- WON'T SETTLE: John McNeil says board is a racket.
The second Friday of every month, John McNeill gets in his truck and makes the drive from Hot Springs to Little Rock for the Arkansas State Contractors Licensing Board meeting. Most weeks, he's the only one there other than the board members, their counsel and investigators, and the contractors who are summoned before them.
In October 2007, McNeill — a licensed electrician — was cited by a contractors board investigator for working a commercial job without a commercial contractor's license. Most contractors caught in a similar situation enter into a settlement with the board and pay several hundred dollars and agree to get their license. McNeill, however, insists he was in the right, and has taken a stand — an ongoing fight that he says has cost him upwards of $10,000. Officials at the contractors board say they're an impartial body, one whose main goal is to look out for the public. McNeill, however, calls the board a racket.
At the time he was cited, McNeill was contracted to wire 13 duplexes in the Shadow Peaks subdivision in Hot Springs, a project that he believed his licensure allowed him to do. McNeill has completed the rigorous, multi-year process of obtaining his residential electrician's license, which allows him to wire single and two-family residences, and the state of Arkansas allows a licensed electrician to wire any project not amounting to more than $20,000 without a contractor's license. McNeill said the general contractor had presented the Shadow Peaks job to him as if each duplex was its own individual residence. Each was on a separate lot, with a separate deed and address. The structures in the development would be sold individually instead of as a package, and none of the duplexes would cost more than $20,000 to wire. According to the Arkansas State Licensing Law for Commercial Contractors, a “single family residence” is defined as “any project consisting of one but not more than four units constructed for single family residency.” Given that, McNeill thought he was in the clear, free to complete the job without a commercial contractor's license. He had roughed in four duplexes and was starting a fifth when an investigator for the contractors board showed up.
“They made the excuse that it's a commercial project because it's all on the same plat and it's financed by the same loan,” McNeill said. “Neither one of those words ever occur in the rules and regulations. Each one of those buildings was separately permitted and considered by the municipality to be a separate project.”
Despite his objections, McNeill was cited for working on a commercial project without a commercial contractor's license. Though he was allowed to complete the work he'd already started, he was barred from moving ahead with other duplexes in the development. Though he stood to make around $45,000 from the Shadow Peaks job — and still might have had he settled quickly with the board — McNeill refused to settle. Eventually the general contractor was forced to drop him in favor of another electrician in order to get things moving again. It is, McNeill said, the unwritten caveat of refusing to “play ball” with the board: knuckle under and pay or fight and be out of work. It's pressure that tends to spread upwards to the general contractor if the subcontractor resists.
“[The general contractor] has got all kinds of money — most of it borrowed — out,” McNeill said. “If this project stagnates, the point of sale and lease of the buildings is pushed further into the future and he's looking at racking up substantial costs. They've basically got your nuts in a vice. They don't have to prove anything to destroy you financially … . It's flat-out extortion ”
According to the March 2008 newsletter of the Contractors Licensing Board, the board levied a total of $896,524 in penalties in 2007. Because they are a self-supporting entity, that money gets funneled back into the board, where officials say it is used for everything from payroll to education programs for contractors.
At a hearing in March of this year, McNeill was found in violation of the law and levied a fine of 4 percent of the gross money he had already been paid and the materials purchased for the job. His case is on appeal. Since his hearing, he has become something of a student of the commercial contractors board. He can cite their rules and regulations verbatim. Many of those rules, McNeill said, are vague, antiquated or both, with the board often falling back on the claim that they have the latitude to interpret the law whenever it doesn't square with their will. As an example, McNeill provided the Times with the transcript of a September 2008 hearing in which another Hot Springs construction firm, JAG Enterprises, was cited by the Residential Building Contractors Committee — the companion to the Contractors Board — for building 40 duplexes. After hearing testimony from investigators that each of the 40 duplexes was being built on a separately deeded lot and that the structures were being sold as completed instead of as a package, the residential board declared that the development was residential and fined the contractor over $100,000.
McNeill's complaints about the board might be familiar to anyone who's followed the state's long history of establishing industry regulatory boards. Critics say they protect established businesses. McNeill points out that the commercial contractors board is stacked with employees of large construction firms — Baldwin and Shell Construction, Southern Pavers, and a member of the Nabholz family (though officials are quick to correct that vice chairman Ray Nabholz is not employed by Nabholz Construction) — with no real representation for smaller contractors. By contrast, most of the contractors who come before the board are small business owners. Many of them, McNeill said, don't know the rules, and don't have the money to pay a lawyer. “Lots of trades people who are contracting themselves might not even have a high school diploma,” he said. “They can't afford, oftentimes, to feed their families and a lawyer's family too. They know there's no way they can fight and win, so they just pay the fine.”
Dan Wright is the chairman of the Contractors Licensing Board. He said that while he couldn't recall much about McNeill's case, he did say that when a board investigator contacted the general contractor for the Shadow Peak project, the general contractor told them that the development was commercial.
Wright said that the board's main goal is to protect the interests and safety of consumers by making sure that a contractor who works on a commercial structure has the knowledge and financial backing to do it right. “We think everybody should be licensed — that we shouldn't have contractors out there with no financial wherewithal, who aren't paying their taxes to the state, that aren't doing everything they're supposed to be doing,” Wright said. “ Let's say a guy wasn't qualified. He met the minimum requirements [for commercial licensure], but he was financially bankrupt. Well, he might go in to wire a building, and he cuts every corner and when the inspectors aren't looking, he goes and undoes what he's done. You'd be surprised what we see.”
Wright said that commercial contractor licensing actually protects small contractors by helping keep out-of-state firms from coming in and doing work without paying state sales tax. “If they're not paying sales tax and (a local contractor) has to because he's buying from a local vendor, having the license is actually protecting him,” Wright said. He added that, in his opinion, the laws regarding who needs a commercial contractor's license aren't vague. Though the board sometimes has to interpret the law, Wright said, he disputes McNeill's contention that they bend the law to suit their ends. “The legislature wrote the law. We did not. Any change to the law has to be done at the legislative level. Just like anybody who sits on a board, we don't want to take a law and twist it around so it's something that it's not. Sometimes we have to read the law and interpret it … at some point, we have to say, this is a violation and this is not.”
In general, Wright said, the board tries to work with contractors who are found in violation, reducing fines and helping them get their commercial license. “We're not after the guys who are trying to make a living or trying to build up a business. We want to help them all we can,” Wright said. “If they're good players and they want to do things by the rules, we're all for them. That's really our purpose.”
Though John McNeill's case is officially on appeal, he says he will never pay his fine to the contractors board, even if it means never being licensed in the state. He said that he's standing up for his rights because it makes him feel like he's helping to keep everyone else's too. He fears things won't change, however, until more people start paying attention.
“I go into those hearings time and time again, and I'm the only one representing the public there,” he said. “They're allowed to conduct their business as if their doors were locked. The people let them do it. It's apathy.”