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Florida A.G.C. Council, Inc. LEGISLATIVE REPORT 2014

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2014 Regular Session of the Florida Legislature
Prepared by Metz, Husband & Daughton, P.A.
April 17, 2014

 

The halls of the Capitol have been relatively quiet this week, as the presiding officers of the House and Senate gave legislators the week off to allow for the observance of Passover and Good Friday. Counting this “Spring Break,” seven weeks of the annual 60-day legislative session have now come and gone, with only two weeks left for the Florida Legislature to conclude its business.

As anticipated, the upcoming election for Florida governor this fall has colored much of this year’s legislative activity. Aided by a $1.2-billion budget surplus, one of the first bills passed by the Republican majority in 2014 was a $400-million roll back of vehicle, vessel, and mobile home registration fees. These fees were increased in 2009 on the watch of then-Republican Governor Charlie Crist, who has switched parties and is now the likely Democratic challenger to Republican Governor Rick Scott in November’s general election. Governor Scott has signed the bill into law, with the fee reductions to take effect on September 1, 2014. About $100 million in additional tax breaks is also likely on the horizon, including a reduction in the communication services tax.

Beyond leaving more money in Floridians’ wallets, the other individual pieces of legislation that are rising and falling in 2014 likewise seem intended to put Governor Scott in the best possible position to win a general election. Bills that might have authorized an expansion of gambling in the state and split Republicans have fallen by the wayside. On the other hand, several measures backed by the National Rifle Association appear likely to become law – a bill allowing unlicensed persons to carry a concealed weapon while evacuating during a state of emergency and a bill allowing people to display guns and fire warning shots in self-defense.

Lower tuition for university students is also likely. At the same time, both the House and the Senate are moving toward granting in-state tuition to Florida high school graduates who are undocumented for federal immigration purposes solely due to the immigration status of a parent. This change will no doubt appeal to Hispanics, who Governor Scott alienated in his initial election bid when he called for Florida to enact Arizona-style immigration laws.

Next week, legislators will start working in earnest to close the $400 million gap between the competing 2014-2015 state budget plans proposed by the House and the Senate.

Against this backdrop, literally thousands of bills have been filed for consideration by the 2014 Florida Legislature. At present, we are tracking 140 bills that would have some impact on the construction industry. Beyond the bills that AGC is actively trying to pass, AGC must also determine the impact of dozens of other bills and decide to support, oppose, or amend them as warranted.

Outlined below are the major bills and issues on which AGC is pursuing the interests of Florida’s general contractors during the 2014 Session here in Tallahassee.

ENHANCEMENT TO PECO FUNDING STATUS: PENDING
SB 1076 - Sen. Anitere Flores (R - Miami) AGC POSITION: SUPPORT
HB 899 - Rep. Mike Hill (R - Pensacola)
HB 5601- House Finance & Tax Subcommittee

Absent intervention by the Legislature, Florida’s public schools, colleges, and universities face another year without significant funding from the state to construct new buildings or to maintain or renovate existing structures. Historically, such funding has come from the Public Education Capital Outlay (“PECO”) program.

PECO funds are generated through a 2.5 percent gross receipts tax on the sale of electricity and a 2.52 percent tax on communications services. This revenue stream, established by a 1963 amendment to the Florida Constitution, has declined dramatically in recent years, in part because consumers are buying more energy-efficient appliances and moving from land-line telephones to cell phones.

Moreover, PECO funds have historically been used to issue bonds. While such leveraging increases the dollars available in the short term, bonding also generates an ongoing need for debt service. PECO’s bonding resources have decreased from a high of over $1.4 billion in FY 2006-07 to $0 in FY 2011-12. It is currently estimated that there will be no additional PECO bonding capacity until FY 2017-18. Over the past few years, the Legislature has tried to alleviate the severe impact on public schools, colleges, and universities by making annual appropriations of general tax revenue, with total funding ranging from $73 million to $294 million annually, most of which is focused on maintenance and repairs.

This year, Agriculture Commissioner Adam Putnam, a likely candidate for governor in 2018, came forward with a proposal combining energy tax cuts for businesses with a new funding source for PECO. Currently, Florida businesses pay a 7% state sales tax on commercial electricity consumption, totaling nearly $450 million per year. Commissioner Putnam is urging the Legislature to spur economic growth in Florida by reducing this tax from 7% down to 3.5% over a three-year period, saving businesses approximately $225 million per year when fully implemented. Businesses in several southeastern states, e.g., Alabama and Louisiana, pay no sales tax on commercial electricity.

At the same time, Commissioner Putnam would gradually divert the remaining 3.5% of this tax to PECO, which, when bonded, could generate up to $2.8 billion to invest in education infrastructure.

UPDATE: AGC supports Commissioner Putnam’s proposal and is an active participant in the coalition pushing his plan, which includes the state’s universities and a number of business groups. In its first legislative committee, SB 1076 was amended to reduce the impact of the bill on state revenue. While businesses would still see the sales tax rate on commercial electricity reduced from 7% to 3.5%, the remaining 3.5% tax would be split between PECO and the state’s general revenue fund instead of being diverted entirely to PECO, thus cutting in half the initially proposed PECO increase.

While HB 899 will not be advanced in the House this session, the House has already passed a bill containing a package of favored tax cut proposals. This bill (HB 5601) includes an important component of the Putnam proposal – shifting 3% of the sales tax on commercial electricity consumption to PECO, which will generate an estimated $188 million annually. Cities and counties publicly opposed this provision of the bill, however, because it would result in a loss of almost $21 million per year to local governments.

The Senate, however, has clearly cooled to the idea of shifting significant tax revenue into PECO funding. After a promising start for SB 1076, the bill now appears to be fatally stalled in committees with only two weeks of the session remaining. Last week, the Senate Appropriations Committee took up HB 5601 and removed the PECO funding shift, as well as a number of the House’s tax cut proposals.

Overall, the House is proposing a $597 million PECO budget for the 2014-15 fiscal year, which includes the initial bonding proceeds from the $188-million PECO funding shift. This proposed budget devotes $309 million to maintenance funding, $215 million to continue previously funded state college and university projects, and $44 million for other projects and for rural schools.

The Senate’s proposed budget does not include the House’s structural revenue shift to PECO. Instead, the Senate is seeking to spend $321.4 million for PECO from a variety of other sources.

PUBLIC-PRIVATE PARTNERSHIPS STATUS: PENDING
SB 900 - Sen. Jack Latvala (R - Clearwater) AGC POSITION: SUPPORT
HB 541 - Rep. Greg Steube (R - Sarasota)

Public-private partnerships (PPPs) are contractual arrangements formed between a public agency and a private sector entity that allow for more significant private sector participation in the delivery and financing of public buildings and infrastructure projects. In addition to the sharing of resources, each party shares in the potential risks and rewards in the delivery of the service or facility.

The most common form of PPP is a Design-Build-Finance-Operate (DBFO) transaction, where the government contracts with a private vendor, granting the private vendor the right to develop a new piece of public infrastructure. The vendor takes on full responsibility and risk for the delivery and operation of the public project in accordance with the terms of the partnership. The vendor is paid through the revenue stream generated by the project, which could take the form of a user charge (such as a highway toll) or, in some cases, an annual government payment for performance (often called a “shadow toll” or “availability charge”).

While PPPs often result from a more “conventional” procurement process in which the government issues a request for proposals and then receives competing responses from private vendors, PPPs may also be initiated by the government’s receipt of an unsolicited proposal from a private entity. Generally, the government requires a processing fee to cover the cost of its technical and legal review of the unsolicited proposal. If the government is interested in pursuing the project, the government issues public notice and solicits competing proposals before entering into any partnership for the facility in question.

Expanding upon successful 2013 legislation that authorized PPPs for counties, cities, school boards, and regional entities, the 2014 bill authorizes PPPs for state universities. This measure will play an important role in addressing the significant decrease in available funding for building construction and maintenance at our state universities (as discussed re: the next bill below). The 2014 bill:

• Specifies the requirements for PPPs, which include provisions that require state universities to provide public notice of unsolicited proposals, conduct independent analyses of proposed partnerships, and enter into comprehensive agreements for qualifying projects.
• Provides that state universities may approve a qualifying project if there is a public need for or benefit derived from the project, the estimated cost of the project is reasonable, and the private entity’s plans will result in the timely acquisition, design, construction, improvement, renovation, expansion, equipping, maintenance, or operation of the qualifying project.
• Specifies that PPP agreements are subject to the approval of the Board of Governors, which is also responsible for developing a PPP process for the state universities.
UPDATE: AGC has long supported PPP legislation as a creative means to help address Florida’s infrastructure needs and to accelerate construction activity in the state. AGC is partnering with the state universities and other construction groups to advocate passage of this bill. To date, HB 541 has progressed through two committees, with two more remaining before it moves to the House floor.
SB 900 has only one committee remaining. As the result of input from the Governor’s office and the Division of Bond Finance, the bill was modified as follows:
• Authorizes university direct-support organizations (DSO) to also engage in PPPs.
• Requires the approval of certain projects by the Governor and Cabinet sitting as the head of the Division of Bond Finance.
• Requires the university or DSO to brief the Cabinet and Legislature prior to engaging in agreements that yield more than $10 million to the university. Any objections must be resolved before proceeding with the PPP agreement.
• Limits the term of PPPs to 30 years.
• Prohibits the obligation of the full faith and credit of the state as part of a PPP.
• Removes the authority for a private entity engaged in a PPP to levy fees on the public for use of a facility that is the product of the PPP.
• Removes the requirement that any liens on the property be paid off at the time that ownership of the property is transferred from the PPP to the university or DSO.

CONSTRUCTION “TRUST” FUNDS STATUS: PENDING
Possible Amendment AGC POSITION: OPPOSE

Earlier this year, the material suppliers approached AGC on the issue of bankruptcy preference claims. Several subcontractors and suppliers have apparently had bad experiences with overly aggressive bankruptcy trustees who try to “claw back” construction funds when an owner (or contractor) has filed for bankruptcy. Reportedly, any funds received during the 90 days preceding the bankruptcy filing are vulnerable.

The material suppliers have cited to a recently enacted Texas statute providing that funds received for real property improvements are deemed held in trust for the purpose of paying those who supplied labor, services, and materials to the project. By designating them as funds held in trust, a defense is created to the bankruptcy trustee’s preference claim. Apparently, there are now 14 states that have some form of trust fund protection in place – 12 with statutes and 2 with case law supporting the concept. None of them require monies to be held in a separate account.

The material suppliers have sought AGC’s support on the following proposed statutory amendment:

489.1261 All payments due, to become due, or received pursuant to a “contract” by or for the benefit of a “lienor,” as those terms are defined in s. 713.01, or for the benefit of a “claimant” under s. 255.05 or s. 337.18, are funds to be held in trust for the benefit of all lienors or claimants who have furnished labor, services or materials under the contract, irrespective of whether the payments are in the possession of the contractor or another. However, nothing contained herein shall be construed as requiring the payments to be placed in a separate account.

UPDATE: After seeking feedback from its members, AGC has determined that it must oppose the suggested statutory change. Our AGC general contractors and attorneys weighing in thus far have reported that they typically do not run into major problems dealing with bankruptcy trustees. In the event of an owner bankruptcy, if a trustee tries to "claw back" owner funds, the trustee usually backs off once the contractor documents that the funds were legitimately earned for work already completed and that the parties paid have executed the necessary releases. This may entail some unwanted paperwork and effort, but it is not fundamentally different from the challenges faced by any business when a customer or client goes bankrupt.

Moreover, there are already ample opportunities for litigation within the context of a construction project, including lien claims, bond claims, breach of contract claims, equitable claims, etc. The proposed amendment appears to add to this mix by creating breach of fiduciary duty claims up and down the construction chain. This may in large part explain the fact that similar trust fund language was adopted by the Florida legislature in 1987, only to be repealed a year later.
While Texas has adopted a “construction trust fund” law, it seems to differ significantly from the proposed amendment. The Texas statute sets up the construction trust fund concept for the purpose of imposing criminal penalties, i.e., creating a special brand of theft, as opposed to altering civil liability.

Since the ramifications of the proposed amendment seem far reaching, with many possible unintended and unforeseen consequences, AGC cannot support it. While no bill on this subject has been filed for consideration in the 2014 Session, AGC will have to closely monitor all construction-related bills throughout the session to ensure that this proposal does not get amended onto another bill.

MANDATORY LIEN/BOND WAIVER FORMS STATUS: PENDING
Possible Amendment AGC POSITION: OPPOSE

This year, material suppliers have also expressed an interest in pushing for a change in the law that would mandate the use of statutorily-prescribed forms for the waiver of a lien/bond claim by a subcontractor or supplier. Currently, the relevant statutes provide a suggested waiver form and require that the actual waiver used must be “substantially” similar to this form. The material suppliers want to require the use of that statutory form and expressly declare any additional terms and conditions unenforceable.

UPDATE: AGC has determined that it must oppose the suggested statutory change, because it would eliminate the general contractor’s ability by contract to require additional waiver terms or to “pass through” additional waiver terms insisted upon by the owner or lender. While no bill on this subject has been filed for consideration in the 2014 Session, AGC will have to closely monitor all construction-related bills throughout the session to ensure that this proposal does not get amended onto another bill.

ATTORNEY’S FEES ON LIEN & BOND CLAIMS STATUS: PENDING
Possible Amendment AGC POSITION: OPPOSE

Since 2010, material suppliers have been pushing for a change in the law that would fundamentally alter how “prevailing party” attorney’s fees are awarded in suits over liens and payment bond claims. Rather than relying on long-established precedent which requires a court to look at the case as whole to determine which party “prevailed” on the significant issues in a payment dispute, the change sought by material suppliers would have awarded attorney’s fees to the supplier or subcontractor if they recovered any amount at all in the litigation, even $1.

UPDATE: AGC has been the primary opponent to this proposed change in the law, which would fundamentally alter the resolution of payment disputes to the detriment of general contractors. While no bill on this subject has been filed for consideration in the 2014 Session, AGC will have to closely monitor all construction-related bills throughout the session to ensure that this damaging attorney’s fee provisions does not get amended onto another bill.

FLORIDA-BASED BUSINESS PREFERENCE STATUS: PENDING
HB 1281 - Rep. Erik Fresen (R - Miami) AGC POSITION: OPPOSE

Continuing an effort he began in the 2013 Session, Rep. Fresen’s bill appears to be aimed at businesses based in foreign countries that are allegedly submitting below-cost bids on public construction projects in South Florida. For public construction work, his 2014 bill would provide a bid preference for Florida-based businesses in situations where the low bidder is an out-of-state business and the bid of a Florida-based business is within 10 percent of the low bid. In this circumstance, the out-of-state bidder and the Florida-based bidder would be given the opportunity to submit a “best and final bid,” with the Florida-based bidder getting the contract in the event of a tie.

To qualify as a Florida-based business, at least 60 percent of the company’s employees must be Florida residents at the time of contract award, its principal place of business must have been located in Florida during the previous year, and the majority of the company’s employees and principals must be located in that Florida office.

The bill applies the same essential preference mechanism and qualifications with respect to the public procurement of most goods and services.

UPDATE: As in 2013, AGC has determined that it must oppose this bill due to its mandated preference and its unworkable criteria for qualification as a “Florida-based business.” The bill has no companion legislation in the Senate, and it has not been scheduled to be heard in its first of three House committees. As a result, the bill is effectively dead for this session.

BAN ON LOCAL WAGE PROTECTION ORDINANCES STATUS: PENDING
SB 926 - Sen. Wilton Simpson (R - New Port Richey) AGC POSITION: SUPPORT
HB 957 - Rep. Neil Combee (R - Auburndale)

A few years ago, Miami-Dade County passed a local ordinance to regulate “wage theft”-- the underpayment or nonpayment of wages earned. The ordinance sets up a local quasi-judicial process through which wage theft claims can be reported and processed. Backed by unions, the ordinance primarily targets industries that have a significant number of minimum wage, low-wage, or day labor workers, such as agriculture, restaurant/lodging, construction, and retail. A similar ordinance was later adopted in Broward County and Alachua County. Palm Beach County also considered this approach, but ultimately instituted a more informal process involving the referral of wage theft claims to local legal aid organizations.

Of course, numerous federal and state laws already address issues of wage protection and the unfair treatment of workers. Layering on top of this established legal framework a series of inconsistent local regulations and processes that vary from one city or county to the next will impose unnecessary additional burdens and expenses on Florida employers.

As in past years, bills have been filed in the 2014 Session to preempt local governments from passing these kinds of prescriptive wage protection ordinances. The current bill, however, would authorize counties to adopt a process similar to the one instituted in Palm Beach County, in which wage theft claims are referred to local legal aid organizations. Such organizations would be charged with seeking a more rapid and informal resolution of claims before any legal actions are filed. This approach differs from the one pursued in 2013, in which preemption was coupled with the creation of a statewide system for addressing wage theft complaints via the county courts. Similar to last year, the 2014 bills would “grandfather” and keep in place the local wage theft ordinances already adopted in Miami-Dade County, Broward County, and Alachua County.

UPDATE: In 2013, this bill passed the House but got caught up in tensions between the two chambers over eventual passage of another bill that prohibited local governments from imposing employee benefit requirements. Thus far, HB 957 has proceeded through one committee on a vote of 7-4 and has two committees remaining. Like last year, there was considerable public testimony against the bill, the defeat of which has become a top priority of labor unions and workers. HB 957 is unlikely to advance any further in the House as Rep. Eddy Gonzalez (R - Hialeah Gardens), the chair of the bill’s next committee, has refused to schedule it for a hearing. Rep. Gonzalez is widely expected to run for local office in Miami-Dade County in the fall, and Miami-Dade County has publicly opposed the legislation.

On the other side of the Capitol, SB 926 has now made it through all of its committees, although it passed its final committee by the narrowest of margins (8-7). The substance of the bill has been significantly amended several times. In an early committee, the bill was amended to give counties the option of adopting a Palm Beach-style/legal aid ordinance or a Miami-Dade-style/quasi-judicial ordinance -- a change which was supported by labor unions, workers, and worker advocates. In its last committee, the bill was amended to remove this option and largely revert back to proposed 2013 legislation that would create a statewide system for addressing wage theft complaints. The bill would give county courts jurisdiction over wage theft claims, require pre-suit notice to employers, and allow aggrieved workers to recover twice the compensation owed. The bill would “grandfather” and keep in place the local wage theft ordinances already adopted in Miami-Dade County, Broward County, and Alachua County, while preempting any new ordinances elsewhere. SB 926 is scheduled to be heard on the Senate floor on April 23.

BAN ON LOCAL BID PREFERENCES STATUS: PENDING
SB 612 - Sen. Alan Hays (R - Umatilla) AGC POSITION: SUPPORT
HB 801 - Rep. Heather Fitzenhagen (R - Ft. Myers)

This bill would prohibit any local ordinance or regulation that grants a preference to a “local” bidder based upon the bidder maintaining a business office or principal place of business in the local jurisdiction, the bidder hiring personnel or subcontractors from within the jurisdiction, or the bidder paying local taxes, assessments, or duties. This prohibition would apply to any local public construction project for which payment is to be made in whole or in part from funds appropriated by the state.

In addition, the bill would require each state agency, university, college, school district, or other political subdivision of the state procuring construction services to award a bid preference to Florida-based businesses. If the low bidder on a Florida project is from a state that awards its own in-state preference, then the same degree of preference would be awarded to the Florida-based bidders. If the low bidder is from a state that does not award its own in-state preference, then Florida-based bidders would receive a 5% preference. This preference already exists in state law for the procurement of commodities, but the bill would expressly extend it to the procurement of construction services.

UPDATE: Similar preemption legislation has been advanced for several years now, and AGC has always actively supported it. Our past experience, however, has been that legislators often oppose local bid preferences in the abstract but quickly change their position once they understand that: (a) one or more local governments in their legislative district have a local bid preference; and (b) the local contractors in their district support the bid preference.

Local governments have continued their vocal opposition to the legislation. Nonetheless, SB 612 has advanced through three committees, with one more to go. As anticipated, the bill has now been amended to prohibit local bid preferences only when state funds comprise 51% or more of the total project cost. The general bid preference for Florida-based businesses has also been removed.

HB 801 has passed through one of its three committees. The bill is unlikely to advance any further, however, because Rep. Eddy Gonzalez (R - Hialeah Gardens), the chair of the bill’s next committee, has refused to schedule it for a hearing.

Rep. Gonzalez is widely expected to run for local office in Miami-Dade County in the fall, and Miami-Dade County has publicly opposed the legislation.

ELECTRICAL JOURNEYMAN REQ’TS STATUS: PENDING
SB 154 - Sen. Darren Soto (D - Kissimmee) AGC POSITION: OPPOSE
HB 705 - Rep. Vic Torres (D - Orlando)

Current law allows a county or city to adopt an ordinance requiring one electrical journeyman to be present on an industrial or commercial new construction site of 50,000 gross square feet or more when electrical work in excess of 77 volts is being performed.

The bill would change this provision to allow a county or city to require one electrical journeyman to be present on any industrial or commercial new construction site of 5,000 gross square feet or more when electrical work in excess of 98 volts is being performed.

UPDATE: AGC has determined that it must oppose this change in law. The decision on how any particular job should be staffed should be left to the electrical contractor and should not be further dictated by an individual county or city. To date, neither bill has been heard in any legislative committee, and they are effectively dead for this session.

CONSTRUCTION LIENS STATUS: PENDING
SB 460 - Sen. Wilton Simpson (R - New Port Richey) AGC POSITION: OPPOSE

Apparently arising from a constituent’s problems with a contractor performing some home repairs, this bill:

• Increases the charge for recording a claim of lien to $50.
• Requires a lienor recording a claim of lien to furnish to the clerk of court a copy of the notice of commencement, the building permit, and an affidavit attesting that the labor or materials were furnished.
• Makes the recording of a claim of lien more than 90 days after the final furnishing of labor, services, or material an act of fraud.

UPDATE: The bill has no companion legislation in the House, and it has not been scheduled to be heard in its first Senate committee. As a result, the bill is effectively dead for this session.

BUILDING CONSTRUCTION STATUS: PENDING
SB 1106 - Sen. Wilton Simpson (R - New Port Richey) AGC POSITION: MONITOR
HB 593 - Rep. Dane Eagle (R - Cape Coral)

A bill is filed almost every year making changes to the laws surrounding the Florida Building Code, and this year is no exception. The bill contains the following provisions of note:

• Provides an additional method for local governments to provide notices to alleged code enforcement violators.
• Requires application to the Department of Health for an operating permit for a public swimming pool or bathing place before an application may be filed for a building permit, and provides additional requirements for obtaining an operating permit.
• Specifies inspection criteria for construction or modification of manufactured buildings or building modules.
• Revises the allocation of funds from building permit surcharges to include the Future Builders of America Program.
• Authorizes the Florida Building Commission to interpret the Florida Accessibility Code for Building Construction and provides specific procedures for those interpretations.
• Revises the definition of “building energy-efficiency rating systems” to set forth qualifying criteria for such systems rather than adopting the systems established by the specific entities identified in statute.
• Allows the Florida Building Commission to grant variances from the public swimming pool provisions of the Florida Building Code.
• Clarifies that, for the purpose of inspection and record retention, site plans or building permits may be maintained at the worksite in the original form or in the form of an electronic copy, open to inspection by the building official, as required by the Florida Building Code.
• Revises education and training requirements for the Florida Building Code Compliance and Mitigation Program.

UPDATE: HB 593 has completed the committee process and is now available for consideration on the House floor. SB 1106 has one more committee to go before it is similarly postured in the Senate.

CONCRETE MASONRY EDUCATION STATUS: PENDING
SB 286 - Sen. Garrett Richter (R - Naples) AGC POSITION: MONITOR
HB 147 - Rep. Matt Caldwell (R - Lehigh Acres)

This bill creates the “Concrete Masonry Education Act,” and establishes the Florida Concrete Masonry Council, Inc., as a nonprofit corporation operating as a direct-support organization of the Department of Economic Opportunity (DEO). The bill:
• Outlines administrative powers and duties of the Council including the power to plan, implement, and conduct educational programs related to the field of concrete masonry, particularly for individuals seeking employment.
• Provides for the appointment of a 13 member governing board.
• Allows the Council to accept grants, donations, contributions, gifts, and to collect self-imposed, voluntary assessments on concrete masonry units produced and sold by concrete masonry manufacturers in the state.

UPDATE: HB 147 has completed the committee process and is available for consideration on the House floor. SB 286 is in a similar posture and is scheduled to be heard for the first time by the full Senate on April 23.

WORKERS’ COMPENSATION “RETRO-RATING” STATUS: PENDING
SB 952 - Sen. Wilton Simpson (R - New Port Richey) AGC POSITION: MONITOR
HB 785 - Rep. Ben Albritton (R - Bartow)
SB 1260 - Sen. Jeff Brandes (R - St. Petersburg)
HB 565 - Rep. David Santiago (R - Deltona)

Workers’ compensation premiums are based on the employer’s payroll, the type of work performed by its employees (roofers, clerical, etc., each with a classification code to which a specific premium rate applies), and the employer’s loss experience (as reflected in an experience modification factor). Generally, premiums are paid up front to provide coverage for the policy period. At the end of the policy, the insurer conducts an audit to ensure that the appropriate premium has been paid. If the actual payroll is less than that initially estimated, the employer will receive a refund. If the actual payroll exceeds the initial estimation, the employer must pay an additional amount to the insurer.

Retrospective rating plans are utilized by large, sophisticated employers to decrease workers’ compensation premiums. In a retro-rating plan, the insurer and employer agree that the final premium paid will be based upon losses actually incurred in the policy period. The insurer and employer negotiate on additional expenses, charges, taxes, and assessments, based upon minimum and maximum premiums. Retrospective rating has been a component of workers’ compensation rating for over 50 years in Florida and nationwide.

In 1991, the National Council on Compensation Insurance (NCCI) filed the Large Risk Alternative Rating Option (LRARO) in Florida, the point of which was to provide greater flexibility in negotiation between an insurer and employer for risks with over $1,000,000 in standard premium. The Florida Department of Insurance rejected the filing, determining that the LRARO did not comply with Florida law. Currently, LRARO plans are available in the majority of the states, but Alaska, Arkansas, Florida, and Nebraska do not allow them.

The bill permits LRARO plans in Florida in situations where an employer has: (a) exposure in more than one state; (b) an estimated annual standard workers’ compensation premium in Florida of at least $175,000; and (c) an estimated annual countrywide standard workers’ compensation premium of at least $1 million.

UPDATE: SB 952 is scheduled to be heard in its final committee on April 21. HB 785 has successfully navigated through all of its committees and is available for consideration on the House floor. A similar provision authorizing LRARO plans is also contained in two omnibus insurance bills, SB 1260 and HB 565. HB 565 passed the House on April 3 and is awaiting Senate action. SB 1260 must be heard in one more committee before it can be considered by the full Senate.

WORKERS’ COMPENSATION ADMINISTRATION STATUS: PENDING
SB 444 - Sen. Bill Galvano (R - Bradenton) AGC POSITION: MONITOR
HB 271 - Rep. Travis Cummings (R - Orange Park)

This bill contains a variety of administrative changes to the state’s workers’ compensation system put forward by the Department of Financial Services (DFS).

Stop-Work Orders: Currently, if an employer fails to comply with workers’ compensation coverage requirements, DFS must issue a stop-work order (SWO) within 72 hours. SWOs require the employer to cease all business operations.

Additionally, employers are assessed a penalty equal to 1.5 times what the employer would have paid in workers’ compensation premiums for all periods of non-compliance during the preceding 3-year period or $1,000, whichever is greater. SWOs remain in effect until the employer secures appropriate coverage and the DFS issues: (a) an order releasing the SWO (for employers that have paid the assessed penalty); or (b) an order of conditional release (for employers that have agreed to pay the penalty in installments). The bill makes the following changes:

• Requires an employer to produce business records requested by DFS within 10 days instead of 5 days, with failure subjecting the employer to a SWO.
• Authorizes DFS to issue an order of conditional release from an SWO to an employer that has secured appropriate coverage if the employer pays $1,000 as a down payment on the assessed penalty and agrees to pay the remainder of the penalty in full or pursuant to a payment agreement schedule.
• Credits the initial payment of premium made to secure coverage against the assessed penalty for employers that have not previously been issued an SWO. When coverage is obtained through an employee leasing company, the credit is based on the amount attributable to the initial workers’ compensation expense.
• Reduces the look-back period for failure to comply with coverage requirements from 3 to 2 years and increases the penalty multiplier from 1.5 to 2 times the amount of unpaid premiums.

Special Disability Trust Fund: The bill changes the methodology for calculating the Workers’ Compensation Special Disability Trust Fund (SDTF) assessment. It requires the DFS to calculate the assessment based upon the net premiums written by carriers, the amount of premiums calculated by the DFS for self-insured employers, and the anticipated fund balance and expenses of the SDTF. DFS indicates that this change will benefit the private sector by allowing DFS to draw down the fund balance of the SDTF to pay approved reimbursement requests that are awaiting payment, without increasing the SDTF assessment rate.

In addition, the bill also reduces the statutory rate cap on the SDTF from 4.52 to 2.5 percent, lowering the maximum assessment that could be applied to employers.

UPDATE: HB 271 passed the House on April 1 and is awaiting Senate action. SB 444 has one committee remaining before it can be considered by the full Senate.

EDUCATIONAL FACILITIES FINANCING STATUS: PENDING
SB 628 - Sen. Bill Montford (D - Apalachicola) AGC POSITION: MONITOR
HB 377 - Rep. George Moraitis (R - Ft. Lauderdale)

The Higher Educational Facilities Financing Authority is a public corporation that assists eligible institutions of higher education in financing and refinancing the construction of facilities. The Authority may issue tax-exempt or taxable revenue bonds, which are privately financed and not secured by full faith and credit of the state. Financing acquired through the Authority may be used for such construction projects as dormitories, parking and student service facilities, administration and academic buildings, libraries, and loans made in anticipation of tuition revenues.

Independent nonprofit colleges or universities which are located in and chartered by the state of Florida; are accredited by the Southern Association of Colleges and Schools (SACS); grant baccalaureate degrees; and are not a state university or community college may participate in educational facilities construction financing through the Authority. This includes all 31 institutions belonging to the Independent Colleges and Universities of Florida (ICUF).

The bill adds authorization for tax-exempt K-12 private schools, located and incorporated in the state of Florida, and accredited by SACS to participate in construction financing through the Authority.

The bill also expands the types of projects that the authority may finance by adding the construction of dining halls; student unions; laboratories; research facilities; classrooms; athletic facilities; health care facilities; maintenance, storage, or utility facilities; and related facilities or structures required or useful for the instruction of students, research, or the operation of an educational institution, e.g., parking; as well as certain purchases of equipment and machinery.

UPDATE: HB 377 passed the House on April 11 and is now awaiting action by the Senate. SB 628 has two committees remaining before it can be considered by the full Senate.

STATE CONTRACTING CRITERIA STATUS: PENDING
SB 914 - Sen. Jack Latvala (R - Clearwater) AGC POSITION: MONITOR
HB 953 - Rep. Kathleen Peters (R - St. Petersburg)

Current law requires agencies to utilize a competitive solicitation process for contracts for commodities or services in excess of $35,000. Depending on the cost and characteristics of the needed goods or services, agencies may utilize a variety of procurement methods, which may include a request for proposal or invitation to negotiate. The agency must consider certain criteria when evaluating the proposal or reply before selecting a vendor.

The bill requires state agencies to consider the prior relevant experience of a vendor when evaluating the responses to a request for proposal or invitation to negotiate. Currently, agencies may consider such prior relevant experience, but they are not required to do so.

UPDATE: HB 953 has passed through all of its committees and is available for consideration on the House floor. SB 914 has one committee remaining before it can be considered by the full Senate.

HOMEOWNERS’ CONSTRUCTION RECOVERY FUND STATUS: PENDING
SB 1098 - Sen. Charlie Dean (R - Inverness) AGC POSITION: MONITOR
HB 1235 - Rep. Dwight Dudley (D - St. Petersburg)

The Florida Homeowners’ Construction Recovery Fund was created in 1993, after Hurricane Andrew, as a fund of last resort to compensate consumers who contracted for construction, repair or improvement of their Florida residence and who suffered monetary damages due to contractor misconduct. A claimant must be a homeowner and, currently, the damage must have been caused by a Division I contractor (general contractor, building contractor, or residential contractor). The Fund is not permitted to compensate consumers who contracted with Division II contractors or to compensate consumers who have suffered damages as a result of payments made in violation of the Florida Construction Lien Law.

Each recovery claim is limited to both a per-claim maximum amount and a total lifetime per-contractor maximum. For contracts entered into after July 1, 2004, the per-claim payment limits are $50,000 with a total lifetime aggregate of $500,000 per licensee. Claims are paid in the order that they are filed. The Fund must be repaid by the contractor in violation or have their license suspended until the repayment is made. The Fund is financed by a 1.5 percent surcharge on all building permit fees. The proceeds from the surcharge are allocated equally to the fund and to support the operations of the Building Code Administrators and Inspectors Board.

The bill revises the law to include Division II contractors within the parameters of the Fund. It revises the statutory limits on recovery payments to include Division II contracts beginning January 1, 2015, for any contract entered into after July 1, 2014. The bill limits Division II claims to $15,000 per claim with a $150,000 lifetime maximum per licensee. The bill removes the prohibition against paying consumer claims where the damages resulted from payments made in violation of the Florida Construction Lien Law for contracts entered into after July 1, 2014. The bill also revises the notice that contractors must give to homeowners detailing their rights under the Fund.

UPDATE: HB 1235 has passed through all of its committees and is available for consideration on the House floor. SB 1098 has one committee remaining before it can be considered by the full Senate.

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