Feb 15
2024
Workers protest loophole in state wage law
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With the first glints of sun coming up over Kenmore Avenue, slowly burning off the morning’s 22-degree freeze, several dozen construction union members rallied Wednesday in protest of developer Michael Wopperer, hoping to highlight loopholes in New York’s prevailing wage law.
Wopperer, the tradesmen and organizers said, had amassed some $17 million in public subsidies for his $23 million renovation of the former Wood & Brooks factory just across the road, yet will not be required to pay prevailing wage to the workers he’s employing on the project.
Wopperer told Investigative Post he’s employing some union workers on the project, but couldn’t afford to complete the 55 apartments and business incubator with all union labor. That means some of the laborers will earn lower hourly wages than their coworkers despite the project being supported by taxpayers in the Town of Tonawanda, Erie County and elsewhere across New York.
Without the loopholes in state law, the organizers said, Wopperer would have to pay all workers on the project union or near-union wages in exchange for the subsidies. But because of the loopholes, Wopperer’s project has emerged as a test case for the state’s prevailing wage law.
“The bottom line is these guys are wealthy owners that are taking advantage of public subsidies,” said Joseph Guza, an attorney and organizer with International Union of Painters and Allied Trades, District Council 4. “Our issue is not with the subsidies … our bigger issue is the loopholes in the prevailing wage law, which has affected this project.”
Joseph Guza, attorney and organizer for the International Union of Painters and Allied Trades of America, District Council 4. Photo by Garrett Looker.
With passersby honking in support and The Coup playing on a loudspeaker, union members held signs calling Wopperer a “welfare king” and pledged that Wednesday’s rally was just the first in their campaign to convince lawmakers to close the prevailing wage loophole.
The loophole works like this: Under state law passed in 2020, private construction projects that cost more than $5 million and receive tax breaks equal to 30 percent or more of the total cost must pay workers prevailing wage. But if a developer receives certain tax breaks — in particular brownfield remediation or historic preservation tax credits — the prevailing wage rule no longer applies. Prevailing wage, set by the state Department of Labor, is heavily influenced by union-negotiated wages and sets a floor for what construction workers can be paid. An electrician in Buffalo must be paid at least $40 per hour under current prevailing wage standards, for example.
In Wopperer’s case, even though the subsidies he’s received total 70 percent of his project costs, he’s exempt from the prevailing wage law because he’s utilizing both brownfield remediation and historic preservation tax credits.
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“If a sufficient amount of public money is supporting the development of a private project … you should apply prevailing wage standards to it,” said Matthew Kent, executive director of the New York Foundation for Fair Contracting, a nonprofit organization that monitors bid, contracting and wage issues. But: “There are carve-outs built into [the law].”
“There are folks who stand to benefit from brownfield tax credits, and as such aren’t interested in having to pick up an additional cost when they are enjoying those benefits,” he added.
In an interview Wednesday, Wopperer said the tax breaks he’s received and the exemption in the prevailing wage law are what make projects like his factory renovation doable. Without them, he said, developers might “take a second look” at a project and ask “is it really worth it?”
Without the subsidies, he said, “it might be that I’m going to not do this cleanup work to avoid the prevailing wage requirement.”
The subsidies
The former Wood & Brooks factory, a hulking industrial complex that once produced millions of ivory piano keys made from harvested African elephant tusks, sits on the border between the Town of Tonawanda and Buffalo’s Riverside neighborhood.
The first of several phases of renovation, Wopperer is converting the complex into a mix of apartments and commercial property, including a business incubator space run by Construction Exchange of WNY. Wopperer said renovation work is approximately 40 percent complete and that he expects the first apartments to be available in September. Rents could range from $1,100 to $1,800 per month.
To complete that work, Wopperer received a number of tax breaks. Those include:
- An estimated $8.6 million in brownfield and historic preservation tax credits from the state and federal governments.
- An estimated $7.3 million in property tax breaks over 12 years from the Town of Tonawanda.
- $1.2 million in sales and mortgage recording tax breaks from the Erie County Industrial Development Agency.
Wopperer on Wednesday said the actual value of his brownfield and historic preservation tax credits is lower than originally estimated because he leveraged the tax credits for capital for the project. He also suggested his property tax break from the Town of Tonawanda will be lower than expected, but did not provide an estimate.
Protesters look toward the Wood & Brooks factory that developer Michael Wopperer is renovating. Photo by Garrett Looker.
Denise Abbott, president of the Buffalo AFL-CIO Central Labor Council and a member of the Erie County IDA board, said she supports projects like Wopperer’s receiving subsidies because they revitalize run-down parts of a city or town. Downtown Buffalo, for example, credits its resurgence, in part, to historic preservation tax credits. But Abbott said those subsidies should come with strings attached.
One of those strings? A requirement that developers receiving subsidies pay prevailing wages, she said.
“These are projects that you do want to see, but when [developers are] getting such big subsidies, there should be some stipulations. There’s got to be some teeth in some of these laws,” she said.
“There has to be some accountability. When it comes to giving out these subsidies, there should be some give-back to the communities in some way.”
Another issue: A first-of-its-kind audit of New York’s tax incentive programs released this week found that both historic preservation and brownfield tax credit programs are money-losers for the state, meaning that the state collects less tax revenue than it invests in those subsidies.
The report concluded, however, that remediating contaminated land and preserving historic buildings increases property values in the areas surrounding projects, making the programs difficult to fully evaluate.
A test case for state law
Wopperer’s amalgamation of tax breaks has amounted to a test case for New York’s prevailing wage law. In October, the Painters and Allied Trades District Council 4 submitted an appeal to the newly active Public Subsidy Board, housed in the state’s labor department. The union asserted that the level of subsidy should require Wopperer to pay all of his workers prevailing wage. But in December, the Public Subsidy Board — made up of developers, union officials and Hochul administration officials — ruled the project was not eligible for the state’s prevailing wage standards.
Labor department spokesperson Kara Burke said the rationale for the board’s decision is “confidential.”
The Public Subsidy Board has met quarterly since November 2022 and, out of 12 cases decided, ruled that only two were subject to the prevailing wage requirements. One was a solar farm, the other was the Hispanic Heritage Cultural Institute on Niagara Street in Buffalo.
That, Kent said, “speaks to the many carve-outs and limitations inherent in the law, and the structure that was set up to enforce it.”
“The list of reasons that your project would be crossed off is a significant weakness of this bill, and probably larger than the advocates would champion [than] when the governor announced the deal.”
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That’s true, Guza said.
“The really frustrating thing is you have a law that labor helped support that, on the surface, looked like it was pro-labor, pro-worker but in reality the exemptions swallow the whole,” he said. “We need to close these loopholes.”
Jonathan Fuzak, an organizer with Laborer’s International of North America Local 210, said his union and others plan to hold similar rallies around the state to highlight the loopholes in the law, followed by a lobbying push in Albany.
The unions are supporting a bill from Rochester Assemblyman Harry Bronson, chair of the labor committee, that would close the brownfield tax credit loophole.
State Sen. Sean Ryan, D-Buffalo, who is pushing for IDA reform this year, supports “tighten[ing] up the prevailing wage law to ensure it’s doing what it’s intended to,” a spokesperson said.
“We must do what is right,” Bronson said in a statement. “Close the loopholes, hire well-trained technicians, protect the health of our families and return usable spaces to economic development that truly benefits our communities.”
“I think most people would agree that taxpayers should be protected.”
