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Then There's This: Hotel Hypocrite

Developer wants to cancel wage agreement but keep incentives

By Amy Smith, Fri., March 8, 2013

Las Manitas Avenue Cafe, back in the day
Las Manitas Avenue Cafe, back in the day
Photo by John Anderson

If city officials need a poster child for reforming the city's economic incentives policy, they need look no further than White Lodging Services Corp., the developer of the 1,012-room J.W. Marriott hotel under construction at Congress Avenue and Second Street.

Nearly two years after the City Council approved a $4.3 million incentives deal for the Indiana-based company, White Lodging now claims those incentives are "essentially worthless" if it's forced to follow the prevailing wage terms it agreed to as part of its 2011 economic package.

That's the word from the megadeveloper's influential attorney, Richard Suttle, who in a four-page letter to City Council last week, asked the city to take action by doing one of three things:

Halt the city's investigation into wage complaints from construction workers building the J.W. Marriott Hotel on Congress Avenue.

Allow the project to continue operating under the agreement as it was erroneously interpreted by former Assistant City Manager Rudy Garza, who gave the okay to pay wages below what Council had required.

Amend the wage agreement to reflect the misinterpretation of former ACM Garza, who resigned from the city in 2012 and is now a business associate of Bury+Partners, an engineering consultant on the hotel project.

There was no confusion, however, over what White Lodging would be getting from the city: roughly $3.8 million in waived development fees and up to $500,000 in shared costs to relocate a wastewater line.

The agreement passed on a 5-2 vote with a last-minute amendment, on a motion by Council Member Mike Martinez, requiring White Lodging to pay prevailing wage to construction workers. Martinez's amendment also included the requirement that White Lodging refund the city for the amount of the fee waivers it received if the company is found to be in violation of the wage hook.

In January, Assistant City Manager Anthony Snipes wrote a memo to the mayor and Council suggesting that White Lodging wasn't holding up its end of the wage bargain. He laid most of the blame on Garza for providing "direction and approval to White Lodging that was contrary to the ordinance passed by Council." He also said the city's contract management department had initiated a wage audit after receiving verbal complaints from leaders of IBEW Local Union 520, which represents electrical workers. Their complaints got another boost in Febru­ary when the Workers Defense Project and other labor advocates announced that two additional complaints had been filed by carpentry workers.

Still, White Lodging – and apparently city staff – remained undeterred by the advocates' Feb. 6 press conference and the city's vow to get to the bottom of the wage problem. According to records obtained by Workers Defense representatives, the city waived $9,590 in crane erection fees for the hotel on Feb. 7 – just one day after the press conference.

Through a spokeswoman last week, city officials said they were still pursuing the wage audit of White Lodging in spite of Suttle's letter.

It should be pointed out that White Lodging has been an on-again, off-again thorn in Austin's side for seven years running. Over the objections of several City Council members past and present, they knocked down a chunk of local culture when they demolished the buildings that housed the iconic Las Manitas Avenue Cafe, a day care center, and the Tesoros Trading Company. The site sat empty through the bust, but White Lodg­ing eventually returned to City Hall seeking a zoning change for additional square footage and a reminder that they were the ones doing Austin a favor by accommodating the city's need for a second convention center hotel. White Lodging continued building upon that message as the developer and its representatives pushed for an incentives deal. They got the deal they wanted, but they don't like the strings that were attached at the 11th hour.

While Suttle's memo to Council could be perceived as a veiled threat, the attorney assured Council that the letter "is not to be construed as staking out any legal positions. It is simply a request to resolve what appears to be the unintended consequences of a last minute condition placed on the fee waivers."

Council's discussion and vote surrounding the last-minute wage amendment was indeed confusing. But confusion and unintended consequences are what we've come to expect when Council is expected to rubber-stamp, on an "emergency" basis, major deals involving major taxpayer money.

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