Big Labor Fights Against Lansing Entrepreneurs … and Virg Bernero?
The influence of Big Labor over the Lansing City Council recently threatened to halt both the cleanup and economic development of a contaminated riverfront property located in the capitol city's downtown. At issue was the council's last-minute decision to hold up an environmental cleanup tax abatement for the project unless the developer agreed to pay union-scale wages and benefits for all of the construction jobs needed to build his $23.1 million upscale apartment complex.
Interestingly, Lansing Mayor Virg Bernero is standing up for the entrepreneurs and opposing the union-scale wage requirement. This will come as a surprise for many who know him only from his frequent cable TV news appearances and recent rhetoric on the gubernatorial campaign trail as a strident defender of Big Labor.
The policy of requiring union-scale wages and benefits on a construction site is known as a project labor agreement.
The developer has successfully beaten the city council in court and hopes to move forward with the project. But the incident raises the prospect that Big Labor will continue to use the tactic in the near future to hold other private development projects in Lansing and other Michigan cities hostage to PLAs. A construction trade industry representative thinks state law should be changed to stop this from ever happening again.
The developer, Pat Gillespie of East Lansing, purchased the property for $1.6 million from the city. He did this knowing that he would need to spend at least $1 million - and perhaps much more - clearing up an as yet unknown amount of environmental contamination. In the sale agreement with Gillespie, the city agreed to use reasonable efforts to help him acquire brownfield tax credits and other assistance to help pay for the clean-up of the contamination. The property sits on the bank of the Grand River, five blocks from the state Capitol Building.
To fulfill the city's part of the agreement, the council took up the issue of extending the brownfield help during two council meetings in October. But at these meetings there emerged a sentiment by four of the eight council members who believe that Gillespie should also be required to agree to a PLA covering 100 percent of the jobs used to build his apartment complex. It is estimated that at least 84 workers will be hired for the work.
Ultimately, the council deadlocked 4-4 on votes to extend the brownfield assistance, thus effectively refusing to approve the help. Gillespie sued, and on Oct. 25 Ingham Circuit Court Judge Rosmarie Aquilina ruled that he had held up his end of the land purchase contract and awarded the brownfield package to him.
On Nov. 8, following the court order, council met again and had another acrimonious debate about whether or not they should vote to discuss an appeal of Aquilina's decision. Mayor Bernero joined this debate and steadfastly supported Gillespie.
Councilmember Kathie Dunbar is allied with the mayor on this issue. At the Nov. 8 hearing she also fired several warnings toward the four council members who wished to continue down the path of blocking Gillespie's plans.
"We breached a contract," said Dunbar of the council's vote against Gillespie. "When you do that, you negate your insurance policy that covers your claims."
Losing a drawn-out legal appeal with no insurance protection, Dunbar noted, could force the city to pay up from its general fund for all of the damages and all of the attorney fees associated with its decision to breach the contract. She warned that it would be the taxpayers of Lansing who would pay for the council's costly mistake if the politicians decided to continue their PLA demands on Gillespie in the courts.
In a contentious appearance before the council, Bernero accused the block of four of playing "roulette" with the city's development future, and putting "petty politics before progress." He also estimated that fighting and losing a "dangerously shortsighted" appeal could cost the city as much as $6 million and compromise the city's ability to fund police and firefighters.
Councilmember Brian Jeffries, one of the four votes holding up Gillespie's plan, accused the developer of having an "entitlement mentality" toward the brownfield abatement help. A fired-up Bernero jumped to Gillespie's defense and gave a ringing endorsement of entrepreneurs who wish to come to Lansing and take risks for progress.
"You talk about an entitlement mentality," Bernero said of Jeffries. "I frankly think that takes a lot of nerve for somebody who is in the public sector and not the private sector."
The mayor also noted that he is "grateful" for every entrepreneur like Gillespie who wants to come to his city and "make money," and that he wished to roll out a red carpet for them.
Gillespie asserts that he attempted to compromise with the local unions, saying that well before the initial council vote he would be willing to agree to apply a PLA to at least 50 percent or more of the riverfront construction work. But Gillespie notes that this halfway compromise was not sufficient for the unions and their allies on city council, who wanted 100 percent PLA coverage.
Following Gillespie's victory in court, Jake Jacobson of United Auto Workers Local 652 told the Lansing State Journal that the developer's decision to sue the city demonstrated that "His heart is not in the right place."
"It just goes to show the people of Lansing that Pat Gillespie is not willing to work with the work force of Lansing."
But Chris Fisher, president and CEO of the Associated Builders and Contractors of Michigan, asserts that at least some of the four council members insisting upon the PLA had compromised motives of their own.
"Council members were awarding special interest favors to their campaign supporters," he said, alluding to the unions.
ABC is a trade group that represents construction contractors in Michigan.
After its debate concluded, the council took a vote on whether or not to discuss an appeal of the court order. There was not enough support in favor of discussing an appeal, thus presumably clearing the last known legal hurdle that council will put in the way of cleaning the site and building the apartment complex. Gillespie must now wait for state approval of the brownfield assistance.
ABC-Michigan opposes PLAs being required on public-sector construction projects such as public school buildings because they needlessly drive up the cost to taxpayers.
"Free and open competition is conducive to production, economic growth and efficient use of limited resources," states the ABC website, which notes that 80 percent of the construction workforce in Michigan is non-union and thus discriminated against when PLAs are imposed.
But Gillespie's proposal isn't for building a public building: It would be a privately-owned apartment complex on private land. Fisher believes the Lansing City Council's attempt to impose a PLA on the construction of a private building is the first time such a thing has been done in Michigan, and he doesn't ever want to see it happen again.
"This is an alarming trend," he said. "Other states have passed laws to stop this, and we should do it here as well."
Below is a brief MichCapCon.com highlight video of the Lansing City Council's Nov. 8, 2010 meeting, featuring the comments of the mayor.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.