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HomeMy WebLinkAbout2026/05/18 - ADMIN - Minutes - City Council - Study SessionOfficial minutes Special study session meeting St. Louis Park, Minnesota May 18, 2026 The meeting convened at 5:15 p.m. Council Members present: Daniel Bashore, Jim Engelking, Tim Brausen, Paul Baudhuin, Sue Budd, Mayor pro tem Yolanda Farris Council Members absent: Mayor Nadia Mohamed Staff present: city manager (Ms. Keller), redevelopment administrator (Mr. Porter-Nelson), planning and economic development manager (Ms. Monson), deputy community development director (Sean Walther), communications and technology director (Ms. Smith), public works director (Mr. Hall), financial analyst (Ms. Stephens) Guests: Nawal Noor, Noor Companies; Stacie Kvilvang, Ehlers; Kori Shingles, PCL Construction; Cathy Capone Bennett, Twin Cities Housing Alliance; Richard Kolodziejski, Northern Midwest Regional Council of Carpenters Discussion Item 1. Prevailing wage policy panel discussion Mr. Porter-Nelson presented the staff report. He outlined the two policy considerations before the council: whether adopting a prevailing wage policy furthered the city's strategic priorities, and whether the council wanted staff to prepare the policy for adoption. He explained that prevailing wage sets minimum hourly compensation standards for construction laborers based on trade-specific schedules covering wages and fringe benefits, and that Minnesota's Department of Labor and Industry sets those rates by county. Projects in St. Louis Park subject to state or federal funding already use Hennepin County wage schedules. Mr. Porter-Nelson stated that the council previously directed staff to draft a policy applying prevailing wage to capital improvements or private developments receiving more than $250,000 in city investment. The draft policy included exceptions for: projects already subject to state or federal prevailing wage requirements, apprentices (consistent with state law), housing improvement areas, and developments with 10 or fewer units on a single site. Compliance would be overseen by a city-designated officer, with certified payroll tracking required, at least one random annual project audit and a public complaint process. Mr. Porter-Nelson summarized anticipated cost impacts as ranging from 5% to 15% per project depending on the contractor and project type. He noted that the policy could reduce the number of city-supported capital improvements or increase costs if project volume was maintained, potentially requiring additional tax revenue, utility rate adjustments or expanded tax increment financing (TIF) assistance. Mr. Porter-Nelson also presented the racial equity and inclusion impact analysis (REIA), which identified a potential reduction in participation by women- and BIPOC-owned firms due to administrative burden. He noted that a review of five buildings across two active developments Docusign Envelope ID: 9596EECE-D543-8382-81E8-1CEC84394B5F Special study session minutes - 2 - May 18, 2026 in St. Louis Park showed 0% to 8% women workforce participation and 4% to 15% BIPOC participation, meaning the primary beneficiaries of the policy as currently structured would be the majority-male, majority-white construction workforce on those projects. Ms. Monson introduced the panel. Ms. Monson reported that prevailing wage policies are uncommon among individual cities in the Twin Cities metro and that only Minneapolis, St. Paul, West St. Paul, Bloomington, Brooklyn Park and Richfield had adopted them. She noted that Bloomington and Brooklyn Park adopted theirs in 2024 and had not yet seen mixed-use or mixed-income projects advance under those policies. Ms. Capone Bennett stated that adding a prevailing wage requirement on top of existing cost- generating policies - including inclusionary zoning, green building requirements and tree preservation - made it harder for private and emerging developers to make projects financially viable. She noted that some developers had already declined to pursue projects in cities with prevailing wage policies because the numbers did not work, and that she had heard from St. Louis Park developers who were already challenged to make market-rate projects feasible even with TIF and affordable housing trust fund assistance. Ms. Kvilvang stated that increased project costs resulting from prevailing wage requirements would ultimately be borne by St. Louis Park taxpayers, since developers would seek additional public assistance to fill the gap. She noted that prior to the city's inclusionary housing policy, TIF district terms averaged four years or less, but had since grown to an average of 10 to 15 years, and that adding prevailing wage could push those terms to 20 years or the full 26-year maximum. She also noted that some cities with prevailing wage policies, including Bloomington and West St. Paul, were seeking exemptions for redevelopment projects due to cost challenges. Mr. Kolodziejski stated that prevailing wage had a positive deterrent effect on labor brokers in cities where it had been adopted. He disputed the commonly cited figure that prevailing wage increases costs by 20%, noting that more than 70% of studies on the subject showed that claim to be inaccurate. He argued that significantly lower bids on construction projects were typically the result of wage theft, off-the-books cash payment, failure to pay workers' compensation and exploitation of workers. He stated these were not genuine cost efficiencies. He cited a recent $1.2 million settlement in the City of Eagan involving wage theft and a related criminal guilty plea as an example of the ongoing problem. When prevailing wage was applied to low-income housing tax credit projects at the state level, the use of labor brokers dropped almost immediately. Ms. Kvilvang stated that workers were the primary beneficiaries of prevailing wage but noted that a large proportion of workers on multifamily developments in the city were already union and therefore already meeting prevailing wage standards. She cautioned that a prevailing wage policy alone would not necessarily stop wage theft. Mr. Kolodziejski reiterated that the broader community benefited when construction workers were paid fair wages, as those workers paid taxes and participated in the local economy. He stated that the prevailing wage rate in Minnesota for carpenters applied equally to multifamily and commercial work. Docusign Envelope ID: 9596EECE-D543-8382-81E8-1CEC84394B5F Special study session minutes - 3 - May 18, 2026 Ms. Capone Bennett agreed with points raised by both Ms. Kvilvang and Mr. Kolodziejski but emphasized that the compliance burden fell disproportionately on smaller and emerging developers who lacked established systems to meet reporting requirements. Ms. Shingles noted that as a large national contractor, PCL had the internal infrastructure to manage prevailing wage compliance, but that smaller and minority- or women-owned subcontractors frequently did not. She stated that in her role as PCL's community engagement and diversity, equity and inclusion manager, she had personally assisted small contractors with their paperwork because they lacked the staff capacity to do so. She suggested the council consider what other tools, such as contractor selection criteria, might address wage theft concerns without imposing a blanket policy. Ms. Kvilvang stated that low-income housing tax credit projects already carried prevailing wage requirements, and that the resulting costs had driven per-unit construction costs to approximately $500,000. She also noted that some developers were declining grants from the Minnesota Department of Employment and Economic Development (DEED) and county sources because the prevailing wage requirements attached to those grants made the math unworkable. Ms. Noor spoke from the perspective of a private development and construction firm. She stated that tax credit affordable housing projects were delivering units at $500,000 to $700,000 per unit compared to $230,000 to $250,000 for market-rate units, with prevailing wage representing approximately 30% to 40% of that cost differential. She noted that subcontractors treated prevailing wage projects as carrying additional paperwork burden, including certified payroll, LCP Tracker reporting and Department of Labor compliance, which added legal complexity and expense. She also cautioned that applying prevailing wage to economic development projects involving small businesses could make simple façade improvements or restaurant expansions three times more expensive than anticipated. Ms. Noor suggested the council consider alternative tools such as contractor pre-qualification based on compliance history rather than imposing a blanket cost requirement. Mr. Kolodziejski stated that the Fair Contracting Foundation of Minnesota was the primary third-party organization tracking prevailing wage compliance, and that his organization had maintained its own database of contractor and subcontractor activity on construction sites across the Twin Cities for 15 years. He described the Building Dignity and Respect Program as a worker-led model originating from advocacy for farm workers. Ms. Shingles stated she was not familiar with the Building Dignity and Respect Program and raised the question of who would bear the cost of engaging a third-party compliance organization, noting it would be more burdensome for smaller contractors than for large firms. Ms. Capone Bennett stated that TIF was one of the most flexible tools available to the city and that attaching prevailing wage to TIF-funded projects reduced that flexibility, particularly for market-rate projects that included inclusionary zoning components. Docusign Envelope ID: 9596EECE-D543-8382-81E8-1CEC84394B5F Special study session minutes - 4 - May 18, 2026 Ms. Shingles thanked the council for approaching the issue thoughtfully and with diverse perspectives and reiterated that other measures in the contractor selection process might be as or more effective than a prevailing wage policy. Ms. Kvilvang noted that the policy placed a cost burden on one sector while workers in other fields received no similar benefit. Ms. Noor stated that the region was well-served by large union contractors who already paid at or above prevailing wage, and that the segment most affected by a city prevailing wage policy would be market-rate multifamily developers, small economic development projects and affordable housing projects — the very projects the city sought to encourage. She suggested the council evaluate whether the additional cost was proportionate to the benefit. Ms. Noor offered alternative tools such as best-value contractor selection criteria with points awarded to diverse or locally established firms to address underlying concerns. Mr. Kolodziejski stated that the real costs of not having a prevailing wage policy included wage theft, lack of tax contributions from exploited workers, law enforcement involvement and harm to workers who could not spend money locally. His position was that certified payroll requirements were reasonable for any business and that prevailing wage created a better city overall despite the acknowledged barriers. Ms. Shingles asked Mr. Kolodziejski whether a prevailing wage policy addressed the root cause of exploitation or only a symptom. She suggested the council examine deeper structural solutions alongside any policy. Mr. Kolodziejski offered that when prevailing wage was applied to tax credit projects, the use of labor brokers declined almost immediately, demonstrating a direct causal effect. Ms. Noor added that wage theft enforcement, including criminal prosecution, was a more direct tool than cost-adding policy requirements, and suggested that contractor pre- qualification based on compliance history could achieve similar goals without increasing project costs. Council Member Baudhuin asked whether a prevailing wage policy could be used as leverage to increase participation by BIPOC and women workers, and whether any city had pursued such an approach. Ms. Noor stated that affirmative action quota-based requirements were under legal challenge following federal executive action in January 2025 and advised against that approach. She suggested instead a best-value contractor selection process that awarded points to small, diverse or women-owned businesses as a legally defensible alternative. Council Member Baudhuin also asked whether data existed on the percentage of St. Louis Park residents working in the construction trades, so the council could assess how many local residents would directly benefit from a prevailing wage policy. Mr. Kolodziejski stated his organization could look into that question. Ms. Noor stated that based on her experience, most construction trade workers tended to live outside the metro area rather than in cities like St. Louis Park. Docusign Envelope ID: 9596EECE-D543-8382-81E8-1CEC84394B5F Special study session minutes - 5 - May 18, 2026 Mr. Kolodziejski noted that among carpenters and laborers specifically, women and BIPOC membership had reached 37.63% in the Twin Cities market and that the union had members living in St. Louis Park but acknowledged that carpenters and laborers represented only a fraction of all trades involved in a typical construction project. Council Member Bashore stated he was open to hearing what other tools existed to prevent wage theft and exploitation. He noted that in the absence of explicit alternatives, he was generally inclined to support moving forward while agreeing with Council Member Baudhuin’s suggestion for further study session discussion. Council Member Budd stated she believed adopting a prevailing wage policy furthered the city's strategic priorities. She cited prior instances in St. Louis Park where workers on mixed-income developments had been employed illegally, noting that those situations had prompted protests, and that the council had also faced feedback about a major developer with a history of labor violations. She stated that federal, state and many other entities already required prevailing wage and did so because it represented good governance, not because it raised taxes. Council Member Baudhuin stated he was not prepared to decide firmly in either direction. He did not want the policy to die at the study session stage and asked that the draft policy receive further council discussion before any vote on adoption. He stated he was willing to indicate support for preparing the policy for adoption on the condition that a dedicated policy discussion occur first. Council Member Brausen stated he was concerned about long-term costs to residents, citing budget pressures and the desire to keep taxes and utility fees low. He was willing to continue discussion but wanted to explore whether labor brokers could be regulated separately. He stated he was undecided on prevailing wage. Council Member Engelking stated that the staff report indicated many contractors on city projects paid livable wages but not prevailing wages. He noted that a livable wage as calculated by MIT for Hennepin County was still low enough that a worker building an apartment in St. Louis Park could qualify for a 60% Area Media Income subsidized unit in that same building. He stated he did not want to redevelop the city on the backs of labor and expressed strong support for both policy considerations. Mayor pro tem Farris stated she was not comfortable adopting a prevailing wage policy at this time, citing the existing high cost of living in St. Louis Park and the impact on seniors and lower- income residents. She expressed openness to further discussion. Ms. Keller summarized the council's direction as a strong desire to continue the conversation at a future study session. She noted specific topics to bring back: what other tools exist to address wage theft, what percentage of St. Louis Park residents work in the construction trades and whether labor brokers could be regulated. Council Member Budd requested that staff obtain and share with the council the research cited by Mr. Kolodziejski showing that prevailing wage does not significantly increase costs. Mr. Kolodziejski agreed to provide that material to staff. Docusign Envelope ID: 9596EECE-D543-8382-81E8-1CEC84394B5F Special study session minutes - 6 - May 18, 2026 Council Member Bashore requested that staff seek perspectives from Bloomington and Brooklyn Park on the impacts of their prevailing wage policies, noting he was not convinced that the absence of mixed-use development in those cities was directly caused by the policy. Ms. Monson acknowledged that staff have already reached out to other cities that have prevailing wage policies but that staff from other cities were not interested in participating in a public panel discussion, but that council members or staff could reach out to these cities informally to gain more perspective on this question. Ms. Kvilvang noted she was currently advising on a project in Brooklyn Park where prevailing wage had extended the required TIF assistance from a five-year tax abatement to an 18-year district and offered that as a concrete example of cost impact. Written Reports 2. Climate Leadership and Natural Spaces system kick-off 3. Solid waste program update 4. Construction & demolition waste reduction 5. Update on the Climate Action Plan amendment 6. Climate action annual report 7. Connected infrastructure system wrap-up 8. Wooddale Station redevelopment update - Ward 2 9. Revisiting proclamation guidelines The meeting adjourned at 6:17 p.m. ______________________________________ ______________________________________ Melissa Kennedy, city clerk Nadia Mohamed, mayor These minutes were created with the assistance of a generative AI transcript service, then edited and finalized by a city staff person. Docusign Envelope ID: 9596EECE-D543-8382-81E8-1CEC84394B5F