Poleski, 122118 MIAGO, AGO 7308

• Case Date: December 21, 2018
• Court: Michigan

Earl J. Poleski, Executive Director AGO 7308 Opinion No. 7308 Michigan Attorney General Opinion State of Michigan December 21, 2018          CONST 1963, ART 1, § 26: Constitutionality of State Housing Development Authority’s Equal Employment Opportunity policy.          PREFERENTIAL TREATMENT:          PUBLIC CONTRACTING:          The Michigan State Housing Development Authority’s Equal Employment Opportunity policy, as applied through its loan agreements with developers, violates article 1, § 26 of the Michigan Constitution, which requires non-discriminatory, equal treatment in public contracting. The Constitution prohibits state instrumentalities, such as the Authority, from using public contracts to mandate that private parties grant preferential treatment to individuals or groups on the basis of race, sex, color, ethnicity, or national origin.          Earl J. Poleski, Executive Director          Michigan State Housing Development Authority          P.O. Box 30044          Lansing, MI 48909          The Honorable Shane Hernandez          State Representative          The Capitol          Lansing, MI 48909          You have asked whether the Michigan State Housing Development Authority’s (Authority or MSHDA) Equal Employment Opportunity (EEO) policy violates article 1, § 26, subsection 2 of the Michigan Constitution of 1963. This Constitutional provision, which was approved by ballot initiative in 2006, provides:

The state shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. [Const 1963, art 1, § 26(2).]

         Specifically, you question whether the Authority’s application of its EEO policy results in the state granting preferential treatment to individuals or groups on the basis of race, sex, color, ethnicity, or national origin in the operation of public contracting, which is contrary to Michigan’s constitutional requirement of equal treatment and non-discrimination for all individuals in Michigan.          Background          This section of the Constitution defines “state” to include not just the state itself but also any “governmental instrumentality” of the state. Const 1963, art 1, § 26(3). The Michigan Supreme Court has expressly concluded that the Authority is an instrumentality of the state, as it is a “body politic and corporate” created by the State Housing Development Authority Act of 1966 (Act), 1966 PA 346, MCL 125.1401 et seq. Advisory Opinion re: Constitutionality of PA 1966, No 346, 380 Mich. 554, 562-563, 575 (1967).          The Act provides that the Authority may “make or purchase loans” for affordable housing projects. MCL 125.1422(i). Accordingly, the Authority frequently issues bonds and loans bond proceeds to private developers, who in turn use those loan proceeds to finance the construction or renovation of affordable housing. The Authority sometimes uses federal funds to finance development projects and may “agree and comply with conditions attached to federal financial assistance.” MCL 145.1422(c). Notably, the constitutional provision in question excepts actions necessary to remain eligible for federal funding. Const 1963, art 1, § 26(4). Federal equal employment opportunity requirements apply to all contractors and subcontractors that hold construction contracts in excess of $10,000, and any portion of the loan is federally funded. 41 CFR § 60–4.1. This opinion does not address either construction contracts in excess of $10,000 for work performed on projects involving federally funded loans or federal equal employment opportunity requirements.          MSHDA’s Equal Employment Opportunity Policy          Section 46 of the Act dictates that the Authority “shall require . . . that contractors and subcontractors . . . shall take affirmative action to assure an equal opportunity for employment[.]” MCL 125.1446. You indicate that the Authority’s EEO Policy (entitled “Michigan State Housing Development Authority Equal Employment Opportunity Goal Requirements”) provides that contractors constructing Authority-financed developments must implement an EEO plan approved by the Authority. According to the EEO Policy, an EEO plan must include goals for “contracting and employment” of minority-skilled tradespeople and female-skilled tradespeople. Contractors must meet the approved plan’s EEO goals or, alternatively, take “all feasible steps” or make “a good-faith effort” to achieve the EEO goals. If a contractor fails to do this, the Authority will deem the contractor “non-awardable” for up to six years, depending on the circumstances, meaning contracts for work on Authority financed projects would be unavailable to the contractor:

If you fail to meet the established equal employment opportunity goals for contracting and employment of minority-skilled trades’ people or female skilled trades’ people or to demonstrate a good faith effort to achieve these goals, you will be non-awardable for a period of two years [from] the contractor’s next immediate (3 months) submission or maximum period of six years following date of 100% completion of the housing development for which equal employment and contracting goals were met. [Michigan State Housing Development Authority Equal Employment Opportunity

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