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Posted on: March 17, 2023

Expansion of Prevailing Wage Requirements to PILOT Projects

The Senate Budget committee was scheduled to consider a bill expanding prevailing wage requirements to PILOT projects, however, after outreach by the League and other stakeholders, sponsor Senator Gopal held S-2798 for additional review and possible amendments. 

S-2798, as amended, expands prevailing wage requirements to projects that have received financial assistance in the form of grants; loans; loan guarantees; expenditures; investments; tax abatements, exemptions, incentives, or rebates; incentives; or other financial assistance, any of which are provided, authorized, facilitated, or administered by public bodies, or by agencies or authorities of public bodies with the exception of projects financed by NJHMFA. 

The bill, which the League opposes, was initially scheduled for consideration by the Senate Budget and Appropriations Committee on Thursday. However, after outreach by the League and other stakeholders the sponsor, Senator Gopal, held the bill for further consideration and possible amendments. 

Payment in Lieu of Taxes (PILOTs) are the single most powerful tool available to municipalities to encourage property owners and developers to make improvements to property or to locate a project in a distressed or blighted area. With respect to long term tax exemptions in particular, exemptions are granted only where the municipality has determined that the project would not occur but for the PILOT. Increasing the cost of already challenged projects by 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.

This is of particular concern where a project’s revenues 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 also believe that the bill has a potential for unintended consequences. As one example, where a municipality has adopted an ordinance permitting five-year exemptions and abatements for improvements to residential properties, it appears that individual homeowners making improvements to their residences would be required to pay prevailing wage. 

The requirements proposed in S-2798 will significantly weaken the ability of municipalities to spur economic development in blighted areas, and will also impede private investment that generates jobs, quality housing, environmental cleanup, and other public goods. We thank Senator Gopal for his reconsideration and look forward to working with him and other stakeholders to address our concerns. 

Contact: Lori Buckelew, Deputy Executive Director & Director of Government Affairs, lbuckelew@njlm.org, 609-695-3481, x112.

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