Exactly how far does the federal government's power to regulate publicly funded construction projects go? According to the Labor Department, it goes all the way to privately funded construction projects. The feds and the D.C. government are currently engaged in a struggle over precisely this issue. For the city, the stakes are about $20 million. For the nation, the stakes are whether yet another drag is placed on this sputtering economic recovery.
Here's what happened: CityCenterDC is a privately funded $700 million development project. It was not commissioned by the city or the feds, nor will they occupy any part of it when it is completed. Nevertheless, the carpenters union has pushed the Labor Department to apply the Davis-Bacon Act to the project. The union argues that the land being used was technically District property, so it's really a public project. (The land is under a 99-year lease to the developers.)
Davis-Bacon requires the developers of any government-funded project to prove they are paying their workers the "prevailing wage" -- a cumbersome and subjective process that is basically another government favor to Big Labor. The intent behind it is to make it too costly to use nonunion workers.
Initially, the Labor Department rejected the union's argument, but an Obama appointee reversed the ruling in 2011 just as ground was being broken. A department spokeswoman has since said the project is public simply because it "will benefit the general public" -- an argument that could be made about any project, anywhere.
That decision could force CityCenterDC developers to pay out $20 million in additional wages to contractors. The precedent has alarmed the city council. "There are many projects in D.C. that are privately financed that may result in incidental tax and employment benefits for the city, but that does not convert them into public buildings or public works. We had no choice but to sue," D.C. Attorney General Irvin Nathan said last month.
Wish them luck, because the Labor Department's power grab here is astounding. If the city loses, then under the department's rationale any private construction project is potentially subject to Davis-Bacon. The decision to apply it would be arbitrary and left up to government bureaucrats -- a regulatory nightmare that would do little more than to delay these projects, add to their costs and further enrich Big Labor. That's not a power any Labor Department should have, but especially not one President Obama has filled with pro-union political appointees who would do things like arbitrarily reverse two-year-old decisions at Big Labor's request.