Legislature(2003 - 2004)

04/09/2003 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 155                                                                                                            
     An   Act  relating   to   the  submission   of   payroll                                                                   
     information    by   contractors    and    subcontractors                                                                   
     performing work  on a public construction  contract; and                                                                   
     providing for an effective date.                                                                                           
GREG  O'CLARAY,   COMMISSIONER,   DEPARTMENT  OF  LABOR   AND                                                                   
WORKFORCE  DEVELOPMENT, testified  that the  bill would  be a                                                                   
"revenue   producer"  for   the  State   and  would   provide                                                                   
sufficient   regulations  for   proper  enforcement   of  the                                                                   
prevailing  wage rate  under Title  36.  He  stated that  the                                                                   
Administration  supports the House  Judiciary version  of the                                                                   
bill and it would be a cost shift from general funds.                                                                           
Representative Joule inquired  if costs were being shifted to                                                                   
the  bid  processor  on  the   "other  side".    Commissioner                                                                   
O'Claray  replied that  there  would be  a cost  shift.   The                                                                   
general contractor would pay for  the cost.  At present time,                                                                   
there is  no fee being charged  for the service.   The people                                                                   
that  use State  services should  pay their  "fair share"  in                                                                   
supporting those services.  He  added that would be a minimal                                                                   
Vice-Chair Meyer asked  if HB 155 was the bill  that had been                                                                   
discussed  in the Department  of Labor  Subcommittee  and how                                                                   
the proposed fiscal costs had  been determined.  Commissioner                                                                   
O'Claray responded  the fiscal  note was  new.  The  original                                                                   
bill  moved  the recording  requirement  to  the  contracting                                                                   
agency,  therefore,  eliminating  a  clerk  position  in  the                                                                   
Department  of  Labor &  Workforce  Development.   Under  the                                                                   
proposed  fiscal   note  there   is  a  requirement   for  an                                                                   
accounting   tech  employee   to  keep   track  of   all  the                                                                   
Vice-Chair Meyer pointed out the  $14 thousand dollars fiscal                                                                   
note  difference.   Commissioner  O'Claray acknowledged  that                                                                   
was correct.                                                                                                                    
JOHN WHEATLEY,  (TESTIFIED VIA  TELECONFERENCE), SENIOR  VICE                                                                   
PRESIDENT,   BRADY   COMPANY,   INSURANCE   BROKERAGE   FIRM,                                                                   
ANCHORAGE,  voiced concern  about the  bill.   He noted  that                                                                   
that  final   payment  would   not  be  released   until  the                                                                   
Department  of Labor  & Workforce  Development verifies  that                                                                   
all the  contractors on the  project indicate that  they paid                                                                   
prevailing wage.   The concern  rests with the fact  that the                                                                   
contractor's receipt of final  payment could be withheld.  He                                                                   
asked what  would happen if the  Department had a  backlog of                                                                   
work  and needed  to undertake  an investigation.   The  time                                                                   
line could lead  to issues of cash flow, which  is of concern                                                                   
for many companies.   He added that could lead  to limitation                                                                   
of  bonding  credit  for  the   contractors.    Mr.  Wheatley                                                                   
emphasized that this  would be an unfair position  to put the                                                                   
contractors in.                                                                                                                 
TERRY FIKE, (TESTIFIED VIA TELECONFERENCE),  PRESIDENT, ALCAN                                                                   
GENERAL  CONTRACTORS, ANCHORAGE,  voiced strong  disagreement                                                                   
with the bill particularly in  Section 2©, the withholding of                                                                   
the final  payment on  a public  construction contract.   Mr.                                                                   
Fike claimed that  it is not appropriate to  have the general                                                                   
contractor sign  an affidavit that they will  pay Davis-Bacon                                                                   
wages when they already agreed  to that when the contract was                                                                   
originally  signed.    In  current  law,  the  contractor  is                                                                   
required  through  public  contract,   to  submit  a  weekly-                                                                   
certified  payroll.   The general  contractor has  no way  to                                                                   
enforce that  requirement.   There are no  rights to go  to a                                                                   
subcontractor's office and request  to see his books to check                                                                   
if  they   are  paying  Davis-Bacon   wages.     The  general                                                                   
contractors do not  have the authority to do  that and cannot                                                                   
be held  liable to sign an  affidavit stating that  they will                                                                   
do that.  Mr.  Fike reiterated that there would  be no way to                                                                   
enforce  that  requirement.     He  inquired the  time  frame                                                                   
expected final payment would be received.                                                                                       
DICK  CATTANACH, (TESTIFIED  VIA  TELECONFERENCE),  EXECUTIVE                                                                   
DIRECTOR, ASSOCIATED GENERAL CONTRACTORS,  ANCHORAGE, pointed                                                                   
out areas of concern with the legislation.                                                                                      
 · Section 1 - The report should be filed every second                                                                          
     week.  He noted that in the House Labor and Commerce                                                                       
     Committee, he had suggested that it be filed                                                                               
     consistently every two weeks, either on the 1 and 3                                                                        
     or on the 2 and 4 week and be consistent for                                                                               
 · Section 2 © - Regarding withholding the final payment                                                                        
     against the  contractor for acts of some  sub contractor                                                                   
     that  he has  no control  over.  The  contractor has  no                                                                   
     legal  authority over that  person and  there is  no way                                                                   
     that the contractor could  place pressure on that person                                                                   
     to sign the affidavit.  That  requirement would penalize                                                                   
     the  contractor  who  abides  by  the  law  for  another                                                                   
     persons action.                                                                                                            
 · Section 4 - Applies to on-going projects.  The                                                                               
     contractor is responsible  for getting the affidavit and                                                                   
     complying with Section 2© again.                                                                                           
Mr.  Cattanach  summarized  that   if  the  bill  moves  from                                                                   
Committee,  there is  no  question that  the  cost of  public                                                                   
construction  will increase  statewide.    The bill  extracts                                                                   
money from the  construction budget to the  operating budget.                                                                   
The  bill  would   take  the  payments  from   the  complying                                                                   
contractors and  delay them indefinitely until  they meet the                                                                   
conditions  of 2©.   Non-complying contractors  would  not be                                                                   
penalized for their actions.   Paper work associated with the                                                                   
bill  will  skyrocket   and  will  seriously   drive  up  the                                                                   
construction costs in the State of Alaska.                                                                                      
Representative  Croft referenced  Section 2©  and asked  what                                                                   
language could  help.   Mr. Cattanach  explained that  if the                                                                   
general  contractor did  not  originally  file the  requested                                                                   
affidavit, then the  penalty would make sense.   He, however,                                                                   
questioned  if  payment  should   be  held  up  for  everyone                                                                   
VINCE  BELTRAMI, (TESTIFIED  VIA TELECONFERENCE),  PRESIDENT,                                                                   
ANCHORAGE  BUILDING  AND  CONSTRUCTION  AND  TRADES  COUNCIL,                                                                   
ANCHORAGE, noted  that they oppose the bill.   The Governor's                                                                   
letter attached to  the introduction of the  bill stated that                                                                   
there would  be $1.15  million general  fund dollars  revenue                                                                   
generated.   Mr. Beltrami pointed  out the cuts laid  out for                                                                   
the Title  36 program.   He  believed that  there would  be a                                                                   
greater  burden on  the Department  in keeping  track of  the                                                                   
affidavits and  bookwork.  He understood that  the Department                                                                   
would loose  the one and only  wage and hour  technician that                                                                   
the State  currently has.   Contractors  would be waiting  on                                                                   
the release of  funds and waiting for the Department  to sign                                                                   
off on those funds with less staff.                                                                                             
Mr.  Beltrami  requested  that the  House  Finance  Committee                                                                   
grant program  receipt authority to  the Title 36  program to                                                                   
capture  a  portion  of  the   $1.15  million  dollars.    He                                                                   
recommended  that  action could  help  save  the much  needed                                                                   
position in the Title 36 program  and perhaps help to fund an                                                                   
additional    position   to    help   with   the    increased                                                                   
responsibilities  so that the  contractors would not  be left                                                                   
waiting for that final payment.                                                                                                 
NANCY  PETERSON,  (TESTIFIED  VIA  TELECONFERENCE),  CITY  OF                                                                   
VALDEZ, reiterated  previous testimony  concern with  Section                                                                   
2©.  She commented that the held  release of the funds causes                                                                   
a  burden  to that  City.   If  the  building  is done  in  a                                                                   
reasonable time  frame, then recommendations should  be built                                                                   
PHIL  ANDERSON, (TESTIFIED  VIA  TELECONFERENCE),  PRESIDENT,                                                                   
AGC  LANDSCAPING, FAIRBANKS,  spoke in  strong opposition  to                                                                   
the   proposed  legislation.      He  maintained   that   the                                                                   
legislation would place the contractor  in a "working for the                                                                   
Department  of Labor  & Workforce  Development" position  and                                                                   
that he  would have to collect  his money from  another State                                                                   
agency.    Mr.  Anderson  claimed that  the  funds  that  the                                                                   
Department expects to receive  would end up costing the State                                                                   
more on the other  end.  To hold up final  payment, the State                                                                   
would be obligated to pay interest.   The Department would be                                                                   
penalizing  not  just the  Department  of Labor  &  Workforce                                                                   
Development  and other  state agencies  through interest  and                                                                   
user fees but the construction  companies would pass them on.                                                                   
SARAH   LEFEBVRE,   (TESTIFIED  VIA   TELECONFERENCE),   VICE                                                                   
PRESIDENT,  EXCLUSIVE  LANDSCAPING   AND  PAVING,  FAIRBANKS,                                                                   
testified in  opposition to the  legislation.   She commented                                                                   
that if  the purpose of  the bill is  to generate  revenue to                                                                   
the  State then  the  legislation  should be  streamlined  to                                                                   
focus on revenue  and eliminate the portion of  the bill that                                                                   
cause the problems.  Section 2,  Lines 4 - 22 is problematic.                                                                   
She  asserted that  the  affidavit process  was  unnecessary.                                                                   
Ms. Lefebvre maintained that fees would be paid up front.                                                                       
Representative Croft  asked if penalties against  the general                                                                   
and subcontractors  should be divided.  Mr.  Cattanach agreed                                                                   
that  would  be  more  appropriate  but  cautioned  that  the                                                                   
contractor   could  still   be  placed   in  a   "contractual                                                                   
loggerhead" with the subcontractor.                                                                                             
Representative  Stoltze  disapproved  of the  position  paper                                                                   
submitted by the  Department of Labor.  He noted  that it had                                                                   
not been dated  and was not written on letterhead.   He asked                                                                   
that   future   correspondence   from   the   Department   be                                                                   
appropriately submitted.                                                                                                        
HB  155  was   heard  and  HELD  in  Committee   for  further                                                                   

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