The American Prospect
No Justice, No Growth
How Los Angeles is making big-time developers create decent jobs.
October 22, 2006
On the morning of June 22, 1995, to the total astonishment of the people working and walking on Hollywood Boulevard -- the sales clerks of a hundred shlock emporiums, the stoners, the runaways, and the crowds of ever-bewildered tourists who had trekked to the heart of Hollywood in search of glamour only to find one of Los Angeles' most depressing neighborhoods -- a sinkhole fully 80 feet wide suddenly opened in the middle of the street. Construction workers building the city's Red Line subway beneath the street scrambled to avoid the descending pavement. Miraculously, no one was seriously hurt, but traffic, street life, and the commercial activity at the center of L.A.'s (if not the world's) most famous neighborhood ground to a near-total and months-long halt.
For a city that had experienced both a cataclysmic riot and a terrifying earthquake over the preceding three years; for a city whose single largest industry, aerospace, had collapsed over the preceding half-decade with the end of the Cold War; for a city that was hemorrhaging middle-class jobs and middle-class residents, then in full flight to Nevada and Arizona and Colorado; the hole in the middle of Hollywood was an apt metaphor for L.A.'s plight. The middle was falling out of the Los Angeles economy, too -- a hole that virtually nobody had the faintest idea how to plug.
As hundreds of thousands of largely native-born and unionized defense workers left town for good, hundreds of thousands of immigrants from Mexico and Central America flooded into the city. During the 1980s and 1990s, according to a new report from the California Budget Project (CBP), the number of foreign-born workers in Los Angeles County increased by 900,000. With amazing rapidity, the economy began to boom at the bottom. Some industries -- the sweatshop sector of garment manufacturing, for one -- were reborn. Other industries -- construction, trucking, building maintenance -- saw their employers fire their unionized employees and hire new ones at half the wage levels of their predecessors. In just the two years between 1994 and 1996, according to a California State Assembly report on the L.A. economy, the number of residents in households with annual incomes under $20,000 increased by 13.5 percent, to 41 percent of the county's population (which was then roughly 9.5 million people). Residents in households with annual incomes between $20,000 and $40,000 increased by 7 percent, to 25 percent of the county's population. But the middle class -- Angelenos in households making between $40,000 and $100,000 annually -- decreased by 7.7 percent, to just 26 percent of L.A. County. And this was during a time when unemployment had started to drop.
Early into Bill Clinton's second term, it was clear that these changes were no cyclical aberration, but simply the shape of the new Los Angeles. The more unemployment declined, the more bipolar the economy became. Developers were beginning to build again, the entertainment industry grew, gentrification was transforming neighborhoods, and the number of truly prosperous Angelenos, like the number of truly prosperous Manhattanites, greatly increased. And yet, the percentage of middle-income jobs and the percentage of L.A. residents leading middle-class lives remained stubbornly low -- and falling. Between 1979 and 2005, according to the CBP report, the inflation-adjusted median hourly wage of a Los Angeles worker actually declined by 6.4 percent, and the share of L.A. workers with job-based health coverage plummeted from 71.1 percent to 50.5 percent. A new Los Angeles, preponderantly grimmer and poorer (if also more opulent and glitzy) than its predecessor, had arisen on the ashes of the old. And hardly anybody had a plausible notion about how the city could recapture the mass prosperity it had taken for granted in the decades after World War II.
As it happened, one person who did have such a notion -- two notions, in fact -- was the city council member from Hollywood, Jackie Goldberg. An activist in Berkeley's Free Speech Movement during her undergraduate days, Goldberg had been a famously innovative public school teacher, then a member of L.A.'s school board, and had won election to the council in 1993 when L.A. and Hollywood were both at their nadir. But as the economy began to come back, Goldberg pushed two new mechanisms through that which L.A.'s new working class to secure a greater, and fairer, share of the region's wealth. The first of these was a living-wage ordinance, which required firms under contract to the city to pay an hourly wage several dollars higher than the federal minimum and to provide health insurance coverage as well -- or an hourly wage roughly a dollar higher than that if the contractor didn't offer the health coverage. After lobbying her city council colleagues for the better part of a year, and backed by the L.A. County Federation of Labor, which had only recently become an election-day powerhouse, Goldberg got the council to enact the ordinance by unanimous vote in 1997.
Her other idea was more Hollywood-specific. As the economy rebounded, Goldberg looked for a major company to commit to a mega-development that might begin to turn Hollywood around. Eventually, she interested Trizec-Hahn, one of the nation's leading commercial property developers and owners, in a site at the corner of Hollywood Boulevard and Highland Avenue, just a few blocks west of where the sinkhole had sunk. Trizec-Hahn proposed a major project that included a theater that would host the Oscar ceremonies, a high-end hotel, and some upscale retail outlets. It was the kind of development that Hollywood had not seen since before World War II. Goldberg was understandably elated. But she wanted more.
Goldberg had two sources of leverage over Trizec-Hahn. First, in L.A.'s bizarrely balkanized city government, it's chiefly the city council member whose approval is decisive for the construction of any major project in the member's district. Second, Hollywood had been run down for so long that it qualified as a redevelopment district, enabling a developer to qualify for tax abatements on its properties and other public subsidies from the city's Community Redevelopment Agency (CRA). And if Trizec-Hahn wanted Goldberg's blessing and those abatements (the city's total investment in the project eventually totaled $90 million), there were conditions she wanted it to meet.
“Prior to my coming on to the city council,” Goldberg recalls, “the CRA had put a fortune into the New Otani Hotel downtown, which has had continuously terrible relations with its employees. I was determined that if we were going to put money into Hollywood-Highland, the employees would be treated well. We wanted development, [but] we basically decided that all boats should rise.”
Goldberg and her development aide, Roxana Tynan, with the assistance of the Los Angeles Alliance for a New Economy (LAANE), the progressive policy and organizing group that had helped Goldberg formulate and build support for the living-wage ordinance, then initiated negotiations with the developer. When they were done, in 1998, Trizec-Hahn had agreed that the employees of the new hotel would work under the same contract that the city's unionized hotel workers had won. (When the hotel opened, the workers joined and the management recognized the union.) The employees of the Kodak Theater were unionized as well. (“Nobody wanted a strike before an awards show,” Goldberg notes dryly.) Trizec-Hahn's direct employees -- the parking attendants, janitors, security guards, and gardeners -- would be covered under the city's living-wage ordinance. The developer also agreed to favor the lease applications of prospective retail tenants who pledged to provide their sales clerks and other employees with health insurance and a living wage. And the company also agreed to recruit its direct employees initially from the immediately surrounding zip codes, which entailed a financial commitment on its part to provide training for many of the local hires. In the end, 20 percent of the construction workers who built the project and 68 percent of the permanent employees at the hotel were hired from the surrounding ZIP code. Working-class Hollywood would have a direct share in Hollywood's revival.
And so was born the first community benefits agreement (CBA). Hatched straight “from Jackie's ideology,” as Tynan recalls, the Hollywood-Highland CBA set a template that LAANE and various progressive officials in Los Angeles have expanded and refined over the years on subsequent major projects around town, including the Staples Center and the surrounding development downtown, and the expansion of lax, the city's notoriously congested airport. Under the dynamic leadership of Madeline Janis (formerly Madeline Janis-Aparicio), LAANE has steadily enlarged the scope both of the CBAs and the living-wage ordinances within Southern California. Its successes have inspired unions and community organizations across the nation to their own campaigns linking growth to justice. Living wage ordinances have now been enacted in more than 120 municipalities across the country, while CBAs -- which now may require developers not merely to provide decent jobs to local residents, but to build affordable housing, parks, health clinics, and other social amenities -- have been implemented on at least 48 major projects from Seattle to Miami.
This is, of course, justice by increments, but in the absence of a federal government interested in raising the minimum wage, providing health coverage for all, or enabling workers to join unions, incremental justice is as good as it gets. So it falls to the states to hike the minimum wage, and to more liberal cities to enact living wage ordinances covering employees of city contractors. And even in a city as liberal as Los Angeles, passing an ordinance mandating CBAs for projects that aren't recipients of city funding or redevelopment district tax abatements is impossible. There are still vast swaths of Los Angeles, in South Central L.A. most particularly, where developers fear to tread. The progressive leaders and groups that require developer concessions on major projects in neighborhoods that are trending upward have shown no desire to ask anything of a developer who ventures into a depressed part of town to build a store or two.
CBAs, says Cecilia Estolano, the new executive director of L.A.'s Community Redevelopment Agency, “work best when there is substantial agency money invested, when they're big projects, and when they're in hot markets or emerging markets.” In much of Los Angeles -- in much of urban America -- none of those conditions pertain. Which compels LAANE, now the primary architect of CBAs across Los Angeles, to go project by project, creating an archipelago of decent living standards in a sea of working-class stagnation.
Even though they are negotiated on a project-by-project basis, CBAs have become, in less than a decade, the way that major developments get built in Los Angeles. For one thing, while CBAs clearly impose additional costs on the developer, they also help ensure that his project will get green-lighted. “The best way to get our project approved is to join with the community,” says Cliff Goldstein, a partner in J.H. Snyder, one of Southern California's largest commercial developers. “Once we've crafted an agreement, we walk hand in hand downtown to the council. We become a formidable foe if someone wants to make us their foe.”
Since Hollywood-Highland first established the CBA, a distinct process has emerged on subsequent projects. One group -- often but not always LAANE -- organizes residents in the vicinity of the proposed project, and links pre-existing community organizations and institutions with other affected parties: the building trades unions that want to construct it, the building maintenance unions (usually, the SEIU) and hotel union (UNITE HERE) that may staff the facilities that the project will contain, environmental organizations concerned with the effect the project will have on the area. The local council member may serve as a liaison to local institutions -- community colleges, for instance -- that will be called on to offer job training to local residents hired by the project.
The expanding scope of CBAs is apparent in looking at the agreements crafted for three major projects over the past half-decade. In the late 1990s, two right-wing billionaires -- Rupert Murdoch and Denver's Phil Anschutz -- announced that they wished to develop the area surrounding the Staples Center, home to the Lakers, with luxury hotels, condos, stores, office buildings, and theaters. A coalition of 25 community groups from the area -- a neighborhood consisting largely of desperately poor immigrants -- already had come together to deal with problems of housing relocation, increased traffic and the like. Separately, Miguel Contreras, head of the L.A. County Federation of Labor, entered into negotiations with the developers on behalf of five unions that sought to represent the parking attendants and the hotel, theater, and maintenance workers who'd get permanent jobs once the project was completed, and the building trades unions that would construct it. The unions reached an accord with the developer first, but refused to sign it until the community groups reached their own accord, which included a commitment to hire half the permanent employees from the neighborhood, the set-aside of one-fifth of the new housing units for low-income residents, and the creation of neighborhood parks. Once these accords were reached, the city council gave the go-ahead for the project, which is under construction today.
LAANE crafted an even larger and more diverse coalition in dealing with the proposed expansion of LAX, which had been stymied for more than a decade when Mayor James Hahn finally sought council approval for the proposal shortly after he took office in 2001. In deference to labor's political clout, Hahn had given Contreras a seat on the Airport Commission, which helped ensure local hiring, living wages and union contracts for workers at the airport's many concessions and retail outlets. As well, the city committed $500 million over the next decade to noise abatement improvements in the schools near the airport and to air-quality improvements throughout the area. “The muscle of the labor movement was the linchpin” in broadening the coalition, says LAANE's Janis, since it was apparent that Contreras' commitment to a far-reaching CBA ensured that a deal would be struck. “It convinced the environmental movement -- the Environmental Defense Fund, the Coalition for Clean Air, the NRDC -- to switch its approach from suing at the back end to helping come up with solutions at the front end.”
Back in Hollywood, meanwhile, a CBA has just been finalized for a project at the storied but otherwise unremarkable corner of Hollywood and Vine, which will include a W Hotel, luxury and low-income condos and apartments, and a number of retail establishments. In addition to the usual local hiring and living-wage stipulations for the hotel workers and other developer employees, the pact calls for the developer to set aside funds for a culinary academy, so hotel workers can move up to better hotel and restaurant jobs, and funding for nearby Hollywood High School to expand its performing arts magnet program.
On the one hand, then, the range of community benefits continues to grow with the varied needs of the impacted communities. On the other hand, both in Los Angeles and in cities around the country, the vast majority of CBAs contain no genuinely enforceable language covering the wages and benefits of workers in the retail establishments that the project owners lease. Only where the city itself has owned the development -- that is, at the airport and at a new mixed-use project slated for development across the street from Frank Gehry's Disney Concert Hall -- have retailers been required to set pay rates in accord with the city's living wage ordinance. “The problem is, unionized supermarkets and Costco are the only retailers to pay a living wage,” says Roxana Tynan, who is now LAANE's chief negotiator of CBAs. Most CBAs require the developer to seek out retailers who will pay such wages; the agreement at one North Hollywood project even imposes some manageable financial penalties on the developer, J. H. Snyder, if it fails to have its retailers pay a living wage to a specified percentage of their employees.
But if CBAs have often failed to raise the pay levels of non-supermarket retail workers, they have plainly boosted the wages of the construction workers who build the developments, the janitors who clean them, and the workers who staff the markets, hotels and theaters (if not clothing stores) therein. Between 2000 and 2006, 104,000 construction jobs and 113,000 permanent jobs were covered under CBAs, according to an estimate from the Partnership for Working Families, the national coalition of local CBA advocacy groups.
Surprisingly, perhaps, in cities where the NIMBY (Not In My Back Yard) mentality has routinely blocked development, many in the business community welcome the emergence of this growth-with-justice political constellation. Economist Jack Kyser, who as vice president of the private Los Angeles County Economic Development Corp. is the closest thing the city has to a business community spokesperson, is no fan of living-wage ordinances or, more generally, increased regulations on business. He has kind words, though, for CBAs, which, he believes, often “defuse the opposition to very high-profile projects. Purists may say this is not the best way to go. But if you want to get something built, especially in an area as contentious as L.A. can be, it's a good way to go. You get your project, and everybody benefits.”
The success of CBAs in Los Angeles, and the willingness of LAANE to commit its resources to the development of kindred campaigns in other cities, means that CBAs and the coalitions demanding them have now sprung up in roughly 20 cities across the nation. In Denver, a boomtown with a generally liberal city government but not much of a progressive political infrastructure, the Front Range Economic Strategy Center has been able to win some affordable housing commitments and prevailing wage standards for construction workers on certain major projects. But, says Front UC Range President Leslie Moody, “trying to get a living wage for retail workers has been a huge frustration.” In San Jose, the labor and economic justice movements decided to eschew specific project agreements and, in light of the city's affluence and progressivism, to push for a city ordinance mandating specified community benefits on all projects exceeding a certain value. San Jose business, however, has fiercely opposed the proposal, and how the city council will resolve the question is as yet undetermined.
To some degree, of course, the scope of a CBA is a function of the power of the forces demanding it. It is hardly an accident that these local strategies first appeared in cities with strong unions, organized neighborhoods, and progressive city councils. CBAs are inherently a second-choice strategy, a narrow attempt to create broadly shared prosperity at a moment when broad attempts that rely on state policy or large-scale unionization are beyond the horizon of the possible. Their limited scope nothwithstanding, they represent a considerable achievement -- intellectual, organizational, and political -- at a time when working-class America is otherwise losing ground. And if more of America were organized, there would be more such local achievements, as well as more complementary national policies.
One place where that achievement is apparent today is Hollywood, where new development is rampant, where the nightlife is both safer and livelier than it's been in years, and where the ubiquitous tourists don't look quite as crestfallen as they did a decade ago when the entire neighborhood seemed to sag. Hollywood has always believed in comebacks, but who would have thought its own would in part be the consequence of a movement for economic justice?