Assigned to COM FOR COMMITTEE

ARIZONA STATE SENATE

Phoenix, Arizona

FACT SHEET FOR S.B. 1261

swimming pool contractors; bonds

Purpose

Requires dual licensed swimming pool contractors and residential swimming pool general contractors to furnish surety bonds or cash deposits of $50,000.

Background

Currently, there are more than 300 pool building companies in Arizona, constructing approximately 14,000 pools within the State each year. Typically, pool contractors subcontract different aspects of the construction to multiple subcontractors and suppliers in order to complete construction at several sites simultaneously. Problems arise when pool builders that began construction at a residential site and subcontracted different aspects of that construction to a variety of subcontractors, go out of business before completion of the project. Subcontractors who supplied the materials and manpower may lose a large amount of invested capital.

In such a situation, subcontractors can recoup some of their losses by collecting the surety bond or cash deposit furnished by the contractor to the Arizona Registrar of Contractors (Registrar) before obtaining licensure. Statute currently requires pool contractors to furnish a surety bond or a cash deposit in the same amount based on the volume of work of commercial contractors. However, according to the Registrar and the Arizona Contractors Association, oftentimes the bond provided by the folded contractor fails to cover the losses incurred by the multiple subcontractors who were under contract with that company. Approximately 240 general pool contractors in this state currently furnish surety bonds of less than $10,000.

S.B. 1261 establishes a flat surety bond or cash deposit of $50,000 required of dual licensed swimming pool contractors and residential swimming pool general contractors prior to licensing by the Registrar.

There is a possible unknown fiscal impact to the state general fund associated with this measure. The Registrar is self-funded by licensing fees and remits 10 percent of those monies to the state general fund. If the $50,000 surety bond or cash deposit impacts the number of contractors seeking licensure, this may impact the Registrar’s contribution to the state general fund.

Provisions

1. Replaces the current method for determining the amount of surety bonds or cash deposits for dual licensed swimming pool contractors and residential swimming pool general contractors with a uniform amount of $50,000.

2. Provides for a general effective date.

Prepared by Senate Research

February 8, 2002