03/20/2014 01:30 PM Senate LABOR & COMMERCE

              SB 193-CONTRACTORS: BONDS; LICENSING                                                                          
                                                                                                                                
1:31:44 PM                                                                                                                    
VICE CHAIR  MICCICHE announced  the consideration of  SB 193."An                                                               
Act relating  to bonds  required for  contractors." This  was the                                                               
first hearing.                                                                                                                  
                                                                                                                                
1:32:02 PM                                                                                                                    
MINDY   ROWLAND,   Staff,    Senator   Micciche,   Alaska   State                                                               
Legislature, Juneau, Alaska, introduced SB 193 on behalf of the                                                                 
sponsor speaking to the following sponsor statement:                                                                            
                                                                                                                                
     AS 08.18.071  requires contractors operating  in Alaska                                                                    
     to  file   a  license  bond  with   the  Department  of                                                                    
     Commerce,  Community  and   Economic  Development.  The                                                                    
     purpose  of  the  bond  is   not  only  to  ensure  the                                                                    
     contractor  has  financial  resources to  pay  tax  and                                                                    
     other  obligations,  it  is  established  in  order  to                                                                    
     provide the  public an avenue  to seek recourse  in the                                                                    
     event there is negligent or  improper work or breach of                                                                    
     contract.  It  also  helps provide  protection  to  the                                                                    
     business  community  to  help contractors  and  vendors                                                                    
     collect  upon  default  for unpaid  work  or  equipment                                                                    
     rental.  The  statute  is  an  important  component  of                                                                    
     Alaska's  consumer protection  laws.  The bond  amounts                                                                    
     were  established in  1982 and  have  not been  updated                                                                    
     since.   The  current   level  of$10,000   for  general                                                                    
     contractors  and $5,000  for  specialty contractors  is                                                                    
     too low and is no  longer providing the intended public                                                                    
     protection. In  many cases,  the recoverable  amount is                                                                    
     not  worth the  legal and  other costs  associated with                                                                    
     pursing a claim against a bond.                                                                                            
                                                                                                                                
     SB 193  proposes to increase  the license  bond amounts                                                                    
     to the following:                                                                                                          
     General Contractors                     $25,000                                                                            
     General Contractors only residential    $20,000                                                                            
     Mechanical or Specialty Contractors     $10,000                                                                            
     Contractors performing minimal work     $ 5,000                                                                            
                                                                                                                                
     The construction  industry, which  will be  impacted by                                                                    
     this legislation,  brought forth the  recommendation to                                                                    
     make  an  adjustment in  the  bond  amounts. Given  the                                                                    
     increase  in  inflation over  the  last  30 years,  the                                                                    
     industry felt an increase  was long overdue. Purchasing                                                                    
     a bond generally costs a  small percentage of the total                                                                    
     amount  of  coverage,   thus  providing  a  significant                                                                    
     benefit to the public  and other businesses in relation                                                                    
     to  the  small  cost  increase  as  a  result  of  this                                                                    
     legislation.                                                                                                               
                                                                                                                                
     SB 193  also corrects  a loophole  in the  statute. All                                                                    
     professional  contractors are  required to  be licensed                                                                    
     and file  a bond. A  notable exemption is that  the law                                                                    
     does not intend to  impose license and bond requirement                                                                    
     upon  non-professional   contractors  such   as  family                                                                    
     members, friends,  neighbors, etc., who get  paid for a                                                                    
     small amount of work.  However, current law allows work                                                                    
     under  $10,000  to  be  exempt  and  this  wording  has                                                                    
     allowed    individuals   who    sell   themselves    as                                                                    
     professionals   to   avoid  the   statutory   licensure                                                                    
     requirements.  In  these  cases,   the  public  has  no                                                                    
     recourse against  unlicensed and  unbonded contractors.                                                                    
     The bill  corrects this by  establishing a  very modest                                                                    
     bond   level   for   those   professional   contractors                                                                    
     performing  work on  projects less  than $10,000.  Non-                                                                    
     professional  handymen   are  still  exempt   from  the                                                                    
     license  and  bond  requirements under  the  definition                                                                    
     provided    in    AS   08.18.171(4),    which    states                                                                    
     "'contractor' means a person who,  in the pursuit of an                                                                    
     independent   business...."   This  language   is   not                                                                    
     intended  to  include  a  person  undertaking  a  small                                                                    
     project for a friend or relative.                                                                                          
                                                                                                                                
She reported no outright opposition to the bill.                                                                                
                                                                                                                                
1:35:26 PM                                                                                                                    
VICE-CHAIR MICCICHE named the people available to testify.                                                                      
                                                                                                                                
ED SNIFFEN, Assistant Attorney  General, Civil Division, Consumer                                                               
Protection Unit,  Department of  Law, stated  that DOL  likes the                                                               
changes  incorporated  in  SB  193.   It  provides  an  inflation                                                               
adjustment  of the  bonding  amounts that  have  been in  statute                                                               
since 1982. Hopefully  the increased bond amounts  will result in                                                               
more consumers  holding contractors accountable if  their work is                                                               
faulty.                                                                                                                         
                                                                                                                                
ALVIN  NAGEL, Mechanical  Inspection Manager,  Division of  Labor                                                               
Standards  and   Safety,  Department   of  Labor   and  Workforce                                                               
Development (DOLWD),  said he was  available to  answer questions                                                               
related to SB 193.                                                                                                              
                                                                                                                                
1:37:45 PM                                                                                                                    
ALAN  WILSON,   Legislative  Chair,  Alaska   State  Homebuilding                                                               
Association  (ASHA), Juneau,  Alaska,  stated that  the Board  of                                                               
Directors  of   ASHA  supports  SB   193.  They  see  it   as  an                                                               
inflationary adjustment, he said.                                                                                               
                                                                                                                                
VICE-CHAIR  MICCICHE  announced that  he  would  hold SB  193  in                                                               
committee for further consideration. Public testimony was open.