Milford Faces Costs Due to Prevailing Wage Decision

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LtoR: State Representative Dave Wilson, State Representative Harvey Kenton and State Senator Gary Simpson.

By Terry Rogers

In October, 2016, Eric Norenberg, Milford City Manager, received a letter from the Delaware Department of Transportation regarding a recent decision by the Attorney General Matt Denn and the Department of Justice that could put several street projects in Milford in jeopardy, including the much-needed resurfacing of Airport Road. According to the letter, sent by Brian Urbanek, Assistant Director of Statewide Support Services, the Bond Bill, or House Bill 450, contained language designed to clarify prevailing wage requirements in the use of Community Transportation Funds (CTF) and Municipal Street Aid (MSA).

“Unfortunately, after further review, the DOJ has advised that, as written, the epilogue language applies only to projects of the Delaware Department of Transportation,’’ Mr. Urbanek wrote. “Since the project in question is the Municipality’s project, it is DelDOT’s understanding that the Municipality will be required to use prevailing wage rates since CTF is being used to fund a portion of the work. DelDOT will be working with the General Assembly to correct his language in January when they reconvene.” CTF and MSA were part of the funds used when budgeting for the Airport Road project.

Prevailing wages are the minimum wages to be paid to various classes of laborers and mechanics for state and municipal projects. The wages required to be paid are based on the wages determined by the Department of Labor, Division of Industrial Affairs to be the prevailing wage in the county where the work is to be performed. In the Airport Road project, the prevailing wage would be based on Kent County’s fee schedule which could add as much as $300,000 to the project.

“Requiring prevailing wage rates prevents the competitive free market from determining the true cost of constructing a project,” Mr. Norenberg said. Senator Gary Simpson agrees with Mr. Norenberg’s assessment, as do Representatives Harvey Kenton and Charles Postles.

Representative Postles, who was elected in November to take over the seat previously held by the late Jack Peterman, said that although he was not in the General Assembly when the Bond Bill was passed, he supports exempting municipalities from the prevailing wage requirement. He feels that when the General Assembly passed the bill, their intention was clear. Representative Kenton, who has long been an outspoken opponent of prevailing wage, said that the Attorney General’s decision was an unwelcome surprise.

“House Substitute 1 for House Bill 145, allowing for prevailing wage exemptions on Community Transportation Fund and Municipal Street Aid projects, was enacted in 2015,” Representative Kenton said. “This situation has been discussed and a bill to fix this issues is expected to be introduced and acted on shortly after the General Assembly resumes action in January. Prevailing wage is very costly. Prevailing wage sets a minimum wage for occupations employed in building public works projects that are wholly or partly funded by the state. The wage varies depending on the occupation, project classification and the county in which the work takes place. The way in which these rates are set by the Department of Labor is flawed, resulting in wages that are not reflective of actual market conditions. The result is that public projects where prevailing wage is mandated can cost twice as much as those bid without the requirement.”

Representative Postles pointed out that private industry is not required to use prevailing wage and are able to put their projects out for competitive bidding, allowing the efficiency of the open marketplace to drive costs down, a statement that reflects Mr. Norenberg’s assessment. Representative Postles said that prevailing wage may once served a purpose when it was first employed more than a century ago, but today he feels the practice is “politically motivated protectionism that rewards organized labor and wastes taxpayer money.”

“When projects throughout the state were stopped because of AG Denn’s ruling, people finally began to realize what ‘prevailing wage’ was actually costing our local, county and state governments,” Senator Simpson said. “I look to continue expanding that debate in the future. A state budget deficit might just be the perfect timing to get that job accomplished.”

Representative Kenton says that he does not see the repeal of prevailing wage any time in the near future. He said there is a long-standing alliance between organized labor and Democratic lawmakers, the latter of which currently hold the majority in both chambers of the General Assembly.

“As an alternative, House and Senate Republicans have, in recent years, repeatedly proposed using federally available wage data to set more accurate prevailing wage rates. Even this modest proposal, which would save the state and local governments millions of dollars annually, has failed to gain any traction among House and Senate Democrats.

Mr. Norenberg said that the City will monitor the situation and determine the best course of action in 2017.

“If a bill to correct the language in the bond bill is passed in time, projects may benefit,” Mr. Norenberg said.

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