Bishop: Labor Piece Agreements . . . as in Piece of The Pie

Thursday, August 20, 2015


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Providence City Councilman David Salvatore is the latest in the line of status quo politicians striking the pose of adult-in-the-room by chiding the hotel workers’ union (known as UNITE HERE) for their politicization of tax breaks for Providence hotel heavyweight Procaccianti. Somehow it doesn’t occur to the Councilman that it was Procaccianti who first politicized the process by asking for different tax treatment than other citizens. And it was actually the Providence City Council that invited this by raising commercial taxes so high that they threaten the viability of Providence’s economy.

Councilman Salvatore says that the Council should be “laser focused on economic development” and should remove itself from “conversations that need to take place between private labor unions and the business community”. I couldn’t agree more with this sentiment, but Councilman Salvatore fails to mention that these tax breaks (that he has a record of voting for) are already inherently political according to his own definition, because they essentially mandate union construction.

So when the Councilman can explain why it is necessary to give a leg up to construction unions but not the hotel workers union, then we might actually be having a discussion instead of listening to hypocritical pontification.

I had that conversation with Buddy Cianci, another promoter of the Procaccianti project, on his radio show. At least Buddy was frank enough to recognize the point. His answer is that the construction trades were influential enough to get their feather bed into the agreement in the back room and the hotel workers were not. Apparently public process in Buddy’s opinion is all to be carried on by who you know and not through advocacy at public hearings and amending policy through transparent development.  I’m shocked.

And these union provisions in city tax breaks give ‘labor piece’ alright, as in piece of the pie. They can cost developers as much as 15% or more in additional labor costs -- millions of dollars and sometimes, tens of millions on big projects.  That means the breaks paid for by other city taxpayers have to be even bigger in order to cover that higher capital expense. That doesn’t sound “laser focused on economic development”.

Who’s against Cranes?

But be absolutely assured that if the Council followed the lead of North Kingstown at the Quonset industrial park and provided 6 year tax stabilization agreements with no apprenticeship (read union) requirement that it would be the trade unions knocking cranes over rather than see them in the sky.

Another reason the city should shed these provisions is that they are illegal, preempted by federal benefits law under a 1st Circuit decision handed down last year: Merit Const. Alliance v City of Quincy, 759 F.3d 152. A coincidental appellate panel of three Rhode Island federal judges in this Massachusetts case held that apprenticeship is an employee benefit plan. Thus it is comprehensively regulated by the federal law known as ERISA and cannot be mandated by cities or states.

Back at the Hotel . . . is labor peace needed

Meanwhile, UNITE HERE, the union trying to organize workers at several Providence hotels owned by The Procaccianti Group, seems to want to use the proposed tax treaty as leverage for a labor peace agreement. Such private agreements on union election conditions can go above and beyond what is required by the labor relations regulations to provide a neutral setting without undue influence from either the hotel owner or the union.

UNITE HERE has argued that these Procaccianti hotels in Providence have created a hostile environment for organizing and treat workers poorly as a matter of pay, scheduling and overloading them with work. If that is true, it is just the kind of situation that unions were designed to remedy in the first place. But, of course, a union must maintain that these problems exist to justify anyone joining and paying dues.

Is it for the City Council to try to figure out which party in this dispute is more reliable? David Salvatore is right that the Council ought not to mistake itself for the labor relations board. But they have already opened that can of worms by becoming virtual agents of the construction trade unions. Can anyone blame the hotel workers who actually worked on City Council campaigns for asking for similar consideration?

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Shame on Salvatore and Cianci, if what they care about is economic development, for not asking that these tax breaks be purged of favoritism to anyone except the taxpayer. If there are minimum standards to be met, that should be the case for anyone building. These breaks should not drive up the costs of projects in the name of improving the economy of a city that is already known for being too expensive to build in!

What ought those minimum standards be? Here I have less sympathy with the hotel workers’ union that looks more like a social movement lately. They are less about making hotels run well for both employees and guests, and more about rectifying the perceived powerlessness of individual employees in the face of intransigent management. So UNITE HERE tallied victories like the employee retention ordinance in 2009 that prevents firing employees for 3 months after ownership changes.  And then they took a run at setting a minimum wage for hotel workers at $15.

Of course these undertakings would affect both union and non-union workers (as would have layoffs if hotels closed or cutback in response). These are not activities you undertake for workers you represent in a technical sense but an effort to establish that you speak for hotel workers in some more general way. But how can a union speak for people it doesn’t represent?

Is there any middle ground?

Isn’t that the crux of this dilemma. Can they win the right to represent Procaccianti’s employees and isn’t that where wages and job stability are addressed, not at the City Council? It is useful for those in the business community to hear that the labor relations process they conceive to be stacked against them, and rightly so, is found equally unavailing by workers who think they can’t get a fair shot with Procaccianti.

It may fall to a figure such as Mayor Elorza to help arbitrate the bitter struggle of wills between an important cog in Rhode Island’s hospitality economy and the equally important citizens who hoped that jobs in that industry would be more than just cogs in a machine.

Sadly, it is probably a non-starter to ask him to do the right thing and help strip all favoritism out of these agreements. Providence taxpayers will be stuck with millions extra paid for construction on these projects and resolution of their legitimacy may be left to the courts.

But there is a road map for the mayor. Labor peace agreements have been struck with hotel workers in other cities where large public subsidies have gone to hotels. While the agreements vary, they generally don’t require unionization and stop short of endorsing card check organizing. Rather they lay out parameters for neutral elections – essentially prenegotiating what could become unfair labor complaints and endless appeals after the fact.

To accomplish such agreement in this impasse would be a major accomplishment for the mayor. But he will need to have the resolve not to accept status quo arguments that this redevelopment and the tax breaks to make it happen are necessary, as that pretty much concedes Procaccianti’s position to begin with.

Tax Breaks aren’t the long term answer

If giving tax breaks to spur development in downtown were alone a solution to Providence’s woes, the city would be on a much more serious upswing given the millions already given away. And giving the state carte blanche to give away more of the store on the I-195 land that was originally promised to augment Providence’s non-profit challenged tax base was a disappointing step in the wrong direction.

No surprise that it was equally urged upon us by the trade unions who are addicted to subsidized development where construction jobs flare brightly like a roman candle and, when it goes out, they are back to begging at the state house and city hall (see, e.g., the Pawsox Stadium proposal).

When there is a sign that all Providence commercial taxes (which are double the rate of residential taxes) stand to be reduced, then we can loose the reputation as the city that is unfriendly to business. Up until then, whether we make a hotel of the Fogarty building (or a ballpark of a park) is small potatoes, and not the least bit of evidence one way or another about Providence’s receptiveness to economic development. 

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Brian Bishop is on the board of OSTPA and has spent 20 years of activism protecting property rights, fighting overregulation and perverse incentives in tax policy. 


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