Local hire fines for Detroit arena contractors climb to $5.2M

Dive Brief:

Contractors on the $863 million Little Caesars Arena in Detroit have paid a total of $5.2 million in fines to the city for not employing at least 51% local residents in the construction of the new hockey arena, according to Crain's Detroit Business. On average, contractors met the requirement for only five months of the 30-month project.
Of the nearly 3 million hours worked on the project, Detroit residents put in only 25% of the total, less than half of what is required for projects that receive brownfield tax abatements or where developers are able to purchase city land for below-market prices. According to a city report, local resident participation was lowest in skilled trade positions like steel work, electrical, plumbing and carpentry.
The fines go to construction-related training programs, but some contractors are able to avoid fines if they hire from plumbing and carpentry unions that set aside 25% of their first-year apprentice positions for Detroit residents. Officials said the city's ultimate goal is to train enough workers so that meeting the 51% requirement isn't a difficult task for contractors.

Dive Insight:

When the city announced the first round of fines in 2016, the total amount was $500,000. At the time, officials said most contractors had made sincere efforts to meet the 51% hiring requirement, including hosting job fairs and offering training programs, but that there were just not enough Detroit residents to fill the available positions.

Then, last August, Detroit officials announced that total fines had risen to $2.9 million. In that report, officials said that from 2015 to March 2017, Detroit residents made up only 27% of construction hires for the arena project, indicating that as construction progressed, fewer locals were hired. The most recent report identified a local participation rate of only 25%.

As the construction labor shortage continues, and as many young people show little interest in construction as a career, local hiring requirements will be tougher to meet. In fact, just last month, the San Francisco's Office of Community Investment and Infrastructure reported that contractors for the Golden State Warriors' new $1 billion arena had also fallen short of the project's hiring mandates.

San Francisco requires that contractors and developers make a good-faith effort to give 50% of the project's contracts to small local businesses, but, as of the city's last report, only 18% of total contracts had been issued to small businesses. Only 2% of contracts had been let out to minority-owned businesses.