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SFAA Reports on Key Legislation That is Moving in the States

Thursday, March 13, 2014  
The 2014 state legislative sessions are well underway in most states. Florida convened last week and Louisiana is about to convene. North Carolina will start in May. This is the short session in most states, and in some states, the fiscal 2015 budget will be the primary item considered. New Mexico Oregon and Virginia already adjourned and Nebraska, West Virginia and Wyoming are close to the finish line for 2014. A lot of surety and fidelity legislation is starting to move in the states and the following is an update on the status of key issues that SFAA has been addressing.

--P3s. Georgia SB 255 would authorize public private partnerships for public facilities and infrastructure. SFAA and AIA worked together to assure that the bill contained a provision requiring the construction portion of a P3 to be bonded under the Little Miller Act. SB 255 passed the Senate and is in the House as the clock ticks toward adjournment. Kentucky HB 407 is a recent introduction that would allow state and local governments to enter into P3s for construction, goods, services and supplies. The bill contains specific provisions regarding the security on local government projects under which the private partner would have to provide maintenance bonds, performance and payment bonds, warranties, guarantees, and optional letters of credit in the forms and amounts that are satisfactory to the local government. SFAA has drafted amendments to require the construction portion of a local government P3 to be bonded.

--Bond Thresholds. Missouri HB 1484/SB 529 would increase the state bond threshold from $25,000 to $50,000. SB 529 has passed the Senate. Mississippi SB 2293 would have increased the state bond threshold from $25,000 to $50,000. The bill died in committee.

--Bond Waivers. California SB 616 would have exempted the Los Angeles Unified School District (LAUD) from the bonding requirements for public works contracts less than $1 million if the contractor is a small business. The bill carried over from 2013 but was stripped of its provisions early this year and converted into a vehicle bill for issues unrelated to surety. LAUSD had until February 21 to reintroduce the bill and it has not resurfaced.

--Surety Eligibility Requirements. Washington
SB 6110 is a surety initiative to address the issue of some public owners requiring the surety on a retainage bond to have an A+ rating from A.M. Best’s. The sureties reached an agreement with the port authorities behind this bill to repeal the provisions in the procurement code that the public owners were interpreting to give them authority to set eligibility requirements, and instead permit public owners to require the sureties to have a rating of A- or better. As amended the AB 6110 passed the Senate but failed to pass the House by the deadline this week for Senate bills to pass the House. The local sureties now are looking for another bill with related subject matter to incorporate the text of SB 6110. Illinois HB 4769 would amend the Little Miller Act to require the surety to have a certificate of authority from the Department of Insurance and at least “A” rating from Best’s.” SFAA and AIA worked to reach an agreement on an A- or better rating. We are gathering more information, but it appears that the impetus for this legislation was problems with assets pledged by individual sureties.

--Surety Disclosures. Hawaii SB 2440 would have required surety companies issuing a surety bond contract executed by a principal acting in the principal's individual capacity to disclose all potential personal losses to the principal arising from any action on the surety bond in writing. The surety also would have to provide principals who are over the age of 62 years with counseling regarding the principal's capacity to sustain personal losses that may arise from any action on the bond. The bill died in committee

--Real Estate Appraisal Management Companies. Arizona HB 2239 would change the $20,000 license bond required for real estate appraisal management companies to a bond in an amount not less than $50,000 and not more than $100,000. The bill passed out of committee in the House. Mississippi SB 2671 would repeal the $20,000 license bond requirement for real estate appraisal management companies. The bill passed the Senate and was sent to the House. Virginia HB 762 would increase the amount of the license bond required for real estate appraisal management companies from $25,000 to $100,000. The bill has passed both chambers.

--Contractor License Bonds. Alabama HB 143, as introduced, would have increased the $2,000 bond requirement for master plumbers and master gas fitters to $15,000 and converted the requirement into a statewide bond. The bill was amended on the House floor and now would repeal the current bond requirement and establish a recovery fund for consumers. The bill also now provides that participation in the recovery fund also would be in lieu of any performance bonds required by a city or county. We fought this bill in the Senate, where in committee the Senate restored the original bill text in increase the bond amount to $15,000 and make it a statewide bond requirement.

--Motor Vehicle Dealer License Bonds. Alabama HB 400/SB 305 would increase the $25,000 license bond for new vehicle dealers and the $10,000 bond for all other dealers. Instead, all dealers would post a $50,000 bond. The bill also would eliminate the licensing and bonding requirements for motor vehicle re-conditioners. The bill has been sent to the Governor. Wisconsin AB 262 would increase the minimum amount required for a license bond for motor vehicle dealers from $25,000 to $50,000. The bill has passed both chambers.

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