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
$5,295Special*
option
License fees ($14,000) ($14,000) Special*
Secretary of State Unknown costs; supported by existing
reg-General
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.
Page 2
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.