LCA contractors fined $2.9M over Detroit hires

Louis Aguilar
The Detroit News

Dozens of the contractors building Little Caesars Arena have been fined a total of $2.9 million as of March for frequently not hiring at least 51 percent of Detroiters at the ongoing construction site, according to the latest data collected by the city.

And that total is expected to be even higher during the push to complete construction of the $862.9 million sports and entertainment complex by early September, based on the monthly data compiled by the city agency monitoring the workforce agreements on construction sites, said Portia Roberson, director of the city’s Office of Human Rights.

An average of 27 percent of total hours worked at the arena site were performed by Detroit residents from April 2015 to March 2017, the latest monthly data available. It’s been two years, August 2015, since at least 51 percent of hours worked at the site was done by Detroit residents, data shows. The percentage of hours worked is the measure the city uses to determine how many residents the individual contractors have working at the site.

In March alone, the city cited 53 of the contractors with fines ranging from $137,613 to a unit of Motor City Electric to 26 cents to John Papalas & Co. Motor City Electric is a large electrical contractor and the Papalas firm specializes in industrial painting and sheeting services. The other 32 contracting units on site were not fined, according to city records. Several large contractors, it should be noted, have multiple units working at the site.

Currently, crews are working three shifts each week day and Saturdays, with more than 1,100 workers on the site on weekdays, said a spokesman for Olympia Development of Michigan, the firm overseeing the construction.

The 20,000-plus-seat arena will be home to the Detroit Red Wings and Pistons. The arena also is expected to become the top concert venue in the area. It will be surrounded by two new buildings filled with offices, stores and apartments. The site plans also include plenty of new outdoor space such as Chevrolet Plaza.

The complex is city-owned and will be managed and operated by Olympia Entertainment, a part of Ilitch Holdings Inc. Ilitch Holdings is run by the billionaire owners of the Red Wings and the Little Caesars pizza chain. Olympia Development is also an Ilitch family operation.

As part of the deal to allow more than $250 million in taxpayer-backed bonds to be used to help pay for construction, Olympia Development had to agree to a city-imposed requirement to hire at least 51 percent of Detroiters at the site. That responsibility then falls on the individual contractors, who are subject to the city fines.

The Little Caesars Arena is the first development for which the city is diligently monitoring the workforce requirement, and the city now monitors 64 different developments, Roberson said. It’s likely other developments will be fined, she said.

Problem finding workers

The growing list of fines reveals the persistent challenge of getting city residents construction jobs at a time when “greater downtown” Detroit is in the midst of $5.4 billion development boom, city officials, developers, trade and union officials, and workforce training advocates said.

“It’s a long-standing issue,” Roberson said. “It’s not a Little Caesars Arena issue, it’s much a larger issue of skilled trades training.”

Messages were left with six of the contractors working at the arena site; none returned calls or emails to The News.

On a positive note, Roberson said, “The fines collected go toward training programs. It’s the long game” to get more Detroit residents the training for skilled-trade construction jobs, which often provide solid middle-class wages and benefits.

Olympia Development officials declined comment for this story, but the firm often touts its commitment to hiring Detroiters. Little Caesars Arena is expected to be the spark for 50 blocks of new development around the arena, just north of downtown, that will amount to more than $2 billion in investment. That plan is called District Detroit.

District Detroit development includes the arena, construction of a new Little Caesars headquarters and the Wayne State University Mike Ilitch School of Business. So far, 673 apprentices have been hired to work on the arena, more than half of whom are Detroit residents, Olympia Development officials said. Skilled trade apprenticeships provide a path to careers in ironwork, electrical, plumbing and carpentry.

“With Little Caesars Arena opening next month and many more projects underway, we’re proud that hundreds of local residents have been set on a path toward new careers with more opportunities to come,” Christopher Ilitch, president and CEO of Ilitch Holdings, said in statement released earlier this month.

Olympia officials said more than $445 million in contracts, 61 percent of the contracts let for District Detroit, have gone to Detroit-based companies.

Skilled-trades recovery

The state’s construction industry is still recovering from the Great Recession that wiped out nearly 45 percent of jobs in the buildings trade. Others noted that the construction industry has always been lacking in diversity.

“The construction industry actually went through a depression for eight years,” said David Poletis, statewide training director for the Michigan Regional Council of Carpenters and Millwrights. “It crushed the skill-trades industry and only recently are we seeing a recovery.”

The carpenters union said it aggressively recruits potential workers, including working with Detroit Public Schools, community colleges and employment agencies. About 500 people are working in the council’s apprentice program in Ferndale — the most since the early 2000s. Trainees in the apprentice programs have found work while in training.

Metro Detroit added construction jobs at a faster rate than all but six of 358 metro areas in the past year, said Brian Turmail, national spokesman for the Associated General Contractors of America. There are 21,700 people working in construction in Metro Detroit, up from 18,800 a year ago, he said. Metro Detroit added 2,900 construction jobs in the past year.

Turmail said he wasn’t surprised to hear that too few Detroiters are getting hired on construction sites. “Detroit is not the only city dealing with the challenge. The fines are a well intentioned attempt to fix a symptom. The root problem is we have disinvested in vocational training,” he said.

Training is ‘key’

Greater downtown Detroit — downtown, Midtown, Corktown, East Riverfront, Brush Park, New Center, Lafayette Park and Eastern Market — is experiencing a development boom, with some of the biggest projects yet to come. At least $5.4 billion in real estate development and redevelopment projects are underway or proposed in and around the area in the next three years, according to a report recently released by CBRE, an international commercial real estate firm. That amounts to 72 projects.

A dominant player in the development scene is Bedrock, owned by Quicken Loans Inc. founder Dan Gilbert. Entities linked to Bedrock and Gilbert own more than 80 downtown area properties, totaling more than $2.2 billion in investment.

In December, Bedrock is expected to begin construction of the city’s tallest building as part of its development on the former Hudson’s store site on Woodward. Next year, it aims to begin a separate $800 million downtown project on Monroe that includes a 35-story office tower fronting Campus Martius. Gilbert is also proposing a $1 billion mixed-use development anchored by a 23,000-seat Major League Soccer stadium at the site of the county’s unfinished jail in Greektown.

It may be tough to get a majority of Detroit residents building those projects, said Joe Guziewicz, Bedrock’s vice president of construction. Bedrock will have to rely on many of the same contractors currently struggling to meet the city’s goals on other development sites.

“It’s a realistic challenge, much like any other construction developments,” said Guziewicz, adding Bedrock will soon announce details on a program to boost training for skilled trades jobs. “We are actively working with city and local trades so we eliminate the problem; really the key is improving our training.”

Twitter: @LouisAguilar_DN