Phoenix passes prevailing wage ordinance amid threats of legal action
PHOENIX (CN) — For the second time in a year on Tuesday, Phoenix has become the only city in Arizona to pass a prevailing wage ordinance for construction contractors.
“By passing a prevailing wage today, we are sending a clear message that we value our labor force and recognize their available contributions to our city's growth and prosperity,” said Phoenix city councilmember Betty Guardado, who has led the effort to pass a prevailing wage ordinance since 2020.
She was the first to make a motion to pass the ordinance in a city council meeting Tuesday afternoon.
Beginning July 1, construction contractors working for the city of Phoenix will have to give their employees union-level wages and benefits “consistent with local standards for a given type of work.” The ordinance passed 6-3 with support from Mayor Kate Gallego.
Laborers in support of the ordinance say it will level the playing field between union and non-union workers, ensuring that all construction workers receive fair compensation for skilled labor.
“Central Phoenix has the lowest median income in Arizona,” said Raquel Teran, an activist and former state legislator. “That district would be incredibly benefited by an ordinance like this. Strong workforces make for strong communities.”
Contractors, on the other hand, say a prevailing wage requirement will hurt small and minority owned businesses that can’t afford to pay the same wages that larger contracting firms can.
Josh Umar, executive director of the American Subcontractors Association of Arizona, called the ordinance “a solution in search of a problem,” because most contractors in the city already pay competitive wages.
The only change the ordinance will make, he said, is to impose administrative burdens on small businesses that will discourage them from bidding on future contracts.
City Manager Jeff Barton said he anticipated this in drafting the ordinance, which is why the ordinance will only apply to projects worth $4 million or more, allowing small businesses to still bid on smaller contracts in which a prevailing wage won’t be required.
Gallego said that while most companies may be paying competitive wages now, the ordinance is a way to ensure those wages stay if the market takes a turn.
The ordinance comes with additional exceptions. It won’t be applied to projects funded by the city’s recently-enacted $500 million general obligation bond program, which will fund parks, libraries, police stations and more. It also won’t be applied to affordable housing projects in an effort to keep them affordable.
“That’s a telling point,” commented councilmember Jim Waring, who voted against the ordinance because of the projected costs to the city.
City staff estimates an overall increase in costs of up to $17 million per year. $1.4 million of that will go toward 12 new city engineer positions to support training, auditing and enforcement of the ordinance.
Councilmembers Debra Stark and Ann O’Brien voted ‘no’ as well, not only because of projected operating costs but because of additional costs associated with the inevitable lawsuits that will follow.
A 1984 law outlaws the use of a prevailing wage, but Arizona Attorney General Kris Mayes opined in June 2023 that a 2006 law allowing cities to establish a minimum wage takes priority. She said a prevailing wage is just a type of minimum wage.
"The earlier prevailing wage statute was obviously enacted with no awareness of the law to come, but the minimum wage law was enacted with the benefit of hindsight," Mayes wrote.
Even if the minimum wage law doesn’t apply, she wrote, the prevailing wage law can’t be applied either. Because it was passed as a voter-supported referendum, the Voter Protection Act bars the state legislature from making amendments to it. And it wasn’t until 2011 and 2015 that the legislature amended the law to apply to cities. Those amendments are null and void, she said, so the law has no teeth in this context.
“Regardless of the current AG’s opinion, I believe this is against state law,” she said. “I will be voting ‘no,’ and I encourage other councilmembers to vote ‘no’ to avoid costly lawsuits.”