Cities, counties push for hometown contracts, local hiring
Sacramento County supervisors earlier this month agreed to give bidding preferences to county firms supplying goods and services.
Elsewhere in the Central Valley, Stockton aims to shore up its construction sector with a new ordinance requiring contractors on public projects to fill at least half their work force with locals.
Local preference rules also have sprung up in Oakland, Richmond, Salinas and other cities seeking to create jobs in a difficult economy. The irrigation district in El Dorado County is considering a policy.
"It helps," said Sal Vaca, Richmond's employment and training director. "Whenever there's city dollars involved in a city project, it creates employment."
Yet these laws can backfire. In 2004, the Federal Highway Administration withheld $700,000 from a road project in Cleveland on the grounds that the Ohio city's local-hiring law, similar to Stockton's, was illegal. A federal appeals court upheld the highway administration's decision.
Beyond legal issues, local-preference programs are sparking cries of protectionism from some building contractors.
"It's the opposite of free trade," said Matt Hedges, spokesman for the Sacramento Regional Builders Exchange. He said Stockton's law will make it harder for out-of-town companies to bid on projects because contractors usually prefer to bring their own workers with them.
"Most contractors have their trained staff on board," said Steve Mitchell, vice president at Teichert Construction of Sacramento. With a law like Stockton's, "you're displacing your trained staff and trying to hire folks that may have different skill sets than the contract requires.
"We would prefer not to have those types of conditions on bidding work," he added.
Stockton officials acknowledge that its law could "scare away qualified contractors," said City Attorney Ren Nosky. "That's not what we want."
Nosky, who helped craft a similar law when he worked for the city of Salinas, said the ordinances help communities generate construction jobs. As one of the nation's hardest-hit spots for home foreclosures, Stockton is stuck with 16 percent unemployment.
The law says contractors must hire local residents for half their work force – or prove a good-faith effort to hire locally – on public works contracts worth at least $100,000.
"There's not a lot of construction going on in Stockton, and they're worried about it," said Hedges, from the Sacramento builders group. "They're taking this isolationist view."
Nosky said Stockton might be willing to revise the law "to take a more regional approach." He said the law is different from Cleveland's and won't jeopardize federal funding for city projects.
Sacramento County has a different strategy. Since 2002, it's offered a 5 percent bid preference when buying goods from small businesses – those with annual sales of $2.75 million or less – located in the six-county Sacramento region. The bid preference means those firms can win county business even if they don't submit the lowest bid.
But the policy "hasn't had that big of an impact" and was revised Sept. 15 by the Board of Supervisors, said county purchasing agent Craig Rader.
The new policy, which takes effect in October, focuses the preferences more sharply on Sacramento County suppliers.
All Sacramento County vendors, regardless of how big they are, will get a 3 percent bid preference. For small businesses from Sacramento County, the bid preference remains 5 percent. Small businesses from the five surrounding counties will get a 2 percent preference.
"Hopefully, it's stimulating the local economy with jobs," Rader said.
Other government entities are approaching the idea of local preference with caution.
After the El Dorado Irrigation District in Placerville recently awarded a $1.7 million sewer project to Teichert, it was asked by a hometown contractor to reconsider. Doug Veerkamp General Engineering said it should get the award even though its bid was about 3 percent higher than Teichert's.
The district's board turned aside the request but directed its attorney, Thomas Cumpston, to research the idea of giving preference to local firms.
Cumpston said the irrigation district will have to decide a philosophical question: Does it want work done as cheaply as possible, or is it willing to pay more in order to generate local jobs?
More and more governments are leaning toward job creation.
"These are city dollars, and we feel we have an obligation to our city residents," said Vaca, the official in Richmond. "It's a broader definition of what a successful project is."