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April 27, 2007

No easy answers for state's budget - The Michigan Building and Construction Trades Council Legislative Conference, 2007

Granholm lays out plan for 'investment' in Michigan

Budget crisis quickens drumbeat for anti-labor legislation

For road work, it may not get any better than this

Construction Marketing, 101 - The rules have changed

North Terminal reaches for the top

News Briefs


No easy answers for state's budget - The Michigan Building and Construction Trades Council Legislative Conference, 2007

By Marty Mulcahy
Managing Editor

LANSING - Did you hear Michigan's state government is in a budget crisis?

Delegates to the 48th Legislative Conference of the Michigan Building and Construction Trades Council got an earful on the subject April 16-18, as Lansing lawmakers confirmed the bad news everybody already knew, while telling the 100-plus delegates what the crisis means to the state's Hardhats.

The bottom line: Michigan has a near-term, $900 million budget deficit and later this year will face a long-term shortfall of $3 billion. That comes on top of $3 billion in cuts that have already been made during the last three years. This is with a state general fund budget that amounts to $9 billion.

"It's an unprecedented state of affairs," said Lt. Gov. John Cherry. "Unless we correct the overall budget problems the future of state government the overall future is dim. We need to have a fundamental debate on the purpose of state government."

Last year, Republican lawmakers allowed the expiration of the Single Business Tax, without a plan to replace the money. The tax, unpopular as it was for some in the business community, accounted for $1.9 billion in state tax revenues. Since then, Democrats took over control of the state House, and a stalemate has ensured over how to replace the SBT and make up the widening hole in the state's general fund budget.

Republicans have been disinclined to talk about raising taxes - which in one form or another is probably inevitable. State Dems have raised the subject - talking about sales, gas and inheritance tax hikes - but know that even broaching the subject is going to be hugely unpopular.

Freshman State Rep. Joan Bauer, (D-Lansing) said she is 13 weeks into her new job after winning her election in November. "My husband told me, 'you worked your hide off in the election and wanted this job?' Seriously, we're at a point in this state where we're going to have to make some tough decisions."

She echoed comments by Cherry and others, who said the only three major expenditure areas that the state has left to cut are for "education, health and human services and corrections - the rest of state government you can cut the heck out of and still come up with only $30 million," she said.

Cherry said Michigan's "structural deficit" is due in large part to the state's dependence on manufacturing jobs, but noted that those losses are coupled with a series of tax cuts made during the Engler Administration. "It was a whole series of tax cuts - taxes were cut, but we did not cut state spending," he said.

Sen. Mike Prusi (D-Ishpeming), told delegates that business taxes have already been reduced by $500 million, and Senate Republicans are calling for an additional $300-$400 million in additional cuts.

"I struggle to see the necessity to give them another tax break when we're looking at cuts for K-12 education and higher education cuts. These are the things you build a society on." Prusi also urged more union members to become involved in politics. "If you don't you get representation that doesn't share your vision," he said.

House Majority Leader Andy Dillon (D-Redford Twp.) said "Back in the 1960s, one wage earner could make enough to provide a family of four, six or eight," he said. "That's not the case any more. The erosion of the middle class is the reason I ran for office." He said the current budget debate in our state "is about whether Michigan will invest in itself or keep cutting back and make us a Third-World state where no one will want to work or play."

Pointing to the $3 billion in tax cuts Michigan has made in the last three years, Senate Minority Leader Mark Schauer (D-Battle Creek) said supply side economic theory pushed by Republicans should translate into more investment in the state. "If that were the case we'd have the most prosperous state in the country," Schauer said.

He said continual cutting taxes and cutting wages "will lead Michigan to competing with Mississippi, Alabama and South Carolina," as part of a tax-cutting ideology "that's bringing Michigan into a race to the bottom."

Sen. Randy Richardson, a moderate Republican from Monroe who is vice-chair of the Senate's Economic Development Committee, said the GOP plan to fix Michigan's budget is centered on a $942 million cut to K-12 education - which would result in state spending $34 less per student.

He cited a survey that said three out of 10 people in Michigan want to leave the state. "The things we should be concerned about is that Comerica Bank (which announced last month that it is moving its corporate headquarters from Detroit to Dallas) wants to be where the action is," he said. "Some of us believe that raising taxes will cause more people to leave."

Richardville left the door open to raising taxes -"there is probably some need for revenue enhancement," he said. "But we don't favor (the governor's) 2 percent service tax."

Doug Bennett, former business manager of Plumbers, Pipe Fitters and Service Trades Local 174, serves as a Democratic House representative in the 92nd District.

"The problem in this state is the lack of revenue for the state government," he said. "There is not much more this state can do when it comes to downsizing and privatizing and reorganizing."

As an example, Bennett said he serves as chair of the Department of Environmental Quality Committee, which is supposed to police corporate factories and facilities to prevent polluting. He said the state issues environmental permits - but doesn't have the manpower to investigate to see if they're polluting.

Bennett agreed with a plan for the state to raise the state's 3.9 percent taxation rate to 4.7 percent - where it was before Gov. Engler came into office. But he would agree to place an end date on the tax so it isn't permanent, in order to allow the state to get itself out of its financial hole. "We're off on a tangent that somehow we can cut our way out of this," he said. "We're at the point where cuts aren't going to do us any good."


Granholm lays out plan for 'investment' in Michigan

By Marty Mulcahy
Managing Editor

LANSING - Gov. Jennifer Granholm told Michigan Building and Construction Trades Council delegates that Michigan's job and budgetary woes are rooted in a state that has 630 percent more manufacturing jobs than any other.

And those manufacturing jobs are leaving Michigan in record numbers, pushed out by global competition and lower wages abroad, which is in turn causing a ripple effect in job losses in the service economy and other areas.

"We have to have the courage to invest in our state, in building the next Michigan," Granholm said in comments directed at the building trades. "We can't make an investment in roads, bridges and universities in our state without new revenue."

By "investment," Granholm meant raise taxes. It isn't a popular idea with anyone, which the governor acknowledged. But she said the proposal she has on the table, a 2 percent tax increase on various services, was found to be the lesser of other evils with Michigan voters by internal polling.

That service tax increase idea doesn't appear to be going anywhere in the Republican-led Michigan Senate, or even the Democratic-led Michigan House. But whether its greater "investment," or unprecedented cuts in state services, the state's lawmakers will have to come up with a plan in a manner of weeks, since the state's Constitution requires a balanced budget.

Granholm's told building trades delegates:

  • The state government is already working with 30 percent less revenue than when Gov. Engler left office in 2002. She said the tax cuts initiated by Engler and the Republican-dominated legislature "were supposed to lead to more investment in our state. In reality these tax cuts have led to less and less investment in our state. "The state's workforce has been cut so that it's at the same size as it was in 1974, and we've leveraged technology as much as possible to make up for it," Granholm said. "But when state government gets leaner every year we're cutting our ability to be competitive." She said if there is an advantage to lower taxes in making the state more attractive to investors, it would be offset by poor roads and under-funded public education.
  • She echoed what other speakers said at the conference - the only significant places left to cut the state budget are in prisons, public education and public health care funding. "We don't want to release prisoners who may be a danger, but we have one of the highest incarceration rates in the nation," Granholm said, indicating that's a place to explore state cuts. In addition, cuts in K-12 and university funding would push cost burdens on to local school districts and individual students. And, cutting public health care affects the people least able to afford health care, and would push them toward costly emergency room visits, anyway.
  • The governor's service tax plan would put a 2 cent tax on everything from haircuts to movie tickets, costing the average resident $1.33 a month. "No other plan has caught fire, and we have to do something," Granholm said. "The tax on services was tested as having the lowest impact on citizens." The governor said as Michigan climbs out of its economic hole, our state needs to look at opportunities to diversify. One of the major areas she suggested was build on the state's burgeoning alternative energy industry - ethanol plants are growing like corn in the state, and Michigan has two plants that are solar panel employers. "We need to re-brand as a post-industrial state with opportunities in alternative energy," she said.

GOV. JENNIFER GRANHOLM talks to Michigan Building and Construction Trades Council delegates. Seated (l-r) are council President Patrick "Shorty" Gleason, CEO Patrick Devlin, and State Rep. Doug Bennett.


Budget crisis quickens drumbeat for anti-labor legislation

LANSING - With Democrats in control of the state House and the governor's chair, passage of a right-to-work law and the outlawing of project labor agreements in Michigan are not imminent.

But bills in the state House have been introduced that would both make Michigan a right-to-work state and eliminate project labor agreements, which generally favor hiring union contractors on taxpayer-funded construction work.

In recent years such bills, as well as legislation to kill the Michigan Prevailing Wage Act, have languished in the state legislature for lack of votes. "And the bills aren't going anywhere this time, either," said Todd Tennis, a lobbyist for the Capitol Services who works with labor groups, to delegates at the Michigan Building and Construction Trades Council Legislative Conference. "We're in a good situation with Democratic friends in control of the state House."

But Tennis cautioned delegates that Michigan's budget difficulties have the potential to change public opinion, "Republicans have their friends pounding the drum even louder, claiming that the state would be much more attractive to corporations if we were a right-to-work state. They're basically using economics to scapegoat unions, and we have our work cut out for us to show this is not the case."

As the Viewpoint column on Page 2 of this edition notes, no less than three opinion columns have appeared in local and national publications this month, calling to make Michigan a right-to-work state.

Michigan has its small share of Republican lawmakers who don't support that anti-labor legislation - which is why it never passed when our state was in complete control of the GOP during the Engler Administration.

State Sen. Randy Richardville, a Monroe Republican, flatly told delegates that he lost favor with his party a few years ago for supporting prevailing wage, and not supporting making Michigan as a right-to-work state. "I'm one of your best Republican friends," he told building trades delegates.

State Rep. Doug Bennett (D-Muskegon), former business manager of Plumbers, Pipe Fitters and Service Trades Local 174, told delegates that as long as their Democratic friends control the Michigan House, such legislation will continue to not move.

"Right to work won't get out of committee. Prevailing wage repeal won't get out of committee. Any legislation that would hurt our workforce is not going to get out of committee," Bennett said.


For road work, it may not get any better than this

LANSING - By comparison with what lies ahead, the year 2007 is looking pretty good for highway funding - and for the rating of the condition of our state's roads and bridges.

Michigan Department of Transportation Director Kirk Steudle told the Michigan Building and Construction Trades Council delegates that just as the state has achieved a 92 percent "good" rating for the condition of the entire state highway system in 2007, the state's budget and other factors will put a brake on future highway spending hikes.

He said Michigan will spend $1.62 billion on highway work in 2007, but that amount will decline to $1.2 billion in each of the years 2009, 2010, and 2011. Those declining expenditures mean that the "good" rating is projected to apply to only 68 percent of the state's highways by 2014.

That percentage brings the state back to the dark years of the mid-1990s - when only 64 percent of state roads were classified in "good" condition - and when the public demanded that more money be spend to fix the state's potholes.

State spending on roads, Steudle said, is one-third from federal money and two-thirds generated from the state. And 53 percent of state road improvement expenditures are generated from fuel taxes - an area that's being explored for another tax increase, which would directly help the building trades.

Steudle said the trend toward higher mileage cars will hurt the state's gas tax income, since the trend is for less gasoline to be consumed. And, given the state's financial condition, more money for roads isn't likely to be allocated from the general fund budget.

"We're going to need a greater revenue stream to keep it going," Steudle said.

Michigan's gasoline tax is currently 19 cents per gallon. It was last raised in 1997. Thirty-three states had higher gas tax rates as of late 2006.

Todd Tennis, a lobbyist for Capitol Services, which serves the IBEW and other unions, said there is going to be opposition to any tax increase in Michigan - but the building trades would be one of the primary beneficiaries. "You guys do so much public construction," he said, "you can already see that you're going to be doing less and less work because revenues are going down."


Construction Marketing, 101 - The rules have changed

Editor's note: across Michigan, local unions and contractor associations are increasingly hosting management and workplace consultants at seminars to talk to members about how to get an edge over the competition in the construction marketplace.

Following are excerpts of an article written by Guy Snyder of Michigan Construction, that illustrates what contractors can do to improve their firm's marketing efforts. Of course, in many cases, their efforts will also depend on successful buy-in from their construction workforce.

Want to get more work in the highly competitive construction market? The simple answer, Scott Humrickshouse, a director and shareholder of FMI Corporation, told the West Michigan Construction Alliance, is to differentiate your contracting firm and showcase its distinctive qualities through proactive marketing.

Humrickshouse hammered these themes during the WMCA's April 4th Construction Labor-Management Conference. Speaking before an audience of organized labor representatives, contractors, and executives from employer associations, he said significant changes have occurred within the industry during the last ten to 15 years.

They've made old models of marketing construction and design services virtually obsolete. Instead, to succeed, a far more comprehensive model must be used - a model that leverages all of an organization's most qualified resources.

Following are some points to ponder from the conference:

*Construction has always been a "price-driven" industry. Today, fast tracking, increased dependence on intelligent technology, and strong movement toward negotiated contracting using construction management and design/build project delivery systems, have all but destroyed the traditional design-bid-build process.

The hard emphasis on price remains but the pace has accelerated astronomically. At the same times plans and specifications have become sketchier and more dependent on a "just-in-time" philosophy, drawn as the building goes up. Not only construction managers, architects, and engineers need to gain early knowledge of upcoming construction, today's major subcontractors need to as well, if just to provide input on constructability and cost issues.

All of a project's major players must gain a position on the construction team well before the work comes up for bid, or else face being swept away in the mad rush. As a result, construction professionals must develop very long range "sales radar" to learn about potential projects before they've even been conceived.

*Under the old model, Humrickshouse said, marketing was a function handled by a company's most senior management. There was no real strategy or attack. The pace of project development was slow enough that those who had a natural talent for such work usually were able to sufficiently react to changing market conditions.

Potential clients were wined, dined, and driven to the golf course. The most common question directed to a potential project owner was, "what work do you having coming up?" The project owner's typical answer was, "I don't know yet but when something hits I'll tell you." There was very little available for an inexperienced project owner to use to identify contractors that consistently exceeded industry averages. Often they could not tell the competition apart.

In today's market this approach is stale and no longer effective, Humrickshouse said. Instead, generating name recognition due to qualities or abilities that set a contractor or designer above the mundane is what's important. The goal is to establish a reputation for expertise so that owners will immediately think of involving your company with their project as soon as the need arises.

*Because very few firms are large enough to do everything, Humrickshouse discussed how contractors need to carefully target their markets, identifying prime customers that will most likely have a need for their particular services or products.

Rather than restricting project owner contact to a business development manager or representative, he outlined a holistic approach to market development, where key departments within a contracting firm are trained to work directly with project owners.. Many project owners, he emphasized, want questions answered by the estimators, designers, schedulers, and project supervisors who'll actually perform their project's work. "Team selling," Humrickshouse stressed, "has to become a significant part of the business development process."

*He introduced the concept of the "Business Development Pyramid" to the workshop and showed how various marketing tools fit into it. Public relations, advertising, events, conventions, and web sites are to be used to gain the attention of targeted markets and identify potential customers within in. These potentials - through applications of direct mail, telemarketing, and print material distribution - can become prospects that welcome a visit from your business development personnel.

From there a relationship can grow that, down the road, leads to contracts and, hopefully, repeat business.

Focusing for a moment on just one tool, Humrickshouse placed a heavy emphasis on public relations, especially the use of news media for achieving recognition.

Construction industry firms, he recommended, should consistently issue press releases about such developments as contract awards, groundbreakings, and project completions. They should inform reporters and editors about awards, community service contributions, new services, the hiring of new personnel, and staff promotions. Any positive feature articles written about them should be reprinted and distributed to potential customers as direct mail pieces.

Stories appearing in the news media can be an extremely powerful and positive force for marketing, Humrickshouse declared.

Always the goal of a contractor's marketing should be the delivery of construction projects at the "best possible cost," recognizing, as Humrickshouse said, "there's a lot of parts in the term." Developing a long-range relationship with project owners can lead to their understanding that "best possible cost" includes high levels of productivity, quality, on-time scheduling, and safety. Too heavy a weight given to lowest bid price often overlooks these important elements. And overlooking them when bids are first received can lead to delayed project completions, expensive change orders, a higher end cost, and dissatisfaction with the end result.


North Terminal reaches for the top

ROMULUS - The last major structural steel beam was lifted into place April 18, signifying the topping out of the $426 million Metro Airport North Terminal Redevelopment Project.

Iron Workers from Local 25 and Midwest Steel put the beam into place. The new 26-gate terminal will open in 2008, replacing the aging L.C. Smith and Berry Terminals.

"The Wayne County Airport Authority could not be more pleased to celebrate this important milestone in the redevelopment of the North Terminal-and in reality, a milestone in the redevelopment of our region," said Authority Chairman Michael Glusac. "The Smith and Berry Terminals have served our region well throughout the past 50 years. It is now time for a brand-new facility that meets the needs and standards for
efficiency and convenience set by today's airlines and travelers."

The joint venture of Walbridge-Aldinger and Barton Malow is leading the construction process.

When it opens in 2008, the new 26-gate terminal will be Detroit's home to Air Canada, American, AirTran, British Airways, Frontier, Lufthansa, Royal Jordanian, Southwest, Spirit, United, US Airways, and USA 3000. Northwest Airlines and partners Northwest Airlink, Air France, Continental and Delta will remain in the McNamara Terminal, which opened in 2002.

"Today we recognize not only the significance of this new terminal for Southeast
Michigan, but also the skilled tradesmen whose hard work continues to make this new
facility a reality," said Authority CEO Lester W. Robinson.

The North Terminal Redevelopment Project will create about 3,200 construction jobs during the project. Upon completion of the new facility, the existing Smith and Berry terminals will be decommissioned-making DTW one of the newest, most operationally capable and efficient airports in North America, the authority said.

IRON WORKERS STAND behind the final major structural beam to be put into place at the 26-gate Metro Airport North Terminal. Midwest Steel is handling the steel erection on the project, which is being led overall by the joint venture of Walbridge-Aldinger and Barton Malow.
Photo by Anne-Marie Poltorak/Barton-Malow




News Briefs

Trades protest Belle Isle work
Building trades crafts want to prepare the Belle Isle for the Detroit Grand Prix - but they can't get off the starting line.

The quasi-public Downtown Detroit Partnership has hired three "no-contract contractors," according to sponsors of picket lines at the entrance of Belle Isle this month, to perform earth and paving work to set up the race course.

Laborers Local 1191 Vice President Bruce Ruedisueli said three contractors have been pouring more than 100 yards of concrete per day and will be making patches on the existing concrete course. The total contract is worth about $5.5 million, he said.

"We've always done everything union associated with the Grand Prix," he said. "But not here. We're just dealing with a closed door."

Labor, lawmakers blast Korean free trade pact
WASHINGTON (PAI) - Organized labor and Democratic lawmakers blasted the proposed U.S.-South Korea Free Trade Agreement, which the Bush regime and the South Korean government signed at virtually the last minute in the wee hours of March 31-April 1.

The pact, which Bush sent to Congress to get under a deadline for bargaining free trade treaties under his so-called "fast track" authority, would end tariffs and other barriers between the U.S. and Korea, the world's 10th-largest economy. Like trade pacts starting with NAFTA over a decade ago, the U.S.-Korea pact has no enforceable labor rights.

And, like the other pacts bargained under "fast track," including pending trade pacts with Colombia, Peru and Panama, both houses of Congress do not vote on the U.S.-Korea pact itself, but on legislation to implement it. And all those votes are up-or-down with no possibility for amendments that protect workers' rights, or anything else.

Critical lawmakers were led by Sen. Debbie Stabenow and House Trade Subcommittee Chairman Sander Levin (both D-Mich.). They said the pact would do little if anything to open Korea's auto market, while leaving the U.S. market wide open to Korean cars and trucks. In 2005, the last year for which data is available, the U.S. imported 731,000 Korean vehicles and exported 5,800, due to Korean tariffs and internal barriers.

Labor's opposition to the U.S.-Korea FTA goes beyond cars. AFL-CIO President John J. Sweeney said the pact would hurt U.S. workers in apparel and electronics, too. And he cited news reports that the pact would let in goods from the North Korean border city of Kaesong, an industrial zone whose workers toil as "indentured servants" to export products to South Korea.


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