Legislature(2003 - 2004)
04/09/2003 01:45 PM House FIN
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* first hearing in first committee of referral
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+ 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
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.
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