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August 24, 2010 John Duncan, Director California Dept. of Industrial Relations Office of the Director 455 Golden Gate Ave. San Francisco, CA 94102

 Also admitted in Arizona  Admitted in Hawaii  Also admitted in Nevada  Also admitted in Illinois  Also admitted in Missouri  Also admitted in New York


Request for Coverage Determination West Village Project Regents of the University of California (Davis campus)

Dear Mr. Duncan: This office represents the Northern California Carpenters Regional Council (“Carpenters”), whose affiliates represent members who work on public works construction in Northern California. These workers are directly affected by the issue of whether or not the project referenced above is subject to the requirement to pay prevailing wages found in Labor Code §1770, et seq. Our client has contacted us regarding the question of whether prevailing wages are required on the project described above. On behalf of the Carpenters, we wish to submit the following question to you for a determination of coverage under the California prevailing wage laws. QUESTION: Is construction of the mixed-use UC Davis West Village project covered by California’s prevailing wage requirements? It is our belief that this project is covered by California’s prevailing wage requirements, for reasons we outline below: 1. This project is a public work, based upon the contributions of UC and other public entities to the construction project. 2. The UC Davis West Village Project constitutes one integrated project, rather than several separate projects. 3. This project falls under one of the exclusions established by case law to UC’s general constitutional autonomy from state regulation; namely, that the scope of the project goes beyond internal university affairs, due to the presence of commercial properties and facilities for community college and K-12 students.

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August 24, 2010 Page 2

FACTS UC Davis has published comprehensive background information on this project, which can be found at The relevant facts are as follows: 1. The UC Davis West Village Project is a mixed-use project involving the construction of apartments and cottages for UC Davis students and employees, a building called the Davis Center for the Los Rios Community College District, a facility for the Davis Joint Unified School District; 45,000 square feet of retail shops and possibly a future child care center. 1 2. The West Village website 2 describes the apartment housing portion of the project as “oriented around a Village Square anchored by retail shops that will serve as the heart of the community.” 3. The campus is retaining ownership of the land and entering into a ground lease with the private developer for the development of the housing and retail portions of the West Village Center. The University is investing approximately $14.5 million in infrastructure work (primarily for roadways and utilities). 3 4. A contract for the construction of the Davis Center of the Los Rios Community College has been awarded by the Community College District to JDS and requires payment of prevailing wages. 5. It is our belief that the construction contracts covering the majority of the construction in the West Village site do not call for payment of California prevailing wages. We have reviewed the following background documents and will refer to them in the succeeding paragraphs:  Master Ground Lease: Regents of the University of California, Davis and the West Village Community Partnership LLC (“WVCP”); document number OHS West 2601186943.16; 4 West Village Project: Frequently Asked Questions,

1 2 3


W. Village Implementation Plan, Nov. 2006, pp. 2 and 18 West Village Project: Frequently Asked Questions, UC Office of the President Amendment of the Budget for Capital Improvements and the Capital Improvement Program and Approval of External Financing for West Village Backbone Infrastructure, Davis Campus (July 13, 2007) pp. 2-3. Note: You will need to obtain a password from UC Davis to access this document.

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2003 Long Range Development Plan Final Environmental Impact Plan (“EIR”) Scroll down to find West Village Project portion of the plan. West Village Implementation Plan, 2006 (UC Davis) UC Office of the President Amendment of the Budget for Capital Improvements and the Capital Improvement Program and Approval of External Financing for West Village Backbone Infrastructure, Davis Campus (July 13, 2007)

 

ANALYSIS 1. The Project is a Public Work A.    Overview The University is borrowing and investing $14.5 million dollars in road, utility, and related infrastructure construction. 5 The infrastructure work is part of a single, integrated project and represents more than a de minimis 6 contribution The University is retaining ownership of the land and leasing it to the developer. If the lease is for less than the fair market value (“FMV”) of the land, this would bring the project under the category of public works as defined in Labor Code §1720 (b)(3). The University is making a payment to the developer in the amount of $4.5 million to cover the costs of constructing the improvements to the university-owned land at the end of the ground lease period. 7 There are a number of underlying facts that show that this project is a public work:



UC Office of the President Amendment of the Budget for Capital Improvements and the Capital Improvement Program and Approval of External Financing for West Village Backbone Infrastructure, Davis Campus (July 13, 2007) The infrastructure portion of the work represents approximately 5.2% of the total cost of the project. To the best of our knowledge, amounts in excess of 2% have not been found by DIR to be de minimis in past cases. Ground Lease, pp. 44-45


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Elements Providing a Basis for Coverage 1. The Project is a Single Integrated Project

Whether or not the entire scope of work contemplated in the development of the West Village Project is a single, integrated project will influence the outcome of the coverage determination. This aspect of the analysis deals with several different questions:    Is the road and utility work integrated with the rest of the project? Are the community college and Joint Davis Unified School District facilities integrated with the rest of the project? Is the retail space and housing for university students and employees part of a single, integrated project?

There are a number of relevant court cases and DIR opinion letters on the question of whether a project is a series of separate projects or a single, integrated project. Despite the fact that DIR no longer formally recognizes precedential decisions, DIR continues to rely on the reasoning in the Vineyard Creek Hotel and Conference Center, Redevelopment Agency, City of Santa Rosa (PW 2000-16, October 16, 2000) in order to determine whether construction is a series of segregated projects or a single, integrated project. The determination as to whether there are single or multiple projects must be made on a case-by-case basis. The factors to be analyzed pursuant to the reasoning set forth in the Vineyard case are as follows:      Organization of construction; Physical layout; Oversight, direction and supervision; Financing and administration; and General interrelationship of the various aspects of the project.

DIR Opinion Letter re: Public Works Case No. 2007-101 8 dealt with a mixed-use development involving several public entities (a city and a redevelopment agency) and a private developer. The city conveyed 15.5 acres of land to the developer at no cost. The redevelopment agency did the site preparation and agreed to operate and maintain the Center. DIR found that contribution of public agency was not de minimis under LC§1720(c) (3). The decision analyzed whether this was one project or multiple projects, using the Vineyard Creek analysis. DIR based its determination that the project was one integrated project on the following factors:    

The entire Center was developed in coordination with the developer, city and redevelopment agency as a single development plan. The movie theater construction (alleged by the developer to be a separate project) was a required and key component of the plan from the beginning of the planning process. The facilities were interconnected by walkways, open space and shared parking. The developer, city and redevelopment agency exercised approval authority over the architectural plan of the theater.

Movie Theater Construction at Glendale Town Center; Glendale Redevelopment Agency (January 12, 2009)

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Development of the project would not have been economically feasible without the public financial contributions. The construction schedule of the movie theater was dependent on the preparation and delivery of the site for the theater. The theater opening was dependent on the completion of the common areas, walkways and parking structure. There was a coordinated flow of planning, design, review, approval, and construction activities for the project.

The case on Administrative Appeal re: Public Works Case No. 2006-003 9 involved construction of a replacement conveyor and enclosure improvements for the petroleum storage and handling facility at the Long Beach harbor. The appellants argued that the project was performed under two separate contracts with two separate contractors, and that it was, therefore, two separate projects (with only one contract subject to prevailing wages). DIR held on appeal that there was no basis in law for the argument that construction can be divided into public and private parts through contractual agreements of the parties. DIR relied on Lusardi Construction Co. v. Aubry, 10 which held that the statutory obligation of a contractor to pay prevailing wages cannot be contracted away. DIR found that:        Producing a “usable facility” was the objective of the parties’ agreements. The lease agreement acknowledged the partnership between the private developer and the Port. Definitional terms were common to both contracts. The separate contracts showed interdependence. The two portions of the construction (the conveyors and the enclosure) were physically connected. The construction of the two parts of the construction was connected in time. One aspect of construction was dependent upon completion of the other construction elements. Work under both contracts proceeded under the same Harbor Development Permit. Construction was approved under the same regional air quality management district permit.

The facts relating to function, use, oversight, location, permitting, designs and physical connections of the conveyors and enclosure improvements provided a reasoned basis on which to conclude that these were not two separate construction projects, notwithstanding the two separate construction contracts. The set of documents pertaining to West Village Center cited in this memo establish the following:



Pier G, Pad 14, City of Long Beach (July 3, 2008). (1992) 1 Cal. 45h 976

August 24, 2010 Page 6         

The entire West Village Center is being developed through the cooperation of the Developer, UC Davis, and the other participating public entities. 11 The facilities are connected by walkways, bike paths, open space, and shared parking. 12 The Community College District and the Davis Joint Unified School District are participating in the project. 13 The construction of the buildings is dependent on the prior road and utility work. 14 UC is obligated to maintain related university infrastructure associated with the project.

There is a coordinated flow of planning, design, review, approval and construction for the entire project. 16 University regulations apply to the construction and implementation of the project. 17 The university reserves the right of approval for all design decisions.18 The university exercises substantial control over the project. For example the university issues permits, 19 approves construction contracts, 20 has right to audit books, 21 reviews the environmental remediation plan, 22 responds to situations concerning hazardous substances, 23 has approval rights as to street names and signage, 24 and retains all oil, gas, water and mineral rights on leased land. 25

These factors lead to the conclusion that the West Village Center constitutes one integrated project. 26 2. The Project Is Being Paid for, In Part, By Public Funds The expenditure of $14.5 million dollars on roadway and utility improvements that were an integral part of this development project satisfies the requirement that the project be paid for, in part, by public funding as defined by Labor Code § 1720. The ground lease establishes a 10-year lease of University-owned land to the developer. 27 The university is required, under the
11 12

Frequently Asked Questions, Ibid., page 1; 2003 EIR, Volume III, pp. 2-100-105, 2-118 13 Ibid. 14 Ground Lease, p. 18 15 Ground Lease, supra, pp. 20, 36 16 West Village Ad Hoc Committee on Faculty/Staff Housing Policies within West Village, January, 2008, Exhibit S, Design Review Criteria 17 Ground Lease, supra, pp. 18, 24, 28 18 Ibid., p. 37 19 Ibid., p. 3, 20 Ibid., p. 4 21 Ibid., p. 23 22 Ibid., p. 26 23 Ibid., p. 26 24 Ibid., p. 29 25 Ibid., p. 31 26 West Village Master Plan, Chapter 3, 27 Ground Lease, supra, p. 20.

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agreement with the developer, to pay for the cost of infrastructure improvements on university land leading into the West Village Project, and for other improvements to nearby roadways and intersections called for by the Environmental Impact Report. 28 The university is required to reimburse the developer for the cost of improvements for the Los Rios Community College section of the construction. Ownership of the Community College improvements reverts to UC upon payment from UC to the developer of approximately $4.5 million at the termination of the ground lease. 29 3. The Project Does Not Fall Under Any of the Exceptions to Definition of Public Works Found in the Statute Labor Code §1720, in defining public works, sets forth several types of projects that are not public works. None of them accurately describes the UC Davis West Village Center. Labor Code §1720(c)(1) exempts private residential projects built on private property unless built under agreement with a state agency, redevelopment agency, or local public housing authority. The land on which the West Village project is built belongs to UC Davis and is not private property. The existence of the ground lease does not change the fact that the land is not privately held. Labor Code §1720(c)(2) provides that if a state or a political subdivision requires a private developer to perform construction, alteration, demolition, installation or repair work on a public work of improvement as a condition of regulatory approval of an otherwise private development project, and the state or political subdivision contributes no more money or the equivalent of money to the overall project than is required to perform this public improvement work, the state or political subdivision maintains no proprietary interest in the overall project, and only the public improvement work shall become subject to this chapter. The roadwork and utility installation is an integral part of this development project, not simply work that needs to be done to obtain regulatory approval. Additionally, given the presence of facilities for at least two other public entities (the community college district and the school district), the project cannot be considered an “otherwise private development.” Therefore, this exclusion from the definition of a public work does not apply. Since the University retains ownership of the land and is putting university funding into several aspects of the project (i.e. related infrastructure costs and payment to the developer for some of the improvements to the land), this project meets the definition of a public work. C. The Law Regarding UC Autonomy 1. The General Principle of Constitutional Autonomy for the University of California Having shown that the project is a public work as defined by Labor Code §1720, the next question is whether it is exempt from regulation under the constitutionally-derived right of autonomy of the UC Regents.

Ibid., p. 33, and Environmental Impact Report,, Section 2, pp.115-119. 29 Ground Lease, supra, p. 44-45, 57, 80

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The California Constitution sets forth the general principle that “the University of California shall be administered by the regents with full powers of organization and government, subject only to such legislative control as may be necessary to insure compliance with the terms of the endowments of the university and the security of its funds.” (§9, Article IX, California Constitution). As will be discussed in more detail below, appellate courts are split in their interpretations of this Constitutional provision with respect to whether or not prevailing wage laws, alone, constitute a matter of statewide concern and go beyond the purview of internal university affairs.30 However, other aspects of this project take it beyond the purview of purely internal university affairs. 2. Exceptions to the General Principle of Constitutional Autonomy There is a consistent line of court cases establishing three exceptions to the immunity from state law enjoyed by the UC under the California Constitution.    The Legislature is vested with the power of appropriation. General police power regulations governing private persons and corporations may be applied to the university. Legislative regulation of public agency activity not generally applicable to the public may be made applicable to the university when the legislation regulates matters of statewide concern not involving internal university affairs.

(Tolman v. Underhill (1952) 39 Cal.2d 708, 712; Scharf v. Regents of the University of California (1991) 234 Cal. App.3d 1393, 1402; Division of Lab. Stds. Enforcement v. Ericsson Information Systems (1990) 221 Cal. App.3d 114, 123; San Francisco Labor Council v. Regents of the University of California (1980) 26 Cal.3d 785, 789; Regents of the University of California v. Aubry (1996) 42 Cal.App.4th 579) 3. Applicability of the Case Law to West Village Center Project

In Division of Lab. Stds. Enforcement v. Ericsson Information Systems, Inc. (supra) the appellate court found that the UC Regents’ public works contracts were subject to the state prevailing wage law. However, another appellate court refused to allow the Labor Commissioner to enforce the prevailing wage law on a UC project involving the construction of faculty and staff housing (and a child care center) in Southern California. (Regents v. Aubry, supra, p.582). The Regents v. Aubry court found the construction undertaken by the University involved internal UC affairs vital to its core educational function, rather than matters of statewide concern, and refused to enforce the prevailing wage laws. (Ibid., 42 Cal.App.4th at 591) The Regents v. Aubry court relied on the decision in SF Labor Council (supra) a case that does not address prevailing wage issues, but instead pertains to the wages to be paid to UC’s own employees, not employees of a private contractor performing work with public money. However it is not necessary to find that the prevailing wage laws alone address matters of statewide concern and thus make a project covered. There are other facts leading to the conclusion that the UC Davis West Village Project is not limited to internal university affairs.

Division of Lab. Stds. Enforcement v. Ericsson Information Systems (1990) 221 Cal. App.3d 114, 123

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A number of cases have explored the issue of what constitutes matters related to internal university affairs. courts have determined that the following subjects are among those that relate to purely internal university affairs: payment to UC employees for required uniforms, compensation and benefits (In re Work Uniform Cases (2005) 133 Cal. App. 4th 328, 343); and peer review, tenure and educational curriculum (Scharf v. Regents of the University of California (1991) 234 Cal. App. 3d 1393, 1405). These subjects share a common characteristic: They relate to internal university affairs and are not interrelated with other government agencies or retail establishments on public land. The case at hand is distinct. The project, by admissions contained in UC Davis’s own documents (including the ground lease posted on its website and cited in this letter), goes beyond internal university affairs. Community Colleges are covered by prevailing wage requirements. The Davis Joint Unified School District facility is likewise covered under the state prevailing wage laws. (California Labor Code §§1720, 1721) Likewise, the presence of commercial retail space on land owned by UC takes the West Village Center beyond the purview of “internal university matters” and removes from the project the presumption of constitutional immunity from the requirements of the prevailing wage statutes. CONCLUSION The documents and case precedents cited above establish that:     Public funds were utilized and constituted more than a de minimis portion of the project; West Village Center is a single, integrated project; West Village Project is a public work; and The project falls outside the grant of constitutional immunity from state regulation applicable to purely internal University of California affairs.

We therefore respectfully request that DIR issue a coverage determination for this project, and that the determination state that the project is covered by California’s prevailing wage requirements. 31 Sincerely, Nina Fendel


Samantha Draper, Bill Feyling, Rich Cary, NCCRC Blythe Mickelson, Sandy Benson, Patty Gates, Weinberg, Roger and Rosenfeld Gregory Govan, DLSR


Labor Code § 1770

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