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ESSA PAYMENT BOND BILL ON ITS WAY TO THE GOVERNOR (Go Top)

On March 17, 2004, an Empire State Subcontractors Association program bill (S1099/A5805), which would require a payment bond to be posted on certain “hybrid” projects in New York State, was passed in the NYS Senate and will be delivered to Governor Pataki for his consideration. This legislation, sponsored by Senator Kemp Hannon and Assemblyman Ronald Tocci, was passed in the Assembly on February 23, 2004. On March 9^th, the bill had been reported out of the Senate Judiciary Committee to the floor of the Senate.

Under the NYS Lien Law, as currently construed by the courts, contractors, subcontractors, and material suppliers do not have any lien rights for labor performed or materials furnished for public improvements where no public fund has been established to finance the public improvement. This effectively leaves contractors, subcontractors and material suppliers without effective remedies to ensure payment for their work or materials where a public improvement is financed with private funds.

A prime example of this problem is where a private entity leases property from the state or a public corporation, and thereafter constructs a building on this property for the benefit of the private entity. As construed by the courts, this improvement is immune from mechanic’s liens. The real property is owned by the public entity, eliminating the possibility of a private lien. But there also exists no public fund for the construction of the building, thereby eliminating the possibility of a public improvement lien. A subcontractor or supplier, therefore, is left without any lien rights whatsoever on such a project.

If signed by the Governor, this legislation will require that a payment bond be posted by the private entity, which will provide all parties supplying labor and/or materials to the project with a measure of payment projection. Since no lien rights are available, contractors, subcontractors and suppliers will be able to file a claim against the payment bond.

RETAINAGE IN ESCROW BILL REPORTED TO SENATE FLOOR (Go Top)

On March 9, 2004, the Empire State Subcontractors Association’s top priority bill (S1089B/A4620C), which would require owners of private construction projects to place retainage held from contractors and subcontractors into an interest-bearing escrow account until such time the retainage is released, was reported out of the Senate Judiciary Committee to the floor of the Senate. The Assembly version of this bill has also shown signs of movement in that house, and on March 16^th was reported out of the Assembly Economic Development, Job Creation, Commerce and Industry Committee to the Codes Committee.

This legislation, which has been advanced by NESCA’s state affiliate for several years, would require any interest earned on such escrowed retainage to accrue to the benefit of the parties from whom retainage has been held, that is, the contractor and subcontractors working on the project. By having retainage placed in an escrow account, contractors and subcontractors will have far more assurance that they will actually receive the money that they have earned in the event an owner’s financial status becomes questionable later on.

NESCA Membership Meeting

April 8, 2004

Century House – 6:00 p.m.

6:00 Open Bar/Registration

6:30 Dinner: Prime Rib

7:10 Business Announcements

7:30 Program: W.C. Reform vs. Benefit Increases

What NESCA Members Can Expect in 2004

Speaker: Kerry Kirwan, Legislative Analyst

The Business Council of NYS, Inc.

Open Bar, Dinner, Tax & Gratuities - $35

PRESIDENT’S MESSAGE (Go Top)

As you can see from the stories on the front page of this Newsletter, NESCA’s state affiliate, the Empire State Subcontractors Association (ESSA), is making some good progress with its legislative agenda. We’re still fairly early in the legislative session, and already we have one bill that has been passed by both houses and will be sent to the Governor, and another bill that is showing some promising signs of movement in the Senate and Assembly.

Many members may not realize that ESSA, which is comprised of NESCA and four other subcontractor associations located in Buffalo, Rochester, Syracuse and New York City, has been looking out for our interests in the Legislature for nearly 30 years. During this time, ESSA has compiled an impressive resume of accomplishments, including 33 pro-subcontractor/supplier bills signed into law since 1975. A portion of the annual dues we all pay to NESCA each year is applied toward supporting ESSA’s lobbying and other government relations activities, which leads me to the following request. Please consider making a contribution to the newly-established NESCA Political Action Committee. ESSA operates on a very small budget, and total political contributions from ESSA average less than $5,000 per year. However, times have changed, and in order to continue to have our voice heard in 2004 and beyond, we need to do more. Our sister chapter in New York City has already established a PAC, and NESCA’s Board of Directors recently made the decision to do likewise. The NESCA PAC will be one of the best vehicles we will have to deliver our message to public officials and show the political strength of subcontractors in New York State. The PAC cannot use association funds and depends on the contributions from individual members. Please do what you can to support the NESCA PAC this year and help keep our voice strong in Albany. Included with this Newsletter is a donation form for the NESCA PAC.

Update forms for NESCA’s 2004-05 Membership Directory will be mailed out to all members in Mid-April. It is important that we receive updated information from members to be included in the 2004-05 Directory. To ensure your proper listing in the membership and classified listing sections, please complete the Directory update forms when you receive them and return the completed forms to the NESCA office as soon as possible.

Finally, I encourage you to attend NESCA’s April 8^th membership meeting, which will feature a presentation on what we might expect this year from the Legislature on workers’ comp. reform vs. significant rate hikes.

Jeffrey B. Senft, President

HELP WANTED

Legal Secretary/Paralegal

Major Albany law firm seeks litigation secretary/paralegal with excellent computer and word processing skills. Experience with construction law, bankruptcy, and/ or civil litigation preferred. Competitive salary & benefits. Fax cover letter & resume to Kevin Laurilliard, Esq. at 518-426-4260.

BANK’S FAILURE TO FILE “NOTICE OF LENDING” IS A BREACH OF ITS FIDUCIARY DUTY AS

AN ARTICLE 3-A LIEN LAW TRUSTEE (Go Top)

In 1989, Berry Street Corporation entered into a turn-key contract of sale with the New York City Housing Authority (NYCHA) whereby Berry Street acquired title to three parcels of land in Brooklyn to construct residential buildings on the parcels and convey title to the improved property to NYCHA. The contract specified periodic payments from NYCHA to Berry Street and its general contractor as the improvements were completed. Fleet Bank made a construction loan to Berry Street and as additional security for the loan, Berry Street simultaneously assigned all of this right, title and interest in the turn-key contract to Fleet. In conjunction with the assignment, NYCHA agreed to make payments directly to Fleet until Fleet notified NYCHA that Fleet’s loans to Berry Street were fully repaid. NYCHA purchased the three sites and their improvements from Berry Street over the course of three years. Because Berry Street had not yet fully repaid the construction loan to Fleet, NYCHA paid the purchase amounts for each improved parcel directly to Fleet. Fleet applied these amounts to the debt owed it by Berry Street under the loan agreement and eventually discharged its mortgages on the properties.

Aspro Mechanical Contracting, Inc., and other subcontractors, commenced a special proceeding to recover lien law Article 3-A trust funds allegedly diverted by Fleet and NYCHA. The subcontractors alleged that they were owed monies on their subcontracts and that Fleet had diverted trust funds by paying itself prior to paying plaintiff’s claims. Plaintiffs further argued that Fleet’s failure to file a notice of assignment or notice of lending deprived Fleet of any affirmative defenses it might otherwise have had and sought to recover for Fleet’s violation of its fiduciary relationship under the trust.

On February 12, 2004, the New York State Court of Appeals in deciding the case in the favor of the subcontractors (Aspro Mechanical Contracting, Inc., et al. v. Fleet Bank, N.A.), concluded that Lien Law Section 73 provided a mechanism for trustees to alert beneficiaries to the distribution of trust assets to repay advances made by lenders. Trustees or lender-transferees may file a “Notice of Lending” in the County Clerk’s Office to protect the lender’s right to repayment from trust funds. The court concluded that in the instant case, a filing by Fleet of a notice of lending would have satisfied Fleet’s fiduciary duty to provide notice to the trust beneficiaries of its use of trust assets to discharge Berry Street’s debt. However, nothing in the filings relied upon by Fleet imparted this information to trust beneficiaries. Hence, Fleet failed to file any document that served as adequate notice to beneficiaries of its status as a trustee and its depletion of trust funds to repay its loans.

The court further noted that Fleet by complying with the filing and covenant requirements of lien law §§ 13(2) and 22, obtained priority for its building mortgages over subsequently filed mechanics’ liens. However, nothing in the mortgage documents identified Fleet as the trustee of the Article 3-A assets nor did anything in the documents inform the beneficiaries that Fleet planned to use trust assets to repay itself.

Terence J. Burke, Esq.,

NESCA Legal Counsel

CALENDAR OF EVENTS (Go Top)

April 1, 2004

Board of Directors Meeting

Century House, Latham, 6 pm

April 7, 2004

NESCA/GBC/ECA Seminar

Standard First Aid Course

Building Industry Center, 12 noon

April 8, 2004

NESCA Membership Meeting

Century House, Latham, 6 pm

April 14, 2004

Mid-Hudson Membership Meeting

Reservoir Inn, West Hurley, 6 pm

April 23-25, 2004

National Subcontractors Alliance Meeting

Orlando, Florida

April 27, 2004

NESCA/GBC/ECA Seminar

Construction Sales Tax Requirements

Building Industry Center, 6 pm

May 4, 2004

Binghamton Membership Meeting

Niko’s Char Pit, 8:00 am

May 13, 2004

Board of Directors Meeting

Century House, 5 pm

May 13, 2004

NESCA Membership Meeting

Century House, 6 p.m.

WELCOME NEW MEMBERS (Go Top)

Adept Surface Solutions, Inc.

P.O. Box 38

Valley Falls, New York 12185

(518) 753-0186; FAX (518) 753-0976

Contacts: Lynette Hunt, Shawn Hunt

JAG Industries, Inc.

175 Broad Street, Ste. 320

Glens Falls, NY 12801

(518) 812-0808; FAX (518) 812-0808

Contacts: Michelle Barber,Tim Barber

Levitan, Yegidis and Goldstein LLP

One Industrial Drive

Middletown, NY 10941

(845) 695-6800; FAX (845) 695-6801

Contact: Phillip Goldstein

Mason Builders of Orange County

6 Main Street

Chester, NY 10918

(845) 469-2800; FAX (845) 469-2801

Contact: Glenn Botbyl

Pat and Co. Cleaning Service

1021 Knight Road

Delanson, NY 12053

(518) 428-5955; FAX (518) 895-5279

Contact: Pat Weakley

UNION MEMBERSHIP DECLINES (Go Top)

The proportion of workers in New York who belong to unions continued to drop in 2003, but the state remains the most heavily unionized in the nation at 24.6%, well above the national average of 12.9%. According to the Bureau of Labor Statistics, New York’s union membership declined by about 45,000 workers from 2002 to 2003 to 1,936,000.

MEMBER PROFILE – AWESCO (Go Top)

AWESCO is a distributor of industrial, medical and specialty gases; welding equipment & industrial supplies, with its main offices located at 20 Center Street in Albany, New York. Founded as Albany Welding Supply in 1940, AWESCO maintains store locations in Albany, Kingston and Poughkeepsie and services the 17-county “Tech Valley” in New York as well as western Massachusetts, southern Vermont and northwestern Connecticut. AWESCO represents such manufacturers as Praxair, Miller Electric, Lincoln Electric, Victor Equipment, Thermal Dynamics, ESAB and Concoa.

After purchasing the company in 1986, Dave Mahoney changed the name to AWESCO. As President, he has led the 37-employee company ever since, with a management team consisting of Nicole Armsby, Controller; Derek Lang, Director of Operations; John Sector, Director of Purchasing; John Gaffney, Industrial Gas Sales Manager; and Jim MacDonald, Specialty Gas Sales Manager. AWESCO prides itself on the extensive experience of its staff, which enables the company to provide valuable customer support in all the fields they service.

In 1995, AWESCO was awarded the Albany-Colonie Regional Chamber of Commerce’s Small Business of the Year Award, based in part on the company’s development of an effective quality control program that increased its internal efficiencies and benefited its customers. AWESCO’s commitment to quality control has led to the utilization of sales teams which tie every outside sales rep to a dedicated inside customer service representative. This approach helps AWESCO better serve their customers. AWESCO also takes pride in being the only local gas distributor that utilizes a UPC bar code system to track and manage all of its (40,000) gas cylinders.

A member of NESCA since 1979, AWESCO is currently engaged in a major renovation of its Albany operations, which includes an expansion of its cylinder fill plant. President Dave Mahoney served as President of NESCA during 1992-93, and is a Past President of the National Welding Supply Association.

MEMBER ANNIVERSARIES (Go Top)

In April, the following members reached milestone anniversaries as members of NESCA. Thank you very much for your continued support!

Five Years

International Fidelity Insurance Co.

NEXTEL Partners, Inc.

R.S. Masonry

Ten Years

Neill Supply Co., Inc.

Fifteen Years

American Indian Builders & Suppliers

Associated Lightning Rod Co., Inc.

Robert H. Finke & Sons, Inc.

Twenty Years

Arold Paving Co., Inc.