The state labor bureau has ruled that a proposed headquarters building for Lithia Motors Inc. in downtown Medford may be built without requiring that the project meet prevailing wage rates.

The Bureau of Labor and Industries said Lithia would not have to pay the higher level of prevailing wages to workers involved in the Lithia portion of the Middleford Commons redevelopment project in downtown.

BOLI said it made its determination because the building would be on land owned entirely by Lithia, no public funds will be used to finance its construction and no public agency is involved in the contracting.

Under state law, workers on public projects must be paid a pre-determined wage rate which is usually higher than wages paid by private employers.

Bill Hoke, Medford's deputy city manager and the city's chief economic development officer, said the BOLI ruling was a relief.

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"We really appreciate their timely response and their favorable ruling," said Hoke.

In September, BOLI ruled that another downtown Medford project must pay prevailing wages. Cook Development Corp. of Portland was ordered to pay prevailing wages on the six-story Bella Vita building on West Main Street because the project directly involved the publicly funded Medford Urban Renewal Agency.

The Bella Vita project includes a central parking structure, paid for with urban renewal funds, and privately built condominium and commercial spaces on three sides. Developer Terry Cook said the BOLI ruling pushed his project costs from $6.8 million to $7.9 million for the first phase.

Concerns that the Bella Vita ruling might affect Middleford Commons, a public/private partnership between MURA, the city and Lithia Motors, prompted Mayor Gary Wheeler to send a letter to BOLI in September requesting that the proposed Lithia Motors headquarters building be exempted from the prevailing wage law.

The Middleford Commons project is proposed to be located between Central and Riverside avenues and Third and Sixth streets, with Lithia's 10-story headquarters as the anchor. It would include office, residential and retail space, a parking structure and a "park blocks" section.

MURA is negotiating property acquisitions for Middleford, including the Greyhound terminal at Fifth and Bartlett streets, the Greyhound garage at Fourth and Apple streets and a variety of smaller properties.

"Discussions are ongoing with everybody," said Dan Thorndike, MURA's attorney.

The project's developer, Mark Rivers of Boise, Idaho, said his development team is designing the headquarters building and have begun design work on the park blocks. He said he hopes to bring plans to the city for review soon.

"I think we'll start to make some submittals for things this calendar year," he said, adding that some demolition could begin in the next few months.

Lithia is relocating its downtown car dealership to property it owns on Highway 62. The plans for the new dealership are scheduled for review by the Site Plan and Architectural Commission on Nov. 3, according to city Planning Department staff.

Reach reporter Meg Landers at 776-4481 or e-mail mlanders@mailtribune.com.