Business leaders weigh in on PLA debate

When the City of Cloquet passed a proposed Project Labor Agreement into city code in May of 2017, the council chambers were standing room only, and packed with union members who spoke in favor of the PLA. Three years later, when councilors voted to overturn the PLA at their May 4 meeting, this time virtual, it was packed again.

The city council will reopen its vote eliminating the PLA at its 6 p.m. meeting Tuesday, June 1, after Ward 2 Councilor Sheila Lamb motioned at the May 18 meeting to reconsider the repeal of the PLA, citing “further investigation and discussion with the city of Duluth and some of the unions” as the reason she wanted to reopen the issue. Expect the meeting Tuesday to be packed again, as council meetings will now be conducted in person again (masks required).

Although union voices in favor of PLAs were an overwhelming majority at both earlier meetings — arguing they help keep jobs and money local, prevent work stoppages and keep projects running smoothly — some local businesspeople don’t agree. They just aren’t very verbal about it.

In October 2017, five months after the PLA was passed, Mike Schultz wrote to the city council and mayor. At the time, Schultz was the managing director of the Sappi paper mill, with a long history there. He is now a vice president of Sappi North America, and stands by his 2017 letter.

Schultz said the city’s requirement that any private project with more than $175,000 in city funding use a PLA would deter Sappi from seeking such financing opportunities. But that wasn’t the issue he had with PLAs.

In his letter, Schultz explained the Sappi mill is a union facility and seeks to utilize union contractors when practicable. Rather, his issues were based on his experience with the $500 million Potlatch pulp mill project in the 1990s in Cloquet, when the mill used a PLA and experienced a “very significant negative economic impact trying to force the use of union labor where the expertise we needed for certain specialty work was non-union.”

“Given the state of the pulp and paper industry, we cannot afford even the slightest inefficiency in any project that we do. As such, especially for large projects, we generally would not consider signing on to a PLA and tie our hands,” he wrote to the council. Estimating that 95 percent of all the contract labor they utilize was union, Schultz asserted that it wasn’t a union versus non-union issue. “It’s an efficiency issue,” he said.

Local business owner Adam Kiminski of Kiminski Paving wrote a letter to the council in advance of the May 4 meeting from a similar viewpoint, although on a much smaller scale. The paving company had been non-union, but converted to being a union contractor over the past five or six years for two reasons: more opportunities to quote union contractors, and better health insurance at a better price.

“I’m a firm believer that no company should be forced to sign a union agreement. In fact I think it’s wrong,” Kiminski wrote. “If the city wants to keep jobs on a level bidding platform, they simply bid their jobs as [prevailing wage and benefits]. These wages are set by the state and are completely in line with union wages.”

Generally, under the terms of a PLA, construction unions have bargaining rights to determine the wage rates and benefits of all employees working on a project. The terms of the agreement apply to all contractors and subcontractors working on the project, although they do not have to be union companies themselves. PLAs also typically require that employees hired for the project be referred through union hiring halls — in Cloquet’s case, the Duluth Building and Construction Trades Council. Cloquet’s PLA applies to both private and public projects using at least $175,000 in city funds, including loans, grants, tax increment financing (TIF), abatement and bonds for private developers.

Craig Olson, president of the Duluth Building and Construction Trades Council, spoke at the May 4 council meeting, noting that 1,002 union members live in Cloquet, 218 in Carlton and 318 in Saginaw, not including Teamsters members.

He pointed out that private developers don’t have to abide by the PLA if they don’t use public money: $175,000 or more of public funding will trigger the PLA requirement. “But they don’t want that. They want to come to the Cloquet taxpayers and they want to be in their pockets for handouts, for public subsidy, plain and simple,” Olson said. “We’ve had enough of that,” he continued. “We think … they should have to follow some public rules that keep Cloquet and local people working.”

Kiminski said it is the union, not the worker, that wins with a PLA. The Kiminski Paving owner said the wage for a PLA job is $36 per hour to the employee as wage and $19 to the union for health and welfare/pension. He compared that to the same $36 for a prevailing-wage job, and $19 for benefits and pension that gets paid directly to the employee.

Although the council removed the part of the PLA that required workers to remain in or join a union in response to an ongoing lawsuit earlier this year, city administrator Tim Peterson said the PLA — as it was written — would still force contractors to pay into union benefit funds that their employees will never benefit from.

Also a commissioner on the Cloquet Economic Authority, Schultz said he was disheartened to hear of housing projects that were scuttled because of the PLA requirements, referring to the third 14th Street apartment building by developer David Chmielewski which was delayed initially, but ultimately built opposite the college after the city adapted its PLA requirement, the developer said.

In recent communications with the Pine Knot News, Chmielewski said more than 50 percent of his company’s work is done by union hands. He hires both union and non-union contractors.

“The issue is whether or not it is OK to have a government body vote to provide exclusive organizational privileges to a private labor organization when public money or business subsidy tools are involved,” he said, adding that Carlton County is a challenging housing market.

“Adding a PLA requirement in Cloquet and Carlton County makes developing here untenable for our operation. After constructing and renovating 129 units of housing in this county and investing millions of dollars in private equity, we simply had to go somewhere else where housing is needed,” he said. “If government bodies here want to continue supporting discriminatory economic policies, and the voters continue to support them, I guess I am in the wrong place.”

Schultz was also critical of the city in 2017.

He pointed to the Cloquet mill’s vision statement to be a “dynamic, world-class operation that secures a sustainable future for our employees, business partners and community.”

“Constraints added by the city, such as the PLA requirement, make it just that much harder to live up to that vision. It also gives one pause to wonder what the vision is for the city of Cloquet?”