january 2007

Commerce Requiring Prevailing Wage Law Compliance as Condition to Reimbursement under Brownfield Redevelopment Agreement

Since 1998, New Jersey’s Brownfield Law has provided financial incentives to developers who return abandoned or underutilized contaminated properties to viable, productive uses. Among other financial incentives, the Brownfield Law provides up to 75% reimbursement of remediation costs to a developer who enters into a so-called Redevelopment Agreement with the New Jersey Commerce, Economic Growth and Tourism Commission (“NJ Commerce”) and the State Treasurer. This incentive is available for projects which the State concludes will generate qualifying state tax revenues in an amount sufficient to reimburse the developer for the remediation costs to be recouped under the Redevelopment Agreement. The State has reimbursed millions of dollars to brownfield developers through this program.

In August 2006, NJ Commerce revised its Redevelopment Agreement template to include a clause which requires developers to certify that they are paying prevailing wage on construction contracts in excess of $2,000. NJ Commerce reasons that its prevailing wage law is applicable to all construction contracts undertaken in connection with its financial assistance programs, including the brownfield reimbursement program, even though the program provides reimbursement of remediation costs, not construction costs.

We understand from construction industry sources that the prevailing wage is approximately 25% greater than the industry standard. Thus, payment of the prevailing wage substantially offsets the brownfield reimbursement incentive.

Advocates for commercial and residential developers are pressing the issue, seeking either rescission of Commerce’s requirement, or a legislative solution.

If you have any questions concerning these issues, please contact Susan C. Karp.