Apr 3, 2023 - Politics

Phoenix approves prevailing wage law with possible $93 million impact

Illustration of a hundred dollar being built by construction vehicles. 

Illustration: Aïda Amer/Axios

The Phoenix City Council passed a "prevailing wage" ordinance last month that will increase worker pay on future construction projects — but might also bust the city's budget.

The latest: Under the new law, any company hired by the city for construction projects of more than $250,000 will be required to provide their employees with union-level wages and benefits.

  • City manager Jeff Barton estimated the "prevailing wage" is likely between 6% and 30% more than what the city typically budgeted for.

Why it matters: Phoenix is in the throes of an affordability crisis and proponents say increasing wages is key to ensuring middle-class workers don't slip into poverty.

  • "I firmly believe that prevailing and competitive wages need to be prioritized in order to ensure that Arizona's growing economy can continue working for everyone," Vice Mayor Yassamin Ansari said.

Yes, but: Contractors will almost certainly pass on the increased labor cost to the city, and Phoenix has not planned for the upticks in its budget for next year or its ongoing capital improvement plan, Barton said.

  • By rough estimates, he said the new ordinance could result in an additional $93 million next year that the city hasn't accounted for.

What happened: Progressive Council Members Laura Pastor, Betty Guardado and Carlos Garcia called a special meeting to vote on the "prevailing wage" ordinance on March 21, giving their colleagues a single day's notice.

  • City staff said they were unable to review the measure for legal issues before the meeting.

The intrigue: Outgoing conservative Council Member Sal DiCiccio cast the deciding vote.

  • He said he agreed to support the ordinance because it also requires developers that receive subsidies from the city to pay their employees the increased wages.

What they're saying: Mayor Kate Gallego, who voted against the ordinance, said asking the council to vote on something with significant financial impacts on such short notice, "is a terrible way to do public policy."

The big picture: The federal government requires its contractors to pay prevailing wages.

  • Until Phoenix, no cities in Arizona had adopted a similar standard.

What we're watching: Arizona law appears to prohibit cities from adopting "prevailing wage" ordinances, and individuals representing construction companies told the council to expect lawsuits.


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