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Unions Await Fantastic Return on High-Speed Rail Political Investments

It’s a heady time to be a top construction union official in California, as the California High-Speed Rail Authority presumably now holds proposals from as many as five design-build consortiums to build the first segment of the $68 billion project.

If this project moves forward, it will become part of the pantheon of huge American infrastructure projects that unions cite when they brag about the lasting accomplishments of union labor. And unions can also claim an essential role in the politics behind its advancement.

Even before Californians had a chance to vote directly on funding for High-Speed Rail, union-affiliated labor-management cooperation committees made massive campaign contributions to stop statewide ballot initiatives in the mid-2000s that would have given property owners stronger rights against the government’s power of eminent domain, as a result complicating the High-Speed Rail Authority’s land acquisition plans.

For example, the State Building & Construction Trades Council Labor Management Cooperation Trust contributed $1 million in 2006 to the campaign to defeat Proposition 90, a statewide ballot measure to strengthen property rights. And in the spring of 2008, the California Construction Industry Labor-Management Cooperative Trust contributed $250,000 to this No on 98/Yes on 99 campaign committee to oppose another statewide ballot measure to protect property rights.

These two union-affiliated committees are authorized under the obscure Labor-Management Cooperation Act of 1978, a federal law signed by President Jimmy Carter and implemented by the Federal Mediation and Conciliation Service. There are no federal or state regulations specifically addressed toward these trusts, and these trusts do not have any reporting requirements to the U.S. Department of Labor’s Office of Labor-Management Standards. Unions use these trust funds routinely now to fund campaigns for and against state and local ballot measures in California. 

When Proposition 1A was on the November 2008 ballot asking California voters to authorize borrowing $10 billion for the high-speed rail project by selling bonds, unions provided a substantial portion of the campaign funding. Leading the charge was the California Alliance for Jobs, another labor-management cooperation committee authorized under the Labor-Management Cooperation Act of 1978.

As shown in the Operating Engineers Local 3 Northern California Master Agreement (page 42) and the Northern California District Council of Laborers Master Agreement (pages 14, 26), construction companies belonging to various business trade associations must pay an amount to the California Alliance for Jobs trust based on the number of hours worked by each employee represented by the union. These amounts are incorporated into the state-mandated construction wage rates (so-called “prevailing wages”) as part of the “Other” category of payments. This ambiguous category of employer payments was implemented as California Labor Code Section 1773.1(a)(7-9) when Governor Gray Davis signed Senate Bill 868 in 2003.

Through contributions, a $100,000 loan, and in-kind/non-monetary gifts, the California Alliance for Jobs was able to assist the campaign to pass Proposition 1A with $616,500, comprising 23% of the total amount raised by Californians for High Speed Trains – Yes on Proposition 1A – A Coalition of Taxpayer, Business, Environmental and Labor Groups and People from Across California Tired of Being Stuck In Traffic.

The national headquarters and the Northern California and Southern California locals of the Operating Engineers union combined for another $575,000, the Laborers union chipped in $100,000, and the State Building and Construction Trades Council of California gave $75,000. 

Top Ten Contributors to the Main Campaign Committee to Pass Proposition 1A (Includes Loans and Non-Monetary/In-Kind Contributions)

1

California Alliance For Jobs Rebuild California Committee

Union-Affiliated Labor-Management Cooperation Committee

$616,500

2

International Union of Operating Engineers Construction Union

$250,000

3

Operating Engineers Local Union No. 3 (Union & PAC) Construction Union

$250,000

4

Professional Engineers in California Government (PECG) Public Employee Union

$183,493

5

California State Council of Laborers Construction Union

$100,000

6

Parsons Brinckerhoff Americas Inc. Construction Design & Engineering

$76,500

7

AECOM Tech Corporation Construction Design & Engineering

$75,000

8

International Union of Operating Engineers Local No. 12 Construction Union

$75,000

9

Members Voice of the State Building Trades Construction Union

$75,000

10

HNTB Corporation Construction Design & Engineering

$63,000

Union involvement in pushing the high-speed rail wasn’t over with the 2008 election. In 2010 and 2011, when the California High-Speed Rail Authority was stumbling under a confused business plan and skyrocketing cost estimates, the head of the State Building and Construction Trades Council of California and regional building trade unions submitted commentaries to newspapers defending the planned rail program. And as appointees to the Board of Directors of the California High-Speed Rail Authority, the head of the State Building and Construction Trades Council of California and a representative of the Operating Engineers union kept the votes coming to move the project forward.

Now the unions get the rewards. Section 7.11.3 of the Request for Proposal for Design-Build Services for the first segment of the California High-Speed Rail project stated that “Proposers are advised that, subject to FRA [Federal Railroad Administration] approval, the Authority intends to develop a Community Benefits Agreement consistent with the Community Benefits Policy adopted by the CHSRA [California High-Speed Rail Authority] Board at its December 6, 2012 meeting with which the Contractor will be required to comply.”

And Section 10.1 of the Request for Proposal states that “The Authority [that is, the California High-Speed Rail Authority CEO Jeff Morales] will not make a recommendation for award of the Contract [to the California High-Speed Rail Authority Board of Directors] unless the successful selected Proposer has submitted the following…A letter of assent executed by the Proposer agreeing to be bound by the Community Benefits Agreement.”

This “Community Benefit Agreement” is commonly known as a “Project Labor Agreement.” In fact, a “draft” Project Labor Agreement is included as Addendum 8 in the High Speed Rail Authority’s bid documents for the Request for Proposal. (See my comprehensive analysis of the union “Community Benefits Agreement” for the California High-Speed Rail and the subsequent rebuttal from the Building and Construction Trades Department, AFL-CIO national headquarters.)

For construction unions, California’s High-Speed Rail project will yield a fantastic long-term return for their political investment. It remains to be seen if taxpayers see any worthwhile returns on their “investment” in paying for it.

Kevin Dayton is the President and CEO of Labor Issues Solutions, LLC and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.

Unions Creep Closer to Monopolizing California High-Speed Rail Construction

UPDATE (December 7, 2012): A article today in the Fresno Bee (‘Needy’ Workers Will Get Jobs on High-Speed Rail) about the “Community Benefits” policy approved on December 6, 2012 by the California High-Speed Rail Authority contains a stunning revelation:

Five teams of contractors have been invited to bid on the first major contract for a stretch of the rail route between Madera and Fresno. How the new policy will translate into the contract has yet to be determined, said Jeffrey Morales, the authority’s CEO. Potentially complicating the issue is that each of the five would-be prime contracting teams has already signed project labor agreements with labor unions. Morales said the existence of project labor agreements between the contractors and labor unions is independent of any action the agency takes.

So all five prequalified bidders have negotiated and signed Project Labor Agreements with construction unions. How did that happen? Why? Was there some kind of deal involving the High-Speed Rail Authority? Are the five agreements all the same? What do these union agreements contain? Will the public ever get the chance to see these agreements, which give unions a monopoly on the work?

California High Speed Rail Project Labor Agreement Mandate - Section 10.1

California High Speed Rail Project Labor Agreement Mandate – Section 10.1


At its December 6, 2012 meeting, the board of directors of the California High-Speed Rail Authority unanimously approved a resolution to establish a “Community Benefits” policy for construction of California’s high-speed rail system. The High-Speed Rail Authority promptly issued a press release with quotes from local elected officials in the San Joaquin Valley who like the concept of community benefits but apparently aren’t aware of the big-city union scheme behind the plan.

While a typical reader of www.UnionWatch.org is instantly alerted by the phrase “community benefits” to the likelihood that government is executing a special deal at the expense of taxpayers, the policy sounds innocuous and benevolent to the ordinary person. Staff of the High-Speed Rail Authority claimed before the board vote that this policy will enhance employment opportunities for economically disadvantaged and low-income workers, veterans, youth, unemployed, homeless, single parents, and people with criminal records. It will “ensure that California benefits as much as possible.”

There are numerous signs that the High-Speed Rail Authority established this policy to provide a strong incentive for construction contractors to sign a Project Labor Agreement with unions for construction of the $68 billion-$100 billion rail system, including related structures such as stations. Staff for the High-Speed Rail Authority reported that “different stakeholders” will participate in the implementation of the policy, and no stakeholder has been more involved in perpetuating this massive, costly project than the State Building and Construction Trades Council of California.

As I reported in a January 11, 2011 article in www.TheTruthaboutPLAs.com entitled California’s Top Construction Union Officials Love the State’s $100 Billion High-Speed Rail Project, construction unions have long sought a Project Labor Agreement in order to monopolize the construction workforce on this project. With the Community Benefits policy now in place, here’s what some of the most politically-astute California construction industry officials expect to happen:

  1. The High-Speed Rail Authority will award construction contracts using a “design-build” bidding procedure. Instead of awarding contracts to design a project and then awarding contracts to the lowest responsible bidder to build it, the High-Speed Rail Authority is authorized under state law to award contracts to qualified corporate entities that combine project design and construction work. It will select the design-build entities using a somewhat subjective list of “best value” criteria that could result in design-build entities winning contracts even if they do not submit bids with the lowest price. The California Department of Finance will approve the criteria to award the design-build contracts, and the State Public Works Board will oversee the contract awards.
  2. The High-Speed Rail Authority will indicate in its construction contract specifications that bidders will be evaluated in part based on their plan to conform with the Community Benefits policy. Potential bidders will either be explicitly informed or figure out that the chances of winning a design-build contract will be greatly improved if they commit in their bids to negotiate and sign a Project Labor Agreement with construction trade unions in order to comply with the Community Benefits policy.
  3. By using this strategy to implement a Project Labor Agreement, the board of directors of the High-Speed Rail Authority and their union cronies will avoid controversial and high-profile public votes to negotiate it and approve it. California taxpayers and the U.S. Congress will remain generally unaware that unions cleverly obtained a monopoly on the construction of the rail project, because reporters will have difficulty researching and explaining this complicated procedure and because the Project Labor Agreement will not be a matter of public record. And the High-Speed Rail Authority will avoid accountability for the Project Labor Agreement; it can portray the agreement as the contractor’s own internal private and voluntary business decision.

There are recent precedents for imposing Project Labor Agreements on large government projects in California while evading public deliberations and votes. Clark Construction negotiated and signed a Project Labor Agreement for the San Diego Convention Center Expansion Phase III and negotiated and signed a Project Labor Agreement for the new Governor George Deukmejian Courthouse in Long Beach. Both the City of San Diego and the California Administrative Office of the Courts claim that these Project Labor Agreements are not a matter of public record, and Clark Construction declines to provide the union agreements to the public.

There is one weakness in the High-Speed Rail Authority’s plot to give construction unions a monopoly on the rail project with Project Labor Agreements: representatives of the beleaguered California construction organizations opposed to government-mandated Project Labor Agreements and other costly union schemes are tough, experienced, and smart. They are exposing the scheme.

Representatives of the Coalition for Fair Employment in Construction, Associated Builders and Contractors (ABC) of California, the Western Electrical Contractors Association (WECA), the Plumbing-Heating-Cooling Contractors Association of California (PHCC), and the Air Conditioning Trade Association (ACTA) spoke at the meeting against Project Labor Agreements for the High-Speed Rail construction. In addition, a representative of the Bakersfield-based Kern Minority Contractors Association spoke during public comment and asked that both union and non-union contractors have the opportunity to work on the high-speed rail project. (The High-Speed Rail Authority is moving forward with building the first segment of the high-speed rail line in the San Joaquin Valley, basically from Fresno to Bakersfield.)

High-Speed Rail Authority chairman Dan Richard, a former member of the board of directors of the Bay Area Rapid Transit District (BART), concluded board discussion of the proposed Community Benefits policy by responding to public criticism of Project Labor Agreements. Chairman Richard declared that while no decision has been made about how the new “Community Benefits” policy will be implemented, he thinks Project Labor Agreements are effective in improving the efficiency of project delivery, reducing the number of conflicts, and providing a way for minority contractors to get work.

Chairman Richard also reported that he attended a December 5, 2012 meeting at which the minority community expressed very strongly that a Project Labor Agreement was the way to achieve the policy objectives. It appears that Chairman Richard was the keynote speaker at a “California High-Speed Rail Small Business Opportunity Conference” sponsored by the American Asian Architects and Engineers in San Francisco on December 5, 2012 and featuring Congresswoman Barbara Lee (D-Oakland/Berkeley). Of course, it’s contractors that will employ trade workers in the San Joaquin Valley, not San Francisco architects and engineers.

Chairman Richard also took a moment during the meeting to recognize two important people watching in the audience: Bob Balgenorth, outgoing head of the State Building and Construction Trades Council of California and former High-Speed Rail Authority board member, and Robbie Hunter – the head of the Los Angeles-Orange County Building and Construction Trades Council – who is the incoming head of the State Building and Construction Trades Council of California. Were these union leaders attending the meeting to express support for employment opportunities for the homeless, or were they in the audience to see another piece fall into place for a union Project Labor Agreement on what will be far-and-away the most expensive public works “mega-project” in American history?

Kevin Dayton is the President and CEO of Labor Issues Solutions, LLC and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.