An animal shelter project in the City of Long Beach that was partially funded by the city was not subject to the prevailing wage law for public works projects that was in effect at the time, the state Supreme Court has ruled. Although local governments and the development industry were on the winning side of the case, the ruling appears to have minimal implications. That is because the Legislature in 2000 amended the prevailing wage statute to ensure that it covered precisely the sort of pre-construction activities that Long Beach funded. Under the prior version of the law, the court said in a 6-1 ruling, the prevailing wage law did not extend to preconstruction activities such as architecture and design, project management, surveying, insurance and legal counsel. And the court declined to address the question on many minds - whether the prevailing wage law applied to a "municipal affair" of a charter city. Government agencies and developers have long griped about having to pay prevailing wage, which is set by the Department of Industrial Relations (DIR) and typically reflects big-city, unionized pay levels. Still, state law since 1937 has required the payment of prevailing wage for public works construction. In 2000, the Legislature approved an amendment that changed the definition of "construction," and in 2002 the Legislature went further to put almost any construction project that receives any sort of public assistance (including fee waivers or discount real estate) under the prevailing wage requirement. These changes have plagued some local economic development efforts. However, it was the law in effect in 1998 that the state Supreme Court interpreted. That was the year Long Beach signed a contract with the SPCA of Los Angeles. The city agreed to pay $1.5 million toward the SPCA's $10 million animal shelter. The project would be built on land leased by the SPCA from the city, and the city would house its animal control operations in part of the facility. The city limited expenditure of its $1.5 million to preconstruction items. Acting on an inquiry from a labor union, DIR in 2000 investigated and determined that the project was a public work that was subject to prevailing wage requirements. The city sued DIR, arguing that the project was not a public work and that, even if it were, the city's status as a charter city prevented the application of the prevailing wage law. Los Angeles County Superior Court Judge David Yaffe ruled for the city. The Second District Court of Appeal disagreed and ruled for the DIR. Finally, the state Supreme Court sided with the city. The case turned on the 1998 definition of "construction" in former Labor Code § 1720, subdivision (a). The DIR argued that construction encompassed planning, design and other pre-building phases of the project. The city argued that the term had a more limited meaning. Both sides pointed to the 2000 amendment for support. The city contended that the amendment was a prospective change in the law that expanded the definition of construction. The DIR argued that the 2000 amendment only clarified the existing law. The state high court agreed with the city. In reaching its conclusion, the court cited the legislative history, including a letter from the bill's author, state Sen. John Burton, that said the change would "operate prospectively." Additionally, the Legislative Counsel's digest spoke of a revision in the definition of public works and the imposition of new costs on local government. The history suggests the 2000 amendment was more than a restatement of existing law, the court concluded. The court also cited dictionary definitions of construction, and the U.S. Secretary of Labor's definition, which does not cover work done by surveyors, lawyers and project managers prior to the start of actual building. "[U]nder the law in effect when the contract at issue was executed, a project that private developers built solely with private funds on land leased from a public agency remains private," Justice Ming Chin wrote for the majority. "It does not become a public work subject to the PWL [prevailing wage law] merely because the city had earlier contributed funds to the owner/lessee to assist in defraying such 'preconstruction' costs or expenses as legal fees, insurance premiums, architectural design costs, and project management and surveying fees." In a dissenting opinion, Justice Joyce Kennard said that when the Legislature does not define its terms, the court should defer to DIR as long as the DIR's decision was made by senior agency officials and was consistent with previous DIR decisions, which was the case here. She further noted that the contracts for construction management and architecture extended to all phases of construction. The extensive argument over the meaning of the 2000 statutory amendment was irrelevant, Kennard added. "[T]he intent of the 2000 Legislature has no bearing here. What is at issue is the intent of the Legislature back in 1937,when it first used the word 'construction' to define public works in former § 1720(a)." Kennard said the project was a public work subject to prevailing wage. She urged the court to then consider the other issues in the case: Whether the project was a "municipal affair" of a charter city that was exempt from prevailing wage requirement, and whether the prevailing wage law was a matter of statewide concern that would override such an exemption. Instead, the court majority said it would leave those questions - on which many government, labor and development groups had provided input - for another day. The Case: City of Long Beach v. Department of Industrial Relations, No. S118450, 04 C.D.O.S. 11142, 2004 DJDAR 15029. Filed December 20, 2004. The Lawyers: For the city: Robert E. Shannon, city attorney, (562) 570-2205. For the DIR: John Rea, chief counsel, (415) 703-4240.