With the shock of Amazon’s decision to abandon its plan for opening a second headquarters in New York still fresh, New York state now is facing another decision with the potential to be even more damaging to the state’s increasingly fragile economy. It’s called Prevailing Wage legislation and it is a construction project killer.
Both the Assembly and the Senate have included Prevailing Wage language in the new state budget scheduled for adoption by April 1. If passed, this legislation, that is strongly backed by the construction labor unions, would require that any development project receiving state funding assistance would be required to pay prevailing wages for all construction labor. The requirement, which would apply to private development projects as well as projects built by not-for-profits including hospitals and colleges, would increase labor costs by 30 percent or more.
What would this mean? However well-intentioned, instead of helping construction workers, it’s a job killer. In simplest terms, any project receiving financial assistance would pay union wages for all work. While laudable on the surface, the consequences are far-reaching and would bring a large percentage of the major construction projects planned in communities across the state to a standstill. The most severe impact would be on urban downtowns such as in Yonkers, New Rochelle and White Plains that are on the cusp of unprecedented revivals after decades of little or no new investment.
Why? Without state subsidies, the vast majority of projects being planned in urban downtown locations will simply not be built. State and municipal subsidies provide the financial cushion to make these costly construction projects financially viable. The vast majority of the affected projects are residential, meaning much needed new housing at all levels, including affordable housing built by non-profit groups, could not move forward.
The significantly increased labor costs resulting from the proposed legislation would be particularly harmful in Westchester where residential rents are considerably lower than in New York City.
In Westchester, more than 30 prominent development company leaders have joined with the Business Council in forming the Westchester Coalition for Smart Development to present the facts about the unintended consequences of the proposed legislation. We have met with the entire Westchester legislative delegation, as well as other leaders in Albany to promote an open public dialogue before passage of this far-reaching legislation. We have also joined with the Business Council of New York State in this effort.
We need look no farther than Yonkers to see the consequences of requiring Prevailing Wages. For 18 months the City’s Industrial Development Agency (IDA) imposed the requirement for any project it funded. What happened? The additional labor expense was far greater than the IDA benefits would have been. The net result? Not a single major proposal came before the IDA during that period.
We have no opposition to union labor. In fact, most major projects employ some union labor. But requiring all construction projects receiving public financing of any kind to pay union wages will effectively assure that most of the projects won’t move forward. That is certainly not an outcome that anyone wants.
We strongly urge that the Prevailing Wage legislation proposals be put on hold until a thorough and thoughtful discussion of all consequences takes place. New York State cannot afford to do otherwise.
Marsha Gordon is the president and CEO of The Business Council of Westchester. John Ravitz is executive vice president and COO of The Business council of Westchester.