Last night at the West St Paul City Council meeting during the “Citizen Comment” segment, a deluge of callers dialed in to voice their strong opposition to a proposal that would rescind the 2007 prevailing wage ordinance. The ordinance is applied to private development that receives public monies and the reversal would specifically benefit Dominium Development Company.
Resembling a call-in radio show without a filter and with the acoustic quality of a drive-through window, Mayor David Napier patiently took each call. But he slowly became irritated after repeatedly explaining that the open comment period was specifically for items not on the agenda, and the prevailing wage reversal proposal was scheduled to be discussed.
Last night was only the first reading and if approved by the City Council would receive a second reading and then an opportunity for public comment. Callers weren’t satisfied as they questioned whether this was the appropriate time to consider a reversal of the prevailing wage ordinance during a national crisis.
The council considered the repeal after developer Dominium indicated that the company might withdraw the development proposal if prevailing wages are required.
Dominium argues that prevailing wages would increase construction costs by 25%, a figure that unions claimed were exaggerated and that City Manager Ryan Schroeder admitted are dubious.
Schroeder also said that, “it’s an issue of subsidy.” According to Shroeder, the developer said that if the prevailing wage requirement continued there would be a greater subsidy request.
Dominium plans on constructing 137 units of workforce housing and 232 units of independent senior living on the site of a former Kmart at 50 Signal Hills Court on the northern part of the Signal Hills Shopping Center. The project will cost an estimated $100 million. “To help finance the project, Dominium intends to apply for tax-exempt bonds and 4 percent affordable housing tax credits through Dakota County,” according to the Pioneer Press. Additionally, Dominium is apparently seeking tax-increment financing (TIF) assistance from the City of West Saint Paul.
The Fair Contracting Foundation explained in a written statement that,
“Prevailing wage requirements ensure that local wage standards are maintained when taxpayer funds or financing is used on a project. With prevailing wages, local and non-local contractors alike fairly compete on factors like productivity and quality instead of wages and labor costs. As a localized economic policy, it supports the resiliency of local construction contractors at no extra cost and keeps money in the local economy through good careers. In fact, a 2018 study looking at school construction projects in Minnesota found that projects built with prevailing wage requirements did not cost more. Ex. A. Trained, skilled and safe construction workers are more efficient and more likely committed to their craft and their community. “
In response, the Laborers Union (LIUNA) submitted the following statement
“It is especially disturbing that you are considering such a drastic attack on construction workers during the COVID-19 global health crisis, which will have devastating consequences for LIUNA members and their families and working people in general. With the City Council conducting Monday night’s meeting (and all others until further notice) virtually due to COVID-19, we are unable to adequately make our voices heard in person. To be clear, we strongly oppose this attack on living wages for construction workers and will join the Saint Paul Building and Construction Trades Council in strongly opposing any elected official who stands against prevailing wage protections.”
Prevailing wage ordinance is designed to combat wage theft and labor trafficking along with keeping well-paying construction jobs locally, practices that Dominion has been accused of violating in the past. At a recent housing forum in Minneapolis, construction worker Mr. Hernandez one described working on Dominium’s Legends of Spring Lake Park project for a subcontractor whose practices he compared to “a chain of theft that goes down, down, down and those people at the very bottom – those of us in the Latino community.”
LIUNA further explained how damaging a prevailing wage repeal could be:
● Repealing the City’s prevailing wage requirement could mean that the Dominium project would be allowed to pay substandard rates for construction workers while the property owner would receive nearly double the per-unit price of area housing developments (~$17,250 vs. $8,000 to $12,000 per unit) according to the city’s consultants
● The proposed project would evidently generate $8.16M in development fees and $7.38M in expected net cash flow over the first 15 years 11 — amounts that seem excessive since Dominium is apparently not contributing equity to the deal.
● Management of affordable housing by Dominium’s operating arm has been criticized by advocates and residents who alleged “safety issues, unfair treatment from management and poor living conditions” and a “cavalier” use of evictions at Huntington Place in Brooklyn Park.
However, according to city documents, the biggest cost issue for Dominium is not construction costs, rather Dominium is paying 1.5-2 times what they should be paying for the land. According to a December 4, 2019 memo submitted to Schroeder and Community Development Director Jim Hartshorn from Stacie Kvilvang and Keith Dahl of Ehlers Public Finance Advisors,
“The proposed land acquisition cost of the Project is approximately $17,250 per unit. This figure is higher than what we expected to see for this area. We would expect to see a market range of $8,000 to $12,000 per unit for similar development projects of its type in this area. However, this is the negotiated price with the current property owner. The City and Dominium met with them to request a reduction in the price which they were not willing to do.”
While Ehlers agreed that the project can only continue forward with “public financial assistance,” Dominium disputes their estimates for the amount of assistance needed.
“We conclude that TIF assistance in the amount of $3.282 million over a term of 12 years is supportable for this project.It should be noted that Dominium disagrees with our recommendation and is requesting the EDA to consider providing 15 years of assistance totaling $3.98 million. As mentioned above, after the deferred developer fee is paid off in year 11, the net cash flow is expected to be over $1.4 million. If the additional 3 years of assistance is provided, Dominium’s net cash flow in each subsequent year will be in excess of approximately $2 million per year. For this reason, we maintain our recommendation of 12 years totaling $3.282 million.”
The City Council seemed to have heard community members. While concerned that the project might not move forward they collectively felt the repeal of the prevailing wage ordinance was unnecessary. The measure was unanimously voted down.