Legislature(2003 - 2004)

04/04/2003 03:19 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 155-PUBLIC CONSTRUCTION PROJECT REQUIREMENTS                                                                               
Number 0060                                                                                                                     
CHAIR ANDERSON announced  that the first order  of business would                                                               
be 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."                                                                                                                
Number 0083                                                                                                                     
REPRESENTATIVE DAHLSTROM  moved to  adopt the  proposed committee                                                               
substitute (CS) for HB 155,  Version 23-GH1119\D, Craver, 4/3/03,                                                               
as the  working document.   There being  no objection,  Version D                                                               
was before the committee.                                                                                                       
CHAIR ANDERSON  noted that  this CS resolves  many of  the issues                                                               
raised during  testimony at the  earlier hearing.  Section  1 was                                                               
revised so that submission of  certified payroll reports is every                                                               
two weeks  instead of weekly,  and it removes the  requirement to                                                               
submit the reports to the contracting agencies.                                                                                 
CHAIR ANDERSON  noted that Section  2 of  the CS states  that the                                                               
general contractor  will pay all  fees for the entire  project at                                                               
the beginning of  the project -- the contractor's fee  plus a fee                                                               
for each subcontractor.   The second part of Section  2 creates a                                                               
sliding  scale for  the  fee  based on  the  contract amounts  as                                                               
follows:   under $5,000 - no  fee; $5,000 to $10,000  - $100 fee;                                                               
$10,000 to  $50,000 - $150 fee;  $50,000 to $500,000 -  $200 fee;                                                               
$500,000 to $1 million  - $250 fee; and $1 million  and up - $300                                                               
fee.   The  maximum fee  to be  paid by  the contractor  would be                                                               
$5,000.  He noted  that Sections 3 and 4 of  the CS are unchanged                                                               
from  the original  bill.   Section 5  directs the  Department of                                                               
Labor  &  Workforce  Development to  computerize  the  submission                                                               
process for certified payroll reports.                                                                                          
Number 0250                                                                                                                     
CHAIR ANDERSON  described Conceptual  Amendment 1, which  read as                                                               
   1. Need exemption for emergencies (such as the wind disaster                                                                 
     in Anchorage) to allow work to begin and then file notice                                                                  
     of intent to pay prevailing wage.                                                                                          
   2. Clarify that jobs under $5,000 are exempt from the fee but                                                                
     not from filing notice of intent and an affidavit of                                                                       
   3. Make language consistent (e.g. the terms "contractor" and                                                                 
     "subcontractor" need to be used consistently instead of                                                                    
Number 0319                                                                                                                     
CHAIR ANDERSON  moved to  adopt Conceptual Amendment  1.    There                                                               
being no objection, it was so ordered.                                                                                          
The committee took an at-ease from 3:25 to 3:27 p.m.                                                                            
Number 0497                                                                                                                     
DICK   CATTANACH,   Executive    Director,   Associated   General                                                               
Contractors (AGC), Anchorage, noted  that construction is a cost-                                                               
pass-through  industry, so  the AGC  can support  the concept  of                                                               
[the fees in] this bill.  He  said that the costs would be passed                                                               
on  to  the  ultimate  owners,  in  this  case,  the  state,  the                                                               
municipality, and  the various political  subdivisions.   He said                                                               
he will  suggest ways to make  CSHB 155 work better.   In Section                                                               
1,  which requires  the submission  of certified  payroll reports                                                               
every second  Friday, a company  with numerous jobs could  end up                                                               
reporting  every week.   He  suggested  reporting all  previously                                                               
unreported payroll on  the second and fourth  Fridays, then every                                                               
contractor would  be reporting consistently  on the  same Friday.                                                               
This would help reduce paperwork, he said.                                                                                      
Number 0578                                                                                                                     
MR.  CATTANACH   recommended  in  Section  2   that  the  minimum                                                               
[threshold  for contracts  for purposes  of calculating  fees] be                                                               
changed from  $5,000 to  at least $25,000.   He  also recommended                                                               
that the  fee be a percentage  of the contract amount,  up to the                                                               
maximum of $5,000.   For example, a contract  between $50,000 and                                                               
$500,000 would result  in a fee between $500 and  $5,000 per job.                                                               
This avoids  burdening the contractor with  additional accounting                                                               
just to figure out how much he has to pay.                                                                                      
CHAIR ANDERSON  asked how  it was  a burden to  add up  the total                                                               
amounts of a job.                                                                                                               
Number 0660                                                                                                                     
MR.  CATTANACH replied  that depending  on the  size of  the job,                                                               
general  contractors   have  from   five  to   fifteen  specialty                                                               
contractors working under them; he  would have to aggregate those                                                               
subcontracts to see how much he  would have to pay.  He suggested                                                               
its  simpler to  take a  percentage on  the general  contractor's                                                               
total  rather   than  the  general  contractor's   job  plus  the                                                               
associated  subcontractors.   He suggesting  taking a  simple one                                                               
percent  if the  goal of  this section  of the  bill is  to raise                                                               
MR.  CATTANACH pointed  out problems  with Section  2, subsection                                                               
(c), on  page 3, lines  3-7, which appears  to hold up  the final                                                               
payment  if  one  subcontractor   has  not  signed  the  required                                                               
affidavit of  compliance.   He said that  this holds  hostage all                                                               
the  good  subcontractors  who  have  signed  the  affidavit  and                                                               
followed  the  law.    The  provision  puts  enforcement  on  the                                                               
contractor and  that's not where it  belongs, he said.   He asked                                                               
that this subsection be deleted or reconsidered.                                                                                
MR.  CATTANACH  questioned the  purpose  of  Section 4,  page  3,                                                               
starting on line 18 [which  states that contractors starting work                                                               
before the  July 1, 2003, effective  date] must file a  notice of                                                               
intent but no  fee.  He said  he didn't see what  the state gains                                                               
with  this  section.    Rather,  he  suggested  leaving  existing                                                               
contracts out of  the bill, and making the bill  apply to all new                                                               
contracts issued on or before July  1, 2003, and making it a part                                                               
of the  required contract  language.   He suggested  allowing for                                                               
electronic reporting to the extent possible.                                                                                    
Number 0899                                                                                                                     
MR. CATTANACH,  at the  request of  Chair Anderson,  restated his                                                               
five suggested changes to the CS.   1) In Section 1, file reports                                                               
the second  and fourth Friday of  the month for all  payroll that                                                               
has been  incurred since the  last reporting period,  rather than                                                               
every two weeks.   2A) In Section 2, change  the minimum contract                                                               
size from $5,000  to $50,000.  2B) For contracts  from $50,000 to                                                               
$500,000, calculate a  simple fee of 1 percent  calculated on the                                                               
general contractor's  contract.  3) Delete  Section 2, subsection                                                               
(c)  because it  allows  one subcontractor  who  doesn't sign  an                                                               
affidavit to  hold up payments  to all other subcontractors.   4)                                                               
Delete Section 4  because it requires a notice of  intent from an                                                               
ongoing project.   5) Expand the concept of  electronic filing of                                                               
certified payroll  reports and allow  those to be filed  with the                                                               
Number 1083                                                                                                                     
REPRESENTATIVE CRAWFORD noted his  agreement with Mr. Cattanach's                                                               
points.   He said, however,  that HB 155  is a smoke  and mirrors                                                               
way of raising revenue; all it does  is add to the cost of public                                                               
construction,  which  will be  paid  by  the public  entity  that                                                               
contracts to build a school or a  road.  This money won't flow to                                                               
the Department of  Labor & Workforce Development; it's  not a fee                                                               
to  help fund  their  programs.   If  it's  a  tax, he  suggested                                                               
calling it a tax.   He said he doesn't agree  with the premise of                                                               
the bill.                                                                                                                       
Number 1179                                                                                                                     
GREG  O'CLARAY, Commissioner,  Department  of  Labor &  Workforce                                                               
Development,  stated  that the  CS  is  an improvement  over  the                                                               
original HB  155.  The  department supports  Conceptual Amendment                                                               
1.  He  said he disagreed with Mr.  Cattanach's suggested $50,000                                                               
as a  minimum size contract;  he preferred using $25,000  for the                                                               
minimum size  of contracts.  He  said he agreed with  using the 1                                                               
percent  to calculate  the general  contractor's fee  because the                                                               
fee increases with the size of the contract.                                                                                    
Number 1316                                                                                                                     
CHAIR  ANDERSON summarized  Commissioner  O'Claray's response  to                                                               
Mr.  Cattanach's five  points.   1) Commissioner  O'Claray agreed                                                               
with filing  certified payroll reports  on the second  and fourth                                                               
Fridays.    2)  He  preferred  starting  the  fees  with  $25,000                                                               
contracts and a 1 percent  fee to calculate the contractor's fee.                                                               
3)  He did  not agree  with deleting  subsection 2(c)  because it                                                               
gives the  department teeth to  enforce the prevailing  wage law,                                                               
especially with  a general contractor  who is out  of compliance.                                                               
He said there  should be a way for the  department to address the                                                               
problem  of a  subcontractor who  is  out of  compliance so  that                                                               
others would not  be penalized.  4) He agreed  that Section 4 can                                                               
be  deleted  because  current law  requires  reporting,  and  the                                                               
effective date of  the bill will determine when the  new fees are                                                               
MR. CATTANACH  clarified his fifth point  about electronic filing                                                               
and noted that it's already contained in the CS.                                                                                
Number 1591                                                                                                                     
REPRESENTATIVE GUTTENBERG asked about  holding a prime contractor                                                               
responsible for  a subcontractor filing  on time.  He  noted that                                                               
it's a set of teeth to keep the subcontractor in line.                                                                          
COMMISSIONER O'CLARAY  said he agreed  in concept but  was trying                                                               
to avoid  holding up a  payment to  a prime contractor  because a                                                               
bad subcontractor had "gone south."   He said he wants to be able                                                               
to hold up payment to the subcontractor.                                                                                        
Number 1688                                                                                                                     
MR. CATTANACH described a typical  final pay request on a project                                                               
that  might have  15 subcontractors.    This bill  would hold  up                                                               
payment  to  the  single  subcontractor   who  hasn't  filed  the                                                               
affidavit  of  compliance  as  well  as  payments  to  the  prime                                                               
contractor and  the 14 other  subcontractors.  He  suggested that                                                               
if  contractors don't  comply with  the rules,  disbar them,  and                                                               
don't allow them  to bid on any more projects  until they comply.                                                               
He asked why  one would penalize the contractors who  play by the                                                               
REPRESENTATIVE GUTTENBERG said he'd  support an amendment to deal                                                               
with this issue.                                                                                                                
REPRESENTATIVE CRAWFORD  said he  wholeheartedly agreed  with the                                                               
need to disbar people who  violate the Little Davis-Bacon Act [AS                                                               
36.05].    He  said  he has  investigated  several  instances  of                                                               
companies that  do this repeatedly.   But he said it's  not clear                                                               
how to incorporate that issue into this bill.                                                                                   
Number 1782                                                                                                                     
REPRESENTATIVE GATTO asked  what happens if it  is the contractor                                                               
who   goes   south   [thereby  holding   up   payments   to   the                                                               
COMMISSIONER O'CLARAY  explained that is exactly  the issue being                                                               
debated.    The  bill  gives  the  department  the  authority  to                                                               
withhold  payment in  order to  force compliance  with the  newly                                                               
required reports.   He said the bill gives  the department enough                                                               
teeth to  keep the  contractor from  going south.   He  said he'd                                                               
prefer to  see CSHB 155  move out  of committee, and  perhaps the                                                               
disadvantage to the subcontractor could  be addressed by a future                                                               
Number 1861                                                                                                                     
RON TRUINI,  Ironworkers Local 751,  proposed several  changes to                                                               
clarify payroll reports and employers.                                                                                          
REPRESENTATIVE  CRAWFORD noted  that Mr.  Truini's concerns  were                                                               
already covered in Conceptual Amendment 1.                                                                                      
Number 1958                                                                                                                     
VINCE  BELTRAMI, IBEW,  [International Brotherhood  of Electrical                                                               
Workers]  Local 1547,  asked for  confirmation that  the proposed                                                               
CSHB 155 will continue having  the contractors send the certified                                                               
payroll reports directly  to the Department of  Labor & Workforce                                                               
Development.  He also confirmed  that contractors can continue to                                                               
submit written payroll  reports after the July  1, 2004, deadline                                                               
when  the department  starts accepting  electronic  reports.   He                                                               
expressed  concern regarding  whether  this  bill raised  revenue                                                               
earmarked  for the  department.   He  asked  the commissioner  to                                                               
comment about whether these funds  will prevent cuts to the Title                                                               
36 [wage enforcement programs].                                                                                                 
Number 2052                                                                                                                     
COMMISSIONER O'CLARAY responded that  he could not guarantee that                                                               
the money  raised by  CSHB 155  would flow  to the  Department of                                                               
Labor & Workforce  Development.  The user fees  will be deposited                                                               
to the  general fund.   He said he  hoped that these  funds would                                                               
[prevent]  future   cuts  to  the  enforcement   section  of  the                                                               
[Division of  Standards and  Safety].  He  said he  will advocate                                                               
for  retaining the  funding for  this program.   He  responded to                                                               
another  question  from  Mr.  Beltrami,  saying  that  the  House                                                               
Finance  Standing Committee  will be  making decisions  about the                                                               
governor's proposed FY  04 budget.  There's  always the potential                                                               
that Title [36] programs could be impacted, he said.                                                                            
Number 2161                                                                                                                     
CHRIS TUCK, IBEW  Local 1547, stated that his  concerns have been                                                               
voiced by previous speakers.   He confirmed that the language for                                                               
contractors and subcontractors in the  proposed CSHB 155 has been                                                               
MR. TRUINI  suggested on  page 1, line  8, deleting  "wages paid"                                                               
and inserting "payroll reports".                                                                                                
REPRESENTATIVE  CRAWFORD noted  that the  wording in  question is                                                               
the current  statute that has been  in effect for quite  a while.                                                               
He reiterated that  all of Mr. Truini's concerns  have been dealt                                                               
with in Conceptual Amendment 1.                                                                                                 
Number 2267                                                                                                                     
CHUCK WIEGERS, ABC [Associated  Builders and Contractors] Alaska,                                                               
Fairbanks, noted  that his  issues have been  addressed.   He did                                                               
note  that under  the current  law,  the department  can ask  the                                                               
attorney general  to prosecute any  contractor who is  not paying                                                               
the prevailing wage; the teeth are still present in the law.                                                                    
Number 2287                                                                                                                     
JOHN  BROWN,   President,  [Fairbanks]  Central   Labor  Council,                                                               
stressed that  the department needs  the funds necessary  to make                                                               
the prevailing wage  law work.  Enforcement  activities have been                                                               
underfunded, he said.                                                                                                           
REPRESENTATIVE CRAWFORD  responded that  if these user  fees were                                                               
designated  as program  receipts,  the money  could  be used  for                                                               
enforcement.   As the  bill is  written, all  this money  will go                                                               
directly into the  general fund, so the [proposed  CSHB 155] will                                                               
raise the cost  of construction but won't really  help the budget                                                               
of the department.                                                                                                              
Number 2348                                                                                                                     
NANCY PETERSON,  City of Valdez,  expressed appreciation  for the                                                               
changes in Section  1 of CSHB 155, keeping  the certified payroll                                                               
reports  flowing   to  the  Department   of  Labor   &  Workforce                                                               
Development.  She noted concerns  with Section 2, subsection (c),                                                               
withholding of  final payment because  it will place a  burden on                                                               
the  local contracting  agency  that will  have  to pay  interest                                                               
while  the department  determines  whether  all the  requirements                                                               
have been met.                                                                                                                  
TAPE 03-28, SIDE B                                                                                                            
Number 2375                                                                                                                     
REPRESENTATIVE GUTTENBERG asked where  Valdez will find the funds                                                               
to pay the fees that the contractor will pass on to the city.                                                                   
MS. PETERSON  said the fees being  charged [and passed on  to the                                                               
City  of  Valdez by  the  contractors]  will  result in  a  small                                                               
increase in  the cost of the  project.  She said  she was pleased                                                               
to  see  that  the  changes   in  the  proposed  CS  require  the                                                               
department  to  monitor  the   certified  payrolls  [rather  than                                                               
assigning the task to the contracting agencies].                                                                                
Number 2284                                                                                                                     
DON  ETHERIDGE,  Lobbyist  for  Alaska  State  AFL-CIO  [American                                                               
Federation of  Labor and  Congress of  Industrial Organizations],                                                               
said his  group supports  the changes in  the proposed  CSHB 155,                                                               
especially with the certified payroll  reports remaining with the                                                               
department.   He also urged a  method directing the user  fees to                                                               
the department, which he acknowledged is a different battle.                                                                    
CHAIR  ANDERSON  pondered  the   need  for  a  second  conceptual                                                               
amendment   which  incorporates   the  commissioner's   suggested                                                               
changes.    These  changes  would  be:   Changing  Section  1  to                                                               
reporting  on  the second  and  fourth  Fridays for  all  payroll                                                               
incurred; changing Section 2, raising  the minimum contract limit                                                               
from  $5,000  to  $50,000  [per  Mr.  Cattanach]  or  $25,000  as                                                               
recommended  by  the commissioner;  use  a  1 percent  figure  to                                                               
calculate  the fee  above  $50,000 instead  of  a sliding  scale;                                                               
leaving   in  the   notice  element   in  Section   4,  per   the                                                               
commissioner, or removing it, per Mr. Cattanach.                                                                                
Number 2181                                                                                                                     
REPRESENTATIVE  GATTO suggested  clarifying  the interim  periods                                                               
between the  second and fourth  Friday deadlines of  every month.                                                               
He  suggested deleting  "two weeks"  and inserting  "the previous                                                           
reporting period" on page 1, line 12.                                                                                         
COMMISSIONER  O'CLARAY   agreed  that  "the   previous  reporting                                                               
period" is a good clarification.                                                                                                
Number 2099                                                                                                                     
CHAIR  ANDERSON  reviewed  the possible  changes  for  Conceptual                                                               
Amendment 2.                                                                                                                    
REPRESENTATIVE GATTO  reiterated his suggestion of  deleting "two                                                             
weeks" and inserting  "the previous reporting period"  on page 1,                                                           
line 12.                                                                                                                        
CHAIR  ANDERSON confirmed  that  the second  change  [on page  2,                                                               
lines 19-28] would  set the minimum contract at  $25,000, per the                                                               
commissioner's preference, and use  the 1 percent calculation for                                                               
the fees instead  of the stepped amounts.  He  confirmed that the                                                               
committee  did not  want to  delete subsection  2(c) because  the                                                               
commissioner opposed this action.                                                                                               
Number 2007                                                                                                                     
REPRESENTATIVE CRAWFORD  said he  hated that [the  final payment]                                                               
could be  held up  because of  one bad actor,  but the  law needs                                                               
teeth to do the right thing.                                                                                                    
CHAIR ANDERSON  said he  believes Section  4 of  the CS  needs to                                                               
remain in place and thinks it has  been misread.  If not, he said                                                               
he's willing  to work to  change it before  it goes to  the House                                                               
finance committee.                                                                                                              
REPRESENTATIVE  GATTO  asked  whether  the language  "on  a  form                                                             
provided by"  on page  2, line 1,  refers to a  paper form  or an                                                             
electronic  form.   He noted  that the  CS uses  both "form"  and                                                               
"electronic filing".                                                                                                            
Number 1933                                                                                                                     
PAULA  SCAVERA, Special  Assistant, Office  of the  Commissioner,                                                               
Department of Labor  & Workforce Development, said  that the word                                                               
"form", found in various state laws, means paper or electronic.                                                                 
Number 1901                                                                                                                     
CHAIR ANDERSON summarized Conceptual Amendment 2 as follows:                                                                    
   1. Page 1, line 12 - After the word "previous", delete "two                                                                  
     weeks" and insert "reporting period".                                                                                      
   2. In Section 2 adjust the minimum contract price to $25,000.                                                                
     Additionally, the sliding scale needs to be removed and                                                                    
     replaced with a flat 1 percent of the total contract price                                                                 
     for all qualifying jobs.                                                                                                   
REPRESENTATIVE GATTO asked for clarification on whether the                                                                     
contract total refers to the sum total or only the amount above                                                                 
CHAIR ANDERSON confirmed the amount is the total contract.                                                                      
Number 1856                                                                                                                     
CHAIR ANDERSON moved to adopt Conceptual Amendment 2.  There                                                                    
being no objection, it was so ordered.                                                                                          
Number 1836                                                                                                                     
REPRESENTATIVE DAHLSTROM [moved to adopt Amendment 3, 23-                                                                       
GH1119\A.1, Craver, 3/19/03, with line numbers on page 3 hand-                                                                  
corrected to reflect Version D of HB 155] which read as follows:                                                                
     Page 1, line 1, following "relating to":                                                                                 
          Insert "the definition of 'public construction'                                                                     
     for purposes of paying prevailing wages, and to"                                                                         
     Page 3, lines 1 - 3:                                                                                                       
          Delete all material and insert:                                                                                       
          "Sec. 36.05.900. Definitions.  In this chapter,                                                                     
               (1)  "contracting agency" means the state or                                                                     
     a political subdivision of the state that has entered                                                                      
     into a public construction contact with a contractor;                                                                      
               (2)  "public construction" does not include                                                                      
     rehabilitation,   alteration,  extension,   or  repair,                                                                    
     structural  or otherwise,  undertaken by  tenants of  a                                                                    
     building  owned   or  controlled   by  the   state  for                                                                    
     government   or   public    use   after   the   initial                                                                    
     construction  or acquisition  of  the  building by  the                                                                    
     state, notwithstanding AS 36.95.010."                                                                                      
REPRESENTATIVE DAHLSTROM explained that she was presenting                                                                      
Representative Rokeberg's amendment because he was not able to                                                                  
attend today's meeting.   She referred to  his accompanying cover                                                               
memo in each member's bill packet.                                                                                              
Number 1753                                                                                                                     
REPRESENTATIVE CRAWFORD objected to Amendment  3.  He stated that                                                               
this would  be a  huge change  in [AS 36.05,  Wages and  Hours of                                                               
Labor] and  would not have  the general agreement of  the various                                                               
parties who  worked on  the CS.   He said it's  a huge  change to                                                               
remove rehabilitation,  alternations, extensions, or  repairs [of                                                               
buildings]  from  the  Little  Davis-Bacon   Act.    No  one  has                                                               
contemplated  this kind  of a  change in  the law,  he said.   He                                                               
explained  that he  has worked  on a  rehabilitation of  a public                                                               
building that was worth many millions of dollars.                                                                               
COMMISSIONER O'CLARAY acknowledged that  Amendment 3 would have a                                                               
major  negative   impact  on  the   prevailing  wage   rate  law.                                                               
[Renovations  of  buildings]  account  for about  50  percent  of                                                               
construction  projects,  he  said.    The  department  could  not                                                               
support this  amendment, and it  would be  a deal breaker  on the                                                               
REPRESENTATIVE GUTTENBERG  stated that adopting  this [amendment]                                                               
would make the  legislation a different bill.  It  is an entirely                                                               
new concept with an entirely  new constituency that would want to                                                               
testify.    [This amendment]  goes  to  the  core issues  of  the                                                               
prevailing wage law,  he said.  It would be  a disservice to this                                                               
bill and  the work  accomplished by the  various players  to open                                                               
the bill up to a [change] this large and wide.                                                                                  
Number 1570                                                                                                                     
A roll  call vote was taken.   No Representatives voted  in favor                                                               
of proposed  Amendment 3.  Representatives  Guttenberg, Crawford,                                                               
Dahlstrom,   Gatto,  Lynn,   and  Anderson   voted  against   it.                                                               
Therefore, Amendment 3 failed by a vote of 0-6.                                                                                 
CHAIR ANDERSON closed testimony and debate on the bill.                                                                         
Number 1560                                                                                                                     
REPRESENTATIVE DAHLSTROM  moved to  report CSHB 155,  Version 23-                                                               
GH1119\D,  Craver,  4/3/03, as  amended,  out  of committee  with                                                               
individual  recommendations  and  the accompanying  fiscal  note.                                                               
There being  no objection,  CSHB 155(L&C)  was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                    

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