Request By:
Mr. D. Patton Pelfrey
Chairman of the Board
Preservation Alliance of
Louisville and Jefferson County, Inc.
712 West Main Street
Louisville, Kentucky 40202
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Martin Glazer, Assistant Attorney General
You have requested an opinion of this office as to whether Preservation Alliance of Louisville and Jefferson County, Inc. is a public authority subject to the prevailing wage provisions of KRS Chapter 337 under the 1978 amendment to the definition of public authority in KRS 337.010(3)(d). That statute was amended in 1978 to add the following language:
". . . and any non-profit corporation funded to act as an agency and instrumentality of the government agency in connection with the construction of public building facilities, including but not limited to the types of entities funded through revenue bonds; . . ." (Emphasis supplied)
As you point out, the term "public building facilities" is not defined in the prevailing wage law nor anywhere else, and that it is your opinion that it is intended to be more restrictive than "public works" because the pre-1978 definition of "public authority" already included "publicly owned or controlled corporations, authorized by law to enter into contract for the construction of public works. " You also point out that "public works" is a defined term which includes in addition to "buildings", "roads, streets, alleys, sewers, ditches, sewage disposal plants, waterworks and all other structures or works. . ." You advise us that Preservation Alliance is a non-profit corporation recognized by the Internal Revenue Service as a section 501(c)(3) educational organization, that your entity acquires, renovates and resells houses in historic districts, these sales are to the general public when renovation is completed, and that all proceeds from such sales less administrative costs go back into new projects. You further state that approximately 75 percent of the corporation's capital comes from federal community development funds from the Community Development Cabinet of the City of Louisville and that the rest is borrowed from banks. You expect to receive in the future federal funds from the Kentucky Heritage Commission in the form of matching grants. It is your contention that Preservation Alliance is not a "public authority" within the meaning of the prevailing wage law and that its activities should not be subject to prevailing wages.
The prevailing wage law is set out in KRS Chapter 337, specifically some of the definitions in KRS 337.010 and 337.505 through 337.550, and the appropriate penalty sections in 337.990. The purpose of the prevailing wage law is to require the payment of certain minimum wages to construction workers on public projects. Thus, it was necessary for the statutes to define "public authority" and "public works" . For many years, the term "public authority" in KRS 337.010 was defined as:
"Any officer, board or commission of the state, or any political subdivision or department thereof in the state, or any institution supported in whole or in part by public funds authorized by law to enter into any contract for the construction of public works. "
In 1970, the General Assembly amended this section as follows:
"'Public authority' means any officer, board or commission of this state, or any political subdivision or department thereof in the state or any institution supported in whole or in part by public funds, including publicly owned or controlled corporations, authorized by law to enter into any contract for the construction of public works. "
In 1978, this definition was again amended to include:
". . . and any non-profit corporation funded to act as an agency and instrumentality of the governmental agency in connection with the construction of public building facilities, including but not limited to the types of entities funded through revenue bonds."
It is apparent that your entity is a non-profit corporation, but it is not apparent that it is necessarily an agency or instrumentality of a governmental agency in connection with construction of public building facilities. From what you have advised us, it does not appear that you are funded through revenue bonds. We have obtained copies of the Articles of Incorporation of Preservation Alliance of Louisville and Jefferson County, Inc., and find in Article III(a):
"The purposes of the corporation shall be to carry on exclusively public charitable and educational activities within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1954 or its successor, including the advancement of public education and culture, combatment of community deterioration, and erection of public buildings and works through study, restoration, and preservation of the historic and prehistoric resources of Jefferson County. . ." (Emphasis supplied)
It is seen from this power that your corporation has authority to erect public buildings. Therefore, we cannot say that your entity, per se, is not a public authority under the Kentucky prevailing wage law.
For example, if your entity were to be used as an instrumentality of a public agency to build and erect a public structure (that is, to be used by the public generally), and that after building such structure, the structure was then turned over to a public entity, such project would be considered public construction within the meaning of the prevailing wage law.
However, your restoration of private homes to be sold to private individuals, in our view, is not the construction of public works or public building facilities even though there may be a public purpose to your activity, justifying funds from public agencies.
In other words, in order for your entity to be involved in prevailing wage work, you first must act as an agency and instrumentality of the government, and the construction must be of public building facilities. In the activity of restoring private homes to private individuals, we do not find any construction of public building facilities essential to the definition of "public authority" .
Our opinion is bolstered by Gregory v. City of Lewisport, Ky., 369 S.W.2d 133 (1963) which determined that a city's building of a plant to be used by a private corporation was not covered by prevailing wage law. Of course, that decision was based on law then in effect. But, the new changes still require that the entity's end product must be "public construction". Your end product is the restoration of a house to be purchased by private individuals and used for private purposes. There is a public purpose served in that it places dilapidated houses back on the tax rolls, but it does not meet the definition of "public building facilities" required in KRS 337.010.
In that regard, such activity is not covered by the prevailing wage law.