Dave Reid

MORE Hurdles Proposed for Development Projects within Milwaukee

By - Mar 1st, 2009 10:16 pm
Get a daily rundown of the top stories on Urban Milwaukee

In what appears to be a rush to significantly alter development efforts within the City of Milwaukee, Alderman Ashanti Hamilton is proposing additional requirements for development projects that accept more than $1 million in Tax Incremental Financing.  The changes include requirements that developers pay construction workers prevailing wages, hire a significantly higher percentage of City of Milwaukee residents, and hire a higher percentage of emerging businesses as subcontractors.  Although it sounds great to have developers pay higher rates to construction workers, and have them hire more City of Milwaukee residents, as with most things it brings with it unintended consequences.

One result of this new regulation could be that developers ask for larger TIFs to offset the cost of paying higher hourly rates.  In the short run this may not be much of an issue, but over time these inflated TIFs will begin to create problems of their own.  There will be less available funding so fewer projects will be able to receive funding.  The inflated cost of these TIFs will necessitate a longer payback period, so it will be longer before Milwaukee Public Schools, the City of Milwaukee, Milwaukee Technical School System and Milwaukee County begin receiving property taxes from these projects.  Finally, by inflating TIFs this could have a negative impact on the City of Milwaukee’s bond rating, which again would make future projects less likely to receive funding.

It is also possible that projects that in the past would have requested slightly more than $1 million in TIF financing may scale the entire project back so as to avoid these requirements.  Although this may seem drastic, developers surely will look for ways to avoid the additional cost.  Developers might not cut additional units or floors, but they might drop or scale back public areas of the project such as pocket parks, riverwalks , and other amenities.  This clearly could have an impact on both the quality of the development and the number of people employed during construction.

Finally, it is also likely that fewer projects will come forward, due simply to the new regulations and additional hurdles.  It’s not clear if the PERC requirements in the Park East have been a deterrent to development there or if the problem lies in lot sizes and multiple levels of government, but it is clear that nothing has been developed in the county-owned portions of the Park East.

If implemented these new regulations could lead to less development, less employment and less tax base creation.  So it seems that these unintended consequences may do more harm than good.

Categories: Real Estate

38 thoughts on “MORE Hurdles Proposed for Development Projects within Milwaukee”

  1. Meghan says:

    Instead of making this a mandatory ordinance, would it work to compromise and instead add incentives for developers who hire local? Perhaps that should’ve been done with the Sick Leave too.

  2. Dave Reid says:

    Agreed. Especially right now we need to find ways to get private money flowing into new developments to create jobs and by adding costs/time, all be it when using TIF, will likely just slow things down.

  3. Juli Kaufmann says:

    I agree with Meghan. Incentives are appropriate, mandates are not. As an “emerging” business owner, I can tell you that I simply cannot effectively compete when prevailing wages are required. Prevailing wages are not realistic and, frankly, I personally do not earn as much as some of the lower laborers at prevailing wages. If the prevailing wage rates were actually more realistic, perhaps in line with the definitions for living wages, this could be more palatable. Generally, I prefer incentives and prioritization to mandates. Those who advocate for these mandates have their hearts in the right place, it just becomes counter-productive when good intentions create the opposite of the intended impact. I am amazed that leaders are not willing to be more realistic about how markets work.

  4. JCG says:

    I definitely see the nuances you present, and agree there may be drawbacks. With a little more discussion, you may even convince me it’s a bad idea. But aren’t multi-million dollar TIF’s, by their very definitions, in and of themselves “incentives” to develop (re: Meghan’s comment)? And aren’t they a public investment in private development (pointing that while there is certainly civic gain to be had from seeing said development, most of the “real” financial gain goes to the private sector – otherwise the private enterprises wouldn’t do it!), so therefore with that shouldn’t that come with responsibilities and at least some tangible benefit payback for the public? Ultimately, I don’t think it’s asking too much to hire local and pay, at the very minimum, “prevailing” wages. Think about that term. By definition it’s not asking for a lot.

    Ultimately, if there’s demand and a market, the private enterprise will follow. I think what you’re seeing in the development slowdown downtown has much more to do with the overall economic crisis we’re in (lack of demand), than it has to do with supposed disincentives. If the demand were there as it was a couple years ago we’d be seeing cranes all over park east right now.

    Thanks for the thoughtful point of view, though, Dave.

  5. JCG says:

    As a follow-up question, what would be some non-TIF, non-ordinance ways you’d see to achieve the same ends?

  6. Dave Reid says:

    @JCG Yes, TIF is a public incentive and TIF will continue to be used in the future on development projects. So yes development will go on. But the prevailing wage requirement will most certainly add cost. So I believe some projects will get smaller (less workers) to avoid the cost. Some project TIFs will get larger (to pay the higher cost) and just pass the cost back to the taxpayers which will have the impact of reducing the TIF pot for other projects. Additionally, as Juli pointed out and Alderman Witkowiak pointed out today some very small EBE firms can’t compete if the price is the same as the larger firms. Finally, surly some projects just won’t happen, because real or believed it will be easier for projects to build in the burbs.

    So interestingly enough I believe what Prof Marc Levine said to this very CED committee last year. He argued that doubling the EBE requirements and such will have limited positive impact on the joblessness rate in the City of Milwaukee. What he called for was a massive build out of a light rail system which would put thousand of people to work in construction, provide jobs once built and provide access to the some 40,000 low skilled suburban jobs that go unfilled daily.

    PS From listening today I don’t think the RPP or EBE requirements will be very problematic. Generally its the prevailing wage that is the problematic issue.

  7. Kevin Keller says:

    In the Journal Sentinel article on this topic, Barry Mandel cites that Park East has prevailing wages in act. What have we heard so far from Park East? Well, crickets I suppose as there is nothing on Park East. I have to wonder what effect that had on development, especially since a lot of development has happened in the surrounding areas, but nothing on Park East and only ONE lot sold.

    Now sure, if this was implemented across the entire city rather than one area that could help Park East, but would it help Milwaukee? I just don’t think giving businesses and developers another reason to build their new development/locate new jobs in (Name the suburb here) rather than Milwaukee is a good thing.

  8. Dave Reid says:

    @Kevin Keller Yea it is true the County passed Community Benefits Agreements for the Park East (PERC). I’m not sure how big a role they have played in the slow development of the PE but you’re right they are there and nothing has been built. Personally I think the bigger problem in the PE is lot sizes and two levels of government but it is possible the PERC requirements inflated the Palomar TIF request or has scared off developers all together.

  9. Alex says:

    Pres. Hines is standing strong against a prevailing wage mandate. (Keep in mind, 80 percent of these projets are ALREADY prevailing wage AND DPW projects are 100 prevailing wage — we’re only talking about 20 percent of specific TIFs.) Of course, I’m biased. He is my boss.

    Great piece of reporting/commentary, Dave.

    Oh, and the ordinance is being sent to the F&P committee, in case you didn’t hear.

  10. Alex says:

    Please call Mayor Barrett (who has pledged to sign the ordinance and is in full support of the prevailing wage mandate) if you want to get/keep good development going in Milwaukee: 286-2200. Just a suggestion… He should veto it if a prevailing wage mandate is included in the ordinance.

  11. Pam says:

    It’s not been a rush to establish standards for investing taxpayer dollars in development projects. The ordinance has been in development for months. Ald. Hamilton agreed to move the concept forward in front of 650 community members at New Hope Baptist Church in August 2007. Some in the business community and the city powerbase are freaked out that there is an innovative and cooperative effort to put forward some legislation that creates accountability. We’ve had tens of millions of TIFs go out the door in the past 5 years and in the same period of time employment has declined by 5000 in Milwaukee. Trickle down hasn’t worked, folks. It’s time to make it clear, as Alderman Willie Wade stated in committee, that if developers want Milwaukee’s money, they have to take Milwaukee’s people too. According to DCD’s website there wasn’t a single TIF in 2008, a time when 3 Park East developers were seeking help from the City! Nothing is going to be built in Milwaukee without a subsidy in the coming years, but if we use that investment wisely, we can come out of the recession with a better local economy than we started with. Developers that can show a bona fide gap in a pro forma relative to the prevailing wage standard should receive consideration for that from DCD and ZND in determining the amount of the TIF. The solution is not to go low-road and destabilize the position of workers. The solution is to spend our TIF money to spur development AND create good jobs for local residents.

  12. Dave Reid says:

    @Pam I’ve seen liquor licenses get more of a public hearing than this wide ranging ordinance did. Almost no questions were asked at committee, and everybody was limited to 2 minutes, and it was scheduled one day before going to the Common Council. One day. That is a rush.

    You said it, no TIFs happened last year, and now we want to make development more expensive? Look if the prevailing wage part is dropped you will pretty much get support by all parties, wouldn’t that be a good thing?

  13. Jerry Knapp says:

    Personally, I’m a bit tired of explaining the nuances of the construction industry to those who are, at best, peripherally involved. Prevailing wages are 1) the most common (modal) wages in a county 2) reflective of the market rate for both skilled and semi-skilled labor 3) recognized as being essential to the stability of an industry rife with market failures (such as workforce training). Construction workers face dangerous working conditions, high levels of job insecurity and wages that, adjusting for inflation, have remained stagnant for the past 25 years. Workers on average are only employed for 1500 hours a year due to weather restrictions, market fluctuations, etc. When critics of prevailing wages look at the per hour amount workers in a metro area are earning, they assume a full work year. A worker making $20/hr is usually NOT making $40k a year.

    It also baffles me that many of the proponents of new urbanism and the sustainability movement come out against other standards integral to the evolution of the built environment. And let’s not forget that TIFs are subsidies, and generally highly regressive ones. Bear in mind, too, that the MORE ordinance is triggered only after a threshold of $1million. This does not affect builders of small to medium sized commercial or residential projects.

    The arguments I’ve heard so far, here and elsewhere, against the MORE ordinance are remarkably similar to arguments businesses have always made against ANY kind of standards or regulations. The default response to the suggestion that the public MIGHT have something to say about their money is: let the market decide (which, in regards to prevailing wages, it pretty much HAS). I guess I’m not ready to believe that the market is something more than just a group of people playing a game they wrote the rules for and can change at any time.

  14. ted says:

    Wake up people. There is a crisis of unemployment in Milwaukee. If developers are going to come with their hats in their hands and ask for preferential treatment from the city then you better believe there should be requirements in place to ensure that qualified city residents benefit from taxpayer largesse.

    Developers have expressed willingness to accept all the terms of the legislation except the prevailing wage. What kind of message does that send? If you make us hire “these people” we will, as long as we can pay them less? The point is justice and fairness, not another opportunity to discriminate.

    It is particularly disappointing when the people who have been elected to serve our city’s most disadvantaged people take positions that defer responsibility for meeting the needs of their constituents to the free market. If Adam Smith’s invisible hand is doing such a good job, then why is the federal government spending hundreds of billions of dollars to stoke the economy?

    If government interference is so inethema for those in public office, then I suggest they resign their office, join the Libertarian party and campaign against public education, tax-funded highway construction and our current police and fire services.

    But in the real world that I live in, the role of government is to provide basic services that citizens need and to ensure justice and opportunity for all. Last time I checked, that didn’t mean give developers whatever they want and hope for the best.

  15. Jeramey Jannene says:

    @Jerry How is this integral to the development of the built-environment? Things have been moving along to become more and more urban without this requirement. It actually runs counter to increasing urbanism as it adds an incentive to keep the project smaller if they’re going to apply for a TIF (to avoid the $1million trigger).

    My argument against it (and Dave wrote the original article, not me) is that it’s merely going to be another tax. Developers will simply raise the dollar figure for the TIFs to compensate for the increased expenses. Public tax dollars will pay for this.

    I think the requirements for more people from the City of Milwaukee are a good thing. Seems like a logical way to encourage people to live in the city, and reward those that have.

    I don’t think requiring them to be paid a higher amount is going to help anyone but the construction workers. It’s just going to just cost every taxpayer more for an already public-supported development (that wouldn’t be happening without the TIF).

    @Ted If there is a crisis of unemployment (which I would agree with you, we have a problem there), how does this help more people get jobs?

    Minority contracting requirements, I think, go alot further towards helping unemployment in Milwaukee. As would requiring Milwaukee residents. Requiring them to be paid more isn’t going to create jobs for anyone except those that already have them (and puts more people on the edge of losing theirs).

  16. Dave Reid says:

    I’ll add that generally the RPP and EBE requirements are fine, won’t slow development much (or possibly at all), and might employ more minority workers. I say might because I recall Prof Marc Levine speaking on this topic last year in front of CED explaining that even a doubling of the EBE requirements would not make much of a dent in the problem. He argued for a large scale public works project, which I’d support, and could actually put people to work.

    As far as the prevailing wage, understand this works against many small EBE firms as attested to, at CED by Alderman Witkowiak. They compete on price versus more established firms. If the rates become the same they will take a hit.

    Finally, I want to see more development, and more jobs in the City of Milwaukee. It seems to me that by adding cost (which is undeniable as proven by the exception for affordable housing projects) it is possible we will see less development. Or we will see larger TIFs just to pickup the additional cost, which in the long run impacts how many TIFs we can hand out. Or we will see smaller projects to avoid the requirements…

  17. Jerry Knapp says:

    @Jeramy I believe I wrote “integral to the evolution of the built environment.” The notion of sustainability is based on the dual principles of environmental and social progress. It’s remarkable to me that “green” builders and developers who now see a (cash) value in obtaining LEED cert. are reticent to explore the other key component to ensuring sustained urban health. Also, the argument that the difference in wages between the prevailing rate and the non-prevailing rate will result in fewer jobs is a bit spurious. It is generally recognized that the prevailing wage rate is between 15-20% above the sub-market rate. This, however, doesn’t mean that a project having prevailing wage rates (versus one that doesn’t) on it results in 15-20 fewer jobs. First of all, wages on projects like the ones that would be affected by the MORE ordinance are roughly 30-40% of project costs. The class of workers that would be positively impacted by this ordinance (the 10-20% of workers who, by the admittance of the developers who have testified against the ordinance, aren’t being paid the prevailing wage work) are generally the finish trade workers — painters, drywall installers, insulators, etc. Even if 50% of labor hours are going to finish work (and this is a gross exaggeration) this would only marginally raise total labor costs. So let’s assume 500,000 man hours on a large mixed-use project. Let’s assume that the average prevailing wage rate is $30/hr and that the average non-prevailing wage paid to the finish trade workers is $24/hr. Let’s also assume that the gross square footage of the project is 600,000 sq.ft. Let’s also assume that 20% of the labor hours goes to bringing the project from gray box to white box (this,again is the estimate of non-prevailing wage hours given by our developer community). So 400,000 hours at $30 an hour is $12 million. 100,000 hours at $24/hr is $2.4million. At the prevailing wage rate, that amount would be $3million, or, spread over 600,000 sq.ft., an additional $1/sq.ft.

    Interestingly, little is said in this discussion about the positive multiplier affect increasing wages for a few workers would have on the local economy. Applying a 1.5X multiplier to wages, a 20% difference in pay becomes significant (24 x 1.5 vs. 30 x 1.5). Add to this the reality that prevailing wage requirements encourage employers to provide health care benefits by reducing payroll taxes to those who do.

    Most developers have an ROI of around 20 -25%. Reducing that by a few percentage points to offset any real costs still leaves them quite rich.

  18. MilwaukeeD says:

    Projects that require a TIF, are projects that don’t have a high enough ROI (return on investment) for a developer to justify going forward with the project. Yes, a 20-25% return is high…but if that is the return a developer is getting, they wouldn’t be asking for a TIF. TIFs are requested in cases where the ROI is likely below 10%, thus too risky to be worth a developer’s time and investment.

    If you want to increase requirements on projects that get city assistance, that’s fine. But don’t kid yourself into thinking that the developer’s ROI is going to go from 25% down to 23% as a result. Most likely, the developer will be getting the 10-15% deemed a reasonable return given the risk, and the City will be paying the additional cost of those requirements.

    Whether you are for or against the MORE ordinance, you need to at least understand the realities of its impact.

    Further, people often forget what the true community benefits of a development project are: That the project actually gets built, that people are put to work constructing it, that it pays property taxes when it is done, that it brings more residents or workers into the city, etc. If the project never gets built, none of those benefits are ever realized.

  19. Juli Kaufmann says:

    How many of you actually work for construction companies, are developers, or employ people in green jobs? Proponents and opponents alike here speak largely from the realm of theory. Let me respond as somebody who does all of the above things everyday. I oppose prevailing wages merely to allow my socially responsible, green construction business the opportunity to survive. The idea that prevailing wages are really tied to the actual marketplace of wages is a magical farce in my own personal experience.

    Here is a tangible example. We are working hard to get the City of Milwaukee to incorporate deconstruction as an alternative to demolition for residential housing. Deconstruction employs people five to one compared to demolition. We hire crews of five people and a city contract would allow the hiring of as many as 15 people for at least a year and a half – with the goal of long term employment in the construction industry. Our project can pay what is defined as a “living” wage to these basically unskilled workers. The pay rate would be $10 – $15 / hour. Is this great? NO. Is it better than $0? yes. Will it impart tangible training, marketable construction skills , and a “green” job as resume builder? YES. We are going to have to seek a special exception for this project to try to request that prevailing wage not be required even though public funds are involved. Prevailing wage for our crew workers, according to the City DNS would be $38/hour. That is more than I personally earn as company owner and, more importantly, it quadruples the cost of the project, effectively killing it. If we can’t get state and federal waivers for prevailing wage, my business will not get the contract and I will not hire 15 people. Lose, lose. Furthermore, even if I could hypothetically somehow pay employees such a wage on just these public projects, I could never sustain those wages for the private clients, making long-term employment impossible.

    So, while I see the conceptual arguments from each of your point of views, I can’t get past my own personal experience in the construction market. I believe we should demand more for our public dollars – more fairness, more social equity, more sustainability, more investment in the commons, but I just don’t see how prevailing wage gets us there.

  20. Juli Kaufmann says:

    p.s. A recent email alerted me to some revisions – I understand that folks are working on compromises to the MORE proposal, including some changes that would specifically exempt companies like mine and projects that are similar to those I typically undertake- mostly in residential construction. I am grateful to know that smart compromise is being discussed and that good work is apparently underway to respond to concerns. That said, it does not yet change my fundamental concern with prevailing wage. I am willing to accept that there may be some large projects, and some specific situations where prevailing wage could apply and could be useful- achieving the ends that are intended, but I have yet to see the pro formas or hear the descriptions of such a unique case – maybe a freeway reconstruction would be one. But, don’t get me started on freeways……

  21. Jerry Knapp says:

    @MilwaukeeD and Juli – a tacit assumption in both your arguments is that the right to mitigate risk on the developers part supersedes the right of the worker to mitigate his/her risk by bargaining either collectively or in dispersion through the market mechanism for wages that offset the inherent dangers and job insecurity that has made the construction industry so unattractive to most young people. I am suggesting that this assumption, in the long term, is no more sustainable than other moribund ways of doing business in the built environment.

    And how is that other cities, even throughout the rustbelt, have gone way beyond what the MORE ordinance is proposing and yet have not dried up and blown away? And tell me exactly how raising the wages of 15-20% of the workforce on a limited number of projects by a mere 20% is going to shut down development?

    Now I do agree with Juli that the deconstruction work is a tricky situation. However, there are similar programs (such as weatherization programs) where labor unions have crafted agreements that make this type of semi-skilled work “doable” from an economic standpoint yet still connect workers to a legitimate apprenticeship program. Why would that not be possible here?

    There is another assumption underlying the bulk of the comments on this topic: that building more is better. I have yet to run into a “green” builder or developer who has suggested that the best thing might be to re-examine how and HOW MUCH we build. It would be shame if, in the rush to build green, we overbuild . . .

    I would humbly suggest, especially to all my sustainability cohorts, that a read or re-read of some of the founding principles of the movement might be in order. Perhaps start with John Elkington’s Cannibals With Forks.

    In the short term, we might have to simply disagree. Oh, and as long as we’re playing “raise your hand if . . . “, how many of the folks here have been construction workers? I would love to hear from more of them.

  22. Bob Schultz says:

    I am CEO for Fair Market Development (FMD). FMD has submitted a proposal to construct a $80+ Million multi-phase project in Park East with goals that would exceed the MORE Ordinance-not just endeavor to meet the proposed MORE ordinance’s minimum requirements.

    Many governmental units have codified voluntary benefits (and other voluntary financial incentives) that can accrue to a developer who builds in an environmentally sustainable fashion if he chooses to conform w/ the LEED standards. The MORE Ordinance is voluntary just like LEED. If the developer chooses not to conform with the LEED standards or not conform with the proposed MORE ordinance he isn’t being forced to by the government- IT IS VOLUNTARY. Only a developer who voluntarily chooses to accept a $1 million public subsidy must endeavor to conform with the MORE standards. Thus, a developer is not being forced to conform to the proposed MORE ordinance any more than a developer is being forced to conform w/ LEED standards.

    But I ask you this fundamental question: how can a project be truly sustainable if it’s sustainable for the environment but not for the people too?

    There are many many other very good reasons why a developer would want to develop projects in a truly sustainable fashion besides the reason highlighted above. I am proud to be part of this noteworthy effort and everyone who supports this ordinance that will result in significantly uplifting many businesses and people in the City of Milwaukee.

  23. Bob Schultz says:

    I have been recently asked what benefits accrue to a develepor who proposes to build a truly sustainable projects, i.e. one that is sustainable for the environment and people too. Here’s what I listed: It all starts with generating a lot public goodwill. This then results in the following, based
    on my experiences:
    a. Positive media and community attention for the project.
    b. Obtaining the entitlements is generally faster and easier.
    c. Shorter absorption rates for rental or sales because people and businesses like
    to be associated with projects w/ a lot community benefits. My experience is that
    there is stronger interest in these projects from investors, renters and buyers.
    d. The trend is that more density is being permitted or more easily obtained via a
    e. There is also a trend to permit greater height allowances are allowed or more
    easily obtained.
    f. Officials and the community often approach projects w/ CBA’s in a collaborative
    manner making discussions related to densities, variances, or height allowances
    most productive.
    g. Lower marketing costs because of positive media and community attention.
    h. Access to greater number of equity and debt sources that is growing that want to
    be involved in such projects.
    i. Opens doors to other development opportunities because people like to do
    business with developers committed to CBAs.
    j. Negotiating properties to purchase is generally easier for reasons above.
    k. Actual construction work is performed more efficiently, faster, and with fewer
    l. The highest level of safety is demonstrated on the project because all workers
    receive formal safety training.
    m. The highest quality trades people, who take great pride in their work, will provide
    the highest quality product to you and your end user.
    n. Overall greater long-term project value.
    o. Less exposure to liability, E&O lawsuits.
    p. More responsible and accountable sub-contractors who take responsibility for
    their work.
    q. Best trained workers with mandatory drug testing and a proven program for
    assisting people with related problems.

    Best of all, you get to work with great people and professionals and associate
    with companies that typically are the best managed and funded. You feel a great sense of pride. It generally helps to reduce overall less risk, while making more money but difficult to quantify. One needs to look beyond the business model of ‘bottom line profit only’ and then the
    benefits are clear. Best of all, you are leaving the world a better place than the one you came into.

  24. Bob Schultz says:

    For those of you who love 3rd grade math….

    Let’s assume a construction cost of $65 million and say 40% of that is labor. Thus 40% of $65 million = $26 million in (good paying w/ benefits ) labor dollars of which 40% of $26 million would go to City of Milwaukee residents. Thus $10.4 million of wages would be the approximate minimum dollars targeted to City of Milw. residents and this doesn’t the businesses or consultants who are City taxpayers. The TIF, if a developer voluntarily choose to take it is repaid with the incremental increase in property taxes back to the City. Hmmm…let’s see, the City gets all it’s money back and in return $10 million is put into the pockets of city of Milwaukee residents not including the additional $ for Milwaukee businesses. Hmmm.. Sure seems to me like it is an extraordinary wise public investment if the developer voluntarily chooses to accept it.

  25. matthew says:

    What good is more prevailing wage construction jobs if we reduce the number of permanent jobs coming to Milwaukee that use the building after it is built? Milwaukee is already loosing jobs so why do we want to make it more expensive for a company to move or expand in Milwaukee? What are the proponents focusing on the short term benefits of hiring more locals at a higher rate for a few months and ignore the fact that any building that gets built will increase the number of jobs for Milwaukee citizens beyond just the construction. I have nothing against saying that they should hire more Milwaukee citizens, but leave the wage rates negotiable between the individuals and the employer.

  26. MilwaukeeD says:

    Bob, your proposal and the benefits that you plan incorporating into it are fantastic. However, it almost sounds to good to be true. Will you need public assistance to pull it off? And if so, doesn’t that prove that the MORE ordinance, in part, adds costs to a project that a developer cannot absorb, and thus they will look to the City for assistance? Therefore, the developer won’t be paying for the MORE ordinance at all, only the City will be. Which might be fine, but let’s just all agree that the City will be covering those costs, it won’t be coming out of the developer’s bottom line.

  27. Juli Kaufmann says:

    If anyone is hiring a prevailing wage laborer, please post contact info. I would like to send you my resume. I have both hands-on, in the field general construction-building experience as a construction laborer and I also have experience in construction administration. Also, in the meantime, if anyone has commercial space available in a building constructed under prevailing wage requirements, I am interested in lease rates to see if I can find more competitive rental arrangements for my small business. Lastly, if anyone has built housing using prevailing wages I am interested in costs for comparison, but, just so you know, I would only be shopping prices. I am not really in the market since I could never sell my current home, it currently appraises at less than 60% of the cost to build it.

  28. Steve says:

    Low-income people of Milwaukee desperately need jobs and higher incomes, but the current MORE ordinance offers false hope. Supporters are seeking concessions from business owners in a part of our local economy — TIF-supported real estate development in the City of Milwaukee -— that is hardly operating. By the admission of ordinance supporters generated 0 jobs in 2008. Even with TIF dollars available, major new projects are not moving forward. Construction has been suspended on the huge Park Lafayette project. Are MORE supporters suggesting that what is missing in this equation is even HIGHER costs for developers? That’s what will re-start their projects and get them creating jobs again?

    Supporters have a point about fairness. If and when a developer takes city money, the city has a right to expect a portion of the workforce to be local, diverse and paid a living (if not prevailing) wage. But the strings that come with the subsidies must not be so burdensome (as they seem to be in this case) that they actually throw a damper on development and hold back both tax base generation and job generation. After an economic collapse like the one we’re experiencing, it’s not exactly clear where or how strongly economic activity will return. Wauwatosa, Glendale, Brookfield, Oconomowoc and most other municipalities will also be seeking to attract back development using TIFS, but their TIFS will come with few or no strings. If the MORE ordinance were enacted regionally, it would be a different story. But enacted only in the City of Milwaukee, it has the effect of making similar deals in Pabst Farms, the County Research Park or Bayshore Town Center comparatively more attractive. This puts resulting jobs farther from low-income neighborhoods and reinforces inefficient, gasoline-intensive (and low-income worker unfriendly) sprawl development.

    Meanwhile, a robust federal stimulus package and an enhanced earned income tax credit are REAL ways to provide relief. If you’re looking for where jobs are actually going to be created in the coming months, look at the $10+ additional millions coming to the Housing Authority of the City of Milwaukee for repairs and energy retrofits. Construction and weatherization firms will be hiring to do that work. Then there’s road work. The state (and SEWRPC!) should be spending some of the stimulus infrastructure dollars that will flow through them improving city streets, as federal law allows and as Mayor Barett has wisely requested. That would provide real local jobs too. The federal stimulus has the potential to spread costs broadly but concentrate benefits where they’re needed most. In its current form, the MORE ordinance works mostly to concentrates costs where benefits are needed most.

  29. Jennifer says:

    Sorry I accidentally hit submit, before I spell checked my comment!

    Here are the facts:
    1. The MORE Ordinance is a product of more than two years of work, organizing, conversations, research and stakeholder engagement.
    2. The MORE Ordinance is overwhelmingly supported by Milwaukee residents
    3. Thousands of residents have made their voices heard in support of the MORE ordinance
    4. Inner-city Alderman who refuse to support prevailing wage or the MORE ordinance do so at the great dismay of the majority of their constituents who have lifted their voices to support this important piece of legislation.
    5. As Alderman Wade put so eloquently, “If you don’t want to follow the standards, don’t ask for the money.”
    6. In a time of limited resources we should be investing in developers like “fair market” developments, who want to give back as much to the city as they get. We do not have the resources to continue to fork over millions of tax payer dollars to help developers meet profit margins without allowing tax payers to see the same margin of return in terms of created opportunities and jobs.
    7. The ONE thing we know for sure is that the status quo is NOT working!
    8. Development will not disappear from the city of Milwaukee. If “certain” major developers choose to leave Milwaukee we will have what is called an open market, in a city that has made a clear statement that they would like to come to the table financially as partners for a minimal cost that many developers in other cities across the United States already abide by. Trust me, with that kind of reputation we will not have a problem in the long-run attracting development downtown.
    9. If it doesn’t benefit us, than either let it stay barren, or build it without our money…let the tax-payers say amen!
    10. I am PRO DEVELOPMENT and Business. This is my basic belief. If you can develop without any assistance from the government (i.e. the tax payers) than more power to you. Go ahead and discriminate, don’t give minorities, women and inner-city workers a chance to work for you, and if you do – by all means pay them substantially less than their white counterparts because they haven’t had the opportunity to earn as many worker hours because you discriminated against them and refused to hire them until there was a mandate to do so.
    HOWEVER- if you want my tax dollars, than you are going to have to give me a return on my investment. This might sound unpopular, but another condo building with condo’s that I can’t afford or retail store I can’t afford to shop at, or office space where I most likely won’t get a job doesn’t mean all that much to me. The schools I care about are crumbling, my neighbor has been looking for work for over a year, and 6 houses on my street are in foreclosure. What ever you build without these standards will not have a dramatic impact on my life and increasing the tax base by hiring a bunch of suburban folks doesn’t really mean anything to me. I will get out and hit the streets to support developments like “fair markets” doing what ever is needed to ensure they succeed – from engaging the community to finding tenants, to advocating for a 10 million dollar TIF. That is the type of investment a prudent investor would make!

  30. Dave Reid says:

    @Jennifer I love and am truly encouraged by your energy and passion for making Milwaukee a better place. That said my fear is simply that we’ll get less development and therefore less jobs because of an additional cost, specifically the prevailing wage requirement. Further as Alderman Witkowiak testified to during the meeting, there are small EBE firms that will be squeezed out by the prevailing wage requirement, because they compete on price not experience or size. So to me the concern is simply that the unintended consequences will do your (our) cause more harm than good.

  31. Pam says:

    Dave, first of all this is my first week reading urban Milwaukee and I’d like to compliment you for being on top of so many issues, having the time to write about them, and posting great photos.

    I’d like to try to correct some of the misinformation being shared about prevailing wage. Prevailing wage standards definitely raise worker incomes, and in a city with a high poverty and low median earnings problem, this is obviously a good thing. But prevailing wage standards have not been found to raise total project costs, and this finding comes from dozens and dozens of studies. I encourage all who are interested to check out this comprehensive study that was completed last year. http://www.epi.org/publications/entry/bp215/

    The only study that found a cost increase attributable to prevailing wage was one that studied affordable housing projects in California, and this is what prompted the compromise on residential housing that is in the MORE Ordinance.

    I fear that some commenting on this site are basing their views on what they are reading about the ordinance in the Journal Sentinel, which is having its own problems of misinformation about prevailing wage. Did you know that infrastructure investment in a project doesn’t count in the $1 million trigger for the standards?

    So to all who are posing the question of more jobs vs. better jobs – it’s a false choice. You can have both!

    I also wanted to make the point that Marc Levine strongly supports the MORE Ordinance and prevailing wage because Dave has raised his name twice. Check out his recent 4th Street Forum appearance on black male joblessness, he does a great job describing the positive effects of prevailing wage for minorities and he really busts down the phony raises costs argument.

    Finally, in another recent comprehensive study of prevailing wage for the state of MN, researchers concluded the following:

    “Based on our review of the literature we find that the likely outcome of a weakening or repeal of prevailing wage would be to:
    • Lower wages for all construction workers.
    • Shift the burden of health care and other benefits from the contractor to the state.
    • Weaken the state’s thriving apprenticeship program and adversely affect female and minority employees in the process.
    • Increase occupational injuries and thus worker’s compensation claims.
    • Decrease the state’s tax base.

    Prevailing wage encourages contractors to invest in training employees and to operate in the most efficient manner possible. Contractors thus compete on efficiencies rather than low wages.” Lisa M. Jordan, Ph.D. et al, 2006

    So if we want higher wages for Milwaukee construction workers, more minorities and women in the trades, more apprentices, fewer injuries and a stronger state budget, all with no significant increase in total project cost, then let’s get on board with the MORE ordinance.

  32. Matthew says:

    regarding your list of facts:
    1. I don’t really care whether you have been working it for 2 years, or 50 years, if it is wrong, it is wrong. No matter how long you have been working on it.
    2. I have not heard a public outcry for the MORE ordinance, maybe in the circles you run in it is supported, but as one of the many who is looking for a dependable and long term job, the MORE ordinance is counter productive for me and many others like me as it makes it more restrictive for companies to locate in Milwaukee. In the circles I run in, the MORE ordinance is strongly opposed because it is considered detrimental to jobs in Milwaukee.
    3. Thousands have also chosen to make their voices heard by not supporting the MORE ordinance.
    4. Of course they do, every alderman is answerable to their constituents, I would be concerned if they were not. The alderman in my district is answerable to me, as well as my neighbors.
    5 We can’t afford to pay a few worker’s more when everyone else in the community has less.
    6. In a time of limited resources we should be investing in developers who will give back to the city as much as they receive. We do not have the resources to fork over millions of taxpayer dollars to help raise the pay for a few workers at the long term cost of losing good long term jobs.
    7. The ONE thing we know for sure is that the status quo is NOT working. By increasing the standards we will continue to be less competitive with outlying communities, and other regions across the US and globally.
    10. I am PRO DEVELOPMENT and Business. This is my basic belief. If you can develop without any assistance from the government (i.e. the tax payers) then more power to you, but don’t discriminate, judge everyone equitably based on their qualifications, and let the free market govern wages.

    And a few other points:
    11. When an economy slumps or goes into a recession, construction jobs are the first to go, and are considered the least reliable. Why not argue for the removal of the pay increase clause in the MORE standard, and instead require that the businesses that occupy the spaces constructed with TIF funds are required to hire a certain number or percentages of residents from Milwaukee as a means to create long term jobs for Milwaukee residents?
    12. You mentioned several times in your writeup that you advocate for ‘fair market’ yet at the same time you are arguing for an ordinance that ignores ‘fair market’ by inflating wages. The MORE ordinance means that a guy brand new on the job would get paid at the same rate as someone who has been doing the work for 10 years and who is experienced. In most fair markets when someone is inexperienced they get paid less, and as they gain experience their pay increases, but the MORE requirement states that all workers must be paid a certain minimum, thus contractors will be left with two alternatives, the first is to pay the inexperienced workers more, and the second possible outcome is that the contractors would choose to hire only experienced workers.
    13. Finally, I agree that TIF’s shouldn’t be used to subsidize condos, or subsidize more retail.
    TIF’s should only be used for developments which meet a limited set of criteria.
    -First, TIF’s should be used if there is an existing environmental contaminant, and the TIF should only pay for a portion of the environmental cleanup since the depressed value of the land caused by the environmental contaminant should have lowered the land value such that the developer got it for a decent price.
    -Second,TIF’s should only be used if the development will bring an new business or jobs to the area which won’t hurt existing businesses or jobs. TIF’s shouldn’t be used to increase the number of hotels, but should be used for new or expanding manufacturing companies. We need to focus on being competitive on the global level, not on helping a local business compete with their neighbor down the street.

  33. Matthew says:

    In the study you linked about prevailing wages, while it is seems to support prevailing wages, it also makes the argument that the prevailing wages attract better skilled workers and uses that as one of the reasons they don’t see that much of an increase in project costs. It does nothing to address what could happen if prevailing wage clauses were linked with limiting employment to workers from just a select region. I would think that by limiting the workforce while implementing the clause that the benefit of it attracting more skilled workers to complete the job faster might be reversed and instead become ‘more unskilled workers complete the job slower at higher pay and higher costs’.
    In addition, the study notes that prevailing wages may affect the cost of a project by 2.5%(although they also listed numerous other studies that were done by other organizations which showed much higher costs caused by prevailing wage requirements). Does that mean that proponents of the prevailing wage measure are willing to pay the additional 2.5%(using the extreme conservative estimate) of the projects entire costs since most projects built based on TIF’s are already pretty lean financially?
    What if the research you linked to is wrong and the difference is much higher? According to some of the numbers they list we are talking about doubling the amount required by a project for a TIF.
    Finally, what does the organization you linked say about their own interests. 30% of their funding comes from labor unions, do you believe that might make them a bit biased towards labor interests such as higher pay?

  34. Pam says:

    Matthew, you say union like it’s a bad thing! President Obama spoke for me recently when he said “I do not view the labor movement as part of the problem. To me, it’s part of the solution” And anybody working in a job that has a standard 40 hour work week, paid sick days, vacation time, etc, can thank a former labor organizer for that. On the issue of EPI –the Economic Policy Institute is quite highly regarded. One of their senior economists was just tapped as Vice President Biden’s chief economic advisor. The article I linked to is a meta-analysis of many different researchers’ studies, not work done by EPI. The overall conclusion that prevailing wage creates no appreciable effect on total project costs has been found in many studies. On your 2.5% question–Because local projects have tended to try to avoid paying prevailing wages on the finishing work there may be a period of adjustment as that part of the contracting process adjusts to the standards of the ordinance. If a developer can demonstrate a bona fide gap in their pro forma on these labor costs in a manner that satisfies DCD’s fiscal analyst and the City comptroller, then I think it would be fair to consider helping to underwrite them. It would be a decision made knowing what the public dollars were being utilized for — the creation of good jobs — and this is not something the public has always had good information about in past TIFs.

  35. Tom Daykin says:

    Interesting discussion. You may be aware that Gov. Doyle has proposed a similar prevailing wage provision in the state budget. Here’s a link to the Journal Sentinel article that ran yesterday. There’s also a forum where a lot of people posted comments.


  36. Linda Mistele says:

    Is anybody concerned about the future tax base for Milwaukee? About maintaining a healthy metropolitan area?

    I grew up in Detroit when it felt safe and when the car industries were a powerful lobby against much mass transit. We has busses, which, like spokes in a wheel, all went downtown. Never mind that factories kept moving further and further out away from the ghetto in the inner city. As the distance incrased between jobs and workers, the middle of Detroit gradually became a desert; crime increased along with other urban ills.

    That’s what I see now happening in Milwaukee: factories moving to the outskirts and bus lines diminishing. The entire metropolitan area constitutes our socioeconomic eco-system. MPS schools provide a limtus test for the rot which accompanies concentrated and continued poverty. If you want Milwaukee metropolican area to remain vital and its core to regain vitality, then you and I must care for and work with the poor one way or another. Ignoring poverty or moving away doesn’t foster healthy interactions.

  37. Dan says:

    This is interesting. I have been wondering for a while what might come of getting some of you (Jerry, Juli) to talk to each other about some of these things with each other. Maybe a real get-together some time? I’d like to go through all this carefully some time and figure out what the best point summary is for the various positions and see what questions come from that, but here is what comes to mind now.

    1. If you’re going to take shots, there will be return fire

    GJLN has consistently used the moralized rhetoric of race and class to position themselves as speaking for the good/poor/majority vs. the not very nice/rich/minority. It doesn’t work to do this and then say you are “pro-business, pro-developer.” If you want stoke resentment with invidious comparisons, that’s not going to work with people who don’t objectify “the rich” as a target for their frustrations or who think of AIG executives, not Barry Mandel (or his pants). You’re shooting yourself in the foot with that rhetoric a lot of the time.

    Perhaps, as Jennifer wrote, “some in the business community and the city powerbase are freaked out” not because “there is an innovative and cooperative effort to put forward some legislation that creates accountability.” Perhaps they are irritated because people like you–who are paid to do this–are alleging that politicians and business owners are corrupt, money-grubbing, Bad People who need to be shaken down. Is it hard to see how resentment can be a two-way street? if you do not run a business where you are responsible to earn your own “got to live on it” wage and that of your employees yourself, but you make a living denouncing those who do…you’ve got to understand the reaction.

    2. If economic disparity is the real target, are developers really major agents of disparity?

    Why developers? Why always the “condo” obsession? “I hate condos” is only a badge of honor to bozos: anxious, envious members of the east side bourgeoisie, from disaffected suburban youth in Riverwest who like to do grafitti vandalism–often on property of other local residents they deem unworthy–to boomers looking at their situation in the ponzi economies of real estate, social security, 401Ks, etc. Certainly some economic rage is in order–aimed at the state level and higher.

    Why is trickle-up more valid than trickle-down? If you want to go after fat cat capitalism, why not really do that? Go after the payday loan people and the banks. Developers and other business owners along with working and middle class employees are all subject to those who make money from interest to excess–i,e., usury–and all our dollars get sucked back into the finance, insurance, and real estate sector to inflate bubbles and then fund the bailouts. Check out the latest issue of Harper’s for two good articles on labor and the middle class’s fleecing by the end of caps on interest rates in (IIRC) 1979.

    3. Is MORE essentially staked on a social engineering theory?

    It seems the GJLN/MORE agenda is being described rather plainly as a way to have the city and developers fund a social engineering experiment based on the theory that higher wages for construction labor on big TIF projects will improve workers’ socioeconomic position–and do so in a way that is significant enough to improve the overall health of the city and make its economy more self-sustaining. Is MORE really going to undo 50 years of post-industrial history by mandating higher wages for construction workers (how many per year on average?) on big TIF projects? If increased dollars/hr for construction is so strongly thought to cause “social progress,” are there some documented historical case studies that give real, quantifiable credence to that notion?

    4. Are small businesses seen as an acceptable loss?

    It doesn’t seem to be disputed that raising the cost of labor on >$1M TIF projects is likely to force small developers out of that market. True? The 9-to-5/mandated sick leave ordinance, which GJLN also supports, would (even more so than MORE) strain and knock down small businesses who can’t absorb the cost. This makes me wonder if GJLN sees small businesses as acceptable losses.

    5. Will bigger businesses find ways to bypass or pass increased labor costs to the public?

    If the direct goal of MORE is to make developers spend more on labor, how likely is it to accomplish this? Is it likely some bigger developers might just opt out of TIF projects if they can be choosy? What are the likely ways bigger developers might bypass or compensate for increased labor costs if they are subjected to requirements like MORE? What are the consequences of that?

  38. Dan says:

    I meant to include this as a TIF transparency measure I bet we’d all agree on:

    “EveryBlock testifies for open records ordinance” (Chicago)

Leave a Reply

You must be an Urban Milwaukee member to leave a comment. Membership, which includes a host of perks, including an ad-free website, tickets to marquee events like Summerfest, the Wisconsin State Fair and the Florentine Opera, a better photo browser and access to members-only, behind-the-scenes tours, starts at $9/month. Learn more.

Join now and cancel anytime.

If you are an existing member, sign-in to leave a comment.

Have questions? Need to report an error? Contact Us