Florida A.G.C. Council, Inc.
2014 Regular Session of the Florida Legislature
Prepared by Metz, Husband & Daughton, P.A.
March 14, 2014
With a heated race for Florida Governor and mid-term Congressional elections looming on the horizon, the 2014 Regular Session of the Florida Legislature convened in Tallahassee on March 4. The political currents created by the fall elections will shape many of the decisions made in Tallahassee over the next few months.
Two weeks of “lawmaking” have now concluded and seven weeks remain in the annual 60-day legislative session. This week, state economists provided welcome news, estimating that the state will have an extra $150 million to work with for next year due to better-than-expected sales tax collections. This revised estimate leaves lawmakers with a roughly $1.2 billion surplus as they begin to work on the state’s spending plan for 2014-15. Last year’s budget topped $74 billion and was the largest in state history.
Even before this announcement, Governor Scott and the Republican leadership of the Legislature were looking to cut state taxes and fees by about $500 million. One prime candidate is a roll back of auto registration fees that were increased a few years ago under the watch of then-Republican Governor Charlie Crist, now the likely Democratic challenger to Governor Rick Scott in the fall. Spurred by the budget surplus, a number of other tax cut proposals are also being discussed in the Capitol, to include decreasing or phasing out the $1.4 billion sales tax on commercial rents (a tax unique to Florida), various consumer sales tax holidays, reducing corporate filing fees, and continuing the moves made over the last few years to exempt more and more businesses from Florida’s corporate income tax.
Continuing his drive to improve the state’s transportation infrastructure, Governor Scott’s proposed state budget also asks the Legislature to fully fund the five-year work plan of the Florida Department of Transportation. This plan includes a number of major transportation projects, including: (a) $3.8 billion for major highway projects (I-75, I-4, I-95, Turnpike); (b) $139 million in seaport improvements; (c) $192 million in bridge improvements; (d) major state funding to assist with a major renovation and expansion of Tampa International Airport; and (e) $213 million to help build a transportation hub that would link Orlando International Airport to ground transportation options and to the All Board Florida rail line, which will run from South Florida to central Florida as soon as late 2015. AGC supports these capital investments as a critical component for Florida’s continued economic growth.
At this point, literally thousands of bills have been filed for consideration by the 2014 Florida Legislature. At present, we are tracking 135 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 is an expanding list of major bills and issues on which AGC is pursuing the interests of Florida’s general contractors during the 2014 Session here in Tallahassee.
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 PPP guidelines 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’s universities and other construction groups in advocating for passage of this bill. To date, SB 900 has been approved by one legislative committee, with three more to go before it can be heard by the full Senate. HB 541 has progressed through two committees, with two more remaining before it moves to the House floor.
ENHANCEMENT TO PECO FUNDING STATUS: PENDING
SB 1076 - Sen. Anitere Flores (R - Miami) AGC POSITION: SUPPORT
HB 899 - Rep. Mike Hill (R - Pensacola)
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 state 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 leveraging and increasing the available dollars to spend, this 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 building maintenance and repairs.
In 2014, Agriculture Commissioner Adam Putnam, a likely candidate for governor in 2018, has come 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 this bill, which includes the state’s universities and a number of business groups. Last week, SB 1076 was heard in its first Senate committee, where it was amended to reduce the impact of the bill on state revenues. 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. HB 899 has not yet been scheduled for a hearing in its first House committee.
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.
MANDATORY LIEN/BOND WAIVER FORMS STATUS: PENDING
Possible Amendment AGC POSITION: OPPOSE
This year, material suppliers have 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.
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.” To date, 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.
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 in place 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. This year, SB 926 passed its first of three committees on a vote of 6-3. HB 957 got through its first committee on a vote of 7-4 and has two committees left before it can move to the House floor. Like last year, there was considerable public testimony against the bill from labor unions, workers, and worker advocates.
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. To date, SB 612 has advanced through one committee, with three more to go. HB 801 has not yet been scheduled for any committee hearings. As in years past, local governments are strongly opposed to the legislation. In order to advance the bill, it is likely that some threshold of state funding will have to be included, e.g., no local bid preference if state funds comprise more than 20% of the total project cost.
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.
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: SB 460 has not yet been scheduled for hearing in its first Senate committee.
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 building officials, local enforcement agencies, and the Florida Building Commission to interpret the Florida Accessibility Code for Building Construction and provides specific procedures for those interpretations.
Revises education and training requirements for the Florida Building Code Compliance and Mitigation Program.
UPDATE: HB 593 has made it through one of its three House committees. SB 1106 has not yet been scheduled for hearing in its first Senate committee.
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: SB 286 must be heard in one more Senate committee before it can move to the Senate floor. HB 147 has made it through one House committee and has two more to go.