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Plan to expand use of prevailing wage draws concern from builders

The Associated Builders and Contractors’ Empire State chapter has concerns with Gov. Andrew Cuomo’s plan to expand use of the prevailing wage to private projects paid for with any more than 30% New York state investment.

Sen. Diane Savino, D-Shore Acres, said there is an easy way to deal with the association’s concerns as articulated by Brian Sampson, chapter president, during a recent joint legislative budget hearing on economic development — don’t take part in projects that include state economic development funding.

“With all due respect, Mr. Sampson, you don’t have to apply for the incentives,” Savino said. “If it’s so burdensome or the cost is too high and it’s just going to eat into your profits — and I get that, I understand that. Nobody wants to pay for things they don’t have to pay, but it’s public money. We’re not talking about in everything. You have the right to decide whether or not you want to negotiate with the building trades or not. That’s perfectly within your rights. But if you’re going to use our money, there’s a public interest and an interest on the part of the state to see to it that money does not go into salaries that are below the prevailing rate. It’s very simple. So we’re saying if it’s burdensome, don’t apply for the incentives, but if you’re going to apply for the incentives you should be held to the same standard that the voters in 1934 set when they overwhelmingly approved the prevailing wage law.”

Sampson fired back at Savino by saying the state’s high wages and regulations make proceeding with big development projects without state involvement nearly impossible.

“We wouldn’t disagree with you,” Sampson said. “What we would say, though, is we have to put so many incentives on the market to incentivize job growth and job retention because New York state is incredibly expensive. I think the other thing we would say is if prevailing wage was adopted and it was through a convention, then let’s have the state actually follow the law that it adopted.”

The Associated Builders and Contractors’ Empire State chapter is concerned that Gov. Andrew Cuomo’s legislative language expanding prevailing wages to private work, which was included in the 2020-21 Executive Budget bills, is flawed and actually makes the prevailing wage system worse. Sampson testified that prevailing wages are often twice the local market wage, resulting in taxpayers being overcharged for public works projects. Prevailing wages are set each year based on collective bargaining agreements for particular trades in various regions of the state. The state Labor Department used to conduct wage surveys to find out if unions represented at least 30% of employees in a given area, but now neither the Labor Department nor the state comptroller’s office verifies the accuracy of prevailing wage rates.

“Simply put, there is no transparency in how prevailing wage rates are set. Research has found the prevailing wage mandate inflates building costs as much as 25-30 percent, depending on the region,” Sampson said in written testimony. “These additional costs would offset or exceed any public financial assistance incentives. The proposal to expand that murky, antiquated mandate to private projects receiving taxpayer incentives will have devastating consequences for development in New York, with fewer projects being built and more workers unemployed.”

Another issue with Cuomo’s proposal, according to Sampson, is the creation of a public subsidy board that could adjust thresholds that would trigger the prevailing wage mandate, and decide whether to exempt individual projects or entire categories of projects from the prevailing wage mandate. State Sen. George Borrello, R-Sunset Bay, raised questions about that section of the law given that, thus far, only seven of the 11 members can be identified publicly.

“More importantly, that board could change that 30% threshold, which I think is troublesome because it could create an issue where now we’re going to jeopardize projects based on the fact that this board, unelected and in some cases unknown members are going to decide whether projects qualify for subsidies that are critical to overcoming and leveling the playing field when it comes to economic development in New York state.”

Sampson said he would prefer an independent body be selected to oversee any prevailing wage conflicts so economic development remains predictable. Lack of predictable decision making, Sampson said, could make economic development in New York state even more difficult than it already is.

“The board, as constructed in the governor’s bill, we don’t think should exist,” Sampson said. “We need predictability. Banks need it. Insurance agencies need it. Bonding agents need it. Contractors need it. Employees need it. They need that predictability. If you don’t have that, what you will do is you will suppress economic development in the state of New York because of unpredictability. … Without predictability, you’re not going to see economic development in upstate New York and Long Island.”

Ryan Silva, state Economic Development Council executive director, cautioned that the rate at which the prevailing wage could inflate project costs more in some regions, meaning some areas of the state could price themselves out of economic development if the prevailing wage is used.

“As a business owner myself, we’re willing to take risks, but we’re not willing to take unpredictable risks,” Borrello said. “And that’s what happens in New York state with this situation.”

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