Wednesday, October 12, 2016

Arena Contractors Fined $500K For Not Hiring Enough Detroiters
JC Reindl
Detroit Free Press
6:20 p.m. EDT October 12, 2016

The City of Detroit has levied about $500,000 in fines against several contractors working on the new Red Wings arena for failing to hire enough Detroiters.

No fewer than 51% of the estimated 5,500 jobs involved in building the $627.5-million Little Caesars Arena are required to go to Detroit residents.

But some arena contractors have fallen short of meeting their hiring targets, perhaps because of a lack of available skilled-trades workers in the city.

So far, about $500,000 in penalties have been paid for noncompliance with the 51% minimum, city officials said. The lower the number of Detroit residents, the higher a contractor's fine.

The jobs requirement was set by a development agreement between local government and the Ilitch family's Olympia Development, the arena's developer.

Neither the number of fined contractors nor the percentage of Detroiters among the arena project's total workforce were available, city officials said.

In the lead-up to construction, Olympia Development held job fairs across the city to attract residents to arena construction jobs as well as skilled-trades training programs for such jobs.

Portia Roberson, director of Detroit's office of human rights, which monitors and enforces the hiring requirement, said the city believes Olympia Development has made an honest try to recruit residents to fill the jobs.

"I don't think there's any lack of effort on their part to get as many Detroiters involved as possible," she said Wednesday.

All money from the fines has been going to programs for training Detroit residents in the skilled trades, so that they're ready for future developments, Roberson said.

"Where we have not met the 51% goal, we have worked with the unions and the city to put together a training program where those dollars can be used to train residents," said Douglass Diggs, president of Heritage Realty Services, which was hired by Olympia to help with arena workforce training and hiring.

The 51% local hiring requirement was written into the arena deal to ensure that a wide swath of Detroiters benefit from having such a large project in their city with considerable taxpayer subsidies. The arena's public subsidies include $250 million in state-issued bonds, plus $35 million in previously collected downtown property taxes.

In addition to the hiring mandate, 30% of the total value of construction contracts are required to go to Detroit-headquartered and Detroit-based businesses. Officials have said the project is in compliance on that measure.

Little Caesars Arena is on schedule to be completed next year and open by September 2017 in time for hockey season. The new arena will be part of a broader planned sports, entertainment and residential district, situated between downtown and Midtown, in a formerly rundown part of Detroit's once-notorious Cass Corridor.

Voters in Detroit will decide next month on competing ballot proposals that could lead to similar hiring mandates in future publicly subsidized projects in the city.

Proposal A would require developers of projects costing $15 million or more with public subsidies of at least $300,000 to meet with community members to devise a so-called community benefits agreement.

The idea is backed by Detroit City Council President Brenda Jones and a coalition of community groups called Rise Together Detroit. But Proposal A is opposed by over a dozen labor unions, who say it would hinder the city's recovery and encourage developers to go into the suburbs instead of Detroit.

Proposal B would set a higher threshold for community benefits agreements: a project worth a minimum $75 million getting $1 million or more in subsidies. And neighborhood groups would serve an advisory, but not controlling, role in the negotiations. Proposal B is supported by Mayor Mike Duggan's administration and some labor unions.

Those who support local-hiring mandates with hard penalties have cited a 2014 revelation that Marathon Petroleum initially created only 15 jobs for Detroit residents despite receiving a $175-million tax break from the city for a refinery expansion in southwest Detroit.

Contact JC Reindl: 313-222-6631 or Follow him on Twitter @JCReindl.

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