Posted on: Sunday, March 14, 2004
Investors hesitant in strike
By Dan Nakaso
Advertiser Staff Writer
Bruce Coppa keeps getting nervous calls from Mainland investors who want assurances that they can pour millions of dollars into Hawai'i construction projects three years from now and not get burned by another dispute like the 38-day-old concrete strike.
"They're saying, 'Hey, Coppa, are we going to get the same kind of (problem) in 2007?' " said Coppa, president of Pacific Resource Partnership — an advocacy group for union contractors.
These investors, whom Coppa would not name, are well aware that four of Hawai'i's largest construction unions — the carpenters, laborers, operating engineers and masons — are up for contract talks in 2007 with the General Contractors Labor Association, which represents Island builders.
Coppa, who has expressed frustration over the damage to Hawai'i's construction industry from the concrete strike, can't make any promises. "I'm not quite sure what to tell them," he said.
Contract negotiations between the Teamsters and Allied Workers Local 996 and Hawai'i's two major concrete companies, Ameron Hawaii and Hawaiian Cement, have been hung up primarily over who will pay for rising medical costs.
It's an issue that's certain to come up again in 2007 with the four trade unions, said Bill Puette, director of the Center for Labor Education and Research at the University of Hawai'i-West O'ahu.
"It's going to have to come out of somebody's pocket," Puette said. "And it's most likely to be the No. 1 issue if it comes to a strike (in 2007)."
Some trade unions pay for their own medical coverage through their trust funds. But the money that contractors contribute for union members' medical coverage will be decided in contract talks, Puette said.
"It may seem less visible, but the money is negotiated into the trust funds through the companies," Puette said. "Although it looks like the union's medical plan, how much the employer puts into the trust fund is still negotiated."
And as medical costs go up in Hawai'i — they are rising by more than 10 percent a year — more pressure will be placed on the unions and their employers.
"The basic problem is the same: Whether it's HMSA (Hawaii Medical Service Association) or Kaiser, costs are steadily escalating," Puette said. "Who's going to pay for that?"
The question has bogged down contract talks between the Teamsters and Ameron and Hawaiian Cement.
Ameron wants to increase employees' share of their coverage from 20 percent to 30 percent. Hawaiian Cement, which currently covers all of its employees' medical coverage, wants workers to pay 20 percent of their costs.
Both companies argue that they could better control medical costs if workers bear more of the expenses and therefore use their medical plans more wisely.
The issue became so contentious last week between Ameron and the Teamsters that it caused negotiations to break off.
Ameron officials said on Wednesday that the union wanted the company to rescind its medical coverage proposal before meeting the next day. Teamsters President Mel Kahele later said it was the company that wanted the issue off of the bargaining table.
In either case, no talks were held. The two sides have scheduled another round of talks for Tuesday.
"This could go on for a couple more months," said Jim Santangelo, vice president for the International Brotherhood of Teamsters, who oversees the union's Western division. "It's a predicament."
The overall cost of the concrete strike has been difficult to measure because no one in government or the private sector is tracking the number of layoffs or estimating the damage to Hawai'i's construction industry, which had been projected to generate $5.4 billion this year.
Individual developers, however, are reporting dozens of layoffs and millions of dollars in stalled projects.
Patrick O'Neill, director of sales and marketing for Stanford Carr Development, estimates that the concrete strike is costing his company an additional $16,000 per day for its stalled Peninsula mauka project in Hawai'i Kai and another $16,000 per day for its nearby Colony condominium project.
By now, Stanford Carr had hoped to have completed, sold and closed many of the 96 Peninsula mauka homes and paid off the debt financing. But with no concrete deliveries, the company can't finish the homes and pay off the debt, O'Neill said.
"It's like having a $48 million credit-card bill and you're not paying off the balance," O'Neill said. "But you're still being charged the interest. Every day of delay costs us an extra $16,000 in interest per day."
Stanford Carr will absorb the losses on unfinished homes that have been sold, because the price was already set. But the company will pass along its extra interest costs in the form of higher sales prices on houses not yet taken.
"We're not the only ones in this boat," O'Neill said. "Everyone is in this boat."
Developers such as Stanford Carr won't know the true cost of the concrete strike until it ends, construction resumes and homes are sold, O'Neill said.
Much of the post-strike construction schedule will rely on Ameron Hawaii's and Hawaiian Cement's ability to generate concrete, which will be in high demand.
Stanford Carr Development had been receiving one concrete pour per week for its Hawai'i Kai projects. When the strike ends, the company — like others around O'ahu — hopes to triple or quadruple its deliveries to make up for lost work.
Neither Ameron nor Hawaiian Cement will discuss its production plans for when the strike ends, so it's impossible for companies such as Stanford Carr Development to estimate the overall expenses from the strike, O'Neill said.
"The big question is: Can we make up that time that's lost?" O'Neill said.
Actus Lend Lease, which is building and refurbishing 74 homes on Hickam Air Force Base, said all of those homes have been affected by the slowdown.
"Every day the strike goes on pushes back the completion of our project," said Actus' spokesman Ryan Mielke.
Actus Lend Lease also has been named to be the primary contractor for parts of $2.2 billion worth of O'ahu military housing projects that are expected to lead Hawai'i's construction boom.
That work has yet to begin. But it could also be affected, Mielke said, "if this strike drags on for months."
"This wasn't a foreseeable situation," Mielke said. "It's out of our control."
And that's just what investors who bankroll construction projects in Hawai'i want to avoid in 2007.
Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.
