By: DNJ Policy & Advocacy Committee

February 8, 2021

There is state legislation currently gaining traction in Trenton that must be stopped at all costs. The legislation, ACS A1571 & A1576 and S1956, would impose prevailing wage requirements on private projects that receive tax abatements or tax exemptions (PILOTs) if it becomes law. The bill also expands the application of prevailing wage to work on a property or premise leased by a public body – current law only applies to properties 55% leased by a public body, the new bill reduces the percentage to 35%. Just to make clear: prevailing wage is not minimum wage. Prevailing wage is the hourly rate paid to contractors and workers on public works projects. Downtown New Jersey, the state’s premier advocacy organizations for downtowns, strongly opposes legislation that imposes restrictions on a municipalities redevelopment abilities and urges everyone who cares about economic development, redevelopment, and affordable housing to call the Governor and your State Legislators now to tell them you do too. Hundreds of current and future redevelopment and affordable housing projects are at stake.

This legislation is extremely detrimental to a municipality’s ability to incentivize and support downtown redevelopment. Tax abatements/PILOTs are the most powerful and effective tool municipalities have to encourage property owners and developers to redevelop or make improvements to their properties. The projects generated through tax incentives have revitalized downtowns across our state, allowed streetscape and infrastructure improvements to be made, created jobs, expanded municipal tax bases, and turned vacant and environmentally constrained properties into successful developments. Imposing an across-the-board prevailing wage mandate on all redevelopment projects receiving a PILOT will significantly drive up the cost of construction, making this critical economic development tool useless to most municipalities. And the group this bill is supposedly intended to help – prevailing wage workers – will not even benefit if there are no projects for them to work on.

It is estimated that prevailing wage increases project costs between 20 – 30%. If the project is to move forward, that gap needs to be filled somehow. It might mean that the municipality has to increase the amount or term of the abatement, or perhaps reduce community benefits expected out of the redevelopment. As written, the legislation applies to all projects – even those previously negotiated. So, for example, affordable housing settlements will be at peril and/or need to be renegotiated.

Downtown New Jersey opposes the state mandate of requirements on local economic development incentives. We believe it should be up to the municipality to determine and negotiate the use and terms of tax incentives based on context and financial reality. The ability to use PILOTS has made redevelopment possible and allowed over 300 municipalities to successfully negotiate settlement agreements for affordable housing. If passed, this legislation would end redevelopment as we know it, threaten the implementation of hundreds of affordable housing projects, and destroy New Jersey’s economy and post-COVID-19 recovery. Use this link (www.nj.gov/faqs/legis/) to learn how to contact the Governor and your State Legislators and tell them to oppose this disastrous piece of legislation.