Wednesday, July 20, 2011

NYC Trade Unions Confront a Rise in Nonunion Projects

A luxury apartment building is rising at 23rd Street and 10th Avenue, and, across town, one is being created inside an old Salvation Army building overlooking Gramercy Park. Other residential buildings and hotels are going up on 11th Avenue, West 18th Street and East 23rd Street.

All are signs that New York City’s real estate industry is clawing out of the recession. But they are noteworthy for another reason: they are being constructed without any union labor.

For most of the last century, the city’s construction unions were a symbol of labor strength in a pro-labor town, and their involvement in large projects was almost never in doubt. But just as public employees’ unions across the country are in the fights of their lives, the city’s major building unions are facing their own moment of reckoning.

While they are still a major presence, their share of the city’s $20 billion to $30 billion in annual construction work has dropped significantly in recent years. There are no official statistics; according to unionized construction companies, two out of five construction jobs in the city are now nonunion, though unions put the number at one in four. All agree that for many years, at least 85 percent of building jobs were union ones.

And the companies and unions are about to enter what may be their most tense contract negotiations in years, with the employers demanding large concessions and already angering labor leaders by taking their campaign directly to the workers with a Web site and in small group meetings around the city; subway ads may also be forthcoming. “There’s enough pressure on everybody,” said Bobby Bonanza, business manager for the Mason Tenders District Council, which represents about 13,000 workers affected by the contracts. “We don’t need another Wisconsin in this town.”

The employers have backed off an initial demand for wage cuts, but they are still aiming for a 25 percent cut in labor costs, by reducing benefits and changing some work rules. They say these changes would allow them to better compete with nonunionized companies, which are winning jobs from developers because their costs are 20 to 30 percent cheaper. “A combination of market erosion and the recession has permanently changed the financial structure of real estate in New York City,” said Louis J. Coletti, president of the Building Trades Employers’ Association. “This is not about a race to the bottom. It’s about our common enemy: nonunion contractors.”

All told, the negotiations involve 30 different unions and as many as 60,000 steamfitters, ironworkers, crane operators, laborers and carpenters. Union leaders say they have made numerous concessions since the recession started, including wage freezes on non-Manhattan projects, that have reduced overall labor costs by as much as 20 percent. But, they say, employers are now trying to increase profits by cutting benefits and exaggerating the loss of market share at a time when the national political climate has turned against unions.

Not so long ago, starting a large construction job, particularly in Manhattan, with nonunion labor was considered a provocation likely to ignite a pitched battle with carpenters, ironworkers and laborers intent on closing down the job. But during the building boom of the late 1990s and most of the last decade, there was enough work to go around that union workers were not terribly bothered if some jobs went nonunion.

But as the cost of land and construction materials skyrocketed, some developers began to become more cost-conscious and began looking for savings in labor costs, particularly by choosing cheaper nonunionized contractors. And lenders began to scrutinize costs more closely.

The unions and unionized employers argue that union laborers are more skilled and safer than nonunion laborers, and that it is far easier to mobilize large numbers of workers when they are organized. But over the last few years, nonunion construction companies like Flintlock became skilled in putting up midsize 10- to 30-story buildings, the kind of building where, along with interior finishing and renovation, the unions have been losing most of their market share.

Unionized contractors still have a lock on megaprojects like big office towers, including those under construction at the World Trade Center. But union leaders, construction executives and developers are closely watching a project in Long Island City, Queens, where H. Henry Elghanayan, a residential developer whose company traditionally uses union contractors, is expected to select a nonunion outfit to build a large complex with 700 apartments. “If traditional construction managers that stuck with the unions start losing nine-figure jobs,” said one executive of a union contractor, who refused to be named so as not to further anger the unions, “that’s a game changer.” Mr. Elghanayan said in an interview that he had yet to select a contractor. But, he added, “Everyone’s pressing to get total development costs down.”

David Von Spreckelsen, vice president of Toll Brothers, said his company built the first of two towers at its Northside Piers project in Williamsburg, Brooklyn, with union contractors. But as construction costs escalated in 2008, Toll Brothers turned to a nonunion contractor for the second tower, prompting unions to protest with five giant inflatable rats. The company now has three apartment buildings under construction in Manhattan with nonunion labor.

And this week, the developer of the Atlantic Yards megaproject in Brooklyn said it was seriously considering using a prefabricated method to build its residential high-rise. While most of the workers would be unionized, there would be fewer of them and they would earn less money because much of the labor would be done in a factory, where wage scales are lower than on the site.

The construction unions have long been the backbone of the city’s blue-collar middle class. A journeyman carpenter, for example, is now paid $46 an hour, with health, pension and other benefits bringing the total cost to $85. The total compensation for mason tenders, a less skilled position, is $58. “We make a good salary, probably more than most office workers,” said Marc Spring, a union plumber for 25 years whose father was a union plumber for 40 years. “But we work harder than they do, out in the elements.” Mr. Spring acknowledged that “times were tough,” one reason that his local had already made concessions. Still, Mr. Spring said, he resents the constant talk of givebacks. “I don’t see how the developers aren’t making money,” he said.

Besides some benefit reductions, the employers want changes in some decades-old work rules, beginning with overtime. Workers now earn double pay for overtime; the construction companies want to reduce it to time and a half.

On most jobs, the workday starts when workers arrive at ground level, but on large jobs with many men sharing a hoist, it can take another half-hour to reach the actual work site on a high floor, and another half-hour to descend at the end of the day. Employers are proposing that workers be paid only from the time they reach their station to the time they leave it, and some unions have already agreed to this change.

They also want to end a requirement by the operating engineers, who operate cranes, bulldozers and other heavy equipment, that three workers be in place to work even when only one is needed. Although they are a tiny fraction of the work force, they are the highest-paid, often earning well over $200,000 a year, including overtime. James Conway, an official of Local 14 of the Operating Engineers, declined to comment.

The employers, however, are wary of pressing too hard, because a strike by just one union could be enough to shut down many of the city’s major construction projects. And despite the animosity among the unions and their employers, Ruth Milkman, a sociology professor at the CUNY Graduate Center who studies unions, said they have an important common ground. “Once you allow nonunion, lower-cost bidders to undercut the unions, it threatens everybody,” Professor Milkman said. “So there is a mutual interest at work here.”

By Charles V. Bagli
The New York Times

Bloomberg requests proposals which could create more than 7,000 construction jobs

The Bloomberg administration Tuesday unveiled its request for a new engineering campus. It's the beginning of a long-term quest to challenge the West Coast for supremacy in the tech world.

Mayor Michael Bloomberg announced Tuesday details of a request for “universities near and far” to submit proposals to build or expand a science and engineering campus in the city—a project he called “one of the most promising economic development initiatives in the city's long history.”

In a speech at the Crain's Future of New York City conference, the mayor said a 1 million-square-foot applied science campus could create more than 7,000 construction jobs and spin off some 400 new companies, creating 22,000 permanent jobs. Some $6 billion in economic activity could be generated, resulting in roughly $1.2 billion in new tax revenues added to city coffers. “During the 1980s and 90s, Silicon Valley—not New York—became the world capital of technology startups, and that is still true today,” Mr. Bloomberg said. “But if I am right, and we succeed in this mission, it won't be true forever.”

The city is offering real estate on Governors Island, Roosevelt Island or at the Brooklyn Navy Yard at virtually no cost, and is pledging up to $100 million in infrastructure upgrades. It expects that contribution to be “matched several times over” by the winner or winners. Sources say the city could end up selecting two separate projects, and that Roosevelt Island is attracting the most interest, followed by the Navy Yard.

Roosevelt Island is believed to be the most attractive site because of its proximity to Manhattan, its public transportation and easy access to Queens neighborhoods that could accommodate startups launched by engineering students. Governors Island has infrastructure and transportation challenges and the Navy Yard is not accessible by subway. Applicants can also propose other sites.

According to the request for proposals, the winning entry must lay out a plan to develop research that will lead to the formation and expansion of companies in the city in industries with substantial growth potential. It calls for institutions to propose graduate-level programs on the campus and mechanisms to transform research into commercial activity. “We understand we will not catch up to Silicon Valley overnight,” Mr. Bloomberg said. “But—as with everything we do—we are taking the long view.”

The initiative was launched at the end of 2010 when city officials asked educational institutions for expressions of interest in building a new engineering and applied sciences campus. The city received 18 responses from 27 institutions around the world, including Cornell University, Stanford University and Technion-Israel Institute of Technology. They outlined ideas ranging from environmental sciences to nano-engineering. All of the institutions that expressed interest are eligible to respond to the request for proposals.

Cornell, which in the expression of interest phase proposed four hubs, including one encompassing technology for healthier living, sent a large contingent to hear the mayor's Tuesday speech. The university has put together a trustee task force to lead its bid, including Irwin Jacobs, the co-founder of Qualcomm; Andrew Tisch, co-chair of Loews Corp.; and Abby Joseph Cohen, a partner at Goldman Sachs Group Inc. All are Cornell alumni. “We have been in New York City a long time,” said David Skorton, the university's president. “This is part of our DNA.”

Stanford issued a statement Tuesday afternoon saying it planned to make a proposal by the October deadline. The university's initial interest has centered on an engineering, computer science and business program based on Roosevelt Island. The university outlined plans for 200,000-square feet each of residential towers and academic buildings centered around an open green space, with cafes, retail shops, an auditorium and gym on the edge of the East River. "Stanford University brings its entrepreneurial culture, excellence in engineering and technology, proven track record of partnering with industry and history of successfully transferring research advances to the marketplace," said President John Hennessy.

Responses to the call for proposals are due in October, with a winner or winners to be chosen by the end of 2011. Projects will be judged based on economic impact and feasibility (40%), respondents' track records (40%) and their connections to the local community (20%). Ground could be broken in 2013. The opening of the first phase of the project, which includes at least 250,000 square feet of development, is scheduled for 2015.

Mr. Bloomberg described the effort as the city's “most ambitious attempt to counteract a decades-long economic trend that once threatened the very future of American cities”—the decline of manufacturing jobs. New York managed to survive an 81% drop in manufacturing jobs, to 150,000, between 1966 and 2001, when Mr. Bloomberg was elected. But it did so largely on the back of Wall Street, becoming dependent on its booms and suffering from its inevitable busts.”

The request for proposals issued Tuesday is an attempt to shift the city's reliance away from Wall Street and toward a future based on technology. In remarks at the conference, Bloomberg L.P. Chief Executive Dan Doctoroff said New York is “on the cusp” of establishing itself as a player in the tech world. “This can really be the catalyst for making that a reality for the long term,” he said.

By Daniel Massey / Crain's New York Business
July 19, 2011 5:12 P.M.