HomeMy WebLinkAboutSubmittal-City Manager-Memo-Fiscal Impact of Responsible WagesCITY OF MIAMI
INTER -OFFICE MEMORANDUM
TO: Honorable Mayor and Members DATE: February 26, 2015
of the City Commiss1//
FROM: Daniel J. Ao
City Manager
SUBJECT: Fiscal Impact of Agenda Item
SR.3 on the February 26, 2015
Agenda "Responsible Wages"
Item SR.3 on the February 26, 2015 City of Miami Commission Agenda would require all contractors on
City construction contracts to pay "Responsible Wages" as described in the Davis -Bacon Act of the
Federal Government. The Office of Management and Budget (OMB) has worked with the City's Office of
Capital Improvements and Transportation Programs (CITP) and with other interested stakeholders to
determine that the fiscal impact to the City that we can determine with certainty will be $297,000.
First, it should be noted that responsible wages are different from living wages and from minimum
wages. Responsible wages (also known as prevailing wages) are the requirement that "all contractors
and subcontractors performing on federal contracts (and contractors or subcontractors performing on
federally assisted contracts under the related Acts) in excess of $2,000 pay their laborers and mechanics
not less than the prevailing wage rates and fringe benefits listed in the contract's Davis -Bacon wage
determination for corresponding classes of laborers and mechanics employed on similar projects in the
area" (Office of the Assistant Secretary for Policy, Department of Labor website: http://www.dol.gov/
compliance/guide/dbra.htm). The City's Living Wage requires that all temporary and permanent
employees of the City be paid no less than $12.62 per hour for those eligible for health care and was
enacted and funded for the first time on October 1, 2014. The Federal Minimum Wage is the lowest
wage that any employer, public or private, may pay their laborers.
The part of the fiscal impact that can be known with certainty is the cost of compliance. Three positions
are necessary to audit and investigate all contractors to ensure that they are complying with the Davis -
Bacon Act. With all salary, fringe, and other operating costs included, these three positions will cost
$297,000. This does not include potential future wage increases or attrition costs. The OMB and CITP
will continue to monitor these to see if three positions is adequate in the new fiscal year.
Some have stated that raising the pay of the minimum workers on all construction contracts will raise
the cost of each capital project. A survey of Responsible Wages literature contains a wide range of
increase of the total construction cost (including many that state that there is no additional cost). The
costs are counted in different ways across different studies with no primary method of calculation. Also,
market forces can hold potential increases low as contractors may reduce their profits rather than
necessarily pass these cost increases on to the City.
Some relevant reading on the subject includes:
• "U-T San Diego Ignores Growing Evidence of Prevailing Wage Benefits" by Media Matters for
America
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Fiscal Impact of Agenda Item SR.3 on the February 26, 2015 Agenda "Responsible Wages"
February 26, 2015
• "The Davis -Bacon Act and Chan es in Prevailin Wa a Rates 2000 to 2008" by the Congressional
Research Service
• "The Adverse Economic Im act from Re eal of the Prevailin Wa e Law in Missouri" by the
Department of Economics of the University of Missouri - Kansas City Nooshin
• "Prevailin Wa es and Government Contractin Costs A Review of the Research" by
Mahalia of the Economic Policy Institute
• "Ke Issues Related to Re•uirin: Pa ment of Prevailin: Wares on all Cit Public Works Pro'ects" by
the Office of the Independent Budget Analyst Report of the City of San Diego
• "Economic Fiscal and Social Im acts of Prevailin Wa e in San Jose California" by Working
Partnerships USA
• "A Sample of Studies on Davis -Bacon Cost Impacts" by the National School Boards Association
ng
have
These studies are attached to this memorandum.nhaveB's nany queslionshor concerns,fact
p please not
been given to Commissioners' Offices as well. Should you
hesitate to direct them to me at 305-416-1500 or Grose@miamigov.com.
Attachments
Submitted into the public
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on 2 2 (o• City Clerk