Request By:
Mr. Henry M. Reed III
Attorney at Law
Suite 890 Starks Building
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Robert L. Chenoweth, Assistant Deputy Attorney General and Chief Counsel
You have asked the Office of the Attorney General to consider the effect of House Bill 299, 1982 General Assembly, relative to the prevailing wage rate. You stated you are Bond Counsel in connection with a proposed authorization, issuance and sale of $1,100,000 Monticello Independent School District - Kentucky School Building Authority School Building Revenue Bonds, dated August 1, 1982. The net proceeds of these bonds will be utilized to meet the expenses incident to the construction of "special purpose facilities to supplement the elementary school." The Official Statement prepared with regard to this project describes the special purpose facilities as a two story masonry and steel building with energy conserving insulation windows; the ground floor including equipped areas for home economics, industrial arts, music rehearsal and drafting and the second floor including physical education facilities.
Three questions have been presented by you concerning House Bill 299:
1. Does the amendment of KRS 337.010(3)(e) in fact exclude "buildings constructed as institutions of learning" from the definition of "public works? "
2. Does the definition of "buildings constructed as institutions of learning" include within the exemption adjunct facilities for the excluded buildings, such as access roads, sewers, sewage disposal plants or other facilities which, financed alone, might be considered "public works" ?
3. Is the utilization of state funds (through the Authority's participation, the Capital Outlay Allotment, or otherwise) germane to the determination of whether or not "buildings construed as institutions of learning" are exempt?"
We are of the formal opinion the answer to your first two questions is in the affirmative and in the negative as to your third question.
The parts of House Bill 299 relevant to our consideration of your questions are the amendments to the terms "construction" and "public works. " KRS 337.010(3)(a) and (e) respectively now read as follows:
(3) As used in KRS 337.505 to 337.550 unless the context requires otherwise:
(a) "Construction" includes construction, reconstruction, improvement, enlargement, alteration or repair of any public works by contract fairly estimated to cost more than two hundred fifty thousand dollars ($250,000) in 1982 and adjusted annually on July 1 thereafter according to the change in the consumer price index released by the U.S. department of labor, bureau of labor statistics;
* * *
(e) "Public works" includes all buildings, roads, streets, alleys, sewers, ditches, sewage disposal plants, waterworks and all other structures or work except for buildings constructed as institutions of learning constructed under contract with any public authority. However, the provisions of this section shall not apply to construction conducted by a city, county, urban-county government or school district unless such construction is financed with fifty percent (50%) or more of state funds.
KRS 337.505 to 337.550 cover prevailing wages regarding public works. The thrust of these provisions is that prevailing wages are to be paid unless exempted from this requirement.
Our interpretation of House Bill 299 and specifically the new definitions of "construction" and "public works" leads to a series of conclusions which in turn support the answers provided to your questions. First is that with a public works construction project that will cost less than two hundred and fifty thousand dollars, prevailing wages need not be paid. Second, with a public works construction project in the form of buildings * to be used as institutions of learning, irrespective of costs and irrespective of source of funds utilized, prevailing wages need not be paid. Thirdly, with a public works construction project, other than for buildings to be used as institutions of learning, in an amount exceeding two hundred and fifty thousand dollars ($250,000), prevailing wages need be paid only if fifty percent or more of the project is being financed with state funds.
Thus, as to your first question, we believe it is clear that "buildings constructed as institutions of learning" are excluded from the definition of "public works" with the result being that prevailing wages need not be paid in constructing such buildings. As to your second question, we believe "buildings constructed as institutions of learning" could include adjunct facilities, as you referred to them, when such adjunct facilities are all a part of the "learning building" project and are all a part of one contract. We do not believe the General Assembly intended in that situation that support facilities such as sewers, sewage disposal plants, access roads and the like necessary for the complete utilization of the learning building are to be treated differently than the learning building structure itself.
However, such a project should be carefully scrutinized to insure that the adjunct facilities being included are a part of the project because they are necessary to the complete utilization of the learning building. Any attempt to avoid the prevailing wage provisions in building a facility (not a learning building) by simply including it in a learning building project would violate the prevailing wage law. One measure of intent might be the cost of building the adjunct facilities as a percentage of the cost of the total project. However, each situation would stand on its own facts.
Lastly, by the plain language of KRS 337.010(3)(e) defining "public works, " we do not see source of funds as being germane so long as the public works construction project is for a learning building as discussed above.
We trust the above will be of assistance in the application of the provisions of House Bill 299.
Footnotes
Footnotes
* A further discussion of this term appears below.