MACo Opposes Prevailing Wages on Public Construction TIF Bond Projects

MACo Associate Director Barbara Zektick testified in opposition of legislation (SB 870) which would require payment of prevailing wages on construction contracts receiving any funds from tax increment financing (TIF) bond proceeds. Counties are concerned that this bill will drive up costs of public infrastructure projects, stifle use of a demonstrably successful economic development tool, and squeeze out small businesses from participating in infrastructure construction projects.

MACo’s testimony states that the bill,

unfairly applies prevailing wage requirements to certain projects receiving TIF bond proceeds when those projects would not otherwise have to comply even if financed with other public funds.

…this bill will significantly raise costs for development projects funded with TIF bonds. If costs are raised over and above what the development will return in future tax revenues, the county will not issue the TIF because it is not economically viable. This generally prevents the development from occurring, sacrificing blight elimination, job creation, targeted economic development, and growth to the taxable base.

Under existing law, prevailing wages are required on public works contracts valued at $500,000 or more. However, the only threshold in SB 870 is the amount of the TIF bond, applying the wage requirements to any contract funded with a TIF bond valued at $500,000 or higher. It is extremely unlikely that a local government would issue a TIF bond of less than this amount. Therefore, the bill would require payment of prevailing wages for virtually any construction project receiving TIF funds, regardless of the size of the contract or scope of the project. This extremely broad scope unfairly applies higher-than-market wage requirements to projects in TIF districts where these terms would not apply to public works contracts in any other situations.

At the hearing, Senator Stephen Hershey asked why the state would establish a mandate for how TIF money must be spent, if counties created the TIF districts, constructed the deals, issued the bonds and financed the projects with county property tax revenues. MACo further emphasized that counties already have the ability to require prevailing wages in TIF projects on a case by case basis  – and it should remain this way.

This bill was heard by the Senate Finance committee on March 16.

Follow MACo’s advocacy efforts during the 2017 legislative session here.