CITY OF EAST PALO ALTO OFFICE OF THE CITY MANAGER REDEVELOPMENT AGENCY 2415 University Avenue! East Palo Alto, CA 94303

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1 CITY OF EAST PALO ALTO OFFICE OF THE CITY MANAGER REDEVELOPMENT AGENCY 2415 University Avenue! East Palo Alto, CA TO: VIA: FROM: SUBJECT: Honorable Mayor and Council Members Alvin D. James, City Manager/Executive Director Marie McKenzie, Redevelopment Manager Carlos Martínez, Economic Development/Redevelopment Director First Source Hiring (FSH) Report DATE: September 6, 2005 RECOMMENDATION Receive and file report. BACKGROUND In order to address persistent unemployment or underemployment in East Palo Alto, the City and Redevelopment Agency adopted the First Source Hiring and Local Business Enterprise (LBE) Ordinance in Once adopted, both the FSH and LBE policies have been routinely incorporated into City and Agency construction contract documents as well as the Disposition and Development Agreements (DDA s) and Owner Participation Agreements (OPA s) that the Redevelopment Agency entered into with developers. In 2000, the City of East Palo Alto began to handle FSH/LBE administrative and monitoring activities on an internal basis, bringing on a redevelopment project coordinator, to manage and coordinate these programs. FSH and LBE is a great program that creates job opportunities for local residents. However, to be effective, it needs constant and very close monitoring, which takes substantial staff time, given the steady multiplicity of requests coming from both employers and residents seeking job opportunities, as well as the constant follow up required to train new managers at the retail center, and contractors doing business and tenant improvements within the city. All this is an effort worth to continue to maintain the integrity of the program. The program has been very successful in generating and tracking job opportunities and program performance at retail sites. 1

2 However, it has serious challenges in construction sites, where the program has had limited success given the difficulty of monitoring on site, poor cooperation due to conflicting interests from a great number of trade unions and subcontractors involved, the high turnover of workers, and the safety sensitive environment of a job site. The FSH program this year can list the following accomplishment and challenges: Accomplishments: Continuing and building relationships with the established and new retail managers, and their support staff to educate them about and advance the FSH program goals. Conducted a retailers survey on local resident employment trends to identify level of satisfaction with local workers, reasons for leaving the job, and to learn more about the company s hiring process and practices. Staff has used the results to enhance FSH program delivery and effectiveness by advising FSH applicants applying for a job. Continued partnership with local organizations such as OICW, San Mateo Community College District and the San Mateo County Employment Development Department (EDD), EPA.net, EHP s Dress for Success, as well as regional organization to increase and multiply efforts of FSH programs throughout the county and the region. Regionally, staff is championing and taking the lead on FSH efforts with other cities that want to study, increase FSH effectiveness; streamline staff s time in program service and monitoring, creation of best practices for such community benefits. Our program has been reviewed as a successful model by: City of Oakland, City of Fresno, City of Seattle, New York City, Port of Oakland, and the nonprofit East Bay Alliance for a Sustainable Economy. Staff is considering planning a conference in East Palo Alto for local cities, bringing together a cadre of interested participants to lead program review, create new and stronger policies, share program effectiveness and best practices, with the purpose of strengthening the policy itself, monitoring and compliance. Enhanced Pre-employment training program by adding a Customer Service module to Advantage Training classes. Customer Service is the common thread among all employing organizations. Providing a module in the pre-employment training classes enhances the skills of participants and supports them to have a greater understanding of customer service practices in the workplace. Developed a successful recruitment and outreach to EPA residents working at Ricky s Hyatt (nearly 41% local residents found) prior to its closing June Our goal was to recruit and refer locals losing their jobs, for employment at Four Seasons Hotel. Developed recruitment and outreach strategy for increasing workforce placement outside the city by identifying additional hotels in the area that might provide employment to those residents trained in the hospitality industry, but that might not be hired by Four Seasons. 2

3 Currently, there are 799 jobs in the Gateway 101 Retail Center of which, 322 were gained by East Palo residents. That represents approximately 40% of the total jobs. Most retailers with a few exceptions are above the 30% mandated percentage for local residents. 1 PROGRAM CHALLENGES Some of the FSH program challenges are as follows: Union lack of participation and buy-in into the FSH program to actively place local workers on construction sites. Continued challenges with the unions to place local workers on a priority basis, mainly due to conflicting master agreements that precede EPA s FSH policy. Union master agreements differ from union to union, but often they prioritize placing workers by seniority, and not by residency, as FSH requires. Construction subcontractors some times call a non-local union hall, or make their request for workers without specifying that they want workers from East Palo Alto; thus EPA residents might not be sent to the job site. Even in cases where subcontractors request EPA residents from the local union hall, either 1) the dispatcher might ignore the validity of the request and send individuals by seniority, or 2) the union master agreement might require the dispatcher to send a number of union members by seniority first, and then an EPA resident, i.e., (two senior members and one EPA resident). In some cases, non-union companies that have hired local workers have found strong opposition from unions to enter the job site, putting pressure (to the point of picketing and walking out of the job site) on the general contractor to rescind the contract. These are some of the sorest points of contention with the unions and subcontractors regarding the appropriate implementation of the FSH program. Often the unions, general contractors and subcontractors, point fingers either at each other, at the lack of personnel training and familiarity with the FSH policy, or at their existent master agreements. In reality, these frictions arise from, and point out to the difficulty of maintaining a uniform procedure in an environment where the individual players (subcontractors, union dispatchers, workers available for work, etc.) change constantly, and policies (FSH and union master agreements) or interests (unions providing jobs to members vs. non-union EPA residents at job sites) sometimes conflict. Staff has to stay always vigilant trying to follow up the thread of non-compliance when it appears, to the point that in the past has had to notify subcontractors of non-compliance and invoked potential legal sanctions to ensure adherence to the FSH policy. Staff continues exploring ways to overcome some of these challenges in a collaborative manner with the Trades Council. A potential alternative that has been informally discussed is to institute project-specific Project Labor Agreements that might be signed between the Trades Council, the developer and the City, at the signing of the DDA, in order to bring our mutual interests in line. 1 Jobs at Gateway 101 Retail Center and at various construction sites. See Exhibit Pages at end of Report 3

4 This agreement would take precedence over union Master Agreements and hopefully would enable everyone involved, to improve the FSH program. One of the goals of the unions and the City, in passing the FSH resolution was to expand the well qualified and well paid workforce in East Palo Alto by growing the representation of residents in the different union trades. However, apprentice day has never materialized due the overabundance of SMC workers on the union rolls not working as a result of slow down in economy and construction projects. Unions are currently challenged to indenture more workers as apprentices who would in essence never work. To create an apprentice day in East Palo Alto would only increase the hopes of local workers who would wait for many months, up to one year or more to realize sporadic work with unions. Thus, the apprenticeship program is a great idea that is currently been trumped by the limited number of construction jobs available. There is a large number of local workers with limited life skills, and lack of readiness for employment, which hamper their ability to compete in the market place and earn a job. Many local residents are new immigrants who have yet to learn English, or have very limited language skills. This barrier limits them to service industry jobs with low wages and no benefits, which require little or no interaction with customers. When employment opportunities in which English language proficiency are required, those workers cannot be employed. As with the Four Seasons Hotel employment efforts, staff referred residents to ESL classes offered at OICW a full 14 months before job opportunities were realized. While many residents enrolled, upon completion of the program, few enrollees were at the proficiency level required for employment. Even some local residents who speak English still face other barriers such as previous criminal offenses and limited writing, comprehension, effective self-presentation and interviewing skills that are serious challenges that keep them from gainful employment. The FSH program has temporarily lost the Technology Access Point (TAP) centers as a resource. These centers, when they were under direct Plugged Inn s supervision, they were available to FSH applicants; however, these centers have been turned over to its respective locations (school district, Free at Last, OICW, etc.), which have less flexible schedules and their own constituency demands, making their availability to FSH applicants more difficult. Staff is planning to coordinate with the various organizations now managing the TAP centers to facilitate the access for FSH purposes. When launching large employment recruitments, the number of applicants far exceeds the actual number hired. As an example, 1,600 residents applied to 400 total jobs in IKEA s grand opening in 2003, yet only 180 residents were hired. Despite the fact that approximately 45% of the total workforce was local, successfully meeting and exceeding the 30% local employment goal, 1,420 applicants were not hired, creating the impression that no one was hired. 4

5 To date, staff has a list of approximately 700+ local residents interested in employment with at the Four Seasons Hotel, with more applications coming every day for a total of approximately 90 positions. Residents not hired will feel the process did not work for anyone, rapidly becoming the community s perception. Local residents feel frustrated by the use of the non-personal employment process at retail stores, and the lack of varied employment opportunities. Most retailers in the Ravenswood 101 retail center require applications to be filled out online or to voice record an application. The FSH program is working with the retailers to periodically offer FSH job fairs for local residents. However, deeply rooted corporate hiring policies, practices, procedures, and legal caution regarding fair employment laws, make it almost impossible for the local retail manager to launch a local hiring effort. In sum, of the total 804 construction jobs at Nugent Square, the Four Seasons Hotel and The Courtyard, only 40 jobs were awarded to local residents, a low 5%. 2 ANALYSIS Staff s assessment is that; overall, the FSH program has been very successful; more so at providing retail jobs than construction jobs. City of East Palo Alto s rapid expansion of the tax base, and the FSH program, has created more employment opportunities than anyone imagined. Local workers enjoy placement in retail jobs that support entire households and/or supplement regular jobs without having to battle commuter traffic or paying high prices for gasoline. However, most jobs are in the retail/food service industry where limited opportunities for well paid salaries exist; jobs are often seasonal and prone to the ups and downs depending of economic fluctuations. As a result, many local workers have limited incomes, some are either only employed seasonally, while others experience periodic lay-offs or are cut due to market fluctuations, technological advances or operational efficiencies gained in the retail industry. Even though this program has many deficiencies, and is very difficult and time consuming to implement, as above indicated, it s a very valuable policy producing phenomenal results, and a key component in reducing unemployment in the City. FISCAL IMPACT There is no fiscal impact associated with receiving this report. However, the City receives positive fiscal impacts from the direct impact of the FSH program in creating additional jobs and salaries for local residents, plus the multiplier effect associated with re-circulating dollars within the local economy. 2 Jobs at Gateway 101 Retail Center and at various construction sites. See Exhibit Pages at end of Report 5

6 EXHIBIT PAGES City / Area Name Labor Force Employment Unemployed UE Rate San Mateo County 369, ,200 16, % Atherton town 3,200 3, % Belmont city 14,500 13, % Brisbane city 2,200 2, % Broadmoor CDP 2,000 1, % Burlingame city 15,500 15, % Daly City city 52,400 49,700 2, % East Palo Alto city 12,400 11,100 1, % El Granada CDP 3,300 3, % Foster City city 16,200 15, % Half Moon Bay city 6,200 5, % Hillsborough town 4,600 4, % Menlo Park city 15,700 15, % Millbrae city 9,600 9, % North Fair Oaks CDP 7,600 6, % Pacifica city 21,800 20,800 1, % San Mateo County Employment - July 2005 Data (Preliminary) - State of CA EDD Retailer All Employees EPA FSH % FSH Best Buy % McDonald s % Togo s/baskin % California Bank & Trust % Starbucks % Good Guys #DIV/0! Office Depot % Home Expo Closed Closed Closed Home Depot % Taco Bell % IKEA % New LuLu s Petite % New SF Soup #DIV/0! Total Retail Jobs % Redevelopment Project All Employees EPA FSH % FSH Four Seasons Hotel % UCI - Swinerton 6 #DIV/0! Devcon - Courtyard 10 #DIV/0! Total Construction Jobs % Jobs at Gateway 101 Retail Center and at various construction sites. 6

7 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 4.4% 2.7% 4.0% 7.2% 6.4% 3.0% 5.1% 10.3% 3.3% 3.0% 5.4% 1.7% 3.6% 2.4% 9.0% 4.7% 4.4% 3.7% 2.7% 3.7% 5.1% 4.8% 7 San Mateo County Atherton town Belmont city Brisbane city Broadmoor CDP Burlingame city Daly City city East Palo Alto city El Granada CDP Foster City city Half Moon Bay city Hillsborough town Menlo Park city Millbrae city North Fair Oaks CDP Pacifica city Redwood City city San Bruno city San Carlos city San Mateo city South San Francisco city West Menlo Park CDP July 2005 Data (Preliminary) State of CA EDD January February March April May June July CA County East Palo Alto Unemployment Rate in East Palo Alto January 2004-July 2005 (July data is preliminary)

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