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Coming to construction projects: an expanded prevailing wage

An expansion of the state's prevailing wage to include some private development projects – a change long opposed by business advocates and developers – was part of the budget being finalized in Albany on Thursday.

The changes are set to take effect in January 2022. The expanded prevailing wage will apply to projects of over $5 million that receive 30% or more of their construction costs from public sources, such as tax abatements, credits and payment-in-lieu-of-taxes agreements.

Currently, prevailing wage in New York State must be paid to workers on projects that are publicly funded, such as highway construction.
There are exceptions to the expanded prevailing wage set to take effect in 2022. For instance, it won't apply to historic rehabilitation or affordable housing projects, among some other categories.

Last year's proposed version, which failed to win approval in Albany, would have applied to projects where at least 30% of construction costs come from public sources. But the threshold for the dollar value of the projects that version would have covered was much lower: $750,000, compared to $5 million now.

Despite the higher dollar threshold and the project exemptions, business advocates slammed the prevailing wage expansion as a threat to new development in places such as Western New York. They say construction costs will go up and make it financially impractical for some projects to get off the ground.

They are also upset about the timing, amid the Covid-19 pandemic.

"At a moment of great economic upheaval and uncertainty, Albany has decided that it was the right time to raise the cost of doing business and making investing in our community more expensive," said Grant Loomis, the Buffalo Niagara Partnership's vice president of government affairs. "If that is not reckless, I don't know what is."

Michael Kracker, executive director of Unshackle Upstate, called the expanded prevailing wage "a stunning example of Albany rewarding special interests at the expense of workers, taxpayers and job creators."

Labor organizations have argued in favor of an expanded prevailing wage as supportive of the local economy. They say the increase will improve the standard of living and quality of life for construction workers, and they dispute the idea that an expanded prevailing wage will hinder development.

Two leading building trades organizations, in a memo to affiliate organizations, hailed the expanded prevailing wage.

"This expansion establishes for the first time in our state the public policy that with public funds comes the responsibility to pay the prevailing wage," wrote James Cahill, president of the New York State Building and Construction Trades Council, and Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York.

"This is a big win for the trades, we have established a new category of prevailing wage work," they wrote. "Considering the economic crisis the state and country face, this is one that we should all be proud of."

The new version of the expanded prevailing wage calls for a 13-member board – appointed by the governor – that will review the potential economic impact of the expanded prevailing wage, and leaves open the possibility of delaying its implementation.

That would allow time for the board to review business conditions in the state between now and the end of 2021; at the moment, most construction projects in the state are shut down amid the Covid-19 pandemic.

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