04-10-2019 Council Packet - Laserfiche WebLink

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RELEVANT LINKS: League of Minnesota Cities Handbook for Minnesota Cities 10/15/2018 Expenditures, Purchasing, and Contracts Chapter 22 | Page 41 Payments must be based on estimates of work completed as approved by the council. Minn. Stat. § 15.72. A progress payment acts as an acceptance or approval of any work, or a waiver of any defects. A city may reserve an amount as retainage from any progress payment on a public contract for a public improvement. The amount may not exceed 5 percent of the payment. The city may reduce the amount of the retainage and may eliminate retainage on any monthly contract payment if the work progresses satisfactorily. B. Optional method Minn. Stat. § 15.73. At the option of the contractor, the city must pay retainage to the contractor. The contractor may deposit bonds or securities with the city or in any bank or trust company that may hold the security in lieu of a cash retainage for the benefit of the city. In that event, the city must reduce the retainage in an amount equal to the value of the bonds and securities and pay the amount of the reduction to the contractor. Interest on the bonds or securities must be payable to the contractor as it accrues. Minn. Stat. § 15.73, subd. 3. The commissioner of Management and Budget approves the types of bonds and securities a contractor may provide in lieu of retainage. Minnesota Management and Budget, 400 Centennial Building, 658 Cedar Street, St. Paul, MN 55155; (651) 201-8000. These commonly approved types of bonds and securities include, but are not limited to: bills, certificates, notes, or bonds of the United States; other obligations of the United States or its agencies; obligations of any corporation the federal government owns; or indebtedness of the Federal National Mortgage Association. Minn. Stat. § 15.73, subd. 4. If the city incurs additional costs because of this option, it may recover the costs from the contractor by reducing the final payment due under the contract. As work on the contract progresses, the city must, upon demand, inform the contractor of all accrued costs. XI. Limited sales tax exemption for construction projects Minn. Stat. § 297A.70, subd 2. The Minnesota Legislature has granted a limited sales tax exemption to cities for certain construction projects. Materials for a city’s construction projects are generally tax-exempt if the city purchases them directly. However, if the city contracts out the labor and purchase of materials separately, the tax exemption is not automatically available.