STA September 2015 Newsletter

Page 1

Subcontractors news Bringing New York’s Union Subcontractors Together to Build a Stronger Construction Industry IN THIS ISSUE

2 President’s Message By Robert J. Ansbro

3 New Hudson Yards

Station Aims to Revitalize and Reconnect Manhattan’s West Side

7 New York City School Construction Authority Announces Amended Capital Plan By Hank Kita

July/August 2015

New Hudson Yards Station Aims to Revitalize and Reconnect Manhattan’s West Side

11 Construction Contract Notice Provisions –  Subcontractor Wins On Technicality By Henry L. Goldberg

17 Watch the Sales Tax By Robert Schaffer

21 2015 STA Membership Survey Results

If you would like to receive a hard copy of Subcontractors News in the mail each month, please email your full mailing address to ssweeney@stanyc.com with the subject line “Subcontractors News Hard Copy Request”


2

STA Subcontractors News

President’s Message September 2015

As we move into the fall, I am excited to announce the STA’s 50th anniversary coming up in 2016. Since 1966, we have been the voice of subcontractors in New York City—pushing our legislative agendas, advocating for our members and increasing business opportunities within our industry. Please look out for events in the coming year celebrating this landmark milestone. One critical topic we focus on is the funding for the New York City School Construction Authority. The agency just announced an increase in its 2015-2019 Capital Plan, which will create 44,000 new seats in areas of overcrowding in New York City public schools. This creates a myriad of opportunities for subcontractors working on public sector projects. Recently, we conducted a survey to figure out how to further improve our association through our members’ thoughts and opinions. With the results, we aim to target the issues that we face as subcontractors today. We will be using this information to put together events such as Meet the Agency seminars to better educate our members and help them stay ahead. I would also like to thank those who participated at our Annual Golf Outing at the Village Club of Lake Success. Our members’ continued support is what keeps the STA going strong—thank you for your continued involvement. As always, the STA is only as good as its supporters. I would like to once again thank everyone who has supported our event and invite all members to attend events or contact the STA office with any comments or concerns Sincerely,

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Robert J. Ansbro


September 2015

New Hudson Yards Station Aims to Revitalize and Reconnect Manhattan’s West Side

The 7 Flushing Line was recently extended, connecting

Increasing Connectivity and Improving

Times Square to the newly created transit station on

Westside Train Service

34th Street and 11th Avenue. The station, known as 34th Street - Hudson Yards, is now open to the

For the many commuters who work in the area, the

travelling public, enhancing accessibility to the West

new station will allow much easier access to work.

side and revitalizing the neighborhood. The new

Previously, it was necessary to walk all the way

subway terminal improves reliability for all riders of

from the A Train at Pennsylvania Station on Eighth

the 7 Line in Queens and Manhattan, and also provides

Avenue. The new station also provides additional

convenient access to the adjacent developments and

storage space for trains, which will improve service

attractions, including the northern end of the High

throughout the entire 7 Flushing Line.

Line at 34th Street and 12th Avenue. continued on page 5

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STA Subcontractors News

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September 2015

continued from page 3

Manhattan’s Newest Thriving Neighborhood

in over sixty years. The last city-funded expansion

is Linked Seamlessly to Queens

was in 1950, when the Queens Boulevard line was extended to Jamaica-179th Street. Many New Yorkers

The new station provides transit access to the West

and city officials are watching closely to see how the

Side of Manhattan, including the Jacob K. Javits

new station plays into discussions on financing for

Convention Center, by extending the 7 Line one and a

major infrastructure and capital projects. The 7 line

half miles westward from its former terminus at Times

extension may set important precedents for future

Square to the new station located at 34th Street and

projects.

11th Avenue. The extension connects Queens with the heart of what will be midtown Manhattan’s newest

High-Capacity Transit Hub and Commercial

thriving neighborhood. Increased accessibility will

Destinations Fuel West Side Development

help to stimulate economic growth and continuing development of the area. The Hudson Yards

The Hudson Yards Station is projected to be the

Development Corporation is overseeing programs

busiest single station in New York City. Initial

which will similarly boost the area’s business activity

projections estimate that is will attract about 32,000

and economic output.

passengers each weekday. It is packed with unique design features to set it aside from other notable New

The Metropolitan Transportation Authority (MTA)

York City transit centers. For example, the station

employed several members of the Subcontractors’

features specialized low-vibration tracks to provide

Trade Association (STA) for the historic project,

a smoother, quieter and more comfortable ride for

including lighting and electrical specialists E-J Electric

customers, decrease the need for track maintenance

Installation Co. The Hudson Yards Station is the first

and contribute to environmental sustainability by

new subway station in the city since 1989, when

eliminating the use of wooden track blocks.

the Port Authority opened new subway stations at Lexington Avenue and 63rd street in Manhattan,

The 7 Line extension will help rejuvenate an

21st Street-Queensbridge in Queens as well as a new

overlooked stretch of Manhattan’s West Side by

station on Roosevelt Island.

connecting it to flows of professionals, enterprise and innovation. Transforming the neighborhood

Historic Transportation Project May Set

will take more than a new train station, however

Important Funding Precedents

the combination of premium offices created by The Hudson Yards Development Corporation, the city’s

The project is also made unique by its funding, which

largest convention center and singular destinations

is sourced from city, rather than state coffers. It is the

such as The High Line set this area on a course for

first subway extension financed by New York City

steady development and continued success.

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STA Subcontractors News

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September 2015

NEW YORK CITY SCHOOL CONSTRUCTION AUTHORITY ANNOUNCES AMENDED CAPITAL PLAN By hank KITA, STA EXECUTIVE DIRECTOR

While the current upturn in construction activity

would result in the creation of 6,800 more seats.

in New York City has been led by a number of high

This amendment would increase funding for student

profile privately financed projects, there still remain

bathroom upgrades, selected cafeteria upgrades as

considerable

subcontractors

well as identification of one additional year of Capital

working on public sector projects. One such example

Investment projects. This Amended Plan also shows

of these public sector opportunities is illustrated by

an increase of Wrap Up insurance cost in FY 2015 and

the recent announcement of amendments to the New

2016 and an increase in “Prior Plan Completion” costs.

opportunities

for

York City School Construction Authority (SCA) Capital Plan.

The Amended Plan for FY 2015-2019 consists of three major components: Capacity Expansion, Capital

The New York City School Construction Authority

Investment, and Mandated Programs.

recently announced an increase in its Capital Plan for FY 2015-2019 of $700 million over its original

The Capacity Expansion Program is funded at a level

“Adopted Plan” for this period. This Amended

of $4.81 billion and is made up of four elements. They

Plan calls for $13.5 million in capital expenditures

are $3.45 billion for new capacity, adding more than

for New York City public schools. According to the

32,600 seats in an estimated 63 projects. Another

Department of Education and the SCA, the newly

$520 million is targeted for the Pre-K initiative, $490

increased capital plan will create 44,000 new seats in

million for class size reduction and $350 million for a

areas of overcrowding and will take steps to address

facility replacement program.

the pre-kindergarten initiative of the De Blasio administration.

The $4.96 billion Capital Investment Program provides for $3.31 billion for the Capital Improvement Program

In the Amended Plan, key changes include the

which includes exterior and interior building upgrades

identification of 10 new capacity projects creating

and other necessary capital repairs to school facilities.

5,454 seats and 52 Pre-Kindergarten sites which

An additional $1.34 billion for School Enhancement

continued on page 9

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September 2015

continued from page 7

Projects includes funding to support technology

subcontractors here, is that the SCA has set aside

enhancements and realignment of existing facilities.

$830 million over five years for its owner-controlled

Also included are bathroom upgrades, physical

insurance program.

education projects, science labs and accessibility enhancements.

As one can see by looking at this brief summary of the SCA’s capital plan, there will continue to be numerous

The Amended Plan also includes $3.69 billion for

opportunities for subcontractors wishing to work for

Mandated Programs. This program provides funding

this agency. The STA will continue to monitor this plan

to meet requirement of local laws such as remediation

and work on behalf of its members on issues that may

and building code compliance projects, insurance and

arise as a result of working with this agency.

emergencies, among other items. Of special note to

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STA Subcontractors News

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September 2015

Construction Contract Notice Provisions – Subcontractor Wins On Technicality Henry L. Goldberg, Managing Partner, Goldberg & Connolly, and STA Legal Counsel

We often write of the unfairness of the losses suffered

from COFED forfeitures can be obtained. (There will

by contractors and subcontractors due to contract

be more on steps being taken now to establish a

notice provisions of various types. Notice of claims,

statewide “prejudice rule” as an antidote to COFEDs

notice of damage calculations, reservation of claims

in upcoming articles.)

in mechanics lien waivers, and even notice of delay and impact-causing events, are all now land mines

In

this

outlier,

appellate

case,

a

residential

for the unwary. These notice requirements can be as

tower was being constructed in Brooklyn. The

absurd as requiring notice within twenty-four hours.

plaintiff subcontractor was installing the concrete

Certainly such urgent contractual notice could hardly

superstructure. It sued for $3.5 million to recover for

be necessary. But necessity is not why these provisions

“certain additional work” directed by the owner and

are put into subcontracts. The driving reason for

for “delays attendant to the work. ”

most, if not all, such provisions is to impose a COFED (i. e., Contractor Forfeiture Enhancement Device) and

The owner contended that the plaintiff waived any

to, thereby, create a windfall for the particular owner/

recovery by: (1) failing to comply with the notice of

developer or general contractor involved. Worse yet,

claim procedures set forth in Article 8 of the General

these unreasonable provisions have been routinely

Conditions of the contract, and (2) executing a

enforced by the courts on a strict “you signed it, you

mechanic’s lien waiver.

eat it” basis. Generally, where a construction contract contains a However, one recent appellate case in New York

“condition-precedent” type notice provision, setting

discussed below indicates that, occasionally, the

forth the consequences of a failure to strictly comply,

Courts will attempt to carve out an exception to

strict compliance will be required in New York. Article

these harsh COFEDs; just don’t count on it. You must

8 of the General Conditions of this particular project’s

redouble your efforts to fastidiously comply with

subcontract contained such a “condition-precedent”

contractual notice provisions until legislative relief

notice provision, providing that the plaintiff’s

continued on page 13

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STA Subcontractors News

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September 2015

continued from page 11

failure to give written notice of a claim and detailed

In this case, the owner failed to submit evidence

statements, including damages, of the claim within

concerning the party’s course of conduct pertaining

the times specified, shall constitute a complete waiver

to written work change orders. Accordingly, it

of such claim.

failed to meet its burden of establishing that the strict notice of claim provisions of Article 8 were

Interestingly, the plaintiff contractor in this case

consistently enforced, and, therefore, applied to the

conceded that it did not strictly comply with the

subject claims.

notice provisions of Article 8. It contended, however, that its claims for extra work and delay damages

Alternatively, the owner/developer contended that,

were claims for “work ordered pursuant to Article 4”

even if Article 4’s change order provision applied to

of the contract, dealing with “claims for additional

the subject claims, the subcontractor had waived them

compensation or delay based on changes in the work.

by failing to comply with the notice of claim provision

” Allegedly, “nothing in Article 8 indicated that the

in Article 4 itself. Significantly, in this subcontract, the

failure to give proper notice with regard to claims

notice of claim provision in Article 4 was not a severe

for changes in the work, are subject to waiver. ”

condition-precedent type notice requirement setting

Thus, change orders were not subject to the specific

forth the consequences of a failure to strictly comply.

(and harsh) notice requirements, unlike the general

Thus, mere “substantial compliance” with such a

waiver provisions of Article 8, which was the “claims”

notice provision would suffice.

provision of the subcontract. Substantial compliance will be found where, for Furthermore, the contract required that changes

example, there is sufficient correspondence between

to the work be authorized by the owner by written

the parties to give the owner actual notice of the claims.

change order. However, under New York law, oral

The owner failed to meet its burden of establishing

directions to perform extra work, or the general

that it did not have timely notice of the plaintiff’s

course of conduct between the parties, may modify

claims sufficient to satisfy the more “relaxed” notice

or eliminate contract provisions requiring written

of claim provision in Article 4. Should a $3.5 million

authorization or notice of claims. As the court

claim rise or fall based upon such a subtle distinction?

observed, provisions requiring written authorization

Clearly not, but “a win, is a win. ”

for extra work are waived where “the conduct of the parties demonstrates an indisputable mutual

Lien Waiver Provision

departure from the written agreement and the changes were clearly requested by the owner and

The owner/developer’s second “waiver” argument

executed by the contractor. ”

involved the lien waiver forms utilized on this project. It’s surprising, with the law being so well settled in continued on page 15

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STA Subcontractors News

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September 2015

continued from page 13

this regard, that some owners/developers and general

It has to become a religion, part of your company’s

contractors are still attempting to assert that the

culture. Do not listen to owner/developer CM’s or

waiver language in typical mechanic lien waivers

project managers telling your field staff to “stop

routinely submitted with every periodic payment

sending all those letters to the job trailer! ” I don’t

requisition are actually a waiver of claims. While,

want to hear the excuse that you have to work with

again, you must be careful to actually list and reserve

them for two more years. Do your job!

all claims in lien waivers, most courts today recognize that the “waiver” is really utilized to acknowledge

As indicated, the STA is already working on legislation

amounts actually received to date (like a “receipt”)

that will attempt to level the playing field state-

and are “not intended to encompass or preclude

wide regarding these one-sided COFEDs. Legislative

claims that the plaintiff subsequently presented to the

protection is needed since they often cannot be

defendants for additional work. ” The party receiving

“negotiated out” of subcontracts; not if you want the

a lien waiver must prove that the parties treated the

work that is. We will be discussing the “prejudiced

lien waiver other than as a receipt.

rule” antidote to COFEDs in future articles. For now, give the required notice!

G&C Commentary Henry L. Goldberg may be contacted by email, The “good guys” won this one. But don’t rely on it.

hlgoldberg@goldbergconnolly.com or by telephone,

The reasoning in this holding, while laudatory, is far

516-764-2800.

too tenuous a rationale to depend on to protect a valuable claim. The concrete subcontractor in this case

©Goldberg & Connolly 2015 This article has been

was able to exploit an inconsistency between Article 8

prepared for informational purposes only. It is not

(“Claims”) and Article 4 (“Changes”) of its subcontract.

a substitute for legal advice addressed to particular

This loophole, however, could be all too readily

circumstances. You should not take or refrain from

nullified by simple contract draftsmanship. You can

taking any legal action based upon the information

be certain that the owner/developer in this case will

contained herein without first seeking professional,

not make this mistake, or leave this opening, again.

individualized

Always carefully comply with all notice provisions.

circumstances. The hiring of a lawyer is an important

COFEDs are there to hurt you; do not let them.

decision that should not be based solely upon

counsel

based

upon

your

own

advertisements. Before you decide, ask us to send Also, do not rely on the sloppy and imprecise concept

you written information about our qualifications and

of “substantial” compliance. What, after all, is that?

experience

Always strictly comply with contract notice provisions.

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September 2015

Watch the Sales Tax

By Robert Schaffer, CPA, Castellano, Korenberg & Co CPAs PC

New York State’s sales tax rules are extremely complex

materials that will be incorporated into an exempt

and not complying with them can be very costly.

organization’s property can be purchased exempt

The State has found that contractors as a group are

from sales tax by furnishing the supplier with Form ST-

generally not certain of the laws and has, to some

120.1, Contractor Exempt Purchase Certificate which

extent, concentrated its efforts on this industry. If you

should be presented along with a valid exemption

mistakenly treat a repair job as a nontaxable capital

certificate,

improvement you may be responsible for uncollected

Exempt Purchase Certificate or other proof of

sales tax, penalties and interest. Especially in today’s

exemption from the exempt organization.

Form

ST-119.1,

Exempt

Organization

economic climate unexpected expenses like these are very unsettling.

For a capital improvement job where the contractor purchases the materials, the contractor pays the sales

New York State’s Publication 862 provides guidance

tax to the supplier but does not separately charge the

on distinguishing between capital improvements

customer sales tax. The contractor should include the

and taxable repairs to real property. It is critical for

sales tax as part of the cost of the job in determining

contractors to understand the difference. It is equally

the contract price. Form ST-124, Certificate of Capital

important for all contractors to register with New

Improvement, must be received from the customer to

York State Sales Tax and file required sales tax returns

reflect that it is a capital improvement job and that

even if no tax is due. By filing returns, the company

the contract price is not subject to sales tax.

effectively starts the clock on the normal statute of limitations which is three years. A result of not filing

For repair, maintenance and installation services,

sales tax returns allows the State to go back and audit

the customer is charged the sales tax on all of the

for sales tax for a longer period, which is usually six

contractor’s charges. The contractor is still generally

years.

responsible to pay its supplier sales tax on purchases of materials unless it mainly performs these taxable

Generally, the company that purchases building

services and suppliers will accept Form ST-120 Resale

materials for a project is required to pay sales tax,

Certificate. The contractor may apply for a refund

unless an exemption applies. For example, certain

or credit on its sales tax return for sales tax paid on

continued on page 19

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STA Subcontractors News

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September 2015

continued from page 17

materials that are incorporated into the property

New York State defines a “capital improvement” as

transferred to the customer in a taxable job. For

an addition or alteration to real property that:

example, a painting contractor may apply for a refund or credit for sales tax paid on paint used for a taxable

Substantially increases the property’s value or

job.

prolongs its useful life;

Form ST-120.1 may also be used to purchase the

Becomes part of the real property or is permanently

services of a subcontractor without paying sales tax

affixed to the real property so that removal would

for services that will be part of a project and resold to

cause material damage to the property or the article

the customer.

itself; and

Purchases of supplies such as brushes, rollers or tape,

Is intended to become a permanent installation.

etc. by a painting contractor are always subject to sales tax since they are not transferred to the customer. The

Repairs involve keeping the property maintained and

contractor is considered to be the consumer of those

“in a condition of fitness, efficiency, readiness and/or

items and therefore is responsible for the sales tax.

safety” or restoring it to that condition.

Sales tax is also due for supplies such as hammers, screw drivers, small tools, temporary fencing and

The distinction between capital improvement and

scaffolding materials.

repair and maintenance jobs is not always obvious. There are many examples within Publication 862

If sales tax is not charged by the vendor, for example

where installation of an item in connection with new

if materials and supplies are purchased from out of

construction or total reconstruction is considered a

state, the contractor is still responsible for paying the

capital improvement but where that same installation

tax directly to the State on the sales tax return filed

on a property that has otherwise been completed for

for that period. It is considered “purchases subject to

more than six months is a taxable installation.

tax” or “use tax.” Publication 862 is available on the New York State Certain services paid for by the contractor are also

website at www.tax.ny.gov.

taxable, such as security services. In addition, the purchase and rental of machinery and equipment by

Contact Bob Schaffer, CPA in our tax department at

contractors are also subject to sales tax.

516-937-9500 if you need further guidance or have any questions.

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STA Subcontractors News

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September 2015

2015 STA Membership Survey Results

In August, the STA sent out a survey in an effort to

Over 80% of those surveyed said that the most

better serve its member companies in a variety of

important type of General Membership Meeting

different areas, including technology, event topics

or Seminar would feature presentations by owners,

and industry-related issues. The results of the survey

general contractors and construction managers. The

have prompted the STA to continue working hard on

STA will be putting together a seminar directly related

the issues that affect its member subcontractors, and

to this for early December. In that same light, another

embark on new campaigns as a direct result of the

topic of interest is connecting to industry colleagues

survey.

to network and do business. The association will be exploring new ways of connecting its members to

The STA uncovered a few different facts about its

each other through business receptions and various

members. For instance, over 65% of the membership

events.

have been members for over 10 years, with over 85% of that number having been in business for over 25

For any other information on the results of the

years.

2015 STA Membership Survey, please contact the STA at 212-398-6220 or visit the STA’s website at

Social media was marked as an important topic for

www.stanyc.com.

the STA to tackle in the coming year as a means of

participated!

relaying industry related information to its members. Together with The Berman Group, the STA office will be rolling out a new website with integrated social networking, including Facebook, Instagram, LinkedIn and Twitter. Please look out for more information on these STA accounts in the near future!

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Thank

you

to

those

who

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STA Subcontractors News

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September 2015

Subcontractors Trade Association 1430 Broadway Suite 1106 New York, NY 10018 T: 212.398.6220 F: 212.398.6224 e-mail: info@stanyc.com website: www.stanyc.com Officers Robert J. Ansbro President The New York Roofing Company Robert Weiss 1st Vice President A.J. McNulty & Co. Inc. Peter Cafiero 2nd Vice President Island Painting John A. Finamore Treasurer Jordan Panel Systems Joseph Leo Secretary Atlantic Contracting & Specialties, LLC

Hank Kita Executive Director Subcontractors Trade Association Henry Goldberg Legal Counsel Goldberg & Connolly Active Past Presidents Greg S. Fricke, Jr. Leonard Powers, Inc. Jerry Liss A. Liss & Co. Inc. Alan Nathanson (Honorary) Forsythe Plumbing & Heating Corp. Lawrence Roman WDF, Inc. Arthur Rubinstein Skyline Steel Corp. Robert Samela A.C. Associates Gary Segal (Honorary) Five Star Electric Corp. Lawrence Weiss A.J. McNulty & Co., Inc.

Scott Rives Woodworks Construction Co, Inc.

Maureen O’Connor Center Sheet Metal, Inc.

Board of Directors

Randy Rifelli United Iron, Inc.

Joseph Azara Jr. C.D.E. Air Conditioning

Guy VandeVaarst Firecom Inc.

Christine Boccia JD Traditional Industries

John Villafane Eldor Electric

Dan J. DeVita Penava Mechanical Corp.

Upcoming Events

John Dierks Dierks Heating Company, Inc Brent Fleisher Environet Systems James Flynn Independent Temperature Control Patrick Gallagher Cannon Mechanical Stephen Gianotti Arcadia Electrical Co., Inc. Sandra Milad Gibson Milad Contracting Corporation

STA General Membership Meeting Wednesday, October 7, 2015 5:30 pm - 7:30 pm The LaGuardia Marriot Hotel 102-05 Ditmars Boulevard East Elmhurst, NY 11369

O U R M I S S I O N S TAT E M E N T trengthen New York’s construction industry each member firms to increase business opportunities dvocate to preserve subcontractors’ rights

Craig Gilston Gilston Electrical Contracting

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