27 May Opinion: Public Works Legislation Will Harm Minority-Owned Businesses
New York’s minority and women owned businesses (MWBEs) deserve a fair shot. After years of systematic discrimination, shut out of the industry by unfair government policies and inequitable access to capital, MWBEs are finally being offered increased access to the city’s growing construction industry.
After years of progress, however, new public works legislation (S.1947/A.1261) threatens those gains. Brought to this country in chains 400 years ago, communities of color cannot be further disadvantaged by a law that will kill the ability of MWBEs to compete in New York’s construction industry. Lawmakers must reject any legislation that threatens the economic progress of communities of color.
The 400 Foundation has partnered with the New York State Association of Minority Contractors (NYSAMC) and the New York Real Estate Chamber (NYREC) to ensure that this bill does not hinder economic progress in our neighborhoods, which begins with giving minority owned businesses the tools to thrive across the city. The 400 Foundation seeks to promote opportunities for minority developers and contractors, NYSAMC works to meet and surpass a 30 percent activation goal for minority contractors and NYREC represents MWBE developers with a common goal- the expansion of minority business participation and community development in New York. Together, the organizations are committed to lobbying and advocating for new developers, contractors and legislation that benefit MWBEs.
A recent study from Prosperity Now and the Institute for Policy Studies indicates that black median wealth will be at zero by 2053. Enabling the growth of black owned businesses will be a key factor in maximizing black wealth. That must begin to happen now. New public works legislation will take those tools out of the hands of black business owners, ensuring that the vast majority of the economic rewards from New York’s fast-growing construction industry go to predominately white businesses. Minority owned businesses, historically shut out of the industry, tend not to be union firms. In fact, Harry Alford, the president and CEO of the National Black Chamber of Commerce, estimates that 98 percent of construction companies of color are nonunion.
The public works legislation currently being considered by the State Legislature, which effectively places a de-facto union mandate on projects receiving public funds and subsidies, will take projects away from those businesses. The impact of imposing prevailing wages would increase affordable housing construction costs by 30 percent or at least $7 billion – a devastating loss of 74,000 units through 2026. Most MWBEs do not have the existing infrastructure to compete with predominately white union firms when it comes to union labor. Moreover, the prohibitive cost of doing business will ensure that many MWBEs will not be able to bid on lucrative projects across the city.
Affordable housing developments are not public works projects. (S.1947/A.1261) seeks to impose prevailing wage requirements for economic development projects of all kinds, regardless of the size, wherewithal or mission of the entity receiving public support. Affordable housing is not a public works project but instead, a public private partnership intended to benefit low and middle income renters who do not make sufficient income to pay market rent without being “rent burdened,” a term meaning a family pays in excess of 30 percent of its gross monthly income on housing. As vital and necessary as affordable housing is, the rents generated in affordable housing developments are not sufficient to pay for the cost of developing the building. Affordable housing can only be created with the participation of private developers taking on debt combined with financial support from the federal and local governments who provide tax credits and lower cost capital in the form of subsidies.
A prevailing wage requirement in affordable housing would guarantee that the benefits intended for low and middle income rent burdened families would be shifted to support higher labor rates for union or prevailing wage shops which (a) do not traditionally hire from communities of color and (b) whose employees are already making substantially higher incomes than the renters who are in need of affordable housing – the constituency this government support was originally intended to benefit.
Prevailing wage requirements will hurt the efforts of MWBE’s working to win City and State contracts. Advancing this legislation would undermine the goals of MWBE policies developed to help MWBEs grow their financial capacity. Prevailing wage requirements would preclude smaller developers, especially M/WBEs and small non-profit organizations, from building development capacity because of the significant barriers to entry prevailing wage requirements present.
MWBE contractors are already limited in accessing public work due to existing procurement processes, high costs of insurance, limited access to the surety market, limited access to capital and limited representation within the ranks of organized labor. These barriers force MWBE’s to pursue private projects. If this legislation is adopted, all development driven by MWBE’s including projects which impact affordable housing developers, not for profits, community
organizations, schools, and any other entity receiving public benefits or subsidies will have yet another obstacle to surmount in the form of burdensome and expensive prevailing wage compliance requirements.
That will not just harm existing MWBEs, it will create a barrier to entry to the industry that will favor existing, predominately white union contractors. As communities of color are increasingly gaining access to capital to start businesses, the proposed legislation will make it more difficult than ever for new MWBEs to gain market share and compete with firms that have an institutional knowledge of managing complex prevailing wage requirements. Lawmakers must say no.
Progressive lawmakers cannot in good conscience support a piece of legislation that amounts to a handout to predominately white contractors. Nor should progressive lawmakers ever support a piece of legislation that will kill MWBEs, or at best, hamper their ability to be competitive in New York’s construction industry.
Workers of color will be similarly disadvantaged by S.1947/A.1261. About 75 percent of workers in the open-shop are people of color; the proposed legislation will take existing jobs and opportunities away from those individuals. The bill will support higher labor rates for union or prevailing wage shops which (a) do not traditionally hire from communities of color and (b) whose employees are already making substantially higher incomes than the renters who are in need of affordable housing – the constituency this government support was originally intended to benefit.
As a result, 185,000 New Yorkers would lose the opportunity to move into new, affordable homes, or remain in their current homes. This is not an acceptable tradeoff when 56 percent of our fellow New Yorkers are already burdened with high rents and, we are in the midst of a homeless crisis.
And despite our continuing calls, New York’s 32 building and construction trade unions have refused to release their diversity data. Because of this, we do not have the information to evaluate the full scope of the legislation’s economic impact on workers of color.
Repairing the legacy of 400 years of discrimination and exploitation will require a comprehensive suite of legislative actions. That includes giving MWBEs the tools to compete and thrive as well as ensuring that workers of color are given equitable access to New York’s most critical industries.
Instead of regressive policies such as S.1947/A.1261 that have the potential to irreparably harm communities of color, lawmakers should be focusing on increasing access to the industry for MWBEs and workers of color. That includes increasing funding for MWBEs and construction training programs in communities of color. After 400 years, MWBEs and workers of color deserve an equitable playing field.
Rev. Kahli Mootoo is chief of staff of the 400 Foundation, Francilia Wilkins Rahim is Executive Director of NYREC and Joe Coello is Executive Director for NYSCAMC.