School construction budget to be gutted

From Crain's:

At the stroke of midnight on Dec. 31, nearly $140 million will effectively vanish from the budget of one of the city's biggest builders, the New York City School Construction Authority. In the following two years, at least another $260 million will disappear, bringing the total to $400 million—enough to build as many as 10 new schools, say SCA officials.

The losses stem not from budget cuts or cost overruns, but from an unprecedented escalation in the price of the construction insurance that the agency must have to cover the costs of potential injuries suffered by workers on the roughly $2 billion worth of schools the agency builds or rehabs annually.

By most accounts, the culprit is an arcane, century-old rule called Labor Law 240, which mandates that developers assume 100% of the liability for accidents on a building site regardless of fault. That law and a recent run-up in the size of court settlements in such cases have moved insurers to push premiums to record heights.

“As a result of Labor Law 240, which imposes strict and absolute liability on owners and general contractors for gravity-related accidents, the SCA's insurance costs are three to four times greater than they would be for the same construction program in New Jersey, which does not have a similar law,” an SCA spokeswoman said. “The impact of the law on the SCA effectively results in the construction of fewer schools because the additional funds that must be spent on insurance will be unavailable for SCA capital projects.”

After months of rising complaints from contractors and developers about their own escalating insurance costs failed to move Albany legislators to change the law, advocates are seizing on the SCA case as the one they hope will finally tip the balance.