A bill aimed at regulating construction wages has cities worried major developers will look elsewhere.
House Bill 2408, passed out of committee last week, would require private companies to pay prevailing wages on construction projects in Oregon covered by enterprise zone tax incentives.
Projects under $20 million would be exempted, according to the bill’s current language.
David Stockdale, Umatilla’s city manager, said the enterprise zone is a “significant” incentive that has helped bring in data centers and other economic development to Umatilla. He said it seemed counterintuitive to counteract the tax break with higher construction costs.
“Enterprise zones have been highly effective,” he said. “They have had such a high success rate, it’s troubling to see (the legislature) try to fix something that’s definitely not broken.”
Oregon’s current prevailing wage law requires contractors on government-funded projects to pay wages above a certain rate set by the Bureau of Labor and Industry.
Proponents say it prevents contractors from depressing wages in order to be the low bidder on projects, encourages high-quality work and benefits workers who take home more pay. They want to see those benefits added to private projects that are reaping the benefits of temporary tax breaks through an enterprise zone.
The League of Oregon Cities has pushed back, asking its member cities to submit testimony opposing the bill. Stockdale said he agrees with the League of Oregon Cities that the prevailing wage requirements in the bill might stifle economic development.
“Especially for projects right at that $20 million threshold, it might not pencil out anymore,” he said.
Hermiston mayor David Drotzmann has expressed his opposition to the bill as well. He tweeted that it would “crush” one of the only economic development tools cities have left in Eastern Oregon. During a city council meeting last week he said that companies looking to locate or expand in the Hermiston area have not-so-subtly threatened to take their business across the river to Washington if Hermiston is not able to provide the right incentives.
He said if paying prevailing wage had added just 10% to Lamb Weston’s $250 million expansion in Hermiston, that would represent an extra $25 million expense for the company, wiping out most of the money the company is saving through the enterprise zone tax break.
“That can sometimes be the pendulum swing that takes (projects) up to Washington or over to Idaho,” he said.
Hermiston city councilor Jackie Myers said in addition to increasing labor costs on the construction side, in her professional life she has performed the accounting for projects involving prevailing wage, and “you need a full-time accountant to keep track of that.”
Drotzmann said when Knerr Construction of Hermiston worked on the Eastern Oregon Trade and Event Center they had to pay a separate consultant to handle the large amounts of paperwork and accounting involved in complying with prevailing wage requirements.
“This is potentially a killer to economic development,” he said.
The bill passed out of the House Committee of Business and Labor on April 8 on a 6-5 vote.