To: Mike Wildgen, City Manager

Thru: Debbie Van Saun, Assistant City Manager

From: Victor Torres, Neighborhood Resources Director

Subject: LHBA request to establish contractor licensing regulations

Date: December 1, 2003

The Lawrence Homebuilders Association (LHBA) requested the City consider establishing regulations for contractor licensing of building contractors. In a letter dated September 8, 2003 (attached), Bobbie Flory, LHBA Executive Director describes items the regulations would include, specifically, an educational component, a grandfather clause for active builders, an insurance requirement, and a fee structure that would support the administration and educational requirements of the program. The LHBA does not support the inclusion of Framing Contractors in the licensing program, as mentioned in the October issue of Blue Prints (attached).

Licensing — current requirements

The City currently requires that trade contractors (electrical, mechanical, plumbing and journeyman) secure a license to work in Lawrence. At this time continuing education is not a requirement for trade contractors. Approximately 1000 trade contractors and journeyman are now licensed. There is no current requirement for building contractors to be licensed. Staff identified approximately 200 building contractors from our mailing list that would be affected if licensing regulations are established for this group of contractors. Licensing for building contractors can be processed through the existing software the City has in place. In addition, the new building permit system includes provisions for tracking licensed contractors.

Johnson County Contractor Licensing officials were contacted by staff to inquire about the implementation of their licensing program that became effective August, 2001. Nine jurisdictions presently participate in the Johnson County Contractor Licensing Program. Building and trade contractors working in each of the nine jurisdictions are required to be licensed through the Johnson County Licensing Program. Although the program at Johnson County does not currently license framing contractors, program coordinators indicated they are working to include framing contractor licensing in 2004.

Implications — additional licensing requirements

Licensing of building contractors will require the issuance of approximately 200 additional licenses during the first year, followed by the same number of annual renewals. The initial licensing will have little impact on department operations. However, the educational component, if provided by this department, would have an impact on staff’s ability to be involved in that element of the program. While staff concurs continuing education is essential to increasing code knowledge among program participants, maintaining continuing education requirements for all contractors will require additional staff support. One additional staff position will be needed for the successful implementation and continued maintenance of the continuing education program. Partial funding for additional staff could come from program income; an estimate of revenue may range from $20,000 to $40,000 annually, depending on license and renewal fee as well as number of participants.

The Johnson County Licensing Program provides a continuing education component. Their program is fully developed and provides a wide range of week-long training sessions on a bi-annual basis. Working out an agreement with Johnson County might be an option however details will need to be discussed to determine if this is an acceptable arrangement for continuing education for Lawrence building contractors.

Benefits — additional licensing requirements

The benefits derived from a contractor licensing program are substantial to citizens, contractors and the city overall. Contractor licensing will ensure only qualified individuals may secure building permits. An effective licensing program will require contractors to maintain appropriate general liability and workers compensation insurance. A continuing education component of the program will provide an opportunity for contractors to familiarize themselves with new code requirements and applicability. Licensing requirements will protect consumers by applying a uniform set of regulations to the building industry, establishing a minimum level of competency for structures to be built to code, and minimizing costly field changes.

Additional Information

Overall, a contractor licensing program will enhance an already professional building community in Lawrence by providing ongoing training and requiring appropriate insurance coverage for employees and customers alike. Staff feels that the LHBA request for contractor licensing regulations to exclude framing contractors substantially weakens an effective contractor licensing program. The role of a framing contractor is of major importance to any construction project since this contractor actually builds the structure. Staff believes it is important that the framing contractor have the experience and required code knowledge to effectively build a code compliant structure. Inspection staff has found that a majority of code violations could have been avoided if the framing contractor had been familiar with building code requirements. A building code violation in a framing inspection may result in an expensive and time consuming remedy.

The implementation of a building contractor licensing program will include special provisions for licensing active contractors without a general competency test, but will require annual continuing education credits. Eligible contractors must apply for the special provisions within a certain timeframe, typically one year from the date the ordinance is adopted. This type of provision is typical for the implementation of such a program. New applicants (building contractors not currently active in the Lawrence building community) will be required to take a standard examination provided by national testing agencies. Thus, the importance of the continuing education component – some contractors may only gain additional knowledge through this requirement.

Insurance

The Administrative Services Department recently reviewed the insurance requirements for all trade contractors and has recommended that general liability insurance replace the current surety bond license requirement. This recommendation will be included in the existing trade licensing ordinance and building contractor licensing program (if approved), resulting in uniform insurance requirements. In addition to the general liability insurance, licensed building and trade contractors must procure and maintain workers’ compensation insurance, as required by law.

Recommendation

Staff recommends establishing contractor licensing regulations for building contractors and strongly recommends the inclusion of framing contractors in the program. Additional recommendations are:

• Staff will work with LHBA to draft the elements for a building contractor licensing program; once developed, an ordinance outlining the program requirements will be brought to the City Commission for review and approval;
• Staff will contact the Johnson County Licensing Program to pursue an agreement to provide continuing education courses to Lawrence building contractors; (note the cost for participating in the Johnson County continuing education program would be in addition to any licensing fee payable to the City of Lawrence);
• If a continuing education element is to be developed for implementation by the Neighborhood Resources department, licensing fees should be set at a sufficient level to hire and train a licensing coordinator;
• Implement via city ordinance uniform insurance requirements for all contractors;
• Review trade contractors for inclusion in the continuing education requirement.