A Jersey City ordinance that says developments granted property tax abatements must hire union labor on their projects was struck a blow last week by an Appeals Court, although the city’s top official says the matter is far from settled.
The legal fight, which has waged for over two years, pertains to Section 304 of Jersey City’s Municipal Code. Those regulations, enacted in 2007, decree that developers who receive either a tax abatement or a PILOT for a project in Jersey City must enter into a Project Labor Agreement (or PSL) with the city that says they will use union labor for the construction.
The regulations also require that 20 percent of billable hours performed under an apprenticeship program be performed by local workers who reside in Jersey City. Both regulations only apply to any private sector project that’s granted a tax abatement or PILOT that costs $25 million or more. Projects without any tax relief are not subject to the ordinance.
Those regulations were challenged as unconstitutional in court by five non-union plaintiffs, including the Associated Builders and Contractors’ New Jersey Chapter. They argued in their August 2014 Federal lawsuit that the ordinance should be superseded by the National Labor Relations Act and claimed that it puts non-union workers at a disadvantage when it comes to getting work on tax abated projects.
District Judge Wigenton eventually ruled that the city enforces the PLA requirement only as a “market participant” and not as a regulator, dismissing the case. The plaintiffs then appealed the ruling, and oral arguments were heard on the matter in June earlier this year.
Last week, the Third Circuit Court of Appeals disagreed with the lower court’s dismissal of the case, ruling that while Federal and State laws do supersede local ones, that would only apply if Jersey City was just a market participant “with no interest in setting policy.” They noted in their ruling that the city “lacks a proprietary interest in Tax Abated Projects” and ruled that the union labor rules under the ordinance are so broad, they are considered regulatory.
“Jersey City does not purchase or otherwise fund the services of private developers or contractors who are constructing Tax Abated Projects…nor does it sell those services or goods or invest, own, or finance the projects,” the court ruled. “Instead, the City simply reduces the developers’ tax burden for a period of time,” which the court ruled is not “direct state involvement in the market,” but rather the “assessment and computation of taxes—a primeval government activity.”
The city had argued during the appeal that they do have a proprietary interest in tax abated projects because when completed, they stand to improve the city’s economy. But the court ruled that “tax abatements designed to improve future revenue streams are not equivalent to the purchase or sale of goods or services and do not transform the City into an investor, owner, or financier of the Tax Abated Projects.”
The case was remanded back to the District Court for further proceedings and the battle appears far from over. Jersey City Mayor Steven Fulop told The Hudson Reporter over the weekend that the city intends to appeal the court’s decision, meaning this story will likely have a few more chapters.