On Tuesday evening, Governor Granholm gave her annual State of the State Address where she promised renewed emphasis on bi-partisanship. Many of those listening also heard her talking about a $1 billion economic stimulus plan, which seemed to include significant infrastructure spending.
However, based on in-depth analysis by MITA staff this package in reality only includes approximately $150 million in road and other transportation improvements along with new capital outlay projects that include state buildings, college facilities and some airport work. In the end, this is yet another smoke and mirrors attempt to gloss over the real problem that Michigan is currently facing with regards to its failing infrastructure. This short-term fix to a long-term problem will do nothing towards solving the fundamental issues facing Michigan’s transportation investment strategy.
MITA staff will continue to push for a long-term funding solution, which includes a comprehensive approach to financing our state’s infrastructure.
MITA Working on MBT ‘Grandfather’ Fix
As Senators began looking at various tweaks to fix the newly-passed Michigan Business Tax (MBT), MITA is asking that they once again consider a grandfather clause for contracts entered into prior to the tax’s effective date.
It became evident last year during the initial MBT debate that large multi-year construction projects could substantially increase a company’s gross receipts, thereby creating large tax increases that were not anticipated in the original bid price.
Although legislators were sensitive to these concerns raised by both MITA and the Associated General Contractors (AGC), they opted to quickly adopt the new tax structure without the change. However, legislators indicated at that time that they would consider future changes if warranted.
The MBT bills approved by committee yesterday were SB’s 1038, 1053, 1054 and 1058.
Economic Stimulus Package Being Worked Out in Washington
The broad terms of a $150 billion economic stimulus plan have been reached between President Bush and leaders from both parties in the House of Representatives in Washington D.C. The primary focus of the stimulus plan includes tax rebates to some 110 million Americans and an array of tax incentives for businesses.
The Senate proposal includes funding for a variety of infrastructure improvements including federally funded road projects as well as sewer and water improvement monies. Whether or not these infrastructure dollars will be included in the final stimulus package is anyone’s guess. However, to avoid confusion on whether infrastructure is included in the ultimate stimulus package or not does not diminish any current funding levels to the state such as federal transportation dollars or state revolving fund monies that help to support sewer projects across the state. These dollars will remain in place and unaffected by any stimulus package that comes out of Washington.
Contractor Liability Limitations Legislation
Until recently, Michigan courts had ruled that the statute of limitations for a cause of action against contractors, based on an improvement to real property, was three years. Michigan courts also held that the general malpractice statute of limitations applied to licensed architects and professional engineers, and therefore, causes of action against licensed architects, professional engineers expired after two years from the date of the last professional services rendered. In an effort to curb "stale" cases being brought against architects and engineers long after a project was completed, the Legislature enacted a "statute of repose" in 1967 that prohibited any case arising out of defective and unsafe conditions of an improvement to real property six years after use, occupancy or acceptance of an improvement to real property, regardless of when the cause of action accrued. In 1985, the Legislature extended the same "statute of repose" protection to contractors.
In 2006, the Michigan Supreme Court held in the case of Ostroth v. Warren Regency that the six-year statute of repose for actions against architects, engineers and contractors overrides the more general statute of limitations for such actions. The court adopted a six-year statute of limitations for these claims. This ruling significantly increased the risk for contractors.
Senate Bill 865 has been introduced to reverse the Supreme Court's ruling, and to restore the limitations periods to their "historical" periods. Under its current form, the bill clarifies that the statute of repose does not alter the statute of limitations applicable to contractors, and licensed architects and professional engineers. MITA has reviewed the proposed bill, and generally supports its efforts. However, MITA believes the bill could be improved in two significant aspects.
First, the proposed bill refers the reader back to other sections of law, which could add to confusion and inappropriate application. Therefore, instead of referring courts back to a list of possible limitations periods, MITA believes it would be better to state clearly the period of limitations that applies to each group of potential defendants.
Secondly, MITA believes it would be sound public policy to apply the same limitations period to the members of this group (architects, engineers and contractors equally). If an architect or engineer provides directions to a contractor that allegedly causes injury to a person or to property, it is inherently inconsistent to provide that the architect or engineer may not be sued after two years, but the contractor that follows those directions could be sued for up to three years for the same injury. MITA suggests that two years be consistently applied to architects, engineers and contractors.
Please contact Mike Nystrom at email@example.com or Keith Ledbetter at firstname.lastname@example.org or call the MITA office at 517-347-8336 with any questions or comments.