Lengthy approval process remains challenging for LI builders

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A panel of Long Island construction industry executives said the sector continues to be challenged by the area’s plodding entitlement process and rising insurance costs. 

More than 225 people came to hear the panel at the event titled “Challenges in a Changing Construction Environment,” hosted by the Real Estate Institute at Stony Brook University College of Business on Friday, March 8 at the Heritage Club at Bethpage in Farmingdale. 

Moderated by Scott Burman, principal of Burman RE, the panel included Kelly Coughlan-Heck, executive vice president and partner at Tritec Real Estate; attorney Jason Samuels, shareholder at Polsinelli PC; Marvin Rosen, insurance advisor at Rampart Insurance Services/ HILB Group; and Frank Vero, CEO of Aurora Contractors. 

Panelists said one of the biggest obstacles to the construction industry here is the amount of time it takes to get projects approved. 

“Long Island is a challenge,” Samuels said. “There are so many layers of government you have to go through. “Other areas might take six months as opposed to six years. You have to convince everyone that there’s a benefit to them, where elsewhere they see that.” 

Coughlan-Heck talked about how Tritec is working on a 424-acre mixed-use project called Kincora in northern Virginia, where the company had to build $180 million in infrastructure. 

“If we were doing that here, our grandkids would still be talking about the entitlement process,” she said. 

Rosen discussed the importance of securing the proper insurance for construction projects in an evolving market. 

“There’s been consolidation of insurance carriers,” he said. “Part of the insurance broker’s job is determining who does what best, then you can make an informed decision. It’s complicated, but vital. Things can happen, people get hurt.” 

Coughlan-Heck agreed that insurance rates have soared, creating a challenging market. 

“We’ve seen a good number of subcontractors hunkering down and down renewing their umbrella policies,” she said. 

Vero said his firm is proactive when it comes to making sure subcontractors have proper insurance. 

“We have a pre-qualification process for our subcontractors,” he said. 

Burman noted that New York has some of the highest insurance rates in the country because of the state’s scaffold law, which has long been blamed for driving up construction costs. 

Samuels explained that the law, enacted in 1885 when skyscrapers started going up in New York City, holds the property owner and contractor liable for accidents, even if the worker was found to be negligent. He added that New York is the only state that still has the law and that insurance costs on construction projects in other states is about “1 percent or less,” in New York it’s at least 5 percent of the total project cost. 

Another recently amended law is improving cash flow for construction contractors, as the state reduced the amount of money that developers can hold back from contractors from 10 percent to 5 percent. The change affects private construction contracts of $150,000 or more. 

“I’m expecting prices to go down,” Vero said. “To get more cash flow quicker is going to be helpful.” 

On the developer and ownership side, Coughlan-Heck said the change in the retainage law will alter project costs. 

“We hold 10 percent typically and that’s going to change because of this new legislation,” she said. “You are putting out 5 percent more cash and there’s going to be a cost impact on the owner’s side.”