Developers and contractors receiving public subsidies on major Los Angeles projects would be required to hire union hall workers under a proposal that could raise costs and shut out small non-union builders.

The proposed hiring policy is the major component of a so-called project labor agreement being hammered out among the Los Angeles Community Redevelopment Agency, the building trade unions, and developers and contractors. It would be similar to a much larger project labor agreement in force for eight years at the Los Angeles Unified School District.

Essentially, the project labor agreement requires contractors working on ventures that receive subsidies from the redevelopment agency to hire workers through union-run hiring halls. Such workers generally would receive higher total compensation when benefits are included.

The larger goal is to ensure that people living near redevelopment projects get hired as a steppingstone to a career in the building trades.

“We think this is needed. It’s very important to make the link between the subsidy and make sure the benefits filter down to real jobs for people who live in the city of Los Angeles,” said Cecilia Estolano, general manager of the L.A. Community Redevelopment Agency.

The policy, which is expected to be finalized in the next couple months and could go to the CRA board in the spring, would apply to all projects receiving at least $1 million in public funds or employing at least 30 construction workers. Affordable housing projects with fewer than 100 units would be exempt.

However, even with the limitations and exemption, the proposal has generated concern from the development community,

especially non-union contractors who fear they could be effectively barred from bidding on redevelopment projects.

“We have been a longstanding opponent of project labor agreements imposed on contractors,” said Tom Holsman, executive director of the Associated General Contractors of California. “We continued to be concerned about the impact on smaller contractors, who are typically open shop (non-union). They find it more difficult to comply with project labor agreements because of the cost and therefore tend to avoid bidding at agencies with PLAs.”

Holsman added that minority contractors would be hit especially hard, since many tend to be non-union. But minority contractors have yet to voice their concerns. “This is not something that’s come up on our radar screen,” said Gene Hale, president of the Greater Los Angeles African-American Chamber of Commerce.

Developers have their own concerns, chiefly that they would have to bear additional hiring costs to comply with the project labor agreement.

“When a developer seeks a public subsidy, it’s because there already is a gap between the up-front cost and the revenue payback,” said John Whitaker, a partner with the law firm of DLA Piper U.S. LLP, which represents developers working in redevelopment project areas. “If the developer must also pay a hiring administrator and pay somewhat higher wages and benefits, that just increases the gap and makes the project that much more difficult.”

Whitaker’s concerns were echoed by the Valley Industry and Commerce Association, which flagged the issue in a bulletin to members last month. VICA is particularly worried about the impact on the large North Hollywood redevelopment project.

Core employees

Redevelopment officials said they are responding to these concerns. Already, to assuage non-union contractors, they have inserted a clause that allows non-union contractors to use a certain number of “core employees” who are not hired through building trade unions. For developers, they have eliminated a provision that would have allowed the agency to terminate development agreements with developers who do not fully comply with the project labor agreement.

But the sticky issue of whether taxpayers or developers should foot the bill for the extra costs associated with the project labor agreement remains. Developers are pushing for the redevelopment agency to offset those costs with higher public subsidies. But community activists and unions argue that project labor agreements can save costs in the long run for developers through the use of reputable contractors.

“There are so many contractors out there who scam agencies and developers with low bids and then run up the contract costs with change orders. Where project labor agreements are in effect, the change-order costs are cut in half, because these scammers are weeded out,” said Richard Slawson, executive secretary of the Building Trades Council of Los Angeles and Orange Counties.

The CRA’s Estolano said there is another benefit for developers of the project labor agreement: time savings. Negotiating a broad agreement covering many future redevelopment projects now would save developers from having to hammer out agreements on individual projects, as occurred on the Hollywood and Highland project, the Staples Center and others.

“On the Grand Avenue project, the developer (Related Cos.) won the right to develop the project a year ago, but still hasn’t completed negotiations on a project labor agreement, which has slowed progress,” Estolano said. “Once this project labor agreement is in place, it will streamline the process so that all a developer has to do is sign on to the master PLA.”