By Kevin Haas
Rock River Current
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ROCKFORD — City Council members are considering attaching a union labor agreement to a massive financial deal intended to spur the $420 million redevelopment of the Barber-Colman factory campus on South Main Street into a mix of apartments and businesses.
Proponents of requiring the labor deal say it ensures skilled workers will handle construction and it curtails potential work stoppages, but critics say it threatens to kill the project outright by adding unknown time and costs to the development. They also contend the labor requirement will prevent the developer from meeting its commitment to hiring a significant number of minority-owned and women-owned contractors.
The labor deal is the last major sticking point for some aldermen in support of the overall project.
City Council is slated to vote whether to approve the redevelopment deal on Monday, but before they do an amendment is expected to be proposed that requires a project labor agreement, or PLA. Such agreements are a form of collective bargaining between contractors and unions, but this would be the first time in city history one was required as part of a redevelopment agreement, according to City Hall administration.
“In a project this large and potentially transformational it’s important that we have all the key stakeholders happy and fully invested from the beginning, rather than have any controversy or strife make what should be a really positive development become one that has unnecessary animosity surrounding it,” said Alderman Mark Bonne, a Democrat who represents the 14th Ward.
Bonne and fellow Democrat Jonathan Logemann, who represents the 2nd Ward, are expected to put forward the labor requirement Monday.
“I view it as a protection on the taxpayers’ investment,” Bonne said. “It guarantees that there’s not going to be any picket lines or work stoppages. It really is a way to make sure the project is delivered on time, on budget, if not under budget.”
It ‘will kill the project’
Milwaukee-based developer J. Jeffers & Co has already agreed to pay prevailing wages, the state-mandated pay on public projects that are typically union rates.
Requiring a project labor agreement could limit the pool of contractors that can bid on construction as the developer tries to work within the federal Minority Business Enterprise, Women Business Enterprise and Disadvantaged Business Enterprise programs. Those programs are intended to provide more opportunities for socially and economically disadvantaged workers.
“This is in no way a statement that it is not our desire to make this a full union job that can also meet the requirements of MBE, WBE and DBE,” said Brian Loftin, senior vice president of development for J. Jeffers. “We actually are committed to working to do that.”
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He said the company is soliciting bids from more union contractors to try to meet both goals, but a project labor agreement isn’t necessary to do that.
“We’d love to have (union trades) involved fully in the project, but we’re also balancing multiple other requests from the community as a whole,” he said. “We remain open to reaching the goals that everybody wants us to achieve.”
The bigger issue for developers is the time negotiating a labor agreement could add to the development, and how that could add costs with interest rates rising and construction costs ever-increasing.
While the city has never required a PLA on a redevelopment deal, it was mandated to be part of the city’s host agreement with Hard Rock Casino. It took two years from the time the host city agreement was approved to the time the PLA was finalized, according to Todd Cagnoni, city administrator.
“PLAs are complicated. They’re not all created the same. Sometimes PLAs can take years to come to fruition,” Loftin said. “Time is the biggest killer of all deals and we’re in a particularly challenging time because of the volatility of interest rates.”
“A change of rates of even 25 basis points has the implications of hundreds of thousands of dollars of increased costs on this particular project.”
Developers already have term sheets in hand from multiple lenders as they prepare to close on the financing and begin construction this summer.
“A PLA would be a material change to that, to which no one can quantify what that would mean, which would mean a potential pulling of the term sheet,” Loftin said. “That would mean we’re back at the drawing board in terms of moving this project to a close.”
Cagnoni was more blunt in his description of what a PLA would do to the project.
“The condition of a project labor agreement will kill the project if it’s mandated through the development agreement,” he said. “We’ve already had the developer say it’s not the development agreement that we’ve negotiated or submitted to council. By adding that condition, your efforts are to kill it.”
Choosing who to believe
Bonne, one of the aldermen behind the push for the labor deal, doesn’t buy the claim that it will kill the project. Especially since the developers have invested roughly two years and millions of dollars to bring the project to this point.
“It’s a pretty standard negotiating tactic to take that position. You don’t want something, so you threaten to walk away if something is forced upon you,” Bonne said. “I just don’t believe that with $2 million invested so far and two years of time that another two weeks negotiating with labor or a requirement to have a project labor agreement” would stop the deal.
Bonne and Logemann also believe that unions can meet the diversity requirements, something that has been disputed.
“There is a deliberate push to increase diversity within the ranks of the local labor pool,” Logemann said. “I trust labor when they say we can meet the diversity requirements set forth by the project.”
Bonne said that issue of trust is key to the entire deal. He said he and other aldermen have to make a judgement call because union trades believe they can meet the diversity goal, and developers don’t think it can be met.
“It comes down to who do you trust more,” Bonne said. “For me, the labor building trades leadership are people who I know who are local.”
“The workers who are represented by the building trades, again, are all of our constituents and people who live in our neighborhoods and their kids attend our schools, versus an out-of-state developer.”
Logemann also said he doesn’t expect a labor requirement to threaten the overall deal.
“It might extend it a little bit, but for Pete’s sake this is a more than $300 million project,” he said. “There’s a lot of smart people negotiating this deal. I think we can get it done.”
He said the redevelopment agreement should not have gotten this far without buy-in from unions.
“If we’re talking about this seven days before we take this vote I think that’s kind of a failure of overall negotiations on the developers part to engage a significant key stakeholder: labor,” Logemann said in an interview Monday.
‘A big number is still a big number’
Cagnoni said in past redevelopment deals it has been the city’s position to let developers reach their own project labor agreement rather than mandate one.
“We’ve generally allowed the private sector to make that determination, understanding that’s typically a negotiation between the developer and the contractors and organized labor,” Cagnoni said. “There’s a sense of competitiveness that gets removed if its mandated. You’re limiting the pool of potential contractors to bid on the project. So historically, that’s why it’s never been required within a development agreement.”
He said without requiring the PLA, all contractors will be able to bid on the project.
“Organized labor is doing absolutely what they need to do for their members, I understand that,” Cagnoni said. “The city of Rockford always had a great relationship with organized labor, but they’re not the ones who bid on the project. It’s the contractors that bid on the project.”
The city estimates that at least 70% of the work will be done by union workers.
“One of the reasons is that this (project) is going to have high minority contractors, which is good, and not everyone is in the union,” said Rudy Valdez, president of SWIFTT, a nonprofit economic and community development organization that advocates for south Rockford.
Valdez made that comment on June 20 before a City Council committee voted unanimously to move the redevelopment agreement forward. He warned aldermen not to risk the deal by requiring a PLA.
“If it’s going to be 70%, or whatever, 70% of a big number is still a big number,” Valdez said. “Zero percent of an even bigger number is still zero.”
Logemann said that non-union contractors could still work on the project if they abide by the terms of the PLA.
“So essentially they’d be acting as a union contractor for the duration of the contract,” he said.
He said he heard stories from his uncle, a union tradesman, about having to return to sites to fix mistakes by non-union workers. Requiring the labor deal will prevent that, he argues.
“It protects the project. It prevents labor strife from delaying the project any further,” Logemann said. “My uncle is a retired tradesman, and I can remember him saying that the work I do is worth two to three non-union workers because of the efficiency at which I work.”
Bonne also argued that union labor is key on what could be a challenging project.
“It also ensures that we have skilled workers on what is really a tricky job site because those buildings are very old and decrepit and they’re falling in on themselves,” Bonne said.
‘Change it forever’
The former Barber-Colman factory has been vacant for decades, and the city has owned it since 2002.
It would sell the property for $500,000 to J. Jeffers as part of the redevelopment deal, but it would also provide a $6 million cash advance and two no-interest loans totaling $10.25 million.
The loans would be repaid over 17 years starting in February 2030.
The city would also reimburse $3.5 million in infrastructure costs, including $1.5 million that comes from city water funds. The rest comes from federal American Rescue Plan dollars. And the city would turn over a $2 million environmental cleanup settlement to the developers.
In turn, the developer is expected to transform the site into 964 living units and roughly 130,000 square feet of commercial space over about 10 years.
“The city has presented the best possible scenario with regard to being as fiscally responsible as we can with taxpayer dollars and also labor is getting a very fair amount of the project as well,” said Gabrielle Torina, who represents the 5th Ward where the Barber-Colman campus is located.
She said aldermen should support the deal without the PLA to ensure the project happens.
“To me, a vote against a PLA is not a vote against labor,” she said. “It’s a vote for the most likely scenario in order to make this project happen.”
Torina made a passionate plea in favor of the project last month, and she has reiterated on numerous occasions that south Rockford residents often feel like the city has forgotten and ignored their side of town. The Barber-Colman campus has stood as a symbol of that, as the hulking mass of brick and broken windows has loomed over the south side.
“It’s not just a building. This is a 26-acre property. That is almost 20 football fields of blight that this community has to look at for decades,” Torina said. “It’s time to put an end to that. It’s time to be on the right side of history and make a decision for this community that ultimately is going to change it forever.”