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CAM Legislative Update Lame-Duck 2012

CAM Legislative Update Lame-Duck 2012

The legislation, House Bill 5466, sponsored by Representative Kurt Heise (R-Plymouth) amends Public Act 165 of 1966, which invalidates certain indemnity requirements in construction contracts, to do the following, effective March 1, 2013:

  • Extend the Act to the design of a building, and include infrastructure and any improvement to real property.
  • Prohibit a public entity from requiring an architect, engineer, landscape architect, surveyor, or contractor to defend the public entity or any other party from liability claims or to indemnify the public entity or other party for an amount greater than the degree of fault of the architect, engineer, landscape architect, surveyor, or contractor.
  • Specify that the Act would not affect the application of the governmental immunity law.

"Public entity" would mean the State; any public body corporate or nonincorporated public body within the State; or any agency of the State or public body. The term would include cities, villages, townships, counties, school districts, intermediate school districts, authorities, and community and junior colleges, and their employees and agents, including construction managers or other business arrangements retained by or contracting with the public entity to manage or administer the contract for the public entity. "Public entity" would not include State institutions of higher education.

Under the Act, a covenant, promise, agreement, or understanding in, or in connection with or collateral to, a contract or agreement relative to the construction, alteration, repair, or maintenance of a building, structure, appurtenance, and appliance, that purports to indemnify the promisee against liability for damages arising out of bodily injury or property damage caused by or resulting from the sole negligence of the promisee or indemnitee, is against public policy and is void and unenforceable.

Prevailing Wage

It was believed that the Michigan Legislature intended to take up legislation to repeal prevailing wage requirements on school construction work during the "lame duck" legislative session this year.  House and Senate leadership was rumored to have already agreed to pass the legislation repealing prevailing wage.

The Construction Association of Michigan took a position alongside AGC in opposition and was successful in defeating this legislation.  It is believed that bills will be introduced again next year to repeal prevailing wage.

School Bond Loans

CAM joined several other interest groups in opposition that will reduce school construction across the state.  The legislation was a top priority for the Department of Treasury and ultimately the Governor.

The School Bond Loan Legislation would set some limits on school bonding (SB 770, SB 771 and SB 772) was approved by the Senate on its final session day. SB 770 and SB 772 passed along party-line votes, 26-12, with Republicans in support of the legislation and Democrats in opposition. SB 771 only needed to be granted immediate effect by the chamber.

The series of bills would make the following revisions to the School Bond Loan Program:

  • Restrict availability of qualified loans for new bond issues after the outstanding loan balance reaches $1.8 billion. The cap would sunset on June 30, 2016.
  • Set a single final mandatory repayment date by which all qualified loans, whenever made, must be repaid.
  • Allow districts to issue additional bonds and have a later final mandatory repayment date if the district levies an increased millage rate.
  • Require that the millage rate necessary to repay all qualified bonds and qualified loans be recalculated annually based on changes in taxable values, the issuance of new money bonds or refunding bonds, and other circumstances. The recomputed millage would be capped to the extent the district's taxable value declined.
  • Require districts to maintain books and records of bond proceeds and make those records available to the department.
  • Set a single interest rate on loans issued from the School Bond Loan Fund (under prior law) or the School Loan Revolving Fund.
  • Permit the department to pre-qualify a bond issue if there is no "adverse financial impact".
  • Permit a district to use residual funds remaining after a project is complete for project enhancements only if the district's bond counsel opines that using the residual funds to make debt service payments or to repay qualified loans would adversely impact the federal tax treatment of interest on the bonds.

Personal Property Tax Reform

Repealing PPT was a priority for the Governor, Speaker, and Majority LeaderThe plan approved Thursday does not provide communites with full revenue replacement.

That plan would phase out the industrial portion of the tax from 2016-22 with local governments receiving replacement of 80 percent of the revenue they lose, provided the lost revenue equals at least 2.3 percent of a local government's total property tax revenues. That 2.3 percent threshold was lowered from the previous level of 2.5 percent.

Local governments could then use a special assessment on industrial property to replace 100 percent of lost revenue for police, fire, and ambulance and, under an amendment from the House, jail operations.

As passed the House, the bills would also replace all lost school funding with use tax dollars.

But the replacement funds would come largely from the use tax, which requires voter approval in the August 2014 primary election to change its current distribution among state funds. Because all the bills are now tied to HB 6026 that makes that change, they all require voter approval for the PPT on industrial property to begin phasing out.

Left mostly untouched is the personal property tax on commercial and utility personal property.

However, some commercial personal property holders would get a break. Starting in the 2013-14 fiscal year, businesses with less the $40,000 in total commercial or industrial personal property in any one jurisdiction would not have to pay personal property tax to that jurisdiction.

All industrial personal property purchased after 2011 would become exempt in fiscal year 2015-16. Then industrial personal property would become exempt as it reaches 10 years old beginning in fiscal year 2015-16.

The bills would create a Metropolitan Area, essentially a statewide authority that would accept the use tax funds (between 1 to 1.5 cents of every 6 cents on the dollar of the tax) and redistribute them to qualifying communities.

Right To Work

As you know by now, Michigan has become the 24th state in the union to have a law barring workers with unionized employers from having to pay union dues or a fee.  These bills exempt police and fire, however it will impact all other union shops.

Both bills (HB 4003 and SB 116) passed the Legislature on Tuesday and were signed into law by the Governor on December 11th.

The bills will become law 90 days after Sine Die, which will occur in roughly two weeks.  It is expected that these bills will end up in court early 2013.



CAM was monitoring House Bill 4561 sponsored by Representative Joe Haveman (R-Holland) amends the Uniform Construction Code to increase the timeframe in which the director of the Department of Licensing and Regulatory Affairs mustupdate the code from not less than once every 3 years to not less than once every 6 yearsor more than once every 3 years.

The bill would amend the Single State Construction Code Act to do the following:

  • Include the International Existing Building Code and the International Energy Conservation Code in the State Construction Code.
  • Remove the Michigan Uniform Energy Code from the State Construction Code.
  • Require the Director of the Department of Licensing and Regulatory Affairs (LARA), within 90 days after the bill's effective date, to begin the process to add, amend, and rescind rules to update the Michigan Residential Code, including the residential energy code chapter.
  • Beginning with the 2015 national code change cycle, require the Director to add, amend, and rescind rules to update the Michigan residential code every three to six years, as the Director determined appropriate.
  • Require the LARA Director to hold a public meeting and give people an opportunity to present data and comments before issuing a written determination as to whether to update the Michigan Residential Code.
  • If the LARA Director decided not to update the Michigan Residential Code, allow a person to request the Director to promulgate a rule to amend a section or sections of that code.
  • Require the Director to initiate a rule or give the principal reasons for denying a request to amend the Residential Code, within 90 days after the request was filed, and provide that a denial would not be subject to judicial review.

The bill also specifies that if the Michigan Residential Code were updated on a six-year cycle, use of a material, product, method of manufacture, or method or manner of construction or installation provided for in an interim edition of the International Residential Code would be authorized throughout Michigan and would have to be permitted, but could not be mandated, by an enforcing agency or its building official or inspectors. If a material, product, or method in the interim edition were used, however, the enforcing agency, official, or inspectors could require the use to comply with all applicable requirements in the interim edition.