published on May 12, 2017 - 10:01 AM
Written by David Castellon

Developers and others involved in California’s homebuilding industry said they successfully prompted changes in an Assembly bill that could have sent the cost of building most new homes in the state skyrocketing.

But Cesar Diaz, legislative director for the State Building and Construction Trades Council (SBCTC), which authored Assembly Bill 199, said opponents of the legislation spread lies about it and held rallies against it unnecessarily, as they could have avoided the hoopla and simply asked to negotiate the changes that ended up incorporated into the bill earlier this month.

“When you have a small bill you can clarify it,” said Diaz, whose organization is a non-profit federation of building and construction trade councils representing about 400,000 workers across California.

Earlier this year, the SBCTC presented AB 199 to Assemblyman Kansen Chu, D-San Jose, who sponsored it in the Assembly in February.

The bill would amend the law regulating the requirement that construction workers, plumbers, electricians and others receive prevailing wage when they work on government projects and some private-sector projects funded with local, state or federal money.

Prevailing wage generally is higher than wages paid building-trades workers on non-governmental jobs, and Diaz said the bill was intended to close a loophole resulting from California eliminating redevelopment agencies, which used to direct a portion of local property tax money to some private developers as incentives to build or renovate homes and commercial buildings in poor and blighted areas of cities and counties to improve them and generate additional tax revenues.

California’s redevelopment agencies were dissolved in early 2012, and the money they hadn’t spent was transferred to successor agencies — usually city or county governments — that could continue funding development projects.

A condition for-profit developers had to receive redevelopment dollars was a requirement to pay prevailing wages to their construction crews, though developers of low-income housing projects were exempt.

But the SBCTC became aware of at least one for-profit housing project in Southern California in which the developer wasn’t paying prevailing wages, getting around the law because it received money from a successor agency, which wasn’t addressed in the original law.

That prompted SBCTC to write AB 199 in an effort to prevent others from working around the prevailing wage rule, Diaz said.

But that small bill triggered a loud, downright angry response from developers, realtors and others. They claimed that if the original bill became law, it would require private home builders not receiving government money to also pay prevailing wage, which they claimed could add $40,000 to $60,000, on average, to the cost of building a single-family home in the Valley and more in parts of the state where construction costs are higher.

They claimed that under the bill’s original wording, permits for any home construction project would be regarded as a contract with a city or county, making it subject to the same prevailing wage bill as building a courthouse or city office, said Mike Prandini, president and CEO of the Building Industry Association of Fresno and Madera Counties.

That added cost would hurt demand for construction of new homes and kill construction jobs, Nathan Alonzo, government affairs manager for the Fresno Chamber of Commerce, said after an anti-AB 199 rally last month at a Clovis residential construction site that drew about 200 people.

“It would affect all of the economic sectors that do business with residential development — service industries, hardware stores [heating and air conditioning] installers.”

An additional effect would likely have been price increases of existing homes and rental rates, claimed Erin Shaw, a spokeswoman for the Coalition for Affordable and Equitable Housing, a group comprised of homebuilding industry members, tax opposition groups, affordable housing advocates, chambers of commerce and others formed specifically to oppose AB 199.

The Clovis rally included state Assemblyman Jim Patterson, R-Fresno, who called the bill an unprecedented “attack that is directed at private users using private money,” to build homes.

After a March 15 Assembly hearing on the bill, Chu met with representatives from the SBCTC and the California Building Industry Association (CBIA) — the latter a group representing home builders and land developers — to negotiate new language for the bill to require developers receiving funds from successor agencies pay prevailing wage while keeping privately-funded homebuilders exempt.

“Had this law been changed to what it reads now [before being introduced in the Assembly], we wouldn’t have had a problem with it. And since it’s been changed, we don’t have a problem with it,” Prandini said.

Indeed, CBIA and the Coalition for Affordable and Equitable Housing have pulled their opposition of the bill, though they’re not supporting it either, choosing instead to take no position.

When asked why such rancor was raised over what amounted to a problem with wording, Pardini said that while he acknowledged Chu was trying to fix a loophole, he didn’t believe that was the intent of the SBCTC in writing the bill.

“When we asked that question and suggested the language, the [SBCTC] didn’t like that,” he said, explaining that he believes the union advocacy group wrote the original language of AB 199 “because they basically want all building to come out of prevailing wage.”

Diaz denied that claim, saying that the only intent his organization had in writing and pushing for passage of the bill was to prevent some developers from getting out of paying the wages they were supposed to pay, not to force home developers using private money to pay higher wages.

And, he said, a careful reading of the original bill shows it would affect just home construction financed with public, not privately-funded projects, despite the opposition’s claims to the contrary.

In fact, he categorized those claims as “an extreme exaggeration by the opponents of the bill that caused them to kick a lot of their members in high gear.

“It was an erroneous argument generated by the CBIA for fundraising going to their [political action committee]. To scare their members to give more money.”

CBIA officials referred comments on AB 199 to the Coalition for Affordable and
Equitable Housing, with Shaw denying the highly visible opposition of the bill was a ruse to raise money.

“As far as we’re concerned, the bill was not written in such a way as to lower housing prices in California, and there was a broad and diverse group that all agreed that AB 199, as originally written, would have effectively eliminated the residential homebuilding exemption,” she said.

“From our perspective, the bill was amended because of the groundswell of opposition — the diverse groups that came together — from a broad and diverse group of organizations. They all agreed as originally proposed, the bill would have increased home prices and rents.”

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