Caleb Lopez is one of the lucky ones.
With several big development projects on his plate and a steady flow of smaller, private jobs coming in, Lopez might be considered a rarity when it comes to being a contractor in today’s economy.
Following the overall downturn of the nation’s economy and the collapse of the housing market last year, contractors have been working especially hard to stay afloat financially.
“Everything has changed,” said Lopez, a general contractor and owner of Cal Coast Construction.
Based in Grover Beach, Lopez’s business provides contracting services—including remodeling, roofing, and installation—to customers ranging from Paso Robles to the Los Angeles area. He also specializes in porches and decks.
Lopez, who for the last few years has maintained a strong presence in the local construction community, said that a lot of change has come out of the construction freeze.
The downside? A lack of construction work available has thinned down the number of contractors working on the Central Coast, he said.
“Construction on the Central Coast was booming,” Lopez explained. “A lot of people were coming out from the valley and from down south to make money.”
And for several years, he said, construction was people’s bread and butter in Santa Barbara and San Luis Obispo counties.
But as the economy began to slow—and development, both private and public, along with it—the business was forced to readjust to the changing economic climate. To make ends meet, companies tightened their tool belts by lowering prices, laying off laborers, or even filing for bankruptcy.
“It’s a Catch 22 for a lot of people, because not only are they losing work, they’re losing their homes and their businesses,” Lopez said.
And while Lopez continues to do good business—bagging long-term projects like remodeling Novo in downtown San Luis Obispo—the state of his ailing industry stays on his mind like caulk on kitchen tile.
“The industry has a pattern that repeats itself over and over again,” he said. “Hopefully, you saved up when times were good.”
When it comes to the secret of his continuing success, Lopez credits hard work and strong professional ties.
“I’ve been blessed with a core group of clients who continue coming to me with work,” he said.
Another explanation for his business’ success, Lopez said, can be found in a popular children’s fable.
“It’s like the story of the [tortoise] and the hare: The people who are jamming to get work done are going to be sloppy and end up hitting the wall. The ones who work more slowly and do the job right are going to get more work,” he said.
Still, times are hard.
In Santa Maria, development has slowed significantly, according to representatives at the Santa Maria Valley Contractors Association. The association boasts approximately 650 affiliated contractors, and acts as a business networking agency. It tracks contracting developments throughout the Central Coast.
In an interview with the Sun, the association’s executive director, Robin Hayhurst, said the association saw 700 development plans completed by its members last year.
“Now it’s at the end of 2008, and we’re only in the low 500s,” she noted.
And the number of jobs isn’t the only thing declining. So are prices. To illustrate that trend, Hayhurst pointed to her copies of the California Construction Authority’s most recent bid tabulations for developing the Santa Maria Fairpark’s administration office.
The document is packed with 20 bids from 20 different companies—”and this is a relatively small project,” Hayhurst said.
The project’s estimated cost is listed at $950,000, but the bids range from a high of $931,700 to a low of $552,804.
“Usually with the lowest bid you have to think, ‘Now, wait a minute. He must have forgotten something.’ But that’s not always true,'” Hayhurst said.
In today’s economy, bids that range from right on to almost oddly low—with an emphasis on the low—are a sign of the times.
“Bidding is very low, and people have been bidding with no profit margin to keep the family business going,” Hayhurst said.
That low bidding has become a problem for a lot of contractors, even if they’re not the ones making the bids. Dan Herbaugh, co-owner of DK Construction in Santa Maria (and husband of a Santa Maria Sun sales representative) said it’s become more difficult for him to bag a job because he keeps getting underbid.
“It used to be about 95 percent of the bids I made, I would get. I’m really fair, and I do good work, so I would usually get the job,” he said. “But this summer, it dropped to getting about 50 percent of the jobs I bid on.”
Still, Herbaugh said hard work and community connections will keep him working in Santa Maria. Other contractors, like Cal Coast Construction’s Lopez, are less optimistic about getting work in the area.
A couple of years ago, Lopez and his former partner used to book consistent work in Santa Maria. But then their major client relocated, and the two businessmen decided to go their separate ways. Lopez tried to bid more work in the area by himself, but found it difficult.
“There are a lot of people in Santa Maria who’ll work for very low wages,” Lopez said. “So Santa Maria in particular is a hard place to bid work because someone is always going to underbid you.
“If you’re working in Santa Maria, you’re working your butt off and not getting paid much,” he added.
After a while, the heavy competition for low-income projects can become discouraging.
“You spend so much time making a bid and writing up a proposal—making sure that it’s accurate and it’s fair—that when you don’t get anything back, it can get frustrating, and after a while you just give up,” Lopez said.
And there’s more to the underbidding and lack of work that has local contractors frustrated.
To become a contractor in California, a person has to obtain a contractor’s license from the Contractors State License Board. The license means the state legally recognizes its holder as a legitimate contractor.
According to the board’s website, cslb.ca.gov, there are more than 316,000 licensed contractors in the state operating under 43 different licensing classifications.
But the board also estimates that there are thousands upon thousands of contractors in the state operating without a license. The matter of having a license or not might seem trivial, but its effects can be incredibly damaging.
According to information provided by Contractors State License Board representative Pamela Mares, unlicensed operators are a major part of the underground—read: illegal—economy that takes billions of dollars away from legitimate licensed contractors in unfair competition.
Unlicensed contractors can underbid their licensed counterparts because they don’t have to pay taxes, carry insurance or bonding, or comply with worker safety programs.
The IRS estimates the federal government is losing $195 billion in revenue each year because of underground activity, which includes contractors and other businesses.
And according to the California Employment Development Department, the estimated underground economy comprises anywhere from 3 to 40 percent of its legitimate counterpart. Based on those figures, California’s underground economy has an estimated annual net worth of between $60 and $140 billion.
In an effort to impede California’s underground economy, Gov. Arnold Schwarzenegger in July 2005 established the Economic and Employment Enforcement Coalition, a partnership of state and federal agencies dedicated to educating business owners and the public about labor, employment, and licensing laws.
One of those agencies is the Contractors State License Board, which is responsible for licensing and monitoring contractors and educating consumers. The board maintains an online database, listing contractors throughout the state, the status of their licenses, and whether they have any complaints filed against them.
In 2007, the board’s enforcement division opened 21,703 complaints, up from 21,028 filed in 2006. Complaints for 2008 have yet to be officially announced.
The board also runs the Statewide Investigative Fraud Team (SWIFT), which tracks down and apprehends unlicensed contractors by conducting undercover sting and sweep operations on a weekly basis.
In 2007, SWIFT successfully conducted 51 sting operations targeting unlicensed contractors. As a result of the stings, 778 unlicensed operators were cited for misdemeanor advertising, workers’ compensation, and other licensure violations. And 68 people were arrested and taken into custody on outstanding warrants for crimes ranging from burglary and drug trafficking to sexual assault.
“We usually find that if people are doing something illegal like operating without a license, they’re probably involved in other illegal activity in their lives,” the board’s Mares said.
Based on the statistics, Mares explained, she strongly advises the public to do their homework before hiring a contractor. That can include checking the status of someone’s license online, checking professional references, and viewing samples of a contractor’s work prior to hiring.
“Unfortunately, a lot of people spend less time checking out a contractor than they do when buying a television,” Mares said.
Public vulnerability particularly goes up after a natural disaster, like the recent Tea Fire in South Santa Barbara County. Mares said that dishonest people can use a community’s most difficult times as an opportunity to make money.
“We’re currently planning more sweeps in fire zones, and board representatives have been on hand at the multiple disaster centers helping the public and deterring scammers,” she said.
In early November, the board released an industry bulletin announcing that October 2008 was one of the busiest months ever for sting operations. That month, SWIFT hit seven California cities, including Santa Maria. A total of 128 people were arrested and cited for unlicensed contracting activity, 20 of whom were found in the Santa Maria area.
Santa Maria Valley Contractors Association’s Hayhurst explained that such numbers aren’t unusual.
“You have no idea how many people call me saying they’ve been ripped off,” she said.
Contractors Association member Linda Devey, who co-owns Valley Fencing Inc. in Santa Maria, said she too has heard from many potential customers about scamming activity.
Devey recalled one “horror story” in which an elderly couple came into her office asking her to repair a hole in their roof. When she asked how it got there, the couple told her a contractor had put a pulley on the roof to operate a double driveway gate.
“I was pissed, because No. 1 it was against the elderly, and No. 2 he wasn’t even licensed,” Devey said. “And the couple was left with a hole in their roof and a gate that didn’t work.
“Our grandparents’ generation believes that business can be conducted on a handshake, but that’s not how it is anymore,” she said.
When it comes to selecting a proper contractor, Devey said she recommends people take several important steps.
First: “Get at least three different bids. That’s in your best interest,” she said, adding that word-of-mouth is best, but the phonebook works, too.
When looking at advertisements in the phonebook, she said, it’s important to look for a license number. By law, licensed contractors are required to put their license number on anything that might be considered an advertisement, including ads, websites, and even T-shirts.
Contractors’ licenses are made up of six digits and don’t include any letters. Devey said that she’s seen some unlicensed contractors advertise their five-digit business license as a potential contractor’s license.
A quick skim of the phonebook in the Sun office found two five-digit listings.
A business license can be obtained through the city of Santa Maria as a $40 tax. The city does verify the status of each contractor’s license through the state license board, but that doesn’t mean some offenders don’t slip through.
“I’ve heard of that happening before,” said Brenda Brown, utility billing supervisor with the city. “But we’re not a regulatory agency.”
And neither are the phonebook companies, Devey said.
Second: Check out the status of each contractor’s license with the license board.
“If the license is expired, don’t even waste your time,” Devey said.
It’s also important that a contractor have workers’ compensation if he or she has employees. If not, the consumer could be held responsible for any accident that occurs on the property.
Third: Devey recommends looking the contractors up with the Better Business Bureau. She said, while it might seem like going above and beyond what’s necessary, it’s a good way to learn more about a business.
The fourth and final step, Devey said, is to trust your intuition: “How you feel about the guy? Are you comfortable? Is he the ‘shiny shoe salesman’ type who looks like he’s never pounded a nail in his life?”
Another plus to hiring a licensed contractor is that they’re required to be fingerprinted and undergo background checks.
“Otherwise, who’s in your backyard?” Devey said.
And even if the contractor is licensed, Devey explained it’s important to “make sure you’re comparing apples to apples,” meaning checking whether each of the contractors is licensed and has the same qualifications. The idea that a general contractor can do anything, Devey said, is a complete myth.
According to the Contractors State License Board, a general contractor can build any structure that requires the use of at least two unrelated building trades or crafts. Thus, a general contractor is prohibited from advertising for a single unrelated craft, such as fencing or plumbing, unless he or she has a specialty license for it.
The qualifications can seem nitpicky—even overwhelming—but Devey said they’re what keep everyone in the business honest.
“This isn’t a joke. This is my life; this is my livelihood,” Devey said.
Hayhurst with the Santa Maria Valley Contractors Association agreed with the importance of following the law, but also offered an explanation for some contractors’ dishonest actions.
“It’s a traumatic time across the board,” Hayhurst said. “More people are becoming desperate and more people are misrepresenting themselves.”
But that certainly doesn’t mean all contractors are out to get the public’s money.
“There are some dangerous people out there, but on the other side of the spectrum, there are a lot of hardworking people out there with integrity and a sense of community,” she said.
Devey agreed: “The industry is going through a tough time, but it’s not doomsday. I predict the industry recovering, because it always does.
“There are so many wonderful contractors and tradesmen in this community,” she said. “We’re all going to weather this together.”
“We’re all going to weather this together.”
Contact Staff Writer Amy Asman at aasman@santamariasun.com.
This article appears in Dec 11-18, 2008.