Vegas Laborers Union Gambles with Union Pension Fund and Taxpayers Funds to Build a Union-Only Project

see updated story with union correction

The Department of Labor granted special pension waivers to the Plumbers when their pension dug an $800-million-dollar hole in the sand.  Now, the Vegas Laborers want to risk 25% of their underfunded pension on a new Las Vegas town hall.   Besides the obvious problems of risking laborer pension participant’s retirement, some of the money came from forced contributions to the Laborers Union’s pension fund through Project Labor Agreements. 

And, the union wants to force another union only project labor agreement to again force non-union workers to contribute to the Laborer’s pension in order to work on the town hall project – a project that many in Las Vegas see as an unnecessary expense for and burden on Las Vegas Residents and businesses already suffering in the Obama economy.  Ben Brubeck’s blog post and the Las Vegas Sun provide additional information:

A Las Vegas Sun article demonstrates how the Laborers Union Local #872 is willing to gamble with their union’s pension fund in order to secure a union-only project labor agreement (PLA) on a new Las Vegas city hall (”Old Vegas-style financing offered for city hall,” 7/17).

A spokesman for Laborers Local 872 said the union hopes to fund at least 30 percent of the beleaguered construction project, which could ultimately cost more than $250 million. The union has been the most aggressive advocate for a project the city describes as a linchpin to downtown redevelopment, and hopes other locals will follow its example…

…In return for its investment, the union would require a labor agreement ensuring its workers would be employed on the project.

It’s not unusual for a union to finance a project with their pension plan funds in exchange for union-only agreements. However, evidence indicates it may not be a responsible investment of pension funds

Case in point is the union-only construction of the Hollywood, FL Westin Diplomat Hotel and Resort which, according to an industry publication, was funded in part by an $800 million investment from the National Federation of Plumbers, Pipefitters and Journeymen’s pension fund – an amount that was nearly 20 percent of the pension fund’s total assets at the time.

The hotel opened in February 2001, almost 18 months late and at a cost almost $400 million above projections after two years of construction. The pension fund fired the original developer and pension plan trustees were sued by the U.S. Department of Labor under auspices of the Employee Retirement Income Security Act (ERISA), a conflict of interest statute designed to prevent the trustees of a multiemployer national pension fund from engaging in self-serving actions and to ensure fund investments are prudent.

According to reporting by Engineering News Record, the suit eventually led to an Aug. 2, 2004, settlement with the Labor Dept. where trustees Maddaloni and Patchell paid an $11-million civil fine. The settlement allowed union leaders Maddaloni and Patchell to keep their union posts, but they had to resign as trustees of seven pension funds.

It is doubtful that the Laborers Local #872 have learned from the Diplomat Hotel debacle as it has been reported that the union’s members have packed City Council meetings, and its leadership spent $200,000 this year to sink the efforts of a rival union that sought to derail the project.

The Culinary Union, the state’s largest and most powerful labor organization, lambasted the new city hall as fiscally irresponsible, especially at a time when the city faces deficits and has announced cuts in public services.

Labor experts said it’s not unusual for a union to invest in municipal projects, but the size of the union’s potential investment raised eyebrows. According to the city’s latest estimates, the new city hall will cost $157 million, which means the union would put up $47 million to $79 million, or nearly a quarter of its pension fund.

“That’s unusual,” said Ron Seeber, a labor and industrial relations professor at Cornell University. “To have a significant amount of chits in one basket like that seems to stretch the boundaries.”

It’s unusual and fiscally irresponsible, especially when your union pension plan is in the endangered status.

Like hundreds of other union pension plans across the country, the laborers fund recently notified participants that its plan was “endangered,” meaning less than 80 percent of the union’s retirement obligations are funded. The laborers fund also took a hit in the Bernard Madoff scandal: the plan joined a class action suit in April, alleging it lost millions of dollars because of a financial management firm’s investment in Madoff-connected funds.