The Cleveland-Cuyahoga County Port Authority board approved a controversial policy Thursday that will allow developers on port-funded projects to pay workers less than what they are now required to pay them.
The board amended a 2018 policy that said that 100% of workers on certain Port of Cleveland projects had to be paid the prevailing wage. The amendment gives developers the option of choosing not to pay the prevailing wage, which is the average wage of similarly employed workers in a specific occupation in a given area. Prevailing wages are usually higher than minimum wage and can reflect what union members in construction trades are paid.
Several Port of Cleveland officials said that the agency was missing out on financing development deals because of the 2018 prevailing wage policy. A few board members sided with organized labor, saying that giving the developers the option of paying less than the prevailing wage would ultimately drive wages down.
There are dozens of factors that go into the analysis of why a developer may choose their lender base. To pin this on prevailing wages is highly subjective and inaccurate.
Port of Cleveland board member David Wondolowski
Port Board Member David Wondolowski led the unsuccessful case for not amending the policy. He heads the Cleveland Building & Construction Trades Council, many of whose members packed Thursday’s board meeting. Wondolowski said that port officials had not adequately proven that requiring developers to pay the prevailing wage was the reason the agency was missing out on financing deals.
“Developers are always going to seek better financial terms,” Wondolowski said. “This is nothing new and certainly not applicable to the prevailing wage standards. What about interest rates? What about repayment schedules? What about tax incentives? There are dozens of factors that go into the analysis of why a developer may choose their lender base. To pin this on prevailing wages is highly subjective and inaccurate.”
Port President and CEO William Friedman says lost deals, lost millions
Port President and CEO William Friedman gave a presentation before the vote, which supported the need to amend the 2018 policy. He said the port had “lost numerous deals” because of the prevailing wage requirement. These totaled $6 million in fees the port would have earned.
His presentation didn’t contain specifics about lost deals. Friedman said that the Port of Cleveland was the only one among its five or so counterparts in Ohio that had a prevailing wage requirement. He said those without a 100% prevailing wage requirement “have seen much higher deal flows.”
The amended policy applies to deals that offer developers sales tax savings on construction materials. For projects in which 100% of workers make prevailing wages, 80% of sales tax savings would go to the developer. Twenty percent would go to the port as fees.
For projects in which fewer than 100% of workers make prevailing wages, 60% of sales tax savings would go to the developer. Forty percent would go to the port as fees. The policy does not state the minimum number of prevailing wage workers a project must have in order to qualify for the lesser tax savings. The port sets a $15 hourly minimum wage on port capital improvement projects.
“We still think that this provides a real incentive, a strong incentive to reach 100% prevailing wage and yet still keeps us able to equally compete in the market and not just lose out in participating in these transactions,” Friedman said of the amended policy.
‘Touching off a race to the bottom’
Tim Linville, CEO of the Construction Employers Association, has a different viewpoint. During the public comment period, he urged the board to not amend the 100% prevailing wage policy.
“Prevailing wage requirements organize competition around quality, productivity and efficiency without touching off a race to the bottom where contractors underbid one another by lowering employees’ pay and providing them scant, if any, fringe benefit support,” he said, reading from a 2017 letter he had submitted to the board requesting that members adopt a 100% prevailing wage policy.
“Recognized diversity and inclusion standards work hand-in-hand with prevailing wage to promote the use of a local, diverse workforce on construction projects receiving public economic development assistance,” he said.
Darrell McNair, who attended the meeting remotely, was board chair when the 2018 policy was adopted. He said the policy was “never about union vs. nonunion.” He said “it was about economic development and about uplifting our community,” especially Cleveland, which consistently ranks near the top nationally in terms of poverty.
“We knew at that time that we would take a hit on the deals that came through, but we thought it was important to give it a run to see exactly what would happen.” he said. “We’re five years removed from that. I think that we have a little bit of data up underneath our belt to make some adjustments.”
Board approved amended policy
The board approved the amended policy in a 5-2-1 vote. Chair J. Stefan Holmes and board members McNair, Margot Copeland, Andrew Jackson and Teleange Thomas voted in favor of giving developers the option of paying prevailing wages.
Wondolowski and Dan O’Malley, the former head of the North Shore AFL-CIO Federation of Labor, voted against amending the policy.
Peggy Zone Fisher abstained. Several union construction members jeered at her for not taking a position.
Holmes said Thursday’s vote doesn’t prevent the board from reviewing the prevailing wage policy again.
Cuyahoga County Executive Chris Ronayne, who is a former board member, wrote Friedman the day before the meeting asking that the 2018 policy not be amended.
“While lending and development markets continue to change, I believe that not enough time has passed to fully evaluate the impact of the policy and, therefore, believe that the Prevailing Wage policy should remain in place,” he wrote.
