Labor unions argued yesterday that any construction project that receives public money -- even a small loan -- should be subject to the state law requiring union-scale wages for workers.

Construction contractors responded that such a requirement would drive up the cost of building in Ohio, effectively putting the brakes on hundreds of projects.

The two sides made their cases to the Ohio Supreme Court in a dispute over whether a Port Clinton company subjected itself to the state's prevailing-wage law by accepting two government loans to build a showroom.

The company, Fellhauer Mechanical Systems, cobbled together a mix of private financing, a $305,000 loan from the Ohio Department of Development and a $36,750 loan from a program administered by Ottawa County. The money, totaling about $695,000, allowed Fellhauer to build an audio-visual-products showroom in 2006.

As the project began, the Northwestern Ohio Building and Construction Trades Council obtained a court injunction to block the work because Fellhauer was not paying its construction workers union-scale wages.

Later, an Ottawa County Common Pleas Court judge ruled that the project did not require prevailing wages, and an appeals court agreed.

In arguments before the Supreme Court yesterday, the attorney for the trades council said even the $36,750 county loan was enough to bring the project under the state's prevailing-wage law.

"Fellhauer is clearly a private institution but because it received public funds it should have been constructed according to the prevailing-wage law," said Joseph M. D'Angelo, attorney for the group of unions.

In written pleadings, the unions argued that Fellhauer and Ottawa County had devised the financing scheme to get around the prevailing-wage law "at the expense of Ohio's working tradesmen and tradeswomen."

Dennis Duffey, secretary-treasurer of Ohio State Building and Construction Trades Council, called the case "very important" for union construction workers in Ohio.

The construction industry suggested that the case was mostly a power grab by organized labor.

"This case is brought by the building trades council to expand the reach of the prevailing-wage law beyond the statute itself," said Vincent Atriano, the attorney for the Ottawa County Improvement Corp., the county-run agency that loaned $36,750.

Last September, Gov. Ted Strickland's administration concluded that projects receiving any public funds should be subjected to the prevailing-wage requirement, but Republicans vowed to fight that change. The two sides reached a temporary truce when Strickland agreed to discuss the issue with legislative leaders.

Alan G. Ross, the attorney for Fellhauer and the Associated Builders and Contractors of Ohio, said entrepreneurs increasingly are relying on government loans as private financing dries up. Applying the prevailing-wage law to their projects would increase costs by 10 percent or more in many cases, causing entrepreneurs to drop scores of projects, Ross said.

The all-Republican Supreme Court quizzed the lawyers on the differences between public and private projects, but justices did not provide clues about how they might rule. A decision is expected in several months.

jnash@dispatch.com