Thursday, January 29, 2009

Is Milwaukee developer buying opposition to local hiring and fair wages?

Word out of City Hall is that Richard Lincoln, VP of the Mandel Group, a wealthy and politically connected Milwaukee development firm, has been making the rounds lobbying against the proposed MORE Ordinance that would require hiring and contracting standards for development projects that receive $1 million or more in city financial assistance.

The idea that the citizens of Milwaukee have the right to expect that taxpayer subsidized projects employ local residents and meet certain wage standards is know as “community benefits.”

It’s not too hard to see why the Mandel Group is working so hard against community benefits (they have 5 lobbyists registered to work on it).

Mandel has received millions of dollars in public aid for several projects, from Library Hill a decade ago to the North End project currently under construction, and they want to keep it that way. Of course they don't want to come out and admit how profitable it been to be drinking from the public trough. So they are circulating a short paper by Mark Eppli, chair of the Real Estate Department at Marquette University, in their effort to discredit prevailing wage standard requirement legislation.

Eppli’s “paper” is a selective and superficial look at a handful of construction projects that doesn’t meet the rigor of an introductory economics course. The assertions that prevailing wage standards for construction workers contribute to unreasonably high project costs and exclude minority workers are not drawn from the data in the work that Eppli cites.

Beyond the bad science, there is at least the appearance that Eppli’s “paper” is research for hire.

Eppli runs Marquette’s ACRE program designed to attract more minorities into the real estate profession. The Mandel Group is the primary financial sponsor of the ACRE program. City leaders should be asking is this research for hire, with a foregone conclusion designed to satisfy a major funder?

The major source of the data that Eppli uses in his paper is Cross Management Services. Cross Management is a firm that monitors Disadvantaged Business Enterprise contracting requirements on construction projects that is frequently retained by the Mandel Group. Cross Management has a direct financial interest in providing data that supports Mandel’s opposition to community standards legislation. You simply don’t bite the hand that feeds you.

Common Council members should reject this “research” for the propaganda it is.

Whether it is federal stimulus funding or City of Milwaukee TIF money, taxpayers and city leaders have a right to expect that taxpayer supported projects hire local residents, build real career pathways, pay prevailing wages and contribute to long-lasting economic development outcomes for workers and the entire community.

For decades the city has subsidized private developments assuming that the benefits would trickle down to employees and Milwaukee's neighborhoods. Milwaukee's nationally high poverty rates (7th) and the alarming rate of African American male unemployment (46%) demonstrate the failure of this approach.

Big developers have had their way with TIF for the past decades. It's time for them to accept hiring and wage standards as part of any taxpayer supported deal. Otherwise they’re free to forgo the public money. If Mandel Group really wants to aid minority workers in the City, then pay them the prevailing wage for construction employment!

The standards contained in the MORE Ordinance are a step in this direction.

9 comments:

Dave Reid said...

@Michael I'd say I wouldn't want to do anything that makes development more difficult in our current economic crisis.

Quite frankly I think many EBE firms would just like any sort of development projects to be starting, instead of the series that are halting right now.

And often enough developers agree to meet city EBE requirements on the portion of the project funded with TIF dollars, but my guess is that the push is to make it apply to the entire project. This might just lead to larger TIFs.

Maybe when the market gets better but man there's just no development going on at all, and new hurdles now seem problematic.

Dave Reid said...

Oh I'd also take a look at Prof Marc Levine's work. Just last year he argued that you could double the EBE requirements in Milwaukee and you wouldn't see a dent in the African-American joblessness rate.

He also added that the only dip in that rate in decades came during the Marquette Interchange and City Hall projects so we need a project on that scale to impact that number. Specifically light-rail would get lots of people working during construction, give them access to jobs once complete, and provide jobs once complete. It seems to me getting behind a rail initiative will do more to improve peoples lives than raising EBE requirement.s

jgoldstein said...

It is outrageous that these standards aren't already in place! After all, it is our tax $$ they are playing with.

Right now, contractors can hire low wage workers from anywhere on these taxpayer subsidized projects. I have seen immigrant workers who were never paid at all on TIF supported projects!

Access and training increase opportunity for unemployed people in our City. Would we really want to train them for low wage, dead end jobs?

I don't think so. We want to train them for prevailing wage jobs that will help rebuild our middle class!

This legislation will do more to attack the huge issues our community faces... crime, drug addiction and failing schools...than anything else we can legislate.

The MORE ordinance will help bring economic recovery to workers on Milwaukee's Main Street!

John Goldstein

pfendt said...

Tying TIF to responsible development will build community support for the City's investor role because they will see the tangible benefit of new job opportunities in addition to the eventual new tax base. This should help the development community get their projects moving faster. The Palomar Project went belly up because of a disagreement between the developer and DCD over the amount of the TIF. I think support could have been garnered for a larger TIF (though not $18m) if the broader community had known the quality of the jobs were being created.

Dave Reid said...

@Pam The Palomar project failed because it wasn't economically feasible. If anything new requirements would of required an even larger TIF, not smaller.

The goals are noble but even a doubling of EBE requirements will have little impact on joblessness in Milwaukee.

It just doesn't seem like the time to add any new hurdles to development projects, as we desperately need them.

PurpleAvenger said...

who's the "we" who desperately needs the projects? It's the unemployed & underemployed workers in our community - they REALLY need these benefits the most. If we bring them into the process, our whole community is stronger. Why should the city of Milwaukee keep spending more money that will be taken and spent OUTSIDE the city, instead of being kept here and helping us grow?

Dave Reid said...

@PurpleAvenger

The reason this is a bad idea is that development has already come to almost complete halt in Milwaukee. Adding cost when things are bad will slow development down and that won't help anyone.

And once again I'll point to Prof Marc Levine at UWM who explained before CED last year that doubling the EBE requirements would do little to impact the joblessness rate in the inner city.

If you want to use city funds to put city people to work, argue for public works projects (get behind transit). He showed that the Marquette Interchange and the City Hall project were the only thing that impacted the joblessness rate for african american males in decades!

Anonymous said...

Dave:

I disagree wholeheartedly. Your argument against a local hiring requirement is based on three points, all of which are false:

1) You assert that a hiring local requirement will make development more difficult. You provide no proof of this statement. In fact, other municipalities that have these requirements are out-performing Milwaukee's economy.

2) You imply that a local hiring requirement will curtail development in the current economy. Again, there is no proof of this statement. Also, other municipalities with this requirement are out-performing Milwaukee in the current economy.

3) The time isn't right for this policy in a recessionary economy. Again, no proof is offered. While on the surface it may seem a burden, the flip side is also true; by adopting these standards a developer can show that they really are attempting to help Milwaukee's unemployed and not just profit from municipal funds. Adopting such practices without having it forced upon them could build some solid relationships with the City and its people. It seems to me that adopting these polices now could be a strategic differentiator for a developer and help to garner themselves additional city contracts.

Finally, there are a number of variables which affect the economic performance of a municipality not just hiring requirements. So, to link a local hiring requirement with improved performance is a spurious link, but no more spurious than your three above examples. So we are left with our original questions: Should we adopt this policy?

My answers is yes; and let’s examine what kind of impact the policy really has on Milwaukee’s employment rate and the burden it really puts on employers.

Fred Schnook

Jennifer Epps said...

In these harsh economic times we have to make sure that we are getting the biggest bang for our taxpayer buck. That means ensuring that our money is used to create good jobs, with family supporting wages for other Milwaukee taxpayers. I live in the city, I work in the city, and I am dedicated to this city. There is no way I would support something that would harm the development of this city. The MORE Ordinance is the best way to ensure that ALL Milwaukee residents benefit from their investment in development projects. We are not anti-development, but good development projects are about more than just buildings. Which such limited resources we must prioritize our subsidies, by ensuring that the projects that receive our money create jobs for Milwaukee residents, provide training opportunities for Milwaukee residents, and help return stability to the Milwaukee community. This is our right as taxpayers, to demand accountability for our money. We have the right to restore hope to our communities by passing a comprehensive plan to address the unemployment crisis in Milwaukee. Someone commented that City Hall was one of the only projects to have an affect on the unemployment rate. That is because City Hall had development standards attached. All projects that receive as substantial a subsidy as $1 million in taxpayer dollars should be held to the same high standards. That is more than most of these workers will make in their lifetime, even with prevailing wage. I see development all over our city. In fact, you can't drive downtown, in the third ward, in the fifth ward, or on the Southside with out seeing something being built. If our money helped pay for those buildings, than the only just thing to do is ensure that we have the opportunity to work on them!