Your Subdivision May Be a 'Public Work' Subject to Prevailing Wage Laws


A recent appellate decision considered whether Mello-Roos financing constitutes "public financing" under the Labor Code such that the prevailing wage laws apply to a project receiving such financing and, if so, whether a safe harbor was available so the entire project was not subject to them. In Azuza Land Partners v. Department of Industrial Relations (2010) 191 Cal.App.4th 1, the court determined that an entire planned community was a "public work" because it received partial public funding to construct some of the public improvements required as a condition of approval. The obligation to pay prevailing wages, however, fell within an exemption in the statute so that only the public improvements were subject to prevailing wage laws, which included those that were to be privately funded.

Azuza Land Partners (ALP) was the owner of the Rosedale master planned community that involved the potential development of more than 1,200 homes plus commercial space and significant public improvement work. The latter included construction of a public school and adjoining park, freight under-crossings, sanitation district facilities, and backbone and in-tract street, bridge, storm drain, sewer, reservoir, dry utilities, park and landscaping improvements for the cities of Azuza and Glendora. The City of Azuza agreed to provide partial funding of required public facilities through Mello-Roos tax bonds. It established a community facilities district (CFD) to sell the bonds and a special tax was levied against the parcels for the indebtedness. The specific public facilities that were to be built using Mello-Roos funds were identified after the bonds were issued. The total cost of construction of all public facilities was approximately $146 million. The CFD issued approximately $71 million in Mello-Roos bonds and the remaining public improvements were to be constructed at private expense.

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