Legislature(2003 - 2004)
04/09/2003 01:45 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 charge. 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 information. 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 strd consistently every two weeks, either on the 1 and 3 ndth or on the 2 and 4 week and be consistent for everyone. · 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 involved. 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 in. 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 consideration.