Arena contractors fined for lack of Detroit workers

Louis Aguilar, and Christine Ferretti
The Detroit News

An estimated half-million dollars in fines have been levied on contractors working on the new Red Wings arena because the firms haven’t hired enough Detroit residents, according to city officials.

A recent report indicates about 40 percent of the 750 workers at the Little Caesars Arena site are Detroiters. Olympia Development had agreed to a 51 percent goal as part of a deal for $250 million in taxpayer-backed bonds.

The arena developer, Olympia Development of Michigan, is required to ensure that at least 51 percent of arena workers live in Detroit. That goal hasn’t been met during certain periods of the construction, which began last year and is still ongoing, officials say.

A recent report to city officials indicates that about 40 percent of the 750 workers at the Little Caesars Arena site are Detroiters, according to sources familiar with the data. There is some concern that percentage could go lower because of a shortage of skilled-trade workers such as electricians, according to a consultant involved in the arena workforce.

As part of the deal to allow $250 million in taxpayer-backed bonds to pay for construction of the arena, Olympia Development agreed to the 51 percent goal. It also agreed to award at least 30 percent of the construction contracts to Detroit businesses. The 30 percent goal is being met and surpassed, city officials said.

But the failure to meet the 51 percent workforce goal has resulted in contractors being fined, and that money has gone toward workforce training, according to the city officials and representatives for the Ilitch family, which owns Olympia Development. The number of contractors fined wasn’t provided Tuesday.

An inside look at the Little Caesars Arena project

“Where individual contractors and subcontractors fail to meet the 51 percent Detroit resident requirement, a noncompliance fee is paid with 100 percent of that applied to training Detroiters for skilled-trades jobs,” Portia Roberson, director of the city’s Office of Human Rights, said in statement.

The Office of Human Rights is the city department that monitors workforce agreements with developers.

The lack of skilled-trade workers who live in the city has been an ongoing issue for years, a consultant involved in the arena hiring and training said.

“Everyone is working side by side on this, the city, the developers and certainly the Ilitch organization,” said Douglass Diggs, of Heritage Realty Services LLC. “But in some ways, this was anticipated and that’s why the workforce training fund was set up.”

As a consultant to Olympia Development of Michigan, Heritage’s duties include monitoring the workforce hiring and acting as liaison with various government agencies. A spokesman for Olympia Development referred comment to Diggs.

Fines levied by the city can go toward an accredited apprenticeship training program that’s selected and approved by the city, and recognized by the building trade and construction industry. The money can also go toward the purchase of tools and equipment for training skilled tradespeople.

The money from contractors’ fines has gone toward workforce training.

In its ongoing work on the Little Caesars Arena and its surrounding retail and office space, Olympia has awarded more than $300 million worth of total contracts — nearly 60 percent — to Detroit-based businesses, according to Olympia. Nearly $500 million, or more than 90 percent, of contracts have been awarded to Michigan-based companies.

News of the lagging hiring targets comes as city voters prepare to take up dueling ballot proposals in November that seek to provide guarantees, including jobs, for certain large-scale projects in Detroit.

One of the measures, Proposal A, was community-driven. The other, approved by Detroit’s City Council, is Proposal B. Both proposals going to voters on Nov. 8 seek guarantees and other protections for communities where major development is planned. But the ordinances differ on enforcement, levels of investment and city involvement.

A community benefits agreement ordinance has been debated in Detroit for years. Such agreements, often negotiated by developers and either the city or neighboring community groups, generally address issues ranging from job opportunities to traffic and environmental concerns.

Former state Rep. Rashida Tlaib, who is part of the community group Rise Together Detroit behind the community-led ordinance, said the arena project’s failure to hire enough Detroit residents illustrates the need for a benefits law.

“Right now, that development agreement did not work,” Tlaib said. “Enough is enough. I think a lot of us in the city of Detroit are tired of people in the corporate welfare line.”

The city has touted at least a dozen major deals with enforceable, contractual community benefits agreements since 2014.

The $627.5 million, 20,000-plus-seat Little Caesars Arena opens next year. It’s expected to be the economic spark that will transform its 50-block surrounding area. Various entities linked to Olympia Development control a sizable share of the land targeted for the planned 50 blocks of development. That overall plan is called District Detroit.

Last week, Christopher Ilitch, president and CEO of Ilitch Holdings Inc., said “we’ve got about 52 projects right now on the board” for the 50-block area around the arena. Ilitch also upped the ante of how much the Ilitches may invest in the area.

“We are on track to be at about $2 billion,” in Detroit investment, Ilitch said. “We’ve announced about $1.2 billion and got about another billion yet to be announced.”