McCormick Place Chicago


[Update: Here’s Mayor Emanuel’s reaction.]


Car Care trade show pulls out of McCormick Place

I didn’t say it was a sexy headline.

In and of itself, a car-wash trade show deciding to continue its run of shows in Las Vegas may not seem like a particularly significant event. And as Kathy Bergen’s report points out, it’s a small trade show, though if you’re not in the business, six thousand exhibitors and attendees sure does sound big. (There’s a piece of me that will continue to be surprised that twice as many people as lived in the town I grew up in would come to a city to talk car washes.)

But it comes on the heels of two big news events. First, the rejection of McCormick Place reform legislation by district court judge Ronald Guzman. Second, a lengthy Crain’s investigation by James Ylesia Jr. (who’s also done some great reporting for Chicago over the years) on the high costs of doing business at McCormick Place. And more broadly speaking, it’s at the intersection of organized labor and the privatization of government services.

In short: the state passed legislation meant to curtail the costs of holding exhibitions at McCormick Place. Some of the changes were pretty small, but convenient for exhibitors, like allowing them to bring their own food and beverages instead of having to buy them through McPier. But some of the rules impact labor: "The rights also include expanded hours for straight time, allowing exhibitors to select specific workers, reducing worker crew sizes and reducing the number of stewards working the floor."

Sound simple? It’s not. As Crain’s Greg Hinz put it in 2009:

Right now, McPier is a hydra-headed monster jointly run by the mayor and the governor. Since neither has ultimate responsibility, each has grabbed the goodies rather than taking care of business, with the mayoral-controlled McPier board left free to squabble with the gubernatorial- selected McPier CEO.

It’s complicated: it’s a government entity, in an awkward place between the city and state, which is complicated enough, but the actual business of putting on conventions is done by private businesses. The exhibitors, i.e. the people actually showing stuff, pay the trade association, which puts people in front of the exhibitors. The trade association pays McPier for the floor space, and hires a contractor, which is paid by the association but recoups the cost from the exhibitors. It makes more sense in Crain’s handy flowchart.

And if that’s not complicated enough, it complicates the law. Here’s the key passage, for our purposes, from Judge Guzman’s decision:

Section 5.4(c), on the other hand, sets the wages, hours and work rules for "[all] union employees on [MPEA] premises" except those employed by MPEA and has no sunset provision…. Thus, it controls only the private employment relations between union workers and contractors/EACs and, absent repeal, will do so permanently.

Despite its breadth, it is not clear that section 5.4(c) advances the state’s goal of reducing exhibitors’ costs. The record shows that exhibitors do not pay directly for union work but are billed for it by show contractors and EACs…. Section 5.4(c) reduces those entities’ labor costs by capping the number of worker hours subject to premium pay…. It does not, however, cap the mark-ups those entities can apply to the labor charges before passing them onto the exhibitors…. As a result, the extent, if any, to which the statute achieves its asserted goal is left largely to the contractors’ discretion….

[….] On the contrary, the record shows that there are a number of other ways for the state to reach that goal that intrude less on private labor relations, including: (1) limiting contractor and EAC mark-ups on labor; (2) reducing or eliminating any profit MPEA derives from facility rentals and parking services; (3) creating financial incentives for existing trade show customers to stay in Chicago; (4) leasing excess MPEA space for non-trade show use; (5) eliminating MPEA’s subsidy of the CCTB; (6) privatizing some or all of MPEA’s operations; and (7) streamlining MPEA’s governance structure.

Translated from legalese: even though the state runs McCormick Place, the wages and rules and whatnot are a matter of "private employment relations" because, as the flowchart shows, the union workers are paid by the contractors, who are contracted by the trade associations. So by capping wages and changing work rules through legislation, the state is getting around workers’ collective bargaining rights.

Properly, Guzman’s saying, the wages and rules are between the unions and the contractors, and not you meddling bureaucrats.

Furthermore, the judge says, getting cost savings from the unions and their workers is inefficient and not guaranteed to save money, since it "does not, however, cap the mark-ups [contractors] can apply to the labor charges before passing them onto the exhibitors."

Which brings us back to James Ylesia Jr.’s excellent investigation for Crain’s. What he found was that while union-driven labor costs do play some role in making McCormick Place a comparatively expensive place to have an expo, they’re not nearly the whole story:

Average drayage rates at Orlando and Las Vegas convention centers are 42% and 51% lower than McCormick Place, respectively, according to a 2009 Tradeshow Week survey. GES and Freeman say one reason is that labor costs are lower in those cities, but drayage is also 38% cheaper at the Donald E. Stephens Convention Center in Rosemont, which operates under the same labor agreements as McCormick Place.

The Stephens center uses an in-house contractor, Rosemont Exposition Services, to manage its freight.

GES and Freeman are the two contractors that dominate business at McCormick Place; "drayage" is the fee for moving booth materials to and from the shows.

So the contractors say the unions are driving up the costs. The exhibitors, or at least some of them, are saying the contractors are at fault. Who’s zooming who?

Well, another part of the article discusses electrical services at McCormick. The venue’s in-house team is required to offer services at cost. So you’d think that exhibitors would choose the in-house team over the third-party contractors. Ylesia found the opposite. But you get what you pay for, right? Ylesia found that wasn’t necessarily so.

In other words, Ylesia has compelling evidence that the in-house electricians are cheaper and quite possibly better, but are not as widely used as the contractors. And the new private management company running McCormick might jettison the in-house electricians.

Why should you care about this mess? Because a dysfunctional McPier is expensive:

But Currie expressed concern that the state had been on the hook for $19 million in the last budget year to help McPier with borrowing expenses and that figure could rise to $34 million in the current budget year. When the state agreed to provide McPier this type of back-up help, supporters argued the state would not have to pay up because the finances would be sound.

Now McPier board members have responded by asking lawmakers to give them more borrowing authority and extend for decades current taxes such as those on restaurants in a broadly defined area of downtown Chicago, Currie said.

Labor-government relations have been strained throughout the country, most famously in Wisconsin, but in Illinois as well. McPier’s complicated structure, and James Ylesia Jr.’s illuminating reporting, puts those issues into relief. Even in its complexity, it’s a good microcosm.

Update: Mick Dumke from 2010, responding to previous Crain‘s reporting by Ylesia, on why privatization of McPier might make sense.

Photograph: John Picken (CC by 2.0)