The Impact of Prevailing Wages Mandate on NYC Co-ops and Condos

Have you ever considered the potential ramifications of recent mandates on the territory of New York City co-ops and condos? Let's delve into the intricate world of the prevailing wage mandate. If you're a board member in a union-affiliated co-op or condo, this may or may not have an effect on you. However, for those in non-union buildings aspiring to retain their property tax abatement, this is a development you can't afford to overlook.

Undoubtedly, these changes have wielded a pronounced influence, particularly on our valued co-op and condo non-union clients. Imagine this scenario: to secure the coveted property tax abatement granted by the city to co-ops and condos, often amounting to 10% of the total building budget, now find themselves obligated to compensate their employees with prevailing wages.

Now, what exactly do we mean by prevailing wages? In essence, these wages align closely with the 32BJ union wage, akin to a baseline compensation—think of it as a form of minimum wage. Interestingly, numerous co-op buildings are already familiar with the practice of paying prevailing wages, largely due to their union affiliations. However, there's a twist in this narrative. The mandate doesn't confine itself to your building's direct staff. It extends its reach to encompass all employees linked to the building, including third-party personnel like security guards and, for those New Yorkers fortunate enough to have a garage, garage employees.

But the question arises: is paying prevailing wages a prudent move for your board? The answer can be distilled into a simple equation:

Prevailing Wages - Current Salaries = Salary Increase

Versus

Most Recent Total Property Tax Abatement

If the property tax abatement outweighs the projected salary increases, it's a clear indicator that adhering to the new mandate is the way forward. Conversely, if the prospective salary increase fall short of the property tax abatement, the board should chart a course based on the unique circumstances they face. One way to look at it is that it is easier to build a strong partnership with your Resident Manager or Super if you pay up.

But how do you unearth these crucial figures? For buildings managed by property management firms, rest assured that your property manager possesses this data at their fingertips. They adeptly handle tasks ranging from payroll management to filing, collecting, and disbursing property tax abatements.

For self-managed buildings, the quest for this information depends largely on roles and responsibilities. Self-managed boards might have a payroll service provider or bookkeeper who can provide these amounts. If you do not have a payroll service provider or bookkeeper, the treasurer could delve into the financial records to retrieve both salary data and property tax abatement figures.

Financing the impending wage adjustments or the potential loss of property tax abatements boils down to the specific circumstances of each co-op or condo. In a nutshell, the prevailing wage mandate could necessitate an increase in maintenance fees or common charges, depending on the unique considerations at play. On the other hand, losing the property tax abatement, which is often as large as 10% of the total annual budget, will also need to be funded somehow. No matter how you slice it, if you’re not currently paying prevailing wage, you will likely need to increase maintenance or common charges to pay for either the wage increase or to cover the loss of tax abatements.

In essence, the co-op and condo landscape is evolving as a result of the winds of change brought forth by mandates and regulations. Prevailing wages stand out as a pivotal factor that's shaping budgetary deliberations and strategic choices. As this journey unfolds, only time will reveal the true impact of these shifts on the delicate balance between individual benefits and the collective good that defines life within these shared living spaces.

At The Folson Group, our goal is to help every coop and condo owner increase their property values while living in a building that is safer, more sustainable, and more affordable. Our FREE board policies and procedures checklist helps boards with their Environmental, Social, and Governance (ESG)-related policies, fairness and treating everyone equally. Schedule a strategy session with us.