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Hudson Yards and New York’s Union (or Non-Union) Future

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Hudson Yards and New York’s Union (or Non-Union) Future

Open warfare over the long-running commercial project is part of a struggle for control of the lucrative Gotham construction market, especially in Manhattan. September 30, 2018
New York
Economy, finance, and budgets

Anyone stumbling across last month’s union protest at the National Football League’s Park Avenue offices might have thought that the target was the league’s much-discussed requirement that players stand during the national anthem. In fact, the demonstrators were mostly New York construction workers, and they were protesting the inclusion of Miami Dolphin owner Stephen Ross on the league’s new social-justice committee. A New York real-estate developer, Ross has angered unions by launching a campaign against their extravagant compensation and work practices at his gigantic Hudson Yards project on Manhattan’s West Side. Workers wanted to embarrass Ross after his firm, The Related Cos., filed a lawsuit contending that the unions’ failure to live up to an agreement to curb construction expenses has cost the company an astounding $100 million in overcharges. Behind the controversy is a larger union struggle to hang onto a deteriorating share of the construction industry in New York City, still the most heavily unionized and expensive building market in the country.

Hudson Yards is a long-running project to create a new commercial district in Manhattan. The real estate became available only after state and local government authorities approved the building of platforms over Manhattan’s West Side rail yards, which are below street level. Construction of the massive platforms opened up 28 acres of land for development, just blocks from the Hudson River; the plan will eventually encompass some 18-million square feet of office, residential, and retail space.

With the city’s construction industry, devastated by the financial crisis and Great Recession, still recovering in 2013, Related negotiated a so-called project-labor agreement with a consortium of trade unions—the Building and Construction Trades Council of New York—to reduce costs. The unions promised to maintain “standards of excellence,” which included adhering to safety procedures; sticking to common daily starting and ending times for workers; setting out compensation rates for each class of worker that allowed the cost-saving use of apprentices for many tasks; promoting a drug- and alcohol-free workplace; and avoiding strikes or work stoppages. In return for the concessions, unions would get the guarantee of thousands of jobs over a decade. That was appealing in a post-financial-meltdown city that had hemorrhaged 30,000 construction jobs.

Hudson Yards has been a boon to construction in the city. So far, says Related, it has employed 20,000 construction workers and paid them some $3 billion in wages—and nearly a decade of work remains. In its lawsuit, however, Related says that the unions have failed to live up to their end of the bargain. “During the six years of construction at the [Eastern Rail Yards], defendants have in effect repudiated the PLA by condoning, if not actively participating in, various corrupt practices, including failing to work a full day, failing to uphold safety agreements, undermining the discipline essential to a safe workplace . . . failing to provide agreed-upon discounted labor rates . . . and coordinating a campaign of protests, rallies and defamatory hand-bills and allegedly employing a noted labor organizer . . . to conduct a campaign” against Related and its affiliates.

Among the examples of corruption that the lawsuit cites is one employee, who, according to the union’s implausible claim, worked a 12-hour day for 365 days straight, earning $600,000. Other workers—one the brother of a high-ranking union official—fetched coffee, getting paid an outlandish $42.48 an hour ($69.87 for overtime) for the service, Related alleges. The lawsuit charges that unions made few efforts to adhere to agreements on staffing levels, including the use of apprentices for some tasks. Related also contends that, after it started building a nearby tower that wasn’t part of the PLA and used some nonunion labor for the job (about 8 percent of the workers, it says), the trade council began a war of harassment against the company.

The building council disputes Related’s claims. It accuses the company of engaging in a “race to the bottom” on compensation by trying to cut deals with nonunion shops and individual unions willing to work alongside nonunion labor. The head of the union coalition, Gary La Barbera, calls Related “greedy,” and his group has also filed a labor grievance against the employer for conducting unlawful “surveillance” of union members. Related’s lawsuit in turn slams La Barbera, noting that a court-appointed Teamsters investigator had accused him of violating his fiduciary duties as a union chief by not properly investigating why a trucking firm failed to pay $258,000 into a union-benefits fund.

The open warfare over Hudson Yards is part of an ongoing struggle for control of the lucrative Gotham construction market, especially in Manhattan. Over the years, developers have made headway using nonunion work on residential sites. Those advances came first on small projects in the city’s other boroughs, but over time, so called “open shops,” where project managers open up bidding to nonunion construction firms, spread to increasingly bigger projects across the city—among them, large residential apartment buildings that unions once thought beyond the capabilities of nonunion builders. In particular, city-designated “affordable” housing projects, which set aside a certain percentage of units for low- or middle-income residents in exchange for tax breaks, began employing nonunion workers to keep costs down. While the Building and Trades Construction Council says that it still boasts a 65 percent share of work on residential towers with 100 units or more, a 2016 study by the Real Estate Board of New York, using city planning data, found that only 18 percent of large affordable-housing buildings were built using exclusively union labor. The shift is partly responsible for a steady decline in union representation within New York State’s construction industry, from nearly half of all workers in the early 1980s to about 30 percent today.

The move toward nonunion work has accelerated due to the rising cost of New York City land and the increasing burden of property taxes, among the highest for major American cities. Over the last ten years, as real-estate assessments have grown during the recovery, the amount of property taxes that the city collects has doubled, to $26 billion. Such exploding costs have made the savings from nonunion work look ever-more attractive to developers. A 2011 study by the Regional Plan Association, a planning group, estimated that nonunion construction jobs lowered compensation costs by about 20 percent, on average. When the industry boosted the use of PLAs after 2008, the goal was to match those savings with union labor, but most of the developers surveyed said that they saved just 2 percent to 4 percent in costs, the RPA reported.

Construction unions still wield considerable power in New York, and their members have plenty of work completing well-paying jobs in the public sector, thanks to state mandates that government building projects pay “prevailing wages”—that is, the equivalent of union wages. That work is unlikely to diminish soon. Earlier this year, Governor Andrew Cuomo announced plans to spend $150 billion on new state infrastructure over the next five years.

However, the risk for private developers in New York, especially Related, is growing rapidly. Over the past 20 years, the city’s development market has been shaken twice—once by the post-9-11 downturn, and then again by the 2008 crash, which hit the city’s financial market head-on. Though the Manhattan market is soaring again, Related’s efforts to transform the undeveloped parts of the Far West Side will take years, and the company knows that it will likely have to survive at least one major market downturn before it finishes. Spending an extra $100 million here and there because of excessive labor costs is daunting, even in New York. What’s at stake will ultimately amount to far more than that sum, as other developers consider whether they can afford to keep building in the city.

Photo by Stephanie Keith/Getty Images

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