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GOVERNOR SIGNS PAYMENT BOND PROTECTION BILL (Go Top)

Proving that a second bite at the apple during the same legislative session has its advantages, on July 20, 2004 the Empire State Subcontractors Association secured its 34^th legislative success since 1975 when Governor Pataki signed ESSA’s “payment bond on hybrid projects” bill. This new law amends Section 5 of the Lien Law, and will require payment bonds or other forms of security to be posted by owners on certain "hybrid" construction projects valued at more than $250,000, such as those where a private building is constructed on public land. Under current law, contractors, subcontractors and suppliers do not have lien rights on these types of projects.

On May 5, 2004, the Governor had vetoed similar ESSA legislation, his very first veto of the 2004 legislative session. In his veto message, the Governor expressed concern that there was not a minimum dollar threshold above which the bond requirement would become effective, and he also expressed concern that the bill limited the form of security provided by the owner to payment bonds.

Since the Governor's veto came late in the session, there was not enough time to have an amended version of the bill introduced and ushered through the entire legislative process before the session was expected to end. To get around this problem, ESSA came up with a creative solution. Instead of introducing a new bill, ESSA amended another one of its program bills by completely removing that bill’s original language and substituting the amended payment bond language in its place. In other words, ESSA basically barrowed the bill number from another one of its bills. The amended bill (the one signed on July 20^th) satisfied Governor Pataki’s concerns by making its provisions applicable only to projects over $250,000, and by allowing the owner to post alternative forms of security (other than just a bond) as a means of guaranteeing payment to contractors, subcontractors and suppliers.

Obviously, this procedural maneuver worked, and ESSA has secured yet another legislative victory for subcontractors and suppliers doing business in New York State. Members who would like a copy of this legislation should contact the NESCA office.

INSURANCE DEPARTMENT REJECTS W.C. RATE HIKE (Go Top)

New York State Insurance Superintendent Gregory Serio has rejected a proposed 29.3 percent increase in workers’ compensation insurance premiums for 2003-04 that had been recommended by the New York Compensation Insurance Rating Board, ruling that the current rates will remain in place. However, the workers’ compensation assessment, a tax on premiums that all employers must also pay, will increase by 6 percent, from 14.3 percent to 15.1 percent.

The Insurance Department announced the decision to hold rates steady in a July 15 press release, stating the Superintendent determined that the data NYCIRB submitted to support its request, combined with the testimony and information gathered during three public hearings, did not warrant the increase.

In the Opinion and Decision issued by the Department, the Superintendent questioned the need for such a large rate increase given the consistent level of profitability reported by the workers’ compensation industry in recent years, which reported a return of 4.1% for 2004 and 4.5% in 2003. The Department believes that the true rate of return for the industry is as high as 8.1%.

The Department also found that NYCIRB’s filing did not address the effects of Section 32 of the Workers’ Compensation Law, which allows insurers to settle claims at significant savings. The Department’s review of the filing also found that insurers writing workers’ compensation are not performing adequately in fighting fraud.

“With profitability levels remaining high, with the industry’s repeated failure to calculate savings from compensation system efficiencies and fraud initiatives, together with other issues raised in my Opinion and Decision, the industry has not met its burden to justify this rate increase request, Superintendent Serio said. “Therefore, the filing has been disapproved and the current level will remain in place.”

While the Insurance Department has the authority to review proposed increases in premiums, it does not have authority to review proposed changes in assessments, so the proposed change in assessments is automatically enacted. Assessments support the operational expenses of the Workers’ Compensation Board and various special funds.

PRESIDENT’S MESSAGE (Go Top)

Last month in this space I spoke to members about the value of staying fully engaged in the purpose and the activities of NESCA. I mentioned that while we urge every member to actively participate in NESCA activities and to take full advantage of the many valuable services offered to members, the real meat and potatoes of the association is it’s advocacy on behalf of its members, particularly in the State Legislature. This ongoing advocacy has served to the advantage of each and every subcontractor and supplier doing business in New York State, even if many don’t realize it. I talked about NESCA’s 30-year track record in the Legislature and the 33 beneficial laws the association has passed that save all members both time and money. Finally, I pointed out the importance of existing members bringing new members into the association so that we have more subcontractors and suppliers pulling the wagon and fewer riding in it.

That message turned out to be timely because this month I have the pleasure of informing you that NESCA has increased its list of legislative successes to 34. On July 20, 2004, Governor Pataki signed into law our “payment bond on hybrid projects” bill, which will provide contractors and subcontractors with a measure of payment protection on certain projects performed in New York State upon which lien rights do not exist (see page 1 story for details). And that’s really what NESCA is all about isn’t it? Finding ways to protect the payment interests of subcontractors and suppliers? I encourage members to use this latest legislative victory in your efforts to recruit new members. Use it to show your prospects that although NESCA has a very impressive track record spanning more than 30 years, we don’t rest on our laurels. With this latest victory, the association will simply move on to the next challenge.

The number of existing members who have already renewed their membership for 2004-05 is extremely encouraging. By the end of July, more than 60% of our members have paid their 2004-05 dues, and not only that, many have made additional voluntary contributions to our sustaining dues and PAC funds. I thank all members who have renewed for your continued confidence in and support of NESCA. To those members who have not yet renewed, I encourage you to do so as soon as possible. To me, it should be automatic. NESCA dues should be part of every subcontractor’s and suppliers annual budget. After all, do you know any lawyers who don’t belong to the Bar Association? Do you know any doctors who are not part of the AMA? Do you know any surety agents who are not members of the National Association of Surety Bond Producers? People in those lines of work wouldn’t think of operating their businesses without an affiliation with the association that represents their interests, and I don’t think people in the construction industry should either.

To conclude, I remind all members that our monthly membership meetings will begin again on September 9^th at the Century House. Our first program for the year will be a “General Contractor Showcase” featuring The Pike Company. Why not take that opportunity to bring a prospect to the meeting? The prospect can attend for free, and if you are successful in recruiting that company, you win yourself $100!

Kevin J. Garrity, President

COURT UPHOLDS ANTI-SUBROGATION RULE (Go Top)

The Supreme Court of New York, Appellate Division, Fourth Department on June 14, 2004 decided the John McMann, et al. v A.R. Mack Construction Co., et al. case. In this case Apple Roofing, a subcontractor to A.R. Mack Construction Co., the general contractor, and Pagan Construction, Inc., a subcontractor to Apple, were third-party defendants in a third-party action brought against them by A.R. Mack Construction. Mack had been sued by an employee of third-party defendant Pagan for injuries sustained at the construction site. Pagan then cross-claimed against Apple but the court dismissed the cross-claim because Apple was named as “an additional insured” under Pagan’s policy of insurance and the cross-claim would be violative of the anti-subrogration rule under which an insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered.

This case illustrates the application of the anti-subrogation rule where the subcontractor has named its contractor as an additional insured under the subcontractor’s insurance policy. The effect here is to deny the subcontractor and its insurance company the right to seek recovery for its damages against the contractor.

Terence J. Burke, Esq.

NESCA Legal Counsel

DISCLOSURE OF PAYROLL RECORDS VETOED BY GOVERNOR (Go Top)

For the third time in five years, Governor Pataki has vetoed legislation which would have required public entities such as state agencies, cities, towns and school districts to disclose specific data on employees classified as apprentices. This information, including trade classifications, rate of wages and supplements paid, and the number of hours worked by employees classified as apprentices, would presumably be obtained from “certified payrolls” submitted by contractors and subcontractors on public projects. In addition, the bill would have amended the Freedom of Information Law (FOIL) to specify that a public entity may not withhold such information in response to a FOIL request. The only difference between this latest bill and the one vetoed by the Governor in 2001 is that the current bill does not require the disclosure of employee names.

Currently, the Labor Law requires contractors and subcontractors working on public projects to submit certified payrolls to the public owner, within 30 days after issuance of the first payroll, and every 30 days thereafter. The law also requires that such certified payrolls maintained by contractors and subcontractors include the hours and days worked by each worker, labor or mechanic; the occupation at which he/she worked; the hourly wage rate paid; and the supplements paid or provided.

Proponents of this legislation (organized labor) argued that the bill would merely permit verification that properly enrolled apprentices have been correctly designated by their employer on the construction project. Obviously, Governor Pataki disagreed.

While the Governor’s veto message for this bill was not yet available when we went to print, his veto of the 2001 legislation was based on personal privacy concerns. We assume he vetoed the most recent bill for similar reasons.

NEW YORK’S JOB GROWTH LAGS OTHER STATES (Go Top)

New York lags behind competing states’ job creation in almost every major industrial sector, a new report by The Public Policy Institute shows.

The Institute, the research affiliate of The Business Council of New York State, published the first installment of Just The Facts 2004: Key Economic and Social Indicators for New York State. The report includes 11 tables comparing the 50 states’ employment trends in most major industry sectors for the past 10 years, three years and one year. Later installments will provide updated analysis of how New York ranks in terms of taxes, government spending, other business costs, education and other indicators of economic and social well-being.

Over the 10 years ending in December 2003, New York ranked 41^st among the states in creating private-sector jobs, Just the Facts shows. Private-sector employment in the Empire State rose 8.9 percent over the period, compared to a national growth rate of 16.5 percent. Over the last three years, New York had an employment decline of 4.5 percent.

In the construction industry, New York ranked 35^th among the states over the decade with employment growth of 29.4 percent compared to the nation’s 38.8 percent. It lagged most other states for the three and one-year periods as well.

WELCOME NEW MEMBER (Go Top)

Section 7900 Associates, LLC

P.O. Box 97

Castleton, NY 12033

(518) 477-7900; FAX (518) 477-7901

Contacts: Dan O’Neill, Tom O’Neill

CALENDAR OF EVENTS (Go Top)

August 5, 2004

Board of Directors Meeting

Century House, Latham, 6 pm

September 9, 2004

Board of Directors Meeting

Century House, Latham, 5 pm

September 9, 2004

NESCA Membership Meeting

Century House, Latham, 6 pm

September 20, 2004

20^th Annual NESCA Golf Outing

Wolferts Roost CC, 10:30 am

September 21, 2004

NESCA/GBC/ECA Seminar

Fair Labor Standards Act

Building Industry Center, 6 pm

PLASTIC PIPE BAN EXTENTION PASSED (Go Top)

Under pressure from unions, a bill has been passed by both houses of the Legislature that would extend a 3-year ban on the use of plastic pipe in commercial construction. If the Governor signs the bill, New York will have the most restrictive plumbing code in the nation. Most types of plastic pipe are approved by international plumbing codes.

MEMBER PROFILE – EBERL IRON WORKS (Go Top)

Eberl Iron Works, Inc was founded in 1923 by George and Frank Eberl to fabricate wrought iron railings, fire escapes and other light iron items. Later, three other brothers and the second generation of Eberls joined the business to assure continuation during the next several decades. Today, there are four unique and distinct operating Divisions:

Metal Fabrication Division: Job shop specializing in the shearing, forming, punching and welding of sheets and plates for the miscellaneous, structural, specialty contractor, industrial and manufacturing markets.

Unistrut Buffalo Division: Warehouse selling support and grating products such as Unistrut metal framing, Lindapter fasteners, Halfen inserts, GripStrut safety grating and United Interlock grating. Steel, aluminum, stainless steel and fiberglass materials are inventoried for the industrial, OEM and specialty construction markets.

Traffic Safety Products Division: Sells sign posts, delineators, installation equipment, signs, barricades and other related products to municipalities, contractors and property managers.

System Installation Division: Designs and installs specialty systems such as medical supports for the health industry, modular ceiling grids for both the industrial and architectural market and fall protection for industrial plant use.

Today, brothers Frank and George Eberl co-own the business with Frank’s daughter, Nora, and George’s son, John actively involved. The expansion of the Albany market resulted in the hiring of our full time Albany salesman, John Smith, in 1999. Eberl Iron Works, Inc has been a member of NESCA since 1999. Eberl Iron Works, Inc. has been displaying at the annual October trade show since 2000.

Eberl Iron Works, Inc. most recently finished a job for Petco park, home of the San Diego Padres. The job required Eberl Iron Works to Fabricate over 20,000 lbs of quarter inch stainless steel diamond plate steel, and ship it out to Sand Diego. Systems Installation division has finished jobs in recent years at Saratoga hospital and Cayuga medical center.

MEMBER ANNIVERSARIES (Go Top)

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

Five Years

EMI Guide Rail, LLC

T. Lemme Mechanical, Inc.

Fifteen Years

Encon Services & Supply, Inc.