How do you get to Carnegie (Innovation) Hall?

For any private entity offering to lease City-owned land or buildings and renovate the property at its own expense, our pro-labor City Council has a message:  If you want a deal with the City, you’ve got to take care of the construction trades unions.

It happened in 2016, and it’s happening again now.

The first instance occurred when Greenway Golf proposed to do a multi-million-dollar makeover of the North Course at Corica Park in exchange for an extension of its existing lease.  As we previously reported, Councilwoman Malia Vella personally interjected herself into the negotiations to insist that Greenway employ only union labor on the project.  When Greenway stated that it preferred to use its own workforce, which was experienced in golf-course construction, Council relented – as long as all of the Greenway employees joined a union and paid union dues for the life of the project.  Otherwise, no extension.

The latest situation involves the former Carnegie Library.  At its October 15 meeting, Council will be asked to approve a lease between the City and a non-profit organization called Carnegie Innovation Hall.  In exchange for renovating the building and converting it into what the staff report calls a “center for education and innovation, combining entrepreneurial skills with the arts, performance, technology and music,” the non-profit will not have to pay rent for 33 years.  (The lease does not contain a cost estimate for the improvements, but the City previously estimated that “upgrades for occupancy” would cost $6.6 million.)  It then has the option to renew the lease for another 33 years at a rent equal to two percent of gross revenue.

The proposed lease contains the following provision:

Section 4.18. Labor Peace. . . .  Prior to Tenant commencing construction of any Improvements at the Premises, Tenant shall meet with and endeavor in good faith to negotiate with the local trade representative(s) in an effort to come to a mutually acceptable written agreement with some or all trades such that labor peace can be ensured during construction of the Improvements. . . .  Tenant agrees that such good faith negotiation efforts by Tenant and Tenant’s reaching a mutually acceptable written agreement consistent with this provision shall be a condition precedent to Tenant’s commencement of construction of the Improvements.  If Tenant is unable to reach an agreement consistent with this provision prior to commencement of construction, then Tenant shall meet and confer with the City Manager or his or her designee to consider alternatives to this labor peace condition, which alternative(s) shall be proposed to and finally approved by City Council. . . .

This provision thus prohibits the non-profit tenant from even starting to renovate the building until it has reached an agreement with the unions “such that labor peace can be ensured” during construction.  No union pact, no innovation hall.  But what sort of “labor peace agreement” does the City have in mind?

One can only speculate.  The term “labor peace agreement” has no fixed, universal meaning; it can range from a promise by an employer to facilitate organizing efforts by a union (in exchange for the union’s promise not to disrupt the job) to a pledge by a developer to use only contractors who commit to get their workers through union hiring halls, to follow union work rules, and to pay into union benefit funds (in exchange for the unions’ promise not to strike).  The state cannabis licensing law provides an example of the former; the “Project Stabilization Agreement” ordinance adopted by Council in October 2016 represents a version of the latter.  (The Alameda ordinance applies only to construction contracts awarded by the City itself and specifically excludes “public/private” projects like the Carnegie Library renovation.)

The lease leaves it to Carnegie Innovation Hall to work out a “mutually acceptable” agreement with the unions.  But by making a “labor peace agreement” a condition precedent to the start of construction, the lease gives the unions the upper hand in any negotiations.  If the non-profit doesn’t assent to what the unions demand, it can’t begin the restoration work that is its very raison d’etre.  In the event of an impasse, Carnegie Innovation Hall can try to get Council to approve an “alternative.”  But imagine what the current Council majority would say if the tenant complained that the unions were being unreasonable!

Why would Council make it a condition in the lease for the Carnegie Library that the tenant enter into a “labor peace agreement” with the construction trades unions?  Since all of the Council discussions about the proposed lease have taken place in secret – i.e., “closed session” – we can’t point to any answer in the public record.  But the possible explanations depend on whether one wants to be high-minded – or cynical.

The staff report, naturally, takes the high road.  We’ve never seen a footnote in a staff report before, but this report drops one after summarizing the requirement for a “labor peace agreement.”  It reads:

Footer 1 – The City requests this provision pursuant to its proprietary / market-participant capacity and seeks to avoid any potential disruption of this important City project. The City’s proprietary / market-participant interests include, but is [sic] not limited to, the significant financial investment the lease permits and expects the developer to make on the City’s behalf at this City property, the unique value of this historic property to the City, the exceptional place this property holds in the City’s civic core, and the importance of having the highest quality of work product on the construction in the building and effective delivery of public services post commencement.

When we first read this note, the phrase about the City’s “proprietary / market-participant capacity” stopped us short.  So we turned to City Attorney Yibin Shen for an explanation.  The term, he told us, “is merely intended to clarify that the City is not acting through its regulatory capacity.”  Well, we didn’t understand that, either, so we asked Mr. Shen again.  He responded:  “[A]nother way to put it is that the City is not acting as a regulator in entering into this prospective lease but as a landlord/lessor, with interests consistent with being a landlord/lessor.”

All clear?  Line up for your honors law degree here.

If what Mr. Shen is saying is that the Carnegie Library is a historic asset for the City, which gives it an interest in seeing that the renovation work is done right, that would make sense.  But it still doesn’t answer the question why a “labor peace agreement,” of any sort, is necessary to achieve that end.  Indeed, if we were the artists behind Carnegie Innovation Hall, we’d be a little miffed at the suggestion that we wouldn’t be willing or able to deliver the “highest quality of work product” on the project unless we had cut some sort of deal with the construction trades unions.

So on to other possible explanations.

One argument ought to be dismissed at the outset.  The requirement that the tenant enter into a “labor peace agreement” is not there to benefit the workers who actually perform the work.  Those workers already are going to be paid “prevailing wages” – i.e., union-scale wages.  (Whether the City’s agreement to fund the Carnegie Library renovation by foregoing rent brings this project within the existing “prevailing wage” ordinance is not clear, but it doesn’t matter:  the lease itself requires payment of “prevailing wages.”)  But if they join a union – either voluntarily or by fiat – they’ll have to start paying union dues, and their take-home pay will be reduced accordingly.

By the same token, the requirement that the tenant enter into a “labor peace agreement” inevitably will benefit the construction trades unions themselves.  Even under the less intrusive form of agreement (like the one required by the state cannabis law), union organizers get to proselytize on the job site – and, if they’re successful, there will be more members on the union rolls and more money in the union coffers.  The more closely the “labor peace agreement” resembles a “project labor agreement” (like the PSA required by the City for “public works” projects), the more control the unions get, and the less flexibility the owner (or, in this case, the tenant) has, over whom to hire for, and how to run, the job.

We can understand how, as a philosophical matter, a “progressive” politician might favor requiring a “labor peace agreement” as a way of maximizing union power.  After all, capital is bad, and labor is good – right, Senator Sanders?  But there aren’t any political philosophers on Council – not since Trish Spencer left, anyway – so we’ll have to look for a more prosaic explanation.

Let’s follow the money.  Does it surprise anyone that, beginning in 2016, two of our Council members have gotten thousands of dollars in campaign funds from construction trades unions?  No?  Well, you then probably won’t be shocked to find out who they are.

As Louis would say, round up the usual suspects:

  • Councilwoman Vella got $9,250 in cash contributions from construction trades unions in 2016, and, through the end of this June, her 2020 re‑election campaign committee has taken in another $17,450 from them. (Part of the latter amount went to the lawyers defending her in the fire-chief scandal that resulted in the Grand Jury finding that she had violated the City Charter.)  In addition, “Alamedans United,” the PAC promoting Ms. Vella and now‑Mayor Marilyn Ezzy Ashcraft for Council in 2016, collected another $15,250 from construction trades unions.
  • Councilman Jim Oddie got $6,850 in cash contributions from construction trades unions in 2014, then took in $19,300 from them for his 2018 re‑election campaign. (Like Ms. Vella, Mr. Oddie spent part of this amount to pay the lawyers who conducted his unsuccessful defense against the Charter-violation charge.)

In comparison, Vice Mayor John Knox White got only $1,900 in cash contributions from construction trades unions for his 2018 Council campaign.  Mayor Ashcraft got . . . nothing, from any labor organization.  (Ah, the consequences of defying Jeff DelBono!)

Did this boatload of cash influence any Council member’s direction to staff about whether the lease for the Carnegie Library renovation should include union-friendly terms?  If you believe people like Harvard Law Professor Lawrence Lessig, it surely must have.  But since all the Council discussions occurred in closed session, there’s no way to prove it.

At the October 1 Council meeting, one of the public speakers hinted that there is a back story to be told here.  Howard Harawitz, a renowned photographer whose exhibit entitled “Looking Back at the 60’s Civil Rights Movement” was featured at the Frank Bette Center in 2017 (or someone with the same name), got up to urge Council not to force the Carnegie Innovation Hall group to use only union contractors for the renovation project.

“The contract originally negotiated with staff is being modified to require that there be union contracts with anybody that works on the modification of the building,” Mr. Harawitz reported.  “It’s unreasonable to require [that of] a non-profit organization, which has volunteers working for it and businesses and workers who are willing to work for less than union wages because they support the project,” he continued.  “It’s too soon to require that, and I would hope that the City would drop that.”

The Merry-Go-Round was unable to corroborate Mr. Harawitz’s account of the negotiations between the City and Carnegie Innovation Hall (although we tried).  But the similarity between how he said the City is behaving now and what Ms. Vella and her cohorts did to Greenway gives his description the ring of truth.

After Mr. Harawitz made his disclosure and plea, Mayor Ashcraft invited comment from City Attorney Shen, who proceeded to admonish the public to honor the City’s “expectation” that the negotiations for the Carnegie Library lease would “remain private.”  No whistle-blowers in these chambers, please.  And then, after finishing the public agenda, Council went back into closed session to discuss the lease some more.

Fortunately, the ability to enforce secrecy can last only for so long:  Council must vote on the lease at a public meeting, now scheduled for October 15.  So the veil may be lifted then, and maybe we’ll find out the who, what, and why behind making a union-friendly provision a condition precedent in the lease.

But don’t bet on it.  It’s more likely that we’ll just have to wait and see what kind of “labor peace agreement” the construction trades unions force Carnegie Innovation Hall to swallow – and then how much those unions contribute, and to whom, in 2020.  Need we point out that both Ms. Vella and Mr. Oddie will be up for re-election that year?


RFQ: 2018-10-16 staff report re RFQ; Carnegie Library RFQ; Carnegie Library proposal

Lease: 2019-10-15 staff report re lease; 2019-10-15 Ex. 4 to staff report – Lease Agreement

About Robert Sullwold

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

2 Responses to How do you get to Carnegie (Innovation) Hall?

  1. Nancy McKinley says:

    Very upsetting. I wish the council would spend this much time trying to restore Alameda’s safety. Their decisions are ruining our once safe island in the Pacific. I have yet to speak to one resident who is pleased with the destruction of our beloved Alameda. Just because we have open land doesn’t mean we need to build on it. Our forefathers worked very hard to preserve Alameda. What it has become is very disturbing. We realized our mistake with AHS and rectified it by not destroying the old AHS. Let’s take our City back!!!
    Nancy McKinley

  2. Jan Schlesinger says:

    Thanks for your cogent comments here. Walking through Jean Sweeney Park the other day, I passed by benches honoring people who made it happen as “dedicated volunteer,” “courageous advocate” and “visionary”. I’m so very sorry we have none of those (with the possible exception of Tony Daysog on this issue) on the City Council. There’s was a very short-sighted attitude toward the non-profit group spearheading this effort. Now there will be no Carnegie Innovation Hall.

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