“LAUSD could be affected in the future but for right now they’re good, You know all those bonds that were approved by the taxpayers? Is the LAUSD going to be able to sell them?” - Doug Bernards, President - Bernards Bros. Construction
By Linda Coburn | San Fernando Valley Business Journal Staff
1/5/2009 -- The budget crisis in Sacramento is trickling down to businesses here in Southern California with the design and construction industry being particularly affected.
On Dec. 17, architects, engineers and contractors all over the state received notification that invoices relating to any general obligation bond projects were being put on hold immediately.
At the beginning of December, Carolyn Casavan, CEO of West Coast Environmental and Engineering in Woodland Hills was at a meeting where her team was assured that since the bonds had already been sold for their project, they would have no problem.
Then they received a letter from the State Water Resources Control Board stating that invoices for work connected to Propositions 13, 40, 50 and 84 will be put on hold immediately and no new commitments (grant agreements) will be formalized.
What that means, said Casavan, is that her company will not be getting paid for an indefinite period of time and for any of the work they’ve already completed and invoiced.
“They already take a long time to pay and now they’re suspended,” she said. “We have invoices that are two months old that will be suspended, and we had to stop all work on the project.”
Bernards Construction, headquartered in the City of San Fernando, also had a project at Cal State L.A. put on a 60-day hold.
That project is in the early stages, said President Doug Bernards, so the impact is not as great as it would have been were they putting up steel, but he has other concerns pertaining to bond projects as well.
“LAUSD could be affected in the future but for right now they’re good,” he said. “You know all those bonds that were approved by the taxpayers? Is the LAUSD going to be able to sell them?”
Redevelopment agencies have also been directly impacted with funds that had already been authorized for fiscal year 2009 being taken back due to the state’s budget emergency.
Budget trailer bill AB1389 approved in September included provisions to return $350 million in committed redevelopment funds to the State.
For the City of San Fernando, that meant they lost $426,000 that their redevelopment agency was planning to spend on street improvements and other projects. “We’re on pins and needles that we don’t lose additional funding,” said City Administrator Jose Pulido. “This year we have reserves. So we haven’t had to cut yet.”
But the City is probably going to be exhausting those reserves, said Lorena Quijano, finance director for the city.
“The State is talking about appropriating federal grants,” said Quijano. “We’re starting our budget process in the next few weeks and we will be remaining very conservative.”
All told, Los Angeles County lost nearly $25 million in redevelopment funds.
Agencies in Palmdale, Lancaster and Glendale were all hard hit with just over $8 million disappearing from their budgets.
And when cities lose redevelopment funds, real estate developers lost their ability to move forward with projects.
Sandy Sigal, president and CEO of retail developer NewMark Merrill Companies in Woodland Hills said that cities are becoming more reluctant to move forward with projects without knowing where funding for infrastructure improvements is going to come from.
Freeway on- and off-ramps, signalization of intersections, street improvements and the like are all funded in this manner, said Sigal who has projects underway in Riverside and Carson.
AMCAL, a developer and builder of affordable housing projects based in Agoura Hills, has also been impacted by the CRA funding problems.
“Housing departments and other agencies are all kind of running short,” said President and CEO Percy Vaz. “The budget problems have frozen Prop 1C monies, temporarily hopefully, but that’s causing additional turmoil.”
The New Administration
Many are hopeful that a new president will be kinder and gentler to the region.
“We think the (Barack) Obama administration will be more generous,” said Vaz, “but so does everybody else. Everybody is lining up with their hands out and how they’ll meet those expectations, I’m not sure.”
Those who provide SBA loans are also looking to Washington for assistance.
“Even before the election, Obama came out with a pretty good SBA plan that we were supportive of so we look forward to that being implemented,” said Robert Barragan, president of the Valley Economic Development Corporation.
“His new pick for SBA administrator, Karen Mills, is very good – we knew her back in the Clinton administration and she has been very supportive of small business.”