Appellant Housing Partners I, Inc. (HPI) appeals from a judgment denying its petition for writ of mandate against respondent John C. Duncan, the Director of Industrial Relations for the State of California (Director). In administrative proceedings, the Director determined that a low-income housing project developed by HPI was a "public work" within the meaning of section 1720 and was not subject to a statutory exception to the usual requirement for payment of prevailing wages on a public works. The Director's determination could mean HPI would have to pay higher labor costs on its low-income housing project and possibly be "subject to a prevailing wage and penalty assessment, fines, lawsuits and disciplinary action, and . . . barred altogether from bidding on future public works projects." (20 No. 4 Miller & Starr, Real Estate Newsalert 1.)

HPI's appeal involves two statutory exceptions to the requirement for payment of prevailing wage on a public works project and concerns the interplay of two important public policy goals, "encouraging the construction of low-cost housing and ensuring compliance with the prevailing wage requirements." (State Building & Construction Trades Council of California v. Duncan (2008) 162 Cal.App.4th 289, 294.)

The prevailing wage law requires that workers employed on public works projects be paid prevailing wages. (§§ 1771, 1774.) Various exceptions to that rule are found at section 1720, defining the meaning of public works. The two exceptions which are the subject of this appeal are section 1720, subdivisions (c)(4) and (c)(6)(E). One exception, section 1720, subdivision (c)(4), applies to affordable housing projects that receive money from a redevelopment agency's low and moderate income housing fund. Another exemption, section 1720, subdivision (c)(6)(E), applies to residential projects that receive below-market interest rate loans if the project dedicates a percentage of its units to low-income occupants. Because a combination of three kinds of funding sources was used for the subject project, the Director concluded that neither exemption under section 1720, subdivision (c)(4) or subdivision (c)(6)(E) could be satisfied. Instead, the project was subject to the requirement for payment of prevailing wages.

HPI argues this court should reverse the Director's administrative decision for several reasons. First, HPI contends principles of statutory construction require statutes to be interpreted reasonably to avoid absurd results. Next, HPI asserts the legislative history of section 1720 establishes a clear legislative intent that the exemptions be harmonized together. Third, reading the exemptions in concert with each other furthers the public policy of providing affordable housing. Finally, the Director's interpretation of section 1720 renders the statute so vague as to violate HPI's right of due process.

In opposition, the Director counters that the exemption provided in section 1720, subdivision (c)(4) does not apply because it exempts affordable housing projects paid for solely with funding from a low and moderate income housing fund, or by a combination of such funds and private funds. The subject project did not qualify because, while some of its funding was obtained from a qualified fund, other funding was not. Similarly, the exemption stated in section 1720, subdivision (c)(6)(E) does not apply because it exempts certain affordable housing projects when the public funding element is limited to below-market interest rate loans. Here only part of the project's funding consisted of below-market interest rate loans, thus taking the project outside the scope of the section 1720, subdivision (c)(6)(E) exemption.

We agree with the Director that the project did not qualify for either of the claimed exemptions from the prevailing wage law. We affirm the judgment.

II THE PREVAILING WAGE LAW

The Prevailing Wage Law, sections 1720-1861, is a comprehensive statute governing the minimum wage standards on public works construction projects. (Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 986.) All workers employed on public works costing more than $1,000 must be paid not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which public work is performed. (§ 1771.)

Under California law, a project is considered a "public work" if it is paid for, "in whole or in part out of public funds," among other requirements. (§ 1720, subd. (a)(1).) Whether a particular construction project constitutes a "public work" subject to the prevailing wage requirements is determined by reference to section 1720. Section 1720, subdivision (a)(1), defines "public works" to include: "Construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds." Section 1720, subdivision (b)(1) defines the phrase "paid for in whole or in part out of public funds" to include, among other things, direct payments of money "or the equivalent of money by the state or political subdivision" and "loans, interest rates, or other obligations . . . that are paid, reduced, charged at less than fair market value, waived, or forgiven by the state or political subdivision." (§ 1720, subd. (b)(1), (4).)

Section 1720, subdivisions (c) and (d) set forth a number of exemptions to the prevailing wage law for publicly-financed housing projects. One exemption, section 1720, subdivision (c)(4), applies to affordable housing projects receiving money from a redevelopment agency's low and moderate income housing fund. Another exemption, found in section 1720, subdivision (c)(6)(E), applies to low-income residential projects that receive public low-interest loans.

The Director of the Department of Industrial Relations is responsible for setting the general prevailing wage according to statutory criteria. (§ 1770.) The Director is also charged with issuing opinions regarding whether a specific project or type of work requires compliance with the prevailing wage law. (Cal. Code Regs., tit. 8, § 16001, subd. (a)(1); Lusardi Construction Co. v. Aubry, supra, 1 Cal.4th at pp. 988-989.) Any interested party may file a request with the Director to determine whether a project is covered under the prevailing wage law. (Ibid.)

III FACTUAL AND PROCEDURAL BACKGROUND

There is no material dispute between the parties ...


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