Kings arena deal shows enduring labor clout

It looked like a snapshot from an earlier decade: Dozens of hard-hatted construction workers gathered at Downtown Plaza recently to celebrate an agreement ensuring that Sacramento’s proposed new NBA arena will be built largely with union labor.

Barely 11 percent of American workers hold a union card these days, and membership in the construction industry is only 13 percent. Drill deeper into the data, though, and it isn’t so surprising that the Kings’ owners and the city of Sacramento agreed to ensure union workers would fill the vast majority of the 3,500 or so arena construction jobs. While organized labor is in retreat in most sectors of the U.S. economy, unions maintain strength when it comes to construction of mega-sized developments in the private and public sectors alike, said Peter Philips, a labor economist at the University of Utah.

Building trades unions, representing electricians, plumbers, sheet metal workers and others, are among “the last bastions” of union strength in America, Philips said.

Project labor agreements, or PLAs, such as the one executed for the $448 million arena, represent organized labor’s ability to protect its flank and dominate a major job site. Practically all the workers will be dispatched from union hiring halls. In return, the unions gave a no-strike pledge and made concessions on grievances and other issues.

Although no official records are kept, UCLA labor expert Kent Wong said PLAs are becoming more common. In the last few years, California’s building trades unions have won PLAs governing such developments as California’s fledgling high-speed rail network, SMUD’s $110 million operations center on Bradshaw Road and the San Francisco 49ers’ new $1.3 billion stadium in Santa Clara.

That’s no accident. In an era of declining membership across the labor movement, unions have put a high priority on securing PLAs – to the point of using tactics that are controversial in some quarters. Critics say unions often exploit the California Environmental Quality Act, holding construction projects hostage with lawsuits until they get their labor agreements.

“They strong-arm PLAs,” said Greg Anderson, an executive with Sacramento nonunion electrical contractor Rex Moore. “It’s the whole CEQA greenmail tactic.”

Nonunion contractors such as Anderson are so incensed about the arena PLA, they’re thinking of taking action. In particular, they’re considering lending financial support to the citizens group attempting to force a public vote that could imperil the $258 million taxpayer subsidy proposed for the Downtown Plaza facility.

“Rex Moore was not opposed to the arena,” Anderson said. “We’re definitely opposed to the corruption. ... I’m opposed to building an arena under a PLA.”

The contractors’ complaint: The PLA will unfairly lock them out of a chance to grab a piece of the arena project.

The agreement itself says nonunion subcontractors can bid on arena work, but Anderson said the deal is designed to effectively limit him to using just a handful of his own employees As a result, he said, Rex Moore doesn’t plan to bid on any of the work.

PLAs are the product, in part, of labor’s continuing political heft. Despite their shrinking numbers, unions still play a big role in electing politicians, many of whom go on to support PLAs, said Chris Tilly, a labor relations expert at UCLA. The Sacramento arena PLA was signed by Turner Construction Co., the general contractor, but was announced with great fanfare at Downtown Plaza by Mayor Kevin Johnson, who has led the charge for building the arena. Turner, which is known as a union contractor, declined comment for this story.

“The unions are able, through the paycheck provisions, to forcibly extract money from their covered employees to pay for their political campaigns,” said Richard Markuson, a Sacramento lobbyist for nonunion electrical, plumbing and air-conditioning contractors. “We don’t have that same opportunity.”

‘Comfort and certainty’

Critics say PLAs serve no public purpose and can be costly to taxpayers. A 2011 study financed by nonunion contractors said PLAs inflated California school construction costs by 13 percent to 15 percent.

Certainly union workers earn more money. A union electrician in Sacramento can earn as much as $43 an hour, plus benefits, while a nonunion contractor like Rex Moore pays $25 to $35.

In the case of the Kings arena, however, the labor agreement may not have a significant effect on the wages paid to workers. Because the city plans to subsidize the project with $258 million in public money, its own law requires that all workers – union or nonunion – must be paid the “prevailing wage.”

Prevailing wages vary, depending on geography and the specific craft. The pay and benefits are set for each city with prevailing wage laws by the state Department of Industrial Relations, based on the rate paid on public works projects “to a majority of workers in a particular craft.” In markets with a strong union presence, the compensation generally will be comparable to union scale; in Sacramento, it matches the union rates exactly, according to labor officials.

Supporters of PLAs say the agreements essentially guarantee a smoothly run job site, where work gets done on time and under budget. Jurisdictional disputes that can tie a project in knots – does this part of the work belong to plumbers or sheet metal workers? – are few. The Kings endorsed the union deal, with team CEO Chris Granger telling the audience at Downtown Plaza that it would “provide us with great comfort and certainty” that the arena would open in time for the 2016 basketball season, in time to meet the NBA’s 2017 deadline.

“The reason why project labor agreements have actually increased in number in California is that they’ve been shown to work,” said Wong, director of UCLA’s Center for Labor Research and Education.

Only 13 percent of all construction workers in the United States are unionized, according to the Bureau of Labor Statistics. But those figures are skewed by the residential construction industry, where unionization is practically nonexistent. In commercial and public works projects, anywhere from 30 percent to 60 percent of the workers are unionized, depending on location and the specific craft, according to Philips.

The Utah economist said the difference is rooted in skill levels. Simply put, he said building a house takes fewer skills than building a sports arena, and the unions churn out the majority of the skilled craftsmen through apprenticeship programs they operate in cooperation with their contractors.

‘A political stranglehold’

Nonunion contractors run apprentice programs, too, but generate only about one-third as many graduates as the union-sponsored programs, Philips said. That gives unions the edge. Union-based apprenticeship programs “have been able to create skilled labor in ways the nonunion sector can’t,” he said.

Unions say they’re merely providing the skilled workers demanded by complicated jobs.

“Most arenas are built union anyway, because they want the high-quality work,” said Bob Balgenorth, president emeritus of the State Building & Construction Trades Council of California. “That’s our guys.”

Nonunion contractors say the situation isn’t quite so simple. They say they’d be able to produce just as many skilled workers as the unions do, but their nonunion apprentice programs have been hamstrung by the state-run California Apprenticeship Council, which regulates the programs. Anderson said the council has been slow to let nonunion programs expand.

“It’s a political stranglehold created by the unions,” Anderson said.

The Rex Moore official and others say a similar dynamic enables unions to secure PLAs. Not only do unions play a major role in political fundraising, they also have used environmental lawsuits – or the threat of litigation – to secure such agreements, nonunion contractors charge. In one notable example, unions filed a CEQA lawsuit in 2008 to block redevelopment of the downtown Sacramento railyard, although the suit was dismissed.

With the Kings arena, a group called the Coalition for Fair Employment in Construction charged that project developers signed the PLA to make sure unions didn’t file a CEQA suit that could have held up the arena.

Labor officials deny they use CEQA to obtain PLAs, and say it’s highly unlikely any union was threatening to block the Kings arena in order to get an agreement.

“You never know what an individual union will do, but probably not,” Balgenorth said.

The Legislature late Thursday passed a bill making it harder to use CEQA suits to block the Sacramento arena. The bill, Senate Bill 743, aims to help urban “infill” projects around the state avoid CEQA-related delays. Gov. Jerry Brown has indicated he will sign it, although some experts question how much difference the bill will make in terms of limiting CEQA suits.