Seeking a more level playing field

Media

Chris Fellersen at Pacific Modern Homes Inc. wants a public member on the California Air Resources Board to be a representative of small business — and for legislators to sign off on proposed regulations before they are approved.

Joel Lucich at Cal Sierra Construction wants big paving contractors to pay the same tax on materials that little contractors do.

At a time when the national focus is on job creation to jump-start the economy, small businesses in California, which account for most of the private-sector jobs in the state, want regulatory relief from burdens that hit them disproportionately.

“If we can address issues like regulatory reform and create an environment for small businesses to prosper, they will generate jobs and tax revenue,” said Michael Shaw, legislative director for the California Chapter of the National Federation of Independent Business.

And stay in business, which James Riolo Paving Inc. did not. The local company shut its doors Jan. 4 after 40 years and laid off at least seven employees.

One reason for the shutdown was inability to stay competitive as a small contractor that has to pay taxes on building materials, while large contractors that produce the materials don’t, Riolo said.

“It just isn’t right, that’s for sure,” he said.

It’s been that way since the 1930s, Betty Yee, chair of the state Board of Equalization, told the Business Journal in November, amid talk of a legislative fix. “It does create a competitive disadvantage to small businesses.”

The tax inequity affected roughly a quarter of Riolo Paving’s contract bids, Riolo said. Coupled with a down economy that stalled demand overall, he simply could not remain in business.

“It got down to where we didn’t have any work,” Riolo said.

Supplies such as sand, gravel, asphalt and concrete can account for as much as 30 percent of the cost of a subdivision job, said Cal Sierra owner Lucich. “And we’re bidding against contractors with their own supplies.”

Senate Bill 1373 by Democratic state Sen. Mark Leno from San Francisco would require contractors that manufacture their own supplies to pay taxes on materials, too. The bill is sponsored by Small Business California, a San Francisco-based advocacy group.

Waiting for change

Ninety-four percent of the small businesses that responded to Small Business California’s 2010 survey in February said their work force has declined or stayed the same in the past year, while more than two-thirds said gross revenue has declined.

Twenty-one percent don’t even see themselves in business in California in three years. Regulatory burdens on small business are often cited as the reason.

“Regulatory reform is the primary issue for NFIB this year,” Shaw said. “There are bills out there on both sides of the aisle,” he added. “This tells me ... we’re very likely to see something come out this year.”

The organization is sponsoring three bills and supporting others.

AB 2328 by Republican Assemblyman Roger Niello from Sacramento requires one of two public members on the California Air Resources Board be an owner of a small business. AB 2652, also by Niello, requires the Office of Administrative Law to send proposed legislation to legislative policy committees for review before adoption.

Also alive from last year is Senate Bill 356 by Rod Wright, a Democrat from Los Angeles. It will be amended soon to require an independent economic analysis of regulations that looks at compliance costs for small businesses and considers less burdensome alternatives.

“Giving small business a voice on CARB is certainly warranted in the current environment,” Shaw said of the agency currently drafting regulations to tell employers how to comply with AB 32, California’s landmark legislation to cut greenhouse gas emissions.

“An awful lot of things in the abstract seem like wonderful ideas — but ARB is the same agency that gave us MTBE,” Fellersen said, referring to a gasoline additive found to pollute groundwater. “We are starting to see with some of these (new) regulations, there is not a good cost-benefit analysis done. It’s ethereal and these things drive businesses out of the state.”

Pacific Modern Homes sells prefabricated housing components. Fellersen is senior vice president and controller.

What does — and doesn’t — constitute “first aid” in the work place is another big issue for small business due to different interpretations by different government agencies. AB 615 by Niello seeks to clarify the issue.

“Whether it’s a minor injury from a paper cut or a minor sprain, employers don’t know when to report,” said Lori Kammerer, a lobbyist for Small Business California. That means some do and some don’t, and the ones that do get hit with higher rates.”

“It’s a confusing area that is often misunderstood,” agreed Dave Bellusci, chief actuary at the Workers Compensation Insurance Rating Board. “From our perspective, there is no first aid exemption if costs are incurred — but not for a Band-aid, obviously. Where a lot of confusion comes down is from an exception from another system like Cal OSHA. ... It would be helpful to have some consistency.”

“Bad bills” the small-business lobby will oppose include a union card check bill by Senate President Pro Tem Darrell Steinberg of Sacramento that would allow agricultural employees to unionize without a secret ballot election.

Opposition continues to any leave expansion because of the disproportionate impact of employee absences on small businesses. And a proposal to expand the maximum cash-out on gift cards to $20 would turn small businesses into banks at a time when they can least afford it — during a down economy, Shaw said.