Gov. Doyle Signs Construction Bill

Two important construction bills were recently signed into law by the Governor:

AB 736 (now 2005 Act 181) requires all employers working on building projects under the prevailing wage law to be part of a substance abuse testing program.  This landmark legislation was a joint management-labor initiative with a goal of achieving safer, drug-free public job sites.  The bill’s effective date of May 1, 2007 allows contractors time to get into compliance with the uniform, state-wide standards.  While specifying what the essential elements of a qualifying substance abuse prevention program are, the act is not prescriptive when it comes to the details and administration of individual plans.  We recognize the leadership and efforts of the bill’s author, Rep. Jeff Stone (R. Greendale) in working with us to craft an approach that achieved broad-based and bipartisan support.

SB 450 (now 2005 Act 181) revises and updates the state’s construction lien law and is the culmination of several years of work by a subcommittee of the Construction Section of the State Bar of Wisconsin.  We were pleased to be part of a core group of supporters that successfully resolved a number of technical and language issues as the bill worked its way through the legislative process.  In addition to making the law clearer and more workable, the bill for the first time makes repair work lienable.

Taxpayers Protection Act (TPA) Advances in Assembly

It was hardly a show of force but last week the Assembly Ways and Means Committee narrowly approved the constitutional amendment (AJR 77) to limit the rate of increase of state and local government revenues.  Some changes were made in the proposal known as the “TPA” to allow it to receive a 7-6 favorable vote in committee but many critics, including some majority party legislators, insist it still needs more work before it is ready for “prime time”.

 We remain concerned about the measure’s potential impact on public building programs and have organized a construction industry coalition that has met with the authors and committee members.  Our primary focus has been to advocate for a change that would exempt bonding proceeds for capital projects from the revenue limits (please see attached  “talking points” for the rationale here).  While the substitute amendment voted on in committee attempted to address that problem, it is not at all clear how effective the new wording is.

 We are continuing to try to have this issue resolved; at the same time it appears that the Assembly Speaker may push for a floor vote as early as next week.  There is only a two week floor period scheduled the last week in April and the first week in May before the Legislature concludes its regular business this session.  The future of TPA in the Senate is even more uncertain as five Republican Senators (and all the Dems.!) have thus far withheld their support.  We are obviously monitoring the situation closely but the best guess at this point is that some form of TPA may pass the Assembly but will likely stall in the Senate.  Most people think that outcome would be better than sending a flawed proposal forward (must pass two successive sessions of the Legislature and a statewide referendum).

Questions/Concerns about TPA    (AJR77 / SJR63):

 ·        The amendment has confusing and inconsistent treatment of government revenues derived from bonds:  the proceeds of some types of bonds are exempt from revenue limits while most are not.

 ·        Funds from the sale of most bonds are treated as income (revenue) in a particular year even though the debt service payments on those bonds may stretch for 20 years or more.   Under generally accepted accounting practices, bond proceeds would be treated as loans rather than as income or revenue in a particular year.

 ·        In some cases these bonds may be paid for by a dedicated stream of revenue from a facility (e.g. parking structure financed through fees or airport expansion funded with user fees.)  In other cases, “program revenues” such as student fees or gifts and grants may defray a major portion, if not all, of the costs of a capital improvement project such as a sports center or a university dormitory.  There may limited or no general taxpayer dollars going to the debt service on those bonds but under TPA the proceeds are treated exactly the same as the taxes and fees levied by governments to finance their basic operations.

 ·        The proposed method of calculating bond revenues will result in the state and many local governments exceeding annual revenue limits and subjecting projects to referendum approval where none previously existed.  Under a worst case scenario this will threaten the public infrastructure, and at minimum will add more expense to projects involving bonds in the form of election costs, legal fees, and the like.

 ·        Limits on indebtedness already exist in the State Constitution and in the measurers and operating procedures of the financial institutions, including the bond rating agencies.  The overall limit on revenues in the TPA also serves as a restraint on government bonding since it would limit the funds available to make debt service payments.

 ·        The TPA also places an arbitrary 60% cap on the value of new construction.  By not allowing municipalities to capture 100% of the benefit of new development, it will serve as a curb on growth by causing communities to evaluate whether they are able to recoup all their costs under the 60% cap.  This could be a real disincentive to economic development, particularity in smaller communities.

 ·         Public policy arguments aside, the above noted problems with the TPA should be fixed before it is debated.  These are structural deficits with the proposal that need to be addresses, independent of the philosophical and political arguments pro and con.