Assigned to COM FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Phoenix, Arizona

REVISED

FACT SHEET FOR S.B. 1261

swimming pool contractors; bonds

Purpose

Modifies the current amount for surety bonds or cash deposits paid by dual licensed swimming pool contractors and residential swimming pool contractors to a sliding scale of $50,000 or more depending on the annual volume of construction work by the contractor.

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 214 general pool contractors in this state currently furnish surety bonds of $5,000.

S.B. 1261 establishes a sliding scale for deferring a surety bond or cash deposit with a minimum set at $50,000 required of dual licensed swimming pool contractors and residential swimming pool 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 minimum $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. Applies current bond requirements to all residential pool contractors.

2. Replaces the current method for determining the amount of surety bonds or cash deposits for dual licensed swimming pool contractors and residential swimming pool contractors with a sliding scale based upon annual volume of construction work by the applicant as follows:

a) If estimated annual volume is $10 million or more, the applicant must furnish a surety bond or cash deposit between $50,000 and $100,000.

b) If estimated annual volume is $5 million to $10 million, the applicant must furnish a surety bond or cash deposit between $50,000 and $75,000.

c) If estimated annual volume is less than $5 million, the applicant must furnish a surety bond or cash deposit of $50,000.

3. Provides for a general effective date.

Amendments Adopted by Committee

1. Applies current bond requirements to all residential pool contractors.

2. Replaces the current method for determining the amount of surety bonds or cash deposits for dual licensed swimming pool contractors and residential swimming pool contractors with a sliding scale based upon annual volume of construction work by the applicant.

Senate Action

COM 3/13/02 DPA 6-0-0-0

Prepared by Senate Research

March 14, 2002