VALPARAISO — Valparaiso has joined the growing list of communities in the Region fighting tax and payroll fraud by contractors, passing an ordinance Monday banning the practice.
The ordinance prohibits contractors from classifying employees as independent contractors, which costs the state $405 million each year due to payroll fraud, according to a report from the Indiana/Kentucky/Ohio Regional Council of Carpenters. The ordinance has also been adopted in Portage, Merrillville and Hobart.
Randy Palmateer, business manager for the Northwestern Indiana Building and Construction Trades Council, said the ordinance will protect from "unscrupulous contractors" underbidding local, skilled contractors for projects.
"The main reason of the ordinance and the point of the ordinance is we can request that information sorted by payroll because we want to make sure the contractors are paying into all the coffers — local, state and federal," Palmateer said.
The Valparaiso City Council passed the ordinance unanimously. In June, Councilman Robert Cotton, D-2, suggested an ordinance for the city to adopt. He said he has been trying to pass a measure to counteract the payroll fraud since 2016.
"This won't be the magic bullet that stops it all, but it certainly does send a message," Cotton said. "Valparaiso stands for fair contracting."
At the time, Mayor Jon Costas suggested the city err on the side of caution on the proposal.
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“I'm not saying regulations are superfluous," Costas said in June. "We don't see a history of (payroll fraud) in our city. We've had a few complaints."
That ordinance was tabled and Patrick Lyp, general counsel for the city, was asked to rewrite it along with union representatives and city staff.
"The challenge is that all of us can sit around and say there is a problem, but then the question is how do you address it. " Lyp said. "This is a good first step and it at least begins to address this issue on the basic level."
Porter County Prosecutor Gary Germann has announced his intent to prosecute contractors who break the ordinance.
"I think it sends a message to any contractor that wants to skirt the rules that we're not going to tolerate it in Valparaiso," said Matt Murphy, mayoral candidate and R-3 councilman.
The investigation of the July 22 death of 35-year-old carpenter Mattias Miguel-Baltazar at a Chesterton construction site has prompted these increased efforts at the local level.
"We want something done about it, we're just fed up with it," Palmateer said. "He did not die in vain."