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ARIZONA STATE SENATE
RESEARCH STAFF
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JULIE SZPERLING LEGISLATIVE RESEARCH ANALYST COMMERCE COMMITTEE Telephone: (602) 542-3171 Facsimile: (602) 542-7833 |
COMMERCE COMMITTEE
DATE: April 2, 2001
SUBJECT: Hamilton Strike Everything
Amendment to H.B. 2465
Purpose
An emergency measure that requires contractors, subcontractors or material suppliers to provide notice to a lender 30 days prior to a work stoppage.
Background
Last session, legislation was enacted permitting a contractor or subcontractor to suspend performance or terminate a construction contract if not paid in a timely manner (Laws 2000, Chapter 233). The legislation requires a contractor to provide written notice to the owner at least seven calendar days before the intended suspension or termination, unless a shorter notice period is prescribed in the contract. The legislation also establishes timeframes for a subcontractor to provide notice prior to suspending performance or terminating a subcontract.
Financial lenders have expressed concern that the statutes relating to construction contract payments do not have a provision for notifying a lender when there is a default in payment before a work stoppage occurs. The strike everything amendment to H.B. 2465 requires contractors, subcontractors or material suppliers to provide written notice to the lender 30 days prior to the intended suspension of performance to allow for the ability to cure the non-payment relating to work and supplies. The limitation on suspension only applies to construction contracts related to a project that meet the following criteria: the project has a value of at least $750 million; a notice to proceed with the project has been issued prior to March 1, 2001; the project is being financed by a group of one or more lenders; and the project is one of at least two similar projects in Arizona and one other state, being financed together simultaneously. The only entity that currently meets the prescribed criteria is the Gila River project developed by Panda Energy International, Inc.
Panda Energy International, Inc., a private, non-regulated electric generation company, is involved in a joint venture to build, own and operate two merchant plants located in El Dorado, Arkansas and Gila Bend, Arizona at a capital cost of $2.3 billion. The Gila River project is in an advanced stage of development, with siting, permitting and other agreements in place. The 2,080-megawatt project will be interconnected with the grid, with plans to sell electricity to wholesale customers throughout Arizona and excess energy to wholesale customers in the West. The project is scheduled to begin commercial operation in the summer of 2003.
There is no anticipated fiscal impact to the state general fund associated with this measure.
Provisions
1. Prohibits a contractor, subcontractor or material supplier from suspending performance under a contract or subcontract unless both of the following occurs:
a. a written notice has been given by the contractor, subcontractor or material supplier to the beneficiary of a construction deed of trust or to a mortgagee under a construction mortgage.
b. a failure by the beneficiary or mortgagee to pay, within 30 days of receiving the notice or when the contractor, subcontractor or material supplier has been notified of the beneficiary’s or mortgagee’s intention not to pay.
2. Applies the limitation on work suspension to construction contracts on a project if all of the following apply:
a. the project has a value of at least $750 million.
b. the project notice to proceed was issued prior to March 1, 2001.
c. the project is being financed on a non-recourse project basis by a group of lenders, including foreign lenders.
d. the project is one of at least two similar projects in this state and at least one other state that are being financed together.
3. Allows the contracting parties of a construction contract relating to a project that complies with the prescribed applicability requirements to apply the laws of another state to the construction contract, provided that there is no provision requiring that litigation, arbitration or other dispute resolution proceeding arising from the contract be conducted in another state. Exempts mechanics’ and materialmen’s liens from the provisions relating to choice of law.
4. Exempts the limitation on work suspension subject to the prescribed requirements and criteria from the statutes that govern work suspension or termination for failure of a contractor or subcontractor to receive timely payments.
5. Contains a delayed repeal date of January 1, 2004.
6. Contains an emergency clause.
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