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COLORADO GENERAL ASSEMBLY
2010 Legislative Session Summary
 
The Colorado legislature just ended its tumultuous and controversial 2010 session.  AGC was at the front and center of all the legislative fights that directly impacted our industry, for good and – in a year that saw the introduction of many anti-business bills – for bad.

Here is a round up of the most important bills to our industry, out of the roughly 650 that were introduced during the session.

Construction contract payment reform
After twice working to negotiate comprehensive “prompt payment” reform legislation in 2008 and 2009, only to see them defeated by the local government and some private owner groups, the AGC succeeded in 2010 in passing Colorado’s first major payment reform legislation in a decade.

SB10-116 – Requiring reimbursement of costs in public works change orders
Sponsors: Sen. Mike Kopp (R-Jefferson), Reps. Joe Rice (D-Arapahoe) and Kevin Priola (R-Adams)

IMPACT: This new law will permit contractors to recover hundreds of thousands of dollars in incurred costs for directed work that otherwise sit on the books awaiting final change order approvals.

This legislation – initiated by AGC and the industry coalition Building Jobs 4 Colorado – was the product of months of negotiations with the City of Denver over the controversial subject of change orders.  The bill now requires local governments to reimburse the contractor for its actual costs incurred after the issuance of a change directive but before the final change order is signed.

AGC Position: Support
Result: Signed into law

HB10-1162 – Limiting retainage in construction contract
Sponsors: Rep. John Soper (D-Adams), Sen. Bob Bacon (D-Ft. Collins)

HB1162 originally limited retention in all construction contracts to 5.0% until the project is 50% completed, then 2.5% thereafter.  It also required, among other things, the establishment of separate escrow accounts and all interest earned on retention to be returned to the contractor.  The bill ran into a number of problems, including its large fiscal impact to the State of Colorado and strong political opposition from local government and private owners.

AGC Position: Neutral
Result: Killed

Workers Comp “De-form”
While the business community beat back a 2009 legislative raid of $500 million of Pinnacol’s reserves to help balance the state’s budget, the fight was far from over.   A 2009 summer interim committee established to investigate Pinnacol recommended 7 bills, most aimed at all of Colorado’s well-functioning workers comp system and opposed by the AGC.

HB10-1009 – Changing the Pinnacol Board of Directors
Sponsors: Rep. Joe Miklosi (D-Denver), Sen. Mary Hodge (D-Adams)

HB1009 attempted to politicize the Pinnacol Board by requiring non-management employees, an injured worker and a health care provider be added to the board.   The sponsors were finally able to get the bill passed in the last days of the legislature only after striking everything in the bill – including the Board appointments – leaving just a requirement for advance public notice of Board meetings.  

AGC Position: Oppose
Result: Passed legislature in neutered form, awaiting Governor’s signature

HB10-1012 – Limiting surveillance in WC fraud investigations
Sponsors: Rep. Sal Pace (D-Pueblo), Sen. Morgan Carroll (D-Aurora)

IMPACT: Passage of this AGC-opposed bill would have caused Colorado contractors’ comp insurance rates to increase without an effective deterrent to fraud.

Likely the most controversial of the workers comp bills, HB1012 would have practically eliminated the effective and cost-savings practice of using video surveillance in the investigation of workers comp fraud.   After the sponsors repeatedly re-wrote the bill in hopes of keeping it alive, it failed by just a single vote in a Senate Committee. 
  
AGC Position: Opposed
Result: Killed

HB10-1356 – Capping Pinnacol’s surplus
Sponsors: Rep. Su Ryden (D-Aurora), Sen. Lois Tochtrop (D-Adams)

IMPACT: Passage of this AGC-opposed bill would have de-stabilized Colorado’s cost effective and affordable workers comp insurance market, and hurt Colorado contractor’s EMR ratings.

Another bill to come from the 2009 Pinnacol investigation committee, HB1356 capped Pinnacol’s surplus – which the insurance company uses to cover unanticipated losses – at 800% of risk based capital.  The highly technical process of setting reserve or surplus limits is not the job of the legislature, and too tight of limits could cause wild swings in insurance rates in the event of unforeseen losses.

AGC Position: Opposed
Result: Killed

SB10-11 – Prohibit incentives to deny claims
Sponsors: Sen. Morgan Carroll (D-Aurora), Rep. Joe Miklosi (D-Denver)

IMPACT: In its original form, the bill would have effectively prohibited workers comp insurers from paying claims adjusters to investigate and deny claims that are unjustified, resulting in a direct increase in insurance costs.

SB 11 was one of the more aggressive efforts to control Pinnacol proposed by the Interim committee.  In the last days of the session, the bill was significantly amended over the objections of the Senate sponsor, moderating its approach to conflicts of interest in the workers’ compensation system.  Among other things, the final version of the bill prohibits employees and contractors reviewing workers’ compensation claims from being compensated on the basis of: the number of days to maximum medical improvement, the number of claims approved or denied, the number of treatments approved or any other metric which might conflict with the workers’ compensation system’s purposes.

AGC Position: Opposed
Result: Passed legislature with mitigating amendments, awaiting Governor’s signature

SB10-12 – Increased penalties for violations of workers’ comp laws
Sponsors: Sen. Lois Tochtrop (D-Adams), Rep. Sal Pace (D-Pueblo)

IMPACT:  As introduced, this bill would have made it harder for comp carriers to fully investigate or deny potentially fraudulent claims, increasing costs to Colorado contractors. 

SB12 originally doubled the maximum penalty against an employer or insurer violating a worker’s comp statute from $500 to $1,000.  It also lowered the standard for proving the violation from “willfully” to “knowingly.”  The bill was amended in the last days of the legislature by the insurance carriers to exempt unintentional delays from the increased penalties. 

AGC Position: Opposed
Result: Passed legislature with mitigating amendments, awaiting Governor’s signature


Government Contracting Regulations
Contractors doing business with state and local governments were particularly the targets of negative legislation in 2010.  The legislature attempted to impose extensive and punitive new requirements on public works contractors in the name of openness and combating government fraud. AGC led the industry charge on both of the following bills.

HB10-1357 – Colorado False Claims Act
Sponsors: Rep. Buffie McFadyen (D-Pueblo), Sens. Chris Romer (D-Denver) and Betty Boyd (D-Jefferson)

IMPACT:  Colorado contractors could have been forced to spend $50,000 or more to defend frivolous or groundless lawsuits filed under this act.  AGC successfully led the opposition to this bill.

The False Claims Act provided powerful financial incentives for employees of government contractors to become “whistleblowers” and sue to recover money for the state.  Whistleblowers could sue for treble damages, attorney’s fees and $10,000 per violation – and keep 15-30% of those recoveries.   Proof of intent to defraud or actual knowledge of the alleged fraud was not required.  While no one defends government contracting fraud, this bill – supported by the plaintiff’s bar – exposed Colorado contractors to very real threat of expensive lawsuits from disgruntled employees.

AGC Position: Opposed
Result: Killed

SB10-114 – Opening government contractor records to public inspection
Sponsors: Sen. Morgan Carroll (D-Aurora), Rep. Paul Weissman (D-Boulder)

IMPACT: Had this bill passed in its original form, Colorado contractors could have been forced to spend thousands of dollars and hundreds of man-hours responding to document requests from competitors and the general public.  AGC led the opposition to this bill.

SB114 originally exposed all documents or records related to the cost or performance of a government contract to the Colorado Open Records Act – the state version of the federal Freedom of Information Act (FOIA).   The AGC worked with the sponsors of the bill to not only remove the worst parts of the bill, but to provide Colorado contractors with protections under the law they don’t currently have.

AGC Position: Opposed without significant amendments, Neutral with negotiated amendments
Result: Killed

Construction Defect Lawsuit Reform
Construction defects litigation reform was AGC’s top legislative priority item for 2010.   Instead of fighting more legislation initiated by the plaintiff’s bar (which was never introduced this year), the AGC worked with the rest of the building community to pass a much needed bill. 

HB10-1394 – Overturning court decision eliminating construction defect coverage
Sponsors: Rep. Joe Rice (D-Arapahoe), Sen. Mark Scheffel (R-Douglas)

IMPACT: Colorado contractors faced no coverage by their insurance carrier for construction defect claims without this successful AGC-backed legislation.

A series of potentially disastrous court cases in Colorado have essentially ruled that the damage resulting from a construction defect is not an insurable occurrence, thereby rendering a Colorado contractor’s commercial general liability policy almost useless for construction defects.  HB-1394 sought to overturn those decisions, restoring the status quo for construction defect coverage.  Although the insurance companies opposed the bill, asserting it goes to far in creating new coverage that will increase rates, the bill passed with strong bi-partisan majorities.

AGC Position: Support
Result: Passed the legislature, awaiting signature by the Governor

CONSTRUCTION DEFECTS

SB10-045 -- Homeowner Protection Act
Sponsors:  Sen. John Morse (D-Colorado Springs), Rep. Andy Kerr (D-Jefferson)

IMPACT:  If used to push the plaintiff bar's agenda to win more money out of construction defect claims, this bill could have increase the number and cost of lawsuits faced by Colorado contractors.

SB45 was introduced as a mortgage reform bill, but it was widely viewed as a "stealth" construction defect bill for the trial lawyers.  It had the same sponsor and same title as failed 2009 construction defect legislation.  The bill was introduced in the first week of the session and was not acted upon until the last week of the session, at which time the sponsor killed it.  Throughout the session, contractors and builders worried the sponsor could use the bill to instead push the trial lawyer agenda of pushing back the date at which pre-judgment interest begins to accrue.  Since interest on the judgment can often be as much as the judgment itself, such a bill would pose a real threat to Colorado's already fragile construction defect insurance market. 

AGC Position: Monitor closely
Result: Killed


Tax increases to balance the budget
 The first major issue facing the 2010 General Assembly was balancing the state budget.   Last fall the Governor settled on a package of thirteen bills, introduced late in January and intended to take effect beginning March 1 raising some $130 million a year.  Some of the tax increases were aimed at consumers, notably the expansion of the sales tax to soda and candy and Internet sales.  Others were aimed at business, including the sales tax exemptions for custom software and for industrial energy.  Republicans used the bills as an opportunity to paint the Democrats as the party of tax and spend and to argue that raising taxes in a recession is job killing and would discourage business investment.  Democrats decried the irresponsibility of Republicans for their indifference to the constitutional requirement to balance the budget.  These themes were repeated over two weeks of extensive committee and floor debate.  In the end, the package of tax increases passed without substantial amendment, essentially by party line.
 
Two other tax increase bills were of particular interest to Colorado contractors.

HB10-1263 – Limit income tax deduction for direct and indirect compensation over $250,000
Sponsors:  Rep. Jack Pommer (D-Boulder), Sen. Betty Boyd (D-Jefferson)
 
IMPACT:  This AGC-opposed bill would have especially penalized Colorado’s contracting industry, made up of many small and medium-sized family run businesses. 

This bill – widely seen as retribution against the business community for opposing the Governor’s package of 13 tax increase bills – eliminated the income tax deduction for the amount of salary or other compensation (including benefits) over $250,000 paid to an individual.
 
AGC Position: Opposed
Result: Killed

SB10-142 - Resolving local government disputes over sales and use taxes
Sponsors: Sen. Joyce Foster (D-Denver) and Rep. Cheri Gerou (R-Evergreen)

IMPACT:  The heavy hand of liens to collect use tax on construction projects would have put Colorado contractors at a distinct disadvantage when resolving tax disputes with local governments. 

El Paso County stirred up controversy this year by attempting to impose liens for unpaid use taxes, of particular concern to contractors. Dealing with the unrelated subject of time limits for a taxpayer to protest a local tax deficiency notice, El Paso County proposed an amendment to authorize such liens.  The AGC successfully fought the amendment, along with other local taxpayers, and helped ensure there was not a late bill on this subject.  The County has said it may bring a stand-along bill on this subject next year.   

AGC Position:  Oppose with use tax lien amendment
Result:  Bill passed without lien amendment
 
Capitol Dome Repair
 The crumbling state of the historic Capitol Dome highlights the hundreds of millions of dollars in deferred capital maintenance put off by the state during the recession.  The AGC supported two competing bills to finance the Dome repair – both to bring a major project to our industry and to highlight the sad state of capital maintenance in Colorado government buildings today.   


SB10-192 – Funding capitol dome repair from limited gaming
Sponsors: Sen. Mike Kopp (R-Jefferson) and Rep. Jerry Sonnenberg (R-Logan)
 
HB10-1402 Permitting private fund-raising campaign for repairing the Capitol Dome
Sponsors: Sen. Bob Bacon (D-Ft. Collins), Rep. Jim Riesberg (D-Greeley)

SB192 was the first of two competing bills finance the $12 million dollars in needed repairs to the Colorado State Capitol Dome. The bill initially would have allowed for the transfer of state funds from the State Historical Fund to be used for the dome repairs. The second bill, HB10-1402 by Rep. Riesberg and Sen. Bacon would give legislative authority for the state to conduct private fundraising of the funds instead of using state funding. SB10-192 was amended to encompass the provisions in HB10-1402 allowing the state to take money from the State Historical Society as well as conduct private fundraising efforts. Both bills passed.
 
AGC Position: Supported both bills
Result: Both bills passed the legislature, awaiting Governor’s signature