Category: Construction Contractor – Fall 2024

Clark Equipment: Heavy Hitters in Heavy Equipment Owner’s Focus? Customers Satisfaction Company in Culture and Equipment

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By: Martha Conway

Clark Equipment Rental and Sales of Canastota celebrates its 20th anniversary next year – an impressive milestone for any business today – and owner Adam Clark is planning for the next twenty. Clark’s origin story began in grade school; through his dedication to customer satisfaction and adapting to changing client needs, he’s built an impressive reputation.

“I’ve always been an entrepreneur,” Clark said. “Before I could drive, I was pushing a lawnmower around town; I mowed about 15 lawns.”

Clark said he just fell into the work, growing up in a construction family.

“My dad suggested I start an equipment rental business, and I thought he’d done a lot more than just casual thinking about it when suggesting I should start a business,” he said.

Expanding to meet demand

Clark said after taking a couple of years to learn how to manage the business, he wanted to capture revenue lost from not selling equipment.

“The first year, I was by myself,” he said. “I drove around in a pickup doing deliveries. I had a cell phone the office phone rolled over to and another to call customers. Toward the end of my second year in business, I hired my brother to do deliveries. I did sales, still driving around with the office line rolling over to me.”

Over the next couple of years, Clark hired Kyle Stevens and Mike Christian. Stevens has moved on, but Christian just celebrated his 10-year anniversary.

“I’m really proud he’s still with me,” he said. “He saw me go from the Quonset hut on Brighton Avenue to the building on State Fair Boulevard and now to Canastota.”

Clark started out working from a storage unit in Syracuse. From there, he moved to a one-acre property with a 3,600-square-foot warehouse. The next move increased the physical space to about six acres with a 7,000-square-foot building.

“I thought we’d never outgrow that place, but after three or four years, I realized we needed more space,” he said. “Now I have 20 acres and a 20,000-square-foot warehouse, and a year later, I’m like, ‘holy cow, we’re going to outgrow this place.’ I’m already thinking I need a bigger building.”

Clark Equipment started out with three skid-steers and three mini-excavators; over the years, he kept adding more equipment – bulldozers, rollers, and backhoes. Inventory typically runs between 600 and 700 pieces of equipment now and he employs 30 people. Clark said he’s started doing a lot of telehandlers and boom lifts in recent years.

“That’s a different customer than we were initially focused on,” he said. “I’ve got a bunch of excellent mechanics; they’re hard-working and loyal, and I take care of them the best I can. In addition to my mechanics, I’m blessed to have a strong sales and service department staff.”

Customer service is Job #1

The entire Clark Equipment team is laser-focused on customer service,

“When I first started, I was so small, I couldn’t help but get to know customers personally,” Clark said.

“I think when you’re that small, you respect and appreciate having people come to you, so you want to give them really good service,” said general manager Amelia Trenga. “That desire to provide excellent service has stuck with Adam and Clark Equipment, which allows us to maintain the small business feel, no matter the growth.”

Trenga said Clark Equipment looks for staff who have natural customer service abilities.

“You can teach someone the equipment, machines and processes, but you can’t teach empathy, understanding, flexibility and compassion,” Trenga said, explaining that as general manager with a great team, she is able to focus on customer experience and satisfaction.

“We’ve kept that personal touch,” Clark agreed.

Service writer Jodi Stone said Clark Equipment particularly prides itself on quick customer response, whether rental, sales or service.

“If you have a machine out on rent and it breaks down, we respond within 24 hours, if not the same day,” Stone said. “With the bigger companies, you could be waiting for four or five days. I think if you polled our customers, they would tell you everyone here is very nice – we don’t have any ‘Grumpy Georges.’ We listen and try to be super positive and helpful. We listen carefully then say, ‘Okay, let’s figure out how we can fix this.’”

She said because Clark deals in newer equipment and performs extensive pre-rental and pre-sales inspection checklists, job interruptions due to equipment problems are rare.

Max Ford, who heads up inside and out-of-state sales and rentals for Clark Equipment, confirmed the need for speed.

“Having a quick response time, answering the phone and being transparent is what customers want,” Ford said, adding that he works to make transactions as painless as possible for clientele. “This has been pivotal to building a new customer base and repeat customers; now I have a solid repeat customer base outside New York state.”

“We have a lot of repeat business because people like our customer service,” Stone said. “Max has a lot of repeat customers thanks to his efforts and everything service does to get equipment ready and help customers once they have it. If they have a problem, we try to help them through it. It’s harder when they’re out of state, but we can still point them in the right direction, whether they need parts or service.”

Company culture

Trenga said Clark has cultivated a company culture that drives employees to treat customers very well.

“Everywhere is going to have the machines, but not everywhere is going to have the dedication and understanding we do,” she said. “We are determined that customers feel taken care of. That’s not true at every company, and it starts from within. Our company culture drives a staff that is motivated to achieve a common goal.”
“We’re a family-owned and -operated business – we’re not treated like numbers, so we don’t treat customers like numbers,” Stone said. “I think bigger dealerships see customers as dollar amounts, not people. We know our repeat customers by their first names, and they know me by my first name. Sometimes they are driving by and stop in to say ‘hi.’”

“From the guy who washes the machines to the guys who service them and the rest of the team, we have a great support system,” Ford said.

Trenga said no one works in a vacuum if a problem arises because everyone pitches in to help.

“We’re not a big chain, so we can focus on the smaller things,” Stone said. “That’s one of the things I truly enjoy about working here. It’s nice to work for someone who understands that life happens. Adam cares about his employees and cares about his customers.”

Expanding client base

Ford said quick responses, top-notch customer service and the ability to sell equipment country-wide have contributed to Clark Equipment’s growth.

“We’re also able to help with financing and shipping to customers all over the country, which has made it a lot easier for me to sell equipment,” he said.

Ford said it is critical to deliver on promises made and to be transparent in all transactions.

“My favorite part of the job is being able to solve problems for people,” Ford said.

Clark said he listens constantly to client needs in order to make available the equipment people need when they need it.

“If we keep getting customers asking for something, we start buying it,” he said. “I would never have thought we’d be selling forklifts. Three years ago, I didn’t have any forklifts. I try and keep track of needs so I can fill them.”

Newer-model machines without the new equipment price
“We don’t hold onto equipment too long,” Clark said. “I try to turn everything over within two to three years. These machines are so expensive, it’s hard for the average contractor to afford them. A big advantage to working with us is that we take the edge off the price of buying new.”

“Clark is unique there, too,” Trenga said. “You’re renting and buying used machines, but they’re newer with fewer hours. Some companies keep equipment for 10 years. Here, people can get newer machines more competitively priced.”

Before any equipment goes out the door, it is subjected to a number of checklists. There are checklists for machines being rented out, for those being sold and for those being received into inventory.

“We go through everything to ensure everything is working,” Stone said.

For rentals, Clark Equipment uses the Record360 Rental Inspection app to record equipment condition.

“That protects us and the customer,” Stone said. “If something gets damaged on the job site, we have the proof for insurance.”

There’s another checklist when equipment returns from rental, and the service department goes through everything again.

“When we sell an item, there’s an even more detailed checklist the mechanic performs before anything goes to the customer,” Stone said. “They go through and make sure everything works; even though these customers are purchasing used equipment, they’re getting top-notch vehicles.”

New, bigger location

Clark said the new location provides space to have all equipment centrally located; early on, Clark rented additional spaces and had to take clients to different locations where equipment was stored.

“It’s easier to manage the inventory,” he said. “I’m very particular about the way my equipment looks and how it’s maintained. With everything in one location, it makes things much easier for my staff and customers.”

“The layout is much better geared toward success,” Trenga said. “We can have clients come and look at everything. It’s convenient to the Thruway, and it turns out it’s not much further from where they were originally getting machines. We’ve expanded our clientele east. It might not be budget-feasible to some of the smallest clients, but we’ve been able to serve everyone we already did and the people who are out here.”
Stone said the service department facilities are much improved, also.

“Rentals are flourishing, and we’ve got a lot of new customers purchasing equipment,” she said.

“It’s been great,” Ford agreed. “We have more room to store equipment, so we have a larger inventory; that equals more sales. The expanded, more efficient shop set-up allows the guys to get machines in and serviced faster, which means I can sell them faster. Basic maintenance and new asset check-in is quicker, too.”

Future vision

Clark plans to open a second location in another city within two years.

“I don’t know if we’ll go to Albany, Rochester or Buffalo, but I want to find a couple more team members, get a couple more processes in place, and I either want to buy somebody out or open a new store,” he said, adding that Canastota will be his headquarters. “After we have a second location set up, the third and subsequent location will come quicker.”

The goal is to open two new locations within the next five years.

“The challenge for me will be managing subsequent locations successfully, then keep rolling them out,” Clark said. “We have between 600 and 700 machines and sell 30 to 50 machines monthly. We rent a few hundred machines every month. The operation is pretty amenable to scaling. I just need a couple more key people – a couple more mechanics and one or two more good over-the-road salespeople. A couple more years of saving my pennies and we’ll open another store. Growing the business is fun.”

Why Clark

Staff cited Clark Equipment’s customer service and family-owned business environment as top reasons people should do business with them over competitors.

“We’re all family here, and we take pride in getting people quality used equipment for a great price,” Ford said. “We take a lot of steps to make sure the equipment is in excellent condition. Even if a machine was just inspected when it came off rent last week, we bring it through again to make sure everything works and it’s up to date on maintenance and service.”

“Adam has been in this industry his entire life, starting with his grandfather and father,” Stone said. “He’s very knowledgeable, and his people are very knowledgeable. There is always someone in this building who can solve problems.”

“It’s 100-percent a relationship business,” Clark said. “You have to be competitive on price and deliver a good product, but friendships make it much more fun, and everyone involved is much more productive and profitable ”

Clark Equipment Rental and Sales is located at 4 Technology Blvd., Canastota. For more information, call 315.472.7607 or visit ClarkRents.com.

 

Protect Your Right to Be Paid –What You Need to Know to Make a Claim on a Payment Bond

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By: Sheats & Bailey, PLLC

Hardly a week passes that our firm is not asked to file a claim on a payment bond for one of our clients.  A claim on a payment bond, like a mechanic’s lien, can be an effective device for getting you paid.  It is not the only legal tool at your disposal, but it can be a very effective tool.  This article will provide a few things you need to know about making a claim on a payment bond.   
 
Payment bonds are required by Section 137 of the State Finance Law on public projects.  Payment bonds are not a guarantee of payment; they are an undertaking by a surety which provides that a company providing work or materials for a project will have added security beyond the assets or liquidity of the contractor with whom you have a contract.  In other words, the payment bond provides another deep pocket from which to get your money.  I am sure you have encountered or heard of fellow subcontractors/suppliers that performed work/supplied materials, but never got paid because the upstream contractor went out of business.  A claim on a payment bond can prevent that from happening to you.   
 
In order to place a valid claim on a payment bond on a public project you need to be mindful of certain time limitations.  An action against a payment bond on a public project must be brought within one year from when the project was completed and accepted.  If your action is brought against the bond after the one-year statute of limitations expires then the action may be dismissed. 
If you are a second-tier subcontractor/supplier on a project then you must also provide an additional notice by certified mail, return receipt requested, to the up-line contractors, owner, and the surety.  The notice must generally provide a description of the work, the party you had a contract with, the amount of money due to you, your initial contract price and when the money was due.  Second tier subcontractors must give that notice within 120 days of when they last supplied labor or materials to the project.  Although there are exceptions, the failure to provide the notice may prevent you from asserting a claim on the bond.   
 
Sometimes private owners, like hospitals, universities, and museums, require contractors to provide a payment bond for their projects.  Private improvement bonds typically contain similar, but not identical, notice provisions and statutes of limitations as outlined above.  Often, the payment bonds on private projects require notice from second tier subcontractors/suppliers within 90, not 120 days, of when they last supplied labor/materials.    
 
Considering the tight time frames to make a claim on a bond, the best thing to do is get a copy of the bond for your records early in the project.  Have your PM and/or accounts receivable person calendar the statute of limitations within the bond and any notice requirements.  If you want to find out who the surety is then call the architect of record or send the public owner a Freedom of Information request; it is little more than a letter stating that the request is “pursuant to the Freedom of Information Law.”
People often ask if they should file a mechanic’s lien or make a claim on the bond.  Why not do both?  However, there are a few advantages to making a claim on the payment bond.  Very often an action against a payment bond will be a less cumbersome and less expensive way to recover your money than filing and foreclosing a mechanic’s lien.  Plus, the existence of a lien fund (i.e., does the owner owe money to the GC) is immaterial to a payment bond claim, but is necessary to prove to lien foreclose.  Likewise, the presence of any other claimants on the bond or those with other mechanic’s liens are immaterial.  A payment bond action can be as simple as your company versus the surety 
 
For more information or assistance contact Sheats & Bailey, PLLC, Tel: (315) 676-7314, www.TheConstructionLaw.com. 
 The information provided in this article is not intended to serve as specific legal advice for any particular situation. Competent legal and experienced counsel should be consulted.

Empowering Central New York:The Crucial Role of Manufacturing

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Jim D’Agostino, CEO, MEP Center Director

Central New York is a region rich in history, culture, and natural beauty. Amidst the picturesque landscapes and vibrant communities, manufacturing stands as a cornerstone of the local economy, driving growth, innovation, and opportunity. As we explore the unique regional economic landscape, one quickly sees that manufacturing plays a pivotal role in shaping our prosperity. And, with the arrival of Micron Technology and its supply chain, the influence of manufacturing will only continue to grow.

Central New York’s manufacturing sector serves as a vital source of employment, providing jobs that sustain numerous families and communities. From the production of aerospace and defense components to advanced medical devices and beyond, manufacturers in Central New York offer a diverse array of career opportunities. These jobs not only offer stability and some of the most competitive wages in the area, but they also foster a sense of pride in contributing to the region’s economic vitality. Manufacturing also fuels a culture of innovation and technological advancement within the region. Central New York boasts a rich ecosystem of research institutions that collaborate closely with manufacturers in a multitude of industries to drive innovation forward. Whether it’s developing cutting-edge materials, refining manufacturing processes, or pioneering new technologies, Central New York’s manufacturers are at the forefront of innovation, propelling the region into the future.

Manufacturing also serves as a magnet for investment and talent, bolstering Central New York’s economic development efforts. The region’s strategic location, robust infrastructure, and skilled workforce make it an attractive destination for businesses looking to establish or expand their operations. From multinational corporations to homegrown startups, manufacturers in Central New York benefit from a supportive business environment that fosters growth and prosperity. Importantly, manufacturing plays a crucial role in driving exports and enhancing Central New York’s competitiveness in the global marketplace. The region’s manufacturers produce a wide range of goods, from precision machinery to specialty foods, that are in demand both domestically and internationally. By exporting goods to markets around the world, Central New York’s manufacturers not only generate revenue but also raise the profile of the region as a hub of innovation and quality craftsmanship.

Additionally, manufacturing contributes to Central New York’s resilience and self-sufficiency, particularly in times of crisis. The COVID-19 pandemic underscored the importance of localized supply chains and the need for regions to be self-reliant. Central New York’s manufacturing sector rose to the challenge, pivoting production to meet the urgent needs of healthcare providers, essential workers, and the community at large. This agility and adaptability demonstrate the inherent strength of Central New York’s manufacturing base and its ability to weather adversity. Manufacturing continues to play a vital role in developing the skilled workforce that the region needs to thrive in the 21st century economy. Through partnerships with educational institutions, apprenticeship programs, and workforce development initiatives, manufacturers in Central New York are investing in the next generation of talent. By equipping individuals with the technical skills and knowledge needed to succeed in modern manufacturing settings, Central New York is ensuring that its workforce remains competitive and resilient.

As most of us locals already know, manufacturing is not just an industry in Central New York; it is a driving force behind the region’s prosperity and resilience. From creating jobs and fostering innovation to driving exports and empowering communities, manufacturing touches every aspect of life in Central New York. As the region looks to the future, including the exciting arrival of Micron Technology, continued investments in manufacturing will be essential to building an even more vibrant and sustainable economy that benefits all of us. By harnessing the power of manufacturing, Central New York can unlock new opportunities, spur innovation, and chart a course towards an even brighter tomorrow

TDO is a consulting and training organization based in Liverpool, New York. Our mission is to grow the local economy by helping Central New York manufacturers and technology companies drive operational excellence and cultural transformation to reach their full potential. TDO’s support of the local mission generated $265 million in economic impacts in the last contract period supporting jobs, investments, cost savings, and profitable growth. If you are a small or mid-size manufacturer and would like to talk further, TDO’s team is fully certified to help. Reach out today to learn more, 315-425-5144 or visit online TDO.org.

Navigating New York State Sales Tax

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Anthony Pokrentowski, CPA, Dannible & McKee, LLP

Taxable vs. Nontaxable Services

In NYS, sales tax applies to two main categories for contractors: repairs and maintenance, and installation services. Repairs and maintenance are subject to tax when they involve fixing or maintaining existing systems or structures, such as repairing damaged roof shingles or fixing a broken railing. Installation services are taxable when the installed items do not become part of the real property. This includes freestanding appliances, above-ground swimming pools, canvas awnings or weather stripping.
Conversely, capital improvements are exempt from sales tax. A capital improvement is characterized as an addition or modification that must:

1. Enhance the property’s value
or extend its useful life.

2. Become a permanent part of
the property.

3. Be intended as a permanent fixture.

To qualify, the customer must provide the contractor with a Certificate of Capital Improvement (Form ST-124).
Distinguishing between repairs and maintenance versus capital improvement can sometimes be tricky. The NYS Department of Taxation and Finance’s Publication 862, Sales and Use Tax Classifications of Capital Improvements and Repairs to Real Property, offers guidance. However, each project should be assessed individually to determine its classification.

Purchasing and Billing

Contractors generally pay sales tax on all materials and other tangible personal property purchased. Nevertheless, as discussed later, situations exist where purchases may be exempt, or credits can apply.
When invoicing a customer for taxable services, sales tax applies to all materials and labor costs, including markups. For instance, if $200 is billed for materials and $400 for labor, sales tax applies to the total of $600.

Organizations like churches, private schools and government entities are exempt from sales tax. To forgo collecting sales tax, contractors must obtain an Exempt Organization Certificate (Form ST-119) from these customers. In some situations, contractors can purchase materials tax-free when transferred to a tax-exempt customer as part of the project by using a Contractor Exempt Purchase Certificate (Form ST-120.1).

Use of Subcontractors

General contractors can hire subcontractors for taxable work without paying sales tax by using a Contractor Exempt Purchase Certificate (Form ST-120.1). This exemption allows the services the subcontractor provides to be exempt from sales tax to the general contractor. However, the general contractor remains responsible for collecting sales tax on the entire amount charged to the customer, which includes the fees of the subcontractor.

Materials and Projects

When purchasing materials for taxable services, contractors must pay sales tax at the time of purchase, but they can claim a credit for the tax paid. Examples include plywood, drywall, nails, landscaping, plumbing and electrical materials. However, credits do not apply for sales tax paid for items not transferred to your customer as part of the project, such as tools, rental equipment, paint brushes, drop cloths and gas.

For capital improvement projects, contractors pay sales tax on all purchased materials but do not charge sales tax to the customer. Additionally, you cannot claim a credit for the sales tax paid on these materials on your sales tax return. However, the sales tax paid on materials can be included in your material costs for the job performed.

When working with tax-exempt organizations, you can purchase materials tax-free using the Contractor Exempt Purchase Certificate (Form ST-120.1). If sales tax was paid on materials that later were used in an exempt project, you can claim a tax credit on those materials. However, sales tax paid on other supplies, even if used in an exempt project, cannot be claimed for credit.

Credits

Contractors may claim a sales tax credit if they paid sales tax on materials purchased and then passed those materials on to a customer as part of a taxable service while also charging sales tax to your customer. However, credits do not apply to capital improvement projects.
If you purchase materials and pay sales tax in NYS and later use them for an out-of-state project, you can receive a credit for the NYS sales tax paid. Similarly, if sales tax is mistakenly charged to a customer and later refunded, you can claim a credit for the refunded sales tax.

Subcontractors can accept a Contractor Exempt Purchase Certificate (Form ST-120.1) from the prime contractor instead of charging sales tax. Doing so does not prevent you from claiming a sales tax credit for any taxes paid on materials, provided that the project qualifies as a taxable repair, maintenance or installation service.

Documentation

To claim credits or substantiate nontaxable sales, contractors must maintain proper documentation, including:

• Purchase invoices showing sales tax paid.

• Customer invoices detailing materials used or invoices indicating materials were resold as retail.

• Contracts confirming the project as a repair, maintenance or installation service.

• Form ST-124 for capital improvement projects.

•Exemption certificates from customers, as needed.
Navigating NYS sales tax rules requires a clear understanding of taxable services, capital improvements, and the ability to manage tax credits and exemptions. Maintaining thorough documentation and staying updated on tax guidelines can help contractors stay compliant and avoid penalties. If in doubt, consulting with a tax professional is advisable

Anthony P. Pokrentowski, CPA, is a tax senior manager at Dannible & McKee, LLP, a public accounting firm with offices in Syracuse, Auburn, Binghamton and Schenectady, NY, and Tampa, FL. The firm has specialized in providing tax, audit, accounting, and advisory services since its inception in 1978. For more information on this topic, you may contact Anthony at (315) 472-9127 or visit online at www.dmcpas.com.

Nuclear Energy

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Earl R. Hall Executive Director – Syracuse Builders Exchange

In 2019, the Climate Leadership and Community Protection Act (CLCPA) was passed by the New York State Assembly and the New York State Senate, then signed into law by former Governor Andrew Cuomo. This legislation requires New York State to reduce greenhouse gas emissions by 40% in 2030, and 85% by 2050 from 1990 levels. In addition, the CLCPA requires establishing a 100% clean electrical grid by 2040.

Recently there has been a renewed interest in nuclear energy to supplement other clean and renewable technologies such as wind, solar and batteries. Elected officials and others engaged in the New York energy industry have realized it is impractical to reach the above noted requirements within the CLCPA without nuclear energy.

With increased demand from large manufacturers, industrial owners, future data centers associated with Aritificial Intelligence (AI) and other rate payers, nuclear energy is required to support those important industries and technologies that require clean, reliable, on-demand power 24/7/365. Micron alone will require 400 megawatts for each of the five potential semiconductor manufacturing facilities in Clay, NY. To put that into perspective, it would take 12,000 acres of solar panels to produce 100 megawatts of power.

Nuclear energy has proven to be the most effective and efficient energy source to assist in replacing fossil fuels. The positive characteristics of nuclear energy include:
• Renewable
• Low-carbon emissions and
footprint (four times less than solar)
• Safe and reliable
• Small land footprint
• Clean and efficient

Oswego, New York is home to the largest producer of nuclear energy in New York State. The four nuclear reactors along Lake Ontario (one in Wayne County, three in Oswego) produce 20% of the electricity in the state of New York. The Oswego County community has embraced the nuclear industry over the past 40 years, enjoying the benefits of excellent paying jobs and associated economic development.

The nuclear industry supports nearly half a million jobs in the United States and contributes an estimated $60 billion to the U.S. gross domestic product each year. Nuclear plants can employ up to 700 workers with salaries that are 30% higher than the local average. They also contribute billions of dollars annually to local economies through federal and state tax revenues.

Nuclear energy technology has transformed industry over the past few decades, with today’s nuclear power plants being smaller, safer, and more efficient than their predecessors from the 1980s. Nuclear energy will ensure affordable, safe, secure, and reliable access to electricity services for New York State’s residential and business consumers, at fair and reasonable rates, while protecting the natural environment.

Advanced nuclear development has led to innovative technologies and efficiencies associated with various Small Modular Reactors (SMR). SMR technologies and capabilities provide different reactors for different solutions. There are grid scale reactors, industrial scale reactors, high temperature gas reactors and micro-reactors which may be deployed in the future to solve unique challenges in society.

Nuclear remains the largest source of clean energy in the United States. It generates nearly 800 billion kilowatt hours of electricity each year and produces more than half of the nation’s emissions-free electricity. This avoids more than 470 million electric tons of carbon each year, which is the equivalent of removing 100 million cars off the road.

To achieve New York’s goals as a leader in economic development, including hosting future data centers and supporting the nation’s most robust semi-conductor manufacturing industry, the Public Service Commission and elected officials in the State of New York must include nuclear energy as an additional clean, renewable energy solution. Now is the time to adopt new, advanced nuclear development technologies to meet immediate and future energy consumption demands of the State of New York, and to comply with the overly aggressive requirements within the 2019 CLCPA.

Sources:
• United States Energy Department
•NYS Public Service Commission
•NYSERDA Future Energy Economy Summit
•NYS Blueprint for Consideration of Advanced Nuclear Energy

Workers’ Compensation Rates Continue to Defy Inflationary Pressures

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Steven Bell Vice President of Underwriting and Sales, Lovell Safety Management Co., LLC

Despite the on going inflationary environment, workers’ compensation costs are set to decrease for the eighth consecutive year on October 1, 2024. Overall, loss costs and resulting rates will drop by an average of 9% across all class codes. However, this change may vary depending on specific class codes, with some seeing increases and others decreases, but the overall net decrease averages 9%.

During this same period, workers’ compensation insurance carriers have enjoyed several profitable years. Their profitability is typically measured by the combined ratio, which compares total expenses—including losses and operational costs—against premiums earned. The chart below highlights the accident-year combined ratio performance in the New York State (NYS) workers’ compensation market, consistently showing combined ratios below 100%.

Accident Year Combined Ratios

Source: NYCIRB State of the System 2023

Understanding the Combined Ratio

So, what does this mean? For every $100 of premium earned in 2023, carriers paid out $90.10 in expenses and losses, leaving the remaining 9.9% as underwriting profit. It’s worth noting that the combined ratio does not account for investment interest income, which can be significant for workers’ compensation due to the long-tail nature of claims. Workers’ compensation has been a reliable profit center for many carriers, thanks to factors such as reduced claim frequency and severity. Moreover, wage growth during this period has increased premiums for carriers, further contributing to their profitability.

Declining Rates Amid Carrier Profitability

While insurance carrier profitability has remained stable, workers’ compensation rates have steadily declined. Since 2017, rates have cumulatively decreased by an average of 53.9% across all class codes. In the same timeframe, wages have increased by approximately 34.5%. Although rising wages have offset some of the rate decreases, employers who haven’t seen corresponding wage growth should have experienced a reduction in their workers’ compensation costs. The ongoing profitability of the market, paired with decreasing rates, may seem counterintuitive, but the key question for many employers is whether these benefits have translated into lower overall costs for them.

Safety Groups: A Path to Profit-Sharing for Employers

For employers looking to capture the benefits of underwriting profits, there are alternatives in the fully insured market that offer low-cost, low-risk options. One such program is the workers’ compensation safety group, which operates with a different model that prioritizes the financial well-being of participants.. A safety group is a collection of businesses who are in the same trade or industry. The members of the safety group are homogeneous or have similar work conditions, safety hazards, and job risks.

Employers with similar operational hazards are grouped together to reduce their workers’ compensation costs, spreading the risk from the individual policyholder to the entire group. The premiums of the group are pooled together, while the group works to improve safety and limit injuries. These fully insured, not-for-profit programs compile members’ annual workers’ compensation premiums and then deduct the costs of claims plusand administrative expenses and charges are deducted. All safety groups maintain a contingent balance to fund future increases of on–going claims. Any money left over after accounting for these expenses is available for payment of a dividend.

The Benefits of Safety Group Programs

For businesses in New York State, joining a safety group program is a proven strategy for reducing insurance costs and ensuring excess premiums are returned as dividends. These programs incentivize employers to maintain safe working environments, fostering a culture of prevention that benefits both employees and the bottom line. The potential savings in a safety group depend on how the group is managed and its combined ratio. For members of Lovell Safety Management’s 13 industry-specific safety groups, over $1.24 billion has been returned to participants in the form of dividends to date.

A Proven Path Forward

The workers’ compensation rate decrease on October 1, 2024, marks yet another chapter in an eight-year success story for the industry. Workers’ compensation safety groups, in particular, stand out as a model for how businesses can thrive under a well-managed insurance program. While insurance carriers have benefited from lower rates and improved profitability, participants in workers’ compensation safety groups have shared directly in the financial rewards, enjoying both reduced rates and returned higher dividends. As safety groups continue to prioritize safety and financial transparency, their members can look forward to sustained savings and ongoing financial returns for years to come.

For more information on Workers Compensation Rates or similar issues you may contact Lovell directly at 1-800-556-8355 or visit online at www.LovellSafety.com.

Understanding Contract Surety Bonds

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By Ron Metcho, Surety Specialist, OneGroup

In the realm of construction and development, contract surety bonds are indispensable tools that ensure the successful completion of projects. Contract surety bonds can be categorized into four primary types:

1. The Bid Bond – ensures that a bidder will enter into the contract and provide the necessary performance and payment bonds if awarded the contract.

2. The Performance Bond – guarantees the project’s completion according to the contract’s terms and conditions.

3. The Labor & Material Payment Bond – ensures that subcontractors and suppliers are compensated for their work and materials.

4. The Subdivision Bond – guarantees that developers will complete improvements in line with local government specifications.
Underwriting contract bonds is a meticulous process based on three critical factors:

1. Character – involves evaluating the business and personal background of the company principals, including any prior bankruptcies.

2. Capacity – assesses the organization and key personnel, as well as the type, size, and location of previously completed projects.

3. Capital – reviews fiscal year-end financial statements prepared by a third-party financial professional.
For contracts generally valued at $1 million or less, the underwriting process is simplified. This transactional bond underwriting relies on the personal credit history of the construction company principals, without requiring company financials. The bond rate typically ranges from 2.5% to 3%, and personal guarantees are required from owners and their spouses. This process can apply to a single contract or multiple contracts totaling $1 million or less.

For larger contracts, a more detailed underwriting process is followed. The underwriting process involves an evaluation of character, capacity, and capital. It includes a detailed assessment of the business and personal background of company principals, an in-depth evaluation of the organization and key personnel, and a comprehensive review of financial statements, including the quality of presentation and the basis of revenue recognition.
Specific financial analysis factors under capital underwriting considerations include the company’s history of profitability, working capital, corporate equity, total debt to equity, surety credit limits, and the availability of bank credit.

The surety industry plays a vital role in the construction sector, emphasizing its importance in risk management and insurance. A thorough understanding of contract surety bonds, their types, and the detailed underwriting processes involved is essential for anyone involved in construction and development projects, ensuring they are well-equipped to navigate the complexities of surety bonds

Ron Metcho is a surety specialist at OneGroup with over 40 years of experience and serves as a resource to organizations for all surety-specific questions and concerns. OneGroup has a team of specialists, dedicated to risk management and construction industry specific insurance issues. Our team takes great pride in being at the forefront of industry trends and assisting others where we can.

For more information please contact Brett Findlay, Senior Vice President Business Risk Specialist at
(315) 280-6376 or BFindlay@OneGroup.com

Potential to Deliver Services to Contractors in the Mohawk Valley

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Earl R. Hall Executive Director – Syracuse Builders Exchange

In July 2023, representatives of the Mohawk Valley Builders Exchange (MVBE) Board of Directors, including their President, met with me regarding a potential merger of MVBE into the Syracuse Builders Exchange (SBE). That initial meeting has resulted in 14 months of due diligence by both MVBE and SBE as both organizations evaluate what is in the best interest of their Associations and the regional construction industry which they serve.

On September 10, 2024, the MVBE Board of Directors voted to merge with SBE, with SBE being the successor organization. Prior to that, the SBE Board of Directors met with legal counsel, and voted to approve SBE’s merger proposal to MVBE, merger agreement with MVBE and to continue the merger and due diligence process.

To legally effectuate a merger of two not-for-profit Associations in the state of New York, and to comply with both Associations’ By-Laws, the following must occur:


• Proper due diligence;

• Proper calling of membership meetings by both Associations;

• Approval by each Associations’ members;

• Approval by each Associations’ Board of Directors;

• Approval by the NYS Attorney General’s Anti-Trust Bureau

In the weeks ahead, SBE will provide members with a formal Membership Meeting notice, advising of the meeting purpose, date, time and location, and the ability to vote either in person or via written proxy. The MVBE will do the same with their member employers.

Although SBE has approximately 40 member employers located in the Mohawk Valley region, SBE remains extremely excited about delivering important industry services to all construction industry employers throughout the Mohawk Valley region. Many argue the Mohawk Valley is inclusive with Central New York, which is the region SBE’s By-Laws identify as the geographic footprint of SBE.

The SBE staff is prepared for this next chapter of the Association, which dates back to 1872, and well equipped to begin delivering services to construction industry employers throughout the Mohawk Valley effective January 1, 2025.
As a fiduciary Officer of SBE, it remains my opinion, and that of the SBE Board of Directors, merging MVBE into SBE is in the best interest of the Association and the member employers which SBE serves. In addition, and in accordance with SBE By-Laws, such a merger is in the best interest of the regional construction industry and the public which SBE serves.
For the above-noted reasons, I recommend SBE member employers vote to approve of the MVBE merger into SBE. The SBE Board of Directors and I look forward to working collaboratively with our friends and colleagues on the MVBE Board of Directors in our effort to achieve a January 1, 2025 merger

I welcome feedback from our members and remain prepared to address any questions or concerns. Feel free to email me at ehall@syrabex.com or call (315) 437-9936.