Towns, unions headed for a showdown over prevailing wage

For nearly two decades, state-mandated wage levels for public construction projects have been a topic of heated debate between municipalities and labor unions.

Now, with Connecticut facing a record-setting budget deficit and 9 percent unemployment, both sides are hopeful that economic factors will push the debate in their favor.

Town leaders say the current system imposes millions of dollars in unaffordable labor charges on property taxpayers whenever communities want to renovate a firehouse or construct a public works facility.

Labor leaders counter that this system is one of Connecticut’s most effective safeguards against a growing number of unscrupulous contractors who rely on undocumented workers and illegal wage practices to exploit labor and undercut honest companies.

“We know we have to look at this very seriously this year,” Sen. Edith G. Prague, D-Columbia, co-chairwoman of the Labor and Public Employees Committee, said. “We don’t want to exacerbate the towns’ problems. We don’t want to be an obstacle. But we know we have these unethical contractors and we have to do something about them.

“I’m not sure what the answer is yet, but we have to do something this year and we have to do it right.”

The committee has scheduled a forum on prevailing wage issues for 1 p.m. Thursday, in the Legislative Office Building.

For Connecticut’s cities and towns, part of the answer lies in adjusting threshold levels that haven’t changed in two decades.

Since 1991, state law has mandated that communities pay “prevailing” wages for renovations projects costing more than $100,000 and for new construction priced above $400,000. Local officials say that’s too low, given 20 years of inflation. The Connecticut Conference of Municipalities has proposed raising the threshold to $500,000  for renovation work and $1 million for new construction; the Connecticut Council of Small Towns wants a $1 million floor for all projects.

Municipal leaders also say the prevailing wage rates set by the state Department of Labor are too high. The law says the wage must equal “the rate customary or prevailing for the same work in the same trade or occupation in the town in which such public works project is being constructed.” Local officials argue the data used to calculate these prevailing wages overwhelmingly reflect companies that use unionized labor, not the average rate actually paid in communities.

“There is no dispute that the prevailing wage mandate forces municipalities and the state to pay millions of extra dollars every year for public works projects,” CCM wrote in its December briefing to state lawmakers, adding the system can inflate wage rates by more than 50 percent.

For example, CCM reported, a bricklayer in Bridgeport–Connecticut’s largest city–would earn an average wage of $28 per hour under regular conditions, but $43.65 under the Labor Department’s prevailing wage.

In Warren, a tiny Litchfield County community with less than 1,400 people, a plumber would earn an average rate of $29.97 under normal conditions, and an extra $17.31 under prevailing wage.

“For smaller communities in particular, this is big bucks,” Bart Russell, executive director of the Council of Small Towns, said, adding this problem only will be exacerbated if municipal aid is reduced next fiscal year to help close the state’s $3.67 budget deficit. “When are we going to fix this? If not now–when?”

announced this past week that he plans to close at least $2 billion of the projected $3.67 billion shortfall for 2011-12 with spending cuts. That deficit equals nearly one-fifth of all current spending.

And while the new governor said his goal is not to reduce education grants – which represent about two-thirds of all municipal aid – he is unsure whether that can be done. Malloy has made no such statements about non-education aid.

But labor advocates counter that construction workers have troubles of their own in this economy, and changing these threshold levels only would hurt.

Construction is a seasonal occupation that, like other fields, was hit hard during the recession, said Craig Metz, business manager for the International Union of Operating Engineers, who predicted that lowering thresholds would attract a “lesser grade of construction workers” to municipal projects.

Gov. Dannel P. Malloy’s new state labor commissioner, Glenn Marshall, said last week that while “I totally understand in the economic climate we’re in that people want to cut costs, I personally don’t believe it should come off the backs of the workers. It could open up a Pandora’s Box.”

Though the threshold levels haven’t been adjusted in two decades, Connecticut still has the second-highest levels in the nation, ranking only behind Maryland, Marshall said.

Marshall, who was president of Local 210 and district manager of the New England Regional Council of Carpenters, also said Connecticut’s construction industry has been harmed by a growing “underground economy” marked by unethical contractors who rely on undocumented workers, under-the-table wages and other illegal practices. “They not only cheat the workers, they cheat the whole system,” he said.

Though these firms typically avoid prevailing wage projects, because of the extensive reporting requirements, raising the threshold could open a new series of projects for them to pursue, Marshall added.

But James Finley, executive director of CCM, called this a “red herring,” adding that most cities and towns have “lowest responsible bidder” regulations that screen out corrupt contractors.

Finley said he believes raising the threshold levels would allow communities to stretch their capital budgets 10 to 30 percent further, launching more projects and creating more jobs.

“We’re not asking for an eliminating of prevailing wage,” he said. “We just want to bring the levels up to market reality. That would mean more jobs and lower costs for municipalities. This is win-win.”

But a 2010 study of the prevailing wage system by the University of Utah concluded that the hypothetical cost savings municipal leaders project if prevailing wage mandates are lessened are “greatly exaggerated” since labor costs typically constitute about 30 percent of construction project costs.

Much of that study was prepared to refute an earlier proposal from Connecticut towns, which had called for a suspension of the prevailing wage system.

But the report also concluded that states with prevailing wage statutes:

• Promote greater safety in the construction industry.
• Encourage and expand apprenticeship training, which in turn helps preserve and grow construction skills statewide.
• And include more racial and ethnic minorities in construction apprenticeship programs.