Legislature Goes Into Extra Innings

With big league ballplayers loosening up for the fast-approaching baseball season the Washington State Legislature has gone into extra innings as they wrestle with the mountainous problems facing them in balancing the state budgets. Upon adjournment last Thursday evening Governor Gregoire called legislators back into session at noon on Monday March 15. Saying that legislators needed the time to “get it right” the Governor suggested that they would only need a week to complete their work…

Although once called back into session no Governor can limit the subjects considered or the time taken (up to the Constitutional limit of 30 days) the Governor noted that she hoped that the Special Session would focus on “jobs and the budget.” Lists of preferred bills for consideration have surfaced and it appears that some of particular interest to contractors will be the proposal to increase the hazardous substances (petroleum-based products) tax (House Bill 3181); the $850 million bond sale to fund school and public building energy efficiency projects (House Bill 2561); and other proposals to stimulate construction projects (i.e. House Bill 3147 incentivizing data center construction).

The basic parameters on the budget and taxation debate have remained largely unchanged and will occupy center stage. The Governor has asked for about $600 million in new revenue the House for $750 million and the Senate wants $890 million. The most fundamental difference between them is the Senate proposal for a three-year increase in the general sales tax by .3% -- raising about $300 million. The balance of the approaches is achieved through clarifications correcting recent court decisions targeted taxes (i.e. bottled water candy and tobacco) and the elimination of various tax incentives (or “loopholes” depending on your perspective…). Material differences exist over which business taxes to address as well as how to spend much of the increased revenue. AGC will continue to watch for attempts to slip budget provisos in when no one is looking; such as those which would give a leg up to PLAs (House Capital Budget) and open the door to implementing employer “gag rule” provisions addressing labor relations matters (House Operating Budget).

Still under consideration are proposals (House Bill 3181 & Senate Bill 6851) which would increase the Model Toxics Control Act (MTCA) tax. Proposed by environmental interest groups the purported purpose of the tax increase was to clean up stormwater runoff pollution. However the initial proposals would have diverted two-thirds of the money raised to the general fund not to stormwater clean up. The State Dept. of Revenue estimates that the tax would add at least 3 cents to the price of a gallon of gas. Tripling the MTCA tax increases collections from the current $115 million to $340 million per year with approximately 83% coming from petroleum products and ultimately Washington consumers as a hidden gas tax. AGC has opposed these proposals as they would significantly affect the long-term prospects for approval of transportation financing proposals and for their “shell-game” diversions of the tax revenue. The increase on petroleum taxes alone is more than $186 million annually. House Bill 3181 was amended by the House Finance Committee significantly changing the Tax as well as the distribution of revenues. The tax rate is increased by 0.1% in each of 4 years. None of the new revenue is diverted to the general fund. A third option has surfaced adding another .5% tax with 85% of the revenue directed to the stormwater account and 15% to WSDOT for stormwater retrofitting projects. It is not yet clear whether any of these proposals will be adopted.

A number of measures which AGC has worked on during the Regular Session have been sent to the Governor for her signature. Some of the key measures include:

Engrossed House Bill 2805 Public works involving off-site prefabrication. This bill presents real problems for contractors and public works projects. It would require contractors to disclose certain information at the time of filing the Affidavit of Wages Paid at the end of a project. Failure to provide the information is a violation and would mean a contractor is “non-responsible” for future public work. AGC opposed the measure and will ask the Governor to veto this bill.

Engrossed Substitute Senate Bill 6381 Supplemental Transportation Budget. Updates the $7.5 billion 2009-2011 Transportation Budget to an overall spending level of $8.5 billion to reflect the receipt of $590 million in the federal high speed rail grant program under the American Recovery and Reinvestment Act as well as the receipt of other federal funds and acceleration of state-funded project work. The Nickel and Transportation Partnership Act construction programs remain viable for the 16-year planning period. Of the 391 Nickel and TPA projects originally authorized 2333 were completed as of November 2009 56 were under construction and 26 were headed for advertisement. That means that by May 2010 81% or $6.4 billion worth of projects have been completed or underway. AGC will ask the Governor to sign this bill.

Engrossed Substitute Senate Bill 5529 Regarding architects. Updates and clarifies many aspects of Architecture licensing law. The original bill included a provision which would have expanded requirements to use architects for projects from the current requirement of “4000 square feet of construction” to requiring an architect on projects on any work in buildings of “4000 square feet of building size.” AGC opposed this provision. AGC’s amendment was adopted allowing projects less than 4000 sq ft. without architect drawings if they do not impact the structure or life safety system of the building. The Senate agreed with the amendments and sent the bill to the Governor.

Second Substitute Senate Bill 6578 Optional multiagency permitting teams. This bill the first step in a long-standing AGC priority expands on the TPEAC process used successfully to shorten permitting time on WSDOT projects. It would allow for the resource agencies to concurrently process environmental permits rather than sequentially. The result is efficiency and time and cost savings without lessening important environmental protections. AGC will ask the Governor to sign this bill.

Substitute House Bill 2758 Documenting wholesale sales for excise purposes. This bill allows contractors to receive a Reseller Permit for two years (rather than current one-year issuance). The original bill delayed implementation of two year permit until 2013. AGC opposed this delay and worked to amend the bill. Amendments were adopted to address a majority of AGC’s concerns allowing an earlier implementation of the two-year permit as well as using a two year “look back” period to calculate the 25% eligibility threshold. AGC will ask the Governor to sign the bill.

Second Substitute Senate Bill 6575 Concerning the recommendations of the joint legislative task force on the underground economy. This bill was a product of the Underground Economy Task Force intended to strengthen education and penalties for unregistered contractors. The significant accomplishment in the legislation is establishment of a separate fund to administer contractor registration fees. The legislature has been diverting one third of Contractor Registration fee revenue to other uses. Labor attempted to limit the use of independent contractors on jobsites. This issue was stripped out at the last minute by the House but will be back. AGC will ask the Governor to sign the bill.

If you have any questions regarding any of the bills above please contact the AGC Legislative Office at 800.690.2630.