Brief⁽¹⁾

H.B. 2731, as introduced, amends the city urban renewal law to change the criteria for measuring whether a property should be repaired or demolished from the current test of a percent fixed by the governing body of the "reasonable cost in relation to the value of the structure" to one of a fixed percent as set by the governing body of the "reasonable cost in relation to the replacement value of the structure."

H.B. 2731, as amended by the Senate Committee of the Whole, requires that in contracts of $1 million or more a public entity may approve a request from a contractor to place retained funds in an interest bearing escrow account. Costs to establish and maintain the escrow account would be paid by the contractor. If a contractor defaults on the contract retained funds in the account would be returned to the public entity. Retained funds would not be released to the contractor until authorized by the contracting public entity but interest would paid to the contractor. Also for contracts involving $1 million or more, the contractor could request that with the approval of the public entity, securities of types specified in the bill be substituted for the funds retained by the public entity. The bill specifies the manner in which such securities are to be issued and requires the retained funds for which securities are substituted to be paid to the contractor within five working days.

This contracting provision added to H.B. 2731 was contained in S.B. 489.

Background

H.B. 2731 was supported by the Shawnee County legislative delegation. A proponent said that identical houses in different parts of a city would require the same amount of money to rehabilitate but would constitute a different percent of the assessed value. Using replacement values will allow more properties to qualify for rehabilitation regardless of the area in a city at which they are located. Cities continue to have a right to set the percentage for determining when rehabilitation is too costly.

The Senate Committee of the Whole amended the bill to add provisions of S.B. 489 dealing with retaining moneys by public entities in regard to construction projects.

S.B. 489 was requested and supported by the Kansas Contractors Association, the Heavy Constructors of Kansas City, and the Builders Association/AGC of Kansas City.

Conferees who opposed certain provisions of S.B. 489 included: the Executive Director of the American Institute of Architects; the Executive Director of the League of Kansas Municipalities; the Legislative Services Director and General Counsel of the Kansas Association of Counties; the Director of Accounts and Reports; the Intergovernmental Director, Johnson County Government; and the Director of the Division of Architectural Services.

The Assistant Secretary and State Transportation Engineer of the Kansas Department of Transportation (KDOT) said that KDOT supported the 5 percent retainage provisions, but opposed the provisions relating to escrow accounts.

The Committee amendments would allow a public entity to approve any request from a contractor to place retained funds in an escrow account in contracts of $1 million or more or to substitute securities. The Committee deleted provisions that would have provided for a 5 percent retainage in funds in contracts between public entities and contractors. Current law allows for a not more than 10 percent withholding of the full contract price. The Committee amendments strike all sections of the bill that would have amended existing statutes.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.