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Home My WebLink About3. Prevailing Wage Impacts 01/10/2012Mount Prospect Public Works Department 1 INTEROFFICE MEMORANDUM TO: VILLAGE MANAGER MICHAEL E. JANONIS FROM: DIRECTOR OF PUBLIC WORKS DATE: JANUARY 4, 2012 SUBJ: CHANGES IN STATE OF ILLINOIS PREVAILING WAGE REQUIREMENTS Background In the 1940s, the State of Illinois enacted legislation requiring the payment of prevailing wages on public works projects utilizing state funds. At the time, this action was part of a national trend in which most states enacted local legislation intended to emulate the provisions of the federal Davis -Bacon Act. In fact, 1940s press reports often referred to these state acts as "little bacon ". Generally, this law required that workers on state - financed projects be paid at least what the locals were currently making in the area where the work was being performed. Since most communities lack the resources to establish justifiable prevailing wage rates, most workers are paid according to the prevailing wages rates established by the Illinois Department of Labor (IDOL) for the county in which the project is sited. Arguably, the State of Illinois has one of the most vexing prevailing wage laws in the country. In large part, the confusion surrounding this law stems from the fact that the statute is vaguely worded and court case rulings have done little to answer important questions about the scope of the law. For your reference, a complete copy of the Illinois Prevailing Wage Act can be found at the Illinois General Assembly website: http: / /www. ilga.gov /legislation /ilcs /ilcs3.asp ?ActlD= 2405 &ChapterlD =68 Initially, and for many subsequent years, the term "public works" was construed to refer to the construction of fixed works. That is, most lawyers advised public agency clients that the law applied to workers on state - financed construction projects. Notably, it was generally accepted that the law did not apply to maintenance work or non - construction work. It was also a widely held belief that the law did not apply to tree work or grounds maintenance work. Over the years, amendments to the act, as well as interpretations made by IDOL, have significantly expanded the scope of the law. Today, the Village Attorney has advised staff that the law generally applies to all construction work and most maintenance work paid for with Village funds or any other public funds. As a consequence, payment of prevailing wages is required on most contracts let by the public works department. One notable exception, however, has been contracts for tree work and grounds maintenance work. The Village Attorney has maintained, and staff concurs, that this type of work fails to satisfy the letter or intent of the "fixed works" requirement specified in the Act's "public works" definition. Page 2 of 3 Changes in State of Illinois Prevailing Wage Requirements January 4, 2012 Last November, staff attended a prevailing wage seminar in which an IDOL representative made a number of specific pronouncements that directly threaten the viability of our long -held tree work and grounds maintenance work exception. Specifically, IDOL stated: • "Any job paid by any public funds that requires a screwdriver, except for janitorial work, requires prevailing wages." • "If in doubt about whether prevailing wages are required, put it in ". • Tree planting and tree removal work requires the payment of prevailing wages because it "changes the landscape ". Problem Statement Arguably, these statements are not supported by the text of the state's prevailing wage law. Nevertheless, IDOL appears intent on construing the law widely. If the Village strictly adheres to IDOL's pronouncements, tree and grounds maintenance contract budgets could require increases ranging from 65% to 100% in order to maintain existing levels of service. Discussion Staff has researched the potential financial impact of requiring prevailing wages in all tree work and applicable grounds maintenance work contracts. Our research included discussions with contractors that have executed prevailing wage contracts as well as communities that have required prevailing wages in their contracts. Conservatively, we estimate that our contractual costs could increase by 65% or $789,910. However, some communities reported that their costs doubled. For your reference, the attached table depicts these anticipated increases in greater detail. Due to the vagueness of the statute, and differences in legal opinions offered by corporate counsel, there is no uniform interpretation of prevailing wage requirements among non -state public agencies in the Chicago metropolitan area. Some communities rarely require prevailing wages, others always require it, but most seem to have a unique mix of requirements that range between the two extremes. It is also relevant to note that this latest IDOL initiative, in combination with the detrimental effects of emerald ash borer (EAB), gypsy moth, Dutch elm disease, and extreme weather events, has the potential to create tremendous pressure on tree maintenance budgets. Infestations and big storms have forged a dramatic increase in the volume of tree work. At the same time, this mandate threatens to lessen the purchasing power of already limited funds. Potentially, it is a "perfect storm" of constraints that could substantially hamper the Village's urban forestry program. It is difficult to ascertain the vigor with which IDOL will pursue enforcement of their most recent prevailing wage interpretations. However, in the end, it seems certain that public agencies that fail to heed these interpretations will face enforcement action including fines and lawsuits. Recommendations Staff is currently advocating legislative clarification of prevailing wage requirements with respect to tree work and grounds maintenance work via several forums including the Illinois Arborists Association, the Illinois Landscape Contractors Association, the Illinois Municipal League, and Page 3 of 3 Changes in State of Illinois Prevailing Wage Requirements January 4, 2012 the North West Municipal Conference. The goal of these efforts is to garner the support of state lawmakers willing to champion a legislative amendment that specifically exempts tree work and grounds maintenance work from prevailing wage requirements. Our expectation is that this is a long -term solution that will not provide relief for the near term. Staff has also asked the Village Attorney to research the viability of enacting a local prevailing wage ordinance that creates specific exemptions for tree work and grounds maintenance work. The City of Naperville has enacted such an ordinance and reports a successful experience. Most importantly, the Naperville ordinance appears to have withstood a rather thorough vetting from IDOL. I would greatly appreciate it if you could consider this matter for the January 10 Committee of the Whole agenda. Appropriate staff will be in attendance. Sean P. Dorsey Cc: Village Attorney Buzz Hill Village Clerk Lisa Angell Deputy Director of Public Works Jason Leib Forestry/Grounds Superintendent Sandy Clark Administrative Assistant to the Village Manager Doreen Jarosz C: \Documents and Settings\SDORSEYWy Documents \LEGAL \PREVAILING WAGES \COW PREVAILING WAGE MEMO_ JAN 2012.docx PUBLIC WORKS DEPARTMENT Revised December 2, 2011 FORESTRY /GROUNDS DIVISION PLANNED CONTRACTUAL WORK IN 2012 Contract Amount Budgeted RFP /Bid Date Est. % Increase If Prevailing Wages Required New Contract Amount Prevailing Wages Needed ?* Sodding $64,530 Yr 3 of 3 65% $106,475 Very likely Restoration Seeding $13,400 Yr 2 of 2 65% $22,110 Probably Urn /Bulb/ Shrub /Perennial Plantings $41,569 2/13/12 65% $68,589 Probably Creek Spray $2,000 2/20/12 65% $3,300 Probably Not Turf Fert and Broadleaf Weed Control $2,000 2/20/12 65% $3,300 Probably Not Spray Paved Areas $7,345 4/12/12 65% $12,119 Probably Not Landscape Maintenance Contract $107,000 1/13/12 65% $176,550 Probably Not Sprinkler Maintenance $8 2/20/12 65% $14,004 Very likely Expand Sprinkler Systems $7,000 6/15/12 65% $11,550 Very likely White Light Installation $33,390 7/13/12 100% $66,780 Very likely Installation of Hanging Baskets $6,070 1/18/12 65% $10,016 Very likely Maintenance of Hanging Baskets $7,600 1/18/12 65% $12,540 Probably Not Turf Mowing $65,000 1/13/12 65% $107,250 Probably Not Creek Trim /Removals $20,000 6/18/12 100% $40,000 Probably Creek Raking $5 4/3/12 65% $8,250 Probably Not Tree Fertilization $4,227 3/9/12 65% $6,975 Probably Not Tree Planting $58,043 12/30/11 65% $95,771 Very likely Parkway Tree Removal $155,000 12/13/11 100% $310,000 Very likely Parkway Tree Trimming $183,000 12/30/11 100% $366,000 Probably Not Parkway Stump Removal $85,000 Yr 2 of 2 100% $170,000 Probably EAB and Gypsy Moth Treatments $38,760 2/10/12 65% $63,954 Probably Not Street Banner Installation $28,800 2/3/12 100% $57,600 Very likely Total $943,221 $1,733,131 * This is S. Clark's interpretation of how likely IDOL is to say prevailing wages are required, based on 11/9/2011 meeting and IDOL website. C: \Documents and Settings \sdorsey \Local Settings \Temporary Internet Files\ Content .Outlook \18K30TX4 \Planned Contract Work 2012- Revised 12- 2- 11(3).xlsx