ABC’s Testimony on the New York State Economic Development Joint Budget Hearing
The following testimony was submitted to the 2023 New York State Joint Budget Hearing on Economic Development:
Thank you Honorable Chair Ryan and Honorable Chair Bronson for the opportunity to share our testimony with you and the members of the Senate and Assembly.
The Associated Builders & Contractors, Empire State Chapter (ABC) is a construction trade association representing hundreds of open shop contractors, employing tens of thousands of workers across New York State. Our organization promotes fair and open competition and provides education and world-class safety services for our members. Additionally, we advocate for, or against, legislation and regulations that impacts the cost of construction in New York.
We applaud Governor Hochul for her proposed $100 million investment in the Regional Economic Development Councils (REDCs), the $100 million for the New York Forward program, and the $92.5 Olympic Regional Development Authority (ORDA). We also support her proposed funding of other major projects throughout New York. These investments can result in thousands of new jobs if leaders in Albany take the necessary steps to protect their investment by reducing the cost of construction in New York. We’d like to highlight two recommendations we believe you should implement immediately.
The first recommendation is that New York State must avoid falling into the same trap as they have in the past by mandating harmful Project Labor Agreements (PLAs) on state-funded projects. A PLA is a pre-hire bargaining agreement that forces contractors to hire the majority of their workforce from the union hall. When a local, qualified contractor is forced to use labor from the union hall instead of people they currently employ, they choose not to bid on the work. It is unfair to ask them to turn their back on people that have supported the company for years and who have a vested interest in seeing the company continue to succeed.
The relationship between the employer and employee is one of respect and support. Imagine if you, as a Senator or Assemblymember, were told by your leadership that you must jettison 75% of your current staff and have them replaced with people you don’t know, have no idea of their qualifications, and who have little interest in your success. You have to work with those people rather than those that have been with you for years, the people you’ve gone to battle with, who support your ideals and your values and who understand your priorities. You’d be aghast at the request and tell the leader you will absolutely not do that.
Yet, when you support and mandate a PLA, that is exactly what you’re asking our members to do. It makes the decision on PLA projects very easy. They simply won’t bid. That translates into two significant issues. Primarily, qualified local workers in New York will be unable to benefit from these projects. Second is that the construction cost will significantly increase.
There has been a substantial expansion of the use of mandated PLAs, and the unions in New York don’t have the manpower to fulfill the workload. PLAs have been mandated on the following major projects:
- Micron Investment
- Buffalo Bills Stadium
- I-81 in Syracuse
- Kensington Expressway
- Countless renewable energy projects
- JFK and LaGuardia Airports
- MTA projects such as the 2nd Avenue Subway
In New York, in order to implement a PLA a “study” must be conducted. That “study” must identify that some form of savings can be achieved by using a PLA. However, unsurprisingly, the “study” is nothing more than smoke and mirrors as it starts from a flawed premise, or question.
The question asked in these studies is would a PLA, by adjusting the work rules in current Collective Bargaining Agreements (CBA), save labor costs thus lowering the cost of the project. There are two glaring problems with the question at hand. The first, and what should be the most concerning to you, is that the savings can only come from a reduction in labor costs. Therefore, every construction worker on these PLA projects will receive less pay and benefits. The savings will come off of their back while their leaders make no sacrifices and continue to get their full pay and benefits. I hope you find that as appalling as we do.
The second problem of the “study” is the basic assumption in the “study” is that a union contractor will win the bid. But suppose the building project is awarded to a nonunion contractor not burdened by the same rules and procedures of a CBA. Then the cost-saving attributed to the PLA by the “study” is irrelevant to the question of whether to require a PLA or not. What is relevant is whether, in requiring a PLA, the builder discourages bids from nonunion contractors and thus increases the cost at which the project is performed. As we said previously, that is exactly what happens as non-union contractors refuse to bid on PLA work.
Experts agree that when you lower the number of bidders you increase the cost of the project. A study by Dr. Paul G. Carr, P.E., from Cornell University, illustrates what happens when the number of bidders on a project is reduced. The study looked at 125 public works projects in New York State and found that the construction costs increased when the number of bidders on the project decreased. Reducing two bidders added more than 4% to the bid cost. That means taxpayers will pay $3.7 million more for construction on the $92.5 million investment if a PLA is implemented. The PLA will add approximately $56,000,000 to the $1.4 billion project on the New Buffalo Bills Stadium project due to the lack of competition. That is unacceptable when New Yorkers are already facing record inflation, skyrocketing utility costs, and some of the highest tax rates in the country.
According to the Bureau of Labor Statistics, over 70% of the construction industry chooses not to be part of a union. That number is higher, or lower, depending on the trade and the region of the state. This is an important statistic to understand. When mandating a PLA, you are choosing to sideline tens of thousands of New York taxpayers. It is a conscious decision by you and others to turn away your constituents from a chance at better wages and a brighter future.
The second recommendation we encourage you pursue is to immediately disband the Public Subsidy Board created in legislation passed in 2021. We have serious concerns about an unelected group of people controlling the state’s economic future. This group will determine which private projects are going to be subject to prevailing wage requirements, effectively increasing the cost of these projects by as much as 30%. This group will determine which regions of the state can become more prosperous. Yes, they’ll be in charge of picking winners and losers.
That should be an affront to you in your role as a duly elected representative. Your constituents elected you to be their voice. Yet this group is taking away your voice and will determine what happens in your district.
It’s clear to us they will not do what’s in the best interest of all New Yorkers. The Public Subsidy Board should be immediately disbanded so that real economic development professionals and our elected leaders have the power to determine which projects are best for our future.
To ensure the resurgence of our economy and the success of these economic development programs in New York, the Governor, and you, the legislature, must take action to reduce the cost of construction in New York. If you do nothing, you will continue to see projects and investment going to other states.
While we may occasionally land a whale, don’t let that cloud your perspective. Businesses are closing left and right. Main Street USA has forever been altered. New Yorkers are voting with their feet. Please do what’s right. Stop implementing PLAs that make construction more expensive. Disband the Public Subsidy Board. Send a message to the rest of the country, perhaps even the world, that New York is serious about attracting economic development and growth.