The Austin Chronicle

Marriott Incentives Deal Dies on Dais

Council takes no action on proposed revisions to prevailing wage ordinance

By Mike Kanin, August 16, 2013, News

After months of posturing and arguing, deciphering a set of conflicting memos from the City Manager's office and listening to hours of public hearings, City Council finally attempted last Thursday to dispatch with the lingering issue of $3.8 million in incentivized fee waivers for a new downtown Marriott hotel by doing ... nothing.

That is, when it came time to vote on an item placed on the agenda to clarify just what it was that council members meant by "prevailing wage" when they told the developer behind the Marriott project, Indiana-based White Lodging Services Corp., that their construction workers had to be paid on that scale, Council took no action. Mayor Lee Leffingwell reminded his colleagues that by not voting on a clarifying amendment to the agreement between White Lodging and the city, they would reaffirm the initial document. What the parties – White Lodging, city management, and the labor group at the vanguard of the fight for prevailing wages, the Workers Defense Project – were left with was a statement from Council Member Mike Martinez.

Martinez had originally moved, back in June of 2011, to include a prevailing wage clause in the incentives deal. Now, 26 months later, he hinted at just how uninformed he and his colleagues had been about the idea. "I'm not going to point to all of the mistakes that were made, I believe that it's up to each individual to own their mistakes. I'm going to speak to the mistakes that I made – that I believe were mistakes. It doesn't change my intentions," he said. "Two years ago, we had this before us, and I think the mistake that I made was that I put an amendment on that I really didn't know the full ramifications of what that would mean – but, five other council members also agreed to add that amendment."

For those in need of a refresher: A prevailing wage attachment was introduced to the 2011 deal. Council Member Bill Spel­man asked White Lodging President and CEO for Investments and Development Deno Yiankes if the company had dealt with prevailing wages on any of its other projects. Yiankes said yes, and reiterated that position last week. But Yiankes also said that the company subsequently determined that the city of Austin has no prevailing wage policy – though in fact, city code states that contractors on city-contracted projects must pay the prevailing wages "for their trade, as set by the U.S. Department of Labor," although that policy had not previously been applied to private projects. Yankes said Martinez referred him to former Assistant City Manager and convenient fall guy Rudy Garza. With Garza's well-documented "OK," White Lodging proceeded with a definition of prevailing wage that allowed the firm to get to those figures by what has been termed an average rate: low-end pay is increased, argues White Lodging, at the expense of some higher-wage positions not compensated by the full prevailing amount.

For some, this is – at best – creative math. The Dept. of Labor sets prevailing wage rates, based on labor market surveys, a fact that would seem to limit the sort of averaging that White Lodging says it used. So when the WDP began hearing complaints from workers, all civic hell broke loose. City management eventually reversed Garza's position, and, after it received what it says was an inadequate response from White Lodg­ing, Assistant City Manager Anthony Snipes sent a letter earlier this year that ordered the company to forfeit the $3.8 million in fee waivers – presumably now to be paid in full – it had received for the project.

White Lodging then asked for Council to weigh in again on the whole mess – something no one was eager to do – and after some June 2013 deliberation and a postponement, everyone found themselves back in Council chambers.

Yiankes was clearly frustrated. He noted that a full-scale prevailing wage approach "would erase the fee waivers" (that is, in the sense that the additional labor costs would be higher than the $3.8 million in waived fees). He also continued to make a point about the wider implications of the confusion brought by the adventures of the past two years, as city staffers questioned, in effect, the company's fulfillment of its promises. "I ask, why isn't City Council and the city manager doing what they said they would do," he responded, recounting what he described as conflicting information.

After the hearing, White Lodging attorney Richard Suttle – not accumstomed to defeats at City Hall – said that the company would explore its options. Sovereign immunity could protect the city from a breach of contract suit, and Council's non-action, which avoids an interpretation that there was something to correct, may protect it from other legal challenges. And the hotel, already nearly 30% complete, will be built – presumably on contractual pay scales that still "average" prevailing wages. Still, no one on the city's side of things comes out of this looking particularly shiny, with management having been embarrassed by the Garza snafu.

Whatever else it means, the episode has embedded prevailing wages as one of the chips – or "community values" – at issue in future debates over city incentives (such pay standards were already mandated in city-developed construction projects). Beyond that, it's another major public victory for the WDP. Martinez, after all, never budged from the idea that his original intent in all of this was to enforce an entire program of prevailing wage salaries – the original target set by WDP. And City Hall buzz has it that the organization's Gregorio Casar and Emily Timm hit home runs with their Council presentations in advance of last Thursday's meeting. Of course, if you believe The New York Times, which ran a major profile of the group Sunday, Aug. 11, a Workers Defense victory is nothing new.

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