Symbol of Municipal Bankruptcy: Abandoned Mixed-Use Development in California Saddled with a Project Labor Agreement

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Rule of Thumb: when you hear about a failed construction project in California, assume that the government or the developer required contractors to sign a Project Labor Agreement to build it.

Case in point: an article in the April 7, 2012 San Francisco Chronicle about the anticipated bankruptcy of the City of Hercules, in Contra Costa County, in the San Francisco Bay Area. (See “Hercules Teeters on Brink of Bankruptcy.”)

The article leads off with this sentence: “If there’s a symbol of California cities’ economic hangover, it’s a pair of four-story, half-finished, plastic-wrapped apartment buildings in Hercules.”

Although I was not familiar with this specific project, immediately I guessed that the city or the developer required the construction contractors to sign a Project Labor Agreement. This project is located in an area where construction unions often exercise their political clout and also routinely abuse the California Environmental Quality Act (CEQA) – a tactic also known as “greenmail” – when needed to extract Project Labor Agreements from gullible governments and vulnerable developers.

Additional evidence suggesting a Project Labor Agreement was provided in the article’s second sentence: “The city sank $38 million into those buildings, a 144,000-square-foot redevelopment project gone awry. Last week, the City Council sold the buildings for $425,000.”

So I checked on this project. Sure enough, on September 22, 2009, the Redevelopment Agency of the City of Hercules voted to authorize its executive director to negotiate a Project Labor Agreement (PLA) with the Contra Costa County Building and Construction Trades Council and its affiliated unions.

Placed on the meeting’s consent calendar, the resolution authorizing the Project Labor Agreement claimed that this kind of union agreement (1) provides the skilled labor pool needed to build the project, (2) creates employment opportunities to local residents and members of surrounding communities, including returning military veterans, (3) promotes safety, quality, productivity and labor harmony, (4) reduces the possibility of delays, and (5) maximizes cost savings through timely project completion. See the resolution here.

See the Project Labor Agreement itself here. The staff report associated with the resolution states that “This agreement is modeled after a similar agreement entered by the City of Brentwood.” Apparently this Project Labor Agreement has the same language as the one approved in May 2009 on a 3-2 vote of the Brentwood City Council for the new Brentwood Civic Center (and later including the adjacent parking structure).

I’m sure the Contra Costa Building and Construction Trades Council would claim that the Project Labor Agreement had nothing to do with the $37.5 million financial loss on this half-finished fiasco. Project Labor Agreements maximize cost savings through timely project completion, except when they do not maximize cost savings through timely project completion.

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