Prevailing wage expansion included in budget deal
Real estate interests were opposed, saying construction costs would rise
Despite a massive shortfall in revenue and a projected $10 billion reduction in state spending, prevailing wage rules are expected to be expanded in New York’s budget.
A bill printed Wednesday, which closely mirrors an earlier proposal by Gov. Andrew Cuomo, requires owners to pay construction workers union-level wages on projects where public funds cover at least 30 percent of construction costs and such costs exceed $5 million.
Prevailing wages for construction workers are significantly higher than non-union crews make. Developers have argued that mandating them on certain projects would render some development uneconomical, preventing them from happening at all.
The latest proposal makes a few changes to a controversial board that would have discretion to exempt projects — most crucially giving the body the ability to delay new prevailing wage rules from kicking in and forcing it to make some of its proceedings public.
Under the revised version, the board would have 13 members instead of 11, adding the “largest statewide organization representing building owners and developers” and another owner/developer group that represents another region of the state. Presumably, one of these groups would be the Real Estate Board of New York.
REBNY President James Whelan said that although it’s an “odd” time to implement legislation that — in his view — will likely result in less work for union contractors, his members remain committed to working with the building trades.
Another industry group was less reserved in its criticism.
“Even in the midst of one of the greatest economic challenges in the history of our great state, the majority conferences in Albany couldn’t stop themselves from stomping on our recovery,” said Brian Sampson, president of the New York chapter of the Associated Builders and Contractors, whose members largely do non-union construction. “Investors and builders need predictability and a strong commitment from the government to do no harm. Forcing them into the hands of an unelected public subsidy board that can determine current and future thresholds as well as creating an inconsistent definition of construction is unconscionable. They can, and will, take their investment opportunities elsewhere.”
Construction unions, meanwhile, praised the bill.
“By including the expansion of prevailing wage in the budget, especially during such trying times nationwide, Governor Cuomo, our Assembly, and our Senate have proved their commitment to the backbone of our state – the men and women who build it and keep it running,” Sam Fresina, business manager of the Eastern New York Laborers District Council, said in a statement. “This is an outstanding example of responsible legislating that uplifts New York’s middle class.”
Opponents of the bill argued that the board was granted too much authority to ultimately determine what projects should be subject to prevailing wage requirements. Under the latest version, the board must hold a public hearing before changing the cost threshold or other wage requirements for all projects.
However, the board’s decisions on individual project exemptions would still be made in private. The board can also delay application of the new rules, which kick in January 2022, either statewide or in specific regions, if it “finds that there is or likely would be a significant economic impact of implementing the prevailing wage requirements.”
As with the governor’s proposal, the bill includes carve-outs for the 421a tax break and other affordable housing projects and certain small businesses. The state Senate has approved the measure, and awaits a vote by the state Assembly, but its inclusion in the state budget virtually assures passage.
For several years, legislators have tried and failed to clearly define “public works,” in order to apply prevailing wage rules to certain private projects. New York’s constitution defines public works as state-financed projects, but private projects that receive tax breaks and other types of public funding traditionally haven’t been required to pay such wages.
A more sweeping version of the measure, which would have applied to all projects financed in whole or in part by public money, came close to passing last year, but was left on the cutting-room floor after several amendments were floated and rejected.
The measure’s inclusion in the budget this year comes at a time of extreme uncertainty for the construction industry. Most types of construction have been shut down throughout the state, without a clear timeline of when work can resume. Earlier this week the governor indicated that some policies announced in January as part of his proposed budget might not ultimately pass.
But during a press conference on Wednesday, Cuomo noted that this “was a particularly difficult budget because there’s no money, and there is much fear and much stress.” He said, however, that havoc wrought by the coronavirus — which will cost the state as much as $15 billion in revenue — did not stop his administration from pushing through ambitious policy initiatives.
“It’s not like we said because ‘we’re busy, we’re going to scale back,’” he said. “You look at this budget, you would not know that anything else is going on.”
Bail reform is expected to be included in the budget, but legalization of recreational marijuana did not make the cut.
Write to Kathryn Brenzel at email@example.com
Correction: An earlier version of this story misstated when the subsidy board can delay expanded prevailing wages from kicking in. The board can extend beyond January 1, 2022.