Commerce Director’s comments on prevailing wage relief to ED community

OEDA_Summit_Logo_20092009 OEDA Annual Summit

The Ohio Economic Development Association (OEDA) held their annual conference last week, and the content was really good.  Executive Director JC Wallace and the crew are to be commended.  I was able to video most of it, but perhaps the most interesting video was a snippet I took of Ohio Dept. of Commerce Director Kimberly Zurz discussing prevailing wage in answer to a question after her presentation about the current ruling.  She joked at the beginning of the answer that she thought she was going to get away easy (i.e., without addressing issues like this.) 

Director Zurz makes it clear that prevailing wage statute will be applied in a pre-2008 (equipment and construction are separate; public land development and private development afterward are separate) way.  This is good news for economic development (ED), as even with the recent Supreme Court ruling, there was some uncertainty about how the ruling would be applied.

Prevailing wage + incentives: pre-2008

Prevailing wage is a law dating back to the 1930s which requires that the wages for workers on a publicly funded construction project be roughly the same as those for union wages for the region.  This usually makes costs higher, from 10 to 30 percent.  The issue has to do with economic development incentives.  Prior to last year, the standard practice was to allow for projects to separate the costs.  If a State Rapid Outreach grant or Direct 166 loan was given to a company to purchase equipment, then prevailing wage was not applied to any new construction that the company also might be doing but only on the installation of the equipment.  If Clean Ohio funds were used to clean up a brownfield site to create a new park, there was no expectation that future private construction would be prevailing wage. 

The clarification heard ‘round the state

Last year, the Ohio Department of Commerce ruled (“clarified”) that all such projects can’t be separated but have to be considered “one” project, meaning prevailing wage would apply if incentives were used. 98% of OEDA’s members responded that this would have a negative impact on development.  ED professionals began to ask questions about whether prevailing wage would apply if a JCTC were granted.

Northwestern Ohio Bldg. & Constr. Trades Council v. Ottawa Cty. Improvement Corp.

This July (July 6, 2009), the Ohio Supreme Court ruled 7-0 in the above mentioned case that “the state’s prevailing wage law applies only to work performed in the construction of a ‘public improvement’ by or for the benefit of a public authority, and does not apply to work performed on a private development project that was partially funded by state and county economic development grants.”   For more details, click on the links below.

>> Supreme Court of Ohio – Case 2008-1069

>> History of case in lower courts

>> Manufacturers Association for Plastics Processors – article on ruling

>> Associated Builders & Contractors – article on ruling

>> The actual judgment

>> Columbus Dispatch editorial

>> Ohio Economic Development Association (OEDA)

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One Response

  1. […] Commerce Director’s Comments on prevailing wage: this post was an interesting one.  I attended a conference this year in which Kimberly Zurz, […]

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