Hartford Business Journal

22 HARTFORDBUSINESS.COM | APRIL 15, 2024 FOCUS: COMMERCIAL REAL ESTATE Developer Avner Krohn says state prevailing wage mandates have blown a multimillion-dollar hole in his plan to build a 100-unit apartment building in downtown New Britain. HBJ PHOTO | STEVE LASCHEVER Thanks, But No Thanks Developers, municipal officials say prevailing wage costs overtake value of state economic development incentives Connecticut, then the incentive actu- ally has to be a viable incentive." 'Stop subsidizing poverty wages' Prevailing wage has a long history in the U.S., having been enshrined in the federal Davis-Bacon Act of 1931, which established a requirement that public projects pay laborers at a rate at least equal to the wages that "prevail" in their geographic area. Connecticut eventually adopted its own prevailing wage requirements for public projects. Today, Connecticut's Department of Labor sets prevailing wages based on union rates. The agency also deter- mines prevailing wage applicability under the 2017 law. Prevailing wages in the state can vary significantly by job type and geographic location. In New Britain, for example, the 2023 prevailing wages for a residential project range from $61.42 per hour for an elevator mechanic, to $15 for a common laborer. A power-equipment operator makes at least $43.38 per hour, while roofers make at least $41.20 per hour, according to DOL data. Developers and consultants inter- viewed for the story say prevailing wage requirements typically increase costs by 20%. That's a figure contested by Kimberly Glassman, director of the Foundation for Fair Contracting of Connecticut, which lobbies on behalf of labor unions and union-affiliated developers. She contends there is no basis in fact or peer-reviewed study that supports that cost estimate. Glassman said prevailing wage protections are meant to ensure workers get fair wages and are By Michael Puffer mpuffer@hartfordbusiness.com D eveloper Avner Krohn says prevailing wage mandates attached to a $4 million state grant have blown a multimillion-dollar hole in his plan to build a 100-unit apartment building in downtown New Britain. Now, Krohn said, he and city officials are working with the state Department of Economic and Community Development (DECD) to try to patch that financial gap in time to begin construction this summer. Krohn is among an increasing number of developers, economic development officials and others raising concerns about the impact of a six-year-old law requiring "prevailing wage" for labor on private developments supported with $1 million or more in state financial assistance through DECD. The requirement was embedded in the two-year state budget adopted in 2017, and went into effect in 2018. Complaints began mounting a few years after the law went into effect. The issue could threaten new projects, creating a roadblock to Gov. Ned Lamont's and lawmakers' efforts to add affordable housing in the state. DECD, in recent years, has been increasingly active in funding new apartment projects, investing hundreds of millions of dollars through various programs like the Community Investment Fund. That's opening up more develop- ments to the prevailing wage mandate. Additionally, developers and others say they've noticed a recent change in the way the state is applying the 2017 law. The mandate is increas- ingly being applied by the state Department of Labor to an entire development, rather than part of a project being supported by state funding, like brownfield remediation. That has upended budgets for some new apartment developments, experts say, adding costs that exceed the value of state grants. Krohn, for example, said the added costs of prevailing wages on his $26 million development — planned to be located on a parking lot that formerly housed the Strand Theatre — would top the $4 million state grant. He's already invested more than $1 million in the project, including buying the Main Street property from the city of New Britain last year for $125,000. Krohn said he's not opposed to paying prevailing wages on a portion of his development. He accepts that state assistance comes with strings, including a requirement that 20% of the units be set aside as affordable. "We're not saying take away the strings," he said. "We're just saying be aware, if the goal is to incentivize additional housing in the state of Prevailing (hourly) wages in CT JOB CATEGORY NEW BRITAIN FAIRFIELD Sprinkler fitters $47.55 $47.55 Power-equipment operator: backhoe/excavator $45.71 $45.71 Electricians $42.60 $43.40 Roofers: slate & tile $41.70 $42 Cement masons/concrete finisher and tile setter $21.22 $17.89 Plumber/pipefitter $16.67 $48.28 Source: CT Dept. of Labor

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