North Carolina Legislative Report - 2013
By: Dave Simpson

CAGC Has Excellent 2013 Session of NC Legislature

Legislative Highlights: The NC General Assembly ended its long session on July 26 after approving CAGC-pushed legislation that will save lives with a major rewrite of underground safety/damage prevention laws, provide for a fairer playing field on public construction work and create 122,000 additional jobs under a new highway funding formula.

Lawmakers approved about $480 million toward UNC System construction and $150 million for state renovations and repairs this year. CAGC was successful in leading efforts to defeat proposals that would have allowed local bidder preferences on public work. Another bill that was not successful would have, as initially written, made it costly and time-consuming to take legal action against designers through a proposed Certificate of Merit.

Lawmakers, before ending the six-month session, also approved important legislation to bolster North Carolina's open-shop status as well as vocational education and make major cuts for individual and business taxes. Highlights for the construction industry include:

  • Passage of House Bill 476, which will make North Carolina, currently among the weakest in the nation for underground safety/damage prevention laws, what some say will be the model state program.

    CAGC worked on this top legislative goal for years and negotiated on this for months. Special thanks to Rep. Mike Hager for leading legislative efforts on this bill, which began late last summer on an issue CAGC has pursued for over a decade.
  • Passage of House Bill 857 (DB, P3, Prequalification Study) is another bill CAGC worked on for months to ensure a level playing field for the construction industry at a time when a number of local design-build bills are introduced each year with few, if any, parameters. Special thanks to Rep. Dean Arp for leading his tireless efforts on this legislation by vetting it thoroughly with CAGC and many other organizations and individuals.

    CAGC was successful in efforts to defeat a provision in H857 we opposed that would allow designers to be the lead on construction projects. In an unusual move pushed by CAGC, the bill was amended on the Senate floor to include language that will provide protection for contractors so that contracts will not be deemed null and void if public owners are not following new reporting requirements.
  • Strategic Prioritization Fund: In the most significant change to the way transportation funds are allocated across the state since the 1989 Highway Trust Fund became law, the General Assembly enacted a new concept on how transportation funds are distributed. All projects are now considered as capital projects and divided into three basic categories.

    NC DOT estimates that this new distribution formula, when fully in effect with projects to be let after July 1, 2015, will provide a net result in increasing from a 10-year existing plan total of projects let to contract of about 115 projects to 292 projects. This will result in the number of jobs created to move from 110,000 to 232,000 under the new plan. This is accomplished mostly by reallocation of existing revenues from DOT programs. Projects already in the pipeline and scheduled to be let prior to July 1, 2015 will stay on current schedules.
  • Infrastructure Funding: The $480 million approved for UNC System self-liquidating projects cover dormitories and other fee-driven projects. Funding also is provided for $68.9 million for water resources projects as well as millions for other projects (see complete list here).

    Meantime, CAGC continues work on infrastructure funding for non-transportation projects. Unlike in many past years, lawmakers this year did not pass study legislation calling for reviews of numerous issues, including CAGC's efforts highlighting the need for more than $10 billion for construction improvements for state agencies, the UNC system, community colleges and public schools. But study issues that may be authorized in coming weeks may include our proposal with key legislators to study the issue and make recommendations for the short session, which begins May 14, 2014.

"Carolinas AGC had a strong year in North Carolina this year, leading efforts in saving lives on new underground safety laws, keeping a level playing field for the construction industry on public work, infrastructure funding and a new highway formula that will create more badly needed jobs," said Bill Marshburn, chair of CAGC's NC Legislative Committee.

CAGC Efforts: CAGC lobbyists Dave Simpson and Berry Jenkins monitored dozens of bills and played offensive/defensive ball on many of them. See related CAGC tracking report. CAGC lobbyist Allen Gray led a stakeholders' group that made recommendations that led to passage of H476, capping more than a decade of work.

And dozens of CAGC members helped rally behind our efforts in answering legislative action alerts and in attending our CAGC NC Legislative Day. Special thanks to NC Bar Association/CAGC committee members, particularly Raleigh attorney Keith Coltrain of Wall Templeton for providing key legal support on legislation involving design-build, PPPs, prequalification and Certificate of Merit issues.

Top Lawmakers Make CAGC Presentations for NC Legislative Day: Nearly 200 people registered for CAGC's NC Legislative Day on May 22. Special presentations were made to CAGC from leading lawmakers, including House Speaker Thom Tillis; Senators Bob Rucho and Bill Rabon, co-chairs of Senate Finance; Rep. Mike Hager, chief sponsor of H476, the rewrite of underground safety laws, to take effect Oct. 1, 2014; House Speaker Pro-Tem Skip Stam; Sen. Tommy Tucker, a mechanical contractor; and Rep. Ruth Samuelson, a leading contender for House Speaker in 2015.

The Legislative Day began with a legislative primer at the AIA NC Headquarters, followed by member visits with lawmakers in the Legislature, Senate recognition from the floor to CAGC attendees and a reception at the Capital Club. Click here to see related photos and here for short You Tube video:
Carolinas AGC's 2013 CAGC NC Legislative Day photoset Carolinas AGC's 2013 CAGC NC Legislative Day photoset

Transportation, Other Legislative Details: NC DOT estimates that the new distribution formula will result in an increase in jobs created from 110,000 to 232,000 under the new plan. This is accomplished mostly by reallocation of existing revenues from DOT programs. Projects already in the pipeline and scheduled to be let prior to July 1, 2015 will stay on current schedules.

CAGC believes the inclusion of quantifiable data input and the transparency of the ranking system should help reassure the Legislature and the public that DOT is operating with a minimum of political influence in project selection and is truly dealing with the greatest transportation needs of the state based on existing revenues streams which by most everyone's assessment are inadequate for the future. Recently, after review, the Board of Transportation appears supportive of this new concept.

Read the full Transportation Legislative Report

Tax Reform Package: Throughout the session of the GOP-led Legislature, leaders noted that North Carolina had the highest tax rates in the Southeast and what they said was one of the worst business climates and unemployment rates in the country. High taxes, they said, remained North Carolina's greatest roadblock to economic recovery and prosperity. With tax reform now becoming law though certainly less than favored by Sen. Bob Rucho, North Carolina reportedly will move from the 44th to the 17th best tax climate in the nation - putting the state on the road to economic recovery, legislative leaders say. The package, among other things:

  • Reduces the state personal income tax rate from the current maximum of 7.75 percent to a flat 5.8 percent in 2014 and 5.75 percent in 2015;
  • Reduces the corporate income tax from 6.9 to 5.0 percent by 2015.  If the state meets revenue targets, it will then go down to 4.0 percent in 2016 and 3.0 percent in 2017;
  • Caps the state gas tax at 37.5 cents/gallon, which CAGC told lawmakers will have minimal impact over the next two years, estimated to be $5 million total less revenue;
  • Eliminates North Carolina's estate tax;
  • Protects Social Security benefits from state taxes.

Design Build-PPPs-Prequalification Study: H857 authorizes the use of qualification-based selection of design-build; design-build using bridging; and public-private partnerships where the developer must put up at least half of the financing. The bill also calls for a study of prequalification methods and requirements for hiring general contractors.

CAGC was able to help lead efforts at keeping at bay proposed legislation that could have allowed for unsolicited bids and design-build with no new funding sources. Click on the links for a look at the final version of H857 and for a legislative analysis of an earlier version of the bill (which was done before CAGC was successful in amending the bill on the Senate floor to protect the construction industry by not having unrelated contracts declared null and void as a result of a public owner not complying with reporting requirements). The bill takes effect 30 days after it becomes law and applies to projects bid on or after that date and public-private development contracts entered into on or after that date.

Other Items of Interest:

Double Payment/Liens: On Jan. 30, the first day of the Legislature's long session, CAGC put together a coalition on lien legislation that included Raleigh attorney Matt Bouchard of Lewis & Roberts, Ricky Vick of S.T. Wooten Corporation, Scott Bengal of Shelco and Dave Simpson of CAGC. The four testified in favor of not having new lien legislation, which took effect on April 1, 2013, apply to commercial construction - only one- and two-family residential construction, similar to a Virginia law. While the lien legislation did become law, a new online system makes the process much simpler. The lien legislation followed CAGC's successful effort last year to lead efforts to enact legislation which took effect Jan. 1, 2013 that helps solve the double payment problem where contractors unfairly had to pay twice for the same work or materials.

Local Bidding Preference: CAGC put together a coalition to oppose successfully H284 (S232), which would have given a bidder whose principal place of business was in in the jurisdiction of the local government unit a bidding preference - that is, be able to match a low bid from the low bidder as long as the local bidder's bid was within 5 percent or $10,000, whichever was less, of the low bid. CAGC strongly favors open, competitive bidding and the free market. CAGC also led efforts, which were not always successful, to water down a handful of design-build bills which would not result in a level playing field for the construction industry.

UNC Self-Liquidating Projects: S480 will help the construction industry with many UNC construction projects funded in the new law.

Certificate of Merit: CAGC worked closely with, and commends, the Professional Engineers of NC in its efforts to help us try to improve from our standpoint H739, which, as initially written CAGC opposed because it would make it very cumbersome and costly to take legal action against the designer. A revised version of the bill, which CAGC did not oppose, was not successful.

Roofing, Irrigation Contractors: H880, which CAGC helped exempt general contractors from concerning roofing licensure, was not successful. S71, which CAGC was able to exempt building/utility contractors from, was successful.

Public Contracts/Project Labor: H110, which CAGC worked closely with Rep. Tom Murry on, will provide in the new law for fair and open competition in government contracts, strengthening NC's open-shop status.

Career Technical Education: CAGC, which last year testified in favor of this legislation before a legislative study commission that made related recommendations, strongly supported S14. The bill, the first signed by Gov. Pat McCrory, gives better recognition of vocational education by recognizing on high school graduate diplomas, beginning in 2014, whether the student is career or college ready - or both.

Wake County Responsible for School Construction/Net Zero Energy Schools: H726 passed the Senate but not the House. The bill would allow Wake County to be responsible for construction instead of the schools, a precedent-setting bill. Meantime, S474 never made it out of the Senate concerning energy savings on school construction.

State Building Commission: Susie Lewis of Beam Construction, current vice chair of CAGC's Building Division, was appointed to the State Building Commission, along with Aaron Thomas of Metcon.

Onslow County PPPs: H75, which CAGC was heavily involved with in providing for more competition and bonding requirements on a construction project there, was approved and served as a template of some of the language in H857.

Energy Code: CAGC was successful in amending legislation that would have required the state building code for commercial construction to have to be updated at least every three years. Following member input, CAGC began efforts to try to water down metal building energy requirements, which were much more stringent than those of neighboring states.

House-passed H201 would have rolled back the energy code to the 2009 edition, including metal building requirements. After H201 began moving, the State Building Code Council did weaken those metal building requirements, as supported by CAGC. H201 is in Senate Rules and still alive for next year.

LEED: H628 was rewritten from its original version which would have disallowed the use of LEED on state projects if wood was involved. It was signed by the Governor on July 3.

Regulatory Reform: H74, supported by CAGC, has workers' comp and other badly needed bureaucratic reforms. (More info in transportation report.)

Tax Modernization/Immigration: H998 was supposed to be a complete rewrite of the state's tax code and prolonged the length of the long session. But like the sweeping immigration legislation, H786 (Reclaim NC Act), the final versions of both bills that were sent to the Governor were much less sweeping than initially planned.

Next Legislative Session: While there are expected to be many legislative committee meetings in coming months, the NC General Assembly is not expected to begin the so-called short session until May 14, 2014. Then, one of CAGC's top priorities will be infrastructure. We have plans in the making now.


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For more info, contact:

Dave Simpson
Building Division

Berry Jenkins
Highway-Heavy Division

Allen Gray
Utility Division

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