FONTAINEBLEAU: Union says work will not stop despite some layoffs - Business

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May. 02, 2009
Copyright © Las Vegas Review-Journal

FONTAINEBLEAU: Union says work will not stop despite some layoffs

Problems started when $800 million pulled

By ARNOLD M. KNIGHTLY and TONY ILLIA
LAS VEGAS REVIEW-JOURNAL

Putting the brakes on the $3.1 billion Fontainebleau Las Vegas project will create problems once the developer and contractors begin bringing back the work force to complete the project.

Dr. David Shields, director of the construction management program at the University of Nevada, Las Vegas, said just how long it will take to get the work force back to full speed will depend on many factors, including how long the project ends up being idled or slowed to whether the workers coming back to the project are new or if they have worked on the project before.

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"When you're called back, there's a remobilization to the level that you were at with bringing all your tools and equipment back to the project," Shields said. "The contractors have to find the appropriate people. If they're new people, of course they'll have to become familiar with the project."

Fontainebleau Las Vegas' contractors began laying off and furloughing workers this week after a group of banks withheld a portion of a $130 million loan that was to be used to pay construction costs.

The 63-story, 3,815-room development is reportedly about 70 percent complete and is scheduled to open in October.

Early Friday, some workers were told they could not take the furloughs but would be laid off instead because the developers believe it will take longer than expected to straighten out the financial issues and the project could be shut down completely, a worker who did not want to be identified said.

"(The foreman) said it could take a couple months," said the worker. "That was longer than they thought when they offered the furloughs."

Union officials, however, said they think work on the project will continue.

"I don't think they are going to completely shut down," said Tommy White, secretary-treasurer of Laborers Union Local 872, which had 250 crafts workers laid off between general contractors and subcontractors. "They are too far along. Not everybody will get laid off on that project. But it's not going to be as big as push as it once was."

The laborers local has had 250 crafts workers laid off this week, he said.

Steve Redlinger, a spokesman for the Southern Nevada Building and Construction Trades Council, an affiliate of 17 labor unions, said the unions have not been given an indication if there are plans to shut down.

Work on the 24-acre site, however, was drastically slowed this week when contractors began pulling their work crews after it became increasingly obvious a construction payment scheduled for Thursday was not going to be made.

That furloughs aren't being offered now could slow down the project once contractors begin ratcheting up the work force again, though.

Union workers who have been laid off will have to go to the bottom of their union's out-of-work list, which already have hundreds of people waiting for jobs.

In the meantime, with work on the project slowing down, the developer and contractors have many issues to deal with besides their financing problems.

Decisions must be made on what to do with site-specific equipment, including tower cranes. Many machines are large and costly and take time to set up and disassemble.

The massive development requires large equipment for its construction. Many pieces are being rented, including two large tower cranes used for building the tower skyward.

High-value equipment items like copper wire, air handlers, and escalator equipment must be removed and safely stored elsewhere or face damage and theft if left unattended on the site.

"It takes a lot of money to close down a project," said Marc Furman, administrative assistant for the Southwest Regional Council of Carpenters. "And this (project) is further along than Echelon (Boyd Gaming's $4.8 billion Strip project that stopped construction in August). It's really interesting."

Fontainebleau Resorts, an investment group led by Miami-based developer Jeffrey Soffer, has invested about $2 billion in debt and cash in the project thus far. Some question the decision to slow development so close to completion.

"A project is going to be worth more as a completed operation as opposed to structural steel sticking out of the ground," said George Ogilvie, managing partner of McDonald Carano Wilson, a Las Vegas practice specializing in construction law.

Fontainebleau Las Vegas' problems began last week when 11 lenders pulled $800 million in arranged financing after the developer was served with a default. The developer filed a lawsuit against the banks in response.

Developers and the Bank of America-led lender group say they are negotiating a new "structured financing" for the project.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. laborer wrote on May 06, 2009 11:16 AM: They better leave more people there to watch the floors for leaks, fires etc...what happens if a pipe bursts and noone is there to catch it, stop it and clean it up? their investment is shot. just hurry up fontainebleau!! settle with the banks, hire back the people that were there and pretend like this never happened. The biggest pool in the state of nevada is at this casino. that will bring in tons of wealthy tourists.. dont turn vegas into another salton sea. Clark County Development Services wrote on May 02, 2009 01:44 PM: We the employees of Clark County Development Services want to affilitate with another union other than the completely worthless SEIU. Can representatives come and speak to us.....we are ready for a CHANGE. And a change is needed on the Clark County Commissioners since none of them have shown leadership other than complete incompetence. County manager Virginia Valentine needs to be immediately terminated as the City of Henderson did the right thing in terminating their City Manager for being incompetent. fred t wrote on May 02, 2009 01:36 PM: I think the subcontractors have learned their lesson. We have weak mechanic's lien laws in Nevada, and good old Sheldon took advantage of it in the 90's. The Owner doesn't pay the GC, so the GC doesn't pay the subs. Then the subs are forced to settle for much less than their subcontract, simply to remain in business. And if you won't settle, the project might simply go BK, like Vantage Lofts in Henderson, and you lose a lot, like one million in one subcontractors case there. Tough world out there, but I'm glad to see the subs aren't hanging around to take it in the shorts once again. And "get evens" have appeared in Sheldon's world, too....Good. da truth wrote on May 02, 2009 12:25 PM: well da truth is fontainebleu just layed off over 3000 workers and only 2% can draw unemployment the rest was illegal alein workers how bout talking about the people they been working that's not tax payer screw them and any other crop that work illegal then want to cry about the banks well protect america's workforce or dont lend them a dime knock it down in build it back up right with an american work force a wrote on May 02, 2009 10:02 AM: First, the layoffs started last week. Second, it hasn't been "some" workers, it has been hundreds. In some cases, subcontractors entire crew (including equipment). I found it interesting that the news media in Las Vegas hadn't stumbled on this before Thursday (9:04 AM)and then only reported on comments by a laid off worker. You guys all asleep at the wheel, or what? RANDY wrote on May 02, 2009 08:23 AM: THIS IS WHAT HAPPENS WHEN YOU OVER BUILD. YOU GOT TO BLAME THE ANNALISTS. WHEN YOU ASSUME AS THE ANNALISTS DID THAT PROPERTY VALUES WOULD ONLY GO UP, YOU GET A BUBBLE. THERE ARE MANY FACTORS THAT LED TO A FINANCIAL ECONOMIC MELT-DOWN. FIRST, WE HAD A ISLAMIC TERRORIST GROUP ATTACK THE U.S. AND WE FINALLY WENT TO WAR WITH THEM. SECONDLY, THE BANKING RULES WERE CHANGED.THE CHANGED RULES LED PEOPLE TO LEND MONEY WITHOUT MAKING SURE THERE WAS A GOOD CHANCE OF BEING PAID BACK. THIS LED TO A HUGE RUN-UP IN THE CREDIT DEFAULT SWAP MARKET. THERE WAS NO REGULATION TO THESE DERIVATIVES. THIRDLY, WE HAD A OIL AND GAS PRICE SPIKE. I BELIEVE THIS WAS THE TRIGGER THAT BROKE THE ECONOMY. OIL AND GAS IS THE LIFE BLOOD OF THE U. S. ECONOMY. WHEN IT GOT EXPENSIVE PEOPLE HAD TO CUT-BACK ALL AREAS. THIS WAS STARTING TO MAKE PEOPLE SPEND LESS ON TRAVELING. AS GOODS AND SERVICES BECOME MORE EXPENSIVE TO TRANSPORT, DEMAND WILL FALL OFF. IT WAS ONLY A MATTER TIME. IF YOU WANT TO BLAME SOMEONE, BLAME THE CONGRESS. THEY ARE IN CHARGE WITH OVER-SEEING THE BANKS. THEY MAKE IT IMPOSSIBLE TO DRILL ON OR OFF SHORE FOR OIL. THEY MAKE IT IMPOSSIBLE TO BUILD A GASOLINE REFINERY. THEY WANT CAP-IN-TRADE. WHICH IS A TAX ON EVERYONE USING ENERGY. OUR LEADERS ARE SOCIALIZING THE LOSSES AND PRIVATIZING THE PROFITS. sam wrote on May 02, 2009 07:25 AM: I blame the banks for the entire mess neiman wrote on May 02, 2009 06:49 AM: I blame Bush for this entire mess.