The California Department of Industrial Relations (DIR) has determined that the Kimpton Hotel and other real estate developments in downtown Palm Springs are subject to prevailing wage in part because of more than $140 million in city funding and projected tax rebates, The Desert Sun reports.
The DIR determination means the projects’ developer 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 the project was charged with allegedly bribing city officials for a sweetheart deal,” the newspaper reported.
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.
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 Kimpton Rowan Palm Springs Hotel opened in November 2017. The Virgin Hotel construction is still pending.
Marcus Fuller, assistant city manager with the City of Palm Springs, was quoted as saying the city is aware of DIR’s determination and is evaluating its potential impact on the city.
The newspaper says Wessman Development namesake John Wessman in 2017 was charged in an alleged scheme to bribe Palm Springs mayor Steve Pougnet in exchange for favor from the city. Wessman stepped down from the company in 2017. It has changed its name to Grit Development and is now run by Wessman’s son-in-law, Michael Braun.
DIR found Palm Springs paid the developer $46 million to fund public and private improvements, including the Kimpton’s construction.
In an August 13 letter, 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. Schoorl concluded the project “was primarily undertaken for private benefit and profit, with a subsidiary goal of removing blight.”
Robert Fried, a partner with Atkinson, Andelson, Loya, Ruud & Romo representing Palm Springs Promenade, said the company will appeal to DIR. If DIR upholds its decision, a company found out of compliance with prevailing wage laws by DIR has the opportunity to seek a writ in state superior court, claiming the agency made an error, the Desert Sun reported.
The Center for Contract Compliance, a nonprofit labor advocate founded by contractors unions, in January 2017 requested the DIR prevailing wage review.