As of this writing, the Arizona State Legislature has yet to adjourn sine die, but just because the session isn’t over doesn’t mean that all problems affecting residents and businesses in the Grand Canyon State will be resolved this year. Indeed, every industry faces challenges that need to be addressed legislatively, and construction is no outlier. So, what are the game-changing legislative issues impacting the construction industry?
Here’s what Arizona Builders Alliance (ABA) members Derek Wright, president and CEO of Suntec Concrete, and Bill Headley, senior vice president at Holder Construction, believe are the top three issues pressing the industry that should be addressed in future legislative sessions.
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Construction legislative issues: Education
One of the biggest challenges in the construction field is a shortage of skilled labor. As veteran trade workers continue to retire, the current pipeline of new tradespeople is not sufficient.
“Derek feels this day in and day out in the concrete industry,” Headley explains. “We’re hoping the legislature can help us in terms of promoting construction as an industry and help support training and development.”
One avenue for this trade education is through Arizona’s 14 career and technical education districts (CTEDs), such as West-MEC, East Valley Institute of Technology, (EVIT) and Pima JTED. These institutions give high school students the opportunity to become certified in various trades. CTEDs also have relationships with businesses in the industry, which offer job shadowing experiences and often help students get jobs after graduation.
“It’s frustrating that a few years ago, the legislature decreased funding for CTEDs, so we’ve been promoting to get that funding restored,” Headley says. “We think that’s a great way for young individuals to learn more about the industry and get them pulled in.”
Not every high school graduate wants or needs to get a postsecondary education, Wright adds, and it’s important that those students have a pathway to a good job.
“When you look at real percentages of high school graduates that go forward and get a four-year degree, that number is not that high. But that is what we teach in the educational system,” he continues. “The collaboration of associations, whether it’s ABA, Build Your Future, the CTEDs, means there’s a whole resource of alternative work development that leads to a very good wage, living and lifestyle that doesn’t go through the four-year curriculum. State legislators supporting that is a must.”
Construction legislative issues: Taxes
One of the other construction legislative issues has to do with how projects are taxed. Headley notes that the sector is used to prime contracting versus a point-of-sale scheme.
“Right now, we have both [tax structures] depending on the size and type of project,” he says. “For some, you pay your taxes at a point-of-sale, but in the larger projects — depending on which category — you pay it as a percentage of the total contract price, so it creates a lot of confusion.”
For example, a project might start small enough to be in the point-of-sale track, then grow over time to the point where it should be prime contracting. Having to make that change is a headache for businesses. Also, different tax code officials might interpret which classification a particular project falls under in the first place.
“When the governmental agencies that collect the tax proceeds can’t even agree on who’s right, there’s a problem,” Wright says. “Every other state is completely different than what we do here.”
The hope is that the legislature will make the process more seamless and reduce uncertainty. Headley says that prime contracting has worked for years and requires less paperwork than point-of-sale, but “from an industry standpoint, we’re okay with one or the other, it’s just that having two different systems creates confusion.”
Construction legislative issues: Wages
Laws that mandate prevailing wages require contractors and subcontractors to pay workers a wage determined by the government based off the wages in a specific geographic area for a particular type of work and are typically used for public construction projects.
“On the surface, you would think prevailing wages sets a minimum amount that workers should be paid,” Headley says. “But the law is so antiquated that in almost every year since [it was enacted] the workers are already being paid more than that prevailing wage amount. What it really creates is a lot of paperwork for all the companies to prove that they are meeting that requirement. So, we do believe there’s something more going on behind this other than just making sure that everybody is being paid a fair wage.”
On the topic of fairness, Wright questions why a specific industry is singled out instead of being uniform across an entire municipality. In his view, if the goal is to raise pay, it should be across the board and not concentrated in one industry. Instead, Wright speculates that a prevailing wage ordinance is a solution in search of a problem and may be a gateway for project labor agreements.
“We’re completely fine with fair and open competition. Union, non-union — doesn’t matter to us, as long as the rules apply equally to everyone,” he concludes. “Why should [prevailing wage requirements] apply to a construction project, but everything else that goes on around it isn’t under the same condition? Don’t put this ordinance on the most vulnerable population of contractors to keep up with the burdensome regulation of paperwork.”
