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HomeMy WebLinkAbout2025/10/13 - ADMIN - Minutes - City Council - Study SessionOfficial minutes City council study session St. Louis Park, Minnesota Oct. 13, 2025 The meeting convened at 6:02 p.m. Council Members present: Margaret Rog, Lynette Dumalag, Sue Budd, Tim Brausen, Yolanda Farris, Mayor pro tem Paul Baudhuin Council Members absent: Mayor Nadia Mohamed Staff present: City manager (Ms. Keller), city attorney (Mr. Mattick), community development director and interim building and energy director (Ms. Barton), economic development manager (Ms. Monson), redevelopment administrator (Mr. Porter-Nelson), planning manager (Mr. Walther), engineering director (Ms. Heiser), operations superintendent (Mr. Okey) Discussion items 1. Prevailing wage discussion Ms. Monson presented the staff report. Ms. Monson noted the policy consideration: Does the city council wish to consider enacting wage requirements for development projects in St. Louis Park? Ms. Monson stated that in January 2025, staff provided an initial review in response to a council-requested study session on a prevailing wage policy. That review offered background information on prevailing wage requirements and scheduled the topic for discussion during the Housing and Neighborhood-Oriented Development system. Several metro-area cities have enacted prevailing wage ordinances in recent years, with approaches that vary widely in scope and enforcement. As the council considers whether to adopt a prevailing wage ordinance or policy in St. Louis Park, it will be important to clarify desired outcomes, carefully evaluate potential impacts, and consider how different approaches align with the city’s strategic priorities and goals. Ms. Monson stated that if the city council directs staff to develop a prevailing wage ordinance, the fiscal impact will depend on the scope and requirements of the ordinance. Additional staff may need to be hired to implement, administer and enforce the ordinance. If contractors and subcontractors are required to submit weekly certified payroll to the city, the purchase and ongoing service costs for an electronic tracking system could cost up to $20,000 or more in the first year and $5,000 to $20,000 annually thereafter. Such an ordinance or policy may increase the number of requests and calculated need for public financial assistance to development projects required to comply with the ordinance. Ms. Monson stated additionally, if applied to city contracts, prevailing wage requirements are estimated to increase overall project costs by 10–15%. Legal fees for ordinance development and enforcement may also be incurred. Due to these costs, implementation of any new policy should be aligned with the budget process so that departments have the staff and resources needed to meet the latest standards. Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE Study session minutes -2- Oct 13, 2025 Council Member Brausen asked if all affordable housing projects would be subject to the prevailing wage policy. Ms. Barton stated that the policy would apply to affordable housing projects and noted projects that receive low-income housing tax credits are already federally required to meet prevailing wage standards. Council Member Rog asked if staff were aware that there are studies that show prevailing wage has no impact on project costs in the estimated 10-30% increase for project costs. She asked how staff arrived at their estimate. Ms. Barton stated that staff arrived at the estimated increase of 10-30% through research and also by contacting other cities that have adopted prevailing wage ordinances. Ms. Barton also noted that there was a wide range of cost increases based on project size. Council Member Rog clarified that the 10-30% increase estimate had come from organic research by city staff, and Ms. Barton confirmed this. Council Member Rog asked if there were particular types of projects that showed elevated costs in comparison with others. Mr. Porter-Nelson stated that estimates depend on project size and added that with larger projects, there could be significant impacts because a different pool of contractors are involved. Smaller contractors would need to invest in tracking software in order to be in compliance, incurring more upfront administrative costs. Council Member Rog asked if a dollar threshold was used to differentiate between larger or smaller projects in this research. Mr. Porter-Nelson stated that a set threshold was not specified. Council Member Budd asked if the federal Davis-Bacon Act guidelines state that projects of fewer than eight units are exempted. Ms. Barton confirmed that is correct. Mr. Porter-Nelson noted that if a city has a local prevailing wage ordinance, and a project was exempted from the Davis-Bacon Act on the state and federal levels, the city will not necessarily have to exempt the project. Council Member Budd stated that the estimated 10-30% increase assumes that projects are not aligning with federal and state requirements for project size. Ms. Barton stated that if projects have to comply with the Davis-Bacon Act, they have to comply with prevailing wages already. There would be additional impacts if the city had a local ordinance as well because of additional monitoring and compliance. Council Member Budd stated that other cities that have already adopted prevailing wage policies do not have different reporting requirements for state and federal compliance. Ms. Barton stated that differences lie in the methods each city uses to track, such as the use of a payroll and construction site compliance LCP tracker system. She added that an LCP tracker is not necessarily the same system as is used to track alignment with Davis-Bacon Act requirements. She stated that the method could be exempted through the policy, but if not in place, there is an additional administrative cost because of tracking separate compliance. Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE Study session minutes -3- Oct 13, 2025 Council Member Budd pointed out that if the city creates an ordinance around prevailing wage, then it should be noted that if state and federal regulations already exist, the city will not add additional requirements. Council Member Budd asked if there was development that would not be affected by a prevailing wage ordinance because they are already required to meet those requirements for other levels of reporting. Ms. Barton confirmed that any projects that have low-income housing tax credits in their development already comply with prevailing wage as its required by state law. Council Member Dumalag asked staff if they have information on development that must comply with LIHTC and has also been found in violation of prevailing wage. Ms. Barton stated that staff does not have data on this. Council Member Dumalag stated that she is aware that some contractors are working with developers that have had LIHTC flagged for cities to monitor. Regarding compliance, she questioned how robust the LIHTC monitoring program is and if there might be issues if some of the developers use contractors in violation of LIHTC. Council Member Rog asked whether with the adoption of a prevailing wage policy, if there is a likelihood of greater efficiency and quicker product completion because of skilled labor. Ms. Barton stated that this is included in the staff report and is one of the positive considerations listed in the pros and cons. Council Member Budd stated that another positive that resonates with her is not only ensuring fair wages and benefits but ensuring legal wages and benefits. This is meaningful to her, especially with concerns about low bidders in the affordable housing space. Mayor pro tem Baudhuin referred to a list of pros and cons in the staff report and noted that it was a list of outcomes that may or may not happen. He asked staff whether there were narratives or specific situations where these listed outcomes have occurred in specific cities. Ms. Barton stated that when talking to other cities, staff did not go into that level of detail relating to the pros or cons listed. Mr. Porter-Nelson noted specific anecdotes. He shared his own experience, having previously worked for other cities. He recalled that the prevailing wage ordinance adds an extra layer to the process and sometimes there was more back-and-forth with developers adding additional time to the development process. He confirmed that the list of pros and cons was generated from actual researched realities and the potential outcomes are not theoretical. Mayor pro tem Baudhuin asked if any cities had reported that they regretted adopting a prevailing wage ordinance, or if they reported they were glad that they had one in place. Mr. Porter-Nelson stated that each city representative he spoke with noted that there are usually positives, negatives, costs and benefits to any public decision. Mayor pro tem Baudhuin asked why St. Louis Park would have to provide an incentive to follow the clear legal path to fair wage practices. Mr. Mattick stated that if city funding is provided on a project, the legal path is clear, such as Tax Increment Financing (TIF), where money is given to Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE Study session minutes -4- Oct 13, 2025 the developer for financing. Mr. Mattick stated the city could not control contractor pay practices if the city is not providing funding on the development in some way. Mayor pro tem Baudhuin summarized that if the developer does not need any assistance from the city in order for their project to move forward, the city cannot place prevailing wage guidelines on their project. Mr. Mattick confirmed that providing money on the development approval side is what allows the city to place prevailing wage guidelines on how the project proceeds. Council Member Brausen noted that he is exploring all the alternative approaches. Noting the staff report, and where it states that a living wage will apply to service contracts, he asked how many service contracts the city has with developers that are not paying a living wage at this time. Ms. Barton stated that her staff has not examined this, and Ms. Keller stated that staff will research this and report back to the city council. Council Member Brausen asked what the cost to the city will be in order to get up to the prevailing wage, specifically the cost to public works, and whether enough companies will bid on projects to make it worth the work or if this decision will be an inflation trap. Ms. Heiser stated that when there is state or federal aid involved, the city usually pays 10-15% more in expenses, which is built into estimates and work related to bids. Superintendents must conduct interviews for workers in the field and ensure that they are being paid in compliance with state funding requirements. At the core, there are additional factors besides skilled labor that may affect project efficiency – such as weather. Mr. Okey stated that in contracts with the public works department he has noticed a trend related to smaller companies bidding on projects. Over the past few years, fewer contractors have been submitting bids for projects such as road-marking and crosswalks. He noted that many smaller contracting companies have been bought out by larger corporations. It has been difficult to find smaller companies to contract with. Council Member Brausen stated his understanding is that smaller contractors may bid on smaller jobs because there are fewer reporting requirements. Larger contractors would be affected by prevailing wage requirements as their projects would be larger. Council Member Rog also stated the council needs to consider the fact that the city has a requirement to go with the lowest responsible bidder. This does not allow the city to choose to award a bid to another contractor who might be paying their workers better by comparison. Without a prevailing wage ordinance, there is no mechanism in place for choosing one contractor over another based on pay practices. Council Member Rog noted there are projects in the queue which are already subject to prevailing wage laws. She asked what current projects are not subject to prevailing wage requirements. Ms. Heiser stated the local street pavement project is an example of a project currently underway but not subject to prevailing wage. The contractor finished the job a month early and has also worked on contracts that were subject to prevailing wage for the state. Her understanding is that contractors pay their workers the same wage no matter what the Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE Study session minutes -5- Oct 13, 2025 reporting requirements are for the project they are working on, noting that she has not done deeper research into this. Ms. Barton added that Sherman Associates is an example of a developer who pays wages equal to prevailing wage requirements. Council Member Dumalag noted that developers will find ways to work as cost-effectively as possible, depending on the requirements of their projects in different municipalities or even different states across the nation. Council Member Budd stated that the report brought up many questions related to prevailing wage, adding that there is also information that seems contradictory depending on what data is being compared. Council Member Budd stated she would like to get some industry expert advice on prevailing wage before moving ahead. Council Member Rog stated the council received information from some labor professionals in the community. She asked if staff had also received this information, Ms. Barton noted that staff had not and that it might be useful as it relates to research completed on prevailing wage. Council Member Rog added that she is not ready to move forward yet on prevailing wage. She stated that it is possible that monitoring developer and builder practices at the city level could be better than it is at the state and federal level. The city is comfortable assuming additional costs with climate-friendly alignment, DEI values and incentives for affordability. She stated that it feels like it is the responsibility of the council to have alignment in prevailing wage policy as well. Council Member Rog stated that an additional percentage of cost on a limited number of projects might fit well here. She would like a better sense of how many projects prevailing wage would involve, as well as what types of projects. Council Member Brausen stated that he would like more information on the parameters of a limited threshold model as well as their impacts on projects with city financial assistance. Ms. Keller stated that staff would review past projects within comparable thresholds and bring this information back to the council. Council Member Dumalag stated that she supports a prevailing wage policy. Council Member Dumalag noted that the requirements around LIHTC projects are new. She noted that St. Louis Park is largely developed and she has concerns excluding projects that have fewer than 20 units. Council Member Dumalag stated that in any situation where labor is involved, there is a risk of exploitation. She stated she wants the same thresholds and requirements for all contractors; people that comply with the law to be able to do work in the city. Council Member Farris stated she is not ready to say she is for or against prevailing wage at this time. She would like more information and added that the city will need to protect contractors who do a good job on secure and stable housing. Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE Study session minutes -6- Oct 13, 2025 Council Member Brausen stated he would like to further explore an ordinance with thresholds. He added that he would also like to know how many contracts this will have an impact on and would like to see the data on how much the costs will be. Council Member Budd stated she is supportive of more information and would like to hear from some experts, especially when looking at cost-effectiveness. Council Member Dumalag suggested that the Human Rights Commission should review the prevailing wage ordinance. Council Member Rog suggested that the Planning Commission and Housing Authority should also review a prevailing wage ordinance. Ms. Barton stated that staff can bring this back at another study session for further discussion and can also bring in stakeholders to speak to the council. Mayor Pro Tem Baudhuin stated that in general, when the free market does not do the job of paying overall fair wages, it increases dependency on government agencies and cities to compensate. Because of this, he is in favor of the prevailing wage. Mayor Pro Tem Baudhuin stated this is not only about the wages the workers make, but it is about the bonuses that the executives make. Mayor pro tem Baudhuin stated there seems to be subtle blame to the workers, making it seem as though they expect too much or that the city cannot afford to pay workers that much. Mayor pro tem Baudhuin added that this is frustrating and stated he would like further discussion with experts as well. Council Member Budd asked if, with prevailing wage projects, the city interviews workers. Ms. Heiser stated yes, that is correct and stated the staff report notes this. Council Member Rog stated she would like to hear more from the experts and about costs and ranges, as well as percentage increases. Ms. Barton stated that staff will put together cost information for the city council. Council Member Brausen stated he would like to hear from Minneapolis or St. Paul and their experience with prevailing wage policy, also. Ms. Keller stated that staff will bring back information to the council related to a prevailing wage ordinance and added that the council will want to hear from stakeholders , as well as have more information on what an ordinance could look like. Ms. Keller added that staff will do an analysis and include the assumption of projects with more than 8 units, with the threshold size of the project being $175,000. Ms. Keller stated that staff will bring back information on whether an ordinance would have been in effect, and how many projects would have been impacted. 2. Developer business practices Mr. Walther presented the staff report. Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE Study session minutes -7- Oct 13, 2025 In response to council members’ desire to better understand the flexibility and boundaries in the formal decision-making processes in relation to development projects, staff prepared a decision matrix detailing the council’s role when presented with certain land use and financial assistance decisions. Mr. Walther stated the matrix is intended to provide a framework for the council to better understand their level of discretion in the decision-making process when development projects come before them for consideration. This matrix was provided to the city council in a written report on April 28, 2025, noting that a comprehensive discussion surrounding these decisions, developer business practices and avenues to address council concerns relating to proposed development projects would occur during the housing + neighborhood-oriented development system later in the year. Council Member Rog asked if the nuisance code is defined in the city code or by the council. Mr. Walther read the general conditions for CUPs to the city council. Council Member Rog stated that the code is subjective. Mr. Walther agreed and stated that uses are usually conditional uses when hazards are involved. And nuisances that are defined and measured with purely objective criteria are contained elsewhere in the city code and handled entirely administratively. Zoning and CUPs can be a preventative tool to anticipate and mitigate specific issues identified in the review process. Mr. Walther further explained the council’s levels of discretion in planning and zoning decisions. Ms. Monson discussed various types of financial assistance and the timing and types of decisions the council makes. Council Member Rog noted that the city provided Sherman and Associates with significant financial assistance and a lot of incentives after they presented the council with a project that included a lovely façade to a parking ramp. Over the course of the development, Sherman and Associates returned to the council and said they could no longer provide the façade due to escalated costs. Council Member Rog said she is now disappointed that the council provided financial assistance for the project because it was later reduced. She felt confusion around the council’s ability to make demands and stated she now feels regret about the project. Council Member Rog asked what the council’s options are when TIF is offered and a developer later modifies the project. Ms. Barton stated that at any point in the process, the city council has the opportunity to say no and not provide tax increment financing (TIF). Ms. Barton added that if TIF is provided, the council can say the project needs to adhere to its original plan. Ms. Barton added that the developer can also make changes or refuse to do so, as well as to make a compromise. Council Member Dumalag asked if the council could put restrictions on a project in the event that a developer changes it. Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE Study session minutes -8- Oct 13, 2025 Ms. Monson stated the council amended a Planned Unit Development (PUD) to allow for changes in the referenced Sherman and Associates project. Ms. Barton stated that the council can also choose not to amend a PUD if desired. Council Member Brausen stated the council made a business decision on the Sherman and Associates project and it made sense because there were so many things the developer was offering related to affordable housing in that space. Mayor pro tem Baudhuin added that the council should exercise their authority to push back if needed. Ms. Barton stated the council also has the authority to allow or not allow funding through the affordable housing trust fund, similar to TIF. Communications/meeting check-in (verbal) The meeting adjourned at 8:09 p.m. ______________________________________ ______________________________________ Melissa Kennedy, city clerk Nadia Mohamed, mayor Docusign Envelope ID: 6D8538DB-869F-4FC8-82BD-E086EB6292DE