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The 22nd edition of Pillsbury’s Newsletter: Perspectives on Real Estate features articles on energy consumption data reporting (AB1103 and 531), construction and risk management, new foreign tax withholding forms, chapter 9 and public-private partnerships.

Articles include:

The Fall 2012 Edition of Perspectives on Real Estate is edited by: Laura Hannusch, Peter Freeman, Christine Roch and Noa Clark and can be downloaded in its entirety by clicking here.

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On November 20, 2012, the California Contractors State License Board posted an Industry Bulletin alerting licensees and applicants alike to a recent scam involving fraudulent calls asking licensees or applicants for their credit card information over the phone in connection with renewing their licenses, obtaining continuing education credits, or taking licensing exams. CSLB Registrar Steve Sands has confirmed that at least one “unscrupulous company” has used information from the CSLB’s website to contact licensees or applicants “to mislead and scam them.” The CSLB confirmed that it “will never ask for credit card information over the phone, nor will they process any payment over the phone.” CSLB fees are only payable through the mail via check or at CSLB headquarters via cash, check, or credit card. Moreover, there are no continuing education requirements to renew a CA CSLB license.

The CSLB confirmed that although California Business and Professions Code § 7080.5 requires it to make public the name and address of every accepted application for a license, and that it intends to continue to post this information, it could change its process if applicants continue to be preyed upon by unscrupulous companies. To read a copy of the Industry Bulletin, click here. To read additional CA CSLB 2012 Industry Bulletins, click here.

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In deciding Westfield Insurance Company v. Custom Agri Systems, Inc., 2012 Ohio 4712, the Ohio Supreme Court recently held that defective construction or workmanship is not a covered “occurrence” under a commercial general liability (“CGL”) insurance policy, even if the defective work was performed by a subcontractor of the insured contractor. In that case, a contractor sought defense and indemnity from its insurer related to allegations of damages arising from a steel grain bin which had been defectively constructed by a subcontractor. The insurer argued that the claims against the contractor were not for “property damage” caused by an “occurrence,” or, alternatively, that the claims were removed from coverage by the policy’s contractual liability exclusion.

In rendering its opinion, the court stated that faulty workmanship was not fortuitous and therefore not an accident or occurrence under a CGL policy. Because it held that defective construction was not an occurrence, the court did not address question of whether such claims were excluded by the contractual liability exclusion. The dissent, however, noted a “strong recent trend in the case law” which interprets the term occurrence to include unanticipated or unintentional damage to non-defective property resulting from faulty work. The dissent went on to criticize the majority opinion as being too broad because it foreclosed the possibility of defective workmanship constituting an occurrence under any circumstance.

Courts throughout the country are split on whether defective workmanship is an occurrence under a CGL policy. Ohio is simply latest state to weigh in on the debate. The Westfield decision will not be well-received by contractors but is likely to be celebrated by insurance companies who may rely on it in refusing to defend claims.

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The replacement of the eastern span of the Bay Bridge is a process many here in the San Francisco Bay Area have had a first-hand view of, as the new span is being built next to the old span. According to Caltrans, the new span will be the longest Self-Anchored Suspension span in the world. Here CalTrans explains the fascinating process by which the weight of the new bridge is transferred from the falsework which has supported it during construction to the new suspension cable. The load transfer process is scheduled for completion this month, with the new span slated to open Labor Day 2013.

Wish the election were over already? This little girl does too.

Do parking structure designs account for loads generated by large numbers of dancing people? Maybe they should. [Audio NSFW]

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There is no doubt that Public-Private Partnerships will play an integral role in improving this country’s infrastructure in the coming years. By leveraging private investment, P3s have the ability to bridge the funding gap in many state and local governments. States are slowly recognizing that they can tackle critical infrastructure needs by partnering with the private sector. Some states, however, are still hesitant to commit to P3s.

Pillsbury’s P3 practice has created a chart that lists which states have enacted significant P3 enabling legislation. This P3 Enabling Statutes chart is available on Pillsbury’s P3 practice homepage. The statutes include links to the full text of the enacted legislation so that you can learn more about how you can take advantage of these P3s. In addition to listing the agencies and types of projects authorized, the chart also lists whether the statutes encourage unsolicited proposals. To promote ingenuity and entrepreneurialism, P3 legislation should continue to welcome unsolicited proposals from the industry.

We will of course continue to update this chart as more states pass P3 enabling legislation.

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Last week, the Federal Energy Regulatory Commission (“FERC”) began enforcing Order 1000, a broad and detailed set of guidelines regarding the development of the nation’s power transmission system. The Order, which has been viewed as one of the most significant transformations to the electricity market in recent memory, impacts regional transmission planning and allows for new transmission projects to be competitively bid. As outlined by FERC, Order 1000 consists of three categories of reforms – planning reforms, cost allocation reforms, and nonincumbent developer reforms.

The most controversial aspect of the Order appears to be this third category of reforms, which takes away incumbent utilities’ right of first refusal from any FERC jurisdictional contracts. But not all energy executives are opposed to this reform. Transmission & Distribution World shared the views of several top utility executives, including one who supports the elimination of the right of first refusal because it opens up opportunities for more providers to participate in building transmission lines and allows existing utilities to compete in other parts of the country. Other executives, however, fear that opening up development by letting inexperienced companies bid on transmission may jeopardize reliability.

It is undisputed that the nation’s current power grid is out of date. The American Society of Civil Engineers reports that 70 percent of power lines and transformers are over 25 years old, and 60 percent of circuit breakers are over 30 years old. Clearly, the need for investment and opportunities for development, construction, and business are massive. Bloomberg reports that approximately $673 billion will need to be invested by 2020 to avoid major breakdowns of the power grid. $104 billion worth of new transmission capability will be constructed by 2022, resulting in an estimated $6 billion in profits for developers of power lines.

It is anticipated that the costs of modernizing the power grid will be borne in part by consumers, who will likely face increased rates. But a more efficient power grid should ultimately lead to lower rates. In addition, modernization will help facilitate the use of renewable energy. SmartGridNews.com notes that new transmission lines are essential for energy sources like solar and wind to be incorporated into the power grid.

The true impacts of Order 1000 may not be known for some time, but the need for improving the grid combined with the opportunity for increased competition may provide a much needed economic boost.

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  • A new form of procrastination for students. This amazing video shows students working together to make a building dance by opening and closing its windows.

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On the eleventh anniversary of the September 11 terrorist attacks, One World Trade Center steadily progresses toward a late 2013 completion date. The spire on top of the 104-story skyscraper will reach 1,776 feet, a symbolic reference to America’s independence. David Childs of Skidmore, Owings and Merrill, Architect, is the architect for One World Trade Center, and Tishman Construction is the primary contractor. Although reports vary, the final construction cost of the tower will be close to $4 billion. The current images of One World Trade Center are inspiring and an uplifting image on this day of remembrance.

On June 14th, President Obama joined Governor Cuomo, Governor Christie and Mayor Bloomberg to see first-hand the tower’s progress. The President added a personal touch to one of the final steel beams to be installed at the top of the skyscraper by including the following signed message: “We remember We rebuild We come back stronger! Barack Obama.” One World Trade Center will be surrounded by three additional high-rise office buildings and the National September 11 Memorial & Museum.

While the tenth anniversary of 9/11 put the memorial on full display, the 100,000-square-foot museum is currently behind schedule. Delayed by funding, oversight, and financing, construction of the museum came to a halt after the tenth anniversary. On Monday night, however, the 9/11 Memorial and Museum Foundation (chaired by Mayor Bloomberg) and the Port Authority of New York and New Jersey (controlled by Mayors Cuomo and Christie) signed a memorandum of understanding, resolving the outstanding issues. The parties negotiated additional payments from the September 11 foundation, in an attempt to ensure that no additional public funds are needed to complete the National September 11 Memorial & Museum. Originally planned to open today on the eleventh anniversary, the museum is now likely to open at the end of 2013.

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When trouble, in the form of adverse changes in financial conditions or the property marketing environment, strikes during the period between construction contract signing and completion of procurement and construction activities, the developer often will have to consider taking the course of action that will maximize value for all stakeholders. Ultimately, it may reluctantly determine that the construction contracts and work should be suspended for some period of time or terminated altogether. Our white paper Shutting Down the Construction Project, updated to include California’s mechanic’s lien laws effective July 1, 2012, outlines significant issues that an owner should consider when suspending or terminating a California commercial construction project.

Things to consider include providing notice of the suspension/termination, if the contract is suspended, keeping the contract and subcontracts in effect, and closing out the claims exposure. Similar principles apply to projects in other states and projects of a residential, industrial or public nature. As becomes quickly apparent, the laws governing these issues are highly technical and often impose short deadlines for compliance, and also pose signfiicant risk to owners and contractors for non-compliance. To learn more about this, click here to our white paper.

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