City Floats County Jobs, Pays Delinquent Lynx Taxes
In other intra-government wheeling and dealing Monday night, the council approved an administrative amendment to increase the cost of a Siemens Transportation Systems contract for 16 Lynx Blue Line light-rail vehicles by at least $5.1 million. City officials, however, said the accounting razzle-dazzle would have a net effect of zero on Charlotte Area Transit Systems’ budget. The amendment is needed so CATS can pay sales and use tax on the 16 light-rail vehicles, which Siemens did not include on its invoices, dating back to 2004 when council originally approved the $52.5-million contract.
Typically, local governments are exempt from their state’s sales and use tax; North Carolina, however, uses a “pay and refund” method where local municipalities pay the tax on purchases and apply to the state for a refund during the same fiscal year.
When CATS purchased the 16 light-rail vehicles in 2004, the applicable sales and use tax for rail cars was a maximum of $1,500 per car and officials were confident that the contract’s $3 million contingency could cover the tab. However, in 2006 and prior to delivery of any light-rail vehicles, the sales and use tax increased 7.5 percent and the $1,500-per car cap was lifted. Those changes skyrocketed the sales and use tax for the 16 light-rail vehicles from $24,000 to $3.8 million.
Siemens never included sales tax on it invoices to the city and the sales and use tax – wait for it – has not been paid for any of the light-rail vehicles. An internal Siemens audit noted to invoicing error.
With the contract amendment in place, the city will pay the applicable sales and use tax to the state and then apply for a refund from the state. The amendment also covers an additional four light-rail vehicles the city purchased in 2008, for which sales and use tax has not been paid. Total tab on back taxes owed: about $5.1 million, not counting any possible penalties.
Speaking of purchasing transit vehicles, the city council on Monday night shelled out millions of dollars to the firm that employs Mayor Anthony Foxx.
The council approved purchasing five electric hybrid buses from DesignLine International for a contract amount of $2.7 million. Foxx, an attorney with DesignLine, recused himself from the vote. The buses will become part of the airport’s burgeoning fleet of green vehicles. Funding for the five buses comes courtesy of a $1-million U.S. Department of Energy grant, with matching funds of $1.7 million from the airport’s Capital Project Fund.
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