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March 11, 2009

Fair labor

Would imposing strict labor standards on private developers help or harm the city?

Before the Metro Council approved a plan last fall to expand Fourth Street Live, local union leader Joe Wise pleaded with the Democratic caucus to vote against it.

But his plea was unsuccessful, and the council finalized the deal with the Cordish Cos. — the Baltimore-based developer behind the downtown entertainment district — and invested $24 million to transform the old Louisville Water Co. block into a development called Center City.

“I expressed back then that the deal wasn’t a good one,” says Wise, secretary-treasurer of the Greater Louisville Building and Construction Trades Council, who opposed the agreement because it lacked key labor standards.

Although state law requires that prevailing wages be paid to laborers who work on big-ticket projects fully funded by local government, such projects make up only a small fraction of development in the city. Metro government has been reluctant to ask private developers to institute similar labor standards for fear of scaring them away.

Behind the scenes, a handful of council Democrats voiced concerns about the lack of labor standards in the Center City deal. In the end, however, the majority caucus pushed the sweetheart deal through.

Hoping to avoid repeat scenarios, Councilmen Jim King, D-10, and Rick Blackwell, D-12, drafted an ordinance establishing minimum labor standards for building projects that use substantial public financing.

A key provision of the ordinance would require developers receiving public subsidies of $250,000 or more to pay workers a prevailing wage. Unlike the minimum wage, a prevailing wage is the average pay given to laborers in a county or city. The prevailing wage varies, depending on the type of work.

In addition, the ordinance would require that at least 75 percent of construction jobs go to Kentucky and Indiana residents, and that 20 percent go to minorities and 5 percent to women. Also, 20 percent of contracts would be awarded to minority-owned businesses, and 5 percent to businesses owned by women.

“The Center City deal made it very clear that we’re somewhat haphazard in our approach,” King says.

The proposal is based on the labor agreement reached between the city and the Louisville Arena Authority, the entity behind construction of the new downtown arena. The council proposed a strict set of labor policies for the construction of the arena, but was met with opposition from developers, then-Gov. Ernie Fletcher, Greater Louisville Inc. and Mayor Jerry Abramson.

Ultimately, a compromise was reached, but now some council members want a set policy.

Critics suggest stringent labor regulations could hamper negotiations with would-be developers and block an economic rebound.

In a letter signed by Greater Louisville Inc. President Joe Reagan, the chamber of commerce argues the measure could torpedo job growth and development.

“The ordinance would drive potential growth away from our city, as it puts in place constraints that are radically different from the policies in our competitor cities,” Reagan writes.

 Although King calls the letter “political posturing,” he says conversations with the business community have been professional and substantive. As a result, he and Blackwell have already amended the bill, including raising the cap on businesses the ordinance covers to those receiving $250,000 or more in public assistance.

The proposed labor goals would be tracked by requiring contractors to report disbursement of wages and post prevailing rates on site. The ordinance also would allow any “authorized agent of Metro government” to question employees about the wages being paid. Republicans say that’s an unusual intrusion by government into private business.

Although it remains unclear exactly where the mayor stands on the proposal, Abramson previously balked at the idea of imposing mandatory labor standards on the Louisville Arena Authority.

Kentucky law requires that prevailing wages be paid to laborers working on projects that are funded solely by a local government and that cost in excess of $250,000. Chad Carlton, a mayoral spokesman, says Abramson supports the current standard, and has not yet review the ordinance.

Without speaking to the proposal, Carlton says creating a one-size-fits-all regulation could make Louisville less competitive.

“When you have a developer coming to a community and putting capital on the table asking the local government to partner, there’s a difference between being a partner and being a dictator,” he says. “The mayor supports the idea of local jobs at a fair wage, but he’s concerned about overstepping our bounds.”