One for the road

If departing Councilman Jim Oddie and his re-elected colleague, Councilwoman Malia Vella, get their way, Mr. Oddie will be able to do one more favor for organized labor before he leaves office.

The beneficiaries will be the construction trades unions who have contributed funds to Mr. Oddie’s and Ms. Vella’s political campaigns.

The potential losers will include commercial firms who want to lease and renovate City-owned property; non-profit developers who want to build affordable-housing projects on City-owned land; and private developers who want to build new market-rate or affordable housing on City‑owned sites.  In a very real sense, the ultimate losers may be the Alamedans who were counting on the benefits from projects such as these.

The device that will set in motion the events leading to these results is a Council referral submitted by Mr. Oddie and Ms. Vella for the December 1 meeting, the last regular session scheduled before the new Council – on which former Mayor Trish Spencer will replace Mr. Oddie – is sworn in.

Mr. Oddie and Ms. Vella have marked their referral “urgent and important” – the highest of the four available categories.

To the referral they have attached a resolution that they want their colleagues to adopt on the spot.  If they can’t get the votes for that, they want the outgoing Council to “agendize the resolution at the first Dec. 15 meeting (before the swearing in of the new Council).”  (emphasis supplied)

And what, in this day of spiking coronavirus counts and worsening economic distress, is so vital?

It’s a resolution amending the requirement, promoted by Mr. Oddie soon after he was first elected to Council in 2014 and finally enacted in October 2016, that any contractor on a public-works project performed for the City enter into a so-called Project Stabilization Agreement (more commonly known as a Project Labor Agreement) with the construction trades unions.  Among other things, the PLA obligates the contractor to get its workers through union-run hiring halls; pay union-scale wages; follow union work rules; contribute to union-run benefit trusts; and require its workers to pay union dues.

The resolution proposed by Mr. Oddie and Ms. Vella would extend the PLA requirement beyond public-works projects to:

  • Tenant improvement work done by a lessee of City-owned property;
  • Affordable-housing projects “of any cost and regardless of funding source” built on a parcel owned by the City or conveyed by it to a non-profit affordable-housing developer;
  • Construction projects that include a parcel sold or conveyed by the City where the developer has entered into a development agreement or disposition and development agreement;
  • All other construction projects that are “receiving either a direct contribution of funds from the City or a credit or other non-monetary subsidy from the City” to be applied to “particular project costs.”

(We should point out that the proposed resolution contains dollar thresholds in three of these categories and a unit threshold for the affordable-housing category, but it seems fair say that any “major” project would be subject to the PLA requirement.  It also allows a Council majority to “suspend application” of the mandate for a particular project or part thereof.)

Obviously, the construction trades unions like PLAs.  And they know how to express their appreciation to the politicians who push for them:  Mr. Oddie got $6,850 in cash contributions from construction trades unions in 2014 and $19,300 from them in 2018, and Ms. Vella got $9,250 in cash contributions from those unions in 2016.  That year, the construction trades unions also contributed $15,250 to “Alamedans United,” the PAC promoting Ms. Vella and Marilyn Ezzy Ashcraft for Council.

The 2020 figures aren’t finalized, but, according to the reports filed to date by the candidates, cash contributions from construction trade unions through Election Day totaled $13,000 for Mr. Oddie and $22,750 for Ms. Vella.

Since the PLA requirement was adopted in October 2016, the City has required a PLA on nine public-works projects, including the Jean Sweeney Open Space Park and the Cross-Alameda Trail.  The Oddie-Vella resolution, if passed by the lame-duck Council, would expand the universe of projects for which a PLA is mandatory.  In so doing, it would formalize a process that has been going on for several years.

Consider three examples about which we’ve written previously:

The Request for Proposals for Site A at Alameda Point stated that the project would be “subject to the City’s PLA policy” – which didn’t yet exist – or “to a PLA negotiated directly with the Building Trades by the developer.”  The Disposition and Development Agreement between the City and the successful applicant, Alameda Point Partners, didn’t impose any PLA requirement, only an obligation to pay “prevailing wages,” but City staff made it clear that, absent a PLA, one Councilman – Mr. Oddie – wouldn’t vote to approve the project.  APP caved.

Likewise, the lease between the City and Greenway Golf for the rebuilding of the Corica Park south course did not require Greenway to employ only union labor, but when Greenway sought to amend the lease to allow it to perform a more extensive renovation of the north course, the firm was told – by Ms. Vella, personally – that she and Mr. Oddie wouldn’t vote for the amendment unless it required its workers to join a union and to pay union dues for the duration of the project.  Greenway caved.

Finally, the Request for Qualifications issued by the City for the renovation of the Carnegie Library said nothing about any PLA requirement, but, according to Alameda Magazine, when it came time for an actual lease, the City insisted that the successful applicant, a non-profit organization called Carnegie Innovation Hall, agree to a PLA with the building trades unions.  Estimating that such a requirement would increase its costs by 25 percent, the non-profit withdrew from the project.

Carnegie Innovation Hall’s concern was well-founded:  multiple studies have shown that a PLA significantly increases construction costs for a public-works project.  For example, a recent study published by the Beacon Hill Institute (which had done many previous studies) of public-school construction in Connecticut between 2001 and 2019 concluded that PLA requirements had raised construction costs by 19.84 percent.

If these and similar studies are accurate, the original PLA requirement adopted by Council made the nine public-works projects performed on City-owned property between 2016 and 2019 more expensive and thereby cost Alameda taxpayers thousands of dollars.  Expanding the requirement to cover projects done by tenants and developers, as the Oddie-Vella resolution proposes, won’t cost the taxpayers anything directly.  But this doesn’t mean it will have no impact on Alameda citizens.  Instead, to the extent that, by increasing construction costs, an expanded PLA requirement diminishes, or even destroys, a third party’s willingness or ability to undertake a project, it may deprive Alamedans of something they want or need.

Take Alameda Point as an example.

The Site A development appears to be proceeding apace (although we note that the closed-session agendas have revealed that further “real property negotiations” between the City and Alameda Point Partners are occurring), but developing the rest of the former Naval Air Station hasn’t been easy.

Originally, the City sought a master developer for the commercial area known as Site B, but no satisfactory candidate emerged.  Since then, the City has been marketing the site on a building-by-building basis.  For a while, the crowning achievement appeared to be a lease with a data storage company called Nautilus, which proposed to invest $6 million in building improvements.  The deal fell through (for environmental reasons), but a future tenant might not be willing to undertake such an large-scale renovation if it must incur the extra costs resulting from a PLA requirement.

Similarly, the planning for development of the so-called West Midway neighborhood has not gone smoothly.  Initially, the City selected two private developers for the site, but then one of them withdrew, followed shortly thereafter by the other.  The City issued another Request for Qualifications, which informed developers that Council “may require a Project Labor Agreement as a condition of approval and interested parties should be aware of and consider this possibility.”  Neither of the firms comprising the successful applicant – Brookfield Properties and Catellus – committed in their response to the RFQ to enter into a PLA with the building trades unions.  If the Oddie-Vella resolution passes, they will have to.  But will they be willing to?

The successful development of a project on the West Midway site is the linchpin to the City’s plan for a new supportive housing complex for the Alameda Point Collaborative, since it will pay for the backbone infrastructure for the entire area.  If the City starts making it more costly for private developers by mandating a PLA for the project, it may risk losing not just the new market-rate housing units planned by the private developer but the supportive housing units as well.

A similar concern can be raised about affordable-housing projects generally.  As Virginia Cooper of the Alameda Housing Authority has pointed out to us, some state or regional grants used to finance affordable-housing projects – such as Alameda County Measure A1 – already impose a PLA requirement.  To that extent, the Oddie-Vella resolution is redundant.  But, as written, it covers affordable-housing projects regardless of their source of funds.  As a result, the additional cost burden would appear unavoidable.

Unlike a private developer, who might be able to absorb this burden by accepting a smaller profit, the developers of affordable-housing projects are non-profit organizations.  And, as a recent study by the Terner Center at the University of California – Berkeley shows, they don’t have a lot of room to maneuver:  the more expensive a project is to build, the more difficult it is to cobble together a financing package.  Imposing union-friendly requirements like a PLA makes the task even harder.  The risk is that, as a result, the project won’t get built at all.

Perhaps expanding the PLA requirement will not have as serious an impact on tenants and developers as we fear, and Alamedans will not lose any benefits they were counting on.  But it appears no one has analyzed these issues.  And if Mr. Oddie and Ms. Vella have their way, no one will do so before their current colleagues vote on the resolution.  The unions will get what they want, and Mr. Oddie will leave the dais smiling.  It’ll up to his successors to clean up any resulting mess.  Does that sound like a good result to you?

Sources:

“Project Stabilization Agreement”: 2016-10-18 Signed Project Stabilization Agreement; 2019-12-17 staff report re extending PSA

Oddie-Vella referral: 2020-12-01 Oddie-Vella referral; 2020-12-01 Draft Resolution

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
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6 Responses to One for the road

  1. William says:

    Alameda’s City Council are always enthusiastic in using tax payers money! The Golf Course costs increased dramatically once Union workers were required. Do not know if it slowed the development down as well. I have no problems with Unions, but when politicians “use” them for their own political gain, it bothers me. It is true that Democrats are for the people, though those people are the politicians it seems. Oddie was sent packing because of this. He should and Vella should understand that there is a message in Jim’s dismissal vs. them acting like Donald Trump.

  2. Stevie Wonder says:

    Cmon, nobody is surprised. Hell, even I saw this coming.

  3. Dave says:

    Ah, yes. Jim Odious has such a commitment to affordable housing that he’s making it more expensive to build in service to special interest groups who make campaign contributions to him.

  4. Reality says:

    It’s easy to find articles are studies that point out the flaws of PLAs, just as it’s easy to find ones that tout their benefits. Let’s see what Barack Obama’s White House had to say about PLAs:

    “The use of a Project Labor Agreement can provide structure and stability to large construction projects. PLAs also help ensure compliance with laws and regulations governing workplace safety and health, equal employment opportunity and labor and employment standards.”

    “Project Labor Agreements are a win-win; they benefit businesses, workers and taxpayers. I’ve seen the track record in cities like Los Angeles — high quality work on projects done on time, on budget and good job and training opportunities that strengthen our communities.”

    “The Tennessee Valley Authority has used Project Labor Agreements on its construction projects for nearly 19 years. In the nearly 200 million person hours of work on Tennessee Valley Authority construction projects using Project Labor Agreements, there have been no formal strikes or any organized work stoppages. The rate of injuries on these projects has also been significantly reduced.”

    Projects backed by PLAs are more likely to finish on time and prevent costly shutdowns – these projects delays and breakdowns are often not factored into comparative analyses (“…concluded that PLA requirements had raised construction costs by 19.84 percent”). If you want to use sources to ding PLAs, perhaps let’s do better than the right-wing think tank “Beacon Hill Institute,” which was founded by a Republican politician to push anti-labor agendas.

  5. Unbowed and Unbroken says:

    I have to agree with “Reality.” In doing so I realize that I sound like I am absolving the “progressives” who have demonstrated an extraordinary penchant for “gross weaselosity” on most matters. But at the core of the matter at hand is a truth that gives me many hours of private, uncomfortable contemplation. Personal income has to rise in the US. The portion that is going to senior leadership in the form of compensation and bonuses has to be shared with the people in the trenches, not to make overpaid executives even richer. There…I said it.

    So with respect to Alameda council members, this is like discovering you share a political fundamental…just one…with a neighbor, who is a known felon, raving lunatic, or active member of some thoroughly repulsive group to the extreme left OR extreme right. Namely, developers shouldn’t be paying low wages and bringing hordes of “itinerant” non-regional construction workers from say, the Southern Central Valley, to displace a Bay Area workforce.

    This case is complicated because it is evident that the PLA policy the “progressive” faction champion is so clearly the quid pro quo for forking over campaign funds to Vella and Oddie. The unions paid for a PLA when they shoveled tons of money into the campaign funds of V and O and dammit, they expect delivery.

  6. dave says:

    Personal income has to rise in the US. The portion that is going to senior leadership in the form of compensation and bonuses has to be shared with the people in the trenches, not to make overpaid executives even richer.

    ====================================

    This isn’t a case of taking some of the plutocrats’ share to make things more equitable. It is FAR from Jeff Bezos vs. a warehouse worker. The parties coughing up income are the city (taxpayers’ median household income approx 90K/yr) and the purported beneficiaries of the affordable housing, which is people making much less.

    In your last paragraph, you plainly state the obvious, that it’s a corrupt bargain between union bosses and third rate politicians. I do not understand the disconnect between your first and second points. Both have their validity, but the case of Alameda’s PLA fits only the second, not the first. At all.

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