May 14
2024
Secretive state board gives Amazon another break
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The 3 million-square-foot Amazon distribution center being built in Niagara County will not have to pay construction workers prevailing wages, a state board has ruled, despite the project receiving $137 million in tax breaks and subsidies.
State law says the developer must pay prevailing wages if a private construction project costs more than $5 million and subsidies account for at least 30 percent of costs. The wage rate is set by the state Department of Labor and influenced by union pay.
But the state Public Subsidy Board decided in March those rules won’t apply to the Amazon facility.
Why not? The Subsidy Board is refusing to say. So is the labor department, which oversees the board.
By law, the board deliberates and votes in private and isn’t required to explain its decisions — a seeming contradiction with the state’s Open Meetings Law.
“The whole point of the Open Meetings Law is for the public to see and hear the discussions and decisions by public bodies,” said Paul Wolf, president of the New York Coalition for Open Government. “Holding such discussions behind closed doors and then reporting the results decided afterwards defeats the purpose of the Open Meetings Law.”
The ruling came as a surprise to Matthew Kent, director of the New York Foundation for Fair Contracting — the watchdog group that asked the Subsidy Board to adjudicate the Amazon project. He believes the project should have qualified for the prevailing wage designation.
It’s “very frustrating” to see the board rule against the project and not say why, Kent said.
“I would love to have [the board’s reasoning] explained to me, but that’s not been forthcoming,” he said. “It is in the dark. I can’t say I love that practice.”
Kent said he can only guess why the board ruled how it did on the Amazon project. What is known is this: Subsidy Board members disagree with one another about how to apply the prevailing wage test.
At issue is whether the board should use a project’s total costs or its construction costs as the basis of the 30 percent calculation the wage rule hinges on. Using total cost, a higher number, would likely result in fewer projects qualifying for the prevailing wage protections.
Amazon told the Niagara County Industrial Development Agency in 2022 that its project would cost $550 million, a total that broke down into $450 million for construction and $100 million for equipment, fixtures and other costs, including architectural and engineering designs.
The IDA subsequently awarded Amazon $124 million in property, sales and mortgage tax breaks.
The Foundation for Fair Contracting, gathering information from the New York Power Authority, then determined that a low-cost electricity allocation to Amazon was worth between $12.7 million and $25.2 million in savings, meaning total subsidies ranged between $137 million and $149 million.
Using the $450 million construction cost, the Amazon project would hit the 30 percent mark and qualify for prevailing wage.
Using the $550 million total project cost, the project would fall short and not qualify.
Kent’s group argued that state law intended for the board to use construction costs, which would mean the $137 million in subsidies require prevailing wage.
“I think the public should be sharing in the concern that we've got laws on the books that are thin to start with, that are maybe not being held up to the way they were supposed to,” Kent said. “And at the end of the day, well-heeled interests are receiving substantial amounts of public dollars.”
Board admits struggling
The Subsidy Board isn’t talking, so it’s not known why the Amazon project didn’t qualify for prevailing wage, or what numbers the board used to make its determination. Board members told Investigative Post they’re prohibited from speaking with reporters. Only Labor Commissioner Roberta Reardon, who chairs the board, is permitted to speak publicly about its work, members said. A Labor Department spokesperson declined to make Reardon available for an interview for this story.
Asked how the board made its decision on the Amazon project, Kara Burke, its spokesperson, pointed Investigative Post to state law, which says, “any proceedings of the board which relate to a particular individual or project shall be confidential.”
Burke said it would be up to a labor department attorney to decide if the board could publish any rationale of its decisions. For now, all that’s posted on the board’s website is a “covered” or “not covered” determination with no explanation.
The board considered the Amazon project at its most recent meeting in March behind closed doors. It posted its decision online in mid-April.
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Wolf, of the coalition for open government, noted that board votes taken behind closed doors need to be recorded in its minutes. As of now, no meeting minutes are posted online.
But what the board does talk about in public is telling: At the March meeting, Subsidy Board members discussed openly that they hadn’t yet decided which cost standard to use — total cost or construction cost.
The board is composed of representatives from labor, the development community and state government. Stephen Tucker, the sole board member from Western New York, heads the Northland Workforce Training Center.
Developers on the board said they prefer a total cost standard, which would make it less likely for a project to require prevailing wage. Labor union representatives prefer the construction cost standard, which would make more projects qualify for the higher wages for workers.
“In all candor we have struggled within the agency about this issue,” Reardon said at the meeting. “I’m very aware of the composition of this board and the difficulty we’re going to have coming to a consensus.”
To date, the board has only found three out of 17 construction projects were subject to the new prevailing wage rules. One was the Hispanic Heritage Cultural Institute on the West Side. For that project, too, it’s not clear why the board ruled the way it did.
Kent said the board ruling on projects while debating which standard to use “did not instill with me a great amount of confidence as to where the Amazon application was going.”
“I’m certainly feeling like the goalposts are moving here,” he said.
What does the law say?
State law does not dictate which cost standard the Subsidy Board should use. Passed as part of the 2020 state budget, it says the standard should be “total construction project costs.”
Based on press releases and reports released at the time, lawmakers in both the Assembly and Senate seem to have interpreted that phrase to mean “construction costs” and said as much in their budget summaries that year. Cuomo’s press release on the budget used similar language: “Private projects larger than $5 million where at least 30 percent of construction expenses are supported by public grants, tax credits or certain other incentives will be required to pay prevailing wage.”
Some Subsidy Board members, however, say it’s not so simple.
“I remember that the insertion of the word ‘project’ into that definition ... was very important for us,” board member Peter Florey, an affordable housing developer, said at the March meeting. “It was our understanding at the time that it was going to be the whole project. Clearly there's a disagreement there.”
Board member Gary LaBarbera, head of the New York Building Trades Council, said labor prefers the construction cost standard and argued that the labor department needs to choose one or the other.
Florey declined to comment for this story, citing the policy that only Reardon can speak for the board. LaBarbera did not return a phone call seeking comment.
Burke, in response to a question about the board’s ruling on the Amazon project, cited the law.
“If the board determined a project was not covered, then that means either the total construction project costs failed to meet the threshold in the law … or the project and/or funding fell into one of the exemptions,” she said.
She declined, however, to define total construction project costs.
Secrecy criticized
Others who have interacted with the Subsidy Board in recent months also expressed frustration about the lack of information about its rulings.
“I can think of zero reasons why the reasoning should not be public,” said Joseph Guza, a lawyer and organizer with the District Council #4 union, which put a different project before the board in December last year.
In that case, the reason the board ruled against the project was clearer: Developer Michael Wopperer received both brownfield cleanup and historic preservation tax credits for his rehabilitation of the former Wood & Brooks piano factory in Tonawanda — two subsidies that mean the prevailing wage rules don’t apply. Tradesmen with District Council #4 called that a “loophole” in the law at a February protest — a label Wopperer said he disagrees with.
Wolf, head of the New York Coalition for Open Government, found other transparency issues, too.
“Their one-page agendas leave a lot to be desired as they really don't inform the public as to what is being discussed,” he said. “No meeting documents are posted for the public to see. Executive sessions should not be scheduled in advance but it appears that they are.”
Paul Brown, head of the Buffalo Building Trades Council, said despite the board’s ruling, it’s likely a majority of the construction on the Amazon project will be done by union members. Crews have begun site work on the 111-acre property in the Town of Niagara.
An Amazon spokesperson said the board ruled on its project “in accordance with state law.”
“The Niagara County IDA requires Amazon to use regional construction labor — which we are abiding by,” spokesperson Steve Kelly said.
Kent argued that regardless of how much union labor ultimately builds the distribution facility, all workers should earn prevailing wage. In Niagara County, for example, prevailing wage means a carpenter must make at least $33 per hour, and an electrician $40 per hour — plus benefits.
Kent said that if the board is changing its standards for evaluating projects, the intent of the prevailing wage law may well be moot.
“It really begs the question of, why are we going through all this song and dance?” he said. “I am not encouraged by the direction here.”
