A Denver nonprofit building a four-story youth homeless shelter will have to dip into its furniture, equipment and staffing budget after losing a wage dispute that added an estimated $2 million in costs ahead of its projected July opening.
Urban Peak paid its construction crews for the $40 million building at residential rates instead of business rates, an issue flagged by Denver Labor as potential wage theft. The nonprofit appealed the decision to a hearing officer appointed by the city auditor, who sided with Denver Labor.
The determination that Urban Peak’s 136-bed shelter for young people ages 15-24 was classified as business construction came as a shock to most involved — including the project developer and even the city department that provided $16.8 million in funding.
The project’s developer, Christian Pritchett of BlueLine Development, testified that he and the general contractor, as well as some subcontractors, were “flabbergasted” and “shocked” to learn of the business classification. Testimony also showed that the city’s Office of Housing Stability told Urban Peak that shelters were classified as residential, not commercial.
Despite the confusion among city departments, the hearing officer determined in an April 30 ruling that the project was a commercial development and that Urban Peak must pay the higher wage rates.
The project is not residential because it “bears no resemblance to single-family homes, townhouses, duplexes, small apartment buildings, or any other construction in that classification,” the ruling says. The shelter will have dorms, a commercial kitchen where young people can learn to cook, a medical clinic, classrooms and office space for 45 workers.
Homelessness in the city has at least doubled in recent years and “is complete insanity,” Urban Peak CEO Christina Carlson testified during the hearing, calling the system to deal with homelessness “irrevocably broken.” Urban Peak, which began in a church basement 36 years ago, works to break the cycle of homelessness by providing mental health care, substance abuse treatment and a step-up program that moves teens from dorms to apartments.
Some kids, including those who have aged out of foster care, arrive at Urban Peak thinking that they will survive their whole lives on government assistance. The program works to change that “downward spiral of low aspirations nurtured by the present housing voucher system,” the hearing officer wrote in the final report.
Urban Peak board blames city miscommunication
The nonprofit never intended to shortchange construction crews and has adjusted its budget to pay the difference in wages, Carlson said. Among other cuts, Urban Peak scaled back on furniture that was part of its “trauma-informed” design of reading nooks and other quiet, comfortable spaces. And it will open with fewer staff than originally planned in mid-July, when kids and teens move into the shelter on Acoma Street south of downtown, she said.
The nonprofit is also ramping up fundraising efforts to help cover the costs.
“Our priorities are to pay people appropriately based upon the wage determination and to serve youth experiencing homelessness,” Carlson told The Sun. “It’s amazing how this is coming along and the vision is coming to life.”
The nonprofit is operating a crowded 30-bed youth shelter in downtown Denver as it awaits the opening of the new building. At the new shelter, teens 15-17 will live separately from young adults, ages 18-24. The first floor has dorm-style rooms, while the second and third floors are arranged in “neighborhoods” of individual and double bedrooms surrounding shared living rooms.
A message to Urban Peak supporters from the nonprofit’s board of directors put the blame for the unexpected cost increase on city agencies.
“The cost increase comes as a result of a miscommunication between city agencies over the appropriate prevailing labor wage for the project,” the email said. “Despite some sensational framing of this issue, there was never any ill intent on our behalf. We want to reassure the community and our supporters that we will pay the amazing contractors working on this project the determined wage rate and ideally it will not delay our July opening.”
Denver Labor, a division of the Denver Auditor’s Office, has long been responsible for monitoring wage theft but its “responsibilities were dramatically increased” in January 2023 when the city council passed the Denver Wage Theft Act.
Most projects, and especially those using more than $2,000 in public money, are required to check in with Denver Labor for guidance about federal law and Denver ordinances that dictate the “prevailing wage” for specific types of work. The residential prevailing wage for drywall finishers, for example, is $13 per hour. But the commercial prevailing wage for drywallers is significantly higher — $21.20. For electricians, the rates are $26.91 per hour for residential and $39.75 per hour for commercial.
The new homeless shelter, a 66,578-square-foot complex, was funded by $16.8 million from the city’s voter-approved RISE bond program, $11 million in private capital through a federal tax credit program called New Market, $3.8 million from the state, $3 million from the federal government and $4 million in private donations.