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Montpelier Prevailing Wage Ordinance Means Some City Construction Contracts Cost 10% More, City Council Told

Photo by Carla Occaso.
At the suggestion of city staff members, the Montpelier City Council is considering waiving a “responsible employer” ordinance this construction season. The ordinance requires contractors on construction projects over $200,000 to pay workers the state prevailing wage. The ordinance may be costing the city an extra 10% on such projects, according to Department of Public Works Director Kurt Motyka.

The state prevailing wage schedule establishes the average wage for various construction jobs in Vermont. Montpelier and Burlington are the only two municipalities that have a prevailing wage ordinance or policy requiring contractors to pay the average wage or more, according to Motyka. Montpelier passed its ordinance at the end of the 2019 construction season.

Montpelier City Manager Bill Fraser said at the end of the June 26 council meeting that, because of the pandemic and the flood, the city has not had many large construction projects since the ordinance was passed, but that is now changing. “All our flood recovery work is going to be hit with this,” he said.

“The feedback we are getting is that if it is more hassle to take on Montpelier projects, why do that?” he reported. He noted that contractors have many jobs to pick from now because there is a lot of flood recovery work happening in the state. 

Fraser said it was a “tricky issue,” but suggested the council put the topic on the agenda of one of its upcoming meetings to consider putting a hold on the ordinance through this construction season and then revisit the topic in the fall. Since it is an ordinance and not just a policy, putting a hold on it would require a public hearing, he said.

Councilor Cary Brown said she was happy to talk further about the ordinance, but that she would stand by it. “We didn’t adopt this ordinance to save money, we adopted it to make sure people get paid fairly and decently,” she said. “And that is going to cost more money.”

The council discussed the ordinance at its July 1 special meeting, although no action was taken. Brown again said she had no interest in waiving the ordinance, but the topic was put on the agenda for the July 17 meeting at the request of Councilor Tim Heney.

Motyka said at the July 1 meeting that federally-funded projects require a different wage scale — called Davis-Bacon — that varies but is generally a bit lower than the Vermont prevailing wage, and is something contractors are used to, he said. However, he added, federal funding through ARPA, the USDA, and FEMA has no wage requirements.

One concern is that the city’s ordinance may be deterring some contractors, especially smaller contractors, from bidding on Montpelier projects. “Some contractors don’t have enough overhead capacity to deal with it,” Motyka said. “We are possibly shrinking our pool of contractors who will bid.”

The ordinance means some contractors not only have to pay their employees more than on other jobs, but they also must make adjustments to their payroll and accounting practices — whether in-house or with an outside firm — and keep close track of the employee hours on Montpelier jobs versus other jobs.

The Montpelier ordinance states in part: “The bidder or proposer and all subcontractors under the bidder or proposer must make arrangements to ensure that each employee of every contractor entering or leaving the project individually completes the appropriate entries in a daily sign-in/out log. The sign-in/out log shall include: the location of the project; current date; printed employee name; signed employee name; and the time of each entry or exiting . . . Such sign-in/out logs shall be provided to the city on a daily weekly basis.”

In addition to paying the prevailing wage, contractors working under the city’s ordinance are required to provide employees with benefits — such as insurance or vacation pay — equivalent to 42.5% of their wages, potentially requiring further accounting adjustments to company practices for the duration of a Montpelier project.

The concern over the ordinance was triggered by bidding for a project to complete the water main work on School Street. Only one bid came in, from Dirt Tech, for $663,495, much higher than the city’s $458,000 estimate for the job. The company initially told the city that its bid was 30% higher than it would be without the city ordinance, but further discussion with the company found that only the labor component was increased, by 20% to 23%.

Motyka said after analyzing this project and others, “my best guess is there will be a 10% increase on [total] project costs from this ordinance.”

In an interview after the council meeting, Motyka said the staff wanted to make the council aware of the impact on the city budget that the ordinance may be having and let them decide what to do. He said the School Street project and a recently approved paving bid by J. Hutchins of $698,502 will be governed by the ordinance. Additional contracts for work this later summer could be affected by a “hold,” if the council decides to act soon, he said.

In the future, the city will be seeking bids for an estimated total of $23 million for a project at the water resource recovery plant and for pipe replacement and paving on East State Street, according to Motyka. Both are funded in part by the USDA, which has no wage requirements, so it appears the “extra” cost for these projects could be $2.3 million, if Motyka’s 10% estimate is correct.

FEMA — which the city is hoping will pay for municipal building repairs and other flood recovery projects — also has no wage requirements, according to Motyka. Asked if FEMA or the USDA would cover any additional costs of contracts signed in compliance with the Montpelier ordinance, Motyka said he was unsure of the answer.