from Kevin Pedrotti, Legislative Advocate for the Golden State Builders Exchanges
Bills that Made the Cut and Did Not
The legislature returned on August 15 to complete the legislative year on September 9. This week it was learned which bills on the respective Appropriations Committee Suspense file would move to the floor for final consideration.
AB 780 (Calderon) - Legislation to resolve tax changes to fix priced contracts was held by the Senate Appropriations Committee. Similar legislation last year was vetoed by the Governor and another measure three years ago was held in committee as well. AB 780 provides that the contractor in a fixed price contract is entitled to an increase in payment for a change in the contract price attributable to an increase in the state sales and use tax rate. The bill also provides that the government entity is entitled to a reduction in payment when the sales and use tax rate is reduced. Increases or decreases shall be made in accordance with the contract or by agreement if the contract does not so provide. The bill applies only when the contract is entered into prior to the rate increase, and does not apply to property, materials, or fixtures obligated pursuant to a contract during the period of time contractor has the right to terminate the contract unconditionally or upon notice, whether or not the right is exercised. The measure similarly applies to leases that are continuing sales and purchases of property. The bill applies only to contracts entered into on or after its effective date. Efforts will continue in the future should there be consideration of a temporary or permanent sales tax increase.
SB 293 (Padilla)– Passed the Assembly Appropriation Committee to the floor. Among the bills numerous provisions, limits retention-the amount withheld from public works contract progress payments by any state or local public entity to a contractor, by the contractor to a subcontractor, or by a subcontractor to a subordinate subcontractor-to no more than five percent of the payment for all contracts entered into after January 1, 2012. The bill, stipulates that the above does not apply if a subcontractor, following written notice by contractor, is unable or refuses to furnish a payment or performance bond.
CIFAC Sponsored Legislation to the Governor
AB 720 (Hall) - In 1983, the Legislature enacted the California Uniform Construction Cost Accounting Act (Act) to alleviate disputes between public agencies and the construction industry over what projects should be put out to bid and what projects should be completed with county employees. The Public Contract Code spells out the procedures that public agencies are required to follow when they build public works projects, including limits on the contracts' values. However, when public agencies voluntarily use UPCCAA, they can use their own employees for projects worth $30,000 or less. Projects worth $125,000 or less require informal bidding and those worth more than $125,000 require formal bidding. UPCCAA requires the Commission to review these limits to account for higher costs every five years.
For most local agencies, state law imposes caps on the dollar amount of public works projects that can be completed with local government employees (i.e., force accounts) or day labor. Projects that exceed the cap generally are required to be put out to bid to the private sector and awarded to the lowest responsible bidder. Similar requirements are in place for state agencies as well.
Existing law makes an exception, however, for counties that have road commissioners or that have registered civil engineers working under the authority of a county transportation director. These counties have virtually unlimited authority to use day labor or force account for highway projects.
Counties without road commissioners are limited to doing work by force account or day labor to contracts costing $25,000 or less.
This bill would end confusion with regard as to whether public agency optees of UPCCAA can utilize other aspects of the Public Contract Code. This bill will provide clarity that the county road commissioner authorization in other provisions of the Public Contract Code would apply only for purposes of maintenance and emergency work. The author says public agencies still are free to make a choice as to how they wish to perform county highway and road construction projects: either by opting in to UPCCAA or by using the county road commissioner provisions. The bill preserves small counties' flexibility to use the road commissioner alternative procurement procedures when necessary, while giving private construction firms more opportunities to bid on large road construction projects.
GSBE supports this legislation and will be sending letter to the Governor requesting his approval.
Other Bills of Interest
AB 474 (Evans)– What has been a very contentious bill between sub-contractors, general contractors and project owners, may be close to the various parties agreeing or at least being neutral on this very technical piece of legislation. Sponsored by a number of subcontractor associations, the bill would, except in certain instances, place restrictions on commercial construction agreements, and insurance provisions that require a promisor to indemnify, release, hold harmless, insure, or defend another person against the actual or claimed liability, damage, or expense arising, in whole or in part, from the negligence, willful misconduct, defective design, violation of law, or other fault of that person or that person's agents, employees, independent contractors, subcontractors, or representatives. This bill would provide that contract and insurance requirements that shift indemnity away from at-fault parties to non-fault parties would be void and unenforceable.
The bill is on the Assembly Floor soon to be amended.
AB 742 (Lowenthal) – There was a long hearing this week on a gut-and-amend bill that was a face-off between Granite Construction and the Pechanga Tribe. In plain English, the purpose of this bill is to prohibit a single mining operation that is proposed in Riverside County at a location that the Pechanga Tribe of Luiseno Peoples considers its most important sacred place, the place considered to be the Place of Creation. Among the arguments made by Granite: It considers the bill an intrusion into the permitting process that is now underway; it contends that the Pechanga was not forthcoming about its concerns regarding the sacred site; and, it is concerned that the bill sets a damaging precedent for future infrastructure projects elsewhere in the state.
Many construction groups and private construction labor voiced opposition to the bill primarily for the precedent it would set.
The bill was sent back the Senate Rules Committee, keeping it alive, but with the committee asking that the Tribe and Granite attempt to reach some sort of an agreement.
Governor Proposes Jobs Proposal
The Governor announced his "California Jobs First Plan" at a Capitol news conference on Thursday. Brown was joined by Democratic legislative leaders and representatives from some major manufacturing companies. The Governor proposed the elimination of a tax option that allows out-of-state corporations to save $1 billion on California taxes, and establish in its place tax breaks for in-state manufacturing companies that he believes will stimulate job creation. In addition, he seeks to expand an existing hiring tax credit for small businesses to provide a $4,000 credit for each new worker hired by California companies with fewer than 50 employees.
The tax option the Governor seeks to eliminate allows corporations to either pay taxes based solely on the percentage of their sales that come from California or to use a weighted formula that also takes into account how much of their property and how many of their workers are in the state. An out-of-state company that sells a lot of goods in the state but has a small physical presence here can use the second option to reduce its California tax liability. He proposes allowing only a single formula, basing state taxes only on the percentage of a company's sales that take place in California. That so-called "single sales factor" approach is used by most large states.
Brown will need the support of at least four Republicans to change a tax law enacted in 2009 that allows multi-state corporations to choose between two options in determining what percentage of their profits is subject to California taxes.
Assembly Republican leader Connie Conway of Tulare described Brown's proposal as "too little, too late," and said it would be counterproductive to finance a plan designed to create jobs by, in effect, raising taxes on some large corporations.
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