Legislators to examine tax breaks

Ohio has 128; critics dispute value of some

With an eye toward the next two-year state budget, Senate President Tom Niehaus says it’s time for a thorough review of the billions of dollars in state tax deductions, credits and exemptions given to Ohio citizens and businesses each year.

The New Richmond Republican has assigned his Ways and Means Committee to hold hearings and craft a report this fall on the so-called state tax expenditures that will cost Ohio $15 billion in forgone revenue in the current two-year budget.

“If we wait until March of 2013 to have the discussion, we’ll run out of time,” Niehaus said. “ Do they make sense? Are they doing what they were intended to do? Do we need to eliminate them? We’r e also looking at all of those programs as they relate to job incentives.”

Groups across the political and social spectrum have called for such a review.

In May, the conservative Buckeye Institute, liberal Center for Community Solutions and moderate Greater Ohio Policy Center joined to propose eliminating tax expenditures totaling $300?million a year. They also called for a “sunset” provision under which all tax expenditures are repealed unless re-enacted by the legislature and governor.

The liberal-leaning Policy Matters Ohio and business-friendly groups such as the Ohio Chamber of Commerce and Ohio Society of Certified Public Accountants also have called for a review of the state’s 128 tax exemptions, credits and deductions.

Niehaus tried to create a committee to study tax expenditures in the new two-year budget, which took effect July 1, but it was pulled out at the request of House GOP leaders. Niehaus said House leaders argued that each chamber already has committees that can study it. He said that was a fair point, “but for 20 years, we haven’t done it.”

Digging into state tax expenditures is sticky political territory. While they cost state government huge sums of money, every deduction, exemption or credit was created for a reason — often at the request of politically influential special interests.

Some of the biggest tax expenditures are unlikely to be touched, such as the sales-tax exemption on prescription drugs ($1.2?billion over two years); state income-tax deductions for spouses and children ($1.1?billion); and an income-tax exemption on Social Security benefits ($550 million). But there are dozens of other options to choose among.

“Some of them make good sense. Some of them are, on their face, preposterous,” said John Begala, executive director of the Center for Community Solutions, pointing to a sales-tax exemption on partially owned private jets.

Sen. Tim Schaffer, R-Lancaster, chairman of the Senate Ways and Means Committee, said he first plans to call Begala and the leaders of the Buckeye Institute and Greater Ohio to talk about their plan, which includes doing away with the $20 personal income-tax credit that is given to every Ohioan just for being alive, and a $50 credit for contributions to political campaigns.

Schaffer said he hopes to start the committee in October, depending on when Senate sessions are scheduled. He said he doesn’t want to bring people to Columbus just for Thursday committees.

He did not point to specific tax expenditures he thinks are questionable.

“My personal goal is to make sure there is still some usefulness in the tax expenditures,” he said.

A new House study committee also has been meeting around the state to review not just tax expenditures but the entire state tax structure. The committee is supposed to issue a report this fall.

“Good ideas are hard to resist,” Begala said. “When you get organizations as diverse in their interests as ours, I think it’s worth people paying attention.”

He likes that lawmakers are examining tax expenditures outside the budget process.

“It will allow us to look at these objectively and think about what are reasonable criteria for judging the utility of these things, independently of having to balance the books.”

As legislators returned from their summer break this week, Governor Kasich was asked about his legislative agenda for the second half of 2011.

He said his administration is still considering a capital projects budget bill that has been on hold since 2008 because of cash shortages.  He also said he will pursue upgrades to the state’s worker-training program.

Also on the table are: the privatization of the Ohio Turnpike and Ohio lottery and possible changes to the state’s school-funding formula along with possible mid-term budget amendments.

The Ohio House of Representatives August 18 released the names of members of its three ad hoc study committees. They are as follows:

House Tax Structure Study Committee

Republican members include the following: Reps. John Adams (Sidney), chair; Peter Beck (Mason), Lynn Slaby (Copley), Terry Boose (Norwalk), Terry Blair (Dayton), Cheryl Grossman (Grove City) and Brian Hill (Zanesville).

Democrats on the committee include Reps. Tom Letson (Warren), Denise Driehaus (Cincinnati), Mike Foley (Cleveland) and Sean O’Brien (Brookfield).

This committee will be looking at the commercial activity tax (CAT), tax exemptions and the sales and use tax.

Its first meeting is set for Wednesday, Aug. 24 at 10 a.m.

House Workforce Development Study Committee

Republican members include the following: Reps. Tim Derickson (Springboro), chair; Nan Baker (Westlake), Richard Adams (Troy) and Andy Thompson (Marietta).

Democrats on the committee include Reps. Sandra Williams (Cleveland), Nancy Garland (New Albany), Lou Gentile (Steubenville) and Roland Winburn (Dayton).

Its first meeting is set for Wednesday, Aug. 31 at 10 a.m.

House Technology in State Government Study Committee

Republican members include the following: Reps. Craig Newbold (Columbiana), chair; Margaret Conditt (Hamilton), Andy Brenner (Powell), Mike Dovilla (Berea) and Mike Henne (Clayton).

Democrats on the committee include the following: Reps. Ted Celeste (Columbus), Michael Stinziano (Columbus) and Debbie Phillips (Athens).

Its first meeting is set for Wednesday, Aug. 31 at 10 a.m.

Luther L. Liggett, Jr., attorney, gave opponent testimony to the budget on behalf of the National Electrical Contractors Association, Ohio Conference and Mechanical Contractors Association of Northwestern Ohio, Inc., stating that if passed, “every contract in Ohio would not have to be competitively bid.”

“One idea,” he stated, “called ‘construction reform’ in Statehouse jargon and backed by Republican Gov. John Kasich, would give state agencies, state universities and local governments an option to pick construction managers – or award design-build construction contracts – based on ‘best value.’ That means what’s ‘best’ in public officials’ judgment — not necessarily what’s best in price.”

The House recently breathed new life into an expiring tax credit for renovating historic buildings in Ohio, but preservationists are hoping to convince the Senate to make the program more robust.

Under the House’s version of the $55.6 billion biennial budget (HB 153), the Historic Building Rehabilitation Tax Credit, which was set to expire in July, would become permanent. However, the cap on the program is set to decrease from the current $60 million to $25 million a year.

The tax credit, which is claimed against the personal income, corporate franchise, and dealers in intangibles tax, could reduce state tax revenues in fiscal year 2013 slightly, but the full impact will likely occur after the next biennium, according to a Legislative Service Commission analysis.

Any revenue loss to the general revenue fund would also decrease the amount of tax revenue flowing to counties and local governments through the Local Government Fund and the Public Library Fund, LSC said.

Proponents say demand for the tax credit is outstripping the current $60 million limit and asked the Senate Finance Committee during a recent hearing to go one step further and increase or remove the House’s proposed $25 million a year cap.

Joyce Barrett, of Heritage Ohio, said research by Cleveland State University found the tax credit generates $0.31 back to the state before $1 is paid out when a project is completed.

“The historic preservation tax program is a critical part of Ohio’s economic recovery and the jobs that will be created by this and other elements of the budget bill,” she said in testimony.

Duane Van Dyke, president of Van Dyke Architects in Cleveland, said renovating historic buildings helps attract educated youth and entrepreneurs that help revitalize urban areas.

“You want to attract high tech companies to Ohio? Then you need to have rehabbed, turn-of-the-century factories with exposed brick and wood floors, not a suburban office park with a sea of parking surrounding it,” he said, adding Ohio may have the third most historic buildings in the U.S.

Every $1 million in historic preservation tax credits generates $8 million in construction spending, 80 construction jobs and has a total economic impact of $32 million and 300 jobs, he said. The state tax program was also matched by 75% in private investment and federal tax credits.

“Buildings that would have remained empty, non-income producing, non-tax-paying blight are now contributing again,” Mr. Van Dyke said.

Steve Coon, of Historic Developers, LLC, said the state and federal tax credits helped him finance a renovation project in Hamilton when banks stopped lending during the financial crisis.

“Without this, not only would I have not been able to develop in these extreme times, the City of Hamilton would have lost a great opportunity to revive their core downtown,” he said.

Competitive bidding on state projects got a small shot in the arm this week when the House Commerce & Labor Committee passed a bill dealing with project labor agreements (PLAs) along a party line vote. House Bill 102 will ensure state agencies cannot prohibit or require a PLA in bid specifications for public improvement projects. Essentially, this will remove the requirement that a non-union contractor’s workers either join a labor union or pay dues to one, which can drive up the project’s cost as much as twenty to thirty percent. 

Under a PLA, the contractor’s non-union workers are sent to the local union hall to “get in line” for the chance to work on the project. This results in the contractor being forced to use union workers instead of its own employees on the project. Additionally, non-union contractors continue to pay their workers’ wages and benefits even though those very workers are replaced by union labor. PLAs also require contractors to pay into the union pension and benefit plans even though their employees will never see the benefits of these contributions given the short duration of most construction projects. 

Non-union contractors in favor of HB 102 testified that being forced to use union labor in place of their own employees is one of the reasons they will not bid on state or local construction contracts that have a PLA. The owner of a non-union roofing business in Massillon testified that, “Once I sign a PLA agreement, I’m going to lose control of my people. Once I lose control of my people, I’m going to bid higher…They [PLAs] are a waste of taxpayer dollars and it is closing the door on 85 percent of employers in this state.” 

HB 102 also would not allow state funds to be used for local government construction projects that either prohibit or require a PLA in the bid specifications. The bill now awaits a vote by the full House. 

The House Commerce & Labor Committee advanced a proposal Wednesday to restrict state funding for construction projects that require union labor.

The panel split along partisan lines in reporting Rep. Ron Young’s (R-Leroy) proposal (HB 102), as well as an amendment that the sponsor said was designed to make the bill’s title more accurately reflect the legislative intent.

Chairman Rep. Joseph Uecker (R-Loveland) said after the hearing that he had no assurance from leadership that the bill would come to a vote on the House floor shortly. However, he doesn’t anticipate substantial opposition within the GOP caucus.

Democrats and labor unions that oppose the measure, which would prohibit governmental agencies from requiring project labor agreements on public construction, say it closely resembles a law that Rep. Young sponsored in 1999, which the Ohio Supreme Court subsequently overturned.

Opponents say governmental entities should be free to enter into PLAs to ensure a high quality, well-trained source of local labor for public improvement projects. Proponents say the agreements effectively stymie non-union companies from bidding and drive up construction costs. 

Rep. Young said the measure was substantively different than his previous legislation, which included an outright prohibition against political subdivisions entering into PLAs.

“This bill doesn’t do that,” he said in an interview. The intent is to open up the pool of potential bidders on public construction projects, he added.

The measure would allow government entities to enter into PLAs, but if government officials include requirements that allow only unionized companies to bid on a project, it would not be eligible for state funding.

“We won’t use our monies to support that if they discriminate. Of course as the state, we can control our own processes,” he said. “I don’t like the idea of government entities saying, ‘We’re only going to work with these particular companies.’ I think it should be an open process.”

Rep. Young said his amendment cleaned up the bill title by stating that PLAs could not be prohibited or required.

The Ohio House Judiciary Committee took testimony April 3 on HB170 which would shorten the period of limitations for actions upon a contract in writing.

Mark Johnson, a partner at the Columbus office of Baker Hostetler LLP, testified in support at the request of the Ohio Alliance for Civil Justice.

He said Kentucky and Ohio are the only two states that allow 15 years to bring a suit on a written contract. Twenty-two states have a statute of limitations of six years, while 18 have a limitation period of between three to five years, and eight states set the limitation period at eight or 10 years.

Johnson said there is no sound reason to allow for 15 years to bring a suit, and said it negatively impacts businesses in Ohio, who face class action suits on an inflated size of that class, and must pay extra costs to maintain documents for longer periods of time.

As an example, he said a business may face a class size of 100,000 people under the current statute. If each person gets $100, the exposure to the company could be $10 million. If the limitation is six years, the class could be 40,000 with an exposure of $40 million.

He also noted the cost of keeping documents directly and indirectly affects the ability of businesses to be competitive. He said that in cases where the documents do exist, the people who drafted or performed the old contracts may be retired or have moved on and may not remember the details.

Johnson said research showed that the limitation was adopted in 1803 when Ohio became a state, requiring that contracts under seal have a 15-year statute of limitations. In 1824, the under seal requirement was dropped but the statute was kept.

Rep. Stebelton asked if the legislation would cover construction of a building that may fail 10 years later. Johnson said it would depend on what the suit is over, noting that personal injury cases are covered by separate statutes.

Opponents to changes in prevailing wage and pension contributions in the biennial budget asked lawmakers Friday to not completely scrap the provisions but rather consider them as separate legislation.

Witnesses testifying during the final day of House hearings on the budget bill (HB 153) advocated that the changes be removed from the legislation and seemed to have members from both side of the aisle agreeable.

The governor’s budget proposal would raise the threshold amount for which local governments must pay prevailing wage from the current $78,000 to $5 million, exempt state-assisted universities from paying prevailing wage on construction projects, and exclude from the requirement both private and public projects that previously were covered because they were financed with grants from the Department of Development.

Joseph D’Angelo, an attorney with D’Angelo & Szollosi Co., told members of the House Finance & Appropriations Committee reviewing the budget that the changes do not belong in the budget bill because prevailing wage requirements in public construction is not a “statistically significant” factor affecting project cost.

“The proposed prevailing wage amendments have no impact on either the state’s budget or on the construction budgets of state, county and local bodies,” he said.

Mr. D’Angelo added that prevailing wage enforcement activities are also insignificant because between 2006 and 2010, of the tens of thousands of public improvement projects, an average of 320 prevailing wage complaints were filed each year.

Four members of the Mechanical Contractors Association of Ohio testified as a group against changes to prevailing wage law.

J.K. Williams said the threshold change from $78,000 to $5 million would “essentially repeal” the law, and elimination of prevailing wage takes away the long-term ability of the union and open shop contractors to privately train their workforce.

Sam Halker, MCAO vice chairman, said, “By driving down the construction wage you are writing the invitations to Michigan, Indiana and Kentucky to have our jobs and the businesses that employ them.”

MCAO chairman Howard Risher said reforms are needed to make prevailing wage work better for Ohio, but legislators must give the topics a thorough examination before voting on them.

Rep. John Patrick Carney (D-Columbus) said the witness’ testimony and what the committee has heard over the last couple hearings, “demonstrates a need to take this out of this piece of legislation and have more full and robust debate on this issue.”

Rep. Nancy Garland (D-New Albany) voiced the same sentiment. “We all agree, I think it sounds like, that there are definitely parts of this that we can look at.”

Mr. Williams responded to Ms. Garland when he said, “We are very, very agreeable to helping create reform outside of the budget.”

Rep. Ross McGregor (R-Springfield) asked if a separate bill on prevailing wage could be enacted quickly.

“I feel that there are reforms that are needed to help make Ohio a more competitive place to do business, but I do have concern that they’re so technical that we need to take the time to do it right; I just don’t want to take too much time,” he said.

Mr. Williams said he believes the changes could be accomplished in “short order.”

When asked by Rep. Robert Mecklenborg (R-Cincinnati) about a preferred change in threshold, Mr. Williams suggested raising the level to $100,000 or $150,000.

Luther Liggett, shareholder with Luper, Neidenthal & Logan Attorneys, said the process of prevailing wage is flawed. “We need to fix it,” he said and suggested legislators consider it in a separate bill so it can be fully debated.

Terry Estes, project manager for J&B Steel, also voiced opposition to the prevailing wage changes and said because of the complexity of the issue, it should be addressed separately, “giving ample time to study and discuss the full impact such changes would have on our business and our communities.”

Legislators to examine tax breaks

Ohio has 128; critics dispute value of some

With an eye toward the next two-year state budget, Senate President Tom Niehaus says it’s time for a thorough review of the billions of dollars in state tax deductions, credits and exemptions given to Ohio citizens and businesses each year.

The New Richmond Republican has assigned his Ways and Means Committee to hold hearings and craft a report this fall on the so-called state tax expenditures that will cost Ohio $15 billion in forgone revenue in the current two-year budget.

“If we wait until March of 2013 to have the discussion, we’ll run out of time,” Niehaus said. “ Do they make sense? Are they doing what they were intended to do? Do we need to eliminate them? We’r e also looking at all of those programs as they relate to job incentives.”

Groups across the political and social spectrum have called for such a review.

In May, the conservative Buckeye Institute, liberal Center for Community Solutions and moderate Greater Ohio Policy Center joined to propose eliminating tax expenditures totaling $300?million a year. They also called for a “sunset” provision under which all tax expenditures are repealed unless re-enacted by the legislature and governor.

The liberal-leaning Policy Matters Ohio and business-friendly groups such as the Ohio Chamber of Commerce and Ohio Society of Certified Public Accountants also have called for a review of the state’s 128 tax exemptions, credits and deductions.

Niehaus tried to create a committee to study tax expenditures in the new two-year budget, which took effect July 1, but it was pulled out at the request of House GOP leaders. Niehaus said House leaders argued that each chamber already has committees that can study it. He said that was a fair point, “but for 20 years, we haven’t done it.”

Digging into state tax expenditures is sticky political territory. While they cost state government huge sums of money, every deduction, exemption or credit was created for a reason — often at the request of politically influential special interests.

Some of the biggest tax expenditures are unlikely to be touched, such as the sales-tax exemption on prescription drugs ($1.2?billion over two years); state income-tax deductions for spouses and children ($1.1?billion); and an income-tax exemption on Social Security benefits ($550 million). But there are dozens of other options to choose among.

“Some of them make good sense. Some of them are, on their face, preposterous,” said John Begala, executive director of the Center for Community Solutions, pointing to a sales-tax exemption on partially owned private jets.

Sen. Tim Schaffer, R-Lancaster, chairman of the Senate Ways and Means Committee, said he first plans to call Begala and the leaders of the Buckeye Institute and Greater Ohio to talk about their plan, which includes doing away with the $20 personal income-tax credit that is given to every Ohioan just for being alive, and a $50 credit for contributions to political campaigns.

Schaffer said he hopes to start the committee in October, depending on when Senate sessions are scheduled. He said he doesn’t want to bring people to Columbus just for Thursday committees.

He did not point to specific tax expenditures he thinks are questionable.

“My personal goal is to make sure there is still some usefulness in the tax expenditures,” he said.

A new House study committee also has been meeting around the state to review not just tax expenditures but the entire state tax structure. The committee is supposed to issue a report this fall.

“Good ideas are hard to resist,” Begala said. “When you get organizations as diverse in their interests as ours, I think it’s worth people paying attention.”

He likes that lawmakers are examining tax expenditures outside the budget process.

“It will allow us to look at these objectively and think about what are reasonable criteria for judging the utility of these things, independently of having to balance the books.”

As legislators returned from their summer break this week, Governor Kasich was asked about his legislative agenda for the second half of 2011.

He said his administration is still considering a capital projects budget bill that has been on hold since 2008 because of cash shortages.  He also said he will pursue upgrades to the state’s worker-training program.

Also on the table are: the privatization of the Ohio Turnpike and Ohio lottery and possible changes to the state’s school-funding formula along with possible mid-term budget amendments.

The Ohio House of Representatives August 18 released the names of members of its three ad hoc study committees. They are as follows:

House Tax Structure Study Committee

Republican members include the following: Reps. John Adams (Sidney), chair; Peter Beck (Mason), Lynn Slaby (Copley), Terry Boose (Norwalk), Terry Blair (Dayton), Cheryl Grossman (Grove City) and Brian Hill (Zanesville).

Democrats on the committee include Reps. Tom Letson (Warren), Denise Driehaus (Cincinnati), Mike Foley (Cleveland) and Sean O’Brien (Brookfield).

This committee will be looking at the commercial activity tax (CAT), tax exemptions and the sales and use tax.

Its first meeting is set for Wednesday, Aug. 24 at 10 a.m.

House Workforce Development Study Committee

Republican members include the following: Reps. Tim Derickson (Springboro), chair; Nan Baker (Westlake), Richard Adams (Troy) and Andy Thompson (Marietta).

Democrats on the committee include Reps. Sandra Williams (Cleveland), Nancy Garland (New Albany), Lou Gentile (Steubenville) and Roland Winburn (Dayton).

Its first meeting is set for Wednesday, Aug. 31 at 10 a.m.

House Technology in State Government Study Committee

Republican members include the following: Reps. Craig Newbold (Columbiana), chair; Margaret Conditt (Hamilton), Andy Brenner (Powell), Mike Dovilla (Berea) and Mike Henne (Clayton).

Democrats on the committee include the following: Reps. Ted Celeste (Columbus), Michael Stinziano (Columbus) and Debbie Phillips (Athens).

Its first meeting is set for Wednesday, Aug. 31 at 10 a.m.

Luther L. Liggett, Jr., attorney, gave opponent testimony to the budget on behalf of the National Electrical Contractors Association, Ohio Conference and Mechanical Contractors Association of Northwestern Ohio, Inc., stating that if passed, “every contract in Ohio would not have to be competitively bid.”

“One idea,” he stated, “called ‘construction reform’ in Statehouse jargon and backed by Republican Gov. John Kasich, would give state agencies, state universities and local governments an option to pick construction managers – or award design-build construction contracts – based on ‘best value.’ That means what’s ‘best’ in public officials’ judgment — not necessarily what’s best in price.”

The House recently breathed new life into an expiring tax credit for renovating historic buildings in Ohio, but preservationists are hoping to convince the Senate to make the program more robust.

Under the House’s version of the $55.6 billion biennial budget (HB 153), the Historic Building Rehabilitation Tax Credit, which was set to expire in July, would become permanent. However, the cap on the program is set to decrease from the current $60 million to $25 million a year.

The tax credit, which is claimed against the personal income, corporate franchise, and dealers in intangibles tax, could reduce state tax revenues in fiscal year 2013 slightly, but the full impact will likely occur after the next biennium, according to a Legislative Service Commission analysis.

Any revenue loss to the general revenue fund would also decrease the amount of tax revenue flowing to counties and local governments through the Local Government Fund and the Public Library Fund, LSC said.

Proponents say demand for the tax credit is outstripping the current $60 million limit and asked the Senate Finance Committee during a recent hearing to go one step further and increase or remove the House’s proposed $25 million a year cap.

Joyce Barrett, of Heritage Ohio, said research by Cleveland State University found the tax credit generates $0.31 back to the state before $1 is paid out when a project is completed.

“The historic preservation tax program is a critical part of Ohio’s economic recovery and the jobs that will be created by this and other elements of the budget bill,” she said in testimony.

Duane Van Dyke, president of Van Dyke Architects in Cleveland, said renovating historic buildings helps attract educated youth and entrepreneurs that help revitalize urban areas.

“You want to attract high tech companies to Ohio? Then you need to have rehabbed, turn-of-the-century factories with exposed brick and wood floors, not a suburban office park with a sea of parking surrounding it,” he said, adding Ohio may have the third most historic buildings in the U.S.

Every $1 million in historic preservation tax credits generates $8 million in construction spending, 80 construction jobs and has a total economic impact of $32 million and 300 jobs, he said. The state tax program was also matched by 75% in private investment and federal tax credits.

“Buildings that would have remained empty, non-income producing, non-tax-paying blight are now contributing again,” Mr. Van Dyke said.

Steve Coon, of Historic Developers, LLC, said the state and federal tax credits helped him finance a renovation project in Hamilton when banks stopped lending during the financial crisis.

“Without this, not only would I have not been able to develop in these extreme times, the City of Hamilton would have lost a great opportunity to revive their core downtown,” he said.

Competitive bidding on state projects got a small shot in the arm this week when the House Commerce & Labor Committee passed a bill dealing with project labor agreements (PLAs) along a party line vote. House Bill 102 will ensure state agencies cannot prohibit or require a PLA in bid specifications for public improvement projects. Essentially, this will remove the requirement that a non-union contractor’s workers either join a labor union or pay dues to one, which can drive up the project’s cost as much as twenty to thirty percent. 

Under a PLA, the contractor’s non-union workers are sent to the local union hall to “get in line” for the chance to work on the project. This results in the contractor being forced to use union workers instead of its own employees on the project. Additionally, non-union contractors continue to pay their workers’ wages and benefits even though those very workers are replaced by union labor. PLAs also require contractors to pay into the union pension and benefit plans even though their employees will never see the benefits of these contributions given the short duration of most construction projects. 

Non-union contractors in favor of HB 102 testified that being forced to use union labor in place of their own employees is one of the reasons they will not bid on state or local construction contracts that have a PLA. The owner of a non-union roofing business in Massillon testified that, “Once I sign a PLA agreement, I’m going to lose control of my people. Once I lose control of my people, I’m going to bid higher…They [PLAs] are a waste of taxpayer dollars and it is closing the door on 85 percent of employers in this state.” 

HB 102 also would not allow state funds to be used for local government construction projects that either prohibit or require a PLA in the bid specifications. The bill now awaits a vote by the full House. 

The House Commerce & Labor Committee advanced a proposal Wednesday to restrict state funding for construction projects that require union labor.

The panel split along partisan lines in reporting Rep. Ron Young’s (R-Leroy) proposal (HB 102), as well as an amendment that the sponsor said was designed to make the bill’s title more accurately reflect the legislative intent.

Chairman Rep. Joseph Uecker (R-Loveland) said after the hearing that he had no assurance from leadership that the bill would come to a vote on the House floor shortly. However, he doesn’t anticipate substantial opposition within the GOP caucus.

Democrats and labor unions that oppose the measure, which would prohibit governmental agencies from requiring project labor agreements on public construction, say it closely resembles a law that Rep. Young sponsored in 1999, which the Ohio Supreme Court subsequently overturned.

Opponents say governmental entities should be free to enter into PLAs to ensure a high quality, well-trained source of local labor for public improvement projects. Proponents say the agreements effectively stymie non-union companies from bidding and drive up construction costs. 

Rep. Young said the measure was substantively different than his previous legislation, which included an outright prohibition against political subdivisions entering into PLAs.

“This bill doesn’t do that,” he said in an interview. The intent is to open up the pool of potential bidders on public construction projects, he added.

The measure would allow government entities to enter into PLAs, but if government officials include requirements that allow only unionized companies to bid on a project, it would not be eligible for state funding.

“We won’t use our monies to support that if they discriminate. Of course as the state, we can control our own processes,” he said. “I don’t like the idea of government entities saying, ‘We’re only going to work with these particular companies.’ I think it should be an open process.”

Rep. Young said his amendment cleaned up the bill title by stating that PLAs could not be prohibited or required.

The Ohio House Judiciary Committee took testimony April 3 on HB170 which would shorten the period of limitations for actions upon a contract in writing.

Mark Johnson, a partner at the Columbus office of Baker Hostetler LLP, testified in support at the request of the Ohio Alliance for Civil Justice.

He said Kentucky and Ohio are the only two states that allow 15 years to bring a suit on a written contract. Twenty-two states have a statute of limitations of six years, while 18 have a limitation period of between three to five years, and eight states set the limitation period at eight or 10 years.

Johnson said there is no sound reason to allow for 15 years to bring a suit, and said it negatively impacts businesses in Ohio, who face class action suits on an inflated size of that class, and must pay extra costs to maintain documents for longer periods of time.

As an example, he said a business may face a class size of 100,000 people under the current statute. If each person gets $100, the exposure to the company could be $10 million. If the limitation is six years, the class could be 40,000 with an exposure of $40 million.

He also noted the cost of keeping documents directly and indirectly affects the ability of businesses to be competitive. He said that in cases where the documents do exist, the people who drafted or performed the old contracts may be retired or have moved on and may not remember the details.

Johnson said research showed that the limitation was adopted in 1803 when Ohio became a state, requiring that contracts under seal have a 15-year statute of limitations. In 1824, the under seal requirement was dropped but the statute was kept.

Rep. Stebelton asked if the legislation would cover construction of a building that may fail 10 years later. Johnson said it would depend on what the suit is over, noting that personal injury cases are covered by separate statutes.

Opponents to changes in prevailing wage and pension contributions in the biennial budget asked lawmakers Friday to not completely scrap the provisions but rather consider them as separate legislation.

Witnesses testifying during the final day of House hearings on the budget bill (HB 153) advocated that the changes be removed from the legislation and seemed to have members from both side of the aisle agreeable.

The governor’s budget proposal would raise the threshold amount for which local governments must pay prevailing wage from the current $78,000 to $5 million, exempt state-assisted universities from paying prevailing wage on construction projects, and exclude from the requirement both private and public projects that previously were covered because they were financed with grants from the Department of Development.

Joseph D’Angelo, an attorney with D’Angelo & Szollosi Co., told members of the House Finance & Appropriations Committee reviewing the budget that the changes do not belong in the budget bill because prevailing wage requirements in public construction is not a “statistically significant” factor affecting project cost.

“The proposed prevailing wage amendments have no impact on either the state’s budget or on the construction budgets of state, county and local bodies,” he said.

Mr. D’Angelo added that prevailing wage enforcement activities are also insignificant because between 2006 and 2010, of the tens of thousands of public improvement projects, an average of 320 prevailing wage complaints were filed each year.

Four members of the Mechanical Contractors Association of Ohio testified as a group against changes to prevailing wage law.

J.K. Williams said the threshold change from $78,000 to $5 million would “essentially repeal” the law, and elimination of prevailing wage takes away the long-term ability of the union and open shop contractors to privately train their workforce.

Sam Halker, MCAO vice chairman, said, “By driving down the construction wage you are writing the invitations to Michigan, Indiana and Kentucky to have our jobs and the businesses that employ them.”

MCAO chairman Howard Risher said reforms are needed to make prevailing wage work better for Ohio, but legislators must give the topics a thorough examination before voting on them.

Rep. John Patrick Carney (D-Columbus) said the witness’ testimony and what the committee has heard over the last couple hearings, “demonstrates a need to take this out of this piece of legislation and have more full and robust debate on this issue.”

Rep. Nancy Garland (D-New Albany) voiced the same sentiment. “We all agree, I think it sounds like, that there are definitely parts of this that we can look at.”

Mr. Williams responded to Ms. Garland when he said, “We are very, very agreeable to helping create reform outside of the budget.”

Rep. Ross McGregor (R-Springfield) asked if a separate bill on prevailing wage could be enacted quickly.

“I feel that there are reforms that are needed to help make Ohio a more competitive place to do business, but I do have concern that they’re so technical that we need to take the time to do it right; I just don’t want to take too much time,” he said.

Mr. Williams said he believes the changes could be accomplished in “short order.”

When asked by Rep. Robert Mecklenborg (R-Cincinnati) about a preferred change in threshold, Mr. Williams suggested raising the level to $100,000 or $150,000.

Luther Liggett, shareholder with Luper, Neidenthal & Logan Attorneys, said the process of prevailing wage is flawed. “We need to fix it,” he said and suggested legislators consider it in a separate bill so it can be fully debated.

Terry Estes, project manager for J&B Steel, also voiced opposition to the prevailing wage changes and said because of the complexity of the issue, it should be addressed separately, “giving ample time to study and discuss the full impact such changes would have on our business and our communities.”