State ruling could drive up road work costs
When tiny Youngwood decided to resurface five streets in 2005, the borough awarded the contract to the lowest bidder.
This former railroad town of 4,100 residents has only 1.3 miles of streets. Officials didn't give the routine maintenance project a second thought.
But after the work was completed, the state Department of Labor and Industry decided it was more than a simple resurfacing project that cities, boroughs and townships across the state undertake each year.
The department's Prevailing Wage Board ruled that the repaving amounted to reconstruction because the contractor used a milling machine to remove 3 1/2 inches of the old pavement. Milling the road before repaving is considered reconstruction, and the contractor should have paid his employees higher prevailing wages.
That decision increased the cost of the $183,000 project by $15,000. Youngwood has a total budget of $668,000, according to borough secretary Diane Hague.
"For a budget the size of Youngwood's, it's significant," said borough Solicitor Gerald Yanity.
Youngwood filed a grievance with the Department of Labor and Industry. It lost, then appealed to Commonwealth Court, which ruled against the borough, saying that milling made the job a "construction" project subject to prevailing wage-rate laws.
The borough is appealing the decision to the state Supreme Court in a case that could have a far-ranging financial impact on municipalities' street paving plans across the state, say local and state officials.
The Prevailing Wage Act requires contractors handling publicly funded projects to pay employees a predetermined rate for certain classes of jobs if the project costs more than $25,000. Those rates are higher than the wages normally paid to workers on nonpublic projects.
The average hourly wage for laborers on paving projects runs from $12.50 to $28.05, depending on the region of the state, according to Ron Geist of the Pennsylvania Associated Constructors in Harrisburg.
Prevailing wage rates range from $28.19 to $31.39 an hour, according to the state's Prevailing Wage Board.
Forcing municipalities -- many of them cash-strapped -- to pay prevailing wages automatically increases the cost of projects by 30 percent, said Chris Cap, deputy executive vice president of the Pennsylvania State Association of Boroughs in Harrisburg.
He said the ruling could affect many cities, townships and boroughs. "This law simply does not reflect today's economic realities," he said.
Rob Ritson, manager of Hempfield, said the township maintains more than 200 miles of roads and spends more than $900,000 a year on resurfacing.
"If we have to pay prevailing wages, that's less roads we'll be able to do," Ritson said. "It's a huge issue."
Guy Costa, director of Public Works for the City of Pittsburgh, said the court's decision is unlikely to impact its paving program because the city already pays prevailing wages on resurfacing projects.
Costa's department will spend $10 million this year to pave portions of the city's 1,080 miles of roads.
Tarentum Manager Bill Rossey said the borough has had to pay prevailing wages on some projects.
"We have received grants where it was stipulated that the project had to pay prevailing wages," Rossey said.
But Rossey said council has given little thought about whether the type of road work it needed fell under prevailing wage laws.
"Usually, when we do our paving, we bid it out through our engineers," he said.
Brownsville Mayor Lewis Hosler said the borough has had problems with projects requiring a prevailing wage and, as a result, does little paving.
"It does increase the cost to the borough, and we have to make sure the contractor pays the prevailing wage. We've run into that situation a couple of times," Hosler said.
When Youngwood awarded the paving contract, the borough relied on a PennDOT directive that considered paving with blacktop as maintenance. But in its opinion, Commonwealth Court judges said the PennDOT directive was "no longer in use."
Attorney Les Mlakar, who is solicitor for several Westmoreland communities, said the definitions used by PennDOT and the Department of Labor and Industry are at odds.
"It's really unclear as to the difference between what is reconstruction and what is repair," Mlakar said.
For smaller municipalities, the ruling could mean rougher roads ahead.
Ritson said Hempfield, like other municipalities, relies on Liquid Fuels funding to pay for paving. Unless the state recalculates its formula for determining a municipality's share of that money, municipalities won't be able to cope with increasing costs of fuel and asphalt.
"The state refuses to grant relief to local governments, and what they need to do is make more money available for road maintenance projects," Ritson said. "This couldn't happen at a worse time for local governments with asphalt prices and fuel costs increasing. These increases are coming at a rate faster than we're generating revenue."