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| 2/2/2010 10:45:00 AM | Email this article • Print this article | Prevailing wage law will apply union rates to more projects
Lower thresholds trigger prevailing wages; some privately funded infrastructure projects subject to law
Last year's budget bill ushered in a host of changes not directly related to the fiscal affairs of state government, and some builders and lawmakers say one of the most dramatic could be the new state prevailing wage law.
The state determines the "prevailing wage" for publicly funded construction projects based on state-conducted surveys of what contractors typically pay in their area. In the past, a prevailing wage determination was required for multiple-trade construction projects with an estimated completion cost of $234,000 and for single-trade projects with an estimated completion cost of $48,000.
The budget eliminated those thresholds and now requires prevailing wage determinations for all public works projects with an estimated completion cost of $25,000.
The new law will also apply prevailing wages to privately funded and constructed public infrastructure. For example, prevailing wages must now be paid on private development projects that received municipal approval requiring a developer to make certain infrastructure improvements associated with the development, such as streets, culverts, and water mains.
Prevailing wages must be paid even if the construction was privately funded, and even though the infrastructure is dedicated to municipal ownership.
In addition, prevailing wage now apply to most private projects in which the developer, investor or owner receives $1 million or more in direct financial assistance from a local governmental unit, such as TIF financing.
So-called turnkey facilities are newly covered under covered prevailing wage laws, too. Those are facilities constructed for a private owner, developer or investor, and then a local government unit or state agency acquires or leases the facility.
Union payoff
According to state Senate Republican leader Scott Fitzgerald (R-Juneau), the changes amount to a payoff to unions and another disincentive for employers and job expansion in our state.
"Jobs are taking a back burner to the Democrats' desire to pay back their union buddies," he wrote on his website.
That criticism is leveled because the state sets prevailing wages mostly at union levels, says John Mielke, vice-president of the Wisconsin chapter of Associated Builders and Contractors.
Mielke made his comments at a Wisconsin Towns Association meeting in Woodruff last week.
"Wages are set every year by an annual survey," he told the audience. "They run them through a meat grinder and spit out the prevailing wage. Eighty percent of the hourly wages are heavily weighted toward the union rate. That's a statement of fact, not an opinion."
The state's Legislative Reference Bureau has acknowledged that prevailing wage rates are typically union scale.
Mielke said the state sends out about 16,000 surveys each year, but only gets about 4,000 returned. In the end, he said, the state uses only about half of the returned surveys to make its determinations; the rest are discarded for various reasons that invalidate them.
"Part of the solution is for the prevailing wage to better reflect actual market rates," Mielke said. "Greater participation in the survey by contractors would help."
A burden to small towns?
At least week's Woodruff meeting, Nokomis town chairman Gary Baier called the new prevailing wage law a "huge burden" on small towns such as his.
During last year's budget debate, state Sen. Dale Schultz (R-Richland Center) made the same point about the law's impact in small, rural communities.
"Rural school districts, municipalities and counties often look to small, local contractors who can build projects for less than large, urban contractors where wage rates are higher," Schultz wrote last year. "The prevailing wage law doesn't let local labor rates apply. Instead, prevailing wage means the rural workers on a local road, school or other public project must be paid the same as workers in wealthy areas of the state."
The budget bill, he wrote, exacerbated that problem by expanding the scope of the law and lowering the cost trigger to apply it.
"If a private developer pays 100 percent of costs and also builds a new sidewalk and turns it over to the local government, the entire project would be subject to prevailing wage," he wrote. "This hurts a small town's ability to build affordable housing projects and achieve other community development goals."
The changes in the law, he wrote, amount to an added tax in the range of 5-10 percent on the cost of local government projects.
In Woodruff last week, Mielke said taxpayers and builders did one break. The Legislature was considering lowering the cost threshold to $2,000 rather than $25,000 - that's the standard under the Davis-Bacon Act for federal projects - but backed off in the end.
"We dodged a bullet there," he said.
Support for the measure
Gov. Jim Doyle proposed and supported the expansion of the prevailing wage law.
In his budget message after signing the bill, he said expanding the scope of of the law was necessary "to assure that Wisconsin workers receive fair and reasonable pay for their labor."
The state AFL-CIO also supported the provisions.
"Prevailing wage reform is about protecting local communities," the labor organization stated in its talking points last year. "Taxpayers deserve to know that public dollars are being spent on quality projects. Workers on those projects deserve to get paid right. And local communities deserve some assurance that these projects will work to stabilize the local economy and stimulate future growth."
The prevailing wage law was passed in 1931 as a public safety measure designed to end the problem of poor construction by unskilled, low-paid workers.
Richard Moore can be reached at rmmoore1@verizon.net.
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