San Antonio Building and Construction Trades Council, Tim McGrath and Bob Salvatore v. City of San Antonio--Appeal from 57th Judicial District Court of Bexar County

DISSENTING OPINION

No. 04-05-00675-CV

SAN ANTONIO BUILDING & CONSTRUCTION TRADES COUNCIL,

Tim McGrath, and Bob Salvatore,

Appellants

v.

CITY OF SAN ANTONIO,

Appellee

From the 407th Judicial District Court, Bexar County, Texas

Trial Court No. 2005-CI-05812

Honorable Joe Frazier Brown, Jr., Judge Presiding

Opinion by: Karen Angelini, Justice

Dissenting opinion by: Catherine Stone, Justice

Sitting: Catherine Stone, Justice

Karen Angelini, Justice

Rebecca Simmons, Justice

Delivered and Filed: February 21, 2007

For decades the Prevailing Wage Rate statute has embodied the public policy of the State of Texas which places great importance on the payment of fair wages to construction workers who build public works in the state. With the advent of public-private partnerships and ventures, questions arise about just what constitutes a public project and whether public funds are being used to fund construction of a public project. Indeed, sophisticated real estate lawyers are advised that "[c]areful structuring of a transaction may allow an exemption from prevailing wages to be claimed ...." Teresa Buchheit Klinkner, Fair Play, 26-JAN L.A. Law. 46 (January 2004).

The City of San Antonio's project agreement with Hotel Investments, L.P. to construct and operate the convention center hotel is a prime example of a public-private venture which raises questions about payment of prevailing wage rates. Through artfully crafted project documents, the City seeks to avoid application of the prevailing wage rate statute and thus circumvent this state's long-standing commitment to payment of fair wages to construction workers on publically-funded public projections. Because the majority opinion permits this conduct, I respectfully dissent.

The majority concludes that public funds were not used in the construction of the convention center hotel. By holding that the plain meaning of the statutory phrase "construction of a public work...paid for in whole or in part from public funds" means public funds actually used to construct the public work, the majority draws a very restrictive definition of "public funds."

The majority argues that the taxes at issue are not funds used for the actual construction of the convention center hotel because they will be used only as security in the event the developer is unable to pay the bond holders. The majority thus holds that the taxes paid as security are not public funds used in the construction of the convention hotel center and to include them in the definition of "public funds" would wrongly expand the scope of the prevailing wage rate law. I disagree.

The City Council created the nonprofit convention center hotel finance corporation so that it could issue Series 2005A Tax-Exempt Empowerment Zone Bonds totaling up to $130,000,000.00 and Series 2005B Taxable Revenue Bonds totaling up to $100,000,000.00. The express purpose of the nonprofit corporation is to finance "a portion of the costs required to construct ... a privately-owned hotel ...." (Emphasis added). Additionally, as security for the revenue bonds, the corporation pledged funds collected by the City from various state and local hotel occupancy tax revenues generated from the project. While the bonds expressly state that they are not a general debt or an obligation of the City, the State of Texas, or any political subdivision of the State, these security interests were at stake and I believe the possibility that they could be used to satisfy the debt is enough to include them in the "public funds" definition. Additionally, the Developer has benefitted from tax-exempt bonds during the hotel construction. These examples are arguably similar to other less common examples of public funds, such as fee waivers, low interest loans, and reduced rent on ground leases. See Teresa Buchheit Klinkner, Fair Play, 26-JAN L.A. Law. 46, 48 (January 2004).

Because I believe that the term "public funds" should be construed to support the broad purpose of the prevailing wage rate law, the text of section 2259.002 of the Government Code should be read to incorporate within the "public funds" definition construction projects of public works financed through tax breaks and bond statutes that might necessitate the use of public funds. By rejecting the majority's argument and adopting this more expansive reading of "public funds," I believe that the purpose of the law is best served.

Catherine Stone, Justice