Accounting Corner

FICO and other credit-scoring models take many factors into consideration when calculating your credit score. The length of credit history accounts for 15% of your FICO score. Your payment history is particularly important in the calculation. Always try to make payments on time to improve your credit score.

Nearly a third of your credit score is based on your credit utilization. Many people think that a high balance-to-limit ratio on your LOC can hurt your credit score; although scoring models do not consider a LOC when they calculate your revolving utilization, sureties might. Therefore, paying your LOC on time could improve your score, as well as lowering your utilization ratio by paying down credit card debt.

When you apply for a line of credit, the lender will typically review your credit reports, which could negatively impact your credit score. Inquiries influence 10% of your FICO score. As long as you are not frequently applying for new credit, seeking a LOC should not have a major impact on your FICO score.

Why Not Get a Credit Card?

There are advantages to using a LOC instead of a credit card. The main advantage is that a LOC is not considered in your credit utilization ratio, so if you borrow money that you do not intend to pay back by the next statement date, a LOC might be a better alternative. Not making payments on a credit card would have a negative impact on your credit score.

On the other hand, the draw period on a LOC typically lasts only for a few years, and a credit card does not have a time limit. If you do not hit your borrowing limit, you can make payments with your credit card indefinitely.

What About a Term Loan?

LOCs are better for short-term capital needs, and term loans are better for long-term investments. Interest rates are usually higher on a LOC than a term loan. A LOC might not ever be used, so banks cannot charge the same rates as they do for a term loan unless the line is used. However, application fees and monthly maintenance fees associated with LOCs are often small compared to the hefty origination fees and pre-determined interest payments with a term loan.

LOCs and other forms of bank financing need to be used correctly and managed responsibly to maximize your surety bond capacity. Contractors need to keep their leverage ratios low to maintain their bonding capacity.

in the lobby

By: zoe baldwin

It’s been just over a year since the start of the pandemic, and as the vaccines continue to roll out and businesses start to reopen, a return to normalcy seems nearly within our grasp. Speaking of business as usual, Governor Murphy has unveiled his fourth and final budget of his first term, kicking off the FY22 budget season in Trenton.

Thanks to heavy borrowing this fiscal year, ample federal aid, and a much-improved revenue outlook, the $44.8 billion proposal avoids raising or adding any taxes or fees and maintains several priority items for our industry including:

• $2 billion for the State Transportation Capital Program, including:

o$1.24 billion for state and local highway and bridge projects

o$760 million for NJ Transit

•$60 million for drinking water and clean water infrastructure

•$200 million for the Offshore Wind Port

In his address, Governor Murphy also stated his intention to "do away with antiquated permitting rules at the Department of Environmental Protection and other departments, which will cut government bureaucracy and get projects off the ground quicker." We do not yet have details of this effort but are supportive of any measure that will speed the process of advancing projects to construction.

In turn, the State Legislature has just begun its process of public hearings and negotiations to finalize their budget bill to send back to the Governor for approval. We expect our priorities to remain intact and will keep you updated as the process unfolds.

Project Labor Agreements – S3414/A5378 (Sweeney/DeAngelo) Legislation to allow project labor agreements on more public works projects over $5 million has passed the full Senate by a vote of 31-4. The bill was amended to limit PLAs to onsite workers and to ensure that participatory unions have adopted the building and construction industry exemption authorized by the federal Employee Retirement Income Security Act. The amended version of that bill was heard in the Assembly Committee on March 15th and, at the time of this writing, is expected to pass a floor vote.

Employer Protection Fixes for Marijuana Legalization

–S3525 (Sarlo) As previously reported, UTCA advocated for stronger employer protections in the law that legalized marijuana. While our concerns and those of other safety-sensitive employers were not ultimately included in the final language, UTCA has worked with Senator Sarlo on newly introduced legislation that would specifically protect the construction industry and remove a provision requiring the use of a third-party Workplace Impairment Recognition Expert for determinations of suspicion of an employee’s usage on the jobsite. This bill has not yet been scheduled for a hearing.

Workers Compensation – S3375 (Singleton) Legislation has been introduced that would mandate non-interference with medical treatment for workers compensation cases. UTCA opposes this legislation and is in contact with other associations and business groups to get ahead of the issue. This bill does not have an Assembly counterpart and has not been scheduled for a hearing. We will keep you updated if it should advance.

I-Bank Expansion – Legislation has been sent to the Governor that would expand the purview of the transportation side of the I-Bank to also finance aviation and marine projects, as well as make it easier for the NJIB to provide emergency, relief, or disaster loans to clean water, drinking water, or transportation projects in the event of an emergency like the COVID-19 pandemic. At the time of this writing, A5057/S3190 is awaiting the Governor’s signature; we expect it to be signed into law. The I-Bank is one of New Jersey’s most efficient and successful programs, and this expansion will help facilitate projects statewide.

Lead Service Lines – S3398/A5343 (Singleton/Schaer) Legislation has advanced in the Assembly that would require all drinking water systems to create an inventory of lead service lines and develop a schedule for replacement. UTCA testified in support of this legislation as it has the potential to create a steady stream of replacement projects in communities across the state.

Local Hire legislation (Chaparro) & Eco-Friendly Concrete (Addiego) – UTCA was successful in amending two bills recently heard in committee. Initially, A5018 would have required contractors to implement local hire programs on I-Bank fund-