Metropolitan Alliance pushes for 'responsible contracting' in housing

A six-month campaign by several unions and community organizations to increase construction of affordable housing by responsible contractors may be close to a result.

The effort is a project of the Metropolitan Alliance for Common Good (MACG), a multi-group labor-community alliance launched in May to fight for sustainable jobs, affordable housing, public education and access to health care.

Since July, a MACG committee made up in part of low-income housing advocates and building and construction trades union leaders has been meeting with officials of the Portland Development Commission (PDC), a city agency that oversees urban renewal construction projects. MACG is pushing a two-part proposal: Increase the share of resources the agency devotes to low-income housing; and commit to a "responsible contractor" policy on contracts to build new low-income housing.

On Dec. 18, the PDC gave the committee half an hour to explain its proposal. On Jan. 8, the commission is expected to respond.

Committee members predict the board will increase resources to affordable housing. MACG asked the PDC to earmark 20 percent of urban renewal funds for affordable housing, for people making less than half the area median income ($57,200 for a family of four.) Based on PDC projects in the last six years, 20 percent would amount to an average of $9.5 million a year - five times what the agency is now spending on affordable housing.

PDC officials rejected MACG's suggestion of a budget quota, but seem likely to agree to commit to an increased number of new units. PDC proposes to double its affordable housing goal - to build 4,500 new units, and preserve 1,500 existing units, over the next eight years. [The income threshold, however, would be set at 60 percent of the area median, which will amount to $140 a month more in rent.]

MACG ran into resistance to part two of its proposal: That PDC adopt a "responsible contractor" policy. MACG proposed that in order to be approved to bid on PDC-financed construction projects, contractors would have to have a record of participation in training programs, and have no history of violating health and safety, wage and hour, or other laws. Most importantly, "responsible contractors" would have to pay "prevailing wages," plus health and retirement benefits.

Under a federal law known as "Davis-Bacon," construction projects with federal money must pay workers the "prevailing wage" - rates set by the state for each region based on an annual survey of contractors. A state law known as "little Davis-Bacon" mandates the same requirements for projects using state money. PDC has claimed exemption from this requirement because most of its projects are funded by "tax increment financing." The way tax increment financing works, the city defines an area as an urban renewal district, and borrows money to make physical improvements in that area. Those improvements cause property values to increase, and then increased property tax revenues are supposed to be used to pay off the debt.

The PDC, backed by court interpretations, has said tax increment financing isn't public money and therefore the projects don't fall under the Davis-Bacon requirements.

Now, however, a recent Oregon Supreme Court decision has cast doubt on whether the PDC will continue to be able to use tax increment financing.

MACG has offered political support to the PDC to secure other sources of funding, but only if the PDC makes its projects worth fighting for - because they fund affordable housing and pay a livable wage to those who build it.

"The Metropolitan Alliance has been clear that we really see the two things tied together," said MACG committee member Nick Sauvie, executive director of Rose Community Development Corporation, a non-profit builder of affordable housing. "We don't think that people who build subsidized housing should have to need subsidized housing. We think there's an important opportunity, when the city is spending tens of millions of public money, for the people that build those projects to make a living wage."

PDC staffers have expressed concern that using contractors that pay prevailing wages could reduce the number of units they're able to build, and jeopardize the goal of awarding contracts to minority and women-owned businesses.

Metropolitan Alliance committee member Don Kool, an organizer with Plumbers & Steamfitters Local 290, disputes those claims. Several academic studies, Kool points out, have concluded that prevailing wage laws haven't increased construction costs because of higher productivity by the skilled workers who earn the higher wages. And the minority contracting issue is a red herring, Kool says: The NAACP is on record in support of prevailing wage laws, and several minority contractors testified to the PDC that awarding contracts to cut-rate contractors hurts them too.

"The reason we have prevailing wage laws," Kool said, "is that government is a big procurer of construction services - it prevents government from undercutting local wages and helps stabilize wages in the construction industry."

"Right now the way the PDC does these projects, it drags standards down," Kool said. "They're undermining community standards and devastating our memberships."

"The PDC is supposed to be to enhance the community standard of living," adds Wally Mehrens, secretary-treasurer of the Columbia-Pacific Building Trades Council. "Instead they undermine our members' living standards."

Faced with pressure from MACG, the Portland Development Commission may try to pass the decision on to a separate multi-agency committee chaired by Mayor Vera Katz aide Sam Adams. MACG leaders say if PDC declines to enact a responsible contractor policy on its own, they'd like the commission to at least recommend that Adams' committee approve one.

January 3, 2003 issue

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