The real change is at the state level, where California cities are the tail being wagged by the dog. Recent and pending state legislation augers increased costs and fosters uncertainty about the location of new redevelopment projects.

Larry Kosmont, president of Kosmont Companies, says that while the costs of doing business in California have stabilized, new laws passed by the state legislature in 2001, and pending in 2002, undermine plans for local redevelopment by increasing construction costs. And potentially decreasing the availability of public agency financial assistance to projects in the form of sales tax revenue sharing. Unfriendly legislation is making life more difficult for private developers.

He referred particularly to California Senate Bill 975, which greatly expands the number of real estate development projects that are considered to be works. When these projects receive some sort of public assistance or cost relief -- from a redevelopment agency, for example -- the label public works can be extended to include just about every urban renewal or affordable housing project in the state.

Under SB 975, workers on any project deemed to be a public work must be paid prevailing wages, which are loosely defined but almost always well above the minimum wage. "Because of the ladder effect,'' Kosmont says, "raising pay even on the lower rungs puts pressure on wages all the way to the top.'' He adds the irony is that the increased cost of public work projects may render them infeasible even with public assistance, thus defeating the purpose of redevelopment agencies.

He says that redevelopment and urban renewal projects are prime generators of employment and new tax dollars, so any legislation that raises costs can slow down business and urban recovery. Such legislation also makes it more difficult to attract new businesses to the state. "So, in effect,'' he says, "Senate Bill 975 is a state-mandated fee on public-private development deals.''

Instant Insights /

Survey Finds Unfriendly California Laws

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