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2014 construction predicted to go on upswing

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Construction executives say that 2014 will be a stronger year for their industry than 2013, although increased fees could mean some negative impact.

Brian Jordan, executive vice president at Helix Electric and president of Associated General Contractors San Diego chapter, said he is optimistic the local construction industry will improve throughout the year.

“You see work slowly picking up and coming back to healthy levels, especially in the multifamily and commercial sectors,” Jordan said. “School districts will continue to have work for contractors as well.”

Jordan added that federal work will almost completely stall in 2014 because stimulus dollars have already been allocated, and those projects are either already finished or will be completed this year.

Marney Cox, chief economist for the San Diego Association of Governments, said there will be a good amount of public sector projects in 2014.

“With SANDAG itself, there will be opportunities [for work] with transportation projects such as the Mid-Coast Corridor Transit Project, I-5 North Coast Corridor and the ongoing improvements to the trolley’s Blue Line,” Cox said.

Other transportation projects include state Route 11 and the San Ysidro Intermodal Transportation Center Study.

Cox said he believes if local school districts can sell their voter-approved bonds this year, there will be educational work from San Diego Unified, San Dieguito Union, Chula Vista Elementary and the Grossmont-Cuyamaca Community College school districts.

Additional public projects in San Diego County include the new Otay Mesa East Port of Entry, ongoing work for the new San Ysidro Port of Entry, the Carlsbad desalination plant and the Nob Hill pipeline improvements project.

In the private sector, Borre Winckel, president and CEO of the Building Industry Association of San Diego County, said multifamily housing will continue to be a source of construction jobs in 2014, based on recent trends.

According to statistics from the Building Industry Association, building permits were pulled for 5,314 multifamily units and 2,305 single-family housing units in San Diego County for the first 11 months of 2013, compared to building permits pulled for 4,319 multifamily units and 2,100 single-family units in 2012. In 2011 there also were more building permits pulled for multifamily units (2,968) than single-family units (2,252).

Winckel added that when he sees the number of permits pulled for single-family units decreasing, he wonders if it's because developers don't have the financing to build or if planning departments are not getting permits processed in a timely manner.

“There seems to be a market in the county for single-family [housing] and there is land in Chula Vista, in the North County and unincorporated areas of the county,” Winckel said.

Jordan cautioned that developers might see bids go up because wages and construction commodities are increasing.

Cox, Jordan and Winckel all said the main concern in the construction industry this year is how San Diego’s increased housing impact fee — or linkage fee — that passed in November will play out.

The linkage fee now charges developers 1.5 percent of 1991 costs to build commercial developments. The fee is used to build affordable housing.

Projects that are still in the permitting pipeline would be exempt from the fee as long as developers gain approval by July 1, when the fee will rise to half the difference between 1.5 percent of the 1991 and 2013 construction costs. The fee will then increase to 1.5 percent of the 2013 costs, with annual inflation-related adjustments beginning July 1, 2015.

“This is going to make developers think twice about building in San Diego and possibly raise fees,” Winckel said. “The city needs to fix this.”

Winckel added that Carlsbad plans to add a $20-per-square-foot fee on development so it can fund affordable housing.

“We would rather sit with cities and find an alternative solution to just footing the bill to developers,” Winckel said, adding that Oceanside has the right approach, with incentive programs for developers who want to build affordable housing complexes like the Mission Cove project.

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