Legislation Passes to Provide Construction Loans

Ivy Chang, Editor | September 28, 2010

On Monday, May 11, the Minnesota Senate voted 56-11 to pass a bill that will provide $100 million in loan guarantees to back private construction projects in the state. A similar bill is waiting consideration in the Minnesota House.

The Senate bill would give the Minnesota Department of Employment and Economic Development $100 million from the state’s general fund to pay for the program and guarantee 20 to 25 percent of approved loans.

The construction industry voiced its opinions to the president of the Senate that $3 billion to $5 billion of projects can begin if contractors can obtain financing which has been distributed slowly amid the recession. He said this bill would stimulate employment in Minnesota.

The Legislature is hopeful that Gov. Tim Pawlenty will support the bill because of its bipartisan nature.

Trade unions won’t budge on their contracts
But that amount may not be enough because trade unions in the Twin Cities will not back down on scheduled wage increases that unions signed as part of three and four-year contracts when the economy was strong. Now, Twin Cities’ construction companies have asked the unions for a wage freeze.

The request, made in March, has yielded few results. The Associated General Contractors of Minnesota, which negotiates contracts with trade unions, said in the current economy, a wage freeze will save builders of large projects hundreds of thousands of dollars and will make a difference on whether or not a project moves forward.

“The idea was that we, hopefully as an industry, would walk hand-in hand together and say we need to freeze wages at a time when this industry can’t afford additional costs,” said Dave Semerad, CEO of AGC of Minnesota.

Vertical Construction Jobs Coalition
Simultaneously, AGC gave a last minute push to lobby legislators on a bill for “vertical construction jobs.” A lobbying group of about 60 members, called the Vertical Construction Jobs Coalition, helped draft legislation to help contractors who build vertical structures.

Semerad said about 70 percent of Minnesota’s construction industry isn’t benefiting from the federal economic stimulus program which favors road and transportation contracts.

The Minnesota Senate passed a version of this bill on May 12 to create a $500 million loan guarantee fund that helps lenders reduce their risks on certain construction loans. The proposal would loosen some tax-increment financing regulations to help stimulate construction projects.