BILL ANALYSIS                                                                                                                                                                                                    

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           392 (Florez)
          Hearing Date:  5/11/2009        Amended: 4/21/2009
          Consultant:  Bob Franzoia       Policy Vote: Jud 5-0  BP&ED 8-0
          BILL SUMMARY: SB 392 would authorize a limited liability company  
          (LLC) to render contractor's services.  This bill would require  
          a contractor LLC to maintain a specified insurance policy or  
          place on deposit or escrow specified amounts.  Because this bill  
          would impose various fees on LLCs that apply for and obtain a  
          contractor's license, this bill would increase the amount of  
          revenue deposited in the Contractors' License Fund, thereby  
          making an appropriation.  The provisions of this bill would  
          become operative on January 1, 2011. 
                            Fiscal Impact (in thousands)

           Major Provisions         2009-10      2010-11       2011-12     Fund
           LLC contractor licensing                        $5,397   

          License fees                      ($14,000)   ($14,000) Special*

          Secretary of State     Unknown costs; supported by existing  
                                 Istration process

          * Contractors' License Fund

          STAFF COMMENTS: Current law prohibits a LLC from rendering  
          professional services unless expressly authorized in statute.  A  
          LLC combines the limited liability protections afforded to  
          corporations with the favorable tax advantages of partnerships.

          Under current law, a corporate contractor license is renewed  
          biennially at a cost of $300.  This analysis assumes those  
          renewals would instead be processed as the new LLC licenses.   
          The timing of the transition from license renewal to license  


          application and issuance may create problem between the new  
          workload associated with processing the LLC licenses and cash  
          flow from the LLC license revenues.  This analysis estimates the  
          decrease in corporate licenses and a reduction in associated  
          workload and the increase in LLC licensing and the higher  
          licenses fees will fully offset any one time or ongoing costs.

          The Registrar of Contractors has the responsibility for  
          receiving evidence of security for claims.  That security is:
          (1) Liability insurance of not less than $1,000,000.
          (2) Maintain in trust or bank escrow, cash, bank certificates of  
          deposit, US Treasury obligations, bank letters of credit, or  
          bonds of insurance or surety companies for payment of  
          liabilities of not less than $500,000.
          (3) A combination of 1 and 2.

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          SB 392 (Florez)

          The cost to process and maintain the liability policies is  
          unknown and not reflected in the costs noted above.

          The CSLB is estimating it would charge current application and  
          issuance fees ($250 application fee and $150 issuance fee) for  
          each application submitted for an LLC license.  As of May 1,  
          2009, the CSLB has more than 72,000 active corporate  
          contractor's licenses.  Estimating that 70,000 corporate  
          contractor's licenses would want to convert to LLC licenses  
          during the next two year license renewal period, revenues would  
          $14,000,000 in 2010-11 and in 2011-12.  Revenues would decrease  
          to $10,500,000 annually beginning 2012-13.