Legislative Update

April 2020

Legislation in the Time of Coronavirus (From ACEC California Update April 3, 2020)

The Legislature has been on extended recess the last few weeks and was due to resume on April 13th, although this morning it was announced that they would remain on leave with no certain return date.
 
The two constitutional deadlines facing the Capitol the remainder of this year are:

  • June 15th is the deadline for the state's annual budget bill to be passed
  • August 31st is the deadline for all other bills to be passed

Legislators are being instructed to shed any nonessential or non-coronavirus related bills (read: the vast majority of their bills).  The Department of Finance has already informed the Legislature and state agencies that this year's June 15 budget will be a baseline budget (i.e. a copy/paste from last year, with only the most essential changes made).  A true FY20-21 budget isn't likely until August, after tax returns come in post the new July 15th filing deadline.

SB-1 and Fuel Tax

(From CSAC Legislative Representative)

CSAC staff have been in touch with the Department of Finance regarding impacts to fuel tax revenues due to the apparently significant decrease in driving and fuel consumption as Californians “shelter in place” consistent with state and local public health orders (e.g. https://www.unacast.com/covid19/social-distancing-scoreboard).

While it is still too early to determine the magnitude of the fuel tax revenue impact in March, or to forecast impacts in subsequent months, please keep the following in mind:
·         Fuel excise taxes are collected a month in arrears and each successive month includes a true-up from the previous month. Accordingly, the May 2020 allocation of fuel tax revenue will provide some idea of the magnitude of the consumption reduction due to COVID-19.
·         While this consumption data will be helpful, the more important issue will be the length of the effect, especially if “shelter in place” orders last for several additional weeks/months, which is currently impossible to predict.
·         Recall that SB 1 removed the direct link between fuel prices and county road maintenance revenue. In prior recessions, including the “Great Recession,” fuel consumption did not decrease as significantly as fuel prices did—the current situation, however, may not be directly comparable.
·         The Department of Finance normally updates its fuel consumption forecast as part of the May Revise of the Governor’s budget proposal, which typically comes out in mid-May.

Resources for Paycheck Protection/CARES Act:

Paycheck Protection Program Website

Department of Treasury CARES Act Website

The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses. If your firm may qualify for this new assistance, please contact your lenders and CPAs immediately for additional information and guidance, as the funds are open and available on a first-come, first-served basis.

Construction Industry:

Governor Newsom has affirmed his commitment to keeping construction moving in the State of California despite what some other states and the Bay Area counties have recently done.  Specifically, he acknowledged that the strict adherence to protocols to keep workforces, and the communities they work in, safe have been working well.  Things are, of course, subject to change, but at the current time the state directives for construction remain (please visit https://covid19.ca.gov/ for more information).
 
Finally, Caltrans has also affirmed that they will be moving forward with their projects, even in counties with stricter stay-at-home orders.  For more specific information, see ACEC's COVID-19 Weekly Update.

Visit ACEC California's COVID-19 Resource page for more links and information.

January 2020

AB1768

AB 1768, which went into effect on January 1, 2020, amends the definition of “construction” work for which prevailing wages must be paid to include “work performed during the design, site assessment, feasibility study, and other pre-construction phases of construction…regardless of whether any further construction work is conducted…”  Although the California Labor Code already defined “construction” to include “work performed during the design and pre-construction phases of construction, including but not limited to, inspection and land surveying work,” according to the bill’s author, Wendy Carrillo, “ambiguity as to what is considered pre-construction work has led to confusion amongst stakeholders in the construction industry as to when prevailing wage requirements apply.”
 
In addition to expanding the definition of construction to include site assessments and feasibility studies, the bill also specifies that pre-construction work is covered by the prevailing wage law even if no construction work occurs.
 
As a result of the expansion of the definition of “construction,” this would mean that if you are engaged by a public client to conduct feasibility studies and/or a site assessment for a project utilizing public funds, you must pay PW to anyone who would be performing services considered a covered trade (e.g., operating engineer/heavy equipment operator, surveyor, carpenter, cement mason, electrician, laborer, building/construction inspector (including a geotechnical engineer acting as a construction inspector), and field soils and materials testers (including a geotechnical engineer performing duties covered under soils and materials testing)).
 
Therefore, it’s not the title that is outcome determinative, it is the duties you are performing that determine whether you should be paid prevailing wage.  
 
As was the case before this law passed, licensed architects, engineers, geologists, and others whose services are primarily intellectual, managerial, creative, and requires the use of independent judgment and discretion, are not subject to prevailing wage and the new law does not change that.  So, if you are a licensed geotechnical engineer and you are actively engaging in inspection and/or testing (construction inspector work), this work would be subject to prevailing wage; however, if you are merely overseeing/managing, you would not be subject to prevailing wage, as was the case before the new law.
 
Note that there is a 6 month grace period on enforcement actions under this new law which ends on May 31, 2020.

SB205

What is SB205? Existing law requires the State Water Resources Control Board (State Water Board) and the California Regional Water Quality Control Boards (Regional Water Boards) to prescribe waste discharge requirements for the discharge of storm water by municipalities and industries in accordance with the National Pollutant Discharge Elimination System (NPDES) permit program established by the Federal Clean Water Act and the California Water Code. The existing law requires regulated municipalities and industries to obtain a storm water permit.

Senate Bill 205 (2019) requires a person applying to a city or county for a new or renewed business license to demonstrate enrollment under the NPDES Industrial Storm Water General Permit for each business location conducting regulated industrial activities described below.

SB205 became effective on January 1, 2020.

Does Senate Bill 205 impact all businesses? No. The requirements of Senate Bill 205 solely impact industrial businesses operating facilities with the following primary Standard Industrial Classification (SIC) codes:
(1) Feedlots of a specific size (SIC codes 0211-0272): Feedlot SIC codes
(2) Manufacturing Facilities (SIC codes 20XX-39XX and 4221-4225);
(3) Oil and Gas/Mining Facilities (SIC codes 10XX-14XX);
(4) Hazardous Waste Treatment, Storage, or Disposal Facilities (often SIC code 4953);
(5) Landfills, Land Application Sites, and Open Dumps (SIC code 4953);
(6) Recycling Facilities (SIC codes 5015 and 5093);
(7) Steam Electric Power Generating Facilities (specific activities under SIC code 4911);
(8) Transportation Facilities (SIC codes 40XX-45XX [except 4221-25] and 5171); and
(9) Sewage or Wastewater Treatment Works (SIC Code 4952).

Standard Industrial Classification code 8711 Engineering Services does not require permit coverage under the Industrial General Permit.  For your business license application, enter SIC code 8711 and the city should continue to process your business license, however, compliance may be required with local ordinances: http://www.calgold.ca.gov/

Download an FAQ about SB205

May 2018

SB 993 Update

Thanks to the diverse testimony and all members supporting the coalition against SB993, we were able to address all the critical points that the committee needs to consider, from small business impact to competitive disadvantages and implementation challenges.

The Senate Governance and Finance Committee, on the morning of May 16th, 2018 held SB 993 (Hertzberg), declining to vote on the bill that proposes to tax services purchased or used by businesses in California. Instead, the committee plans to hold several additional hearings on the issue.

The next hearing is scheduled for June 13. Senator Mike McGuire, who chairs the committee, said the hearing will include a panel discussion. He said this hearing and others will provide a “deeper dive” into the issue of taxing services. We will continue to follow this issue and keep our membership informed.

SB 993 Coalition Letter

CalGeo is pleased to announce that we were able to join the coalition against SB 993 in May 2018 by being added to this coalition letter

CalGeo and the organizations listed in the letter oppose SB 993, which proposes the largest expansion of the sales/use tax in the state’s history. SB 993 imposes a tax on all services purchased by businesses in California, with certain exceptions. While the May 9 amendments attempt to mitigate some of the adverse effects of a 3 percent tax on services with a possible 2 percent reduction of the tax on the purchase of goods (subject to certain state revenue loss limitations), we are concerned that this proposal would result in a significant net tax increase. We oppose this policy for the following reasons:

  • Creates Competitive Disadvantages for California Employers. State and local taxes represent a significant cost for employers, and consequently are a key factor in business planning decisions. Determinations of where to locate or expand operations are influenced by assessments of relative tax burdens across multiple states. Already, businesses pay nearly 40 percent of the sales and use tax in California. Targeting them with an additional tax on services would put California at a tremendous competitive disadvantage.
  • Imposes a Massive Tax Increase. SB 993 taxes all manner of services used by businesses in their daily operations, including many services performed by skilled workers who specialize in particular trades. This sweeping expansion would result in a significant tax increase, potentially in the range of billions of dollars a year. Even with a potentially lower tax on the purchase of goods, this proposal would increase a tax burden that already is among the highest in the nation – chasing away jobs and investment from many of California's key employers, including high-tech and manufacturing companies.
  • Increases the Price of Everyday Goods. By taxing business inputs at multiple stages during the production process, this layering approach (known as “tax pyramiding”) increases overall production costs for everyday goods such as milk, bread, non-prescription medicines, etc. The cost increases on these and other products (which are exempt from the sales and use tax and will not benefit from the proposed rate reduction) ultimately will be passed on to consumers in the form of higher prices. This tax increase disproportionately hurts working families, as higher business taxes negatively impact economic growth, lower wages, and reduce jobs.
  • Costly Government Administration. In analyzing previous proposals to impose a sales tax on services, the former State Board of Equalization (now California Department of Tax and Fee Administration) estimated that program administration costs ranged from approximately $900 million in the first year to more than $600 million every year thereafter. With the complex structure envisioned in this bill (i.e., varying tax rates, exemptions for certain services only for those engaged in certain lines of businesses, apportionment methodologies between services used in state and out of state, etc.) state administration costs likely will exceed the previous estimates.
  • Broad-Based Taxes on Services Have Failed in Other States. Due to the tremendous competitive disadvantages and tax administration/auditing difficulties, many states have repealed their taxes on services shortly after implementation. And many more states have held off from enacting the tax.
  • Higher Taxes Are Unnecessary. The Legislative Analyst’s Office stated in its review of the governor’s proposed 2018-19 budget: “Under our current revenue and spending estimates, and assuming the Legislature makes no additional budget commitments, the state would end the 2018-19 fiscal year with $19.3 billion in total reserves” – adding that revenue is expected to be even higher when the budget is revised in May with updated revenue collection data and possible economic stimulus from federal tax changes. When the state is bringing in surplus revenue, it simply is unnecessary to embark on the largest sales/use tax expansion in California history, targeted directly at businesses that employ California workers and fuel the state’s economy.

March 2018

SB 496 Advisory Letter

As you may remember, CalGeo was part of a 2017 coalition that successfully helped Senator Canella pass Senate Bill 496 that limits the responsibility of design professionals to pay litigation defense costs to the degree that the design professional is at fault.  This was a big win for the engineering community.  The legislation became effective January 1, 2018.  This year, the coalition developed an Advisory Letter that provides helpful language to update contract language in accordance with the new legislation.  Download the Advisory Letter

2018 National Engineers Week Resolution

CalGeo participated in the development of the 2018 Engineers Week Resolution that was approved by the State Senate in February. This is an important document that recognizes the significant contribution of engineers in our society.  CalGeo President, Bob Lokteff, was in attendance on the Senate floor when the resolution was introduced and approved.  Download a copy of the Resolution language.

Current Legislation

CalGeo routinely meets with other California professional engineering and architecture associations to discuss legislation and build coalitions to enact, oppose and support new bills.

SB920

In February 2018 CalGeo joined the coalition to support SB920. This bill proposes to eliminate the sunset on the ability for engineering firms to form LLPs to pursue projects. Download a copy of the Support Letter.