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Home My WebLink About9C Amend Resolution 13-094 O � PRip� � � v � 4646 Dakota Street SE Prior Lake, MN 55372 � CITY COUNCIL AGENDA REPORT MEETING DATE: January 27, 2014 AGENDA #: 9C PREPARED BY: LARRY POPPLER, CITY ENGINEER / INSPECTIONS DIRECTOR PRESENTED BY: LARRY POPPLER AGENDA ITEM: CONSIDER APPROVAL OF A REPORT FROM THE CITY ATTORNEY WITH RESPECT TO RESOLUTION #13-094 AND PAYMENT OF SALES TAX FOR SUNSET AVENUE LIFT STATION COMPONENTS (CITY PROJECT # 13-011) DISCUSSION: I ntroduction The purpose of this agenda is to review the report prepared by City Attorney Rosow, and consider an amendment to Resolution #13-094 for inclusion of sales tax for lift station equipment supplied by Electric Pump. Hi StON The Sunset Avenue project included the construction of a lift station. The lift station components were purchased separate from the bid for the Sunset Avenue work. In order to simplify operation and maintenance of lift stations and reduce spare parts inventory, the City employs the Sanitary Sewer Lift Station Standardization Policy for new construction and rehabilitation of lift stations within the City. This policy also requires that the City obtain certain components for the lift station in order to provide uniformity and standardization. These components include pumps, pump discharge elbows, monitoring units, pump controller, and SCADA equipment. As part of the Sunset Avenue Improvements Project, the City had obtained quotes for the necessary components as outlined in the Standardization Policy. The quote for the lift station pumps and pump accessories was provided by Electric Pump of New Prague, MN for the amount of $24,595. The quote from Electric Pump did not discuss sales tax. The quote stated the "Total Delivered Selling Price" of $24,595. City staff assumed that sales tax was included in this price. Electric Pump is requesting revision of the approving resolution to provide for the inclusion of sales tax in their quote. Current Circumstances At its January 13, 2014, meeting the City Council considered an amendment to Resolution #13-094 due to the above-stated circumstances. Payment of the sales tax to Electric Pump has been Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com rendered. The City Council directed the City Attorney to research options and alternatives to paying the sales tax since it was not included as part of the original quote. The City Attorney has prepared the attached report in response to that direction advising that the City has the obligation to pay either the sales tax to Electric Pump or a"use tax" directly to the State of Minnesota. Conclusion The Council should determine if it wishes to approve the changes to resolution #13-094. ISSUES: Changes to the sale tax laws begin in 2014. Items such as this will no longer require sales tax. FINANCIAL The additional sales tax amounts to $1,668.22 would be added to the IMPACT: overall project cost. ALTERNATIVES: 1. Approve a resolution amending Resolution # 13-094. 2. Deny amending Resolution # 13-094. 3. Table this item to some point in the future. RECOMMENDED As determined by the Council. MOTION: 2 O � PRip� ti � U tr� 4646 Dakota Street SE ��NNFiS�� Prior Lake, MN 55372 RESOLUTION 14-xxx A RESOLUTION AMENDING CITY COUNCIL RESOLUTION # 13-094 Motion By: Second By: WHEREAS, Resolution # 13-094 authorized the purchase of lift station components for the Sunset Avenue Improvements Project (City Project # 13-011); and WHEREAS, The City of Prior Lake took delivery of the lift station components from Electric Pump in November of 2013; and WHEREAS, The quote for pumps and pump components from Electric Pump of New Prague, MN in the amount of $24,595 did not include sales tax. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The City Council amends City Council Resolution #13-094 authorizing the purchase of pumps and pump components from Electric Pump in an amount of $26,263.22 for the Sunset Avenue Improvements Project (City Project #13-011). 3. Costs will be recorded in the Construction Fund (#501-48374-501) for the Sunset Avenue Project. PASSED AND ADOPTED THIS 27th DAY OF JANUARY 2014. YES NO Hedber Hedber Keene Keene McGuire McGuire Morton Morton Souku Souku Frank Boyles, City Manager EP � ELrECTRIC P�/MP Safe RearesentaNve 201 4 Avenue SW New Prague, MN 56071 Sfeve Reed 800-383-7867 612-325-9980 To: City of Prior Lalce March i, 2013 � 17073 Adelmann Street SE ' Prior Lake, MN 55372 Attn: Jim l�arson (sent via e-mail) Ref: Li(t Station Equipmeni Proposat , _.: .,.. , ,.. > ` ; Scope of Materials ` Two (2} Flygt model NP3102-464MT submersible pumps. Fumps to be furnished with the �otlowing: 0 5hp, 1750RPM, 230/46�/3/60 explasion proof motor 0 4" discharge efbow o Stainless Steel Upper and Intermediate Guide Bar Brackets 0 50' of submersible power cable o Stainless steet lifiing chain — 32' 0 5 year warranty One (1) lat of 2" stainless steel sch.80 guide pipe (32' sump depth) Qne (1 } Cable Rack (for hanging pump cables) Two (2) MOSF modules for pump moistura & overtemp protection One (1) LC150 duplex pump controHer One (1) A1000i subrr�ersible transducer (4-20mA output) with 60' of cable One (1} A1000 cable suspension kit One (1) Intrinsically Safe Barrier (for transducer) One (1) Omni-Site Crystal Ball One (1) Lot of freight and start-up services for the abave propased equipment. Tata! Delfvered Selfing Prlce: $24,595.OD lf you have any quesiions in regards to fhis proposal or require additional information please feel fres to give me a call. Thank You, EP etecricro aumr Troy D. Heimerl Cc: Steve Reed i Q 4 P.ItIp�, t� � 4646 Dakoia Street SE '�li,y�eo'��` Prior Lake, MN 55372 RESOLUTION 93-094 A RESOLUTION ACCEPTING QUOTES AND AUTHORiZlNG THE PllRCHASE OF LI�T STATION COMPOI�ENTS FOR THE SUNSET AVENUE IMPROVEMENTS PROJECT (CITY PROJECT # 13-411} Motion By: McGuire Second By: Mor�on WHEREAS, The lift stafion is scheduled for installatian in conjunction with the Sunset Avenue Improvements Project; and WHEREAS, Due to the delivery schedule for the necessary items, advance purc�ase of the (ift staiion components is necessary to assure ifs availability according to fhe construetion schedule for ihe Sunsef Avenue project; and WHEREAS, The City obtains the lift statian components to ensure uniformity and standardization in accordance with the Sanitary Sewer Lift Station Standardization Policy; and WHEREAS, The quote for pumps and pump camponenis from Efectric Pump of New Prague, MN is �24,595 and the quote for the liff station control panel from SYICOM of Richfield, MN is for �19,890 ; and WHEREAS, To maintain eonsistency and for ease af maintenance, Staff recommends Electric Pump for the pump components and SYICOM for fhe lift statian cantrol panel. NOW THEREFORE, BE IT H�FtEBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, � MINNESOTA as follows: � 9. The recitafs setfarth above are incarporated herein. 2. The City Council authorizes the purchase af pumps and pump components from Efectric Pump in an amount of $24,595 and lift station control panel from SYICOM in an amount of �19,890 for the Sunset Avenue Improver�ents Praject {Cify Project#13-011). 3. Costs will be recorded in ihe Construction Fund (#501-48374-501) for the 5unset Avenue Project. PASSED AND ADOPTED THIS 22Np DAY OF JULY 2013. YES iJ0 Hedber X Hedber Keene X Keene Mc(iuire X NEcGuire Mo�ton X Morton Soukup X Souku Frank o s, City Manager MEMORANDUM TO: Mayor & City Council FROM: Ric Rosow & Maggie Evavold DATE: January 21, 2014 RE: City of Prior Lake � Lift Station Equipment Sales Tax Our File No.: 4204.001 On March 1, 2013, the City of Prior Lake ("City") received a proposal from Electric Pump for the provision of lift station equipment for the Sunset Avenue project. The proposal provides a "Total Delivered Selling Price" of $24,595. On July 22, 2013, the City Council passed Resolution 13-094, authorizing the purchase of the equipment from Electric Pump "in an amount of $24,595." The Electric Pump proposal makes no mention of sales tax. Resolution 13-094 also approved the purchase of a lift station control panel from SY/COM in the amount of $19,890. Along with the Electric Pump proposal currently at issue, included in the agenda packet for the July 22, 2013 council meeting was the proposal from SY/COM for the control panel (in the form of an email). That quote from the SY/COM representative was for the approved amount, $19,890, but contained the following statement: "Again, as before, I have not included sales tax and any installation or supplies." The City took delivery of the lift station components from Electric Pump in November 2013. Electric Pump then billed the City $26,263.22, which the City paid in December 2013. After the bill had been paid, City staff noticed the discrepancy between the amount paid and the amount originally approved by the Council in Resolution 13-094. Staff determined that the difference was due to Electric Pump's addition of sales tax in the amount of $1,668.22 to its original estimate ($24,595.00 + $1,668.22 = $26,263.22). Because of this discrepancy, City staff recommended that the Council approve a resolution amending Resolution 13-094 to authorize the addition of sales tax and approve the new amount of $26,263.22. The matter was placed on the Consent Agenda for the January 13, 2013 City Council meeting. The matter was removed the matter from the Consent Agenda, however, and discussion was held. The motion to amend Resolution 13-094 failed, and the Council voted to reconsider the matter at the next meeting after receiving an opinion from the City Attorney. Issue Is the City obligated to pay the sales tax on the lift station equipment? January 22, 2014 Page 2 Law/Analvsis Minnesota law is silent as to whether a contractor submitting a proposal or bid for a public contract must include applicable sales t� in that bid, or which party is responsible for such tax where it is not specifically listed in the bid or proposal. Guidance from the League of Minnesota Cities on competitive bidding for construction contracts states that "Sales tax on materials, as well as withholdings for the contractor's workers, will be included by the bidder in the total amount for a construction contract." LMT Information Memo: Competitive Bidding Requirements in Cities (May 2012). The LMT memo provides no citation or other authority for this statement, and no statute or administrative regulation addresses sales tax in public contracts. The law appears to make no assumptions as to whether a quoted price, which does not separately quote sales tax, includes sales taY. Minnesota's law on sales and use tax defines "sales price" to mean "the measure subject to sales tax, and means the total amount of consideration, including cash, credit, personal property, and services, for which personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise." Minn. Stat. § 297A.61, subd. 7(a) (2012). This amount may include delivery charges. Id., subd. 7(A)(4). Thus, the definition of "sales price" is the price before sales tax is imposed, and may suggest that Electric Pump's use of the phrase "Total Delivered Selling Price" did mean the price of the equipment before sales taxes. Under Minnesota tax law, if a vendor does not charge "sales tax" at the time of the sale, the purchaser must report and pay "use tax" directly to the State. Minn. Stat. § 297A.63, subd. 1 (2012); see also Minn. Dept. of Revenue, Sales Tax Fact Sheet 128 ("If you buy materials, supplies, and equipment for use in Minnesota and no Minnesota sales tax is listed on the purchase invoice, you must report and pay Minnesota use tax directly to the state of Minnesota."). Thus, if the final invoice from Electric Pump had listed a price of $24,595 and did not separately list sales tax, the City would be liable to the State for the equivalent "use tax." Thus, in any event, it appears that the City would have to pay the applicable tax. In sum, it is my opinion that the City is obligated to pay the sales tax to Electric Pump even though the additional sales tax amount was not separately stated in the proposal. In the future, however, the City should specify, when requesting quotes or proposals from contractors and vendors, whether the quote or proposal includes sales tax when applicable under the new law. P:U�ome\4204.001 - Engineering - General�Purchase & Sales Tax�iVlemos�2014 O1 21 - MT Mayor & Council - Lift Station Purchase and Sales Tax (Revised).docx