Hartford Business Journal

HARTFORDBUSINESS.COM | APRIL 15, 2024 23 FOCUS: COMMERCIAL REAL ESTATE not reliant on public subsidies for food and health care. She said her organization would oppose any effort to roll back the 2017 law, which also benefits non-union workers and is backed by contractors who understand livable wages are key to maintaining a skilled workforce. "At what point is the state going to stop subsidizing poverty wages to line the pockets of developers?" Glassman said. "… We want to see a commitment back to the state if we are going to invest in your project. Invest back in us. Hire local Connecticut companies. Hire a Connecticut workforce and make sure that workforce is earning family-sus- tainable wages. Make sure they have access to secure retirement, health care for them and their families. If we're going to make that investment in you, make it back to us." Extra costs jeopardize projects However, developers and economic development professionals say some large-scale projects might not happen if prevailing wage is applied too broadly. At a public hearing before Fair- field's Town Plan and Zoning Commission in January, a developer behind a proposed 245-unit apart- ment redevelopment told town offi- cials that a prevailing wage mandate tied to a $3 million state brownfield grant would add $20 million to the project. "So, if I had to explain that to investors and lenders, I would have a hard time," said Thomas Montelli, a partner in Fairfield-based Post Road Residential, which proposed the apartment development on an industrially polluted, 5-acre site on Black Rock Turnpike. Fairfield Economic Development Director Mark Barnhart said he and the development team antici- pated the state would require prevailing wages, but only on a roughly $5 million environmental cleanup ahead of construction. Instead, Barnhart said, the Department of Labor decided that prevailing wages would be required for all labor on the $125 million project. The town and developer are still trying to figure out a path forward. Combined with elevated construc- tion costs and high interest rates, losing the state grant puts the project at risk, Barnhart said. In Fairfield, New Britain and else- where, DECD is working with devel- opers and local officials who have found prevailing wage requirements unpalatable, trying to plug unantici- pated funding gaps. DECD Deputy Commissioner Matthew Pugliese said his agency cannot advise a grant applicant what portion of their project might be subject to prevailing wage. That determination is made by the Department of Labor after an award is granted, he said. Pugliese said his department has heard "from a small percentage" of grant recipients that are frustrated with recent Department of Labor rulings. DECD is trying to navigate these projects through other financing options, Pugliese said, including reducing grants to under the $1-million threshold, reducing the scope of projects, or identifying other state grant sources not subject to prevailing wage. Some developers and municipali- ties in recent months have opted to reduce their grant requests to under $1 million, Pugliese said. Other proj- ects have "gone on hold" while trying to resolve funding gaps. "Obviously, DECD wants to see the projects move forward and to happen, but DECD also needs to abide by the law that is in place, that really governs this," Pugliese said. "So, when developers come to us, or municipalities are upset, what we try to do is steer them towards what the other way to move forward with the project could be, and we try to be problem-solving partners with them." Pugliese said concerns raised about prevailing wages have not diminished overall demand for DECD funding. Applications for brownfield grants are on pace to top the $30 million the state has set aside for this year. And the $74.3 million in Community Investment Fund awards announced in March received applications seeking $550 million, Pugliese said. The Community Investment Fund, which was established in 2022, is providing hundreds of millions of dollars in grants over several years to historically underserved communities for various economic development initiatives, including brownfield remediation and afford- able housing projects. Mountains or molehills? Thomas Wydra, director of the state Department of Labor's Wage and Workplace Standards Division, said his agency's method of deter- mining prevailing wage applicability under the 2017 law has not changed in the intervening years. If a municipality cleans a brownfield to advance a private redevelopment using $1 million or more in DECD-connected funding, that would trigger prevailing wage for the cleanup, and the following construc- tion, he said. "I think it's important to remember we conduct a careful analysis of all bid documents, architectural drawings, contracts and any materials associ- ated with the project so that we can make a final determination on whether there is a phase one and a phase two of a project that is connected via those documents," Wydra said. Wydra said the number of requests to determine prevailing wage applica- bility have "ramped up" over the past 18 months, something he attributes to an increase in DECD-funded projects. Ann M. Catino, a partner at law firm Halloran Sage and co-chair of the state's Brownfields Working Group, contends the Department of Labor has, in fact, changed the way it's applying the 2017 law. For "a while" the development community had an understanding that prevailing wage would be applied only to those portions of a project funded by a DECD grant, Catino said. "But, in this past year or so, it has gone off the rails and there is an interpretation that is much broader," Catino said. "It is unfortu- nate because it definitely is having a chilling effect on a lot of projects." Catino said it appears this issue will have to be settled by state policymakers, but that is a difficult prospect during this year's short legislative session. Sources close to the issue say concerns about prevailing wage mandates have been raised with DECD Commissioner Daniel O'Keefe and state lawmakers. Asked for comment on the issue, state Sen. Joan Hartley (D-Wa- terbury), co-chair of the General Assembly's Commerce Committee, issued a statement: "The state's economic development is central to the work of the Commerce Committee, which continually eval- uates state investments, its policies and practices." She declined further comment. A spokesman for Commerce Committee co-chair Rep. Stephen Meskers (D-Greenwich) said the prevailing wage issue has not "come before" the committee during this session, which ends May 8. Not penciling out Paige Bronk, president of the Connecticut Association of Economic Development, said concerns about the prevailing wage have been "bubbling to the surface" for about two years. While the law is six years old, it takes years to plan, permit and gather funding to launch a building project, especially a large multifamily development, Bronk noted. "I think people are learning about it now because they are getting closer to that implementation," Bronk said. Bronk, who is also the economic and community development manager for Groton, acknowledged the issue caused his town to forgo $2 million of an $8.46 million DECD grant announced in 2022. The grant was meant to subsidize an $81.4 million redevelopment of underutilized downtown lots by the Poquonnock River. The Groton Housing Authority would build 51 affordable apartments. A development group led by David Preka of Advanced Construction would build just over 200 housing units. And the town would improve a riverside boardwalk, and build a pedestrian bridge over the river, as well as bikeways and park space. The private housing development accounted for more than $50 million of the anticipated budget, a cost that was going to be defrayed by $2 million from the state grant, Bronk said. But the town decided to carve out that portion of the grant after learning it would prompt a prevailing wage requirement for the entire $50 million private development. It "was just not going to pencil out," Bronk said. Instead, DECD was able to connect Preka's group with a state Depart- ment of Housing grant program, which is not subject to prevailing wage, Bronk said. Bronk anticipates it will take another two years or more for the project to come to fruition. "DECD, to their credit, they found a way to work with another state agency to assist that component, so the project could advance," Bronk said. A rendering of The Strand, a 100-unit apartment development in New Britain led by developer Avner Krohn. RENDERING | CONTRIBUTED Ann M. Catino Mark Barnhart Paige Bronk Kimberly Glassman Matthew J. Pugliese

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