NWLP-2-16-09:NWLP
1/20/09
10:45 AM
Page 3
Government solar projects skirt prevailing wage laws
By DON McINTOSH
Associate Editor
With an impact to the public treas-
ury of several million dollars, solar
panels are going up on the rooftops of
four Multnomah County government
buildings.
Union members familiar with gov-
ernment construction projects might
think the installers would earn the
prevailing wage, under the state’s “lit-
tle Davis-Bacon” law. The 70-year-
old law was designed to level the
playing field for construction compa-
nies on public works projects by set-
ting wage standards for workers on a
craft-by-craft basis. Annual wage sur-
veys are conducted by the Oregon
Employment Division, and the law is
enforced by the Oregon Bureau of
Labor and Industries (BOLI).
Prevailing wage laws ensure that
construction workers earn decent
family-supporting wages and health
and pension benefits, while prevent-
ing contractors from winning large
government projects by low-balling
bids based on wages and benefits.
But that’s not happening with the
Multnomah County project or any of
over a dozen similar government solar
projects around the state.
SunEdison, a Maryland-based
company that has financial backing
from Goldman Sachs, got the contract
to put solar up on the Multnomah
County rooftops. A large array on the
rooftops of a pair of county mainte-
nance buildings in Gresham should be
done by mid-February; similar arrays
will go up on the county’s headquar-
ters building on Southeast Hawthorne
and its Donald E. Long Juvenile Jus-
tice Center by year’s end. Counted to-
gether, the county rooftops could be
the state’s largest photovoltaic array.
SunEdison does not have a state-
certified apprenticeship training pro-
gram, and it’s paying nonunion in-
stallers $12 an hour.
If the project had paid prevailing
wage, they would have earned $16- to
$33- an hour for the same work.
Multnomah County’s description
of the project to potential bidders in
September 2007 said it would require
payment of the prevailing wage. In
hindsight, that may have been well-
intended naiveté. The way the deal is
structured, there’s no way it could be
prevailing wage: SunEdison leases
the rooftops, installs and owns the
panels, and sells the electricity to the
county. From the county’s standpoint,
the contract is little more than an
elaborate power purchase agreement,
hitched to a deal to lease rooftops.
Nothing currently requires vendors or
tenants to pay prevailing wage.
Last May, to remove any doubt,
Multnomah County Deputy Attorney
John Thomas sought a determination
from BOLI that the project was not
subject to the prevailing wage law,
and BOLI agreed.
The reason: The public investment
in the panels is indirect, in the form of
JANUARY 16, 2009
SunEdison program manager Jeremy Barnett (left) walks Multnomah
County Commissioner Jeff Cogen through a photovoltaic array installed on
the roof of the Yeon maintenance building. Because of the way the deal is
structured, the $7 million-plus project is not subject to requirement to pay the
prevailing wage.
Photo courtesy of Multnomah County Commission
tax subsidies, not direct, in the form
of spending.
Project costs are estimated to be
between $7.5 million and $8.5 mil-
lion. But the solar panels will replace
just $65,000 a year of electricity the
county is now buying from Portland
General Electric. After 20 years, the
county will have paid SunEdison $1.3
million — one-sixth the cost of the
installation. Selling solar electricity
doesn’t pay for the project. Tax incen-
tives do.
The federal Solar Investment Tax
Credit reimburses 30 percent of the
cost in the first year. Oregon’s Busi-
ness Energy Tax Credit (BETC) pays
back another 50 percent over five
years. And a federal tax formula for
accelerated depreciation adds to the
subsidy: It allows a solar system
owner to say that the panels are en-
NORTHWEST LABOR PRESS
tirely depreciated (used up, obsolete,
worthless) in five years, with most of
that (two-thirds) in the first year. De-
preciation counts like a business ex-
pense, against income, so it reduces
income tax. So in theory, depreciation
could reduce an affluent taxpayer’s
tax bill by another 35 percent of the
project’s cost.
In reality, it’s hard to line up own-
ership to take full advantage of the tax
savings. A big part of SunEdison’s
business model is matching solar
projects with individuals or entities
that can use the tax savings. For each
of the county rooftops, SunEdison set
up a separate subsidiary corporation.
Those corporations, which are eligi-
ble for the tax credits, can then be
sold to corporations or individuals
that owe taxes.
It may seem a strange and complex
way to go solar. But such a set-up —
where a third party builds and oper-
ates the solar array and sells electric-
ity to the host — is becoming the
norm on large projects.
Third-party-financed solar proj-
ects, at various stages of develop-
ment, are under way at other local
governments: Bend, Corvallis, Cot-
tage Grove, Gresham, Hillsboro,
Medford, Portland and Pendleton;
Hood River and Umatilla counties;
Mt. Hood Community College; and
Tualatin Valley Water District.
None thus far have gone to a union
contractor.
EC Company, a signatory contrac-
tor with International Brotherhood of
Electrical Workers (IBEW) Local 48,
bid on the Multnomah County proj-
ect, but found it couldn’t be done
without an additional subsidy from
Energy Trust of Oregon. SunEdison
got the contract because it didn’t need
the subsidy. Could wages have had
something to do with that?
The prevailing wage requirement
takes wages out of competition, and
makes sure that contractors who pay
higher wages don’t compete at a dis-
advantage.
“Third party ownership seems to
be going to be the dominant model in
solar financing,” Multnomah County
Commissioner Jeff Cogen told the
Labor Press. “So it’s worth revisiting
whether it ought to be prevailing
wage.”
More than 80 percent of the Mult-
nomah County solar project cost is
subsidized by tax credits, but there are
no requirements about the number or
quality of the jobs produced, except
that the county did specify that
SunEdison try to employ women, mi-
norities, and emerging small busi-
nesses.
Two years ago, the Oregon Legis-
lature passed a law saying that private
construction projects that get more
than $750,000 of public subsidy have
(Turn to Page 7)
PAGE 3