Proposed Legislation Requires Prevailing Wage for PILOT Projects

New Jersey lawmakers are currently considering legislation that would require developers to pay the prevailing wage for public work on properties receiving tax abatements or exemptions. The Assembly Labor Committee recently advanced Assembly Bill No. 3435, which will now go before the full Assembly.

Proposed Legislation Requires Prevailing Wages for PILOT Projects

As we have previously discussed on the Scarinci Hollenbeck Government & Law Blog, many New Jersey municipalities use long-term tax abatements to attract local development projects. Municipalities must enter into a written Payment in Lieu of Taxes (PILOT) agreement with applicant developers that call for the payment of an annual service charge in place of traditional real estate taxes on improvements for a specified period of time, typically at a much lower overall rate.

Under the proposed legislation, the prevailing wage requirements of the New Jersey Prevailing Wage Act would apply to any public work done on a property or premises for which a public body provides, approves or authorizes a tax abatement or tax exemption for the property or premises, unless the property or premises is exempt from taxation, such as the property of a nonprofit organization. The Prevailing Wage Act requires the payment of minimum rates of pay to laborers, craftsmen and apprentices employed on public works projects. The rates are based on the collective bargaining agreements established for a particular craft or trade in the locality in which the public work is performed and, therefore, vary throughout the state and by profession.

The proposed bill has a number of critics, including the New Jersey State League of Municipalities (NJSLOM). It maintains that “requiring a private property owner to pay prevailing wage for improvements on their property will prompt a greater demand on the municipality for a lower PILOT (thereby diminishing municipal revenue and property tax relief) and may even prevent a project from moving forward.” The NJSLOM has also raised concerns that the negative impact of the bill may be greater where project’s revenue will be limited, as in the construction of affordable housing, or where a project bears additional costs to meet other public needs or interests, such as environmental remediation, historic preservation, or the installation of infrastructure.

We will be closely tracking the status of AB 3435 and will post updates as they become available.

For more information about the proposed bill or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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