Evanston aldermen tonight may debate how much extra taxpayers should spend to encourage employment of local residents on city-funded projects.
The debate involves two separate city requirements.
One requires contractors on construction projects valued at over $250,000 to have at least 15 percent of the work hours performed by Evanston residents.
The other gives a 5 percent pricing advantage to Evanston-based businesses when competing for city contracts.
The city’s Minority, Women and Evanston-based Enterprises Committee is recommending what could be a 10-fold increase in penalties under the construction hiring program — from $100 per day for the period of any violation — to 3 percent of the total contract value.
The committee, in arguing for the penalty increase, said that some contractors have found it cheaper to pay the current fine rather than to try to find Evanston residents to do the work.
And the city has had to hire a part-time worker to monitor compliance with the hiring rules.
For eight contracts totaling just over $7 million in 2013 that the city’s monitor found to have apparent violations of the rules, penalties assessed so far total $20,600 under the existing rules, but could be as much as $211,675 under the scheme the committee is recommending.
City Manager Wally Bobkiewicz says he’s concerned that the increase “may have negative impacts” on the city’s ability to attract competitive bids and could increase costs for its $40 million capital improvement program.
He’s asking the City Councl to defer action on the MWEBE Committee’s request to give staff more time to evaluate its impact and send the issue to the Human Services Committee for discussion at its June meeting.
The city, while it imposes local hiring requirements on outside contractors, does not require its own employees to live in Evanston.
Alderman Ann Rainey, 8th Ward, had asked the MWEBE Committee to reconsider the 5 percent pricing advantage rule for local businesses — suggesting it creates too big an advantage — especially on larger contracts.
But the MWEBE Committee, chaired by Alderman Peter Braithwaite, 2nd Ward, chose not to recommend any change to that rule.
The staff memos prepared for alderment don’t discuss how other communities address the local hiring issue and whether local hiring rules elsewhere may exclude Evanston residents from some jobs.
How much extra should we spend?
None!
Incentives better than penalties
Instead of the forms, fines, and finagling that the current system requires to encourage local employment, the council should consider an alternative incentive. The City could offer to pay the employer portion of Social Security payroll tax for any Evanstonian employed by ANY contractor or bidder.
This subsidy is easy to calculate and verify. Because it reduces the cost of labor for the contractor, local employment is encouraged. Presumably, bidders for City contracts will take this cost reduction into account when preparing their bids. A contractor able to effectively recruit local labor can bid lower without sacrificing profit than a contractor that can not. The cost to the City may well be less than the 6.2% SS contribution.
Maximum flexibility is achieved- the City can still award to the lowest qualified bid and contractors are motivated to hire as much local labor as possible.