Organized Labor

As the Avalos “local hire” ordinance takes full effect, someone needs to give an honest account of what that effect is.

The Trades were so vilified by advocates of the ordinance before and after its passage that few San Franciscans will trust us to give that account.

Nobody should trust City government to give it, either. Politicians who voted for it or who support it in hope of election – including now Mayor Ed Lee – benefit by claiming it as a triumph, whatever the facts may be. City bureaucrats who administer it benefit by calling it a success, because they justify their jobs.

We need a respected, neutral third party, preferably an academic institution, to tell us what the ordinance is doing and what it is not.

This is important because the ordinance says that the Board of Supervisors shall review it in three years, after its mandate has reached 30 percent, to decide if we move to 35 and continue to march toward 50. Without a full range of solid facts the board’s decision, which will be political anyway, will be entirely political.

Three subjects in particular should be watched: Expense, accomplishment and residency.

The City Controller’s office has predicted the ordinance will increase City contracting costs by 1 percent, or $9.3 million, in its seventh year, when the mandate reaches 50 percent. Additionally, the City will need $1.6 million to administer it. Total expense will then be $10.9 million.

The ordinance’s advocates have called the Controller’s estimate high. But in ENR California (April 6, 2011) Andy Ball, president of Webcor Builders, who knows something about construction, said contractors might raise bids as much as 15 percent under the ordinance. This could increase annual contracting costs by as much as $141.1 million, including administration.

Actual expense will be hard to determine, easy to hide. Tracking it will mean tracking not just increases in City contracting costs but comparing them to increases for directly comparable work in nearby jurisdictions while controlling for differences in bid specifications, prevailing wage, local taxes and other factors.

The actual level of the ordinance’s accomplishment will also be hard to determine, easy to obscure. Prior to its effective date, percentages of local hire hours were figured only on hours worked directly on City projects. Hours worked by City residents on other projects for the same contractors were uncounted. The ordinance allows contractors to credit against mandated percentages hours worked by City residents on projects that are not City work. To get a true picture of before and after, those hours on non-City work will have to be backed out of the percentages.

Problems with determining residency and ease of establishing residency for out-of-area workers will also obscure the actual level of the ordinance’s accomplishment or failure. Contractors who have worked in Detroit, which has a similar ordinance, tell me cheating on residency is rampant.  The Avalos ordinance makes prerequisites for residency the same as for voter registration.  These involve a very short time in the City and the “intent” – always hard to disprove – to make it a principal residence. Usually there is no economic incentive for false voter registration; there are penalties for it. The Avalos “local hire” ordinance provides a major economic incentive but no penalties for false residency.

It also provides an incentive for workers in a down economy simply to move here. This might help City shops and businesses, but does little for the local underprivileged workers the ordinance purports to serve.

Avalos was quoted in the San Francisco Examiner (April 18, 2011), “I would think that the union leaders would want to make sure that members were not changing their addresses in order to comply with the law.” We’re not going to knock on doors or shine flashlights in car windows in the dark of night to see if someone actually lives where he or she says. Avalos knows this; he is setting us up as scapegoats for the ordinance’s inevitable problems.

Determining residency won’t be easy for an institution performing a neutral third-party study, but its researchers should have the advantage of promising anonymity to workers and of demonstrating that nothing is gained and much lost by breaking this promise.

The City shouldn’t fund the study, then; this would compromise its credibility and make it impossible to demonstrate to workers that they can believe a promise of anonymity. The same charitable foundations that funded the “stakeholder meetings” prior to the ordinance or funded its advocates in the name of “social justice” should help fund the study.  Those foundations should want to see if their dollars have achieved their ends.

The ordinance is a grand experiment. To reveal the truth, the experiment must be conducted with complete impartiality, with maximum accuracy and under controls that minimize interference from extraneous factors.

The foundations should insist on all this. Then they should pony up, and get us the facts.