By Roland Murphy for AZBEX – BEXclusive
Tuesday’s Phoenix City Council policy session meeting has one item on the agenda: to provide information and background on a prevailing wage ordinance, to provide a draft of a prevailing wage ordinance, and to request approval for additional staff and necessary related equipment if a prevailing wage ordinance is adopted.
Council passed a controversial prevailing wage ordinance last March, requiring businesses that contract with the City for construction projects valued at $250K or more to pay wages and benefits comparable to those received by union workers.
The ordinance was introduced for a Council vote with only 24-hours’ notice and approved on a 5-4 vote. It was also directly amended during the meeting itself.
Public policy watchdogs and trade associations, including The Goldwater Institute, Arizona Builders Alliance and Associated Minority Contractors of Arizona, immediately expressed opposition both to the new regulation and the lack of public notice and debate. The Phoenix Chamber of Commerce also opposed the measure.
Among opponents’ concerns were:
- Fear small firms will not be able to afford to comply;
- Allegations of disproportionate impacts on minority-owned firms and female/minority/veteran and other protected classes of workers;
- Potential violation of a 1984 state law (ARS 34-321) that bans cities from creating prevailing wage requirements for public works projects, and
- Possible loss of construction jobs and increased project delays due to increased labor costs.
City Manager Jeff Barton estimated that the prevailing wage would likely be between 6% and 30% more than Phoenix’s typically budgeted labor costs. Axios reported the first year cost impact estimate at an additional $93M.
Shortly after the measure was passed, Goldwater sent a letter to Council warning of “a high risk of litigation.” At around the same time, Arizona Attorney General Kris Mayes issued a controversial opinion that said municipalities and counties could, in fact, take up prevailing wage regulations.
After passing the ordinance in March, Council voted to repeal it in April following a change in its membership. In a separate vote, Council directed City staff to research the matter and come back with a new ordinance before the end of the year.
The updated measure being discussed this week is the result of that follow-up. Differences between the old ordinance and the new include raising the minimum project value from $250K to $4M and exempting projects under the City’s voter-approved $500M bond program. Implementation will also be phased in so the impacts on City budgets are minimized.
Mayor Kate Gallego’s chief of staff, Seth Scott, also told The Arizona Republic the new ordinance was undertaken after thorough consultation with industry stakeholders, including contractors and labor representatives.
“Thorough” is, of course, a relative term, and no matter how extensive the outreach, very few stakeholders have changed their positions over the last several months. On Friday, Jan. 5, industry group Arizonans for Fair Contracting emailed an “Action Alert” asking for a grass roots contingent of opponents to attend the Council session at 2:30 Tuesday afternoon to express opposition in person or to submit comments before the meeting.
A National Debate
The City of Phoenix is not alone in pushing for prevailing wage regulations. Members of the Tempe City Council were working on legislation similar to Phoenix’s after the first measure passed. That proposal was ultimately tabled after Phoenix repealed its ordinance.
At the federal level, prevailing wages are usually mandated for public projects under the Davis-Bacon Act. Expanding the Act’s coverage has been a major priority for the Biden Administration following the passage of various large-scale public project spending bills early in its term.
Trade groups like the National Association of Home Builders and Associated Builders and Contractors have been outspoken in their opposition to expanding Davis-Bacon prevailing wage coverage and other labor-related regulations they feel would be detrimental to the industry.