Construction Industry Partnership Addresses Threats to Union Construction

Union World Edition: Mar 2009

Developers, owners, labor and management attending the Construction Industry Partnership Conference held in Hollywood, Florida, February 9th & 10th participate in the panel, “What will unionized construction in NYC look like in 2009?.” Moderating the discussion is NYS Building and Construction Trades Council, AFL-CIO President Ed Malloy. Participating in the panel is Local 3 Business Manager Christopher Erikson (4th from right).

At a contentious meeting of the Construction Industry Partnership (CIP) held February 9th & 10th, parties from labor, management and developers openly discussed a plan to combat the threats to unionized construction in New York City.

The event opened discussions regarding the effect the economic downturn has had on the construction industry in New York City and the projects that are threatened. Among the keynote speakers was Larry Silverstein, developer of Ground Zero. He outlined the difficulties being confronted by developers and the need to work together to overcome the economics of development so that construction can continue at Ground Zero and other areas throughout New York.

According to Silverstein, 10,000 construction jobs are in jeopardy at Ground Zero alone. At 7 World Trade Center, 3,000 workers were involved in its construction. “It was the last to fall and the first to be rebuilt,” boasted Silverstein, “however, we need to insure that all of Ground Zero is rebuilt in a timely fashion. It is projected 60,000 families live in downtown Manhattan. The area needs new office space for when the economy rebounds.”

Silverstein estimates that Tower 2 will consist of 3.1 million square feet of space and that Tower 3 at an estimated 1,100 feet tall will consist of 2.9 million square feet and Tower 4 at 975 feet will consist of 2.5 million square feet. “Each will connect with the Fulton Street Transportation Hub,” stated Silverstein.

The construction of Towers 2, 3, and 4 remain at risk according to Silverstein. Funding is drying up due to the economic downturn and slow progress on the public infrastructure is causing cost increases. “Billions needs to be borrowed in order to build; banks are not financing WTC projects. Projected rents are down 30 to 40% which cause banks to reevaluate the terms of their loans to developers,” stated Silverstein.

“We need to reestablish the bottom line on labor costs for banks to be willing to lend. Failure to produce a cost structure will result in not being able to build these jobs. I have been a union builder my entire life,” declared Silverstein. “Presently, Towers 2 & 3 are stopped and Tower 4 is about to stop. We need to work together to obtain whatever cost savings are necessary in order for the financing numbers to work so that the banks will lend to developers in NY.”

NY & NJ Port Authority Executive Director Chris Ward addressed the conference and reiterated many of the concerns ­expressed by Larry Silverstein. He also ­committed the PA to utilizing Building and Construction Trades affiliated workers on all PA work.

Developer Albert Kalimian expressed his need for $120 million in savings to complete the interior of his project at the former Red Cross Building on Amsterdam Avenue with union workers. The veiled threat to go non-union was met with much opposition by participants of the Conference. Many union officials objected to such veiled threats to go non-union as anti-productive at developing the necessary cooperation to combat the effects of the economic downturn.

Panel

One panel entitled, “What will unionized construction in NYC look like in 2009?” brought many of the issues confronting the industry to the front. The panel was moderated by Ed Malloy, president of the NYS Building and Construction Trades and included Local 3 Business Manager Christopher Erikson, ­Executive Director of the General Contractors Association Denise Richardson, Executive Director of the District Council of ­Carpenters Mike Forde, Building Contractors Association President Steve Alessio, Plumbers Local 1 Business Manager George Riley and General ­Counsel Building Contractors Association of NY Ray McGuire.

Local 3 Business Manager Christopher Erikson (center) along with Executive Director of the District Council of Carpenters Mike Forde (left) and Steve Allessio, President of the Building Contractors Association, participating in the panel “What will unionized construction in NYC look like in 2009?”

The panel at times had heated discussions regarding the present circumstances the building trades are confronting regarding the demands of employers and developers for a 25% cost reduction.

Denise Richardson reported that the general contractors she represents are presently busy but that work is scheduled to finish within a year and that projected work has dropped off significantly. She pointed out that out of the Federal stimulus package, only $3 billion is going to New York State with less than $1 billion to New York City. Eighty percent of her members’ work is government funded and that it is questionable, with the loss of tax revenue, if infrastructure work presently projected will go forward.

Business Manager Erikson pointed out to those in attendance that unlike many of those present who have not experienced unemployment recently, Local 3’s members have not experienced full employment since the terrorist attack on the World Trade Center. “We have a furlough program that shares the work opportunity among our membership. Our members are more productive than at any time in our history. He reminded everyone that the union cannot create the work yet we are being asked to do just that today by imposing upon ourselves up to 25% reductions in our costs. Perhaps rather than an across the board PLA, we need to pick one project and develop a PLA that will make it a success and then use that as a prototype for ensuring the success of other projects.

Steve Alessio stated that unless he sees a change he will not be present next year. “I will no longer walk away from the $100 million of work that was lost to non-union in 2008. I will use open shop if I must to stay in business.”

George Riley of the Plumbers Local 1 was optimistic, stating “that by working together we can and will meet the challenge. We can’t just agree to wage cuts and other adjustments. The Union movement is a democratic movement which requires the assent and cooperation of our members. Change takes time. We are all willing to embrace new construction techniques, technology and increased organizing activities to confront the present threat.”

Ray McGuire of BCA, unlike Riley, was pessimistic citing historical trends that indicate trade unions in decline. In response, Local 3 Business Manager Erikson stated over the last eight years his members have worked over 20 million man-hours annually and he finds it difficult to believe that there is an additional 20 million-man hours annually being performed non-union.

Developer Larry Silverstein addressed the participants of the CIP Conference.

Commitment to PLA

On the second day of the Conference the leadership of labor, management and developers announced they are committed to working together to confront the challenges expressed during the previous day. The tone changed markedly to one of mutual cooperation to overcome the present obstacles.

Announced by all was the intent to select six (6) projects presently threatened, to go forward and develop a project labor agreement that would hopefully become a prototype for a city-wide PLA for threatened projects.

Gary LaBarbara, president of the New York City Building and Construction Trades Council (BCTC) and Lou Colletti, executive director of the Building Trades Employers Association (BTEA) committed their organizations to work in cooperation in ­developing the project labor agreement.

Denis Hughes, president of the New York State AFL-CIO outlined the situation in his address. “We are in difficult economic times. We must make meaningful accommodations to succeed. I would suggest the industry identify 4 to 6 projects where financing is threatened, where a PLA could be agreed to by the end of February 2009 and become the prototype for future projects in need of help.

In addition the BCTC and BTEA must commit to one another their intention to work together and eliminate any lack of trust that may exist that one is not as committed as the other.
We should adopt a code of excellence that will build confidence among the developers, lenders and customers in their usage of BCTC and BTEA members.

We must insure that non-productive work practices will not be tolerated. Non-productive workers will be pressured by their peers and urged to be productive.”

Lou Colletti stated that “survival is what is at stake. Our world is collapsing; we have no new work! If we have no work there is no work for our Union partners to work on. We must take drastic action in order to survive. The demands being made for cost reduction is not coming from the employers of union labor but from the banks. As Larry Silverstein stated, banks are not lending monies to developers/builders. Equity in property is less than the financing needs on new projects and banks are looking to take back funding on existing projects due to re-evaluation of the original financing commitments. Labor equals 50% of total cost of construction and some relief must come from that sector of the industry.”

Local 3 Assistant Business Manager Raymond Melville poses a question to NY&NJ Port Authority Executive Director Chris Ward at the CIP Conference.

“There are no guarantees,” stated Colletti, “The contractors are not making the decisions, the banks are. In response to the concern that only union labor is taking the brunt of the cost reduction it is important that everyone understand that contractors have laid off 10 to 15% of their project managers and support personnel. Profit margins have evaporated and no longer exist. Many projects are done at cost. Contractors have forgone salaries and those who remain employed have seen their wages frozen, salaries reduced and reduced contributions to 401(k) plans.

The problems being confronted are industry-wide and industry-wide solutions must be developed. The commitment to a PLA to address the needs of the industry is the first step in the right direction.”