The New York State Legislature took action to include an expansion of prevailing wage in the state’s budget for fiscal year 2020-21, which was signed into law on April 3 by Gov. Andrew Cuomo (D). The provision expands the view of what projects are considered “public works” and applies prevailing wage to private projects of $5 million or above in project cost that receive at least 30% of their financing from public assistance. This assistance goes beyond direct public investment to include loan and grant programs and certain tax incentives, greatly increasing the number of projects required to pay prevailing wages.
The types of financing that qualify a project for inclusion and other related criteria will be determined by a Public Subsidy Board consisting of 13 appointed representatives of the state government, developers, the construction industry and certain nonprofit organizations. Already determined to be exempt are projects under the state’s 421-A tax benefit program related to affordable housing, as well as other types of projects with the public interest in mind, such as certain nonprofit construction and brownfields rehabilitation.
The new policy, S.7058-B, is a result of an effort that began in last year’s session, but did not come to fruition until its inclusion in Gov. Cuomo’s proposed budget, released in January. Though the policy won’t take effect until January of 2022 with certain exceptions, it is being implemented in the midst of the COVID-19 crisis that has sidelined much of the construction industry in the state and put the economy into a tailspin. Supporters of the expansion tout economic stimulus and the perceived lifting of the middle class as a result of these mandatory wage rates. However, opponents are concerned that the increased labor costs and budget uncertainty already expected under prevailing wage policies will be expanded to even more projects in a time when economic recovery will be paramount, and at the discretion of an unelected board with wide discretion and authority.
“Even in the midst of one of the greatest economic challenges in the history of our great state, members of the majority in Albany couldn’t stop themselves from stomping on our recovery,” said Brian Sampson, president of the ABC Empire State Chapter of ABC. “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 create an inconsistent definition of construction is unconscionable. They can, and will, take their investment opportunities elsewhere.”
The Public Subsidy Board does have the option to delay or amend implementation of this policy if it is found to have “significant economic impact.” Critics argue that taxypayer-funded projects should not be subjected to unnecessary cost burdens and obstacles to getting shovels in the ground. In 2018, a study by the Empire Center found that the existing prevailing wage law in New York increased construction costs by 13% to 25% during the prior decade.