ALBANY – An agreement in the works among state lawmakers to expand the state’s prevailing wage requirement to private development projects receiving public support would threaten development in the region, says the region’s largest business group.
The Buffalo Niagara Partnership said the framework of the Albany deal calls for the prevailing wage to kick in for any project receiving state and local assistance equal to 30% of total project costs, for projects over $750,000. Now, there is no prevailing wage requirement for private development projects.
An expanded prevailing wage would make it harder for more complex, challenging projects to move forward, said Dottie Gallagher, the Partnership’s president and CEO. She said the higher wages that would have to be paid on private projects crossing the 30% threshold for public support would cancel out the value of incentives granted to the projects.
"This is really a worst-case scenario, because there's no provision to protect brownfield tax credits, there's no provision to protect historic tax credits,” Gallagher said. “So any project that gets any of those tax credits will be subject to prevailing wage, which is going to make the economics not happen on those projects."
The change would take effect July 1, 2020, if lawmakers adopt the legislation and the governor signs it.
The agreement calls for exemptions for affordable housing, as well as solar energy, university and health care-related projects, according to the Partnership.
"The bill hasn't hit the floor for a vote, but our understanding is that this has been agreed to by all the parties: governor, Assembly, Senate,” Gallagher said. “That's the framework."
However, late Wednesday came word that some members of the Democratic conference in the Assembly object to provisions of the bill and it faces an uncertain future now.
Supporters of an expanded prevailing wage say the change would benefit local workers and the economy. The New York State AFL-CIO has said when taxpayer dollars are used on construction work, “we should be raising the standard of living and quality of life for our workforce and all New Yorkers.”
During the debate over the legislation, the New York State AFL-CIO has countered that labor costs make up less than 25% of the typical costs of a construction project, and that an expanded prevailing wage would not raise project costs.
Gallagher said the agreement would exempt New York City, which she called “adding insult to a significant injury. You would think the reverse would be true. You would think it would be New York City only, and not the rest of the state.”
In New York State, prevailing wage must be paid to workers on projects that are publicly funded, like highway construction, but this mandate doesn't presently apply to privately funded projects.
The difference between the market wage and prevailing wage can be sharp. For example, State Labor Department data shows the median hourly rate in Western New York for a carpenter is $27.01, compared with the prevailing wage of $32.15.
The Legislature for years has debated whether to extend this mandate to private projects that receive public support, such as tax breaks, subsidized loans, brownfield tax credits and historic tax credits. Many projects in this area, particularly in downtown Buffalo, have received those incentives.
Advocates, including many trade unions, say expanding the prevailing wage would put more money into workers’ pockets – and into the local economy. Opponents, including contractors and builders, say it would make many developments cost prohibitive.
The state Association of General Contractors said its members would like clarity on which projects qualify for the prevailing wage. And there are taxpayer-supported projects that likely should qualify, such as some of the Buffalo Billion projects, said Michael J. Elmendorf II, the AGC’s president and CEO.
But Elmendorf said many developments in New York, particularly in upstate, receive tax breaks because the math already doesn’t work for developers. Increasing the cost would only make it that much harder to build.
“It will stop construction activity all over the state,” Elmendorf said.