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What is Phoenix's new prevailing-wage ordinance, and why is it so controversial?

On Tuesday, Phoenix became the first city in Arizona to pass a prevailing-wage ordinance. A divided City Council approved setting wage standards for certain construction projects. 

The ordinance is aimed at city-funded construction projects worth at least $4 million, excluding housing projects for lower-income residents. The ordinance requires companies pay workers a prevailing wage, generally considered no less than the average local wage paid to workers in similar positions. 

"Wages in the construction trade today are the highest that they’ve ever been." — Mike Gardner, Arizona Builders Alliance

“We’re still trying to identify the problem that exists in the marketplace that government action is needed,” said Mike Gardner, representing the Arizona Builders Alliance. “Wages in the construction trade today are the highest that they’ve ever been. We’ve got companies that are starting wages $20 an hour. A lot of our companies are paying $70,000, $80,000 or $90,000 a year for skilled labor.”

Councilwoman Betty Guardado, who supports the ordinance, said, “It should go without saying, but it is important to note that we will never be able to have meaningful conversations about affordable housing and ending homelessness without recognizing the need to at the very least pay our employees a living wage.”

Mayor Kate Gallego called the ordinance a win for working families.

“This vote could become particularly important if we see a major downturn in the economy where we don’t want city projects to be depressing wages," Gallego said.

Woman in green blazer
Phoenix Mayor Kate Gallego speaking with attendees at the 2023 Annual Awards Celebration hosted by the Arizona Chamber of Commerce & Industry at Republic National Distributing Company in Phoenix on June 6, 2023.

Some city projects that receive federal funding already adhere to local prevailing wages, as part of the Bacon-Davis Act, created more than 90 years ago. Business groups plan to sue to stop Phoenix’s ordinance from taking effect July 1, citing a state law that bans cities from enacting prevailing wages. But supporters say an opinion issued in 2023 by Arizona Attorney General Kris Hayes supersedes it. The AG cited a more recent voter approved law that allows cities to set minimum wages. 

Vice Mayor Debra Stark, Councilwoman Ann O’Brien and Councilman Jim Waring voted against the ordinance.

Mike Huckins with the Greater Phoenix Chamber of Commerce, said the ordinance would have a chilling effect on businesses bidding for these types of projects.

“The other main point is the additional administrative cost to the city, whether that comes out of the general fund or capital improvement funds, a dollar is a dollar, in our opinion, and it’s unfortunate that we have to get here today to see those precious city dollars being used on this ordinance where we believe they could be used in more effective manners," Huckins said.

City Manager Jeff Barton said research on prevailing wage varies, depending on who’s funding the study. He estimated the ordinance could add $17 million dollars annually to project costs.

“There are good argument to be made that if you’re paying folks, you know, a better wage, you have less work-involved injuries, you have a better work product in the end — all those things are true — and you have possibly less change orders, so some of those things would offset theoretically some of those cost escalations or those increases we’re talking about,” Barton said.

"Passing a prevailing wage will help all of Phoenix construction workers be able to afford to live in a city they are proudly building while boosting the local economy.” — Jason Sangster, Ironworkers Local 75

"I guarantee you ironworkers will take that money they earn building these projects and pay their mortgages, but food for their family, shoes for their children," Jason Sangster, with Ironworkers Local 75, told council members. "Passing a prevailing wage will help all of Phoenix construction workers be able to afford to live in a city they are proudly building while boosting the local economy.”

In March 2023, the council approved a prevailing wage ordinance that had not been vetted by city attorneys. In April 2023, the council, made up of two new members, repealed it and directed staff to explore an ordinance that could withstand legal challenges. In June, AG Hayes released her opinion. Phoenix staff conducted research, held three meetings each with labor and business groups and drafted an ordinance with a phased approach that the council approved.

Efforts to pass a prevailing wage ordinance date back to October 2021 when the council rejected it.

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As a senior field correspondent, Christina Estes focuses on stories that impact our economy, your wallet and public policy.