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Palm Springs should back unions by denying Virgin Hotel project timeline extension (CA)

Posted by National Alliance for Fair Contracting on

Robert Julian Stone, Special to The Desert Sun
Published 8:00 a.m. PT Jan. 6, 2019

On Wednesday, Jan. 9, Palm Springs’ City Council will consider Grit Development’s request for an extension of completion timelines for the Virgin Hotel. The developer is asking for a three-year extension but, despite the Planning Commission’s 5-2 vote recommending that more time be granted, there is simply no justification for any extension on this project.

On Nov. 15, 2017, the council granted Grit a rebate of 75 percent of the transient occupancy taxes (TOT) for 30 years on the new Virgin Hotel and set forth a timeline for completion. The city estimates the value of this TOT rebate to be between $18 and $50 million.

This year, the State Department of Industrial Relations opined that a TOT rebate and other public funding agreements between the city and Grit Development for downtown work done so far, including on the completed Kimpton hotel, make Grit responsible for paying its construction workers a prevailing wage.

Grit wants a three-year extension because the developer intends to keep the promised TOT rebates while appealing the prevailing wage determination to the state. If that appeal fails, Grit’s attorney has indicated the developer will litigate the issue in court.

It appears the developer simply refuses to pay a living wage to workers on this project – and is willing to sue to be relieved of that responsibility.

Even with an extended construction deadline, it’s likely we will be exactly where we are now in three years. Gov. Gavin Newsom’s administration; the Democrat legislative super-majority; and the courts are unlikely to look favorably upon such a request.

It is disappointing that City Council did not pro-actively require prevailing wages for the project at the time they approved the generous TOT rebate for the Virgin project in 2017. Palm Springs is an increasingly expensive place to live. It is incumbent upon our legislators to protect the livelihood of local workers and advocate for a living wage

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Former Wessman Development LLC could owe Kimpton project workers more wages (CA)

Posted by National Alliance for Fair Contracting on

Amy DiPierro
Palm Springs Desert Sun
Published 10:53 a.m. PT
Sept. 10, 2018

Kimpton Hotel and other real estate developments in downtown Palm Springs are subject to a prevailing wage, a state agency has found, due in part to more than $140 million in city funding and projected tax rebates to the complex. The California Department of Industrial Relations’ determination means the developer of the projects could owe untold amounts of additional wages to workers who built the hotel and shopping district.

The DIR’s August 13 letter, which determined the downtown project is subject to prevailing wage, could sully a tony new development that city officials have hailed for revitalizing the downtown corridor, even after the original developer of the project was charged with allegedly bribing city officials for a sweetheart deal.

Palm Springs Promenade LLC, the limited liability company formed by Wessman Development to build the Kimpton and Virgin hotels as well as office and retail space, received $46 million in city funding and could receive an additional $100 million in potential transient occupancy tax refunds, according to a detailed review of city contracts by DIR.

The prevailing wage rate is the hourly wage paid to a majority of like workers on public works projects in the same place or labor market. Essentially, a prevailing wage is a minimum wage for specific types of workers, when they work on projects that benefit from public funds.

While some cities exempt publicly-funded projects from prevailing wage because of their benefits to residents, DIR Acting Director André Schoorl concluded in the agency’s determination that the downtown complex is not exempt, because the project is neither built, owned nor operated by the city and has the primary purpose of private profit.
“The city’s decision to subsidize the profit margin of (a) private landowner in the city’s downtown is not equivalent in purpose, scale, or function, to the purely municipal acts of building a local fire station or fencing for a reservoir,” Schoorl wrote.

The DIR determination means construction workers that built the Kimpton and other downtown structures could get a boost if wages are found to be owed. Workers and other interested parties may file a complaint with DIR, according to the agency, which would then trigger an investigation into whether workers have already received the correct prevailing wages or not.

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California charter cities can pass laws exempting locally-funding public works projects from state prevailing wage law if they are deemed to be purely “municipal affairs,” like a fire department or library.

But in an August 13 letter, DIR Acting Director André Schoorl noted the hotel and shopping development built by Palm Springs Promenade “has no such obvious public purpose” that would make it exempt from paying prevailing wage. And while the city sought to incentivize developers to invest in blighted properties downtown, Schoorl concluded construction in downtown Palm Springs “was primarily undertaken for private benefit and profit, with a subsidiary goal of removing blight.”

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The Center for Contract Compliance, a nonprofit labor advocate founded by contractors unions, in January 2017 requested DIR review whether the downtown project is subject to prevailing wage.

Although DIR determinations do not set a precedent – meaning it is advice given to a specific project, not a precedent applying to subsequent cases – Center for Contract Compliance Executive Director Branden Lopez said the reasoning in the Palm Springs Promenade case could apply to other jobs, too.

“The reasoning in the case, it applies statewide if they have similar facts,” he said.

Multiple cities in California have subsidized proposed hotel developments on a case-by-case basis. Additionally, according to research commissioned by the city of Long Beach in May 2017, at least five cities and one county in California, including Cathedral City and Palm Springs, have formal economic incentive programs for hotels.

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