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Council to hear Marriott prevailing wage issue at June 27 meeting

Friday, June 21, 2013 by Michael Kanin

Austin City Manager Marc Ott has placed the contentious issue of what to do with $3.8 million in fee waivers awarded to White Lodging Services Corporation for the construction of a downtown Marriott Hotel on the Austin City Council agenda for June 27. With the move, Ott offers Council members a likely unwanted bite at what has become a very sour apple.


Ott announced the step in a four-page memo that lays out four options for Council action. In so doing, he asks Council members – none of whom has signaled any desire to make a move on the issue – to settle what has become a public debate over a pair of contradictory rulings from two assistant city managers.


At issue is a series of wage provisions attached to the development incentive agreement that resulted in the $3.8 million fee waiver. White Lodging argues that prevailing wages paid to every construction worker on the Marriott site would far exceed the amount of the fee waivers.


White further argues that a ruling from Assistant City Manager Rudy Garza allowed the company to move forward with the project by averaging prevailing wages on the job was critical to their deal with the city. That, argue labor advocates, was not the intent of Council. Garza has since retired from the city.


After multiple complaints over wage issues from labor representatives, Assistant City Manager Anthony Snipes informed White Lodging last week that the fee waivers had been revoked. Ott’s letter doesn’t exactly countermand Snipes’ ruling. Rather, it offers Council the opportunity to weigh in and alter the situation.


Ott frames his argument by resetting the White Lodging deal in terms of a Chapter 380 agreements – the approach that the city uses under Texas state law to lure business to the region. He argues that the comparison is appropriate because the late addition of prevailing wage and minority and women-owned business goals made the deal more like one done under Chapter 380.


“Given the magnitude of this project and the impact and benefit to Austin, if the development of the J.W. Marriott Hotel had been eligible to be brought forward as a Chapter 380 Economic Incentive Agreement, we would have been talking about, potentially, a much larger benefit to the developer,” Ott argues, citing a nearly $25.5 million 10-year net benefit to the city as calculated by standard methodology.


“Property taxes over 10 years from the hotel equate to approximately $9 M(illion),” Ott continues. “If it had been an eligible Chapter 380 agreement, a minimal property-tax based rebate of 30 percent to 50 percent  could have been provided, equating to a benefit of approximately $2.7M to $4.5M over a 10-year period. Given that the hotel development would be creating more than 500 jobs, the project would have qualified for consideration under the policy as having an extraordinary economic impact, which would have allowed for up to a 100 percent rebate of property taxes (up to $9M).”


In light of all that, writes Ott, he wanted to give Council members a chance to rule on the matter. Ott offers them four options: He writes that they could enforce the current ordinance and “affirm…(the) expectation that White Lodging pay workers in accordance with the Davis Bacon prevailing wage scale in exchange for stated development fee waivers”; settle on Garza’s interpretation of the ordinance and allow for averaging; agree to average the prevailing wages, but not let White Lodging pay construction workers less than $11 an hour; and an option that would allow Council to establish an $11 an hour wage floor and adjust the fee waivers down to reflect the wage loss associated with that concept.


Ott also continued upper management’s effort to distance itself from Garza’s ruling. “The misinterpretation of the prevailing wage policy compounded a confusing set of circumstances,” he writes.


Workers Defense Business Liaison Gregorio Casar worked with Council, White Lodging, and city staff on the original agreement. He maintains that Council meant for White Lodging to use prevailing wages for each of the construction slots on site.


“Now that the developer of the Marriott has been caught breaking the law, the developer’s lobbyists want the law changed just for them. We should not reward White Lodging with $4 million taxpayer dollars after their workers have been cheated out of their wages, and aren’t even allowed to take a water break while they build the hotel,” he told In Fact Daily via email Thursday night.


“I hope our city leaders choose to show that their laws are real. That protection for taxpayers and workers actually mean something. I hope our leaders choose to protect Austinites and protect our tax dollars from developers with a history of dishonesty.”


White Lodging attorney Richard Suttle told In Fact Daily that he hopes the city honors what the firm considers the original agreement. “The bottom line is that White Lodging has done everything asked of them.”


(Note: After this story was published, Suttle called us to dispute Casar’s description of events. Suttle insists that Casar did not work with staff or White Lodging on this issue until after Council passed the ordinance. Suttle further argues that — with the exception of the 2008 deal that led to the reconstruction of the Seaholm and Green plant areas — there is no established city policy on prevailing wage.)


Council Member Laura Morrison reminded In Fact Daily that she did not vote for the deal the first time around. “I’m certainly not inclined to support a weakened version of it.”


Should Council step away from Garza’s interpretation of the deal, there could be trouble. Suttle says that he is hopeful that they will stick to the Garza interpretation. If not, he says, “the consequences of that are dire for all parties,” noting that any delay could jeopardize the thousands of room nights already booked after the hotel’s scheduled 2015 opening.

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