CityCenterDC, the downtown project on the site of the old convention center, is under construction but subject to a dispute between the District and the Labor Department. (Jonathan O'Connell)

Construction on CityCenterDC, the massive downtown project on the site of the city’s former convention center, had already begun in June 2011 when the Department of Labor’s Wage and Hour Administrator ruled that its developers ought to be paying “prevailing wage” rates under the Davis-Bacon Act.

The inquiry began after the Labor Department received a petition from the Mid-Atlantic Regional Council of Carpenters in 2009.

Mayor Vincent C. Gray’s administration fought the ruling administratively, with Victor L. Hoskins, deputy mayor for planning and economic development, saying the higher wages could add $20 million to the cost of CityCenter as well as millions more to real estate projects that receive land from the District government.

But the Labor Department’s Administrative Review Board upheld the ruling April 30 of this year, according to the complaint, and D.C. Attorney General Irvin B. Nathan brought the suit in district court three weeks later.

At issue is whether CityCenter constitutes a “public work” under the definition of Davis-Bacon. The project was financed by the real estate arm of the Qatari Investment Authority, but is being built on publicly-owned land via a 99-year ground lease.

“This unprecedented decision by the Labor Department is contrary to 80 years of jurisprudence and poses a very serious danger to many other construction projects in the District,” Nathan said in a press release. “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; the Labor Department’s decision must be set aside.”

Sonia Melendez, a Labor Department spokeswoman, explained the ruling in an email by saying that “contracts entered into by the District of Columbia for the development of the CityCenterDC project, a mixed-use project on prime real estate owned by the District of Columbia, constitute contracts for construction of a public work under the Davis-Bacon Act because they call for substantial construction under the District’s authority that will benefit the general public.”

She called it a final decision and said the agency would defend the decision in court in partnership with lawyers from the Department of Justice.

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