2017 NC End of Session Report

NC Legislative Wrap-Up:
CAGC Sees Top Legislative Priorities Approved

The legislative session that concluded on June 30th saw several of CAGC’s top priorities written into law or eligible to advance to next year’s short session.  Funding for construction workforce development initiatives, the expansion of NCDOT’s bridge program and other transportation funding increases and the creation of a new Pay-As-You-Go Capital Infrastructure Fund all made it into the final budget.  Additionally, a bill that CAGC championed that would require the Office of State Construction to issue a final order on verified construction claims within a certain prescribed time passed overwhelmingly in the House and is eligible for consideration in 2018.   

As important as these proactive, positive measures were for CAGC, equally important were our successful efforts to hold back legislation that could have had dire consequences for our members and our industry.  Our amendments to legislation dealing with lien rights and public bidding laws helped ensure that your lien rights were preserved and that no public project was exempt from public bidding laws.   Our construction industry coalition of contractors, architects and engineers also held strong against an attempt to add Job Order Contracting as a new construction delivery method and a local government’s attempt to enact local preference laws.  CAGC also helped the architects “live to fight another day” against a bill that would have given Interior Designers signing and sealing authority – something that could infringe upon an architect’s scope of practice.  (Although this bill passed in the House, the Senate agreed not to take it up this year, giving the coalition more time in the interim between sessions to further educate Senate members.)

Below is a full recap of the 2018 legislative session and the impact on the construction industry – from the CAGC perspective.   This summary includes new laws (some perhaps still awaiting the Governor’s signature), bills eligible for consideration in 2018, legislation that was defeated and other bills of interest.  

New Session Laws:

The Budget – SB 257 – Appropriations Act of 2017 – Vetoed by the Governor but overridden by the legislature.  

Workforce Development

Although not a lot of money in a $23 billion-dollar budget, one of the single most important accomplishments for CAGC this year was the addition of $200k appropriated in the NC Community College System budget for construction workforce initiatives.  This money, in addition to CAGC efforts that secured a like amount from NCDOT, will provide for collaboration with the NC Community College System in developing a communications and outreach plan to increase interest in careers in the construction industry.   Additionally, CAGC supported expanding NCCCS Career Coaches (to be placed in High Schools), also included in the budget, and CAGC will be working with these coaches directly to help inform high school students about careers in construction.  This is all in addition to the successful efforts we are already having with Build Your Career.  

Other significant budget items include:

The budget includes an overall funding increase for NCDOT.
  • $320 million increase allocated over the next two years for the Strategic Transportation Improvement Program to fund 100 more highway projects to be added over the next 10 years;
  • $241 million increase over the biennium to improve bridges across the state – the system preservation program was re- codified as the bridge program indicating a sustained commitment to funding this program;
  • An additional $143 million for the biennium to improve road conditions;
  • Another $120 million for the biennium for the state’s commercial airports;
  • $45 million increase each year to modernize the State Ports;
  • 300 full time permanent vacant positions eliminated.
Capital/Infrastructure Fund
The budget includes $56 million for capital projects including $15 million for water resources.  Another $125 million is allocated for building repair and renovation of state facilities.  NCDOT’s budget includes $11 million for their facility repair projects.  One of the most substantial additions to the budget was the creation of a Pay-As-You-Go Capital Infrastructure Fund that would earmark a certain amount of money each year from budget surpluses be deposited into the fund to use for state and UNC facilities.  Transfers into the fund would not begin until July 2019.  This has long been a priority for CAGC and our construction coalition and is needed to deal with significant repair and renovation needs.

Education/Community College
The final budget includes $5.0 million for a 7th and 8th grade career and technical education grant program, almost $3 million over the biennium for NC Works Career Coaches, and $4.5 million for short-term workforce training programs in Community Colleges.  

NC Underground Utility Safety and Damage Prevention Act

CAGC was successful working with utility owner/operators, and others, in having language included in the final budget amending NCUUSDA to bring it in line with federal requirements eliminating specific right-of-way maintenance activity exemptions. Eliminating the exemptions makes North Carolina eligible for federal grants that will help fund the State’s Underground Utility Safety & Damage Prevention Enforcement Board, which decides complaints of violations.

HB 142 – An Act to Reset S.L. 2016-3 – HB 2

The first 60 days of the legislative session was mostly consumed with talk over repealing HB 2.  Finally, on March 30th, after a year of tumult that saw businesses leave and major sporting events and concerts canceled, lawmakers reached a compromise that resulted in passage of a bill that repealed the state's controversial bathroom law.  The bill repeals last year’s House Bill 2 that required that people at a government-run facility must use bathrooms and locker rooms that correspond to the gender on their birth certificate, if the rooms in question are multiple-occupancy. It effectively maintains a key feature of HB2 by leaving regulation of bathroom access solely in control of the Legislature. And, it prevents local governments, until December 2020, from passing or amending their own nondiscrimination ordinances relating to private employment and public accommodation.

SB 407 – Employee Misclassification/IC Changes

(An act to enact the Employee Fair Classification Act…)

This legislation simply codifies what was already put in place by Executive Order two years ago when the Governor created an Employee Classification Section in the Industrial Commission.  The Commission’s charge is to receive reports of employee misclassification, investigate these reports and coordinate with relevant agencies to recover back taxes, wagers, benefits, etc. and assess civil penalties.  

HB 26 – Worker’s Comp/Approval of Disputed Legal Fees

(Amends the worker’s compensation act regarding approval of disputed legal fees by the industrial commission.)

Three weeks ago, the Supreme Court of North Carolina issued an opinion which many observers viewed as one of the worst workers' compensation decisions for employers in decades (Wilkes v. City of Greenville). Its impact would most certainly have led to significant increased costs for employers and would have reversed the reduction in workers' comp premiums which have fallen in the wake of successful 2011 workers comp reform legislation brought about by the business community.
In short, this legislation restores the presumption that had existed before the decision and correctly places the burden back on the injured employee to prove that any future damage claimed to arise from the workplace injury did, in fact, arise from the original injury.

The NC Retail Merchants Association and NC Chamber led a broad business coalition, of which CAGC was a part, and local government association coalition in achieving this big victory at the end of the legislative session.  

HB 707 –  Lien Agent/Notice of Cancellation

(Would allow for the claimant to cancel the Notice of Lien after potential lien claims are paid.)
This bill creates a duty for a subcontractor or supplier who files a Notice to Lien Agent for labor or materials supplied in connection with the construction of a one- or two-family dwelling to cancel the earlier filed notice within a reasonable time.

CAGC and other stakeholders successfully worked with the bill sponsors to amend the original bill thereby excluding commercial property lien claims from this requirement

HB 656 – College of Albemarle Construction Funds

(Would allow the College of the Albemarle Community College to enter certain construction projects for educational facilities with the counties served by the Community College.)

CAGC successfully amended the bill to ensure that these projects would not be exempt from public bidding statutes as the original bill intended.

HB 252 – Building Code Regulatory Reform

(An act to make various changes and clarifications to the statutes governing the creation and enforcement of building codes.)

All the provisions in this bill relate to residential construction except for one amendment that was added in the Senate that requires an inspector on commercial projects to conduct all inspections required to inform the permit holder of discrepancies in which the inspected work is incomplete or otherwise fails to meet the NC Building Code.  A similar requirement is already in effect for one and two-family dwellings.    

HB 620 – UNC Capital Projects

(An act to authorize the acquisition or construction and financing, without appropriation from the General Fund, of certain capital improvement projects of the constituent institutions of the University of NC.)

This is the annual legislation that authorizes the UNC system to use gifts, grants, receipts, and self-liquidating indebtedness to fund various projects.  The total appropriation this year for various projects is approximately $240 million.  

HB 589 – Competitive Energy Solutions for NC

(An act to reform NC’s approach to integration of renewable electricity generation through amendment of laws related to energy policy and to enact the distributed resources action plan.)

The bill would let residents lease solar panels on their rooftops rather than owning them outright, a financing arrangement popular in other states that could make the projects more affordable. The legislation also includes several provisions, including an agreement to resolve simmering conflicts over the location of utility-scale solar farms, and reducing the amount Duke Energy would pay industrial solar farms for electricity. And for the first time, electric utilities would be required to let state residents participate in a program called community solar. The program lets residents purchase stakes in solar farms not located on their property, getting credit for the power their share generates, just as if the solar panels were bolted to their roof.

A controversial provision inserted in the bill at the last minute is an 18-month moratorium on siting new wind farms due to one powerful Senator’s concern over their potential interference with military flight training.  Two companies planning to build wind farms in the northeastern part of the State may go elsewhere as a result of the moratorium.  

Bills Eligible for Consideration in 2018:  

HB 650 – State Board Construction Contract Claim

(An act providing the time in which the Director of the Office of State Construction shall issue a final order allowing or denying a Contractor’s verified written claim.) 
Passed in the House

CAGC worked to secure a bill sponsor in Rep. Dean Arp at the request of one of our members who wanted to advance this legislation.   This bill, which easily passed in the House, would require the Director of State Construction to investigate and issue a final written decision within 120 days if the claim is less than $100k, 180 days if the claim is $5 million or less and 270 days if the claim is above $5 million.  Prior to the expiration periods, the Director and contractor may, in writing, agree to extend the time the Director must provide a final written decision.  The Director’s failure to issue a final written decision by the deadline shall be deemed a denial of the claim.  A contractor who is not satisfied with the Director’s final written decision may commence a contested case on the claim.  

There is no known opposition to the bill as the sponsor and CAGC worked closely with the Office of State Construction on the language.  The bill is eligible for consideration next year during the short session.

HB 600 – School Construction Flexibility

(An act to provide additional flexibility to local boards of education to enter leases for school buildings and other facilities and revise the procedures for qualified zone academy bonds.) 
Passed in the House  

CAGC has been working with other stakeholders and legislators for the last two legislative sessions on this issue.   After working with legislators to write a bill that our industry could support, the bill passed overwhelmingly in the House.  However, the Senate failed to take up the legislation before adjournment so the bill will be held over until 2018.  

HB 307 – E-Verify Required – All Government Contracts

(An act to require all contractors and subcontractors doing business with the state or any political subdivision of the state to use e-verify.)
Passed in the House  

Current law requires all contractors and subcontractors doing business with state or local government to use e-verify.  However, this bill makes further changes that could have significant implications for the construction industry by:
  1. putting the burden on the contractor and subcontractor to “verify” the work authorization of each employee (verify is not defined),
  2. changing the 25-person employee threshold so that ALL companies now, regardless of size, must comply with e-verify and
  3. including ambiguous language that seems to imply that a contractor is responsible for ensuring subcontractors comply with e-verify.
The bill sponsor has agreed to work with CAGC next year to address our concerns should the Senate decide to act on the bill.

HB 590 – Interior Design Profession Act

(An act to establish a framework for the voluntary registration of individuals in the profession of interior design and to allow registered professional interior designers to obtain permits from local governments.) 
Passed in the House  

This legislation would allow for the Department of insurance to oversee a registration process for interior designers, thus allowing them to submit their own plans for permitting purposes.  The legislation carves out a niche for Interior Designers for work currently performed by Architects and, for some projects, would change the role Architects typically have in overseeing an entire project.  CAGC worked closely with AIA/NC and other stakeholders in opposing this bill because of the confusion it could create among the building professions, resulting in delays, cost increases and the chance that something will be missed.  Interior Designers also could unknowingly compromise the safety of the structure and systems already in place when it comes to an up-fit or renovation project that they may not be trained to handle.

The Senate did not act on the bill this year to give all parties a chance to work out a compromise during the interim before the 2018 short session in May.     

HB 92 – Blue Ribbon Committee/Transportation Funding

(An act to establish the Blue-Ribbon Committee on Transportation Infrastructure Funding.) 
Passed in the House

The bill establishes a Blue-Ribbon Committee comprised of 20 members including members of the House, members of the Senate, two public members, two representing small business and two representing large business.  

CAGC supports the bill which currently resides in the Senate where it may be taken up next year.  

SB 628 – Various Changes to Revenue Laws

During the final hours before adjournment this bill hit a snag and failed to emerge from a joint Senate-House conference committee. The sales tax section of this omnibus bill contains changes modifying the sales tax on repair, maintenance, and installation (RMI) services. Perhaps the most significant change is the provision which increases the "mixed transaction" threshold (which is a project that includes both a capital improvement and one or more RMI services). Under current law, if the RMI portion of the project is less than 10%, it is exempt from sales tax on labor.  This bill increases the percentage to 25% or less of the cost of the entire project. This increase means that most traditional residential remodeling jobs will be exempt from sales tax on labor even if they include significant repair items unrelated to the remodeling. New construction is already exempt from sales tax on labor because, by definition, it is a "capital improvement."

Because the bill was being negotiated when session adjourned it is eligible for adoption when the session resumes in early August.

Bills Defeated Due to CAGC Opposition:

SB 607 – Job Order Contracting Method

(An act authorizing public contracts to utilize the job order contracting method of construction or repair contracts.)

The bill would have added a new construction delivery method called Job Order Contracting.   JOC is a competitively bid, fixed price, indefinite quantity procurement contract compiled from a unit price catalog of construction or repair tasks that is awarded to the most qualified job order contractor bidder.  

There were many problems with this bill, not the least of which is that it would have significantly limited competition due to the $20 million threshold contract allowance (and $20 million for each renewal thereafter without having to bid).  

Due to CAGC’s diligent and proactive actions (including working with subcontractors, architects, engineers and engaging our members), this bill was never saw the light of day.  Therefore, the bill in its current format is effectively “dead” for the near future.  

HB 416– Robeson County/Local Business Preference

(An act providing that counties and cities shall, when contracting for construction or repair work or for the purchase of apparatus, supplies, materials, or equipment involving the expenditure of public funds, give preference to local bidders and residents when certain requirements are met.)  

Although the bill, initially, would have only applied to Robeson County (other legislators, however, kept adding their Counties), the bill had statewide implication as any contractor with residence outside of Robeson County would have been placed at a significant disadvantage if bidding on projects within the County.  Additionally, as other Counties followed suit, competition would have been limited and prices would, inevitably, increase.  

Rep. Dean Arp successfully argued against this bill which was eventually defeated on the House floor.  During the contentious debate, CAGC discovered language in the NC Constitution that should settle this issue of whether local governments have the authority to enact local preference laws.  (Art. II, Sec. 24(j) of the state constitution prohibits local acts that regulate “labor, trade, mining, or manufacturing.” )

Other Bills of Interest:

HB 110 – DOT/DMV Changes – Megaproject Funding

(An act to make changes to state law related to the NCDOT and the Division of Motor Vehicles, and to establish a Megaproject Fund to fund higher-cost and larger-scale transportation projects.) 

The most notable provision in this bill for CAGC members was the establishment of a MegaProject Fund to pay for higher-cost and larger-scale transportation projects.  The Fund would be restricted to statewide or regional projects that exceed $200 million in total project cost.  The Fund would be excluded from the STI formula and projects would be selected by a newly established workgroup that includes representatives from local governments, MPOs and RPOs.  

The bill was overwhelmingly defeated in the Senate due to leadership’s opposition to changing the way projects are prioritized through the STI process.    

And with that… the NC Legislature Adjourns For Now…

The NC General Assembly adjourned on June 30th after overriding the Governor’s veto of the budget and ratifying hundreds of bills that will eventually become law, assuming the Governor’s signature.  Normally, the legislature would not return until the short session next May – the second year of a biennial process.  However, this year, legislators are scheduled to return on August 3rd and again on September 6th to consider overriding gubernatorial vetoes, completing their work on bills that were in the midst of negotiations between the House and Senate, making board and commission appointments, impeachment matters and constitutional referendums and redrawing legislative district maps.  

Over the course of the 5+ months that legislators were in session this year, CAGC actively lobbied on dozens of bills, including the budget bill - negotiating with legislators, joining forces with stakeholders to defeat or advance legislation, and engaging our members to successfully advocate on behalf of our industry’s interests.  

CAGC was the only organization lobbying for the entire construction industry – highway, building and utility – and is widely recognized throughout state government as the voice of the construction industry. 

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