New regulations placing further stress on construction industry, panel says

By MONICA UNHOLD, The Daily Transcript
Thursday, May 13, 2010

The region's current regulatory environment is not conducive to a healthy construction industry or a viable housing market, members of the industry and government officials agreed Thursday during a forum on "Building Construction Jobs in North County."
Organized by the San Diego North Economic Development Council and funded by a grant from the County of San Diego Neighborhood Reinvestment Program, the forum focused on policies affecting the construction industry and provided contractors with information about large projects under way at Lindbergh Field, Marine Corps Base Camp Pendleton and highway construction administered by San Diego Association of Governments (SANDAG) and the California Department of Transportation (Caltrans).
In San Diego County, permits required to build midrange single-family homes are so expensive that developers cannot make a profit, said Gary Knight, president and CEO of the San Diego North Economic Development Council.
It is a major concern for local governments as the region strives to accommodate expected population growth of an additional 1 million people by 2030. Assembly Bill 32, California's comprehensive climate change legislation, disallows the large development projects needed to accommodate such growth, said Steve Kildoo, a member San Marcos' Planning Commission.
In attempting to accommodate such growth, local governments are experiencing a high level of community opposition. The philosophy is, "if we don't build it, they won't come," Kildoo said.
"Ask Valley Center how well that is working out for them," Kildoo said.
A host of new regulations are also adding costs and increasing the time needed to complete projects, said Chris Rice, a project manager with RiceBuilt Construction Co.
"We had to sandbag 500 yards away from the house just to put a shovel in the ground," said Rice, describing efforts undertaken to comply with new stormwater regulations on a recent project.
California is pioneering such environmental regulations, but may be doing so at a great cost, Kildoo said.
"It's nice that California is leading the nation in this arena but the bad thing is, it puts us at a competitive disadvantage," Kildoo said.
Such regulations place additional stress on struggling construction businesses, said Andy Berg, executive director of the National Electrical Contractors Association (NECA) San Diego. The economic climate has resulted in a highly competitive bidding environment. Many contractors are bidding at 3 percent below cost as they seek revenue to carry them through the recession.
However, the market is not all doom and gloom. The economy is beginning to recover, though it may be a while before the construction industry experiences an uptick, Berg said.
"Construction is a lagging indicator," Berg said.
Berg advised members of the industry to use the recession to retool their businesses and prepare for the market's turnaround. NECA is preparing by increasing the enrollment of its training program, despite unemployment rates of 20 percent among its apprentices.
"Be prepared for the recovery," Berg said. "This is really not the time to pull in all your resources and hide in the corner."