Pay stalls Meier & Frank project
A state legal issue with wages for construction workers has the PDC scrambling for a solution to revitalize the historic building
Thursday, June 23, 2005
DYLAN RIVERA
An imminent redevelopment of the downtown Meier & Frank department store could die as early as next week if city and state officials cannot resolve a dispute over wages for construction workers on the long-awaited project.
The prospective developer of an upper-floors hotel as well as the corporate owner of the department store are pushing for a Sunday resolution of a dispute over whether the project must comply with state wage standards for public works, Don Mazziotti, executive director of the Portland Development Commission, said Wednesday.
The PDC, which has pushed for the building's revitalization for years, is scrambling to work out a compromise with state labor officials over the wage requirement, Mazziotti said. He would not detail those negotiations.
City and business leaders have ranked retention of the anchor store -- a historic mainstay at the heart of the city's commercial core -- as their top goal in safeguarding downtown's hard-won vitality.
Developer Sage Hospitality Resources, based in Denver, has lined up financing and development deals for a hotel in the top 11 floors of the 16-story building to coincide with a face-lift of the department store on the lower floors.
In recent weeks, some labor advocates have called for the state Bureau of Labor and Industries to require the hotel developer and the department store to pay a state-set prevailing wage.
The wage issue recently landed the PDC and the Labor Bureau in court. The PDC sued the bureau May 12 to challenge its decision that a PDC-financed office building rehab in North Portland falls under the wage standard. The bureau expects to respond to the PDC's suit in coming weeks, according to the Oregon Department of Justice, which represents the bureau.
Local government and housing advocates have said recent broadening in the wage law's application could threaten a number of public-private projects, including the Meier & Frank renovation. On Wednesday, for the first time, Mazziotti publicly estimated how much the requirement would raise the project's $137.3 million cost: between 8 percent and 14 percent, or between $11.0 million and $19.2 million.
Sage Hospitality said the extra expense would make the hotel portion of the project financially unfeasible. Sage previously put the hotel cost at $107.3 million but did not disclose an additional labor cost estimate.
"Should we not be able to work it out, we will have to seriously consider walking away from the project," said Ken Geist, executive vice president for Sage Hospitality. "Everybody's worked extremely hard on this project for over three years now, and to have this come up at the very last minute is extremely unfortunate." Geist said he was optimistic that a resolution could be reached by early next week.
Annette Talbott, deputy labor commissioner, said she doubted requiring compliance with the prevailing wage would add significantly to the Meier & Frank project's cost.
"We have no facts to suggest whether that's true or false," Talbott said. "I don't believe they've done that analysis."
The bureau is studying the Meier & Frank project in hopes of resolving the controversy within a few days, Talbott said.
Officials with Meier & Frank's parent company, May Department Stores Co., based in St. Louis, would not comment on the issue Wednesday.
The significant threat to the project comes as PDC and city leaders thought they soon would see their dreams of a revitalized building and department store become a reality. Former Mayor Vera Katz worked for years to preserve the department store and trumpeted the hotel plan in her last days in office. Mazziotti advanced the project for years, although he plans to step down June 30, raising questions about the city's ability to follow through on the project.
Mayor Tom Potter, who took office in January, convened a meeting last week to bring the PDC, the Labor Bureau, the hotel developer and the retailer together to discuss the wage issue. This week, Potter said, he met with Mazziotti and Labor Commissioner Dan Gardner to press the two sides to draft a policy for Meier & Frank and similar projects.
"We need to resolve this," Potter said Wednesday. "Each month that it's delayed costs the developers money, so I want to see it get resolved."
PDC officials have said time is short for several reasons. The hotel developer was hoping to finish major upstairs demolition before the winter holiday shopping season, a peak time for the department store. In addition, with a merger between May Co. and Federated Department Stores Inc. pending this fall, any lingering uncertainty would raise concern about whether Federated would follow through on the redevelopment plan.
Dylan Rivera: 503-221-8532;
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I thought this was a done deal, we have vitually seen the same story in the big O three weeks in a row and there doesn't appear to be any progress in resolving what seems to be a drop in the bucket compared to the overall cost. It would really suck if this thing didn't get completed!