Poorly Timed Prevailing Wage Expansion

In the midst of the COVID-19 pandemic, New York State added a major prevailing wage expansion into the enacted state budget. This decision, long opposed by the Buffalo Niagara Partnership and statewide business leaders, will make it even more difficult to attract private sector investment to a state already burdened with high taxes and extensive regulations.

The new law goes into effect on January 1, 2022. As the complete impact of COVID-19 on the nation’s economy will be unknown for some time, this prevailing wage expansion will de-stimulate investment at the point when recovery should be a high priority.

Prevailing wage will be required for construction projects of $5 million dollars or more that receive at least 30 percent “public funds”. Below, please find the expansion’s initial details.

Public funds include:

  • Grants from a public entity
  • Savings achieved from fees, rents, interests or loans
  • Savings from reduced taxes as a result of tax credits, abatements, exemptions or tax increment financing (Industrial Development Agency (IDA) and Payment in Lue Of Taxes (PILOT) agreements
  • Other savings from reduced, waived or forgiven costs that would otherwise been at a higher market rate

 

Public funds do not include:

  • Tax benefits related to brownfield remediation or redevelopment
  • Tax benefits provided for projects which cannot be calculated at the time the work is preformed (Excelsior Job Credits)
  • Funds used to incentivize sewage system development
  • 421-A benefits (New York City)

 

Projects not included as part of the prevailing wage expansion:

  • Historic tax credit projects
  • One or two-family dwellings
  • Construction on non-profits with gross annual revenue under $5 million
  • Various affordable housing projects and manufactured homes
  • Projects covered under a pre-hire collective bargaining agreement
  • Empire State Development Downtown Revitalization Initiative projects
  • Renewable projects under five megawatts

 

A public subsidy board, launching on April 1, 2021, will be empowered to recommend any necessary adjustments and determinations related to the prevailing wage expansion, including:

  • The minimum threshold percentage of public funds
  • The minimum dollar threshold of project costs
  • Construction work excluded from the project
  • The definition of “construction”
  • Whether benefits, monies or credits shall constitute public funds

 

The public subsidy board will consist of 13 members appointed by the Governor, including:

  • One member recommended by the Majority Leader of the Senate
  • One member recommended by the Speaker of the Assembly
  • The Commissioner of the Department of Labor
  • The President of Empire State Development Corporation
  • The Director of the Division of Budget
  • Two members representing construction employees (labor)
  • Two members representing construction employers (business)

 

Prior to any recommendations, the public subsidy board will be required to hold a public hearing on any changes under consideration and is empowered to issue binding determinations on any matter related to an existing or potential covered project. The board may also temporarily delay implementation of these requirements beyond the January 1, 2022 effective date statewide or in a specific region, based on a review of well-established economic indexes and accepted economic factors tied to the construction industry.

Delaying the implementation of the new mandate until 2022 and allowing the subsidy board to adjust the timing based on economic indicators is an omission that the policy is harmful to the economy. Expanding prevailing wage is estimated to raise the cost of construction in metro Buffalo by 20 percent. A new study released just weeks ago highlighted the economic dangers of such an expansion.

The Partnership will continue to work with our allies across the state to draw attention to this harmful policy and the impact it will have on our economic recovery in the wake of the COVID-19 pandemic.