San Jose, Calif., Weighs Boost for Construction Project Workers (Corrected)

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By Joyce E. Cutler

Private San Jose, Calif., construction projects that receive “substantial” subsidies including tax breaks would have to pay prevailing wages and hire local workers under a proposal the city council is expected to consider next week.

Mayor Sam Liccardo and labor representatives crafted a compromise proposal that would sidestep a union-backed ballot initiative to expand the paying of prevailing wages and local hiring on private development in San Jose. The city council on April 3 will consider ordering staff to draft a law on the issue, Liccardo told Bloomberg Law.

“There are three basic challenges we’re trying to grapple with. One is a severe shortage of affordable housing and of housing supply generally; substantial shortage of construction labor, which are driving up construction costs; and third, a growing gap between those who are benefiting from the great prosperity here in the Bay Area and those who are gasping for air with the rising tide,” Liccardo said.

Local Standards

The proposal would require that employers on the projects pay a wage-and-benefits package that’s at least equivalent to the state-determined levels for the work and geographic area. At least 30 percent of the workers on a qualifying project within the city would have to live within 50 miles of the job site. A quarter of apprentice hours would have to go to disadvantaged workers. Projects would have monitoring and compliance provisions.

Projects that receive public subsidies, including money, land, or other direct financial assistance or a substantial reduction in fees or taxes would be covered. The proposal as drafted doesn’t define a dollar amount for substantial public subsidy. The details are expected to be clarified when staff returns with draft language for the ordinance, Louise Auerhahn, economic and workforce policy research director for Working Partnerships USA, told Bloomberg Law.

A separate proposal the council will consider would require community workforce agreements on public projects of $3 million or more, which would mandate good faith standards for hiring local and disadvantaged workers and include additional oversight.

“The end goal is to provide good quality jobs to local workers. And whether we do that by way of initiative or reaching a compromise by the more conventional channels is not so important to us,” Ben Field, South Bay Labor Council executive officer, told Bloomberg Law.

Union-Backed Initiative

The agreement was reached after negotiations with the South Bay Labor Council, Working Partnerships USA, the Santa Clara-San Benito Counties Building Trades, and the Mechanical, Electrical, Plumbing, and Sprinkler Fitters (MEPS) unions, Liccardo said in a memo to the council.

“One of the best ways to ensure that good quality jobs go to local workers is to provide a prevailing wage,” Field said March 23. “One of the basic problems that we’re seeing here is middle class jobs are disappearing. A large part of the reason is the construction workforce is not being paid adequately.” Would-be construction workers aren’t going into trades or crafts where the wages are depressed.

“The basic idea is if we require that on subsidized projects that the workers get paid the prevailing wage, it’s much more likely that those workers are going to be local workers,” Field said.

The unions were promoting the “Build Better San Jose” initiative that comes as the construction labor market is tight and tech employers including salesforce.com Inc., Lyft Inc., and Twitter Inc. are backing proposed statewide zoning changes to encourage housing development.

“Part of the housing challenge is lower-wage workers are not being paid enough to afford housing that is being built, and construction workers are one of those,” said Auerhahn.

Business Opposition

The original union-backed initiative would have triggered prevailing wages and other provisions on residential developments of 100 units or more in San Jose and nonresidential projects of 100,000 square feet or more. The business community opposed the measure.

“I was a union drywall mechanic for several years working my way through college and have huge empathy with union construction workers struggling to afford to live in this region,” Carl Guardino, president of the Silicon Valley Leadership Group, a trade association representing nearly 400 valley employers, told Bloomberg Law. “But it’s not a solution when it dries up their work in the largest city in Northern California and makes new rental and for-sale homes more expensive for 100 percent of people seeking those homes.”

Guardino applauded Liccardo for “bringing all sides together, truly looking at data rather than dogma, and still allow development in his city, creating jobs, and not exacerbate the costs of homes for his constituents.”

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