Cartoon by Michael Ramirez from Investors Business Daily

A TruthAboutPLAs.com reader sent me this sensational letter from Terry Nelson, executive secretary treasurer of the Carpenters’ Disctrict Council of Greater St. Louis and Vicinity.

Nelson is outraged that Gerald Feldhaus, executive secretary-treasurer of the St. Louis Building and Construction Trades Council (BCTC), has tattled to Mark Ayers, president of the Building and Construction Trades Department (BCTD), AFL-CIO, that the local Carpenter’s Union is harming the local BCTC.

Here is Feldhaus’ plea to the BCTD:

We need your help, and we need it now!…I am referring to the continued and expanding efforts by the Carpenters Union to WRECK the AFL-CIO building trades here in St. Louis and, with only a few exceptions, around the nation based on conversations I’ve had with my counterparts elsewhere.

Here are Feldhaus’ key accusations against the Carpenter’s Union [emphasis added]:

[Carpenters have] unilaterally abrogated agreements with our various trades, agreements that have been in effect for decades and provided a working, harmonious relationship on jobsites;

…refused to sign Project Labor Agreements designed to keep a jobsite all union and protect everyone’s jurisdiction.

…And owners, who are faced with the difficult economic conditions today, are growing frustrated. They could well begin demanding that the contractors start using non-union firms, and then all hell will break loose! 

Feldhaus proposes that a ”new Carpenters Division or Union within the AFL-CIO Building Trades department needs to be created quickly, initially funded by the other International Unions.” He confides, “it’s no secret that union construction is now overshadowed by non-union across America.”

I’ve explained how Big Labor sells PLAs to public and private construction owners as a tool to promote worksite harmony and avoid strikes caused by the multiple union trades that compose just 15.4 percent of the U.S. private construction workforce (“PLA Basics: Unions Offer Project Labor Agreements as a Solution to Strikes Created by Union Members,” 5/7/09).

For example, here’s the California State Building and Construction Trades Council’s labor peace selling point on PLAs:

The compelling fact about PLA’s remains the economical and efficient process that PLA’s provide public agencies – ensuring that projects are built with a steady supply of highly skilled productive craftworkers and with labor harmony.

Big Labor recognizes that strikes, work stoppages, slowdowns and other labor unrest caused by union members and bosses can shut down a jobsite and delay the opening of a project, potentially costing construction owners lost revenue. PLA salesmen leverage the threat of union-led strikes to obtain a PLA with terms and conditions that benefit union workers and signatory contractors and eliminate competition from merit shop contractors.

It flirts with extortion and is particularly unsettling because nonunion workers – 84.4 percent of the U.S. private construction workforce that are effectively eliminated from PLA projects – don’t engage in strikes or jobsite unrest.

But the simple truth is that PLAs don’t prevent union strikes or labor unrest on jobsites - just visit this blog entry and read confessions from union bosses that PLAs have failed to prevent strikes.  And a chapter in this report provides examples of PLA projects that suffered strikes and other forms of labor unrest.

But now this smoking gun letter demonstrates why PLAs deliver no accountability to jobsites because Big Labor can’t get their house in order.

If Big Labor can’t get all trade unions to sign a PLA, how can a PLA possibly promote jobsite harmony and prevent labor strikes?

If quarrelling trades are raiding the work of other union trades, where’s the value of using all union labor? 

With your help, TheTruthAboutPLAs.com will continue our PLA myth-busting and shed some sunshine on these corrupt backroom deals.

Mr. Fleishman on PLAs (emphasis added):

They’re nothing more than special interest giveaways to unions and provide no benefit to taxpayers. I can’t imagine any Republican that would support these agreements. Construction contracts of any kind should be awarded to the best bidder, regardless of if they’re union or non-union.

My friends on the left love to claim that these union giveaways guarantee quality and accountability on taxpayer financed projects. However, the Associated Builders and Contractors, California Cooperation Committee (ABC-CCC) and their Taxpayer Accountability Project have blown a hole in that argument. The City of Milpitas enacted a PLA for the construction of a $39 million library project. City officials boasted that this project, because of the PLA, was a resounding success. The problem for City officials stems from the fact that they never anticipated that any organization would actually audit the project to ensure state labor laws were followed.

Mr. Fleishman makes a crucial connection about PLAs in light of the findings of the Milpitas Library report (emphasis added):

… So to summarize, the PLA on the City of Milpitas Library project did not prevent labor compliance violations or ensure accountability by contractors.

This is yet another reason why I’m so proud of the Orange County Board of Supervisors who last year voted to ban PLAs. That was the right decision, because there’s absolutely no benefit in a PLA that cannot be derived through a simple contract. The only difference is that unions are forced to compete on a level playing field with other businesses. Perhaps they can’t compete on quality and cost, and that is why they take the fight to a political forum where campaign cash and electoral intimidation are the tools of the trade.

The FlashReport commends ABC-CCC for conducting labor compliance audits that debunk the union rhetoric. Let’s hope that the folks in Long Beach, who are considering a PLA for the remodeling of the airport terminal, as well as any local elected official that spends taxpayer money on public works projects are paying attention to these developments.

Here is the ABC-CCC Release.

Nevertheless, the Taxpayers Accountability Project of Associated Builders and Contractors, California Cooperation Committee (ABC-CCC) found at least 56 violations of state labor law – including underpayment of workers, failure to follow journeyman to apprentice ratios and improper use of apprentices – on Milpitas’ $39 million City Library project.

ABC-CCC was able to uncover these violations despite the fact that this project was covered by a PLA.  City officials called this project a, “Model of success” in an October 2008 letter to the Santa Clara & San Benito Building and Construction Trade Council.

Here is an excerpt from James Spencer’s article in PublicCEO.com on the release of ABC-CCC’s audit in September 2009:

Milpitas Public Works Director Greg Armendariz wrote in a letter to the Building & Construction Trades Council that the project “was a model of success” and the Project Labor Agreement would help the construction industry work through this downturn in the economy.

Project Labor Agreements require that “union-only” contractors can bid or perform public works projects barring merit shop contractors – despite qualifications – from the opportunity to submit a project bid. The stated goal of the agreement is to ensure worker protections and project quality, as required by the Milpitas City Council.

However, the audit reveals that the 56 violations were the result of a lack of oversight of apprentice workers, which jeopardizes job quality and puts employees at risk.

The audit’s findings have been reported to the Department of Industrial Relations for review and action. ABC‐CCC investigated the 56 violations and filed formal complaints on Sept. 14 with the California Labor Commissioner’s office.

ABC‐CCC is performing audits of public works projects statewide as part of The Taxpayer Accountability Project and releasing findings to ensure that public funds are efficiently and effectively managed.

Well, ABC-CCC sent their findings to California’s Department of Industrial Relations (DIR) and it turns out ABC-CCC was right to be concerned.  DIR has notified eight of the contractors that worked on the Milpitas City Library project that they violated state labor laws.

Here’s an excerpt from ABC-CCC’s January 8 press release (our emphasis added):

Responding to the findings of a labor compliance audit conducted by the Taxpayer Accountability Project of Associated Builders and Contractors, California Cooperation Committee (ABC-CCC), the California Department of Industrial Relations has officially notified eight contractors that they violated state labor laws during construction of the $39 million Milpitas City Library Project. See the letters issued by the state at this link: Milpitas Library Labor Violations.

“Staff for the City of Milpitas reacted angrily and defensively when the Taxpayer Accountability Project submitted its findings to the Labor Commissioner in September,” Kevin D. Korenthal, executive director of Associated Builders and Contractors, California Cooperation Committee said. “The results of the independent audit were validated by the State and we are pleased that action has been taken to protect the public trust and ensure accountability by contractors on public works projects.”

Confirmed violations by contractors on the Milpitas Library Project include lack of proper ratios of journeymen to apprentices and improper use of apprentices. These infractions are significant as they could have contributed to project quality and worker safety issues. Furthermore, many contractors working on the project failed to provide records as required by law until after the audit and subsequent state inquiry.

Contractors confirmed in violation include five based in the South Bay, two others based in the Bay Area, and one based in the state of New York: Milpitas Library Labor Violations.

“Additionally, based upon the findings of ABC-CCC’s independent audit, we have reason to believe that our conclusions only scratched the surface of how labor laws were violated on this project,” Korenthal added. “Clearly, City of Milpitas officials neglected to scrutinize the project following the City Council’s vote to give construction unions a monopoly by virtue of a Project Labor Agreement.”

Additionally, James Spencer at publicCEO.com picked up the story about DIR acting on ABC-CCC’s audit and notifying the eight contractors that labor law violations occurred on the Milpitas library.  Here is an interesting excerpt from this January 11 story:

After the story ran [the September 2009 story mentioned earlier in this post] , I received an irate e-mail from a very high-level public official in Milpitas, who was upset about our article and said that PublicCEO’s information was not accurate.

The official asked, “Do you realize we had a Project Labor Agreement?” and said that Milpitas believed no violations existed on the project. I immediately followed up with this official in regards to the e-mail, but never heard back.

Here at TheTruthAboutPLAs.com, we’d like to take this opportunity to respond to this unnamed Milpitas official.

Yes, we realize there was a PLA on this project and we strongly encourage you to think about the potential quality and worker safety issues that could result from restricting the ability of 80 percent of California’s construction workforce from competition for a project.

We will continue to report on PLAs that don’t live up to Big Labor’s promises on this blog.

Financed with $697 million in tax-free bonds from the city and state that will be paid off by the Mets organization, Citi Field was constructed with a discriminatory and costly project labor agreement (PLA).

Sources said other problems have turned Mets maintenance crews into the team’s real five-tool stars.  Among the problems:

* A nonworking elevator last week that forced Mets owner Fred Wilpon to climb four flights to his office.

* An outfield section known as “Mo’s Zone” flooding in a rainstorm three months ago because drains were clogged. The backup was caused by 20 feet of pipe collapsing in the bullpen.

* A 4-by-6-foot illuminated sign falling in the field-level promenade during an off day.

* Electricity in the kitchen above the ticket booths near the rotunda shorting out. One outage caused the refrigerators to fail and water to leak into the ticket booths.

* A piece of concrete breaking off; it’s now sitting in a field crew’s office.

* Air conditioning and heating in the maintenance crew’s locker room that hasn’t worked since Day 1.

* Improperly installed electrical outlets. There is only one socket in the team’s laundry room, so a power strip is needed to plug in all the washing machines.

* A black granite capstone on the stadium’s ground-level façade falling off. Yesterday, Mets workers were spotted fixing the broken tile.

* Soaked seats in another luxury suite caused by a leaky ceiling during a rainy Mets-Yankees game. Crews carrying buckets, mops and towels paraded into the suite all night to stem the tide.

Even before the 42,500-seat ballfield opened in April, there were signs of trouble. In January The Post spotted rust on a beam running down the wall of the front entrance.

While a project of this size is bound to have minor problems, these anecdotes serve as a reminder that a PLA does not guarantee quality work despite that fact that Big Labor touts PLAs as a tool to guarantee the use of “highly skilled and trained union labor” to deliver a quality PLA project.

Assemblyman Richard Brodsky (D-Westchester), who criticized the city Industrial Development Agency over its deal to give the Mets and Yankees tax-free bonds to build new stadiums, said there should be an assessment of the stadium’s condition now that the inaugural season is drawing to a close.

“Taxpayer money is going to build the stadiums for these wealthy private entities, and it’s not clear that anyone is checking on anything,” Brodsky said. “No one knows who’s accountable.”

The city and state issued $697 million in tax-free bonds to finance the construction of the throwback-style ballpark resembling Ebbets Field. Under the deal, the Mets pay off the bonds, but save on interest and taxes.

Contractor Hunt-Bovis built Citi Field over two years. Federal prosecutors are investigating whether Bovis overbilled for work performed at the stadium.

Yesterday, the New York Post reported that some contractors who built the PLA stadium have ties to the Mafia and a track record of labor corruption and bribery (“Met ‘Mob’ Contracts,” 1/5).  Sounds like there is some excellent accountability going on with this project!

The Mets shelled out $51.6 million in taxpayer money to contractors shunned by the city for their ties to the Mafia, labor corruption or bribery, The Post has learned.

At least seven contractors the city avoids were hired by the team to build Citi Field between 2006 and 2009, according to government records.

The tainted companies were paid from a $91 million pot the city Economic Development Corp. gave to the Mets.

TheTruthAboutPLAs.com has long argued that where there is a PLA, there is political corruption.

The ongoing criminal investigations and past convictions of personnel related to the contracting firms investigated by the NY Post demonstrates an astounding pattern of illegal activity that lends support to our belief that PLAs are closely linked to corruption. (Chalk it up to coincidence? I think not.) 

Is this the type of accountability and quality final product PLAs deliver to the public and construction owners?

As the Lucas County PLA fight heats up, it’s like deja vu all over again for Lucas County residents.

Great Scott Marty! It turns out that Lucas County went down the PLA road in 1996. 

So why is Big Labor pushing for a PLA requirement if the county passed one in 1996?  It turns out the PLA mandate was such a failure and so burdensome that officials repealed it one year later.  That’s right!  The 1996 PLA requirement was repealed in 1997.

Here’s the background thanks to Maggie Thurbur via her blog Thurbur’s Thoughts.  The Lucas County Board of Supervisors adopted a resolution requiring PLAs on all county funded projects in excess of $50,000 in September 1996.  According to Ms. Thurbur, after problems with PLA policy precluding nonunion contractors’ low bid from being accepted and increasing county construction costs, the PLA requirement was overturned by the Supervisors in April 1997.

Clearly, Lucas County supervisors determined that government-mandated PLAs don’t work in the 1990s. Nevertheless, in a stunning example of bad government, a proposed PLA requirement is back in Lucas County.   Interestingly enough (although not surprising), the proposed PLA requirement before the Board of Supervisors in 2009 is nearly identical to the repealed 1996 county law. The most significant difference is the 2009 proposal is broader and would apply to almost all projects receiving county funds.

In other words, the Lucas County Board of Supervisiors found a construction procurement policy that doesn’t work, so now they want to expand it.

There is still more time to let Lucas County Commissioners know that special interest politics have no place in Lucas County, Ohio.  The vote is scheduled for December 15.

In the spirit of Biff Tannen, tell the Lucas County Commissioners to take their PLA proposal and “make like a tree and get out of here.”

Pete Gerken: pgerken@co.lucas.oh.us
Tina Skeldon Wozniak: twozniak@co.lucas.oh.us
Ben Konop: bkonop@co.lucas.oh.us
Phone number: 419-213-4500

Readers may recall that I discussed the problem with forced pension contributions when I provided analysis of anti-merit shop provisions in an actual PLA (PLA Basics, 4/24).

Anti-Merit Shop Provision #5

Article 12.01.a. – The Employer shall make contributions to the established fringe benefit funds in the amounts designated in the appropriate Union agreement and its Schedule A.

Non-union contractors avoid PLA projects because contractors must pay twice the pension/retirement contributions on PLA projects: Once to a union pension plan and once to the existing company plan – typically a 401(k).  Non-union contractors typically can’t suspend and restart contributions to individual 401(k) accounts so they are forced to factor double payments into their contract bid.

Public and private construction users end up footing the bill for the unecessary and inefficient increased costs that are a direct result of this PLA provision. 

Workers lose too. Employees never see employer retirement contributions sent to union pension funds unless they decide to leave their current non-union employer and join and remain with the union until vested. 

This is another way PLAs can be an effective organizing tool to increase union membership: Non-union workers are more likely to join a union once they know they will lose employer retirement contributions to union pension plans. 

This issue raises an example of union hypocrisy in the PLA debate in addition to the bogus ”PLAs protect union local workers” argument.

Unions claim they protect the welfare and retirement benefits of workers.  If that were true, why would unions implement a provision in PLAs that pilfers retirement contributions from workers unless they join a union?

It is obvious from The Washington Examiner report that construction unions need additional resources to sustain their pension plans and they need these contributions from non-union contractors because they are “free” — the pension plan does not have to factor in payouts to these contributors when calculating future liabilities.

Finally, I wrote how paying into underfunded and mismanaged union pension plans can expose merit shop contractors to pension withdrawal liabilities (PLA Basics, 4/24) which is another reason why merit shop contractors avoid bidding on PLAs.

Anti-Merit Shop Provision #6

Article 12.01.c. – When the Employer(s) contribute(s) fringe benefit payments into local, regional, or national trust funds, the Employer agrees to be bound to all lawful terms and conditions of such trust agreements, and all amendments thereto.

Depending on the financial health and rules governing a specific union’s pension plan, signing a PLA or a local union agreement could bankrupt a contractor or prohibit contractors from qualifying for construction bonds needed to build future projects because contractors are forced to calculate and carry multi-employer pension plan withdrawal liabilities on their balance sheet.

PLA Basics: Pension provisions in PLAs:

• Hurt retirement for non-union workers. Employer retirement contributions into union pension plans on behalf of non-union workers are forfeited unless workers join a union.
• Keep underfunded and mismanaged union pension plans afloat.
• Expose contractors to underfunded multi-employer pension withdrawal liability.
• Increase costs to construction users because double pension payment (one payment for the existing non-union plan that workers deserve and one for the mandated union “windfall” plan from which workers will never benefit) is factored into bids from the rare non-union contractors that do bid on a PLA project.
• Cut competition from non-union contractors that do not want to participate in PLA plans (because of the aforementioned reasons), which reduces the number of bidders and increases construction costs.

If you want to know if your local construction union has an endangered or critical pension plan, consult the U.S. Department of Labor list published here: http://www.dol.gov/ebsa/criticalstatusnotices.html

Almost half of top unions have underfunded pension plans

By: Kevin Mooney
Examiner Investigative Reporter
06/07/09 6:41 PM EDT

Almost half of the nation’s 20 largest unions have pension funds that federal law classifies as ”endangered” or in “critical” condition due to being underfunded, an Examiner review of federal actuarial reports shows.

Pensions with less than 80 percent of the assets needed to cover present and projected liabilities are considered “endangered,” while those that fall below a 65 percent threshold are classified as “critical” under the Pension Protection Act of 2006.

Unions are required to file 5500 forms that record the financial health of their retirement plans, show that union pension funds have lost their financial footing over the past several years.

Eight of the largest unions have underfunded plans, according to the most recent 5500 reports, including the Service Employees International Union (SEIU), the United Food and Commercial Workers (UFCW), the International Brotherhood of Electrical Workers, the Laborers International Union of Northern America, the International Association of Machinists, the United Brotherhood of Carpenters, the International Union of Operating Engineers, and the National Plumbers Union.

The average union pension has resources to cover only 62 percent of what is owed to participants, according to the Pension Benefit Guarantee Corporation (PBGC). Less than one in every 160 workers is covered by a union pension with required assets.  

These figures demonstrate that the liability challenge to the long term of health of union funds is systemic and across the board, said Brett McMahon, vice-president of Miller and Long, a Maryland-based concrete construction company.

Demographics figure prominently in the erosion of pension assets now that a smaller percentage of union workers are available to support an expanded group of retirees, McMahon said. Only 7.6 percent of private sector employees are members of a labor union, according to the Bureau of Labor Statistics.

The growing number of local and national union pensions that lack sufficient resources to cover their obligations could threaten the retirement security not just of union members, but also non-union employees if the proposed Employee Free Choice Act (Card Check) becomes law as currently written, McMahon said.

The Card Check legislation includes provisions both to abolish secret ballots in union representation elections in the workplace and to require a binding arbitration process that greatly favors unions, McMahon said.  

“It’s like the Social Security problem on steroids,” McMahon said. “We are talking about a systemic, demographic problem where there are too few people paying in and the plans can’t earn enough returns to make up for the difference.”

McMahon believes “union members are not being told the truth about the condition of their retirement plans. The danger to non-union workers comes in with Card Check because there is nothing in it that prohibits an arbitrator from shoving companies and workers into these underfunded plans.”

Diana Furchtgott-Roth, a senior fellow with the Hudson Institute, is encouraging EFCA critics to focus more attention on the arbitration side of the bill in addition to “card check” for this same reason.

Multi-employer pension plans that are typically negotiated by unions should be of particular concern because they have less federal insurance than single-employer pension funds, McMahon pointed out. The PBGC only guarantees $12,870 in annual payments to a member of the multi-employer plan in contrast to $54,000 for members of a single-employer plan.

If anything, the current 5500 records vastly understate the deteriorating condition of union pensions because they do not include the stock market drop from last year, James Sherk a labor expert with the Heritage Foundation points out. Reports are typically not filed for more than 12 months after the end of a plan year.  

“There are a lot of red zone notices going out now for funds that fell under the critical percentage for liabilities with the market meltdown,” he said. “This would not be evident under the most recent 5500s because they only cover through 2007.”