2014 MISSOURI LEGISLATIVE SESSION OVERVIEW
The 2014 Missouri legislative session ended Friday, May 16th at 6:00 p.m., as the state constitution dictates. Overall, it was not a bad year for the construction industry. Severe cuts debated to the Historic Preservation Tax Credit Program and the Low Income Housing Tax Credit Program did not happen. Funds were appropriated to build a new $200 million plus Fulton State Mental Hospital and state bonding authority was increased to allow more building work to begin. A ¾-cent state sales tax proposal over ten years for transportation projects was approved and will be on the ballot statewide in August. In addition, the first tax cut in a century (for business and individual returns) was passed into law and is slated to go into effect in 2017 if revenue projections are met. Right-To-Work legislation was hotly debated, but legislation never made it out of the House.
Several tax credit incentive bills, like for data centers, were vetoed by the Governor recently. The September veto session of the legislature should be another eventful time for legislators as they try to override some of the vetoes.
The following summaries describe the major issues of the session that will impact the regional construction industry.
TAX CREDIT PROGRAMS REMAIN UNTOUCHED
Legislation Did Not Pass
Over the last several years, there has been an assault on tax credit programs in the state, particularly by a handful of state senators. The two largest tax programs are the Historic Preservation and the Low Income Tax Credit Programs. Staff at The Builders’ Association has been working with a state group to fight the proposed changes, which have ranged from capping the programs at a much reduced level to sun-setting them altogether. These tax credits have proved to be important programs for many members of The Builders’ Association.
Last year really looked like the year for changes to the tax creditprograms in the state, but in the end, everything stalled. This year looked again like something was going to pass, but in the end nothing happened. The primary bill died in the Senate. This is, of course, good news to member companies that utilize the programs. The issue is not going away, though, so uncertainty still surrounds the future of tax credit programs in our state, and particularly these two big programs.
Sixteen tax credit bills were filed in both chambers this session. The primary bill (what is called the “vehicle”) was Rep. Anne Zerr’s HB 1501. It was an economic development bill which included cuts to historic and low income housing tax credits. The bill propsed an annual cap for historic preservation credits of $90 million, and a first ever annual cap on small projects of $20 million. For low income housing credits, this bill would have capped the program at $110 million after a few years. Currently, there is not a cap on this program.
Rep. Zerr has been a supporter of these programs and a voice of reason in the legislature on this issue. She and her colleagues in the House have been all strong supporters, while the Senate was the body that wanted to sunset the programs or drastically cap them. Therefore, it was telling this year that our biggest supporter began the legislative discussion on tax credits at a lower level ($90 million cap on Historics) than before. Looking ahead to next year, two of the most vociferous senators on this issue are leaving the chamber due to term limits (Senators Lamping and Lager), so chances seem good that a bill will make it out of the General Assembly next year. Staff will continue to participate in this issue to help make sure these two programs remain viable programs to drive economic development throughout the state and provide work for our members.
Call or email your legislators to express your support for historic preservation and low income housing tax credits.
RIGHT-TO-WORK LEGISLATION DIES IN HOUSE
Legislation Did Not Pass
Right-To-Work legislation was again on the agenda in the General Assembly this year, primarily the interest of House leadership. Nine bills were filed this session (all in the House). Rep. Eric Burlison filed HB 1770, which became the primary vehicle for this issue this session. It passed out of committee and was perfected on the House floor, but never made it to a final House vote due to a lack of votes for passage.
Most of the bills contained the same basic language. The one main difference centered on if the legislation would follow the normal path to become law (both the Senate and House pass the bill and then it is sent to the Governor for his signature) or if it is sent to the voters of the state in a referendum (which bypasses the Governor). An example of the former language can be found in HB 1053filed by Rep. Donna Lichtenegger. An example of a referendum clause with constitutional language is HJR 44 filed by Workforce Development and Workplace Safety committee chairman Rep. Bill Lant. Rep. Burlison’s HB 1770 is an example of legislation that includes a referendum clause, but does not call for the law changes to be made in the state’s constitution.
This year, a third option was introduced by Rep. Holly Rehder from southeast Missouri. In her Freedom to Work Act, HB1772, she proposed to allow each county to put the issue to the voters and see if they would like their respective county to be a Right-To-Work county. This would have created a random patchwork of Right-To-Work vs. non-Right-To-Work counties throughout Missouri.
From discussions with legislators, it does not seem the new House leadership for next year has the same level of desire to pass Right-To-Work legislation, so we may not see as much action on this topic next year. Undoubtedly, though, Right-To-Work bills will continue to be filed in the Missouri General Assembly for the next few years.
PREVAILING WAGE BILL PASSES ALLOWING VOLUNTEER LABOR
Legislation Passed
Last year’s legislative session resulted in a significant change to prevailing wage in Missouri. Legislation passed that changed how prevailing wages were determined each year under the Annual Wage Order compiled by the Missouri Division of Labor Standards. Essentially, if no wage data is available for a particular craft in a specific county, the Division can now use wages compiled in adjacent counties and go back several years.
Even after the passage of this legislation in 2013, there were a handful of bills filed in the 2014 session. Two identical bills, SB 718 filed by Sen. Richard and HB 1594 filed by Rep. Davis, allowed for volunteer labor on public works projects. The legislation was filed to allow volunteers at local schools to provide help with school projects without being subject to prevailing wage (along as they are truly volunteering their time and sign a written statement to that effect). HB 1594 eventually passed the legislature and was sent to the Governor. The Governor has not acted upon the legislation as of yet, but has until July 14th to do so.
Another bill, HB 1144, was filed by Rep. Bill White and it prohibited the Missouri Housing Development Commission from requiring a prevailing hourly wage to be paid to a contractor on a project with a housing tax credit if it is in a Governor-declared disaster area. This bill was voted out of committee and referred to the Rules Committee, but died there.
Last, HB 1306 filed by Rep. Warren Love, attempted to alter the “new construction” and “maintenance” definitions in the law. In the prevailing wage statute, all new construction falls under the requirements of the law, while maintenance work is not subject to the requirements of the law. This legislation would have narrowed the scope of work falling under “new construction” and broadened the scope of work falling under “maintenance.” This type of legislation has been filed over the last few years, but has not passed out of the General Assembly. This bill was voted out of committee, but stalled after that.
STATE BONDING AUTHORITY INCREASED
Legislation Passed
With interest rates at historic lows, legislators believed now is the time to issue bonds to pay for needed work at Missouri’s institutions of higher education, state parks, the Capitol building, etc., and help jumpstart a slow recovery. Senate Bill 723, filed by Senator Mike Parson, passed the legislature this session to do just those things. Currently, there is a $775 million cap on the amount of revenue bonds that may be issued by the State Board of Public Buildings. This act raises the cap by $400 million to $1.175 billion. Bonds that may be issued due to the increase in the cap may only be used for renovation or repair of existing buildings or facilities, except that bonds may be issued for the construction of a new mental health facility in Callaway County (Fulton). In addition, there currently is also a $175 million cap on the amount of revenue bonds that may be issued by the State Board of Public Buildings for projects at public institutions of higher education. This act raises the cap by $200 million to $375 million. Again, bonds that may be issued due to the increase in the cap may only be used for renovation or repair of existing buildings or facilities.
This bill sits on Governor Nixon’s desk and legislators await his action on the bill. Current discussions in Jeff City indicate he may veto this legislation because he feels it is fiscally imprudent, especially in light of the tax cuts enacted this year.
If the legislation becomes law, the Office of Administration is expected to utilize the several page list of state projects that were found in SCR 39 (that did not pass).
10-YEAR STATE TRANSPORTATION SALES TAX SENT TO VOTERS
Legislation Passed
Over the last two years, a proposed 10-year state sales tax to pay for much-needed repairs to Missouri’s roads and bridges has been on the agenda. This session, HJR 68 filed by Rep. Dave Hinson crossed the finish line and will be on the ballot for state voters in August. The bill, if approved by Missouri voters, would raise the state sales and use tax by three quarters of a cent for a period of ten years, at which point the tax will expire unless renewed by the voters. The temporary sales and use tax measure must be resubmitted to the voters every 10 years until such measure is defeated, in which case the tax will expire at the end of the year following the election. The proceeds from the additional sales and use tax are to be used for transportation purposes only. The tax increase would generate around $534 million annually.
If approved, the proceeds of the tax will be distributed between three different funds established by the act. Five percent shall be deposited into the County Aid Transportation Fund, five percent shall be deposited into the Municipal Aid Transportation Fund, and ninety percent shall be deposited into the Transportation Safety and Job Creation Fund. Funds deposited in the County Aid Transportation Fund shall be distributed to the various Missouri counties to be used for local highways and bridges, state highway system purposes, or for county transportation system purposes. Funds deposited in the Municipal Aid Transportation Fund shall be distributed to the various Missouri cities, towns and villages to be used for local roads and streets, state highway system purposes and uses, or for city transportation system purposes. Funds deposited in the Transportation Safety and Job Creation Fund are to be used for state highway system purposes or for state transportation system purposes and uses. Any moneys deposited in these three funds, or interest earned on those deposits, are prohibited from being counted as general revenue or being transferred to any other funds.
A large portion of the funds going to the Transportation Safety and Job Creation Fund (MoDOT) will be used to upgrade I-70 from Independence to Wentzville.
This constitutional amendment was slated to be on the ballot in November. The governor had the authority to move it to the August ballot and he did just that. Governor Nixon has also announced his opposition to this proposal.
MODIFICATIONS MADE TO THE PUBLIC PROMPT PAYMENT ACT
Legislation Passed
Senator Wayne Wallingford from southeast Missouri filed SB 529. The legislation passed the Generally Assembly and was signed into law by Governor Nixon on June 20th. This act modifies the Missouri Public Prompt Payment Act and the law relating to public works projects. It affects several provisions of the law. First, under current law, all public works contracts made by a political subdivision for a public works project must provide for prompt payment to the contractor. This act provides that the contracts must also provide for prompt payment of any professional engineer, architect, landscape architect, or land surveyor. Second, this act provides that a public owner may retain up to 10% if the contractor is not required to obtain a bond because the contract is not estimated to exceed $50,000.
Under current law, retainage may be adjusted prior to completion when work is proceeding satisfactorily and retainage is paid after substantial completion of the contract or per contract terms. In such cases, 200% of the value of the remaining work is withheld until completion. This act provides that 150% of the value is withheld until completion.
This act also provides that, if the owner determines the work is not substantially completed, the owner must provide a written explanation within 14 calendar days to the contractor. The contractor is then required to provide the notice to any subcontractor or suppliers responsible. If the explanation is not given by the public body, the public body must pay at least 98% of the retainage within 30 calendar days.
Currently, contractors must pay subcontractors and suppliers when they receive payment less any retention not to exceed 10%. This act lowers the retention to 5%.
Additionally, current law provides that when the public owner does not release full payment due because there are specific areas of work or materials the owner is rejecting, the subcontractors or suppliers involved are not paid for the rejected work. This act specifies that the subcontractors or suppliers are not paid provided the owner gives a written explanation as to why the work or supplies were rejected. This act also requires the public owner to include any withheld retainage with final payment of moneys owed to the contractor within 30 days of the due date and requires the public owner to pay any professional engineer, architect, landscape architect, or land surveyor the amount due within 30 days after receiving an invoice. If full payment is not made, the contracting agency must pay 1.5% interest per month it remains unpaid.
OTHER BILLS OF INTEREST
Design-Build: Legislation Did Not Pass
Two similar bills were filed this session by Representative Casey Guernsey (HB 1212 and HB 1945). HB 1945 made it the farthest in the legislative process by being voted “Do Pass” out of committee, but it stalled right after that. The bill authorized any political subdivision to enter into design-build contracts for construction projects exceeding one million dollars and established procedures and advertising requirements for political subdivisions. The act also was amended to include CM language that repealed the prohibition against a construction manager awarded a construction management services contract or any construction firm affiliated with the construction manager bidding on or performing the actual construction on a public works project. The bill also repealed the requirement that a construction management services contract must be let by competitive bidding if the construction manager or any construction firm affiliated with the construction manager guarantees or otherwise assumes financial responsibility for the work of others on the project, provides a guaranteed maximum price for the work of others, or furnishes or provides a performance or payment bond for the other contractors on the project.
Paycheck Protection: Legislation Did Not Pass
Three similar bills were filed by Representatives Bill Lant (HB 1093 and HJR 43) and Holly Rehder (HB 1617). HB 1617 made it the farthest. It passed the House and was brought up for discussion on the Senate floor before dying in the last week of the session. All the bills prohibited any sum from being withheld from the earnings of a public employee for the payment of any portion of dues, agency shop fees, or other fees paid by public employee members of a public labor organization or a public employee who is not a member except upon the annual written authorization of the employee on a form as prescribed in the bill. In addition, a public labor organization would have been prohibited from using or obtaining any portion of dues, agency shop fees, or any other fees paid by member and nonmember public employees to make political campaign contributions unless it obtained a written authorization from the member or nonmember within the previous 12 months on a form prescribed in the bill signed by the member or nonmember and an officer of the union.