Thursday, 28 April 2011

NLRB’s general counsel moves to stop Boeing’s North Charleston assembly plant

By Gregory L. Shelton

As South Carolina prepares for Boeing’s arrival, the National Labor Relations Board’s acting general counsel has other plans for the company. Upon the request of the International Association of Machinists and Aerospace Workers union, the general counsel filed a complaint against Boeing asserting that Boeing’s decision to open the plant in South Carolina violates the National Labor Relations Act. The general counsel, who under the NLRA acts as a prosecutor, will try to convince the five member NLRB that Boeing’s decision violates the amorphous prohibitions against interfering with, restraining, or coercing employees in participating in their union activities (i.e. striking) and discriminating “in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization.”

In his complaint against Boeing, the general counsel seeks an order requiring Boeing to open the second production line in union-friendly Washington state. South Carolina, by contrast, is a right to work state. The idea of a government administrative body managing a company’s expansion plans may seem outlandish, but the current NLRB is union friendly, and the make-up of the NLRB has been viewed by the current and previous administrations in stark political terms.

An NLRB administrative law judge will hear the case in Seattle on June 14. The decision of the administrative law judge may be appealed to the NLRB in Washington D.C. The NLRB’s decision may be further appealed to a federal court of appeals and then to the federal Supreme Court.

I wish I could tell you how this battle will end, but we live in strange times.

FYI, the South Carolina Department of Commerce provides contact information to subcontractors or suppliers seeking business from the construction of Boeing’s second 787 Dreamliner assembly plant in North Charleston. Read More.

Posted by Gregory L. Shelton on Construction Law Carolina. Shelton is general counsel with the law firm of Horack Talley with offices in Charlotte and Rock Hill.

Construction industry group supports legislation to shield NCDOT bids

Legislators are moving to shield from public scrutiny, at least for a time, the information contractors bidding for N.C. Department of Transportation jobs give the agency, reports the Durham Herald-Sun.

The move has support from both DOT and industry trade groups, who support it because they don't want bidders to see each other's submissions before agency officials decide what firm will get a contract.

"We feel like it will enhance the competition in a competitive bidding process," DOT chief spokesman Ted Vaden said.

State law now considers bid submissions public record, thus making most of the information in them subject to disclosure pretty much from the moment the documents arrive at DOT. The problem, DOT officials and trade-group representatives say, is firms hoping for contracts have been using the Public Records Law to get a look at what their competitors have turned in.

That kind of thing's been going on for a while, but is drawing new scrutiny because the agency of late has been relying more heavily on so-called "design-build" contracts where the same firm draws up the detailed blueprints of a project and then quotes DOT a price to actually build it.

Giving competitors a look at the design half of that equation can give them an unfair advantage, said Barry Jenkins, director of the heavy division of Carolina AGC, the trade group for the state's general contractors. Jenkins added that his organization has no objection to DOT's releasing information about a submission after it's awarded a contract. "Once a decision is made, it's public record and nobody has any problem with" that, he said.

State Sen. Bill Rabon, R-Southport, is sponsoring the bill that would make the necessary change to state law. On Wednesday he told members of the Senate Transportation Committee that the law in its current state allows firms to "hitchhike" on another's design "without having to put the time and money into" developing their own, thus negating the public benefits of DOT's bidding process.

Committee members agreed. They decided on a voice vote to endorse the bill and send it to the Senate floor.

The Public Records Law has long exempted trade secrets from disclosure. But DOT officials, after first stiff-arming some information requests from contractors, eventually "decided they [had] to make stuff available or get [legislative] authority not to release it until after" a contract decision is made, Jenkins said.

It's not clear whether the Rabon bill would become a precedent for other agencies or levels of government. As written it applies only to DOT. But DOT isn't the only one that's run into problems on this front. Durham officials, for instance, have twice in recent years seen major contract decisions turn contentious after a firm bidding for their business adjusted its proposal in reaction to what it'd learned about a competitor's offer Read More.

Wednesday, 27 April 2011

OSHA enforcement on fall protection in residential construction to take effect

by Brad Hammock

An OSHA compliance directive requiring contractors performing residential construction comply with the residential fall protection standard will take effect as scheduled on June 16, 2011. The Standard (29 C.F.R. § 1926.501(b)(13), Duty to Have Fall Protection) generally requires that guardrails, safety nets or personal fall arrest systems be used on residential jobsites that are more than six feet off the ground, was recently discussed in the OSHA Law Blog.

Adopted in 1994, the Standard requires guardrails, safety nets or personal fall arrest systems in residential construction. It contained the following exception, “When the employer can demonstrate that it is infeasible or creates a greater hazard to use these systems, the employer shall develop and implement a fall protection plan which meets [certain] requirements….” The employer bears the “burden of establishing that it is appropriate to implement a fall protection plan which complies with [the Standard] for a particular workplace situation, in lieu of implementing any of those systems.”

In June 1999, OSHA issued Directive STD 03-00-001, instructing OSHA officials not to commence enforcement of the Standard against an employer if the employer used slide guards or other fall-protection systems that were included in the 1999 Directive. In 2010, however, the Secretary issued Directive STD 03-11-002, rescinding the 1999 Directive and authorizing enforcement of the Standard as written.

In National Roofing Contractors Ass’n v. U.S. Dep’t of Labor, No. 11-1340 (7th Cir. Apr. 7, 2011), rejecting a challenge seeking to enjoin implementation of the 2010 Directive, the federal appeals court in Chicago ruled the 2010 Directive was an exercise of the DOL’s prosecutorial discretion, rather than an “occupational safety and health standard.” Therefore, contrary to the plaintiffs’ argument, the 2010 Directive is not subject to judicial review pursuant to 29 U.S.C. § 655(f). Thus, the Court dismissed the plaintiffs’ petition for review and stay of enforcement of the Standard.

Employers take note. For those that choose one or more “alternate fall protection measures,” ensure such measures meet or exceed the OSHA's fall protection standard and reflect that in your fall protection programs. Furthermore, be prepared to explain to compliance officers how you came to the decision to implement the alternative measures. Read More.

Brad Hammock is a Partner in the Washington DC Region Office of Jackson Lewis, practicing exclusively in the safety and health area, and is a nationally recognized expert on occupational safety and health law.

Tuesday, 26 April 2011

Sale of new homes increased 11.1 percent in March

Purchases of new houses in the U.S. rose in March from a record low as the weakest industry in the economy strained to recover,Bloomberg News reports.

New-home sales, tabulated when contracts are signed, climbed 11.1 percent to a 300,000 annual pace, faster than forecast, figures from the Commerce Department showed. The median estimate in a Bloomberg News survey called for a rise to 280,000. Housing prices fell from a year ago.

The market for new homes faces competition from a glut of foreclosed properties that may keep prices depressed this year, discouraging new construction. Unemployment above 8 percent and housing’s struggles help explain why the Federal Reserve may announce at the end of this week’s policy meeting that it plans to complete the purchase of $600 billion of Treasuries by June.

Estimates in the Bloomberg survey of 68 economists ranged from 247,000 to 300,000. Sales in February were revised to a 270,000 annual rate from a 250,000 previously reported.

The median sales price decreased 4.9 percent from the same month last year, to $213,800, today’s report showed.

Purchases rose in three of four U.S. regions last month, led by a 67 percent surge in Northeast after a 54 percent slump a month earlier. Sales in the South were little changed at a 162,000 pace after February’s 163,000.

The supply of homes at the current sales rate fell to 7.3 month’s worth in March from 8.2 months. There were 183,000 new houses on the market at the end of March, the fewest since August 1967, indicating builders are reducing construction.

Previously-owned home purchases climbed 3.7 percent to a 5.1 million annual rate in March as a mounting supply of properties in or near foreclosure lured investors, a National Association of Realtors report showed April 20. All-cash deals accounted for 35 percent of the transactions, the most on record, while distressed properties including foreclosures and short sales made up 40 percent of all deals, the group said.

New-home sales are considered a more timely barometer than purchases of previously owned homes, which are calculated when a contract closes. Resales account for about 95 percent of the housing market so far this year.

Housing demand gyrated in 2010, reflecting a boost from a homebuyer tax incentive of as much as $8,000 that gave way to a plunge in sales by mid-2010 after the credit ended.

While sales have steadied, they have yet to strengthen, keeping builders pessimistic. The National Association of Home Builders’ confidence index fell to 16 this month from 17 in March. A reading under 50 means a majority of builders view conditions as poor. Read More.

Monday, 25 April 2011

North Carolina construction contracts decline 10% in February

The overall value of North Carolina’s new construction contracts fell by 10% in February, to $861.6 million, according to McGraw-Hill Construction.

On a sector-by-sector basis, it was either 20% up or down for the month. The residential and nonbuilding sectors each declined by 20% during the month, for totals of $360.9 million and $211.2 million, respectively. Meanwhile, nonresidential contracts improved by 20%, totaling nearly $289.6 million.

For the year-to-date, North Carolina’s contracts are estimated at $1.75 billion, or 17% behind the pace of a year ago.

The nonresidential market is on par with 2010’s pace, with about $682.2 million in new contracts. The nonbuilding sector is down 30% compared to a year ago, with an estimated $350.8 million in new contracts. The value of residential contracts is 23% behind the same period of a year ago, with a total of roughly $721.5 million. Read More.

Friday, 22 April 2011

Architectural Billing Index in holding pattern

The first quarter of 2011 has seen the Architecture Billings Index (ABI) remain virtually unchanged and right at, or slightly above, the break-even level.

The American Institute of Architects (AIA) reported the March ABI score was 50.5, a negligible decrease from a reading of 50.6 the previous month. This score reflects a modest increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.7, up significantly from a mark of 56.4 in February.

As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.

“Currently, architecture firms are essentially caught swimming upstream in a situation where demand is not falling back into the negative territory, but also not exhibiting the same pace of increases seen at the end of 2010,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The range of conditions reported continues to span a very wide spectrum with some firms reporting an improving business environment and even ramping up staffing, while others continue to operate in survival mode. The catalyst for a more robust recovery is likely financing, with stronger growth occurring only when lending institutions begin approving credit for construction projects with much greater regularity.”

Key March ABI highlights:

◦Regional averages: Midwest (53.5), Northeast (51.4), West (50.6), South (49.7)
◦Sector index breakdown: commercial / industrial (54.7), multi-family residential (50.8), mixed practice (49.8), institutional (48.0)
◦Project inquiries index: 58.7

The Architecture Billings Index produced by the AIA Economics & Market Research Group, is a leading economic indicator that provides a glimpse into the future of nonresidential construction spending activity. The diffusion indexes contained in the full report are derived from a monthly “Work-on-the-Boards” survey that is sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended as compared to the prior month, and the results are then compiled into the ABI.
Read More.

Wednesday, 20 April 2011

US construction inflation highest since 2005

The producer price index (PPI) for construction industry inputs hit an annual rate of +6.9% in March 2011, according to the Associated General Contractors of America (AGC). This is the highest this measure of inflation in the industry has been since 2005, when it hit +8.2% according the International Construction magazine website.

The PPI for inputs to construction is a weighted average of the prices of all materials used in construction, plus items consumed by contractors, such as diesel fuel. Indeed, diesel fuel has seen the sharpest price rise of all, with its cost rising +42.5% since March 2010. The other area that has seen sharp increases has been metallic construction products, such as steel bars, pipes and structural members, and copper and aluminium products. Prices or these have risen between +11.7% and +18.9% over the last year.

However, the prices of other products have fallen over the same period, driven by a -3.7% decline in the cost of cement. This has driven down the cost of concrete products by -0.6% overall, with pre-stressed concrete products seeing the biggest decline at -3.4%. The cost of bricks and tiles is also down -3.3% compared to a year ago.

However, with consumer prices rising just +2.7% over the last 12 months in the US and the broad PPI for finished goods rising +5.8%, the AGC sees the +6.9% rise in input costs for construction as bad news for contractors. "This hike added to the cost squeeze on contractors, who have been unable to pass through materials costs in their bids on new buildings," it said in a statement. Read More.

Tuesday, 19 April 2011

NC construction employment increases slightly in March

Construction employment increased by 1600 jobs (0.9 percent) in North Carolina between February and March the Associated General Contractors of America reported in an analysis of state employment data released by the Labor Department. However year-to-year North Carolina lost 6,200 construction jobs (-3.5 percent) over the past year.

“These data show that recovery is spotty and variable in construction, as the location and number of states with job gains retreated from the levels in February,” said Ken Simonson, the association’s chief economist. “While three states posted healthy year-over-year employment gains of more than five percent and North Dakota reached an all-time high in construction employment, West Virginia lost one out of nine construction jobs in the past year.”

South Carolina lost 4000 construction jobs (-0.5 percent) over the last month and 1,900 jobs (2.4 percent)over the past year, association officials reported

The largest percentage drop in construction employment between March 2010 and 2011 took place in West Virginia (-11.1 percent, -3,700 jobs); followed by Wisconsin (-8.0 percent, -7,700 jobs); Georgia (-7.6 percent, -11,500 jobs) and Nevada (-7.5 percent, -4,600 jobs). Florida (-14,700 jobs, -4.2 percent) had the largest number of year-over-year job losses, followed by New York (-12,700 jobs, -4.1 percent) and Georgia.

Association officials said the generally weak results showed the urgency of adopting federal and state measures to improve the investment climate for construction. They urged officials in Washington and in state capitals to review and act on the group’s recently released construction industry recovery plan “Building a Stronger Future.”

“It is unacceptable to allow infrastructure to deteriorate when there are thousands of skilled construction workers and capable companies ready to deliver quality projects,” said Stephen E. Sandherr, the association’s chief executive officer. “The steps we’ve proposed to cut red tape and address aging infrastructure will put millions to work and boost the overall economy.”

View construction employment figures here by state.

OSHA holds employers accountable for recordkeeping inaccuracies

By Brad Hammock, OSHA Law Blog

In a much anticipated decision, the Occupational Safety and Health Review Commission (Commission) has ruled that OSHA can enforce its requirement for employers to record work-related injuries and illnesses on the OSHA 300 Log even when the employer's duty to record the injuries and illnesses occurred more than six months before the issuance of the citation.

The employer in the case had argued that the six month statute of limitations in the Occupational Safety and Health Act for OSHA to enforce violations of the Act prohibited OSHA from enforcing recordkeeping violations that occurred beyond that six month period. The Commission disagreed, however, and by doing so has reiterated for employers the need to continually review their recordkeeping logs to ensure the entries are accurate.

Under OSHA's recordkeeping rule, employers are required to enter a recordable injury on the OSHA 300 Log within seven days of the occurrence of the injury. Employers must also retain their logs for five years and under OSHA's rule, there is an obligation for employers to go back and update entries should the circumstances surrounding them change.

In an earlier decision, Johnson Controls, Inc., the Review Commission had ruled that OSHA could cite employers for inaccurate entries until the entries were corrected or until the end of the five year retention period, whichever is longer. The employer in the case at issue argued that Johnson Controls should be overturned for several reasons, including the Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., 550 U.S. 618 (2007), which had held that an employee's discrimination claim under Title VII of the Civil Rights Act of 1964 was time-barred.

The Review Commission rejected the employer's arguments, however, and held that under OSHA's recordkeeping rule, an inaccurate entry on the OSHA 300 Log constitutes a continuing violation of the rule throughout the entire five year retention period.

For employers, the decision reiterates the need to integrate into their recordkeeping procedures a mechanism to ensure they go back and continually evaluate the accuracy of entries -- during the entire retention period. It is not enough to record an injury within seven days and then "forget" about it. OSHA expects employers to be diligent in updating recordkeeping entries for accuracy and may cite employers who are not. Read More.

Monday, 18 April 2011

Wells Fargo study optimistic about NC growth

A reputation for cutting-edge research and an ability to attract corporate headquarters have North Carolina projected among the top three states in the country for economic growth, according to a study released last week by Wells Fargo Securities LLC.

The research team was led by Mark Vitner, a senior economist with expertise on the economies of North Carolina and the Southeast. The study shows that among states with the best regional advantage for employment in high-growth industries, only Florida was listed above North Carolina.

According to an article in the Winston-Salem Journal, researchers identified the high-growth industry sectors as finance and insurance, professional and technical services, accommodation and food services, services other than public administration, health care and social assistance, and local and state government.

The researchers excluded government from the report because of local and state budget crunches in most states.

"Many of the industries that North Carolina has a comparative advantage in are driven by population gains," Vitner said.

"We essentially need to get the growth motor going again and, once that happens, North Carolina will once again reassert its position as one of the fastest-growing states due to the mix of industries in the state."

Of the 25 individual industries studied, Florida had a positive regional advantage for 22, while North Carolina and Georgia had 21. The researchers cited in particular North Carolina's burgeoning technology sector, both in electronics and life sciences/biotechnology, and energy.

"This report is an indication that North Carolina's economic-development strategies are strong," said Tim Crowley, a spokesman for the N.C. Commerce Department. "North Carolina is attractive because of our top-ranked business climate, our strong education system and customized training programs, and our skilled and knowledgeable workforce."

Despite North Carolina and Georgia being hit hard by downturns in construction and manufacturing, the researchers said "the underlying economic advantages that made (them) two of the nation's fastest-growing states over the past quarter-century remain in place."

The researchers said North Carolina had an advantage in particular with professional and technical services, accommodation and food services, health care and social assistance, and nondurable-goods production.

They also weighed in on economic incentives, saying that every state must focus on where to best put what is expected to become more limited funding and resources for recruitment and retention projects.

"Incentives geared toward growing industries have the potential to generate benefits over a longer time period than declining industries, which may provide a short-term boost to employment, but shed jobs over a longer time horizon," said the researchers, adding that states need to evaluate which industries are best suited for their region and which will come regardless of incentives.

"Industries, such as finance and insurance, and professional and technical services, may offer the greatest return on the local economic-development incentives, whether the incentives are purely financial or more focused on developing the local workforce."

The researchers cautioned that North Carolina and Georgia may have a finite window to run with their advantages in economic recruitment, as they expect Florida will rebound from its housing recession and put more resources into its university system.
Read More.

Thursday, 14 April 2011

Construction materials prices jump 2 percent in March

Construction materials prices increased 2 percent in March, which is the largest monthly increase since July 2008, according to the April 14 Department of Labor Producer Price Index (PPI). Over the past three months, construction materials prices rose 4 percent and are 6.9 percent above March 2010 levels.

"Today’s data comes as little surprise as a variety of commodity prices were rising throughout the month of March, including oil prices, which were up 14.8 percent," says Associated Builders & Contractors Chief Economist Anirban Basu.

Steel mill product prices also saw their largest monthly increase since July 2008, climbing 5.3 percent in March. For the quarter, steel mill product prices are up 12.4percent, and year over year they are 15.3 percent higher.

The prices of iron and steel increased 2.8 percent in March and 10.6 percent for the quarter, to reach levels 14.7 percent higher compared to last year. Prices for fabricated structural metal products saw a more modest increase of 0.8 percent in March and 2.9 percent for the quarter, and are 5.1 percent higher than March 2010. Prices for plumbing fixtures and fittings increased by 0.4 percent in March, 0.4 percent for the quarter, and 1.8 percent year over year.

In contrast, prices for prepared asphalt, tar roofing and siding slipped 0.4 percent for the month, but were 0.3 percent higher for the quarter and 0.6 percent higher than the same time last year. Softwood lumber prices increased 0.5 percent in March and 1.4 percent for the first quarter, but are still 0.8 percent lower compared to March 2010. Concrete product prices stayed level for the month and fell 1 percent for the quarter, making them 0.7 percent lower than one year ago.

Crude energy prices fell 0.4 percent in March, but were up 2.4 percent for the quarter and 6.6 percent year over year. The 11.7 percent monthly decline in natural gas prices helped counter the 5.7 percent monthly increase in crude petroleum prices. Wholesale finished goods prices finished the month 0.7 percent higher, and were up 3.1 percent for the quarter and 5.7 percent compared to March 2010.

Basu says, "The global economy continues to expand at an above-average rate and actual and potential oil supply interruptions in Libya and Nigeria have also helped to motivate price increases in energy-related commodities."

Basu adds, "In the last few days, many commodity prices have been falling. This is possibly a result of investors believing that these commodity prices have reached artificially high levels -- levels associated with a drastic downward shift in the demand curve. Many economists continue to believe that oil prices will eventually settle into a more comfortable range of $85-$95 per barrel, although that may not happen until after the summer. Prices of other commodities are likely to follow suit, which would help support the eventual recovery in the U.S. private nonresidential construction industry."

To view the current report on ABC's website, click Here.

Wednesday, 13 April 2011

NC Senate extends deadline for filling bills; solar power bill expected to be introduced

The Charlotte Business Journal reports North Carolina's state Senate has extended the deadline for filing bills to be considered in this session to April 19, and some additional energy legislation is likely to be filed next week.

The extension is not unusual and does not appear to be keyed to any specific piece of legislation. Observers say it was approved to ease a rush to file bills at the original deadline April 12.

Julie Robinson of the N.C. Sustainable Energy Association says her organization expects Sen. Josh Stein (D-Wake) to introduce a bill that will allow solar project owners to sell power directly to customers.

The proposal could open a new market for solar developers in the state. Under current law, all commercial power plants — including solar farms — must sell the power produced to a utility. Since utilities cannot make a profit on power they buy for resale, they are generally reluctant to buy more than is required by the state.

Allowing direct sales from solar owners to customers would bypass utilities. Large commercial and industrial customers could buy their power from a project, and lock in their rates for a long-term contract, protecting them from rate increases. The bill tops the wish list for many solar companies and many in the renewable-energy industry. Read More.

Construction spending declines 1.4% in February

February spending fell 1.4%, mostly due to an implausible drop in residential remodeling reports Jim Haughey, Reed Construction Data's chief economist. Forthcoming revisions will likely raise the spending total in line with recent gains in construction jobs and reasonably steady construction starts. But construction activity has sagged since November under pressure from collapsing public budgets and a pullback in consumer income and confidence in the face of CPI inflation rising to a nearly 6% annual pace in the last six months. Sustained recovery has again been delayed.

Haughey observes construction spending estimates are notoriously unreliable during the winter, especially during a severe winter when weather interruptions are more frequent than long term average seasonal adjustment factors assume. The final chapter has not yet been written on construction spending trends during this past winter. Separately, annual revisions to construction spending due in May will likely reduce the level of total construction spending last year and show a deeper recession which will also quicken the pace of the initial recovery.

A significant share of the recent decline was a real cutback in public construction, especially buildings financed by municipal governments. This trend will persist well into 2011 as state and local governments are forced to balance their budgets with depressed revenues, exhausted reserves and end of federal stimulus funds on June 30th. The proposed budgets for FY 2011-12 are spending cuts from the current budget year in almost all states.

The Reed Construction Data spending forecast now projects a 2.1% decline in 2011 although spending will be rising steadily before mid-year. The delayed recovery early in 2011 pushes some work into next year raising the gain to 13.9%. Read More.

Tuesday, 12 April 2011

HB 489 proposes significant changes to NC lien law

Guest Editorial by Scott Wolfe Jr.

NC House Bill 489 has been recently introduced to the state’s General Assembly. It is titled “Mechanics Lien and Bond Law Revisions,” and aims to make some important amendments to the lien laws in North Carolina.

Off-Site Prefabricated Material Suppliers Protected

The new law would allow parties to lien for the “off-site design, fabrication and related labor and materials in connection with noncommodity prefabricated materials, product systems or equipment customized for the use and benefit of improving particular real property whether delivered to the real property or not.” There are only few instances in lien laws across the country when folks can obtain lien rights without having their materials or labor installed into the jobsite. Specially fabricated materials is one of those instances in some states…and North Carolina is looking to add themselves to the mix.

Notice of Commencement Filing Requirement

A Notice of Commencement must be filed for all North Carolina projects with the county clerk. While initially the owner is required to file the notice, if the owner fails to do so, the contractor may file the notice. In addition to the filing requirement, the notice must also be displayed on the job site, and a copy distributed to anyone who requests the same within 5 days of the request. Building inspections will not go forward on the project unless the notice of commencement is properly filed, and displayed on-site.

A special type of notice is required when an owner is acting as the general contractor to build a residential structure that is a four family residential building or less. In this instance, a Notice of Owner Built Project must be filed and displayed on site.

Effective Date of Lien Filing

This particular proposed legislative change is in direct response to a case pending with the North Carolina Appeals Court, previously discussed on the Construction Lien Blog: Preserve Holdings LLC v. Superior Construction Corp.

Preserve Holdings is a lien priority case, with a lien claimant contractor pitted against a construction lender, fighting over whose claim has priority over the other’s. The contractor argues its lien claim starts when materials and labor were first delivered, and the construction lender argues that each time the contractor got paid (and executed a lien waiver), the lien claim for that period was waived and the claim only related back to the last unpaid portion of work.

§44A-10 used to read very simply: “A claim of lien on real property….shall relate to and take effect from the time of the first furnishing of labor or materials at the site of the improvement by the person claiming the claim of lien on real property.”

The proposed amendment complicates things a bit, but is certainly more specific:

A claim of lien on real property…shall relate to and take effect from the earlier of (i) the time that the claimant files its claim of lien on real property with the clerk of superior court; (ii) the time that a notice of commencement is filed with the clerk of superior court; or (iii) for a first, second or third tier subcontractor, the date of filing its notice to owner if there has been no notice of commencement previously filed for the contractor through which the subcontractor has provided labor and materials for the improvement of property. In the event there are insufficient proceeds to satisfy all claims of lien on real property, claims of lien shall be satisfied as follows:
(1) Claims of lien on real property shall be satisfied in full by the priority of their effective dates.
(2) Claims of lien on real property with the same effective date shall be satisfied on a pro rata basis with the other claims of lien on real property with the same effective date.

Lien Waiver Policy More Fully Explained

In Another nod to the pending appeals case (Preserve Holdings), the bill proposes some changes to the lien laws treatment of lien waivers.

Some states allow parties to waive their lien rights before any work begins, and others consider this type of waiver to be against public policy. North Carolina has always been a state that considered such waivers to be against public policy. But, as the Preserve Holdings case is demonstrating, there is a blur between a pre-work lien waiver, and those partial lien waivers that are executed throughout the course of a project in every state, and understanding what the limits are upon these routine partial lien waivers can be difficult.

The proposed law makes it clear that partial lien waivers (i) do not alter or waive the lien’s effective date; and (ii) are conditional upon the claimant’s actual receipt of funds. Additionally, the proposed law also gives a partial lien waiver form that must be used.

Subcontractor Notices

Currently, North Carolina subcontractors are only required to deliver notices if the general contractor has filed a notice of contract. House Bill 489 proposes that all subcontractors must serve a notice to owner upon the owner, and file the notice with the superior court clerk. Subcontractors more remote than the first tier must also serve the notice upon the property owner. This notice will be required within 30 days from when labor and/or materials are first provided.

Conclusion

All in all, House Bill 489 proposes some substantial changes to the North Carolina Mechanic Lien system. We’ll watch it closely at the Construction Lien Blog, and report on any changes and progress. Read More.

Scott Wolfe Jr. practices construction law in Louisiana, Washington and Oregon with his firm Wolfe Law Group. He is the author of the Construction Lien Blog.

Sunday, 10 April 2011

NC legislators introduce housing stimulus bill to create construction jobs

The federal tax credit offered to first-time homebuyers in 2009 and 2010 gave the state's real estate industry a boost - albeit a temporary one. Now the state's legislators want to see if they can provide some similar magic.

Last week, leaders of the House Appropriations Committee filed H485: New Home Purchase Stimulus. It creates a $10,000 tax credit paid out over five years, meaning homeowners can claim $2,000 credit toward their state tax liability in each of those years. But unlike the federal credit this one is good only if you buy a newly built home.

If passed, the bill would take effect July 1 and last for exactly a year. It caps the credit at $100 million with no more than $20 million paid out in a single year.

Rep. Harold Brubaker, a Republican from Asheboro, said the legislation was a jobs bill because it will create jobs in the home construction industry.

N.C. State University economist Mike Walden has estimated that the tax credit could lead to the building of 26,000 homes.

Brubaker told the News and Observer that the proposal is one of several that may be included in the budget bill intended to spark job creation. He said budget writers are also examining small business equipment depreciation rules to see whether they can encourage equipment buying. "We're throwing all these things on the table," he said.

The bill has been referred to the House Commerce and Job Development Committee. Read More.

Thursday, 7 April 2011

Carolinas AGC says no to gas tax cap

The Carolinas AGC urges members to join fellow NC GO! advocates in telling the NC legislature to leave the gas tax alone. Efforts are under way at the legislature to either cap or totally remove the Motor Fuels Tax - a major source of transportation funding in the state. Legislators need to hear that HB 399 is the wrong move - bad for businesses and bad for protecting jobs.

Capping the gas tax over the proposed two-year period would:
•Only save the average driver about 20 cents per week
•Result in 18,335 miles of pavement statewide that could not be resurfaced
•Would result in almost 7,000 lost jobs
•Cost the state $250 million over the next two years

Click Here for more information and to send a brief message to legislators asking them to fight for jobs and economic opportunities by protecting transportation funding. You can fill out the short form and get your voice heard.

Carolinas AGC is a co-chair and a founding member of NC Go!, a diverse group which includes local chambers of commerce, regional transit systems, construction industry associations and consulting engineers whose focus is on transportation issues in North Carolina.

Construction industry survey has mixed ressponses

Each quarter Wells Fargo Equipment Finance, Inc. surveys construction industry executives to gather insight into current business conditions. Although 37.0% of construction executives said they anticipate an increase in local non-residential construction activity more telling is that about half (48.5%) believe non-residential activity levels will remain at the low levels recorded in 2010.

Of those executives that expect a decrease compared to 2010 activity levels, 7 in 10 say they don’t expect an improvement until at least Q2 of 2012. States with a net “decrease” outlook for non-residential activity include Arizona, Minnesota, Nebraska North Dakota, and Wyoming.

In spite of a rising optimism over the last two years, overall sentiment is still rather pessimistic about the amount of work available to sustain the current numbers of construction contractors. Very few executives (5.9%) anticipate an increase in the number of contractors this year. 53% said they expect fewer contractors by the end of the year. This maybe an improvement from 2010 when 70% of executives surveyed said they expected fewer contractors by the end of the year.

On average, contractors said they work with 3.7 different equipment distributors. These totals are essentially unchanged from the 2010 survey and indicate few equipment distributors are able to meet all of a contractor’s needs or become its exclusive equipment supplier.

Other survey highlights include the following:

•The Optimism Quotient (OQ) for the U.S. going into 2011 is a modestly positive 96. This is a marked improvement over the 2010 score of 66 and the all-time low score of 42 recorded for 2009. (*In general, an OQ of 100 or more represents high optimism for increased local construction activity relative to the perceived level of activity for the prior year. A score above 75 represents more cautious or measured optimism. A score below 75 signals that fewer executives say local construction activity will increase than say it will decrease – a more pessimistic point of view.)

•For the 11th consecutive year U.S. construction equipment distributors are more optimistic about levels of local construction activity than contractors. The 14-point difference between contractors and equipment distributors is among the highest of the past decade.

•Nearly seven in 10 U.S. contractors (69%) said they intend to buy new construction equipment in 2011 marking a slight increase from the 62% in 2010.

•An even greater percentage of respondents (78.5%) said they intend to acquire used equipment this year. In 2010 only 61% said they planned on acquiring used construction equipment.

You can view the full report Here. The survey was made possible through the cooperation and support of Associated Equipment Distributors.

Tuesday, 5 April 2011

Lien and bond law revisions introduced in NC General Assembly

The American Subcontractors Association of the Carolinas reports NC House Bill 489, titled "Mechanics Lien and Bond Law Revisions" was introduced on in the NC General Assembly on March 28. The bill was assigned to a subcommittee and industry groups will be encouraged to respond to the proposed revisions.

The bill’s sponsors understand that the current lien law is not meeting the constitutional mandate for an “adequate lien” in many circumstances. They have heard, as has the NC Bar Association Construction Law Section, something needs to be done, but have noted over the past several years that unilateral efforts to address the issues have a tendency to be beaten down by the rest of the industry.

While there are objections to the proposed revisions, there seems to be genuine appreciation for the Section’s willingness to undertake this task. As the matter works through the House, Keith Coltrain and the Lien/Bond Law Revision Committee will continue to educate various industry groups about the proposal. The subcontractor group reports there are a lot of rumors and a fair amount of misinformation circulating in the industry in terms of the content of the proposal.

If you have questions about House Bill 489, contact Keith Coltrain keith.coltrain@elmorewall.com, David Layton dlayton@gastonlegal.com, and any of the drafting subcommittee members – Ken Fromknecht kwflaw@dnet.net, Greg Ahlum gahlum@jahlaw.com, Ken Michael kmichael@wcsr.com, Paul Sheridan pasheridan@vannattorneys.com or Nan Hannah nehannah@vannattorneys.com. Additional analysis of the proposed legislation will appear in in the April/May 2011 issue of North Carolina Construction News.

Private nonresidential construction spending higher in February

Private nonresidential construction spending increased 0.9 percent in February, according to the April 1 report by the U.S. Census Bureau. However, despite February’s monthly performance, private nonresidential construction spending is down 13.2 percent from the same time last year. Total nonresidential construction spending – which includes both privately and publicly financed construction – stood at $523.2 billion in February, down 0.2 percent for the month and down 6.3 percent from February 2010.

“Reading the U.S. Census Bureau report, signs of transition with the nation’s construction industry have become increasingly apparent,” said Associated Builders and Contractors Chief Economist Anirban Basu. “We have known for some time that growth in construction volumes would shift from publicly financed construction to privately financed construction.

Six of the sixteen nonresidential construction sectors posted gains in spending on a monthly basis in February, including conservation and development, up 11.3 percent; manufacturing, up 5.4 percent; and power, up 2.5 percent. Five subsectors posted increases from the same time last year, including conservation and development, up 32.4 percent; highway and street, up 10.6 percent; and water supply construction, up 6.8 percent.

Those nonresidential construction sectors posting decreases for the month include water supply, down 5.9 percent; religious-related, down 3.8 percent; and educational construction, down 3.4 percent. The sectors with the largest year-over-year decreases include lodging, down 42 percent; manufacturing, down 30.1 percent; and office construction, down 19.9 percent.

Public nonresidential construction spending slipped 1.1 percent for the month, but is up 0.4 percent from one year ago. Residential construction spending fell 3.8 percent in February and 7.8 percent compared to the same time last year. Overall, total construction spending was down 1.4 percent in February and down 6.8 percent from February of last year.

“As the impact of federal stimulus wanes, and the broader economy continues to recover at a respectable clip, the volume of privately financed construction is now edging higher,” said Basu. “However, for the time being, that slender growth is being more than offset by decreases in publicly financed construction, including projects financed by state and local governments.

“This pattern is likely to continue into the summer. Demand for privately financed construction will probably expand only gradually due to an excess supply of hotel rooms, office space, retail space and industrial space in many markets,” Basu said. “In contrast, the recent decline of construction activity in segments heavily financed by state and local governments will likely continue on that path. Read More.

Monday, 4 April 2011

Carolinas AGC Construction Barometer reports slow but stable business conditions

The Carolinas AGC Construction Barometer™ recently indicated that despite relatively stable construction conditions in the Carolinas, contractors throughout the Carolinas are deeply concerned about long-term cost increases. The Barometer’s 2.2 percent fall in fourth quarter 2010 was mainly due to fears of construction inflation likely arising from concerns about food and energy price hikes. However the Federal Reserve recently reported that these are probably temporary.

While some areas of construction (public works, DOT spending) are likely to decline in 2011, Barometer panelists reported no major decline in anticipated business. Business is likely to remain slow for the majority of 2011, rise moderately toward year-end, and accelerate more briskly in 2012.

Anticipating a slow-but-stable 2011, panelists reported a drop in planned heavy equipment purchases and rentals, a lesser appetite for commercial credit, and stable demand for skilled labor. Consistent with fears of rising equipment and materials costs, panelists also reported modestly rising wage rates and employee benefits costs. Construction employment will likely remain flat throughout 2011.

In the financing arena, the availability of long-term commercial financing remained unchanged. Short-term credit availability for inventory and accounts receivable financing edged lower though, as regional bankers showed little interest in financing the run-up in materials costs. Panelists reported they expect this trend to continue throughout 2011.

Contractors noted sharply stronger expectations that borrowing costs will rise, as bankers adjust the risk premiums they charge contractors. While interest rates are expected to remain at record low levels throughout most of 2011, contractors aren’t likely to see much incremental benefit from them, as bankers grow increasingly wary of financing inflation-driven materials cost increases. Read More.

NC ranked 15th in structurally deficient bridges

Transportation for America, a coalition of housing, business, public health and transportation organizations, said in its recently released report that 13 percent of our state's bridges are considered "structurally deficient." North Carolina ranked 15th among all states in the percentage of bridges needing attention or replacement.

The report indicated that that 11.5 percent, or 69,000, bridges in the U.S. need attention or replacement. It said more federal funding help is "essential."

"For bridges, lack of maintenance can lead to the sudden closure of a critical transportation link or, far worse, a collapse that results in lost lives and a significant decline in regional economic productivity," according to the report, which cited federal data and other sources.

Federal spending for bridge repair has severely lagged estimates of needed funding. Federal spending increased by $650 million from 2006 through 2009, compared to the $22.8 billion that the Federal Highway Administration said it needed to fix deficiencies.

The American Society of Civil Engineers, the leading expert on U.S. infrastructure, has said the United States needs to invest $17 billion annually to improve current bridge conditions. According to a 2009 report, the country only spends $10.5 billion each year on bridges.

Severe budget crises in many states have left them unable to take on a greater share of the costs. In North Carolina 2353 bridges out of a total of 18,099 bridges in the state are considered structurally deficent.

"The nation's bridges are aging and traffic demands are increasing, even as state and local revenues are shrinking," the report by Transportation for America said.

Currently, Congress is considering long-term legislation to fund transportation projects, and states hope to garner billions in new funding. President Barack Obama wants to put $336 billion into rebuilding roads and bridges over six years, with $70.5 billion for road and bridge repair in 2012.

More than 20 states have a higher percentage of deficient bridges than the national average of 11.5 percent.Read More.