America’s Cup Squall
Northern California Carpenter
May 3, 2013
This was written a few weeks before a high tech catamaran capsized during a training run, killing Olympic gold medalist Andrew Simpson.
An effort by the America’s Cup Yacht race organizers to torpedo an agreement guaranteeing prevailing wage standards for the regatta’s work force has spun up a typhoon of anger by local trade unionists who fear such a precedent will scuttle hard-won benefits and working conditions for local workers.
“We are not going to take this lying down,” says an angry Todd Williams, a senior field representative for Carpenters Local 22.
“This” was a 2012 agreement with the city of San Francisco and the America’s Cup that the race would hire local labor and pay prevailing wages for workers hired to build infrastructure, paint signs, run public concerts, and generally make the July to September event happen. Race officials initially projected that the America’s Cup would bring in $1.4 billion, create almost nine thousand jobs and generate $24 million in hotel, payroll and retail tax revenue for the city.
But no sooner was the ink dry on the agreement with the America’s Cup Event Authority (ACEA), than racing teams began dropping out. The projections for economic activity slipped below $1 billion, more than 2,300 hundred jobs disappeared, and tax revenues were almost halved. What unions soon found out was that organizers were also quietly subverting the prevailing wage agreement, and, along with City Hall, establishing a precedent that could roll back wages and benefits for public events that could include a Super Bowl and a future Olympic games.
In what appears to be a direct violation of the original agreement, the city waived the prevailing wage standards for corporate sponsors, which, among others, include Louis Vuitton, Puma, Lexus, Charles Schwab, Red Bull, and Kaiser Permanente. According to Article 27.1 of the contract signed by San Francisco and the ACEA, Cup organizers agreed, “that any person performing labor in the construction of any work, shall be paid not less than the highest prevailing rate of wages….”
Since most large public events these days are underwritten by corporate sponsors, the implications of this waiver are profound.
“The carpenters were out front on helping out” with the huge regatta, says Williams, “and the America’s Cup just pissed on that.” Michael Theriault, secretary treasurer of the San Francisco Building Trades Council, agreed that there is “tremendous disappointment” with the yacht race, “which was sold as something that was good for working people.”
It was the carpenters who uncovered the violations. “We found out by going to the job sites and talking to the workers,” says Local 22 Marketing Representative Manuel Flores Jr. What the union found were workers recruited from Virginia, Louisiana, and Texas, laboring for sub-standard wages.
Other unions found that it was almost impossible to get their people onto to jobs. According to Owen Murphy, a Business Representative for Local 510 of the Sign, Display and Allied Crafts Union, “we saw signs, banners and displays spring up along the waterfront,” but none displaying “identifiable logos or union bugs.” When the union asked how they could get their contractors in on the bidding they found themselves in an Alice in Wonderland world.
“We were directed to Port officials, San Francisco City officials, and America’s Cup representatives,” says Murphy, “which provoked tail chasing, finger pointing and repeated responses of ‘have you talked to the other guys?’” Local 510 soon found out “all unions have been getting the runaround from the America’s Cup.”
Murphy says his local still has “no idea how the bidding process is carried out,” or if “local hire and prevailing wage agreements are monitored or enforced.” In his opinion what is needed is a “labor liaison who is familiar with the unions and the city and port.”
Nor is it just trade unionists who are up in arms. Sam Singer, president of Singer Associates, is embroiled in a battle with Cup authorities over $460,000 in back wages owed to workers who were short-changed in last August and October’s America’s Cup World Series races. Singer Associates represents a who’s who list of corporate clients, including Visa, Chevron, Ford, Nike, Coca-Cola, Sony, and locally, the San Francisco 49ers. “It is very disappointing to have to fight with America’s Cup over this,” says Singer, “Hopefully, we don’t have to go to legal action to get them to do the right thing.”
There is a certain irony in America’s Cup “just being cheap,” as the Northern California Carpenters Council Regional Director of Organizing Jay Bradshaw puts it. The America’s Cup Event Authority is a creature of Larry Ellison, the third richest person in the U.S., and according to Forbes, the fifth richest in the world. Because he won the 2010 Americas Cup races, Ellison had the right to choose the site for the next race and to create the Authority to organize it.
Until 2012—when Ellison cut his annual Oracle salary to $1—he made $960 million a year, and his overall worth is estimated at $43 billion. Forbes, which tracks the individual daily income of the world’s richest people, found that on May 2, 2013 Ellison pulled in $521.47 million.
At a cost of $200 million-plus the billionaire built a home in Woodside, Ca. modeled after a 16-century Japanese imperial palace, and in 2012, he purchased 98 percent of the Hawaiian island of Lanai for between $500 and $600 million.
Part of the original deal was that the city would pony up $32 million to host the race, a figure that has now dropped to $22.5 million as racing syndicates have bailed from the event. That money was supposed to be underwritten by the America’s Cup Organizing Committee, a private fund-raising effort that features local luminaries and financiers, as well as Congresswoman Nancy Pelosi, U.S. Sen. Dianne Feinstein, and Governor Jerry Brown.
The drive, however, has fallen short and the city is currently on the hook for several million dollars of taxpayers’ money. That deficit represents less than five minutes of Ellison’s May 2 income.
Former San Francisco Supervisor Aaron Peskin is circulating a petition aimed at getting Ellison to pick up the bill. Peskin told the San Jose Mercury News, “The normal philanthropic givers aren’t really interested in defraying the hobby costs of the third richest man in America.” Supervisor John Avalos has also been critical, but as Flores Jr. notes, in general, “The supervisors all know about this but they don’t say anything.”
But much of the leadership in the city seems to have fallen head over heels for the software billionaire. “Ellison has carte blanche with San Francisco,” says Local 22 Field Representative Adrian Simy, “the guy is playing the city like a Stradivarius.”
According to ACEA CEO Stephen Barclay, the prevailing wage agreement was only for the development of Piers 30-32 on the San Francisco waterfront, and when that fell through because of the billionaire’s excessive demands, the Authority was no longer bound by the contract, and unawares that it was required to meet the local standards. However a series of emails between Hartmann Studio President Mark Guelfi and Oracle Marketing Director Mirko Groeschner suggests that the Authority was fully aware of the prevailing wage agreement, but was trying to reduce expenses, and “union labor” was a major concern.
For its part, the city argues that it had always “intended” that the corporate sponsors would not have to pay prevailing wages, although that language never appears in any of the agreements. “How do we know what someone ‘intended’ if they don’t put it down in writing?” asks the Carpenters’ Williams.
That Ellison and his Authority would have difficulties with unions is hardly a surprise. Ellison has a long record of laying off workers, and the computer and software industry is largely unorganized. It is no accident that the sub-standard workers who the carpenters found were from anti-union, right-to-work states—Virginia, Texas and Louisiana.
The Authority is also currently advertising for “Team AC 34 Volunteers” to hold down jobs that are normally paid, including “logistics,” “media operations,” “client services,” and “commercial engagement.” The “volunteers” would have to commit themselves to between 10 ½ to 12 days of free labor. In return they would receive “a meal and refreshments,” and an “official volunteer uniform” that they can “keep at the conclusion of the event.”
The war over paying prevailing wages is one unions feel they cannot afford to lose. The San Francisco Bay Area is one of the most expensive areas in the country, but strong union traditions in defense of wages and benefits have kept the region livable for working people. It is those living standards, unions argue, that are under attack, and not just for their own members.
“Standards are for everyone in San Francisco,” points out Augie Beltran, Marketing Director for the Northern California Carpenters’ Regional Council. Trying to bypass those standards and recruit workers from low-wage areas “undercuts the city’s own people and cheats them out of jobs.”
According to Williams, workers have been brought in from other areas in California. “There are not enough trained carpenters in San Francisco?” He points out that building trades workers have lost work to sailing team workers who are also exempt from being paid prevailing wages. “They come in from places like New Zealand and build facilities for their team, work that should be going to local workers.” He adds the non-Bay Area workers tend to be “unskilled, untrained, and underpaid.”
The whole bru-ha-ha has created some tensions between the unions and the city. “Labor is highly disappointed with City Hall,” says Flores Jr. “For years we have worked together, but this puts a strain on the relationship.”
The Carpenters’ Executive Officer Bob Alvarado adds, “San Francisco should be the last line of defense for the workers,” instead of carving out exceptions to the rules that end up undermining the city’s workforce and lowering standards of living for residents. Part of the problem, says Alvarado, is that “there is literally no oversight” over the America’s Cup event.
However, it was the Carpenters that successfully pushed the city’s Office of Labor Standards Enforcement (OLSE) into going after contractors who were paying sub-standard wages. According to Donna Levitt of the OLSE, a number of sub-contractors had never been informed that they were required to pay prevailing wage. Levitt told Organized Labor, the official newspaper of the San Francisco Building Trades Council, not only did some of the contractors not pay regular overtime, some “failed to pay the San Francisco minimum rate of $10 an hour.”
Each of the super-fast 72-foor carbon-fiber catamaran boats initially costs around $8 million, although that cost is considerably higher when sails and wear-and-tear are figured in. A mainsail runs $100,000 and jibs cost $30,000 to $40,000 apiece and may only last a few hours.
In an effort to pump up interest, Oracle Team USA CEO Russell Coutts is hyping an edgy style of racing, which may involve collisions and serious risk-taking. One of Ellison’s boats was “pitch poled”—blown end-over-end—last October, a maneuver that destroyed a $2 million wing sail.
The entrance fee alone is $200,000, and teams spend anywhere from $25 million to $100 million.
As hundreds of millions of dollars of high-tech yachts ply the waters of San Francisco Bay this summer in the 34th America’s Cup race, many of those in the work force that keeps the boats in the water and service the estimated 2 million spectators will be pressured to work for less than the area’s prevailing wage—in some cases for little more than a soft drink and a sandwich.
But not if the local building trades and allied unions have a say in the matter. If Ellison and the America’s Cup Authority try to avoid what they agreed to two years ago, they may find themselves hard aground. “San Francisco was built by working people,” says the carpenters’ Flores Jr.,” It is not a playground for the rich and their toys.”