Hours after construction contractors denounced local hiring quotas as “discrimination” on public infrastructure projects, the Senate amended the biennial budget to block the residency requirements.

The amendment the Senate Finance Committee tacked on to the two-year spending bill (HB 64*) Wednesday borrows language from legislation sponsored by Sen. Joe Uecker (R-Loveland) to prohibit political subdivisions from requiring contractors hire a certain percentage of the workforce from the local population (SB 152*).

Debate over local hiring quotas emerged earlier this year as an amendment to the transportation budget (HB 53*) that was ultimately scrapped under heavy opposition from cities, especially Akron, which had just launched a $1.4 billion sewer upgrade project. 

Senate President Keith Faber (R-Celina) told reporters that the budget amendment would ensure fairness for people who pay taxes that benefit local governments, but can’t get jobs on their public construction projects because of the hiring quotas.

“Our caucus generally has taken a position that residency should not be a requirement to do work for government, especially in governments that receive a large portion of their revenue from non-residents,” he said, presumably referring to municipal taxes, which are based on employers’ location, and state funding for local governments.

“It’s kind of ironic that the local entity that wants to charge non-residents also doesn’t want non-residents to work there. So we just thought that was inconsistent and we need consistency in this area,” he said.

Earlier in the day, the Senate Government Oversight & Reform Committee heard several witnesses argue in favor of Sen. Uecker’s standalone legislation.

Chris Runyan, president of the Ohio Contractors Association, said the bill would prevent local governments from discriminating against Ohioans who don’t live within the city limits.

“It is a violation of this nation’s laws to restrict a citizen’s right to a job based on race or gender or ethnicity. Yet, because of ordinances passed by some cities, we are holding a debate today over whether we can place that restriction on someone based on where they live,” he said.

Mr. Runyan said the Privileges and Immunities Clause of the U.S. Constitution ensures that municipal residency requirements for construction projects don’t apply to out-of-state contractors, which puts Ohio-based companies at a competitive disadvantage.

Responding to questions from Sen. Kenny Yuko (D-Richmond Hts.), Mr. Runyan said many of the employees hired locally lack rudimentary skills and require intensive training before they can do the job. About 50% of trainees dropout of apprenticeship programs when they realize how demanding the industry is, he added.

Sen. Bill Seitz (R-Cincinnati) asked the witness whether he agreed that large cities in Ohio reveal a “schizophrenic dichotomy” by stubbornly refusing to comply with statewide policies, “but wanting to be part of the state when it comes to soaking all the other residents of the state.”

Mr. Runyan agreed, noting that some suburban residents living near construction projects with local hiring restrictions will pay higher fees or taxes for the infrastructure upgrades, but would nonetheless be excluded from the hiring preferences.

Mark Totman, legislative director of the International Union of Operating Engineers, Local 18, said residency requirements conflict with the union’s exclusive hiring hall procedures.

“Simply put, we cannot pick and choose who is sent to a job when a contractor calls the union for an operator for one of their projects,” he said.

“This type of job discrimination will do absolutely nothing to help Ohio’s growing construction industry and it will only hamper our local’s ability to keep pace with the industry’s needs,” he said.

Mr. Totman said the union has four training facilities around the state that have accepted more than 400 new apprentices over the past two years comprised of roughly one-third minority males, one-third women and one-third white men.

Andrea Ashley, VP of government relations for Associated General Contractors of Ohio, said local hiring quotas limit competition, which results in higher bids for public construction projects.

“The ultimate loser with residency mandates is the taxpayer. Taxpayers fund public projects, and must bear the added financial burden related to limited competition, increased project costs and loss of local revenue and opportunities,” she said.

Residency requirements also fall heavier on small construction companies, which include the majority of minority and women-owned firms, she said. “These smaller contractors do not have the luxury of having a large staff to pull workers that reside in a certain zip code, nor do they have the ability to hire and train unskilled workers just to get a job.”

Furthermore, Ms. Ashley said quotas create workforce concerns for construction companies tied to collective bargaining agreements because labor unions must comply with federal requirements that force them to go through a queue, which prohibits them from skipping a qualified tradesperson simply because he or she resides in the wrong zip code.

Michele Pomerantz, policy and labor liaison for the CEO of Cleveland Metropolitan School District, submitted written opposition testimony, arguing that the bill was unfair to Cleveland voters who passed a school construction bond issue in November to build 20-22 new schools and refurbish at least 20 older buildings.

“Prohibiting the geographic-preference in local construction projects goes against a commitment we made to Cleveland voters,” she said, noting that the district campaigned on the premise that the bond issue would create hundreds of local jobs.

In 2003 Cleveland passed an ordinance requiring at least 20% of the total work hours performed on major city projects be performed by residents, she said. The city provides resources to help contractors meet the requirement and the law permits them to negotiate for a necessary reduction in the amount of work performed by Cleveland workers.

Not only would the legislation disappoint voters who believed that the bond issue would prioritize local labor, but it would jeopardize the school district’s ability to renew an operating levy in November, Ms. Pomerantz said. “Our fight for quality school options in every neighborhood is long and we cannot afford to lose supporters’ confidence.”

The bill would also hamper the district’s efforts to bolster career opportunities for students by limiting the apprenticeship program, she said. “Cleveland voters paid for new construction; their children should have greater access to share and compete for the modest quota of local hiring.”

Several organizations submitted written testimony in support of the bill, including: American Council of Engineering Companies of Ohio; Transportation Advocacy Group of Northwest Ohio; Ohio Chamber of Commerce; National Federation of Independent Business-Ohio; and the National Electric Contractors Association.