AGC Texas Building Branch

 "Working for legislative solutions for the commercial building industry in Texas."

 Legislative Report on the 79th Texas Legislature

  

AGC Texas Building Branch
816 Congress Avenue - Suite 950
Austin, TX 78701
(512) 478-5629 - www.agctbb.org

A General Look at the 79th Legislative Session

 The 79th Texas Legislature was successful in passing several important issues for the state, starting with overdue reform of the state's workers compensation system.  After a brief standoff between the House and the Senate, they finally were able to get together to pass a bill that will benefit both employees and employers.

The Legislature was unsuccessful in dealing with issue of reforming the public school finance system that has been in place since the early 90's.  As this report is being written, the Legislature has been called back into special       session to make another run at "education reform" and "property tax relief" - as of this moment, there are still some major obstacles to overcome to pass a bill and in the meantime, the Texas Supreme Court has started its hearing on the issue.

 Statistically, over 5,600 bills were filed by legislators (this includes proposed changes in the state statutes and joint resolutions).  A total of 1,593 bills and resolutions were sent to the Governor for his consideration.  The Governor vetoed 19 bills, signed 1,554 bills and he allowed 20 measures go into law without his signature.

We continued to enjoy unprecedented cooperation from the Texas Construction Association and its lobbyists.  This session also marked the entry of the Texas Surety Federation in lobbying efforts.  We enjoyed the assistance of this new surety industry group and its lobbyist.  We were also able to call on members of the State Bar of Texas Construction Law Section for their assistance.

TBB Legislative Priorities   

As the 79th Texas Legislative Session began, the AGC Texas Building Branch had identified 8 key legislative issues that would be the priority issues for AGC during the Legislative Session. The Priory Issues were: 1) Contingent Payment Clauses in Construction Contracts; 2) Local Government Sovereign Immunity Claims; 3) Statutory Employer/3rd Party Lawsuits; 4) Improvement of the State Administrative Hearing Processes on contract claims; 5) Opposition to mandatory OCIP's; 6) The Use of School District Employees for Construction Projects; 7) Workers Comp Reform; and 8) inclusion of a prior contract exemption for any sales tax increase. 

Six of the eight legislative issues resulted in an action that was favored by the AGC Texas Building Branch.  Four Bills were passed on the following items: Local Government Sovereign Immunity; Improvement of the State Hearing Process on contract claims; the use of school district employees on construction projects; and improvement of the workers comp system.

There was no legislation passed on either the mandatory OCIP issue or for a sales tax increase.  As everyone knows, the Legislature did not pass a public school/property tax reduction bill - thus there was no increase in the state sales tax.  The final AGC issue is the contingent payment legislation.  This bill got thru the House and was passed out of the Senate Committee before it ran out of time in the Senate and did not make it onto the Senate's final legislative calendar.

Statutory employer legislation dealing with the issue of 3rd party lawsuits was ready to be filed by Representative Nixon.  However, after discussions with Texans for Lawsuit Reform and the tragic plant explosion in the Houston area, a decision was made that the 79th Legislative Session was not a good time to try to pass this legislation and the bill was never filed.

To summarize, AGC was successful in addressing six of the seven legislative issues that were on the Priority List that were addressed during the Legislative Session.

AGC Priority Bills Passed and Signed Into Law

HB 2039 by Representative Nixon/Senator Wentworth

This bill provides for an express waiver of sovereign immunity for claims arising from the sale of goods or services with local governmental entities (includes cities, school districts, and water authorities.... does not include state agencies or counties). Recoveries are limited (no consequential damages, exemplary damages, or home office overhead). No wavier of sovereign immunity in federal court.  Legislation will apply to existing as well as future contracts.
STATUS:  The Governor signed this bill and it goes into effect on September 1, 2005.

HB 1940 by Representative Ritter/Senator Wentworth

This bill amends Chapter 2260 of the Government Code (relating to dispute resolution procedures for state construction contracts) to expressly authorize recovery of delay damages (caused by the governmental entity). It expressly allows a contractor who has been sued by a governmental entity to seek recoveries by counterclaim. The procedural timeframe requirements were shortened and it gives a party the right to appeal the administrative order on the basis of an abuse of discretion. It also modifies the provisions which control payment by the agency without additional legislative authorization by requiring payment of that portion of a claim under $250,000 (.i.e., $249,999.99) when the total awarded damages exceeds $250,000.00.  
STATUS:  The Governor signed this bill and it goes into effect on September 1, 2005.

HB 1826 by Representative Grusendorf/Senator West

This bill prohibits school districts from contracting to perform construction or renovation projects with school district employees and property to real property not owned or leased by the district.
STATUS:  The Governor signed this bill on June 18, 2005 and it went into effect immediately. 

HB 7 by Representative Solomons/Senator Staples

This is major legislation "reforming" the workers compensation system.  Under this legislation, the Workers' Compensation Commission is eliminated and its responsibilities are transferred to a separate Workers Compensation Division within the Department of Insurance. Managed care options have been strengthened. 
STATUS:  The Governor signed this bill and it goes into effect on September 1, 2005.

AGC Priority Bills that did not Pass

HB 1146 by Representative Chisum/Senator Averitt

This bill was the result of a consensus between AGC Texas Building Branch and the Texas Construction Association.  It was designed to define the rights and responsibilities of the parties in a construction contract with a contingent payment clause.  The bill passed the House and was passed out of the Senate Business & Commerce Committee late in the session. 
STATUS:  The bill died in the Senate when it was not included on the last Senate Calendar to consider bills.

Other AGC Priority Issues

HB 1626 by Representative Nixon

This bill dealt with the Statutory Employer/3rd Party Lawsuit issue.  AGC worked with Representative Joe Nixon on this legislation.  The issue was clouded when Texans for Lawsuit Reform took a firm position that no legislation in this arena should be pursued with the passage of HB 4 with proportionate responsibility in 2003 and the results of the Etie court case out of Houston.  The issue was further complicated with the tragic plant explosion in the Houston area.
STATUS:  The bill was referred to the House Civil Practices Committee - Chairman Nixon did not schedule a hearing on the bill.

HB 3 by Representative Keffer/Senator Ogden

This bill would have provided property tax relief as a part of school finance and reform package.  This bill was the taxing element of the school bills package.  As the bills were drafted, they would have raised the sales tax anywhere from ½ cent to 1 cent and the bills did not include any provision for a prior contract exemption.  The legislative leaders kept citing a $50 Million tax shortage if the exemption were granted.  The House and Senate could not get together and agree on a compromise tax package.
STATUS:  The bill died in a House/Senate Conference Committee.

Mandatory OCIP's for State Public Works Projects

The legislature did not introduce any legislation calling for a mandatory OCIP for state public works projects.  AGC carefully monitored bills where this type of language could be inserted.
STATUS:  OCIP's are not mandatory for state projects.

AGC Issues that developed during the Session

HB 3356 by Representative Nixon - Companion SB 458 by Senator Fraser

A number of lawsuits have been filed in the Rio Grande Valley on behalf of the Donna ISD coming after contractors for construction defects.  These lawsuits are suspect and very speculative.  HB 3356/SB 458 would have helped in combating these frivolous suits by placing some standards on contingency fees by an attorney or law firm on behalf of a local governmental entity.  It would have limited the maximum hourly legal rate to no more than $1,000 per hour as well as setting a number of other provisions.  The bill was opposed by the Texas Trial Lawyers and a number of cities.
STATUS:  HB 3356 passed the House Civil Practices Committee and it died in the House.  The Senate companion SB 458 did not get a Senate Hearing.

Industry Coalition Legislation supported by AGC, CEC, TSA

HB 2525 by Representative Callegari/Senator Lindsay

The procurement and delivery system laws and requirements for construction applicable to all governmental entities are currently located in about a half dozen different state statutes. This bill would have pulled these statutes together under a single state statute in the Government Code.  The bill also included a provision to ban the use of reverse auctions for public construction projects.  It was a coalition effort bill supported by the Texas Consulting Engineering Companies; The Texas Society of Architects; and the AGC Texas Building Branch.  The Engineers were the lead players on the bill as they have been with all of the alternative delivery bills due to their strong relationship with several legislators.  This bill was caught in a political firefight between the Governor and the Engineers.
STATUS - The bill was vetoed by the Governor.

Significant Bills that Passed that were supported by AGC

HB 265 by Representative Wayne Smith

This bill requires municipalities to issue building permits on a timely basis (statutory time periods are provided). Failure to issue permits on timely basis imposes obligation on municipality to refund permit fee.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 266 by Representative Wayne Smith

This bill requires counties to issue building permits on a timely basis (statutory time periods are provided). Failure to issue permits on timely basis imposes obligation on county to refund permit fee.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 629 by Representative Solomons

In the recent (2003) case of Page v. Structural Wood Components, Inc., the Texas Supreme Court held that a subcontractor's deadline for filing a lien affidavit to perfect a claim for retainage runs from the date the original contract is completed, terminated or abandoned, even if the subcontractor did not know when or if the original contract was either terminated or abandoned. HB 629 remedies this problem for subcontractors by requiring an owner to provide written notice to a subcontractor who has sent a lien notice or who has requested written notice from an owner whenever an original contract is either terminated or abandoned. If notice is not provided within ten days of termination or abandonment and the lien claimant otherwise properly perfects its lien claim, the owner will not be allowed to object on the grounds that an early termination or abandonment of the original contract shortened the subcontractor's time to perfect its lien claim. This will not apply to residential construction projects.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 2988 by Representative Nixon/Senator Ellis

This bill provides that statutory requirements with regard to sovereign immunity, including notice provisions, are jurisdictional.  It makes clear that the decision to waive sovereign immunity rests with the Legislature and that a court does not have jurisdiction over a case if a plaintiff has not met the statutory prerequisites for a waiver.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

SB 15 by Senator Janek/Representative Nixon

This bill creates a new in the Civil Practices & Remedies Code dealing with claims involving exposure to asbestos and silica.  It will require a person bringing an action to file a report from a medical professional confirming that the plaintiff meets certain medical criteria.  Establishes a multi-district litigation process and changes the statute of limitation for bringing claims. 
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

Construction Industry Related Bills

HB 74 by Representative Naishtat/Senator Fraser
Current law has a conflict of interest provision that prevents mold assessors from both identifying dangerous mold and then performing the remediation work.  The law prevents a licensed remediator employed by a school district from performing both functions.  This bill exempts a school district from this conflict of interest of provision for licensed remediators.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 664 by Representative Isett

This bill gives a city with a population of less than 250,000 or a school district with administrative offices located in a city of less than 250,000 the authority to give a 5% preference to a local bidder under a competitive sealed proposal.  Current law allows for cities with a population less than 200,000 to give a 3% preference to a local bidder and school district cannot currently give a local bid preference.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 908 by Representative Turner

This bill set up a pilot program for the State Building and Procurement Commission with regard to purchases of goods and services by reverse auction.  It establishes a goal of 20% of the dollar value purchased by the Commission for the program.  The Commission is to report its findings to the Governor, Lt. Governor and Speaker of the House by December 1, 2006.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 1317 by Representative Driver

This bill "cleans-up" revisions to statewide electrician licensing legislation enacted during the 2003 Legislative Session.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 1573 by Representative Geren

The definition of the practice of architecture for purposes of requiring an architectural license was revised.  It modifies the requirement for a "Certificate of Merit" as a condition to filing suit against an Architect.  Under the new legislation, a Certificate of Merit must be filed as a condition to bringing any action against an Architect for damages - not just an action for professional negligence.  Arguably, an Owner in a dispute for breach of contract would have to file a Certificate of Merit.  This makes little sense when the Certificate of Merit is supposed to identify negligent acts or omissions of the Architect (i.e., what happens if the claim has nothing to do with negligence?).  The Certificate of Merit requirement will also apply to arbitration proceedings.  The Court (or an Arbitrator) in the proceeding will be required to dismiss an action for failing to furnish the Certificate of Merit but will have the option of dismissing the action with prejudice (which would not allow the claimant to re-file) or without prejudice (which would allow the claimant to re-file)
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 2243 by Representative Jim Jackson

This amends the statute regulating "locksmiths" to require those persons or companies that sell "security devices, including dead bolts and locks" to be licensed as a locksmith. Currently, only those persons or entities that advertise or use the name "locksmith" must be licensed.  It prohibits a locksmith from opening a structure or vehicle without the written authorization of the person who claims to own the structure or vehicle.  The bill includes an exception to the registration requirement for a retailer or manufacturer who does not service locks outside of the retailer's premises and who does not hold itself out to the public as a "locksmith".  
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 2481 by Representative Bonnen/Senator Harris

The Texas Emissions Reduction Program was enacted by the legislature in 2001 and was set to expire in 2008.  This bill extends the program to 2013 and all its measures including the equipment incentive program to replace older dirty diesel equipment.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005.

HB 3461 by Representative Baxter/Senator Armbrister

This bill establishes a notification process for establishing a moratorium on commercial property development for municipalities.  It establishes guidelines to be used by municipalities.
STATUS - The Governor signed this bill and it goes into effect on September 1, 2005

Texas Surety Federation
P. O. Box 164077
Austin, Texas 78716-4077