Prevailing Wages for Publicly Subsidized Projects in New York

By: Timothy Lynn

The FY2021 New York State Budget adopts provisions requiring prevailing wages on certain construction projects receiving public benefits. The law, codified at Section 224-a of the Labor Law, applies to construction work on projects with total construction costs over $5 million with public funds providing at least thirty percent of the total construction costs. If subject to this section, the project is subject to prevailing wages rules under Sections 220 and 220-b of the Labor Law. It is generally effective on January 1, 2022.

Public Funds. Public funds has a broad definition, including:

• Payment of money that is not subject to repayment
• Below market rate fees, rents, interest rates, other loan costs, or insurance costs
• Loans that have contingent repayment obligation or that have credits against repayment
• Savings from reduced taxes by reason of tax credits, tax abatements, tax exemptions, or tax increment financing (TIF financing)
• Savings from PILOT agreements
• Other savings from reduced, waived or forgiven costs that would have been at a higher cost but for the involvement of a public entity

If thirty percent or more of constructions are subsidized by one of the above with respect to a construction project of $5 million or more, the law may be triggered.

Exempted Projects. Certain types of projects are exempt from the new law:

• Certified historic rehabilitation projects
• Restore NY projects
• Downtown Revitalization Initiative projects
• Renewable energy projects with a capacity of 5 MW or less
• Construction work on one or two family dwellings where the property is the owner’s primary residence, or construction work performed on property where the owner of the property owns no more than four dwelling units
• Not-For-Profit corporations organized under Section 102 of the NY Not-For-Profit Law that (1) have gross annual revenue and support of less than $5 million and (2) that is not formed exclusively for the purpose of holding title to property
• Specific exclusions for certain affordable housing, supportive housing and subsidized housing projects
• Certain manufactured home parks
• Projects that are subject to a collective bargaining agreement, project labor agreement or similar agreements with a bona fide building and construction trade labor organization
• A handful of exceptions for narrow categories of projects in New York City

Incentives that are not treated as Public Funds. The statute excludes certain incentives from inclusion in the definition of public funds. Several are very specific, but three could have broader impact:

• Funds that are not provide primarily to promote, incentivize, or ensure that construction work is performed
• Tax benefits provided for projects the length or value of which not able to be calculated at the time the work is to be performed
• Brownfield Cleanup Program tax credits

Covered Agencies. Public entities that may provide public funding, as defined in the statute, include, but are not limited to, the following:

• The State
• Local Development Corporations
• Industrial Development Agencies
• Municipal Corporations
• Any state, local, interstate or international authority under the Public Authorities Law

Minority Owned Businesses, Women Owned Businesses and Service-Disabled Veterans Businesses. It is not clear what the requirements are, but owners and developers subject to Section 224-a “shall comply with the objectives and goals of minority and women-owned business enterprises pursuant to article fifteen-A of the executive law and service-disabled veteran-owned businesses pursuant to article seventeen-B of the executive law.” The law does permit the Commissioner of Labor to require that owners and developers provide information on the participation of minority and women-owned business enterprises and the diversity practices of contractors and subcontractors involved in the project.