Author: LegalEase Solutions     

Question presented

• Will Community Colleges be covered by the Prevailing Wage Act (PWA), if the funding for the project is through the college’s revenue fund and local millage funds?

Short Answer

• Community Colleges will not be covered by the PWA if the funding for the project is through the college’s local millage funds.

Discussion

 I           Where Millage Funds are Used For Construction, PWA May Not Apply.

The Supreme Court in Western Michigan has stated that the “sponsored or financed. . . by the state” criterion requires close examination and must be determined on a case by case basis.  Western Mich. Univ. Bd. of Control v. State, 455 Mich. 531, 543 (Mich. 1997).  “If the “state,” including any part of state government, helps to finance a project, or undertakes some responsibility for a project, the fifth criterion is met.”  Id. at 539.  In this regard, when the “contracting agent” is a part of state government, all its projects will necessarily be sponsored or financed by the state and if the projects meet all other requirements under the Act they come within the purview of the Act.  Id. at 542-543.

In contrast, for projects undertaken by contracting agents that are not part of state government, for example, a local school board, the “sponsored or financed. . . by the state” criterion will require closer examination and must be determined case by case.  Western Mich. Univ. Bd. of Control, 455 Mich. at 543.  The existence of these nonstate contracting agents ensures that the “sponsored or financed” language is not mere surplusage.  Id.

In Western Michigan, a construction project for a state university, though not directly financed by the state, was paid for through a general fund, which contained commingled state appropriations. 455 Mich. at 534.  Moreover, the state acted as a surety for the payment of bonds issued to finance the project which was sufficient to constitute “sponsorship” within the meaning of the prevailing wage act.  Id. at 539.   The Court further noted that the board of control of the university assumed responsibility for the construction project undertaken by the university and the university, therefore, is the “sponsor” of the project.  Id.  As a result, the Supreme Court held that because the University was a part of the state government and its funds were state funds, the student recreational facility project was sponsored and financed by the state within the plain meaning of the Act.  Id. at 541.

Therefore, if a community college comes under the definition of “contracting agent” as a “state institution,” its projects will necessarily be sponsored or financed by the state.  As pointed out in the earlier memorandum, in tort claims a community college is recognized as a “government agency” with governmental immunity.  See Abrams v. Schoolcraft Community College, 178 Mich. App. 668, 669 (Mich. Ct. App. 1989).  Under MCL § 691.1401(d) (Governmental Liability for Negligence), the term “Governmental agency” is defined as the state or a political subdivision.  See also, Doe v. Warren Consol. Schs, 307 F. Supp. 2d 860, 874 (E.D. Mich. 2003).  Under MCL § 691.1401(b) “Political subdivision” includes “community college districts.”  Therefore, community colleges are arguably “state institution” and any commingled funds used in the project will subject them to the PWA.

However, unlike universities, community colleges have been defined as “local units of government” operating independently of the state.  MCL § 2.161 (placement of national motto); MCL § 28.754 (Michigan Amber Alert Act); Doan v. Kellogg Community College, 80 Mich App 316 (Mich. Ct. App. 1977).  As such, the board of trustees of each community college district has the power to levy taxes for purposes that are within the power of the board and this revenue can be used for all authorized purposes.  See MCL § 389.144(1); West Shore Community College v. Manistee County Board of Comm’rs, 389 Mich. 287, 293-294 (Mich. 1973).  In addition, the truth in taxation act provides that “local unit of government” or “taxing unit” means a city, village, township, charter township, county, charter county, local school district, intermediate school district, community college district, or authority.  MCL § 211.24e(1)(g).  As such, the millage funds of the community college may considered local in nature and not “state funds” under the Act.  See generally, Durant v. State Bd. of Education, 424 Mich. 364 (1986) (Headlee Amendment MCLS Const. Art. IX, § 29 is concerned with ensuring control of local funding and taxation by the people most affected, the local taxpayers).

Conclusion

Community colleges arguably may be state institutions. But they are essentially local units of government operating independently of the State.  The board of trustees of each community college district has the power to levy taxes which are local in nature.  Accordingly, the “sponsored or financed….by the state” criterion set forth in Western Michigan may fail if the project is funded solely by local millages.