Slapping the union label on Alameda Point

So let’s list all of the City of Alameda plans and policies that Alameda Point Partners’ proposal for Site A at Alameda Point, which will be presented to Council for final approval Tuesday, implements:  the Community Reuse Plan of 1996; the Conceptual Planning Guide prepared for the Planning Board and endorsed by Council in July 2013; the Waterfront Town Center Plan adopted in July 2014; the Project Labor Agreement policy for Alameda Point approved in . . .

Hey, wait a minute.  What’s that last one again?

A Project Labor Agreement is a contract between an owner and the construction industry unions that establishes the terms and conditions of employment for all contractors and subcontractors – union and non-union – working on a specific project.  Without actually mandating that the owner hire only union contractors or that the contractors hire only union workers, a PLA essentially turns the project into a union job.

In a typical PLA, the owner agrees to use only contractors who commit to:

  • Go through union-run hiring halls to get their workers;
  • Pay wages at either the “prevailing wage” rate or pursuant to the scale set by existing master labor agreements;
  • Follow union work rules, including those for assigning tasks across trade lines;
  • Pay into union-run pension and health and welfare trusts even if they maintain their own benefit plans;
  • Require their workers, even those who are not union members, to pay union dues.

In exchange, the unions promise not to strike and to arbitrate any disputes. (The owner similarly promises no lock-outs).

BTC logo.2As it turns out, staff has never presented, and Council has never adopted, any policy regarding the use of PLAs for Alameda Point or anywhere else.  Nevertheless, in all likelihood a PLA – whose terms were still being negotiated as of Friday – will govern the Site A development.  The construction industry unions and their political supporters on Council won’t have it any other way.

If you approach the issue neutrally, a case can be made for or against requiring a PLA for Site A.  Broadly speaking, proponents argue that a PLA reduces the uncertainty inherent in large construction projects, thereby making it more likely that a project like Site A will come in on time and on budget.  Opponents argue that a PLA decreases the number, and increases the amount, of contractor bids, thereby making the project more expensive for a developer like A.P.P.

We’ll get back to those arguments later, but we’re afraid that, like many other public policy issues in Alameda, the merits may not matter as much as the politics.  For almost two years, the unions and their allies on Council have been working to get PLAs required not just for Alameda Point but City-wide.  Tuesday, they apparently hope to take the first step toward accomplishing that goal by getting Council to approve a deal containing a PLA for Site A, the first project at the Point.

Here’s the back story the Merry-Go-Round has been able to piece together from public records and responses by Interim City Manager Liz Warmerdam to our questions:

Back in September 2013, at the request of an unidentified Council member, the former Council held a “workshop” at which a Vallejo lawyer named Michael Vlaming presented an “overview” of PLAs.  Notably, the presentation stressed the advantages of a PLA – but omitted the disadvantages.  It fell to then Councilman Stewart Chen, D.C., to raise the issue of the potential anti-competitive effect of PLAs on non-union contractors.

Mr. Vlaming dismissed Dr. Chen’s concerns out of hand.  Non-union contractors can still bid on a project, he said – as long as they commit to adhere to the PLA if they get the job.  Moreover, while it’s true that PLAs increase costs for non-union contractors by requiring them to pay into union benefit trusts even if they provide benefits themselves, not every non-union contractor has its own benefits plan.

Dr. Chen didn’t follow up, and none of his colleagues pursued the line of inquiry.  Instead, after hearing from Alameda Point Collaborative executive director Doug Biggs, they were intrigued by the idea of using a PLA to get contractors to provide jobs for the formerly homeless served by A.P.C.  The upshot was a direction to staff to return with a proposed policy for a PLA covering Alameda Point.

It didn’t happen.  According to Ms. Warmerdam, “Last year, the City’s representatives met over the course of several months with the Labor representatives to discuss a PLA at the Base but did not come to any agreement.”  Nevertheless, when staff sent out a request for qualifications for potential developers for Site A, the RFQ noted that the City is “currently developing” a PLA policy for Alameda Point and stated that, “New development on Site A will be subject to the City’s PLA policy or to a PLA negotiated directly with the Building Trades by the developer.”

No PLA policy had been proposed or approved when the time arrived in September 2014 to select a developer with whom to enter into an Exclusive Negotiating Agreement for Site A.  So staff inserted into the ENA a provision stating that, “Developer agrees to comply with the City’s PLA policy or negotiate in good faith a PLA with the Building Trades for the project.”

Then came the November election and the ouster of Mayor Marie Gilmore, the defeat of Councilman Chen, and the replacement of termed-out Councilwoman Lena Tam.

We’ll let Ms. Warmerdam pick it up from there:  “With the change in Council, staff felt it best to take a step back and re-engage the new Council to understand their position on the matter.  Additionally, staff’s focus had been on the Site A project and, as you noted, the RFQ clearly stated a PLA would be a requirement in some form (either the City’s document or their own negotiated document).  I believe at some point, it was determined that it would be more efficient for the developer to negotiate their own deal with Labor, than to wait for a City policy that addressed development at the Base.”

Despite Ms. Warmerdam’s reference to “re-engaging” the new Council, the minutes do not reflect any discussion at a post-election Council meeting about whether a PLA for Site A was necessary or desirable.  (Which is not to say that the “re-engagement” did not occur one-on-one between staff and Council members).  But the minutes do show that one newly elected Council member was keeping close tabs on how the negotiations between A.P.P. and the unions were going:  Councilman Jim Oddie.

Oddie, Gilmore & Tam

Councilman Oddie (center) with former Mayor Gilmore (left) and former Councilwoman Tam (right)

Although Mr. Oddie is best known as the BFF of the Alameda firefighters’ union, he also received significant financial support during the campaign from other elements of organized labor, including the construction industry unions.  In fact, campaign disclosure statements show monetary contributions to Mr. Oddie totaling $6,850 from unions (or their political action committees) representing general laborers, carpenters, plumbers and pipefitters, painters, bricklayers, electrical workers, sheet metal workers, and operating engineers.  (By way of comparison, Mayor Trish Spencer received a total of $9,477 in contributions from all sources.  No union was among them).

During the periodic updates presented to Council about the progress of staff’s discussions with A.P.P., Mr. Oddie twice made a point to inquire about the status of the PLA.  Indeed, he seemed to grow increasingly impatient as time went on, remarking at the last update session on May 19, “I would have liked to see that resolved by now, but I hope you’re getting into the nitty-gritty of the negotiations and will be able to report back soon that that’s been taken care of.”

No such luck.  As of Friday, A.P.P. was still negotiating the terms of the PLA with the unions.  Its principal, Minnesota native and Alameda resident Joe Ernst, was unwilling – understandably – to comment on the reasons for the hold-up.

From our vantage point on the sidelines, it looks like Mr. Ernst is being set up for a squeeze play.  A.P.P.’s development deal with the City needs four votes for approval, and Mayor Spencer already has expressed concerns about the project.  So Mr. Ernst needs Councilman Oddie to vote, Yes.  If Mr. Ernst won’t give the unions what they want and no PLA is signed by Tuesday, Mr. Oddie could torpedo the deal by a negative vote.  We’d hope that the Councilman wouldn’t let his loyalty to organized labor overcome his respect for the many Alamedans who have endorsed the A.P.P. project, but who knows?  Mr. Ernst may not be willing to take the risk and decide instead to cave in.

If that happened, it would indeed be a shame.

We don’t need to recite all of the benefits that the A.P.P. project promises to provide.  Just check out the letters to the editor in the Alameda Sun and read the op-ed pieces in The Alamedan.  Nor do we have to dwell upon the primary objection to the project, which can be summed up in one word:  Traffic.

But this is the playing field on which the debate about whether to approve the A.P.P. proposal should take place.  Whether the project is subject to a PLA satisfactory to the unions should be irrelevant.

We’ve read the arguments pro and con about PLAs, and we even asked Mr. Oddie to help us out by recommending pro-PLA articles.  (He never responded).  From that research, we’ve concluded that the only entities sure to gain financially from a PLA are the unions, which get payments of union dues from non-union workers and contributions to union trust funds from non-union contractors.  Beyond that, both proponents and opponents can make arguments, and even marshal evidence, to support their case.

Take, for example, the proposition that PLAs increase construction costs.  A think tank affiliated with Suffolk University in Boston published two studies showing that PLAs raised the costs of building schools in Massachusetts and Connecticut, and a third study showing that PLAs increased the amount of the winning bid for school construction projects in New York.  In response, a staffer with Cornell University’s Construction Industry Program challenged the Suffolk studies on the grounds that they ignored other factors affecting construction costs.  This prompted a rebuttal from the think tank attacking the Cornell staffer’s article as “not a ‘study’ at all.”

At that point, we gave up trying to find a consensus.  (And, rest assured, there are plenty of other articles examining the impact of PLAs on construction costs; we’ve cited a few below).  We felt like a juror being asked to decide which side’s “expert” offered the more compelling opinion in a medical malpractice case (or, closer to home, like a Sun reader being asked to decide whether Eugenie Thomson or John Knox White was a more reliable interpreter of the data presented in the traffic impact section of an environmental impact report).  Just give us a coin to flip.

But if no definitive evidence supports the proposition that PLAs increase construction costs, neither did we read any convincing proof that PLAs enhance the likelihood that a project will get done on time and on budget.  PLA proponents tout the “no strike” provision, but it is no guarantee against work stoppages.  As Mr. Vlaming put it, “There’s a rule against talking in class, but sometimes kids talk.”  Likewise, PLA proponents argue that PLAs promote efficiency by providing a “steady flow of skilled labor,” but a contractor who must go through the union hiring hall rather than use his “usual crew” for the job may see things differently.

We would, of course, have preferred to have seen these issues fleshed out and debated in public.  But that’s not the way things are done in Alameda.

Here’s our prediction:  Sometime between Friday and Tuesday, Mr. Ernst will throw up his hands and sign a PLA containing the terms insisted on by the unions.  At the Council meeting, staff will report that A.P.P. and the unions have reached an agreement, but they will not offer their own analysis of its impact.   (Indeed, they may not even make the document public, since, as Ms. Warmerdam points out, staff would need permission from both contracting parties to do so).

During the public comment period, representatives of all of the construction industry unions who gave money to Mr. Oddie, joined by Marty Freitas of the Teamsters, will get up to extol the virtues of the PLA (which they may not have ever seen).  Maybe Mr. Oddie’s boss, State Assemblyman Rob Bonta, will even make an appearance to praise the PLA as a triumph for working families.

And then – and this is where it gets tricky – Mr. Ernst will give carefully crafted remarks that concede that the PLA will not harm his ability to deliver the project he’s promised.  (We can’t see him feigning enthusiasm about having to work under a PLA.  He strikes us as too honest for that).

With everybody now on board, but without ever having had a single public discussion about the appropriateness of a PLA for Alameda Point, Council will approve a Site A development deal containing the PLA between A.P.P. and the unions.

And you know what else?  We’d be willing to bet that, when the next development project comes before Council, the unions will rely on the Site A “precedent” to insist on a PLA for it, too.

Sources:

We found the following articles to contain the most objective discussions of PLAs:

Other useful articles include:

  • Pro-PLA: D. Belman, M. Bodah, & P. Philips, “Project Labor Agreements” (NECA, PLAs)
  • Anti-PLA: V. Vasquez, D. Glaser & W. Bruvold, “Measuring the Cost of Project Labor Agreements on School Construction in California” (National University PLA study)

Campaign disclosure statements are available online at http://docs.ci.alameda.ca.us/WebLink8/Browse.aspx?startid=310100&row=1&dbid=0.

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Alameda Point, City Council and tagged , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to Slapping the union label on Alameda Point

  1. Al Pryor says:

    Why do you have such a problem with working families earning a living wage, enjoying health care, and retirement benefits? And we can’t see how it is going to cost one dime.

  2. sg says:

    A report included in one of the sources cited in this article “presented a content analysis of California private and public PLAs based upon a review of 82 agreements dated from 1984 to 2001. Some of the key findings include:
    • Nearly three-quarters (72 percent) are private sector agreements….
    • All of the private and public PLAs provide that employers use union referral
    systems to obtain their workforce, but almost two-thirds (63 percent) of the
    private PLAs and most (87 percent) of the public PLAs state that employers
    under the PLA can look to other sources for construction workers if the unions
    have not provided referrals within 48 hours.
    • Almost two-thirds of the private (63 percent) and over three-quarters of the
    public (78 percent) PLAs establish labor management committees.
    • Over half (57 percent) of the public PLAs contain provisions allowing
    contractors’ use of core or key employees.
    • Public PLAs appear to contain stronger management rights clauses than the
    private PLAs.”
    All of this being true, what’s the big deal? Maintaining a decent standard of living is always important, It is especially so during difficult economic times like these, when wages overall have generally not kept up with the rising cost of living in the Bay Area. If “a rising tide raises all boats” then, conversely, an ebbing tide reduces everyone’s standard of living.
    “Leveling the playing field” between union and non-union construction companies, often by adoption of ‘prevailing wage provisions’ in Project Labor Agreements (PLA’s), is a laudable goal. Otherwise, non-union contractors act to drive down wages in the entire industry.

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