RVA Politics is a blog about politics in the state of Virginia And the capital city of Richmond.

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NOB/Navy Hill: How many jobs and minority contracts?

NOB/Navy Hill: How many jobs and minority contracts?

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This post is part of a series on the NOB/Navy Hill downtown development plan.

 Supporters of the proposed North of Broad/Navy Hill downtown development point to two major benefits that will supposedly come from the plan:

  • The development is supposed to be an engine of job creation, including temporary construction jobs associated with the development and then ongoing jobs that accompany the resulting coliseum, renovated Armory, and private investment.

  • Mayor Levar Stoney has pledged to ensure that $300M in city contracts go to minority owned businesses.

Providing jobs and contracting funds for city residents, especially historically underserved minorities, are admirable goals. But like so much else in this proposal, the big numbers thrown out by the developers and the city administration mask a much more complicated story.

JOBS

The developers’ website promises over 21,000 jobs, and Mayor Stoney has touted similar numbers. These numbers seem to come from the economic impact study conducted by VCU researchers for the developers. As I mentioned in my last post, I have some significant concerns about that report, and economic forecasting in general.

Job “creation” is a tricky business. It makes some sense that a new development or business will need to hire more people, but how many? At what cost? (Job creation is expensive.) And are you really “creating” a job that involves a wholly new opportunity, or just hiring away someone from somewhere else in the area?

For example, the VCU report suggests that the newly-built arena and renovated Blues Armory will “create” 328 jobs. But doesn’t the Coliseum currently employ staff? (Or at least, it did until the city prematurely shut it down.) Similarly, the report assumes that VCU will be building over 500,000 square feet of research space as part of the development, and then assumes that this space will be filled by over 1,000 VCU workers. Has anyone confirmed that VCU envisions expanding its workforce (researchers, staff, student workers, whatever) by that amount? Or do they plan to move existing workers into that space, in which case there are no jobs “created” after all?

Supporters might acknowledge this, but point out that construction jobs, at least, are new; brand-new buildings can’t cannibalize from other, existing jobs. Sure, but as local contract lawyer Justin Griffin has already pointed out, the Hunden consultant report (again, an “expert witness” that is building the BEST case for the development) notes that only 17.5% of construction spending will actually be spent in Richmond, with a much smaller number of “created” jobs than the VCU study (only 1,852 “job-years” in one table).

The use of “job-years” is telling. Politicians often tout the number of jobs that have been “created” under their watch, but they rarely break down the numbers to talk about what KIND of jobs. How many of these are part-time? Low-wage? Even construction jobs aren’t what they used to be, characterized by low pay, lack of benefits, and high risk of injury.

Government in general does not do a good job of tracking job creation (here’s North Carolina’s track record, which is not good), so it’s difficult to evaluate the effectiveness of developments in actually delivering employment gains. Still, there are lots of examples of developers and contractors falling short of promised goals.

One solution would be to involve the community more in demanding higher wages and better job outcomes. WCVE’s Catherine Komp has reported on the idea of a Community Benefits Agreement, where community members can negotiate wages, job training, and other benefits directly with the developer. But as Komp notes, there is no obvious citizen group based in the affected area. And there would undoubtedly be resistance from the developers; Komp quotes NH District Corp Spokesperson Jeff Kelley as arguing that “the market must determine wages.”

MINORITY CONTRACTS

Another big benefit to the city that comes from the development deal, supporters argue, is a requirement that half of the deal’s public spending go to “minority business enterprises” (MBE’s). An MBE is a business “at least 51% of which is owned and controlled or 51% operated by minority group members,” according to the city’s Office of Minority Business Development (OMBD).

A cynical view would suggest that the Mayor is using this component of the deal to “buy” support among the city’s African-American leadership. Fine, but so what? It’s an admirable requirement that helps benefit underserved minorities, in a city that has a long history of discrimination in contracting. (Not to mention a history of attempts, sometimes thwarted, of trying to counter this discrimination, including a famous Supreme Court case striking down a quota program.)

But as with jobs, there are a number of questions about how this lofty goal will work in practice. How will this requirement be enforced? Who will audit the developers and their contractors, and what kinds of penalties will be required as part of the development negotiations?

One problem that often arises in these kind of minority set-asides is the long history of Potemkin companies that use minority fronts and/or subcontracts to qualify. Companies can take advantage of smaller minority-owned businesses (as this guy did in Albany) or funnel sham payments to minority contractors (as this Rhode Island company did) or any number of shenanigans. Those familiar with the industry suggest that such practices are widespread, with contractors in Milwaukee in the 90s even circulating a document that explained how to game the system. [“Among other things, the document recommended that prime contractors (1) send certified letters to minority businesses they know have ceased operations or changed addresses; (2) leave messages on minority firms’ answering machines but do not return their calls; (3) do not give information about when a bid is due; and (4) do not lend drawings of the project to minority subcontractors.”]

Richmond has certainly suffered from these problems in the past, or at least hasn’t had any mechanisms in place to prevent it. A 2012 audit of the Richmond OMBD warned that “repeat offenders failing to comply with pledged participation continue to get City business.” The report is marked as “cleared” on the city’s audit website, so presumably such problems have been fixed? But so far I have been unable to find any cases of Richmond enforcing the MBE requirement: no reports of violations, fines, or cancelled contracts. Maybe this is all handled in house and we just haven’t seen the results. But seems pretty suspicious that there is NO mention of enforcement on the city’s website, in the media or, really, anywhere.

One additional concern mirrors the questions that arise about jobs: how much of these contracts will actually go to Richmond-based firms? The OMBD publishes a directory of every MBE registered with the city. Out of 653 businesses in this database, less than half (294) have a Richmond address, with some as far away as Chicago and Atlanta. (Only 27 of 63 in the construction field are local.) Does Richmond even have the construction capacity to staff this development deal?

Maybe more businesses will register. Maybe most of the money will go to Richmond-based contractors. Maybe. But what these questions all suggest is that the Mayor’s NOB proposal will NOT be as simple as handing over a $300M check to the city’s minority-owned firms. The devil, as always, is in the details – and again, this is why a City Council Commission is such a good idea.

Next up: affordable housing. (Do I even have to mention that the numbers aren’t what they seem?)

NOB/Navy Hill: How affordable is the affordable housing?

NOB/Navy Hill: How affordable is the affordable housing?

NOB/Navy Hill: What about these “expert” reports?

NOB/Navy Hill: What about these “expert” reports?