CAM's 9th Annual Legislative Breakfast Recap

Prompt Pay, SOAR Funding, and Wage Debates Take Center Stage at CAM's 9^th Legislative Breakfast

By ALEXIS SEELEY

The Construction Association of Michigan’s 9th annual Legislative Breakfast, which took place at the Somerset Inn in Troy on October 18th, gave industry leaders a glimpse at what Michigan legislators are working on in Lansing.

CAM lobbyist Jason Wadaga of Kindsvatter, Dalling & Associates moderated the bipartisan event, welcoming Sen. John Cherry (D) of Grand Blanc, Sen. Michael Webber (R) of Rochester, Rep. Samantha Steckloff (D) of Farmington Hills, and Rep. Joseph Aragona (R) of Macomb Twp. to the legislative panel.

The legislators spoke on several construction-related topics while also answering questions from the attendees.

The breakfast was sponsored at the event level by the Bricklayers and Allied Craftworkers (BAC) Local 2; CAMComp; John E. Green Company; Mechanical Contractors Association (MCA) Detroit; Michigan Building & Construction Trades Council; Michigan Regional Council of Carpenters; Novara Tesija Catenacci McDonald & Baas, PLLC; Operative Plasterers and Cement Masons International Union (OPCMIA) Local 514; Operating Engineers Local 324; Sheet Metal Workers Local 80; and Solxsys Administrative Solutions.

Presenting sponsors included Kenneth R. Beams, PLLC; BeneSys, Inc.; Construction Federal Credit Union; Laborers Local 1076 - LECET; National Electrical Contractors Association - Michigan Chapter; and Watkins, Pawlick, Calati & Prifti, PC.

Legislators Voice Support for Prompt Pay Bill

 CAM has been at the forefront of promoting legislation for a prompt pay bill, which would ensure timely compensation for satisfactorily completed private construction projects. A prompt pay bill aids construction businesses by ensuring clear and reasonable timeframe for payments, improving cash flow, reducing disputes, and providing legal protections that enhance overall project efficiency and financial stability.

This year, nearly 40 states have a prompt pay law for private construction, and every state has one for public construction projects. This has been a bipartisan effort with a Democratic sponsor for the House Bill 4837 of 2023 and a Republican sponsor in the Senate for Senate Bill 451 of 2023. The bill was agreed upon by all four members of the panel.

Sen. Cherry opened the discussion supporting the prompt pay bill, saying he would like to see it worked out this fall. “I do agree that we need to have a prompt pay provision. I think we're trying to work through to make sure that the votes are there for it,” he said. “The piece that is for Michigan is so important, as we've been drawing in some very large investments … I'd like to make sure our contractors working on them are paying them right because we want to make sure that those dollars are flowing down to the people in the state of Michigan who are doing that work.”

Sen. Webber agreed with Sen. Cherry and supported the bill when it was last in session. “I've supported it in the past and will continue to support it,” he said. “Prompt pay in any sort of industry is such a big thing, and I think it actually decreases litigation costs.”

Rep. Steckloff commented: “I'm glad we're finally seeing some hearings on it and some movement if it comes to the House floor. It's an easy yes for me.”

Rep. Aragona said he agrees with the panel but thinks the bill may not be looked at until next spring due to the November election. “I think there's something like 39 states who have already done so,” Rep. Aragona said. “I think it's going to be very tough to get it done before the end of the year simply because we have the election coming up, and then we're going into lame duck. But I think there's enough support on both sides of the aisle. I think that we'll be able to take a hard look at it next spring.”

 Rethinking SOAR's Economic Impact

The Strategic Outreach and Attraction Reserve (SOAR) Fund was created to provide financial incentives to businesses to relocate to or expand in the state of Michigan. On June 11, 2024, the Michigan House Economic Development and Small Business Committee endorsed a five-bill legislation package. The aim is to enhance housing, transportation, infrastructure, and community development efforts rather than focusing solely on incentives and tax breaks to attract businesses to Michigan.

SOAR will be rebranded as the “Make It in Michigan Fund” and create a 10-year extension of $600 million annually to be distributed. Rep. Steckloff opened the discussion. “The new idea, it's going to be called “Make It in Michigan.” It's not just going to be for SOAR projects, but also taking some of that funding, $100 million, into housing each year, and then possibly looking at some sort of transit piece,” he explained.

Rep. Aragona agreed that housing is important, but he also wants to focus on smaller projects. “The battery plants are the things that make the headlines, right? But what if there are good projects that can provide jobs that aren’t necessarily going to make headlines?” he asked.

He shared an example of an abandoned hotel in a nearby district that remained vacant since his childhood until an investor sought to renovate it but needed assistance with upfront costs. The legislator facilitated some grants to help. “Those are the types of projects that, again, are never going to make the news, but they help our society. They help the residents in all of our districts. I definitely think that’s something we need to take a look at,” Rep. Aragona said. He also proposed using funds to refurbish officer housing and extend the runway at Selfridge Air National Guard Base.

Sen. Webber said he thought the focus of the SOAR program was site readiness, but it hasn’t seemed like that for some time. “I’m really hoping the House can make some amendments. It kind of went from bad to worse, and in a lot of respects. It’s almost unworkable. If you’re going for $20 million and half of it is going to go to transit and all this other stuff, community benefits, etc., what’s the point of going through that process?” Sen. Webber questioned. “I think was kind of rushed through the Senate at the last minute. I’m hoping we can get it worked out more in the House going forward, or we keep the current source system that we have and try to work on it again next session.”

Sen. Cherry took a different approach to the topic, bringing up a project application that is being reviewed at the CHIPS Act office. The CHIPS Act aims to boost domestic chip production and semiconductor manufacturing in the United States, making $53 billion available for semiconductor manufacturing and research and development, even offering a 25% refundable tax credit.

“What has been reported, and I have no reason to believe it to be inaccurate, is that we have a company that is applying to the CHIPS Act office, Western Digital, to build a $55 billion facility here in Michigan -- specifically in my district. I’m going to be very supportive of this,” Sen. Cherry said. “If that application is approved by the CHIPS Act office, the administration’s going to be looking to set up some way for us to do that incentive and bring that company to build that facility here.”

Sen. Cherry further discussed the incentives that Michigan would receive from a $55 billion project, considering the state’s current annual general taxpayer budget of $14 billion. To put the scale of this investment into perspective, with federal funding, it amounts to five times the state’s annual general tax revenue. He stressed the significant benefits, such as creating 10,000 permanent jobs and thousands of long-term construction jobs, alongside rising revenue in industries other than automotive.

“I think the economic benefit of a project like that for the state of Michigan is really huge, both from the perspective of strengthening our communities, but also in diversifying our economy, something that we’ve been talking about for multiple decades,” Sen. Cherry said.

Earned Sick Time Act and Minimum Wage Increases

Over the summer, the Michigan Supreme Court ruled to reinstate the original Earned Sick Time Act (ESTA) and to increase minimum wage, stating that the 2018 ballot petition was improperly adopted then amended by the state legislature to minimize its impact. The controversial ruling essentially means that Michigan workers will soon see an increased minimum wage scale and expanded earned sick time. Some businesses and legislators have expressed concern about the impacts of the changes, which take effect in February 2025.

Both Democratic legislators expressed frustration on how this became an issue in the first place. Sen. Cherry raised questions about how the petition came to pass. In 2018, the Republican-controlled legislature adopted and amended a ballot initiative instead of letting voters decide. The Democratic-controlled Supreme Court has now ruled the amendment unconstitutional, leaving the Democratic-controlled legislature to address the issue under a tight deadline.

“The legislature thought they could get around our constitutional provisions for initial petitions by adopting those initiatives and then changing them, which violates the spirit of the initiative petition process,” Sen. Cherry said. “Those petitions that really should have gone to the ballot for the people of Michigan to decide are now law, and we're going to have to figure out how to handle it. The thing that I think our leaders are weighing is how to respect our democratic initiative process, while also making sure that we're having policy that works for folks.”

Rep. Steckloff noted that with the law set to take effect in February, there is a time crunch due to infrequent sessions and uncertainty about what changes are permitted. “I guess some of the questions include whether ballot initiatives are even allowed to be adopted by the legislature when something should go to the ballot,” she explained. “I believe in the last 40 years, the majority of those ballot initiatives, instead of going to the ballot box, were actually adopted by the legislature, taking away your right to vote on it. So (now we have to) figure out what we can and can't do on something that should never have even been adopted.”

Republican legislators expressed concerns about the potential impact of the minimum wage increase on businesses, especially in the restaurant sector. Both Sen. Webber and Rep. Aragona emphasized the importance of addressing the concerns of restaurant workers and the potential job losses if the tipped wage is eliminated.

“I really hope we can come together on this, because 83% of the workers in that industry are fearful of the loss of their jobs, the lack of people tipping. And it's not hypothetical,” Sen. Webber said. “I mean, we see this in some of these other areas where this is happening.”

Rep. Aragona agreed with Sen. Webber that tipped wage workers in the restaurant industry don’t want minimum wage increased due to already making above $15 an hour. He gave an example that paying $7 above minimum wage helps employers show appreciation for their workers, making them feel valued. However, if the minimum wage rises to $15, that wage advantage shrinks to just $2. Employers would then need to consider raising pay to maintain that sense of value, potentially increasing wages to $22 an hour. He also said that he hopes the majority party will call the representatives back sooner rather than later to fix it.

“I don't think we need to wait for any more judicial opinions, it's time to just get to work and start fixing some of this stuff, rolling back this regulation on small businesses, rolling back additional costs just implemented by the government -- and also, by the way, to save restaurants because tourism and lodging is over 10% of Michigan's GDP,” Rep. Aragona said.

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