March 14, 2014
MO-1
2014 MISSOURI LEGISLATIVE UPDATE AT
THE MIDPOINT OF THE SESSION
Last year’s legislative session was one of the most active for construction-related issues in recent years. Many of the issues debated were left unresolved, though, so 2014 has started with a bang. Of course many of these issues, like Right To Work, tax credit reform, prevailing wage and state bonding, have been on the agenda for the last few years. For different reasons, bills have stalled or not quite passed both chambers. The momentum is now back on several issues.
For construction-related issues, this session has the potential for wide-ranging effects. Tax credits, specifically the historic preservation and low income housing programs, look like they will see reduced caps. Right To Work has seen a lot of action with currently nine different bills filed. The prevailing wage law has four bills proposing changes, even after a significant change to the law last year. A bond program for higher education, parks and other projects is still being discussed with a proposed outlay of $1.2 billion. In addition, reduced individual and corporate taxes have a chance at passing, and a 10-year one percent state sales tax increase is on the table again to fund transportation projects across the state.
All of this is being contemplated as the General Assembly still debates whether to take billions in federal dollars for an expansion of the Medicaid system in the state. So, big issues abound with spring break coming up next week.
Below are the significant issues facing the regional construction industry with a prognosis of their chances to become law in Missouri.
TAX CREDITS LIKELY TO BE CAPPED THIS SESSION
Over the past several sessions, tax credit reform has been a topic of much discussion and deep division. The two programs of most importance to The Builders’ Association, and the two largest, are the Low Income Housing Tax Credit Program and the Historic Preservation Tax Credit Program. Certain state legislators, particularly senators, have wanted to sunset the programs or cap them at the very least. If it were not for legislators in the House, the two programs would have been gutted long ago. In addition, the Governor previously framed the debate as users of the programs are taking resources away from education. He announced again this year that he would entertain tax cuts (which he vetoed last year) if the General Assembly increased funding in education and capped some expenditures from the tax credit programs.
Last year really looked like the year for changes to tax credits in the state, but in the end, everything stalled again. This year, it seems that the odds are even better for some change to occur.
Twelve tax credit bills have been filed in both chambers so far. The most important bill to watch at this point was passed by the House last week. It is HB 1501, an economic development bill which includes cuts to historic and low income housing tax credits. The bill includes 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 cap the program at $110 million after a few years. Currently, there is not a cap on this program. The legislation will now go to the Senate, which can take it up at any time. Staff will be watching this one very closely.
Senator Schaaf from St. Joseph and Senator Emery from Lamar have filed bills SB 922 and SB 923, respectively, to cut the historic and low income housing tax credit programs, as well. The historic credits in both bills would be reduced to $80 million with an additional cap of $10 million on small projects.The low income credits in both bills would be capped at $100 million for authorizations of the 9% credits.
In addition, Senator Brad Lager of Maryville introduced SJR 57 which would place a constitutional amendment on the ballot prohibiting the state from issuing tax credits in excess of $200 million. The amendment would also reduce the rate of tax on individual income tax based on the savings from the total tax credit allocation.
Last, Senator Richard from Joplin has introduced SB 917 which would increase the administrative fee levied on tax credit programs issued by the Missouri Department of Economic Development. The current fee of 2.5% would increase to 5% on the total tax credits issued on each project. This would equate to an additional $25,000 fee for every $1 million in credits. Representative Zerr has filed the same bill language in the House in HB 2030. This new language is a different tactic in the war against tax credits. This particular language can easily be added to a wide variety of other bills, which means staff will need to keep a close eye on related legislation.
It appears something is going to happen this session on these two credits. Builders’ Association staff is fighting to keep the caps as high as possible. These are good programs that have created much work for our members. Call or email your legislators today to express your support of historic preservation and low income housing tax credits.
RIGHT TO WORK IN THE SPOTLIGHT AGAIN
Right-To-Work legislation has again been filed this session. Several bills were filed last year only to stall in the General Assembly. No less than nine bills have been filed in the legislature this session. All of these filed bills are in the House; none have been filed in the Senate. Most all contain the same basic language. The only difference in them centers on if the legislation will 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 to become a constitutional amendment (which bypasses the Governor). An example of the former language can be found in HB 1053 filed by Rep. Donna Lichtenegger. An example of the constitutional language is HJR 44 filed by the committee’s chairman Rep. Bill Lant.
This year, a third option was introduced by Rep. Holly Rehder from southeast Missouri. In her Freedom to Work Act, HB1772, she proposes 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 create a random patchwork of Right To Work vs. non-Right To Work counties throughout Missouri.
Three bills have been voted from committee and two others have had a public hearing but have not been acted upon yet. Staff would anticipate these bills to pick up some steam in the House after the filing for office deadline of March 25th. The Senate has not shown an interest in this issue as of yet. If they do hold a public hearing on the subject, expect to see it also after the March 25th deadline.
PREVAILING WAGE STATUTE ADDRESSED AGAIN
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 use wages compiled in adjacent counties and go back several years. As a condition of this legislation becoming law, the prevailing wage statute was supposed to be left alone in the legislature, at least through 2016.
The 2014 session, though, has four bills that have been debated and voted favorably out of committee. Two identical bills, SB 718 filed by Sen. Richard and HB1594 filed by Rep. Davis, allow for volunteer labor on public works projects. These bills are getting the most attention on this issue. 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). Another bill, HB 1144 filed by Rep. Bill White, prohibits the Missouri Housing Development Commission from requiring a prevailing hourly wage to be paid to a contractor on a project for a housing tax credit if it is in a Governor-declared disaster area. This bill has been voted out of committee and referred to the Rules Committee.
Last, HB 1306 filed by Rep. Warren Love, attempts to alter the “new construction” and “maintenance” definitions in the law. This bill has been voted out of committee and awaits further action. In the prevailing wage statute, all new construction falls under the requirements of the law, while maintenance work is not subject to the requirements under the law. This legislation would narrow the scope of work falling under “new construction” and broaden 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.
BUILDING BOND ISSUE DEBATED AGAIN, ALONG WITH A
STATE TRANSPORTATION SALES TAX
Over the past two or three sessions, Rep. Chris Kelly from Columbia has proposed an $800 million bond issue for higher education around the state. Not much excitement surrounded it until last year. Now, leaders in the General Assembly have picked up the ball and introduced bills of their own, now to the tune of up to $1.2 billion.
With interest rates at historic lows, some legislators believe 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. In the Senate, Senator Dixon has filed SJR 56. This legislation authorizes the issuance of up to $950 million of bonds and creates the “Twenty-First Century Infrastructure Fund.” The bill would provide funds for IT upgrades for state government offices, the construction and renovation of institutions of higher education, the renovation and maintenance of the state Capitol, and the renovation and rebuilding of other state buildings. The legislation has not yet been assigned a committee.
The other Senate bill is SB 723 filed by Senator Mike Parson. 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. 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.
The only House bill is HJR 73 filed by Rep. Caleb Jones. This act proposes a constitutional amendment authorizing the General Assembly to issue bonds to fund higher education improvements, state capitol repairs, park maintenance, and mental health facility improvement. The General Assembly could issue up to $1.2 billion in bonds.
Another part of this discussion includes SJR 48 filed by Senator Mike Kehoe and HJR 68 filed by Rep. Dave Hinson. These similar constitutional proposals, if approved by Missouri voters, would raise the state sales and use tax by one percent 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.
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.
Legislators are debating if the state should undertake two huge programs at once. HJR 68 is ready for floor debate in the House and SB 723 is awaiting debate in the Senate. Builders’ Association government affairs staff is watching this closely and supporting the building bond proposal to jumpstart several construction projects around the state.
POSSIBLE MODIFICATIONS TO THE PUBLIC PROMPT PAYMENT ACT
Senator Wayne Wallingford from southeast Missouri has filed SB 529. 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.