Phoenix council narrowly passes prevailing wage rule for city construction workers

A progressive minority on the Phoenix City Council joined forces with the most right-leaning member to pass an ordinance that will raise the pay for workers on city-funded construction projects.

In a 5-4 vote, Councilmembers Carlos Garcia, Betty Guardado, Laura Pastor and Yassamin Ansari voted with Councilmember Sal DiCiccio to approve a "prevailing wage" ordinance that will require construction companies that are hired by the city for projects costing $250,000 or more to pay employees wages comparable to those of skilled laborers in the region.

The vote occurred Wednesday evening, in one of the final council gatherings for Garcia. He campaigned on the prevailing wage issue but lost re-election earlier this month. Kesha Hodge Washington will replace him as District 8's representative in mid-April.

The ordinance adds wage reporting requirements for companies as an enforcement mechanism. Violations could result in civil penalties and suspension from working for the city for up to a year. The ordinance also encourages contributions to career training programs.

The council failed to pass a similar measure in 2021. DiCiccio on Wednesday agreed to support the ordinance after the left-leaning coalition added a provision targeting some developments that use government property lease excise tax agreements, also called GPLETs. DiCiccio has long spoken out against the agreements, which local governments use to incentivize development. Developers using GPLETs give their property to the government and lease it back, allowing them to pay a lower rate excise tax instead of a property tax.

Approval of the prevailing wage ordinance was a win for the council's progressives who said the ordinance would attract skilled construction workers needed to fill rising labor demands, stimulate the local economy and allow Phoenix to thrive.

City staff, however, warned of potential legal risk and financial impact. Mayor Kate Gallego and Councilmembers Debra Stark, Ann O'Brien and Jim Waring opposed the ordinance.

Tense meeting, frustration over timing precedes prevailing wage vote

Just before the prevailing wage ordinance came before the council, Garcia, Guardado, Pastor and Ansari were outnumbered on several housing-related proposals intended to protect families at three mobile home parks facing eviction.

The housing vote came after six hours of emotional testimony from the public about the impending mobile home park evictions. City officials were noticeably exhausted and tense by the time the prevailing wage issue came up for a vote after 9 p.m.

The fact that the wage vote was added to the council's schedule just one day in advance also exacerbated tensions.

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The city manager and mayor set the agendas for council meetings but additional proposals can be considered if requested by at least three council members. Garcia, Pastor and Guardado requested the wage vote on Tuesday, submitting a letter to City Manager Jeff Barton that was timestamped by the city clerk at 4:56 p.m. Then, during Wednesday's meeting, Guardado revised the ordinance to include language related to GPLETs.

"I will not be supporting this. I think this is a terrible way to do public policy," said Gallego, who noted the short window she had to review the ordinance and the even shorter amount of time to consider the GPLET-related changes.

"We should have a transparent process. We'll do better if we get more feedback. ... This could have very serious financial implications," Gallego said. Councilmember Ann O'Brien echoed Gallego's concerns.

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City staff warns of financial impact, legal risk

The prevailing wage vote came a day after Barton presented his preliminary budget to council members for the next fiscal year. The council will vote on the budget in the summer. The city's general fund will see a $134 million surplus, according to Barton. The vast majority of this surplus is earmarked for raising city employees' pay.

Barton said he roughly estimated that adopting the prevailing wage ordinance could cost the city $93 million, which officials had not accounted for in the city's budget or capital improvement plan, which outlines infrastructure projects. It might also add $12 million to the $500 million bond program that City Council approved in December and heads to voters for approval in November, Barton said.

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Garcia questioned Barton's assessment of the financial impact but said "even if that was the case ... then I would be really, extremely disappointed that we underpay folks that work with the city that much."

Assistant City Manager Lori Bays said the vote might lead the city to reallocate funding intended for employee pay raises to fund the prevailing wage measure.

City Attorney Julie Kriegh warned that the ordinance had not been reviewed by the city's legal team, despite the fact, she said, that staff advised the council to let the city's legal team draft and review the prevailing wage ordinance they sought in 2021.

"I wanted to just put on the record that there might be some legal issues with how this was drafted and the format," Kriegh said.

DiCiccio pushed back. "There is precedent here where I helped write my own ordinance," he said, referencing an ordinance related to permits he said he drafted years ago.

"And did you ask your colleagues to vote on it with six minutes' notice?" Gallego retorted.

Questions over prevailing wage ordinance's legality

Supporters and critics of the ordinance also question whether Phoenix is legally allowed to adopt a prevailing wage rule.

One state law seems to clearly prohibit it, saying cities "shall not by regulation, ordinance or in any other manner require public works contracts to contain a provision requiring the wages paid ... be not less than the prevailing rate of wages for work of a similar nature."

But Michael Angulo, Guardado's policy director who spearheaded the ordinance, points to another law that says cities "may by ordinance regulate minimum wages and benefits within its geographic boundaries."

Taylor Seely covers Phoenix City Hall for The Arizona Republic. Reach her at tseely@arizonarepublic.com or on Twitter @taylorseely95.