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New wage law could hurt development

January 14, 2002|By AARON CLAVERIE, Staff Writer

CALEXICO — A new 2002 law classifies a development project receiving public money as a "public works" project.

It may seem no big deal, mere semantic wrangling by state legislators.

For local non-union laborers such as bricklayers, carpet installers, architects and construction workers the new law is a huge deal — for their wallets.

The law was signed by Gov. Gray Davis in October and went into effect Jan. 1.

Until the law is amended, most developers receiving any sort of financial assistance from a city council, redevelopment agency or housing authority will be required to pay prevailing wages for "design, construction, alteration, demolition, installation or repair work done under contract."

Prevailing wages are generally in line with union wages. Wage rates vary slightly by county.

Private residential projects built on private property are not subject to the requirements of the new law. There are some loopholes for housing projects that receive bond money and low-income housing projects that are allocated tax credits pursuant to a specific section of the tax code.

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The law could be amended by future legislation.

Lately, a number of potential developers have requested financial assistance from the Calexico City Council.

Los Angeles developers looking to build factory outlet stores along the New River have asked for a multimillion-dollar low-interest loan.

Japanese investors have asked for an unspecified amount of assistance to build a manufacturing plant that would convert agave plants into paper money.

Applebee's Restaurant and Grill asked the city to pay for street improvements.

Each of the above projects would be affected by the new law if the city gave any of the private companies a dime of city funds or waived a cost the developers might have had to pay.

Los Angeles-based data production company U.S. Data Source looks to have pocketed city funds just in the nick of time.

Late last year the Calexico City Council, seated as the city Redevelopment Agency board, gave U.S. Data Source a $200,000 grant and a $200,000 low-interest loan to expand its operations here.

If the RDA had given U.S. Data Source the money this month, the company would have been required to pay prevailing wages to the skilled laborers remodeling the old Kmart building on Yourman Road to U.S. Data Source's specifications.

Critics of the new law include the League of California Cities, California State Association of Counties, California Chamber of Commerce and the Imperial Valley's two representatives in Sacramento.

Both state Sen. Jim Battin, R-La Quiñta, and Assemblyman David Kelley, R-Idyllwild, voted against the Democrat-penned bill in their respective branches of state government.

A press release by the league and the association of counties called the new law an "assault on housing."

"(The law) classifies private housing and other forms of private development as ‘public works,' subjecting private development to the payment of prevailing wages. This action is unreasonably intrusive into private enterprise. Moreover, it increases housing costs by as much as 20 percent," according to the release.

Kim Mattoch of the California chamber said the new law expands the definition of prevailing wages beyond what is accepted in the 49 other states and by the federal government.

"In the past, to attract economic development in certain areas, various costs associated with the project were reduced or waived. Often the waiver or reduction of these costs makes a difference as to whether the project is financially viable. With the passage of the new law, now any project that is provided these considerations will be required to pay prevailing wage, thus making the project unaffordable," she said.

In Calexico, developers bankrolling such projects as the Wal-Mart, Calexico 10 Theater and the now closed Calexico Tissue Co. would have been forced to pay millions more in construction costs because of hefty civic subsidies.

For the other side of the story, Mattoch recommended listening to Scott Wetch of the California Building Trades Council.

A recent story by Paul Rosta in the New York publication Engineering News-Record quotes Wetch.

Wetch was quoted as saying redevelopment agencies and other public agencies have long circumvented prevailing-wage requirements by funding projects with nonmonetary contributions such as tax credits, low-interest loans and cut-rate land.

The new law "slams the door on all of that" Wetch said.

He pointed out that the law will expand badly needed opportunities for training craftspeople by expanding the number of projects that must hire at least one apprentice for every five journeyworkers.

Calexico Councilman Gilbert Grijalva said, "It is true skilled labor would get a higher wage but we want to make sure we can still help a good project that comes into town."

Last year he warned prospective developers about the new law during public meetings.

Contacted Saturday, he said, "It would make some projects very costly but our resources remain very limited.

"We don't get any more money even though developers are going to be asking for more."

>> Staff Writer Aaron Claverie can be reached at 337-3419 or claverie7@hotmail.com

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