Demise of Bill Requiring Prevailing Wages for TIF-Funded Construction Contractors

April 3, 2017

Maryland General Assembly House Bill 466, which would have required contractors to pay prevailing wages for construction funded by tax increment financing (TIF) bond proceeds, received an unfavorable report from the Economic Matters Committee — effectively ending its consideration during the 2017 legislative session.

Tax increment financing is a public financing tool that uses future increases in property tax revenues to presently finance public improvements. Baltimore City and all counties and municipalities in Maryland are authorized to issue TIF bonds to finance the development of industrial, commercial and residential areas. At this time, the city of Baltimore and Anne Arundel, Baltimore, Harford, Howard, Prince George’s and Wicomico counties have established TIF districts.

Maryland’s prevailing wage law requires that contractors pay their employees an established prevailing wage rate for work on certain public works projects in Maryland. HB 466 would have expanded the prevailing wage requirement to include projects funded with proceeds of TIF bonds unless the TIF bond issue was less than $500,000, even though these projects would not have been subject to the prevailing wage requirement if financed with other forms of public funds.

The HB 466 requirements would have increased the cost of future TIF construction projects. Based on research by the General Assembly’s Department of Legislative Services (DLS), requiring that prevailing wages be paid could increase total contract costs between 2 percent and 5 percent, although DLS conceded that contract costs could increase by as much as 10 percent.  Financing the increased TIF project construction costs would result in a decrease in property tax revenues available to the general funds of the jurisdiction.

The unfavorable committee report halted HB 466’s progress during the current legislative session. For now, TIF projects remain outside outside of State of Maryland mandated prevailing wage requirements.