sta september 2015 newsletter

New Hudson Yards Station Aims to Revitalize and Reconnect Manhattan’s West Side

July/August 2015

2 President’s Message

By Robert J. Ansbro

3 New Hudson Yards Station Aims to Revitalize and Reconnect Manhattan’s West Side

7 New York City

School Construction

Authority Announces

Amended Capital Plan

By Hank Kita

11 Construction Contract

Notice Provisions –

Subcontractor Wins On

Technicality

By Henry L. Goldberg

17 Watch the Sales Tax

By Robert Schaffer

21 2015 STA Membership Survey Results

IN THIS ISSUE

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SubcontractorS newSBringing New York’s Union Subcontractors Together to Build a Stronger Construction Industry

President’s MessageSeptember 2015

As we move into the fall, I am excited to announce the STA’s 50th anniversary coming up in 2016.

Since 1966, we have been the voice of subcontractors in New York City—pushing our legislative

agendas, advocating for our members and increasing business opportunities within our industry.

Please look out for events in the coming year celebrating this landmark milestone.

One critical topic we focus on is the funding for the New York City School Construction Authority.

The agency just announced an increase in its 2015-2019 Capital Plan, which will create 44,000

new seats in areas of overcrowding in New York City public schools. This creates a myriad of

opportunities for subcontractors working on public sector projects.

Recently, we conducted a survey to figure out how to further improve our association through

our members’ thoughts and opinions. With the results, we aim to target the issues that we face as

subcontractors today. We will be using this information to put together events such as Meet the

Agency seminars to better educate our members and help them stay ahead.

I would also like to thank those who participated at our Annual Golf Outing at the Village Club

of Lake Success. Our members’ continued support is what keeps the STA going strong—thank you

for your continued involvement.

As always, the STA is only as good as its supporters. I would like to once again thank everyone

who has supported our event and invite all members to attend events or contact the STA office

with any comments or concerns

Sincerely,

Robert J. Ansbro

2 STA Subcontractors News2 STA Subcontractors News

Email Feedback to the STA Office

2

The 7 Flushing Line was recently extended, connecting

Times Square to the newly created transit station on

34th Street and 11th Avenue. The station, known

as 34th Street - Hudson Yards, is now open to the

travelling public, enhancing accessibility to the West

side and revitalizing the neighborhood. The new

subway terminal improves reliability for all riders of

the 7 Line in Queens and Manhattan, and also provides

convenient access to the adjacent developments and

attractions, including the northern end of the High

Line at 34th Street and 12th Avenue.

INCReaSINg CoNNeCtIvIty aNd ImpRovINg

WeStSIde tRaIN SeRvICe

For the many commuters who work in the area, the

new station will allow much easier access to work.

Previously, it was necessary to walk all the way

from the A Train at Pennsylvania Station on Eighth

Avenue. The new station also provides additional

storage space for trains, which will improve service

throughout the entire 7 Flushing Line.

New Hudson Yards Station Aims to Revitalize and Reconnect Manhattan’s West Side

3September 2015


continued on page 5

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maNHattaN’S NeWeSt tHRIvINg NeIgHboRHood

IS LINked SeamLeSSLy to QueeNS

The new station provides transit access to the West

Side of Manhattan, including the Jacob K. Javits

Convention Center, by extending the 7 Line one and a

half miles westward from its former terminus at Times

Square to the new station located at 34th Street and

11th Avenue. The extension connects Queens with the

heart of what will be midtown Manhattan’s newest

thriving neighborhood. Increased accessibility will

help to stimulate economic growth and continuing

development of the area. The Hudson Yards

Development Corporation is overseeing programs

which will similarly boost the area’s business activity

and economic output.

The Metropolitan Transportation Authority (MTA)

employed several members of the Subcontractors’

Trade Association (STA) for the historic project,

including lighting and electrical specialists E-J Electric

Installation Co. The Hudson Yards Station is the first

new subway station in the city since 1989, when

the Port Authority opened new subway stations at

Lexington Avenue and 63rd street in Manhattan,

21st Street-Queensbridge in Queens as well as a new

station on Roosevelt Island.

HIStoRIC tRaNSpoRtatIoN pRojeCt may Set

ImpoRtaNt FuNdINg pReCedeNtS

The project is also made unique by its funding, which

is sourced from city, rather than state coffers. It is the

first subway extension financed by New York City

in over sixty years. The last city-funded expansion

was in 1950, when the Queens Boulevard line was

extended to Jamaica-179th Street. Many New Yorkers

and city officials are watching closely to see how the

new station plays into discussions on financing for

major infrastructure and capital projects. The 7 line

extension may set important precedents for future

projects.

HIgH-CapaCIty tRaNSIt Hub aNd CommeRCIaL

deStINatIoNS FueL WeSt SIde deveLopmeNt

The Hudson Yards Station is projected to be the

busiest single station in New York City. Initial

projections estimate that is will attract about 32,000

passengers each weekday. It is packed with unique

design features to set it aside from other notable New

York City transit centers. For example, the station

features specialized low-vibration tracks to provide

a smoother, quieter and more comfortable ride for

customers, decrease the need for track maintenance

and contribute to environmental sustainability by

eliminating the use of wooden track blocks.

The 7 Line extension will help rejuvenate an

overlooked stretch of Manhattan’s West Side by

connecting it to flows of professionals, enterprise

and innovation. Transforming the neighborhood

will take more than a new train station, however

the combination of premium offices created by The

Hudson Yards Development Corporation, the city’s

largest convention center and singular destinations

such as The High Line set this area on a course for

steady development and continued success.

5September 2015


continued from page 3

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BY HANk kITA, STA EXECUTIVE DIRECTOR

NEW YORk CITY SCHOOL CONSTRUCTION AUTHORITY ANNOUNCES AMENDED CAPITAL PLAN

While the current upturn in construction activity

in New York City has been led by a number of high

profile privately financed projects, there still remain

considerable opportunities for subcontractors

working on public sector projects. One such example

of these public sector opportunities is illustrated by

the recent announcement of amendments to the New

York City School Construction Authority (SCA) Capital

Plan.

The New York City School Construction Authority

recently announced an increase in its Capital Plan

for FY 2015-2019 of $700 million over its original

“Adopted Plan” for this period. This Amended

Plan calls for $13.5 million in capital expenditures

for New York City public schools. According to the

Department of Education and the SCA, the newly

increased capital plan will create 44,000 new seats in

areas of overcrowding and will take steps to address

the pre-kindergarten initiative of the De Blasio

administration.

In the Amended Plan, key changes include the

identification of 10 new capacity projects creating

5,454 seats and 52 Pre-Kindergarten sites which

would result in the creation of 6,800 more seats.

This amendment would increase funding for student

bathroom upgrades, selected cafeteria upgrades as

well as identification of one additional year of Capital

Investment projects. This Amended Plan also shows

an increase of Wrap Up insurance cost in FY 2015 and

2016 and an increase in “Prior Plan Completion” costs.

The Amended Plan for FY 2015-2019 consists of three

major components: Capacity Expansion, Capital

Investment, and Mandated Programs.

The Capacity Expansion Program is funded at a level

of $4.81 billion and is made up of four elements. They

are $3.45 billion for new capacity, adding more than

32,600 seats in an estimated 63 projects. Another

$520 million is targeted for the Pre-K initiative, $490

million for class size reduction and $350 million for a

facility replacement program.

The $4.96 billion Capital Investment Program provides

for $3.31 billion for the Capital Improvement Program

which includes exterior and interior building upgrades

and other necessary capital repairs to school facilities.

An additional $1.34 billion for School Enhancement

continued on page 9

7September 2015


Construction, Real Estate & Labor Law • Public/Private Bids and Contracts • Claims • Surety Law • Mechanic’s Liens

• Environmental Law • Commercial Litigation • Real Estate Development • Offering Plans • Labor Law • OSHA Violations • Arbitration • Mediation

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Projects includes funding to support technology

enhancements and realignment of existing facilities.

Also included are bathroom upgrades, physical

education projects, science labs and accessibility

enhancements.

The Amended Plan also includes $3.69 billion for

Mandated Programs. This program provides funding

to meet requirement of local laws such as remediation

and building code compliance projects, insurance and

emergencies, among other items. Of special note to

subcontractors here, is that the SCA has set aside

$830 million over five years for its owner-controlled

insurance program.

As one can see by looking at this brief summary of the

SCA’s capital plan, there will continue to be numerous

opportunities for subcontractors wishing to work for

this agency. The STA will continue to monitor this plan

and work on behalf of its members on issues that may

arise as a result of working with this agency.


9September 2015

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Construction Contract Notice Provisions – Subcontractor Wins On Technicality

HENRY L. GOLDBERG, MANAGING PARTNER, GOLDBERG & CONNOLLY, AND STA LEGAL COUNSEL

We often write of the unfairness of the losses suffered

by contractors and subcontractors due to contract

notice provisions of various types. Notice of claims,

notice of damage calculations, reservation of claims

in mechanics lien waivers, and even notice of delay

and impact-causing events, are all now land mines

for the unwary. These notice requirements can be as

absurd as requiring notice within twenty-four hours.

Certainly such urgent contractual notice could hardly

be necessary. But necessity is not why these provisions

are put into subcontracts. The driving reason for

most, if not all, such provisions is to impose a COFED

(i. e., Contractor Forfeiture Enhancement Device) and

to, thereby, create a windfall for the particular owner/

developer or general contractor involved. Worse yet,

these unreasonable provisions have been routinely

enforced by the courts on a strict “you signed it, you

eat it” basis.

However, one recent appellate case in New York

discussed below indicates that, occasionally, the

Courts will attempt to carve out an exception to

these harsh COFEDs; just don’t count on it. You must

redouble your efforts to fastidiously comply with

contractual notice provisions until legislative relief

from COFED forfeitures can be obtained. (There will

be more on steps being taken now to establish a

statewide “prejudice rule” as an antidote to COFEDs

in upcoming articles.)

In this outlier, appellate case, a residential

tower was being constructed in Brooklyn. The

plaintiff subcontractor was installing the concrete

superstructure. It sued for $3.5 million to recover for

“certain additional work” directed by the owner and

for “delays attendant to the work. ”

The owner contended that the plaintiff waived any

recovery by: (1) failing to comply with the notice of

claim procedures set forth in Article 8 of the General

Conditions of the contract, and (2) executing a

mechanic’s lien waiver.

Generally, where a construction contract contains a

“condition-precedent” type notice provision, setting

forth the consequences of a failure to strictly comply,

strict compliance will be required in New York. Article

8 of the General Conditions of this particular project’s

subcontract contained such a “condition-precedent”

notice provision, providing that the plaintiff’s

continued on page 13

11September 2015


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failure to give written notice of a claim and detailed

statements, including damages, of the claim within

the times specified, shall constitute a complete waiver

of such claim.

Interestingly, the plaintiff contractor in this case

conceded that it did not strictly comply with the

notice provisions of Article 8. It contended, however,

that its claims for extra work and delay damages

were claims for “work ordered pursuant to Article 4”

of the contract, dealing with “claims for additional

compensation or delay based on changes in the work.

” Allegedly, “nothing in Article 8 indicated that the

failure to give proper notice with regard to claims

for changes in the work, are subject to waiver. ”

Thus, change orders were not subject to the specific

(and harsh) notice requirements, unlike the general

waiver provisions of Article 8, which was the “claims”

provision of the subcontract.

Furthermore, the contract required that changes

to the work be authorized by the owner by written

change order. However, under New York law, oral

directions to perform extra work, or the general

course of conduct between the parties, may modify

or eliminate contract provisions requiring written

authorization or notice of claims. As the court

observed, provisions requiring written authorization

for extra work are waived where “the conduct of

the parties demonstrates an indisputable mutual

departure from the written agreement and the

changes were clearly requested by the owner and

executed by the contractor. ”

In this case, the owner failed to submit evidence

concerning the party’s course of conduct pertaining

to written work change orders. Accordingly, it

failed to meet its burden of establishing that the

strict notice of claim provisions of Article 8 were

consistently enforced, and, therefore, applied to the

subject claims.

Alternatively, the owner/developer contended that,

even if Article 4’s change order provision applied to

the subject claims, the subcontractor had waived them

by failing to comply with the notice of claim provision

in Article 4 itself. Significantly, in this subcontract, the

notice of claim provision in Article 4 was not a severe

condition-precedent type notice requirement setting

forth the consequences of a failure to strictly comply.

Thus, mere “substantial compliance” with such a

notice provision would suffice.

Substantial compliance will be found where, for

example, there is sufficient correspondence between

the parties to give the owner actual notice of the claims.

The owner failed to meet its burden of establishing

that it did not have timely notice of the plaintiff’s

claims sufficient to satisfy the more “relaxed” notice

of claim provision in Article 4. Should a $3.5 million

claim rise or fall based upon such a subtle distinction?

Clearly not, but “a win, is a win. ”

LIeN WaIveR pRovISIoN

The owner/developer’s second “waiver” argument

involved the lien waiver forms utilized on this project.

It’s surprising, with the law being so well settled in



13September 2015


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this regard, that some owners/developers and general

contractors are still attempting to assert that the

waiver language in typical mechanic lien waivers

routinely submitted with every periodic payment

requisition are actually a waiver of claims. While,

again, you must be careful to actually list and reserve

all claims in lien waivers, most courts today recognize

that the “waiver” is really utilized to acknowledge

amounts actually received to date (like a “receipt”)

and are “not intended to encompass or preclude

claims that the plaintiff subsequently presented to the

defendants for additional work. ” The party receiving

a lien waiver must prove that the parties treated the

lien waiver other than as a receipt.

g&C CommeNtaRy

The “good guys” won this one. But don’t rely on it.

The reasoning in this holding, while laudatory, is far

too tenuous a rationale to depend on to protect a

valuable claim. The concrete subcontractor in this case

was able to exploit an inconsistency between Article 8

(“Claims”) and Article 4 (“Changes”) of its subcontract.

This loophole, however, could be all too readily

nullified by simple contract draftsmanship. You can

be certain that the owner/developer in this case will

not make this mistake, or leave this opening, again.

Always carefully comply with all notice provisions.

COFEDs are there to hurt you; do not let them.

Also, do not rely on the sloppy and imprecise concept

of “substantial” compliance. What, after all, is that?

Always strictly comply with contract notice provisions.

It has to become a religion, part of your company’s

culture. Do not listen to owner/developer CM’s or

project managers telling your field staff to “stop

sending all those letters to the job trailer! ” I don’t

want to hear the excuse that you have to work with

them for two more years. Do your job!

As indicated, the STA is already working on legislation

that will attempt to level the playing field state-

wide regarding these one-sided COFEDs. Legislative

protection is needed since they often cannot be

“negotiated out” of subcontracts; not if you want the

work that is. We will be discussing the “prejudiced

rule” antidote to COFEDs in future articles. For now,

give the required notice!

Henry L. Goldberg may be contacted by email,

[email protected] or by telephone,

516-764-2800.

©Goldberg & Connolly 2015 This article has been

prepared for informational purposes only. It is not

a substitute for legal advice addressed to particular

circumstances. You should not take or refrain from

taking any legal action based upon the information

contained herein without first seeking professional,

individualized counsel based upon your own

circumstances. The hiring of a lawyer is an important

decision that should not be based solely upon

advertisements. Before you decide, ask us to send

you written information about our qualifications and

experience


15September 2015


BY ROBERT SCHAffER, CPA, CASTELLANO, kORENBERG & CO CPAS PC

Watch the Sales Tax

New York State’s sales tax rules are extremely complex

and not complying with them can be very costly.

The State has found that contractors as a group are

generally not certain of the laws and has, to some

extent, concentrated its efforts on this industry. If you

mistakenly treat a repair job as a nontaxable capital

improvement you may be responsible for uncollected

sales tax, penalties and interest. Especially in today’s

economic climate unexpected expenses like these are

very unsettling.

New York State’s Publication 862 provides guidance

on distinguishing between capital improvements

and taxable repairs to real property. It is critical for

contractors to understand the difference. It is equally

important for all contractors to register with New

York State Sales Tax and file required sales tax returns

even if no tax is due. By filing returns, the company

effectively starts the clock on the normal statute of

limitations which is three years. A result of not filing

sales tax returns allows the State to go back and audit

for sales tax for a longer period, which is usually six

years.

Generally, the company that purchases building

materials for a project is required to pay sales tax,

unless an exemption applies. For example, certain

materials that will be incorporated into an exempt

organization’s property can be purchased exempt

from sales tax by furnishing the supplier with Form ST-

120.1, Contractor Exempt Purchase Certificate which

should be presented along with a valid exemption

certificate, Form ST-119.1, Exempt Organization

Exempt Purchase Certificate or other proof of

exemption from the exempt organization.

For a capital improvement job where the contractor

purchases the materials, the contractor pays the sales

tax to the supplier but does not separately charge the

customer sales tax. The contractor should include the

sales tax as part of the cost of the job in determining

the contract price. Form ST-124, Certificate of Capital

Improvement, must be received from the customer to

reflect that it is a capital improvement job and that

the contract price is not subject to sales tax.

For repair, maintenance and installation services,

the customer is charged the sales tax on all of the

contractor’s charges. The contractor is still generally

responsible to pay its supplier sales tax on purchases

of materials unless it mainly performs these taxable

services and suppliers will accept Form ST-120 Resale

Certificate. The contractor may apply for a refund

or credit on its sales tax return for sales tax paid on


17September 2015


Contract Claims & Disputes | Bid Protests | Labor Law/Prevailing Wage | M/W/DBEMechanics Lien/Payment Bond Claims | Insurance Coverage

CONSTRUCTION LAW SOLUTIONS

CONTACT:HENRY L. GOLDBERG, MANAGING PARTNER

[email protected] | www.goldbergconnolly.com


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materials that are incorporated into the property

transferred to the customer in a taxable job. For

example, a painting contractor may apply for a refund

or credit for sales tax paid on paint used for a taxable

job.

Form ST-120.1 may also be used to purchase the

services of a subcontractor without paying sales tax

for services that will be part of a project and resold to

the customer.

Purchases of supplies such as brushes, rollers or tape,

etc. by a painting contractor are always subject to sales

tax since they are not transferred to the customer. The

contractor is considered to be the consumer of those

items and therefore is responsible for the sales tax.

Sales tax is also due for supplies such as hammers,

screw drivers, small tools, temporary fencing and

scaffolding materials.

If sales tax is not charged by the vendor, for example

if materials and supplies are purchased from out of

state, the contractor is still responsible for paying the

tax directly to the State on the sales tax return filed

for that period. It is considered “purchases subject to

tax” or “use tax.”

Certain services paid for by the contractor are also

taxable, such as security services. In addition, the

purchase and rental of machinery and equipment by

contractors are also subject to sales tax.

New York State defines a “capital improvement” as

an addition or alteration to real property that:

Substantially increases the property’s value or

prolongs its useful life;

Becomes part of the real property or is permanently

affixed to the real property so that removal would

cause material damage to the property or the article

itself; and

Is intended to become a permanent installation.

Repairs involve keeping the property maintained and

“in a condition of fitness, efficiency, readiness and/or

safety” or restoring it to that condition.

The distinction between capital improvement and

repair and maintenance jobs is not always obvious.

There are many examples within Publication 862

where installation of an item in connection with new

construction or total reconstruction is considered a

capital improvement but where that same installation

on a property that has otherwise been completed for

more than six months is a taxable installation.

Publication 862 is available on the New York State

website at www.tax.ny.gov.

Contact Bob Schaffer, CPA in our tax department at

516-937-9500 if you need further guidance or have

any questions.


19September 2015


135 Crossways Park Drive, Suite 201, Woodbury, New York 11797 | Tel: 516.681.1100 | Fax: 516.681.1101 | www.kdvlaw.com

Jason LangeAssociate

Muhammad IkhlasAssociate

Matthew MineroPartner

Andrew RichardsPartner

Chair of KDV’s Construction Practice

Kaufman Dolowich & Voluck Is A Full-Service Litigation Firm That Understands Your Business Needs

In today’s business climate, companies face risks on a variety of fronts when a dispute arises. Our attorneys are proactive, pragmatic and result-oriented. We always act in the best interests of our clients and strive to achieve favorable results whether

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Construction Law

▪ Contract Drafting and Negotiation ▪ Construction Defect Litigation ▪ Claims, Litigation, Arbitration and Mediation

- Breach of Contract - Extra Work - Wrongful Termination - Performance and Payment Bond - Non-Payment - Defective Work - Mechanic’s Lien - Delay Claims

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In August, the STA sent out a survey in an effort to

better serve its member companies in a variety of

different areas, including technology, event topics

and industry-related issues. The results of the survey

have prompted the STA to continue working hard on

the issues that affect its member subcontractors, and

embark on new campaigns as a direct result of the

survey.

The STA uncovered a few different facts about its

members. For instance, over 65% of the membership

have been members for over 10 years, with over 85%

of that number having been in business for over 25

years.

Social media was marked as an important topic for

the STA to tackle in the coming year as a means of

relaying industry related information to its members.

Together with The Berman Group, the STA office will

be rolling out a new website with integrated social

networking, including Facebook, Instagram, LinkedIn

and Twitter. Please look out for more information on

these STA accounts in the near future!

Over 80% of those surveyed said that the most

important type of General Membership Meeting

or Seminar would feature presentations by owners,

general contractors and construction managers. The

STA will be putting together a seminar directly related

to this for early December. In that same light, another

topic of interest is connecting to industry colleagues

to network and do business. The association will be

exploring new ways of connecting its members to

each other through business receptions and various

events.

For any other information on the results of the

2015 STA Membership Survey, please contact the

STA at 212-398-6220 or visit the STA’s website at

www.stanyc.com. Thank you to those who

participated!

2015 STA Membership Survey Results

21September 2015

Email Feedback to the STA OfficeEmail Feedback to the STA Office

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Subcontractors Trade Association

1430 BroadwaySuite 1106New York, NY 10018T: 212.398.6220F: 212.398.6224e-mail: [email protected]: www.stanyc.com

Officers

Robert J. AnsbroPresidentThe New York Roofing Company

Robert Weiss1st Vice PresidentA.J. McNulty & Co. Inc.

Peter Cafiero2nd Vice PresidentIsland Painting

John A. FinamoreTreasurerJordan Panel Systems

Joseph LeoSecretaryAtlantic Contracting & Specialties, LLC

Hank KitaExecutive Director Subcontractors Trade Association

Henry GoldbergLegal Counsel Goldberg & Connolly

Active Past Presidents

Greg S. Fricke, Jr.Leonard Powers, Inc.

Jerry LissA. Liss & Co. Inc.

Alan Nathanson (Honorary)Forsythe Plumbing & Heating Corp.

Lawrence RomanWDF, Inc.

Arthur RubinsteinSkyline Steel Corp.

Robert SamelaA.C. Associates

Gary Segal (Honorary)Five Star Electric Corp.

Lawrence WeissA.J. McNulty & Co., Inc.

Scott RivesWoodworks Construction Co, Inc.

Board of Directors

Joseph Azara Jr.C.D.E. Air Conditioning

Christine BocciaJD Traditional Industries

Dan J. DeVitaPenava Mechanical Corp.

John DierksDierks Heating Company, Inc

Brent FleisherEnvironet Systems

James FlynnIndependent Temperature Control

Patrick GallagherCannon Mechanical

Stephen GianottiArcadia Electrical Co., Inc.

Sandra Milad GibsonMilad Contracting Corporation

Craig GilstonGilston Electrical Contracting

Maureen O’ConnorCenter Sheet Metal, Inc.

Randy RifelliUnited Iron, Inc.

Guy VandeVaarstFirecom Inc.

John VillafaneEldor Electric

Upcoming Events

STA General Membership MeetingWednesday, October 7, 20155:30 pm - 7:30 pmThe LaGuardia Marriot Hotel102-05 Ditmars BoulevardEast Elmhurst, NY 11369

Manhattan Long Island212-661-6166 516-256-3500www.grassicpas.com

find the balance to gain a competitive edge

For more than 30 years, Grassi & Co.’s Construction Practice has been assisting contractors, engineers, suppliers and distributors minimize their tax liability, uncover potential savings, and build a successful future.

trengthen New York’s construction industry

each member firms to increase business opportunities

dvocate to preserve subcontractors’ rights

O U R M I S S I O N S TAT E M E N T

23September 2015

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sta september 2015 newsletter

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