Labor issues remain as Red Cedar project nears its day before Council

When developer Frank Kass came to town in February for the unveiling of plans for the $260 million Red Cedar project, he stopped by the Plumbers & Pipefitters union hall on South Martin Luther King Jr. Blvd.

Speaking to representatives of 18 trade unions, he promised that he and partner Joel Ferguson would use as much union labor as possible.

“But I’m going to give you an example of where I can’t do it, and that’s my framing and my drywall.”

At that, a witness said, a union representative of the framers and drywallers “got up and just sort of stomped out of the room.”

With the Lansing City Council scheduled to take up the project next month, labor issues remain a hurdle for the planned transformation of the old Red Cedar Golf Course from a flood plain to a mixed-use project that would include hotels, restaurants and housing ranging from student occupancy to market-rate apartments, with senior living thrown in as well.

The Schor administration is onboard, but where City Council will land is up in the air.

“If you asked me to vote tomorrow,” said At-large Councilman Peter Spadafore, “ I’d be a no.”

Councilwoman Jody Washington, whose ward includes the old Red Cedar Golf Course site where it would be built on the east end of Michigan Avenue, put herself in the no-as-of-now category as well.

The developer, Continental Ferguson, still has time to win them over. The Council will begin looking hard at the project on June 4. Ground could still be broken this summer if a majority of the Council supports the agreement that has been reached between the developer and the Schor administration.

Spadafore, who was elected last fall, says his mind is open, but he raised serious concerns about labor issues.

Negotiations between the city and Continental Ferguson are influenced by the $90 million SkyVue project on Michigan Avenue, which was built in part with lower-wage, out of state labor.

To avoid a repetition, Spadafore wants Continental Ferguson to sign a project labor agreement before the Council votes.

“I’m not saying they are bad actors,” Spadafore said. “I’m just saying if you don’t have something in writing, it does not require the terms to be clearly understood.”

A written labor agreement appears to be in the works, according to Christopher Stralkowski, executive project manager of Ferguson Development, “We are currently working hard to have an agreement in place with local labor very soon,” he said Tuesday.

Spadafore’s chief concern is how much workers will be paid. He is arguing that because the city has a stake in the project, everyone should be paid prevailing wage. The city owns the property and will sell bonds to raise the funds for a portion of the work. Prevailing wage is what the majority of people are paid for labor in different categories in a given market.

Stralkowski said prevailing wage is not required by law on this project but that Continental Ferguson has agreed to pay it on roughly $70 million in infrastructure. The city is footing over $10 million of additional infrastructure cost through bonds, also to be paid at prevailingwage.

Moreover, he said, he expects prevailing wage will be paid for as much of $50 million worth of the so-called vertical construction because of the salaries such workers as electricians and plumbers can demand.

But Stralkowski confirmed that Continental Ferguson will not pay prevailing wage for less technical work — the “framers and drywallers” referred to by Kass, a national developer based in Columbus, Ohio. Stralkowski said his company cannot pay prevailing wage for everything and be competitive here.

Referring to Kass, Stralkowski said, “If he goes to Tampa, he has pretty much the same material and labor cost, but he can get 35 percent more for a hotel room. He can get $10 more per restaurant tab. Same cost, same headache, but the investment is better in Tampa than in Lansing.”

Another labor issue is where will workers come from.

Lansing Mayor Andy Schor said the city has the right to demand that Continental Ferguson use local labor to the extent possible.

“If we’re going to put our bonding capacity on the line, even though there are no taxpayer dollars at stake, our residents should be able to get the work.”

Schor said Continental Ferguson has promised to use local labor unless it exhausts the supply, “and I do have trust that that will happen.”

If out-of-town contractors are used, Schor said the city has taken the precaution to hire a company to verify that non-local subcontractors obtain city licenses and pay city taxes. He said this marks the first time the city has done that on a development project.

Councilwoman Washington has raised a non-labor issue, which is whether the project will meet expectations.

“We were told it was going to be this magnificent project with this wonderful entryway, these great hotels and these great eateries with wonderfully culturally centered housing, and now we are ending up with God only knows what … student housing and a nursing home,” she said Saturday at a constituent get-together.

“It has gone from here” — raising her hand above her head — “to here” — lowering her hand below her waist — “and we’re supposed to be just as excited.”

Stralkowski said the project has grown, albeit he acknowledged that Ferguson wrongly pegged the project at $380 million early on.

Stralkowski cited the first Red Cedar development agreement, approved 8-0 by the Council in 2014, which bore a $200 million price tag, compared to $260 million today, a 25 percent increase in private development, he said. That’s despite the loss of a facility that Sparrow Health Care System planned to be part of it.

Stalkowski said Continental Ferguson will spend eight times the usual cost per acre to develop the site.

“Are you sending the guys over in the white coats?” he asked rhetorically.

He said Ferguson and Kass are committed to the project because they believe the time is right and the location is among the best in the region.

He cited growing development in the last decade, on the Michigan Avenue corridor and at Michigan State University.

“You’re seeing a natural coming back to the urban core.”

(Care to comment? Email Schwartz at publisher@ansingcitypulse.com.)