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Negotiations continue on Third Party Agreement for minority contractors

Monday, September 19, 2011 by Michael Kanin

Attorney Lino Mendiola told members of the Austin City Council’s Minority and Women-Owned Business Enterprise and Small Business subcommittee last week that negotiations between city representatives and members of the minority contractor community have reached something of an impasse.


The parties have been working on changes to language in the city’s Third Party Agreement that would incorporate minority participation goals into more city-associated projects. Lobbyist Paul Saldaña told the subcommittee that he felt there was more work to do. “I think there is still an opportunity for us to build off of where we are now,” he said.


Minority contractors raised concerns in the wake of the deal that brought Formula 1 racing to Austin. As part of that agreement, race organizers received state funds to help offset costs associated with the event. Saldaña, who represents Hispanic contractors, and representatives from the Austin Black Contractors’ Association argued that Austin’s minority participation goals should have been attached to construction work associated with the F1 racetrack.


That added fuel to calls for a revising the third party agreement—the legal tool by which prime contractors are bound when they sign deals to work for the city. By Tuesday afternoon, minority contractors and city representatives had agreed on nine of 11 changes to the agreement. The outstanding issues related mostly to infrastructure.


Mendiola argued that the city’s water utility is bound by state regulations that require them to provide service for those who say they need it. “What I understand is that, except where there’s a participation agreement on water and wastewater where we apply the ordinance anyway…we cannot add conditions because of their obligation to provide service,” he said.


Council Member Mike Martinez, who chairs the subcommittee, wondered why other city standards could be imposed on third party contractors when building utility infrastructure, but not minority goals. “If private developer ABC has to build it to our standards and our specifications, isn’t that a condition?” he asked.”


Assistant City Attorney Ross Crow, who spends much of his time working with the Austin Water Utility, tried to illustrate the line between an acceptable condition and an illegal one. He argued that Martinez’ example is “a condition that’s directly related to the provision of that service,” but that something like a minority participation requirement was “generally not going to be looked on, under state law, as directly related to that service.”


Mayor Pro Tem Sheryl Cole said that she understood that the city couldn’t employ “a stick.” “My question,” she asked, “is what can we do as a carrot?”


Cole suggested that the city could use financial incentives to get third party water contractors to agree to voluntarily adopt minority participation goals. “If we know there’s a subdivision coming in and there is going to be an additional 300 houses, we can’t hold up a 24-inch line as opposed to an eight-inch line,” she offered. “But we could say that we have a policy of M/WBE participation and your eight-inch line we will also cover, or Council must approve…a $50,000 contribution to that line if you do this participation.”


Martinez wondered about fees. “What if we…said, ‘if you come in for an extension request and we look at all of the work done thus far on your project, and you haven’t established and/or met goals, then the fee for this extension is now in category X, as opposed to category Y?’” he asked.


He suggested that the proceeds from those fees could go to the city’s Department of Small and Minority Business Resources to help improve minority participation.


Mendiola said that while incentives are a good idea, the fees could be legally troublesome.


The parties will meet at least one more time. The City Council must approve any changes to the third party agreement.

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