Like any sector, the construction industry must operate within the legal framework determined by elected representatives across multiple layers of government. These policies can have profound impacts on businesses — intended or otherwise — which is why members of the Arizona Builders Alliance (ABA) speak with lawmakers about their top priorities and concerns.
“Every year in the state of Arizona, upwards of 1,800 bills are introduced. About 300 of those bills end up becoming law,” explains Mike Gardner, president of Policy48, which lobbies on behalf of the ABA.
Expecting elected officials to be experts on every issue they encounter is unreasonable, so Gardner’s job is to explain how a particular bill might affect the commercial construction industry.
“It’s not their fault that they don’t know — they just haven’t been exposed to it. As a former member of the legislature myself, I can tell you there were times I voted on bills that I didn’t fully understand,” Gardner says. “Nobody can know it all, but luckily, we have good people at the ABA who can educate me, then I can help lawmakers make better informed decisions.”
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The ABA’s legislative committee consists of approximately 20 members who regularly meet to review legislation and consider whether the association should support, oppose or remain neutral on it. Those recommendations are then sent to the board of directors for acceptance or modification.
Tim Bee, vice president of government and community relations for the ABA, adds that these members are valuable sources of expertise regarding how a policy may affect operations.
As the former Arizona State Senate President — the only person from Southern Arizona to hold the position since 1974 — Bee works with Gardner, utilizing both of their connections and combined knowledge of the lawmaking process to relay vital insights about the industry to legislators.
“The committee is privileged to host elected officials from all levels of government and have the opportunity to start building relationships with them,” Bee explains. “For example, [in May], we had a roundtable with Congressman Juan Ciscomani and Department of Labor Secretary Lori Chavez-DeRemer.”
Bill Headley, senior vice president at Holder Construction and chairman of ABA’s legislative committee, says Bee and Gardner are instrumental in scheduling valuable facetime with policymakers.
“That helps us learn what the legislator’s positions and priorities are, but it also lets us share our thoughts on the issues — whether it’s weighing in on a current proposal or explaining what challenges the industry is facing we think may need to be addressed,” Headley says.
Reducing ambiguity
Public services and infrastructure are built for the benefit of all, but the mechanisms government entities use to raise revenue to fund these projects can be difficult to parse. Nearly a decade ago, Arizona’s construction-related tax laws were overhauled with the goal of simplification, but Gardner says the new code only made it more confusing.
“We deserve easy to understand tax codes that apply evenly among competitors,” he continues. “If two companies see the tax code differently, one might bid on a job with different assumptions on how much taxes will need to be applied to that contract. Companies will take different approaches on how to complete a project, but everyone should be on the same page regarding the tax bill.”
With the changes made to the system in 2015, contractors must pay transaction privilege tax when purchasing materials for projects involving maintenance, repair, replacement and alteration, each having its own definition within the statute.
“Those words sound synonymous, but the tax code is applied differently based on what work is being done,” Gardner explains. “That means our friends in the [Arizona Department of Revenue] might look at a construction site and say, ‘Actually, you weren’t altering something, you were repairing it, so you paid your taxes inappropriately.’ We have to fix that.”
Seeing as the government employees performing these audits are often accountants and not contractors, explaining why a job should be in one category instead of another isn’t a simple task.
“The construction industry didn’t do a good job explaining to lawmakers what impacts these changes to the tax code would have when the matter was being debated,” Gardner says. “We don’t have a solution yet, but this is a perfect example of why it’s so important to be at the table, otherwise you end up dealing with hurdles — like the very complicated construction tax code we have today.”
Right to work
In 1946, Arizona voters passed a ballot initiative enshrining the right to work in the state’s constitution, meaning union membership cannot be mandated to obtain or retain employment. Efforts have been made in recent years to repeal this amendment, with proponents arguing that since all employees benefit from collective bargaining, they should be required to join or financially support the union representing them.
“That caught our attention,” Gardner says. “We’re not anti-union or pro-union. If you want to sign up, feel free, but people shouldn’t be forced to. My wife is a teacher and chooses to be part of the union because she sees value in what the dues get her. My dad was also a teacher, but didn’t join because he disagreed with some of the union’s political stances.”
The ABA itself has union and non-union members that all want the best outcomes possible for Arizona’s commercial construction industry. Headley notes that Holder Construction has projects with both types of contractors on the same site without any issues, and the goal is to keep it that way.
Rather than taking a stance against unions, Gardner says the association advocates for a level playing field without favoritism towards one style of shop or another.
“Most lawmakers appreciate that we want contractors to be chosen based on factors like their skills, price and guarantee of work instead of union status,” he continues.
ABA members want fair competition
Under Arizona statute, counties, cities and local governments are barred from requiring contractors working on public construction projects to pay a prevailing wage, which is determined through compensation surveys conducted in the region.
Despite this prohibition, Arizona Attorney General Kris Mayes issued an opinion in June 2023 arguing that prevailing wages are a form of minimum wage that municipalities have the authority to regulate. In the wake of that opinion, the cities of Phoenix, Tucson and Tempe all adopted prevailing wage mandates.
“We strongly disagree with the opinion [of the attorney general], so the ABA, along with a few other associations, challenged those ordinances in court based on the fact that they are barred under state law,” Bee explains. “The Goldwater Institute represented us and we were successful, though the case is going through the appeals process. But we are pretty confident that we will win the lawsuit.”
The issue is not with the wage itself, considering most ABA members already pay their workers more than what would be prescribed by the mandates, according to Bee. But the administrative load created by the ordinances, such as weekly paycheck reports to the government, is burdensome, especially for small and medium-sized firms.
“That limits competition,” Bee says. “For large contractors that already work on federal jobs requiring that type of reporting, taking on a prevailing wage contract probably won’t be a problem. But companies that don’t have the necessary staff or infrastructure in place likely won’t even try. When we surveyed our members, 75% indicated that they wouldn’t bid on projects with prevailing wage requirements.”
Holder Construction works on federal projects, and Headley agrees that satisfying the reporting criteria is the most challenging aspect. Both general contractors and trade partners need additional administrative staff to prove to the government that the stipulations are being met, even though Holder Construction pays their employees above the prevailing wage.
“When someone says to a legislator, ‘We want a prevailing wage to make sure the workers on site are getting reasonable pay,’ it makes a lot of sense,” Headley continues. “But if you look at what that entails, there’s a whole lot more to it that it seems.”
Gardner adds that even though prevailing wage ordinances don’t say anything regarding union status, outcomes tend to lean in that direction.
“People that follow prevailing wage statutes are more likely to be union members,” he continues. “It starts to feel like code for ‘you need to be part of the union to get this job.’ Larger companies with union stewards end up winning those contracts instead of smaller, merit-based shops. Again, we have no problems with unions, but you shouldn’t get bonus points because you happen to be in one. Let the market figure itself out.”
