September 2013 co web by Ucane

A publication of the Utility Contractors’ Association of New England, Inc.

SEPTEMBER, 2013

• Using Reform to Address the Commonwealth’s Water Infrastructure Needs • LEED Clean Construction Pilot Credit

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SEPTEMBER, 2013

IN THIS ISSUE

OFFICERS President AL MORTEO FED. CORP. President Elect TONY BORRELLI Celco Construction Corp. Treasurer JOHN OUR Robert B. Our Co., Inc. Secretary PAUL SCENNA Albanese D&S, Inc.

BOARD OF DIRECTORS MARCELLA ALBANESE Albanese Bros., Inc. JEFF BARDELL Daniel O’Connell’s Sons, Inc. VINCENT BARLETTA Barletta Heavy Division MICHAEL BISZKO, III Biszko Contracting Corp. STEVEN COMOLETTI P. Caliacco Corp. MAUREEN DAGLE Dagle Electrical Const., Corp. ADAM DeSANCTIS DeSanctis Ins. Agency, Inc. THOMAS DESCOTEAUX R. H. White Const. Co., Inc. JERRY GAGLIARDUCCI Gagliarducci Construction, Inc. MARCO GIOIOSO P. Gioioso & Sons, Inc. BILL IRWIN C.J.P. & Sons Const. Co., Inc. PHIL JASSET Honorary Board Member BILL KEAVENEY A. R. Belli, Inc. ROBERT LEE J. F. White Contracting Co. RYAN McCOURT McCourt Construction Co. RICHARD PACELLA, JR. R. M. Pacella, Inc. LOUIS SCHOOLCRAFT Ti-SALES, Inc. ANNE KLAYMAN Executive Director

5 President’s Message:

Thank You Madame President

7 Legislative Update:

• Attorney General Martha Coakley Narrows Potential Ballot Initiatives • MassDEP Implements a Fee Increase as Authorized in FY14 Budget • Businesses Sound the Alarm Over Recently Passed “Tech Tax”; Governor Plans Summit to Address Concern • Patrick Administration Announces MassWorks Third Annual Funding Application • Senate Minority Party Loses Quarter of its Membership as Veteran Legislator Knapik Announces Departure

17 Using Reform to Address the Commonwealth’s Water Infrastructure Needs 23 Legal Corner:

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28 Contractor Member of the Month:

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34 Hinckley Allen Partner Joel Lewin Named Best Lawyers’ Construction Law “Lawyer of the Year” 35 Environmental Viewpoint:

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39 MWRA Advisory Board Annual Field Trip 41 Save the Date...UCANE’s 59th Gala Banquet 43 Benefits & HR Strategies:

Follow These Steps to Achieve Quantity and Quality in Your Hiring Pipeline

49 Alyssa Morteo - Massachusetts Leukemia & Lymphoma Society’s 2013 “Woman of the Year” 51 The New England Public Works Expo 53 The McCourt Foundation: Tour de South Shore 55 Financial Management:

• Real Estate Investing With REITs • Deferred Income Annuities for Your Future • Leasing Company Cars

58 UCANE’s Updated Employee Safety Manuals Now Available Editor: Anne Klayman, Associate Editor: Suzanne Savage, Graphic Designer: Sherri Klayman Construction Outlook Chairman: Al Morteo Editorial Board: Al Morteo, Tony Borrelli, John Our and Paul Scenna CONSTRUCTION OUTLOOK published monthly by the Utility Contractors’ Association of New England, Inc., 300 Congress Street, Suite 101, Quincy, MA 02169; Tel: 617.471.9955; Fax: 617.471.8939; E-mail: aklayman@ucane.com; Website: www.ucane.com. Statements of fact and opinion are those of the authors alone and not necessarily those of UCANE and the Construction Outlook editorial board and staff. Subscriptions are included in dues payments for UCANE members. Presorted Standard postage paid at Abington, MA. POSTMASTER, please send form #3579 to Construction Outlook, Crown Colony Office Park, 300 Congress Street, Suite 101, Quincy, MA 02169.

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Thank You Madame President

abor Day is the unofficial end of summer, family vacations and the beginning of a new school year. For our members and the construction community, it’s just another date on the calendar, a short interruption to our ongoing projects, before we get back to those hectic work schedules and the milestones we need to meet. This year, Labor Day signaled the beginning of something else on Beacon Hill, something that has not happened in a very long time; a full and open debate on the Commonwealth’s water infrastructure, including both financial needs and any administrative or program type changes that may be needed to accomplish the goal to meet our citizens’ future water requirements. While everyone seems to understand that clean drinking water is one of the most essential components to ensuring public health, a clean environment, and sustainable economic development, it is Senate President Therese Murray who has taken a leadership role on the critical issue of our future water needs. She has made it perfectly clear to both legislators and the public that legislation relative to potentially financing and reforming the Commonwealth’s water infrastructure system is a high priority with her and that legislation is likely forthcoming during FY14. Senate President Murray should be applauded for her efforts to focus the legislature on this important issue. The Commonwealth’s future water needs have been identified and categorized, and the economic impact and financial costs to every person living in our state will be significant. Therefore, much like legislation impacting the transportation infrastructure in 2009, we can anticipate that the legislators’ initial primary focus will be on “reform before revenue”. This means that legislators will look closely at the way we presently maintain and invest in our water infrastruc-

SEPTEMBER, 2013

ture and what administrative and structural changes can be made to increase efficiency and save money. All of us realize that the days when we could rely solely on federal funding are gone and that we must work together on a federal, state, and local level to jointly maintain and invest in our water infrastructure. It is my hope that legislators will take into consideration the work done by the Massachusetts Water Infrastructure Finance Commission (MWIFC), ably chaired by Representative Carolyn Dykema and Senator Jaime Eldridge, and also the work that UCANE has done to educate and help create a water and sewer infrastructure partnership between municipalities, regional authorities, environmental groups, and other interested parties.

I urge you to read an article in this month’s Construction Outlook magazine beginning on page 16 which will shed more light on areas of potential reform, whether through asset management, coordination of projects or other key cost saving initiatives. While no one can claim to have the entire solution, together, various elected officials, government entities, policymakers, and interested organizations can develop a model to serve the Commonwealth for years to come. n

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Attorney General Martha Coakley Narrows Potential Ballot Initiatives

ith the deadline for submitting ballot initiatives for the 2014 election cycle approaching, various interest groups submitted 33 ballot petitions to the Massachusetts Attorney General for her initial approval. The ballot petitions, which at their earliest stages simply require 10 signatures, progress only if the Attorney General rules that they are properly drafted and constitutional. Of the 33 petitions submitted, petitions governing 14 topics will continue on. Items meeting with the Attorney General’s review included: a higher minimum wage, a cut in the sales tax, an expanded bottle bill, and the repeal of a new computer services tax. The 33 questions filed with Attorney General Coakley’s office proposed 18 new laws and four constitutional amendments. Many of the questions were variations of the same issue.

Other questions meeting constitutional muster included: creating nurse-patient staffing ratios, whale safe fishing, and making daylight savings time the year-round standard time for the state. Items that did not pass the constitutionality test included proposed initiatives relative to genetically modified foods, repealing the new gaming law, and the United States Supreme Court’s decision in Citizens United. On the labor front, the minimum wage question would raise the wage from $8 to $10.50 per hour over two years. Another proposed ballot question would create a statewide earned sick time policy. From a taxation perspective, proponents filed a ballot question that would reduce the state’s sales tax rate from 6.25 percent to 5 percent and, would separately, repeal the new law that applies the sales tax to computer and software technology services. Along those same lines, another ballot petition was

SEPTEMBER, 2013

filed to repeal the linking of the consumer price index to the gas tax. Of the remaining notable filings, proponents have filed a ballot petition to expand the types of bottles covered by Massachusetts’ 1982 bottle bill. While the original law created a 5 cent deposit on carbonated beverages, the question would expand the law to include non-carbonated beverages such as water, tea, and sports drinks. Efforts to expand the bottle law, while being supported in the legislature at some levels, have fallen far short in recent years. Filing the questions with the Attorney General’s office is just the first step on a long road to the 2014 ballot. Now that the Attorney General has determined which questions passed constitutional muster, the next hurdle to getting a question on the ballot involves the submission of certified signatures from voters. Proponents have until December 4 to collect the signatures of 68,911 certified voters. continued on page 9

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Legislative Update continued from page 7

Massachusetts Department of Environmental Protection Implements a Fee Increase as Authorized in Fiscal Year 2014 Budget

he Massachusetts Department of Environmental Protection (“MassDEP”) announced that it will be conducting public hearings relative to the implementation of new fee increases. Acting in accordance with the provisions of M.G.L. Chapter 21A, Section 18 and M.G.L. Chapter 21E, Section 3B, the MassDEP will hold public hearings on amendments to 310 CMR 4.00 et seq., the MassDEPs Timely Action Schedule and Fee Regulations. As a result of the passage of the Fiscal Year 2014 budget, DEP was authorized to promulgate emergency regulations to increase any existing permit or compliance fee adopted under section 18 of chapter 21A and section 3B of chapter 21E of the General Laws to reflect the increase in the consumer price index since the last promulgation of fees by regulation. As the fees were last set in 2004, the

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new fees reflect an increase in the consumer price index from that time period forward. In accordance with the fiscal year 2014 budget, this fee increase will occur during fiscal year 2014 as emergency regulations. The amendments were filed as emergency regulations and became effective on August 8, 2013. Public hearings will be conducted under the provisions of Chapter 30A of the Massachusetts General Laws on:

September 6, 2013 10:00 a.m. 436 Dwight Street Springfield MA Department of Environmental Protection Western Regional Office September 6, 2013 1:30 p.m. 627 Main Street Worcester MA Department of Environmental Protection Central Regional Office September 9, 2013 10:00 a.m. One Winter Street Boston MA Department of Environmental Protection September 10, 2013 10:00 a.m. 20 Riverside Drive Lakeville MA Department of Environmental Protection Southeast Regional Office Testimony may be presented orally or in writing at the public hearings. In addition, written comments will be accepted at the address below until 5:00 p.m. on September 20, 2013. Please submit three copies of any written testimony. Written testimony must be submitted to: Jay Eberle, 3rd Floor, Department of Environmental Protection, One Winter Street, Boston, MA 02108. Copies of the regulation are available on the MassDEP website: www.mass.gov/eea/docs/ dep/service/regulations/310cmr04. continued on page 11

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Legislative Update continued from page 9

Businesses Sound the Alarm Over Recently Passed “Tech Tax”; Governor Plans Summit to Address Concern

fter the passage of the Commonwealth’s plan to address the transportation financing gap, many in the business community have raised alarm over the serious harm one of the key tax components presents to Massachusetts companies. In particular, a movement has begun to repeal the so-called “tech tax” – the new sales tax on computer services. Governor Patrick acknowledged that there is a legitimate concern and a detrimental “reputational impact” created by a new sales tax on computer services. As a result, he plans to meet with legislative and business leaders to discuss potential remedies, including the need to replace any revenue lost by a repeal of the computer services tax. As reported by the State House News Service, Patrick stated, “I would say at this point I’m concerned but not alarmed, and I would say it that way because I think when we talk with people in the sector about the limiting interpretation that the Department of Revenue has put in place their blood pressure goes down, but the repu-

tational impact of the alarm about it is very concerning, very worrisome and it projects something I think was not intended by the Legislature.” In pushing to repeal the tax, the Massachusetts High Technology Council and the Massachusetts Taxpayers Foundation have both said the tax creates a danger for what is now a growth industry, however, it could raise $500 million, far more than the $161 million anticipated by the Legislature. Many legislators have been barraged by calls from businesses that either rely on computer services or are producers of them. Legislation has already been filed to repeal the measure although it is difficult to imagine such a measure passing without some other form of revenue replacing it. As previously noted, the legislature passed a tax package that reduced the impact of the plan proposed by the Administration; but did so through a combination of tax mechanisms. continued on page 13

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Legislative Update continued from page 11

Patrick Administration Announces MassWorks Third Annual Funding Application

ccording to a press release issued by the Massachusetts Housing and Economic Development Committee (HED), the third round of the annual MassWorks Infrastructure Program grants will be open to new applications online between Tuesday, September 3 and Friday, September 13, 2013. The MassWorks Infrastructure Program provides a one-stop shop for municipalities and other eligible public entities seeking funding to support economic development and job creation. Municipalities with a population of 7,000 or less may also seek grants for road improvements to enhance safety. The 2013 grant round will support housing or commercial growth opportunities that contribute to the longterm strength and sustainability of Massachusetts with a particular emphasis on projects that support the production of multi-family housing in appropriately located mixed-use districts, or that support economic development in weak or distressed areas. The MassWorks

Program encourages communities to apply for projects where they have planned ahead for such growth by implementing prompt and predictable permitting and zoning that supports the desired growth. The materials for the third round of grants and the electronic application system were first put online in June. The first competitive MassWorks grant round was held in September 2011 and HED awarded $63.5 million in grants to 42 communities throughout Massachusetts. In 2012, under the second round of grants, the Administration approved 26 projects totaling nearly $38 million. The MassWorks Program represents six capital budget programs that were consolidated by the Patrick Administration in 2011 and codified by the Jobs Bill signed by the Governor in August 2012. For more information about the MassWorks Infrastructure Program, please visit: www. mass.gov/massworks. continued on page 15

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Legislative Update continued from page 13

Senate Minority Party Loses Quarter of Its Membership as Veteran Legislator Knapik Announces Departure

tate Senator Michael Knapik (R-Westfield) recently resigned the Second Hampshire and Hampden Senate seat to join Westfield State University as the new executive director of advancement. Senator Knapik was serving his 10th term in the Senate, and previously served two terms in the House. He had been the ranking Republican on the Senate Ways and Means Committee since 2001 and served on more budget conference committees than any other lawmaker. According to Westfield State University, part of Knapik’s new job is to work with the Westfield State Foundation, a nonprofit organization that raises money and manages charitable gifts for the university. Senator Knapik’s resignation means that a special election will be held for the sixth time in the 2013-2014 legislative cycle. The Second Hampden and Hampshire District includes Holyoke, West-

field, parts of Chicopee, and the towns of Agawam, Granville, Montgomery, Russell, Southwick, Tolland, Easthampton, and Southampton. Accordingly, there are at least five people attempting to succeed Senator Knapik. Representative Donald Humason, a Westfield Republican and former aide to Knapik; and Michael Franco, a Holyoke resident and retired Air Force major at Westover Air Reserve Base, make up the Republican field vying in the special election, according to city elections departments in the district. Easthampton Mayor Michael Tautznik; David Bartley, a Holyoke City Councilor and son of the former House speaker; and Christopher Hopewell, of Holyoke, are Democratic candidates who turned in nominating papers, according to city halls. The districts major municipalities are Holyoke, Westfield, Agawam, and Easthampton. The primary is October 8 and the special election is scheduled for November 5. n

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Using Reform to Address the Commonwealth’s Water Infrastructure Needs By Mark Molloy, Esq., Lynch Associates, Inc.

High and fine literature is wine, and mine is only water; but everybody likes water. - Mark Twain, Letter to William Dean Howells, February 15, 1887 As the Massachusetts legislature returns from an August recess without formal sessions, legislators are faced with a variety of important matters ranging from unemployment insurance reform and gun control to raising the minimum wage and a myriad of bond bills. Perhaps one of the most important issues, the financing of the Commonwealth’s water infrastructure system, may finally see the attention usually reserved for transportation infrastructure. To this end, the Massachusetts Senate has begun to consider potential areas of reform to the way in which drinking water and wastewater infrastructure is maintained and developed within the Commonwealth. There is a sense that, in a manner similar to Chapter 25 of the Acts of 2009 (transportation reform), drinking water and wastewater infrastructure reform must incorporate a combination of best management practices that improve efficiencies and reduce costs. In short, the Commonwealth, its municipalities, residents, and businesses must think of drinking water and wastewater infrastructure as a partnership in which each party is invested in maximizing efficiencies. With that in mind, it is essential that any legislation seeking to address this important matter include elements of the following five principles: SEPTEMBER, 2013

1. Government Leadership and Assistance As municipalities and regional authorities begin to focus on drinking water and wastewater infrastructure reform, they will need the Commonwealth’s assistance in three key ways: (a) clearly delineated and identified leadership to carry-out the implementation of water infrastructure reform; (b) technical assistance on developing asset management plans and implementing full cost (or something closer to actual cost) rate structures; and (c) financial assistance through a secondary trust fund that can provide municipalities with funding to complement SRF funding and assist municipalities and regional water systems with technical issues associated with water infrastructure reform. The successful implementation of drinking water and wastewater infrastructure reform requires that the DEP and WPAT have clear and unquestioned authority to oversee and, if necessary, mandate drinking water and wastewater infrastructure reform initiatives within the Commonwealth. Further, the provision of technical support should be accompanied by a secondary funding mechanism allowing the Commonwealth to both assist and incentivize municipalities to manage assets, implement proper cost pricing, and undertake drinking water and wastewater infrastructure projects. Any secondary funding mechanism, however, must complement the existing SRF program; not compete against one of the Commonwealth’s most successful job development programs.

2. Asset Management and Capital Planning As contemplated by the Massachusetts Water Finance Infrastructure Commission (MWIFC), asset management is the systematic development of a schedule of costs for a water and/or wastewater continued on page 19

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Water Infrastructure continued from page 17 utility to operate, maintain, improve, expand, repair, and replace its assets over an extended period of time; and the identification of funding sources to satisfy the schedule of costs including debt service as well as providing for emergencies within that period. (Note: Various literature references a 10-year planning period updated on a regular basis.) To that end, the Commonwealth should encourage all drinking water and wastewater systems to prepare long-term estimated plans and capital budgets supported by analyses of all major assets. Asset management plans should analyze asset condition, risk of failure, expected costs and dates of maintenance, renewal and ultimate replacement. Along with asset management, the Commonwealth should encourage municipalities to include sources and amounts of revenues sufficient to finance operations, maintenance and capital needs required by the asset analyses. Long-term plan and capital budgets should be updated annually.

for operations (a) that are financed and operated to provide services to the general public on a continuing basis primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control accountability, or other purposes. While approximately 180 municipalities have enterprise funds, the remaining municipalities do not appear to have any mechanism dedicated to funding local water and wastewater projects. As part and parcel of any such requirement to establish a water enterprise fund, a key element must be a non-transferability requirement that prevents municipalities from diverting these dedicated water and wastewater infrastructure funds in unapproved or unrelated ways.

4. Funding Partnership and Fair Cost Pricing

The funding of water infrastructure has traditionally been a federal, state, and local endeavor. With a reduced percentage of federal and state re3. Local Water Enterprise Funds sources, local users can no longer rely on essentialIn conjunction with the aforementioned asset ly “subsidized” service. Fair cost pricing, otherwise management and capital planning, each municipalreferred to as ‘full cost pricing’, is the establishment ity should be required to establish a water enterprise of user charges, which in combination with any othaccount. This type of fund may be used to account er available resources, provide the revenues necessary to recover a water or wastewater system’s costs of providing services including operation and maintenance, repair and replacement, capital improvement, and debt service. As identified by the MWIFC, Commonwealth businesses and residents do not pay the actual cost of the services they receive. (Note: In an analogous example of MBTA service and fares, current water and wastewater rates represent a fraction of the actual cost for service.) The United States Environmental Protection AgenIT Solutions and Management cy, which provides technical resource and guidance for implementing full cost pricing, states that “[m]ost Complete and Custom of the funding for water and wastewater comes from Cloud Computing Solutions the revenues generated by prices. Therefore, pricing water to accurately reflect the true costs of pro“With SSC managing our viding high quality water and wastewater services to “With SSC managing ourtechnology, technology,we’re able to consumers is needed to both maintain infrastructure focus onto managing and encourage (www.water.epa.gov/ we’re able focus our We get conservation.” IT done for you! onbusiness” managing our infrastructure/sustain/Water-and-Wastewater-PricIT Solutions and Management business.” ing-Introduction.cfm). municipalities to Complete and Custom CloudRequiring Computing Solutions - Mike Lenihan determine and781.837.0069 publish fair cost reports on providing ~ Mike Lenihan J. D’Amico, Inc water andwww.systemsupport.com wastewater services is the first step to J. D’Amico, Inc. eventually initiating a billing strategy that recognizes a partnership in funding water infrastructure on a go 462 Plain Street forward basis. (Note: Fair cost pricing will likely reMarshfield, MA 02050 quire an affordability equation based on a percent781.837.0069 age of median household income.) www.systemsupport.com continued on page 21

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Water Infrastructure continued from page 19

5. Coordination of Interrelated Infrastructure Assets While the aforementioned asset management pertains to drinking water and wastewater infrastructure, any legislation should incentivize municipalities and regional water systems to maximize the synergies between water infrastructure and other types of infrastructure. Requiring or incentivizing municipalities or regional water systems to invest in complementary forms of infrastructure is logical. If one type of infrastructure is slated to be improved or maintained, municipalities and regional water systems should coordinate improvements to other infrastructure. Infrastructure repairs cost more than would be the case if the two infrastructure modalities were, in some measure, coordinated (i.e., consider the road replacement project that gets torn up and repaved when a pipe replacement project occurs a year later). While the above referenced items reflect a diverse array of reform areas, it is important that any reform effort consider the eventual, or even immediate, need for a funding mechanism to transition municipalities and regional water authorities into more efficient drinking water and wastewater infrastructure managers. To that end, whether funded through

new revenue mechanisms or the re-allocation of existing revenue sources, a secondary trust designed to complement the existing SRF funding mechanism will provide an excellent opportunity to facilitate the “carrot and stick” necessary to ensure timely and effective reform. This in turn will position the Commonwealth and its municipalities to close the drinking water and wastewater infrastructure gap.

There is no guarantee that legislation to address the Commonwealth’s water infrastructure will become law in this session. Nevertheless, if legislation is passed, the importance of the partnership between federal, state, and local efforts cannot be overstated. Everybody does not just like water; everybody needs water. A strong water infrastructure system improves public health and the environment while establishing a strong foundation for economic development. The aforementioned areas of reform will underpin the partnership necessary to not only address our water infrastructure needs today, but for tomorrow as well. (Next Month: How Funding a Secondary Trust Fund Can Assist Municipalities and Regional Authorities) n

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Charles E. Schaub, Jr. Esq., Hinckley Allen, LLP

Capstone and Scottsdale:

Recent Cases Continue the Trend Toward Recognizing Coverage for Defective Work Claims Note: I would like to acknowledge the assistance of my colleague, Scott McQuilkin, who prepared this article. Scott is an Associate Hinckley Allen LLP’s Construction and Public Contracts Group.

In denying coverage and a defense to general contractors for construction defect claims, liability insurers often assert that defective work is not an “occurrence” or “accident” under the policy and, as such, damage caused to project work alone is not covered. In two recent cases, however, courts have held that defective work is an occurrence under the typical liability policy and that coverage may apply to resulting damage to the contract work if the defective work was performed by a subcontractor to the insured. The cases were decided by the Connecticut Supreme Court and the U.S. Second Circuit Court of Appeals, but they appear to signal a trend in the case law toward recognizing defective work as an “occurrence” that Massachusetts appellate-level courts may very well follow – which would be good news for New England contractors. SEPTEMBER, 2013

The Insurers’ Arguments The typical commercial general liability policy states that the insurer will provide coverage only for “bodily injury” and “property damage” that is “caused by an occurrence.” An “occurrence,” in turn, is generally defined as an “accident.” With respect to claims for damage to property arising out of defective work, insurers usually argue that faulty work is not an “occurrence” or “accident” because the risk of performing defective work, and of damage arising out of such work, should fall on the contractors, as the entities performing the work, and not on an insurer. continued on page 25

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Legal Corner continued from page 23 Insurers also make the similar argument that defective work lacks the element of “fortuity” that makes something an “accident.” Because the contractor (to a certain extent, at least) controls the manner in which it performs the work, and because property damage to contract work is a foreseeable result of defective work, the argument goes, defective work cannot be an “accident.”

Faulty Work IS an Occurrence The Second Circuit Court of Appeals and the Connecticut Supreme Court rejected these arguments in two recent cases that presented common “defective work” scenarios. Scottsdale Ins. Co. v. R.I. Pools, Incorporated involved defective work claims by swimming pool owners against a general contractor for faulty concrete work performed by a subcontractor. The general contractor’s insurer denied coverage on the grounds that defects in workmanship were not “accidents.” The Appeals Court determined, however, that defective work could be an occurrence (i.e., an accident) and that coverage may exist if the defective work was performed by the subcontractor. The Court based its decision on the fact that, while the policy excluded coverage for property dam-

age caused by the general contractor’s own defective work, this exclusion did not apply if the defective work was performed by a subcontractor. In other words, there could be coverage for damage arising out of the subcontractor’s defective work. Because the policy provided coverage for damage caused by certain types of defective work (i.e., defective work performed by a subcontractor), defective work had to be an “occurrence” under the policy. The other case, Capstone Building Corp. v. American Motorists Ins. Co., involved a claim of defective work on a construction project at the University of Connecticut. UConn brought a claim against the general continued on page 27

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Legal Corner continued from page 25 contractor alleging that defective work caused elevated carbon monoxide levels. The general contractor’s insurer denied coverage, claiming that faulty work was not an “occurrence.” The Capstone Court reached the same conclusion as the federal court in Scottsdale, but for a slightly different reason. The Capstone court focused on the definition of “accident” and confronted, headon, the insurer’s argument that defective construction is not an “accident” because it lacks the element of “fortuity” necessary for an accident. The Court stated that an accident is “an event that is unintended from the perspective of the insured” and that “a deliberate act, performed negligently, is an accident if the effect is not the intended or expected result[.]” In other words, while the performance of work was intentional, the contractor did not intend to perform negligent work. Negligent work could, therefore, be an “accident” or an “occurrence.” The Court made clear, however, that while faulty work was an “occurrence,” coverage would be limited to damage caused by the insured’s subcontractors. Scottsdale and Capstone thus provide contractors with two arguments as to why faulty work is an occurrence: (1) by including a subcontractor exception to the faulty work exclusion, the policies make clear that faulty work is an “occurrence” and (2) an “occurrence” includes a deliberate act (construction work) performed negligently. Courts in other states have continued the trend and recognized faulty work as an occurrence.

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Conclusion The recent decisions signal the continuation of a trend in the case law toward recognizing that faulty work can, itself, constitute an “occurrence” under standard commercial general liability policies. In fact, the majority of jurisdictions now accept faulty work as an “occurrence,” and trial-level courts in Massachusetts have followed this reasoning. Although the Massachusetts Supreme Judicial Court has not yet ruled on this issue, general contractors in Massachusetts are now better armed, following Capstone and Scottsdale, to convince insurers and/or the courts to follow the majority view. n SEPTEMBER, 2013

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Chronicling a company like R.H. White Construction Co., Inc. in a concise, easy to read story can be a challenge. When a company is on their third generation of leadership with the fourth generation working its way up the ranks and has a portfolio of outstanding projects spanning 90 years, the task becomes even more daunting. The story of this company’s austere beginnings in 1923 happened like it did for so many of UCANE’s contractor members. A young man has a dream of being a contractor and owning his own business. He prepares as much as possible for that opportunity and knows that ultimately it is a big gamble, but one worth taking. continued on page 30

SEPTEMBER, 2013

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R. H. White continued from page 29

From Horse Drawn Trenchers to a Modern Fleet of 500+ Vehicles Ralph H. White was just such a person. Working out of a barn on land that presently houses the headquarters of R.H. White Construction, he and two close friends started the company in response to a growing need for underground water and sewer infrastructure in Central Massachusetts. Photographs of the horse-drawn trenchers used during those early days are still displayed and are a testament to how primitively utility construction work was performed in the ’20s, and just how far the industry and the company have progressed since then. Company horses have been replaced by a fleet of modern construction vehicles numbering well over 500 pieces. This inventory of equipment is needed to support the company’s five offices – three in Massachusetts, one in New Hampshire, and one in Connecticut, and four operating groups, which include Utility, Mechanical, Building, and Energy Services. Operationally and logistically, R.H. White performs the majority of their projects within the New England region. It is quite apparent that the company’s business has steadily grown as the original three employees now number over 500 with annual revenues of over $100 million.

Ameri-Gas - Propane Storage Tank Installation Installed new underground 30k GWC propane storage Installed the following “Customer-supplied equipment: tank which was “customer-supplied equipment”.  New underground 30k GWC propane storage tank Ameri‐Gas ‐ Install Propane Storage Tank

Moving Beyond Pipe Installation During the remainder of the ’20s, Ralph and his partners concentrated on the installation of water and sewer pipe. But Ralph was not satisfied just performing pipe installation and he quickly realized that the pipe he was installing invariably ended or started at a pumping staCisco Systems - Wastewater Treatment Facility tion or treatment plant. In Ralph’s mind, the building at Constructed 6,000 sq. ft. 25,000 gpd wastewater the end of the pipe was where the action was…where treatment facility including 400 lf. force main and the real engineering challenges that he craved lived. So 9,000 sq. ft. leaching field. Ralph asked his pipe customers if he could start bidding Cisco Systems ‐ Construct Wastewater Treatment Facility on the buildings. Soon he began to direct and expand the Construct 6,000 sq � 25,000 gpd wastewater treatment facility including 400 lf force main and 9,000 sq. �. leaching eld company’s capabilities and operations to include pump station mechanical equipment installation and building construction. While this was the true beginning of R.H. White Construction Co., Inc. and the work being performed today, there were still many challenges ahead.

WPA Experience Proves Valuable According to the R.H. White 80 year history written by Ralph’s son Leonard, who was then R.H. White’s President, the company experienced a few roller coaster economic rides as the nation’s economy “waxed and waned through recessions, depressions, and four wars.” Leonard wrote, “The company’s first real test was surviving the Great Depression of the ’30s. At that time almost 100% of the new utility related construction was headed up by the federal government’s Work Progress Administration (WPA).” To take advantage of this opportunity, Ralph became the Chief Engineer for the WPA’s Worcester County

YMCA Central Branch - Building Renovation Project Renovated portions of four story existing facility YMCA Central Branch ‐ Building Renova�on Project including office space, locker rooms, and wellness Renovate por�ons of four story exis�ng facility including oﬃce space, locker rooms and wellness center. center.

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SEPTEMBER, 2013

operations where he drafted and helped engineer projects in every town. R.H. White performed some WPA projects, but survived mainly by renting its equipment to the government for use on other projects.

Some Early Memorable Projects The experience Ralph and others in the company gained by working on WPA projects was reflected in their first big project, which was installing dewatering pumps in Boston’s Sumner Tunnel during its construction in 1933. Each day the R.H. White crew would travel between Auburn, MA and Boston, via the old Route 9, in the back of a dump truck. It was difficult work, but work that showed R.H. White had a wide range of construction and engineering capabilities. According to Leonard’s history of the company, their second significant project, and almost their last project, was installing the first 12” transite water main in New England under Scituate Harbor. The engineering company overseeing the project insisted on a 150 psi test before backfilling which Ralph and R.H. White engineers argued would cause the line to pull-apart. The test was performed and the line did pull-apart resulting in a new replacement main being installed, tested to 150 psi, and backfilled. Ralph was so invested in this project that he rented a deep-sea diving suit and performed the necessary underwater work himself. According to company records, the main is still in service today.

A Diversified Company with Deep New England Roots Over its 90 year history, the company has performed thousands of projects and with that volume of work,

management had to meet a whole variety of challenges. According to Vice President Tom Descoteaux there have been some truly memorable projects such as the company’s engineering and construction of its first church, the Bethel Lutheran Church in Auburn, MA; and a 1981 fast track project at the Wachusett Ski area, which included building a base lodge and three chair lifts; developing 20 or more trails; creating a water supply pond; and installing snow making equipment together with construction of a pump station. Another project that Tom mentioned was the construction of the Sackler Science Center at Clark University and the four-rink sports arena in Marlborough, MA, the latter another fast track project. When asked about the company’s more unique capabilities and how the company was able to find opportunities during difficult times, Tom spoke of the 1950s when the textile industry became the company’s principal industrial customer. The Whitin Machine Works, at that time the world’s largest textile machinery manufacturer, employed over 100 R.H. White employees on double shifts to build a new state-of-the-art foundry and several new buildings. With each job, R.H. White’s reputation grew and textile mills throughout the Massachusetts area in Douglas, Webster, and Bellingham, and Jaffrey, NH, kept crews busy for years.

Learning to Refocus When the textile industry went south and the digital age was in its infancy, the company turned its considerable construction talents to Digital Computers which became a huge player in the computer field. R.H. White continued on page 32

Holyoke Construct CSO Project Holyoke Construct CSO Project Chart Industries - LNG Storage Tank Project Design/Build Project - Construction of combined sewer overflow facility (CSO), associated piping and equipment. CSO operations building, screenings structure and chlorine contact tank. Installed two 15,000 gallon cryogenic LNG storage Design/Build Project - Construction of combined six 70Tank cu.ft/hr vaporizers, a vaporizer sewer overflow facility (CSO), associated piping and Industriestanks, ‐ LNG Storage Project switching station, LNG trim heater, and centrifugal equipment. CSO operations building, screenings (2) 15,000 gallon cryogenic LNG storage tanks, (6) 70 cu.ft/hr vaporizers, a vaporizer switching station, pump. structure, and chlorine contact tank. m heater, andcryogenic centrifugal cryogenic pump.

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R. H. White continued from page 31 crews were tasked for many years with building their engineering and manufacturing facilities in both Massachusetts and New Hampshire. When the computer related building boom slowed down, the company again found other business opportunities by focusing on building water and wastewater infrastructure, such as the $10 million water treatment plant in Marlborough, MA. According to Tom, treatment plant construction remains the company’s main heavy industry business area.

Natural Gas, LNG, and CNG Point to New Challenges As the company looked to the future and other business areas, offices in Auburn, MA and Bow, NH were set up and a tractor backhoe fleet of over 50 machines was purchased to help meet the expanding needs of the natural gas industry in the New England region. Recently R.H. White completed a challenging 13-mile installation of a biogas pipeline for the University of New Hampshire at Durham. The customer came to R.H. White with a design-build proposal to transport recovered landfill gas from the Turnkey Landfill in Rochester, NH to the University’s cogeneration plant. The challenge came as the desired route passed through four miles of wetlands. Because of the fast track schedule, R.H. White utilized HDPE pipe instead of steel, which allowed directional drilling, leaving no permanent disruption to the wetland area, while staying under federal permitting limits. This engineering decision reduced the project duration by six months.

R.H. White’s Five Solid Construction Business Areas Today the company’s construction knowledge and expertise allows it to successfully compete in many areas. James McCarthy, company COO, identified these areas as being: (1) underground utility installation and repair; (2) water and wastewater treatment plant construction, repair, and service; (3) industrial and corporate building services and facilities assistance; (4) water and wastewater plant operations and maintenance; and lastly (5) liquid natural gas (LNG), compressed natural gas (CNG), and propane storage and distribution construction.

True Diversification: Residential and Commercial Enterprises Down through the generations, beginning with Ralph, then Leonard, and David, and now to Heather, Alana, and Tom (David’s children), and Heather’s husband Jared, the White family has had a knack (or the good fortune) to make critical business decisions which have kept this 90-year old company surviving during the bad times and thriving and expanding during the better times. R.H. White formed White Development to take advantage of the company’s building expertise and to offer planning, design, and permitting services for residential and commercial development projects, as well as to manage R.H. White Companies’ real estate holdings. In 1980, Southbridge Water Company was purchased and this company evolved in 1989 into the creation of another company, WhiteWater, which provides contract operation services for water and wastewater systems. In 2003, East Coast

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Utilities was added to the company. In 2005, the company built a 112-apartment complex, Cordis Mills, which it owns and manages. In 2011, WhiteWater purchased contracts from United Water that boosted sales and profitability. WhiteWater now has over 75 employees and serves hundreds of customers in the Northeast.

A Culture of Safety and Family Commitment According to Ken Margossian, R.H. White’s Senior Executive Officer, in spite of having over 500 employees, R.H. White places great emphasis on both safety and maintaining family culture. “We invest significant resourcWaters Corp. - Laboratory Renovation Project es and training in making certain that all our employees return home safely to their families each day. Employees Waters Corp.Renovated ‐ Laboratory the Renova�on 75,000Project sq. ft. office/laboratory to are also encouraged and supported to participate in75,000 comconsolidation of department square footsupport oﬃce/laboratory renova�on to support consolida�on of department functions. func�ons. munity fundraising events. We provide educational assistance and on many occasions have supported a family in time of special needs. Additionally, the company has a policy allowing any one of our employees to borrow any of our equipment, from a chainsaw to an excavator as long as they have the knowledge and training.”

Company Awards and Recognitions

David White, R.H. White’s CEO and Treasurer, summarized the company’s last 10 years in a March 2013 newsletter, by saying, “The future is no longer about the Leonard and David White families, it’s about all of us (employees) as a team. Thank you for the last fantastic 10 years.” The list of awards and recognitions received by R.H. White is significant as much for quantity as it is for quality. Three awards directly relate to the strong relationship that owners and principals have with employees. So it is obvious that R.H. White doesn’t just pay “lip service” to their concern for families and working conditions, but actually take it very seriously. The company won Family Business Awards from the Worcester Business Journal in 2010 and from Northeastern University in 2013. The company was a finalist in 2012 for the Family Business Award given out by the Family Business Association. They received both the Silver Hammer Award from the Worcester Chamber of UNH - Bio-gas Pipeline Installation Commerce and the Massachusetts Audubon Environmental Award in 2005 for their Cordis Mills development. In Designed and constructed a 62,000 ft. pipeline the safety area, the company received STEP Safety Silver to transport treated landfill gas from the Turnkey Hampshire ‐ InstallNH Bio‐gas Award from Associated Builders and ContractorsUniversity in 2010; of New landfill in Rochester, to thePipeline University campus and Gold safety Awards in 2011 and 2012. Design and Construct 62,000 foot pipeline to transport treated landll gas from the Turnkey landll in Rochester, ina Durham. the University campus in Durham.

UCANE is proud to count R. H. White Companies as a valued member of our Association since 1984. Our officers, board, and staff would like to congratulate them on celebrating 90 years in business and wish them continued growth and success. SEPTEMBER, 2013

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Hinckley Allen Partner Joel Lewin Named Best Lawyers’ Construction Law “Lawyer of the Year”

oel Lewin has been named the Lawyer of the Year in Construction Law (Boston, MA) by Best Lawyers, 2014. This is the third consecutive year Joel has received this honor. As Chair of the Construction Law Group, Joel's primary focus has been representing general contractors, owners, and subcontractors in complex litigation. His practice concentrates on heavy civil projects including tunnels, bridges, highways, and wastewater-treatment plants, as well as office buildings, shopping centers, power plants, hospitals, schools, courthouses, airports, and marine projects. Since 1990, Joel has been the firm's team leader in representing the general contractors performing most of the construction of the "Big Dig" in Boston. This team of attorneys and consultants has provided day-to-day advice to contractors in connection with claims, contract negotiations, OSHA compliance, and other construction matters. In addition, he has litigated many claims before the Big Dig Disputes Review Boards and in federal and state court. Joel's work on behalf of general con-

tractors on the Big Dig has also involved bid protests, whistleblower suits, subcontractor claims, builders risk claims, and general contractor claims. Best Lawyers, which compiles annual listings of outstanding lawyers through a rigorous peer-review process, selects a single lawyer in each specialty in each community to honor as the “Lawyer of the Year.” These lawyers have received particularly high ratings by earning a high level of respect among their peers for their abilities, professionalism, and integrity. Hinckley Allen provides a full range of legal services and pragmatic business advice to clients throughout the northeast. With offices in Albany, Boston, Concord, Hartford, New York, and Providence our team of lawyers provide legal counsel and in-depth industry knowledge in practice areas such as corporate, construction, litigation, real estate, and trust and estates law. n

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Environmental Viewpoint Robin L. Main, Esq.

Hinckley Allen, LLP

Rhiannon Campbell, Esq.

LEED Clean Construction Pilot Credit Note: Robin L. Main is a Partner in Hinckley Allen LLP’s litigation group and co-chair of the firm’s environmental practice group. Rhiannon A. Campbell is an Associate in Hinckley Allen LLP’s litigation and environmental practice groups. Matthew D. LaBrie is a Summer Associate at Hinckley Allen LLP and a J.D. Candidate at Georgetown University Law Center.

Since their creation in 1998, Leadership in Energy and Environmental Design (LEED) certifications have become internationally recognized and desirable hallmarks of excellence in sustainable building design and operation. While the federal and state governments often encourage sustainable practices through tax incentives, LEED is an independent, thirdparty evaluation that offers the pride of its designation as incentive to build and operate in an environmentallyfriendly manner. Today over 10 billion square feet of building space in over 130 countries participate in the LEED rating system. There are four levels of LEED distinction: Certified, Silver, Gold, and Platinum. In order to achieve a LEED distinction, a project must accumulate a designated number of credits in key areas of human and environmental health: sustainable site development, water savings, energy efficiency, materials selection, and indoor environmental quality. SEPTEMBER, 2013

he United States Green Building Council (“USGBC”), which is the proponent and developer of the LEED rating system, periodically introduces “pilot” credits to test new incentives and encourage innovation in sustainability. USGBC allows up to five achieved pilot credits to be counted towards a project’s LEED certification. In January of 2013, USGBC introduced a new credit, the Clean Construction Pilot Credit, in order to encourage more sustainable use of diesel equipment during a building’s construction phase. In order to obtain the Clean Construction Pilot Credit a project, during the construction phase, must (1) limit particulate matter from a percentage of on-road diesel vehicles and non-road diesel equipment to levels required by the Environmental Protection Agency (“EPA”); (2) have a non-idling policy that limits unnecessary idling to less than five minutes; (3) avoid operating machinery in a manner that causes emissions to enter the interior continued on page 37

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Environmental Viewpoint continued from page 35

Construction equipment can last for 30 years or more, and EPA emission requirements only apply to new equipment. As a result, transforming a construction fleet into a clean fleet simply for the purposes of achieving an additional LEED credit can be difficult and expensive.

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of a building; and (4) maintain a log of all equipment specifications, including the type of fuel used and the number of hours the equipment was operated. Additionally, because this is a pilot credit, projects which apply for the credit must also include answers to a questionnaire which USGBC uses to evaluate whether the new credit has had a positive impact on building practices. Construction equipment can last for 30 years or more, and EPA emission requirements only apply to new equipment. As a result, transforming a construction fleet into a clean fleet simply for the purposes of achieving an additional LEED credit can be difficult and expensive. Thus, in order to allow flexibility in implementing this new credit, USGBC has established alternative requirements for retrofitted equipment and provides a three-year transition period to allow newer, cleaner equipment to penetrate the marketplace before the credit mandates equipment compliance with EPA standards. Additionally, since January 2011, the EPA has offered funding for diesel emission reduction programs which helps to further offset the costs of developing a clean fleet.

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Due to increasing EPA and state regulations on diesel emissions, societal pressure to engage in sustainable development, and the ever increasing popularity and honor of LEED certification, construction fleet owners may find that operating clean diesel fleets makes them more competitive. As building standards, codes, and regulations, and ultimately developers and consumers, continue to demand increasingly sustainable construction operations, the investments are likely worth the effort and benefit now, as they may become mandatory later. For more information on the LEED Clean Construction Pilot Credit, visit http:// www.usgbc.org /credits / sspc75. n

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MWRA Advisory Board Annual Field Trip

he MWRA Advisory Board's (www.mwraadvisoryboard.com) tour of Boston Harbor was held August 15, 2013. Staff from the Boston Redevelopment Authority provided a guided tour that highlighted the important link between the Boston Harbor cleanup and the resulting economic revival of the waterfront.

Special guests were former Governor Michael Dukakis and his wife Kitty; Federal District Court Judge Richard Stearns, who oversees the Boston Harbor case; Representative Carolyn Dykema; Senator Jamie Eldridge; and Doug MacDonald, former MWRA Executive Director. Also with the tour were many municipal officials from MWRA service area communities who serve as members of the Advisory Board. The number one priority of the MWRA Advisory Board is to represent and protect ratepayers within the communities where they reside, while their main goal is to ensure necessary infrastructure funding. n

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BENEFITS & HR TRATEGIES Doug V. Mure, Director HR Consulting & Outsourcing, Pinnacle Financial Group

Follow These Steps to Achieve Quantity and Quality in Your Hiring Pipeline While summer workdays can lend themselves to a slower pace due to so many employees taking vacations, HR professionals involved in recruiting may want to take some time now to prepare for a potentially busy fall recruiting season. Employers often return from summer realizing that successfully defining and filling positions with the right people before year end can be a long process – and then they look to HR to be ready to jump on it post-Labor Day as a result. What follows is an overview of effective recruiting best practices.

Don’t Go It Alone Although Human Resources is the catalyst to establishing a recruiting plan, engage others from your key operations to assist in the process. After all, senior management has a vested interest in hiring top talent. Directors and managers should collaborate to identify functions that are critical to the success of your organization and the potential challenges of having unfilled positions in these areas, such as: • Maintaining high client/customer service levels • Production quality assurance • Responding to new business opportunities Although there may be some overlap between functions, this is an important step in a successful recruiting plan that minimizes disruption when vacancies occur and maximizes opportunities by filling them quickly with the best candidates. Note that this is not a “one-time” exercise. It should be re-evaluated on a regular basis as markets change and employees become committed to long term assignments.

Don’t Wait Until There’s an Opening As part of identifying critical areas, it behooves most organizations to consistently connect with

SEPTEMBER, 2013

qualified candidates in the primary jobs that support their operations whether there is an opening or not. (For example, a construction firm should be consistently scouting for good candidates in three primary areas: Project Managers, Superintendents, and Estimators.) The goal should be to establish a sufficient candidate pool, allowing your hiring managers to react quickly to fill any identified gaps in operations.

Establish an Employee Referral Plan Once you’ve identified the positions that may need to be filled, it’s a good time to send a general email to your organization calling out for candidate referrals. This is a simple yet effective path to qualified candidates, even if you don’t have a formal employee referral program. If you do have a robust employee referral program, take the time to make sure employees are aware of its rewards. To illustrate the higher value your organization places on internal employee referrals, they should be treated with some extra attention and follow up. Even if the employee-based referral applicant’s resume appears to be weak, phone interviews or a more personal follow-up letter would help preserve the integcontinued on page 45

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Benefits & HR Strategies continued from page 43 rity and long-term viability of the program. You should at least be able to tell the referring employee that you reviewed the resume and followed up with either a phone interview or letter and the applicant did not meet your current requirements (or you had better qualified candidates to consider).

Facilitate Inquiries and Resume Submittals Via Your Website Having a “Careers” page with either a generic or direct HR contact email address for submitting resumes presents your company as welcoming to qualified candidates and can yield surprising connections. A link to the page is usually placed in the “About Us” section and/or in the website footer.

Uncover Candidates Through LinkedIn’s Talent Search Module For a relatively small fee, any HR professional can utilize the Talent Search module within LinkedIn to identify both active and passive job seekers. If you are not currently subscribed to LinkedIn, you should join and establish your own company and/or individual LinkedIn profiles to better use this powerful tool for recruiting purposes.

Consider Recruiters for Access to Especially Qualified Candidates for Higher Level Positions For executive and managerial level positions, recruiters can provide valuable and efficient connections to qualified candidates, especially those that might not be actively seeking a new position. Always ask a recruiter about their fees.

Once the Pipeline is Full, Separate Qualified from Non-Qualified, and Pick up the Phone Once you have a healthy pipeline of applicants, sort the applicants into two categories: • Employee referral, qualified website submissions, and LinkedIn connections who have been sifted out into a “potential candidate” pool, should ideally receive a phone interview. • Candidates referred by recruiters are not “applicants” until you agree to interview them. The recruiter should be conducting the initial screening process, such as a phone interview. Then HR, together with the hiring manager, can determine if the candidate presented via a recruiter is qualified for a face-to-face interview. continued on page 47

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Benefits & HR Strategies continued from page 45

• Date received

A suggested list of phone interview questions is below, but these can and should be tailored for the situation, position, etc.

• Source (i.e. employee referral, website, LinkedIn, recruiter) • Gender, race & ethnicity (visual observation only; unknown is an acceptable entry). Note: if you are a federal contractor, a voluntary selfidentifying “tear off” sheet would be an appropriate alternative, but not required.

Sample Phone Interview Questions We received your resume from (employee, website, other) and see that you are interested in a _____ position. 1. How do you know referring employee (only for employee referrals)? 2. Are you familiar with our organization and the type of work we do? (If not, give them some background, although this would be a “red flag.”) 3. Can you describe your responsibilities in your most recent assignments? 4. In your opinion, how would your past experience be a good fit for the type of work we perform? Are you willing to travel if the job required it? 5. Are you willing to provide your salary history? What is the salary range you are expecting for this position? 6. Are you currently available? Could you come in for an interview to meet with our hiring manager within the next two weeks? 7. Is there anything that would prevent you from accepting a position with our organization? Are there any questions I can answer at this time?

• Name of Interviewer(s) • Disposition (i.e. phone interview, on-site interview, hired, not hired – with reason for the “not hired”, such as “other better qualified candidates, did not demonstrate relevant experience, salary demand not in line with position, etc.”) By keeping this type of spreadsheet, it will be easy to do an analysis of what has been the best source of new hires, what positions are generating the most candidates (or the most turnover) and the success rate in applicants/hire ratio. This will help in adjusting and re-focusing the recruiting efforts where gaps are found.

Summary By establishing an internal process as described above, your organization will be better positioned to fill necessary staffing gaps on a proactive basis. The goal is to establish a process that allows the company to hire the best candidate available for each position, increasing the likelihood of employee success and retention. n

Personal Interviews

Upon short-listing the potential candidates via phone, schedule face-to-face interviews with the appropriate hiring sources as soon as practical. At this point in the process, HR should be prepared to assist with more involved questions from candidates regarding company policies/proCall Your Nearest GENALCO Warehouse cedures and employee benefits.

Applicant Tracking Organizations that perform work as a federal contractor are subject to detailed applicant tracking requirements of DOL/OFCCP. Even if you do not qualify as a federal contractor it is good practice to exercise some form of applicant tracking to substantiate hiring decisions. As such, a simple applicant tracking log would suffice, to capture the following: • Name • Position Applied For

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Alyssa Morteo

Leukemia & Lymphoma Society of Massachusetts 2013 “Woman of the Year”

ach year, the Massachusetts Chapter of the Leukemia & Lymphoma Sociey (LLS) holds a fundraising event which challenges 5-10 men and women to raise money over a 10 week period to support leukemia research. Each Participant is free to plan different methods of fundraising and the man and woman raising the most money are presented with LLS’s “Man and Woman of the Year” awards. This year Alyssa Morteo, niece of UCANE President Al Morteo (FED. CORP.), met this challenge and raised $70,000 in memory of her father, Albert D. Morteo Sr., who passed away from leukemia at the age of 47. For raising the most money among women participants, Alyssa was named LLS’s 2013 “Woman of the Year.” Alyssa’s dad was diagnosed with Acute Myeloid Leukemia (AML), on Christmas Eve 2004. After several rounds of chemotherapy, two bone marrow transplants, and being in and out of remission, he lost his battle on September 10, 2008. In his memory Alyssa started a fundraising group “Big Al’s Pals.” The first couple of years they walked the Boston Marathon Jimmy Fund Walk and last year they walked the Leukemia & Lymphoma “Light the Night Walk.” Alyssa said, “It was so inspiring to see all the people holding balloons for people they love. After participating, I was honored to be nominated to run for “Woman of the Year.” At first I thought there was absolutely no way I could raise as much money as the past nominees. Then I thought about my dad’s five year anniversary coming up and what an amazing way it would be to honor his memory, while raising money to help find a cure so no other family would have to witness the debilitating effects that blood cancers can have on their loved ones.” Alyssa took on the challenge and is so happy she did. Her mother, brother, and family helped every step of the way with fundraising, planning events, and putting the word out there. She started by sending

SEPTEMBER, 2013

Alyssa Morteo

out letters for donations, and then had a pub crawl, a dance night with raffles, a poker tournament, and finally a bowling tournament. Alyssa stated, “This was one of the most rewarding experiences I've had and I want to thank my family, friends, and UCANE members for supporting me.”

UCANE’s officers, board, and members would like to congratulate Alyssa and thank her for her support of LLS, which UCANE has been involved with for more than 30 years. n

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New England

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New England’s largest public works and construction expo, featuring some of the region’s latest heavy equipment, construction, municipal and highway products & services from top vendors.

September 25th 8 a.m. - 3 p.m.

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TOUR de SOUTH SHORE Ride for Alzheimer’s & MS

Saturday, October 5, 2013 25-Mile Ride or 50-Mile Ride, Wompatuck State Park, Hingham, MA No Fundraising Minimum. Proceeds go to: Brigham and Women’s Center for Neurologic Diseases Lunch provided by:

Awards Ceremony & Live Entertainment! Prizes for Top Teams and Individual Riders Mix, mingle and hobnob at our new Rider’s Village! Presented By:

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John E. Merchant, CPA

Cullen, Murphy & Co., P.C.

IN THIS ISSUE • Real Estate Investing With REITs • Deferred Income Annuities for Your Future • Leasing Company Cars

Smart Tax, Business & Planning Ideas from

Real Estate Real Estate Investing WithInvesting REITs With RE

s the memory of the financial crisis recedes, the real estate market shows signs of recovery. You may believe excellent investment opportunities exist now—and that might be the case. Nevertheless, you may be reluctant to buy investment property. Inexperienced investors can make costly mistakes, property management will be either expensive or time consuming, major commitments of capital might be required, and investment real estate is illiquid. For any or all of those reasons, you may consider investing in real estate investment trusts (REITs) as an alternative. You can buy and sell many different REITs, just as you’d trade shares of common stocks. A given REIT can be diversified, and REIT funds provide even more diversification. What’s more, you can invest in REITs with only a few thousand dollars.

investment trus alternative. You many different trade shares of given REIT can REIT funds pr diversification. W can invest in RE thousand dollar

Real differe

Broadly speakin two categories. Equity REIT more properties specialize in var estate. One RE office buildings another REIT centers. As the memory of the financial crisis ple, while another REIT might own shopping centers. Mortgage REITs recedes, the real estate market shows Mortgage REITs own debt instruments. They instruments. They bu of recovery. You may believe buysigns existing mortgages, collect payments from bormortgages, collect pay excellent investment opportunities rowers, and pass the money through to investors. borrowers, and pass t exist now—and that might be the case. Some REITs are hybrids, owning both properties to investors. andNevertheless, mortgages. you may be reluctant to Some REITs are h buy investment property. Inexperienced Real Differences properties and mortg investorsInvestment can make costlyimplications mistakes, property management either Equity REITs, Broadly speaking, REITs fall into two catagories. In a way, all REITs will are be hybrids. Investment impl expensive or time the consuming, major of both the for instance, reflect performance real Equity REITs own one or more properties. OfIn a way, all REITs ar commitments of the capital might be In a strong real estate market and stock market. ten, they specialize in various types of real estate. Equity required, and investment real estate is One REIT might own only office buildings, for examcontinued on page 57REITs, for in performance of both illiquid. market and the stock For any or all of those reasons, you real estate “BUY FROM THE ADVERTISERS IN consider CONSTRUCTION 55 market, pr SEPTEMBER, 2013 may investing inOUTLOOK” real estate

SP_UCANE AD_042013_Layout 1 4/10/13 8:24 AM Page 1

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Financial Management continued from page 55 estate market, property values rise. Higher property values, in turn, tend to boost the prices of REIT shares. On the other hand, a stock market crash can sink equity REITs. From May 2008 to February 2009, for example, the Financial Times Stock Exchange National Association of Real Estate Investment Trusts (FTSE NAREIT) U.S. Equity REIT Index fell by 62%, as the stock market collapsed. The values of the office buildings, shopping centers, and other properties held by REITs may not have dropped to the same degree. (Since that bottom, more than four years ago, this equity REIT index has more than tripled. As of this writing, it is 28% higher than in May 2008.) While equity REITs are a mix of stocks and real estate, mortgage REITs combine the features of real estate and bonds. The yields paid to investors reflect interest rates on real estate mortgages. These REIT shares, however, tend to trade with the bond market: if interest rates rise in the future, mortgage REIT shares probably will fall along with bond values.

Tax Treatment

corporate bond indexes. Besides the high yields, REIT investors may benefit from favorable tax treatment. Example: Jill Young invests $10,000 to buy 200 shares of ABC Office Building REIT at $50 a share. In 2013, Jill receives a $400 (4%) dividend. On the IRS Form 1099- DIV that ABC sends to Jill, she sees that $100 is a long-term capital gain, $100 is ordinary income, and $200 is a return of capital. Therefore, Jill will owe tax on $100 at favorable capital gain tax rates and $100 at ordinary income rates. She’ll owe no tax on her $200 return of capital. (Generally, REIT dividends do not get the special low tax rates on “qualified” dividends.) Although Jill avoids tax on her $200 return of capital in this example, she must lower her basis by $200—$1 per share—to reflect her $200 return of capital. This reduction drops her basis from $50 to $49 and will increase the tax she will owe in the future on a profitable sale. Nevertheless, the REIT tax treatment works in Jill’s favor, because she avoids paying ordinary income tax now and may owe tax on a future sale at lower capital gains rates.

Building Out

Under the U.S. tax code, REITs are required to pay investors at least 90% of their taxable income each year. This payout reduces or eliminates a REIT’s obligation to pay corporate income tax. By comparison, dividends paid to investors by regular corporations may be taxed twice: both the company and the investor can owe tax on those dollars.

The REIT universe is broad, covering many varieties of investments. Some REITs do not trade publicly; they might offer higher yields but also restrict your ability to sell for many years. Other REITs have been created outside the U.S. These global REITs may offer profit potential, in fast growing regions, but they also might have specific risks found in local markets.

As a result of this tax treatment, REITs generally have relatively high yields. In 2013, equity REITs generally pay around 4% to investors. By comparison, the yield on the Standard & Poor’s 500 Index of large company stocks is around 2%. Mortgage REITs currently yield about 7%, versus 3% for U.S.

Altogether, carefully selected REITs may deliver substantial cash flow, portfolio diversification, and participation in real estate growth. Be sure to look closely at any REIT before investing, so you’re confident you understand the risks involved. continued on page 59

P.A. Landers, Inc. The Smart Choice For All Your Site Development Needs

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Route 130 • Sandwich, MA 02563 800.834.4333 • 508.477.8818 Fax: 508.477.8818

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Your Company Must Have A Comprehensive Safety Program! This year’s Safety Manual includes information on: • OSHA’s New Cranes & Derricks Standard (1926.47) • State and Federal Posting Requirements • OSHA’s Updated Trenching & Excavation Safety • New Cell Phone/Distracted Driver Federal Ruling • OSHA’s Changes to the Penalty Calculation Limit • Field Responsibility — Competent Person • Recordkeeping Requirements — Employee Reporting on Fatalities & Hospitalizations • OSHA 10-Hour Training Requirements

Promote A Safe Working Environment It should be your company’s policy to provide a safe place to work, with the prevention of accidents being your ultimate goal. Your Insurance/Bonding carrier requires a Safety Program. State and Federal Agencies require a Safety Program.

OSHA Inspectors Will Be Enforcing: • Overall Construction Safety (29 CFR 1926) • Excavating Standards • Written Safety and Health Plans

• Hazard Communications Programs • Drug Free Workplace • OSHA 10-Hour Training Requirements

Examine The UCANE Pocket Directory When ordering Company Safety Manuals, the Safety Manual section only, in the back of UCANE’s Pocket Directory, will be made up into an individual Employee Pocket Safety Manual with Your Company Name & Logo printed on the cover. Employee signature cards verifying compliance with safety manual procedures are included. When signed, these cards should be placed in each employee’s file.

Employee Pocket Safety Manual Order Form Company Name:_________________________________ Authorized By:______________________ Pocket Manuals w/ Signature Cards: Qty.__________________ x $3.25 Ea. = $________________ 55.00 Printing and Set Up Charge for Personalized Covers: $________________ 10.00 $________________ Total: $________________

Postage and Handling: Date:____________ ❏ Company Logo Enclosed

❏ Company Logo to be mailed

❏ My check is enclosed

Employee Pocket Safety Manuals are available to UCANE members only. PAYMENT MUST ACCOMPANY ORDER. Utility Contractors’ Association of New England, Inc. • 300 Congress Street, Suite 101 • Quincy, MA 02169

Financial Management continued from page 57

Deferred Income Annuities for Your Future

ow investment yields have robbed many savings vehicles of their appeal. Besides bank CDs and money market funds, fixed annuities also may fail to generate enthusiasm these days. According to Beacon Research, which tracks the annuity industry, fixed annuity sales in the first quarter of 2013 were down 11.7% from the first quarter of 2012. Yet one type of fixed annuity bucked this trend. Beacon reported that sales of deferred income annuities (DIAs) were nearly 150% higher in the first quarter of 2013, versus the first quarter of 2012. Looking back further, New York Life re-

cently announced that DIAs were a $50 million market in 2011; this year, the market is $1 billion and growing rapidly. Invest Now, Collect Later DIAs are sometimes called longevity annuities. That is, you can buy one that will pay out as long as you live. If you’re married, you can buy a joint DIA that will pay as long as either you or your spouse is alive. This guaranteed income stream may help prevent you from running short of money if you live well beyond normal life expectancy. Of course, a traditional income annuity (also known as a payout annuity or an immediate annuity) also can provide guaranteed lifetime income. Why are DIAs so popular now? Because they offer much higher yields for consumers who can wait for the cash to start flowing. Typically, DIAs are purchased continued on page 61

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Financial Management continued from page 59 by pre-retirees who want supplemental retirement income. Example: Ed Larson is single, age 60. He is still working, and plans to retire at age 70. Ed’s current health and his family history indicate he has a good chance of living to age 90 and beyond. By shopping around, Ed learns that he would receive a yield in the 5%–6% range if he were to buy an immediate lifetime annuity now. That is, if he bought this annuity for $100,000, he would receive $5,000– $6,000 a year as long as he is alive. Alternatively, Ed could wait until he retires at age 70 to buy such an annuity. Currently, a 70-year old male could receive $6,000–$7,000 a year from a $100,000 immediate lifetime annuity. Ten years from now, that immediate annuity might have a higher or a lower yield. Instead, Ed buys a $100,000, 10-year DIA. Currently, such an annuity could yield around 10%. Thus, Ed pays $100,000 now and doesn’t start collecting until 2023. Starting then, Ed can receive $10,000 a year throughout his retirement, no matter how long that might last. (Joint annuities have lower payouts than single life annuities.)

Trusted Advice Tracking Annuity Taxes • You must use the “general rule” for determining the taxation of payments from a purchased commercial annuity. • Under the general rule, you determine the tax-free part of each annuity payment based on the ratio of the annuity’s cost to the total expected return. • The expected return is the total amount you and other eligible annuitants can expect to receive under the contract. • To figure the expected return, use IRS life expectancy tables found in IRS Publication 939, General Rule for Pensions and Annuities. • Once you have recovered the cost of the annuity, tax-free, any subsequent payments are fully taxable.

SEPTEMBER, 2013

Nothing for Something For today’s pre-retirees, the idea of a 10% investment return, guaranteed, with no ending date, may be attractive. You’ll be confident that money will keep coming, regardless of what happens in the stock or bond markets. Nevertheless, DIAs come with risks you shouldn’t ignore. Keep in mind that DIAs might be guaranteed, but that guarantee doesn’t come from any government agency. DIAs are backed by the assets of the issuing company, so you should check into the insurer’s financial health before buying a DIA. Your own physical health also is a major concern. If Ed Larson in our example buys an age 70 DIA when he’s 60 and dies at, say, age 68, no one will collect a penny from his $100,000 investment. Also, Ed won’t have access to his $100,000 if he needs money before age 70. (Some DIAs have refund options, but you’ll have to accept a lower payout if you want this opportunity.) Therefore, you should consider your longevity prospects before deciding to put part of your retirement fund into a DIA. continued on page 62

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Financial Management continued from page 61

Leasing Company Cars

consumers, leasing cars is deliver the mong percentage of business car use, popular. use. According to r company increasingly rather than personal Experian Automotive, a data providlong-termer, a record For your employees, personal 27.5% of new cars financed m keepingin theuse of quarter their company is leased, first of 2013car were with 24.4% one yearbenefit. earlier. ice has compared considered a taxable fringe if you each provide cars to one n, when Thus,Thus, yearcompany the company must or more employees, you might consider ou’ll have leasing determine the value of the fringe rather than the traditional purrve mileage benefit for their employees with chase arrangement. ecessary company cars, socars those employees Leasing company offers obvious advantages. thatincome your compacan payAssuming the resulting tax. Sarah’ thatthe shesame drivesreLeased carss logs won’tshow deliver ny leases the cars for two or three years, Commuting to work counts as thevalue, leasedand caryour a total of 15,000 miles company won’t be your employees will always be driving a sale s able to enjoy the long-term cost savings taxable personal with this year, including 3,000 miles (20%) new or relatively newuse, car along on business. that from keeping a car after the carsfor forvacations no longer three driving andthan any other ave tax by Leasing forcome personal use. Therefore, she has purchase price has been fully paid. In years can present a more professional nonbusiness reasons. Among several addition, You’ll pay a personal use factor 20%, so her when you leaseofcompany cars, image to clients and prospects and reallowable methods to put a value on hly lease duce the chance your employees will you’ll personal use is valued at $1,850: 20% have to urge employees to observe mileage restrictions and avoid unnecesuse, mostproblems, companieswhich use the of $9,250. the full have personal major operating and tear. can affect productivity. Annual Lease Value table, found in sary wear Consequently, ABC reports Superior Tax Savings Leasing cars can deliver financial adIRS Publication 15-B, Employer’s Tax that Sarah had $1,850 re driving of taxable vantages, too. Upfront costs may be lowYour company also may save tax by leasing Guide to Fringe Benefits, to determine its company your fringe benefits from her used car. cars. You’ll pay sales tax only on the er when you lease rather than buy a car. thepayments value of personal of leased ease lease payments, rather than on the full purReimbursements for gasoline Monthly likely willuse be lower than monthly chase price. pay on acars. car loan. As mentioned, related you’dcompany must be reported, too, at 5.5 cents Once your employees are driving their leased short term leases reduce the chance your Example: ABC Corp. provides nspections per personal mile.can ABC must company cars, your use company deduct the lease employees will need expensive repairs. payments as well as all the related costs, from gas employee Sarah Perkins with a leased perform similar calculations and uld make and oil to inspections and maintenance. You should The downside, of course, is that your car; Sarah the car when s new t this tax company reporting for each employee has63 continuedwho on page won’t gets actually own theit’cars. he business with a fair market value of $35,000. personal use of a company car. Our According to the IRS lease value Therefore, office can help your company create a table, the annual lease value of that e some reporting system that complies with car is $9,250. ating their IRS regulations. g

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ying your 2013 income tax through Individuals. If you have an automatic six-month extension to file your enough tax during the year that way), income tax return for 2012, file Form 1040, 1040A, or 1040EZ, and r 2013 estimated Form 1040-ES. pay any tax,IN interest, or penaltiesOUTLOOK” due. 62 tax. Use “BUY FROM THE ADVERTISERS CONSTRUCTION SEPTEMBER, 2013

ty, Medicare, withheld income tax, and

Employers. For Social Security, Medicare, withheld income tax, and

Financial Management continued from page 62 make your employees aware that this tax treatment applies only to the business use of their company car. Therefore, they must keep a log or use some other method of substantiating their percentage of business car use, rather than personal use. For your employees, personal use of their company car is considered a taxable fringe benefit. Thus, each year the company must determine the value of the fringe benefit for their employees with company cars, so those employees can pay the resulting income tax. Commuting to work counts as taxable personal use, along with driving for vacations and any other nonbusiness reasons. Among several allowable methods to put a value on personal use, most companies use the Annual Lease Value table, found in IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits, to determine the value of personal use of leased company cars. Example: ABC Corp. provides employee Sarah Perkins with a leased car; Sarah gets the car when it’s new with a fair market value of $35,000. According to the IRS lease value table, the annual lease value of that car is $9,250. Sarah’s logs show that she drives the leased car

Did You Know?

ndexed universal life (IUL) sales, as a percent of total universal life sales, increased from 18% in 2009 to 40% through the first nine months of 2012. With IUL, the policy’s cash value increase is fully or partially based on a stock market index. Such policies may offer upside potential and downside protection. Source: Milliman a total of 15,000 miles this year, including 3,000 miles (20%) for personal use. Therefore, she has a personal use factor of 20%, so her personal use is valued at $1,850: 20% of $9,250. Consequently, ABC reports that Sarah had $1,850 of taxable fringe benefits from her used car. Reimbursements for gasoline must be reported, too, at 5.5 cents per personal use mile. ABC must perform similar calculations and reporting for each employee who has personal use of a company car. Reprinted from CPA Client Bulletin. n

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Advertisers’ Index ATS Equipment, Inc. ...........................................................36 Adler Tank Rentals ..............................................................14 Boro Sand & Stone Corp......................................................15 Dennis K. Burke, Inc............................................................63 Concrete Systems, Inc..........................................................42 Dagle Electrical Construction, Corp....................................38 Darmody, Merlino & Co., LLP........................................... 60 DeSanctis Insurance Agency, Inc. .......................................52 Dig Safe System, Inc............................................................21 The Driscoll Agency ............................................................37 EJ...................................................................... Ins. Back Cvr. Eastern States Insurance Agency, Inc..................................13 T. L. Edwards, Inc................................................................62 Ferguson Waterworks...........................................................25 Ford Meter Box Co.................................................................9 Fringe Consulting.................................................................52 Geod Consulting, Inc............................................................56 Genalco, Inc..........................................................................47 L. Guerini Group, Inc...........................................................52 HD Supply Waterworks..........................................................4 HD Supply White Cap..........................................................20 A. H. Harris & Sons, Inc. ....................................................54 Hinckley Allen, LLP..............................................................8 P. J. Keating Company..........................................................26 P. A. Landers, Inc.................................................................57 Lawrence-Lynch Corp......................................................... 60 Liddell Brothers Inc..............................................................12 Lorusso Corp........................................................................54 Lorusso Heavy Equipment, LLC.........................................48 Mabey, Inc............................................................................59 Mass Broken Stone Company.................................................7 Milton CAT..................................................................... 2 & 3 Norfolk Power Equipment, Inc.............................................15 Our Outhouses, Inc...............................................................27 Palmer Paving Corporation..................................................34 E. H. Perkins Construction Co., Inc.................................... 64 Podgurski Corp.....................................................................54 E. J. Prescott, Inc..............................................Ins. Front Cvr. Rain For Rent-New England................................................ 46 Read Custom Soils ...............................................................61 Rodman Ford........................................................................22 Rogers & Gray Insurance Agency, Inc................................ 24 Schmidt Equipment, Inc.......................................... Back Cvr. The Scituate Companies.......................................................50 Shea Concrete Products....................................................... 44 Smith Print............................................................................56 Social Mavens...................................................................... 60 Sunbelt Rentals/Pump & Power Services............................10 Systems Support Corporation...............................................19 Taylor Oil Company.............................................................11 Ti-SALES, Inc. ....................................................................45 Albert J. Tonry & Co., Inc....................................................27 United Concrete Products, Inc. ............................................56 United Rentals Trench Safety...............................................18 C. N. Wood Co., Inc. ........................................................... 40 Woodco Machinery, Inc.........................................................6

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