Pennsylvania Prevailing Wage Act Provisions Apply When Public Funds Are Used for a Public Purpose
In Lycoming County Nursing Home Association v. Department of Labor and Industry, Prevailing Wage Appeal Board, 156 Pa. Commw. 280, 627 A.2d 238 (Pa. Cmwlth. 1993), the county had established a new, private, non-profit corporation, referred to as the "Association," to run a facility that serves indigent patients.
The incorporators of the Association were the county's three commissioners.
The County loaned the Association $ 500,000.00 for start-up costs.
The Association applied for a certificate of need from the Department of Health, which was subsequently issued to the County.
Ten months after incorporation, the Association's bylaws were amended to provide for nine directors.
The Association's directors voted to eliminate the positions set aside for the commissioners, and the commissioners resigned.
The Association solicited bids to construct a new facility, and awarded the contract to the lowest bidder.
A month later, the Association entered into a lease agreement with the County, under which the County authorized issuance of two bonds totaling $ 11,590,000.00, which was loaned to the Association.
The county remained liable on the bonds if the Association defaulted.
Additionally, the County leased the property on which the facility would sit for twenty-five years, at the conclusion of which the County would own all improvements on the property.
The Association agreed to construct the facility and run the facility's day-to-day operations.
The contractor and Association disputed whether the Pennsylvania Prevailing Wage Act's provisions applied, with the Association arguing that it was not a public body.
The Court disagreed, reasoning that:
The County here clearly was not just involved with the financing of the project.
As No. 28-1974, however, notes, funds for a project, when obtained through the issuance of revenue bonds ... for which it pledges its credit and must repay in the event of default by the private entity, are public funds when a public purpose is furthered.
As the Board found, the County loaned money to the Association and remained liable on the bond if the Association defaulted.
Moreover, the County leased the property to the Association.
The County's Commissioners undertook the feasibility study, appointed themselves as Directors, and, as Directors, influenced the Association when it contracted for the building and the operating of the facility.
In addition, construction began before the lease agreement for the land was signed and before the bonds were issued, indicating that the Commissioners knew that the outcome of the negotiations between them and the Association's Directors would be favorable.
Although the Association actually contracted for the construction of the project and undertook the responsibility of the day-to-day activities of the nursing home, the Board found that the funds were public funds and were intended to further a public purpose.
Moreover, the Act applies even when a "public body ... proposes the making of a contract for any project of public work." Section 4 of the Pennsylvania Prevailing Wage Act.
Therefore, we hold that because the Association used public funds for a public purpose that was proposed by a "public body," it stands in the shoes of the County, is a "public body" doing "public work" and is covered by the Pennsylvania Prevailing Wage Act. LycomingCounty, 627 A.2d at 243.