One-Hundred and First Regular Session
TUESDAY, June 25, 2013
The Chief Clerk makes the following entries under the above date.
Report of Committees
The committee on Economic Development and Local Government reports and recommends:
Senate Bill 150
Relating to: local ordinances regarding possession of marijuana or a synthetic cannabinoid.
Ayes: 4 - Senators Gudex, Petrowski, Leibham and Lassa.
Noes: 1 - Senator L. Taylor.
Senate Bill 183
Relating to: the applicability of a county shoreland zoning ordinance in a shoreland area annexed by, or incorporated as, a city or village.
Ayes: 3 - Senators Gudex, Petrowski and Leibham.
Noes: 2 - Senators Lassa and L. Taylor.
Committee on Economic Development and Local Government
Petitions and Communications
State of Wisconsin
June 20, 2013
Enclosed is the report of the State Claims Board covering the claims heard on May 31, 2013.Those claims approved for payment pursuant to the provisions of s.16.007 and 775.05 Stats., have been paid directly by the Board.
This report is for the information of the Legislature, The Board would appreciate your acceptance and publication of it in the Journal to inform the members of the Legislature.
GREGORY D. MURRAY
STATE OF WISCONSIN CLAIMS BOARD
The State of Wisconsin Claims Board conducted hearings at the State Capitol Building in Madison, Wisconsin, on May 31, 2013, upon the following claims:
Claimant Agency Amount
1. Casimir Borzowski Revenue $18,455.04
2. J&L Steel and Administration $217,499.00+
3. Clear Channel Transportation $385,812.95
4. Wisconsin & Transportation $160,371.86
The following claims were decided without hearings:
Claimant Agency Amount
5. Progressive Administration $1,633.30
6. Jacqueline Metzler Transportation $11,194.00
7. Andrew W. Nahas Safety and $3,414.88
8. Elbert Compton Corrections $105.84
9. David Jessick Corrections $221.29
10. Mario A. Martinez, Jr. Corrections $66.45
11. Anthony J. Machicote Corrections $156.27
12. Ross Nashban Corrections $70.00
13. Terrance J. Shaw Corrections $275.00
14. Timothy Talley Corrections $822.00
15. Da Vang Corrections $5,309.60
The Board Finds:
1. Casimir Borsowski of Waupaca, Wisconsin claims $18,455.04 for sales tax overpayments based on assessments by DOR. The claimant states that his business closed in early 2010 and that in the process of closing the business, the bookkeeper neglected to file the October, November, and December 2009 sales tax forms. When the business was sold in November 2011, DOR seized monies from the sale to pay assessments for the missing sales tax returns. The claimant states that when the sales tax returns for October, November, and December 2009 were filed in May 2012, they resulted in overpayments of $4,586.12, $6,958.21 and $6,910.71, respectively. The claimant states that he has suffered undue hardship due to the closure of his business and still has outstanding debts related to the closure. He requests reimbursement of the sales tax overpayments so that he can reimburse his remaining creditors.
DOR recommends denial of this claim. DOR states that it is prohibited from refunding the sales tax overpayments because no refund was claimed with the two-year time limit prescribed by § 71.75(5), Stats. DOR notes that the October-December 2009 sales tax returns were not filed until May 23, 2012. DOR also states that 25 notices, a number of which contained information about the statute of limitations for claiming a refund, were sent to the claimant regarding his late sales tax returns.
The Board concludes there has been an insufficient showing of negligence on the part of the state, its officers, agents or employees and this claim is neither one for which the state is legally liable nor one with the state should assume and pay based on equitable principles.
2. J&L Steel and Electrical Services of Hudson, Wisconsin claims $217,499.00 for increased bid costs, expert witness fees and attorney’s fees related to an allegedly incorrect interpretation of the bid/contract for a visual nurse call system at a new DVA skilled nursing facility. DOA ran the bidding process for the call system for the DVA facility. The claimant states that section 28 52 23 of the bid specifications called for a “Rauland Responder 4000 or approved equal system.” The claimant points to the fact that the bid’s general conditions required that substitutions be submitted for approval 10 days prior to bid but did not require the same pre-bid submission of “approved equals” to the Rauland system. The claimant notes that the general conditions also specified that biding was not restricted to the Rauland system but that the brand name was only used to provide a standard of quality for the required system. The claimant states that it called both a Rauland system supplier and a Jeron system supplier for price quotes but that only the Jeron supplier called back. The claimant states that it based its bid on the Jeron supplier’s verbal quote. The claimant won bid to provide the system. The claimant states that in July 2011, pursuant to the contract, it provided a submittal to the Division of Facilities Development (DFD, formerly the Division of State Facilities) showing the intended use of the Jeron system. The claimant states that at a September 2011 project meeting, both DFD and DVA approved use of the Jeron system. The claimant states that the Rauland system supplier contacted DFD in September 2011; erroneously alleging that the claimant’s bid was non-responsive because the claimant did not submit the Jeron system as a “substitute” 10 days prior to bidding. The claimant believes this is a misunderstanding of the bid/contract documents and that because the Jeron system is equal to the Rauland system, pre-bid submittals were not required. The claimant notes that there is only one supplier for the Rauland system and the claimant believes the supplier’s contact with DFD was improper and suspect, motivated by supplier’s desire to obtain a windfall as the only source for the Rauland system. In October 2011, DFD rejected the claimant’s proposed use of the Jeron system, indicating that it did not match “the manufacturer/vendor listed in the specifications” and was therefore not acceptable. The claimant appealed this rejection. The claimant notes that DFD’s November 2011 response to the appeal stated “…this project was specified to provide a particular manufacturer and model (in this case Rauland Responder 4000)…” The claimant believes that this proves that DOA conducted an unlawful sole-source procurement in violation of WI law, DOA regulations and its contract with the claimant. The claimant states that if DOA wanted to conduct a sole-source procurement, it was required to obtain a sole-source waiver from the Governor and the State Bureau of Procurement prior to opening the project for bidding. The claimant notes that DFD has never provided a technical basis for rejecting the Jeron system. It was rejected only because it was not the Rauland system, which results in a de facto sole-source procurement in violation of WI law. The claimant believes that DFD is attempting to justify the rejection based on trivial technicalities. Finally, the claimant points to numerous examples in case law where courts have ruled that when a contractor proposes to use an “equal” component, it has a contract right to be granted approval of that component.
DOA recommends denial of this claim. Section 28 00 00 of bid specifications (Division 28 of contract) states, “Where the Contractor wishes to use equipment or methods other than those listed by name, that equipment must be approved by the Engineer.” Section 28 further states that that submittal “shall be received in the Engineer’s office 10 business days prior to bidding.” DOA states that the claimant did not submit its intent to use the Jeron system until over four months after the bid opening, which violated the contract and denied DFD the opportunity to make the existence of the Jeron system known to other contractors, which would have improved competition. DOA notes that the claimant submitted information on the Jeron system to the Architectural and Engineering firm but did not submit that information or a Request for Submittal Approval form to DFD as required by Articles 16 and 17 of the General Conditions. DOA also notes that although the claimant cites various court cases in support of its position, none of the cases are applicable to the facts from which this claim arose. DOA states that the claimant failed to follow the proper procedures in the contract related to approval of the Jeron system and in doing so, denied DFD the opportunity to protect the interests of the public in a competitive bidding process. DOA does not believe the claimant should be rewarded for failing to follow the terms of the contract.
The Board concludes this claim would best be resolved in a court of law. Therefore, weighing the equities, this claim is denied. [Member Murray not participating. Members Leibham and Marklein dissenting.]
3. Clear Channel Outdoor, Inc. of Pewaukee, Wisconsin claims $385,812.95 for loss of three billboard structures and future revenue allegedly caused by DOT’s revocation of the claimant’s permit for the billboards. Since 1999, the claimant has maintained and operated three billboards in the Town of Wayne. The claimant states that it justifiably relied on three outdoor advertising permits previously issued by DOT for the billboards. DOT revoked those permits in 2010, stating that they were granted in error, and ordered the claimant to remove the billboards. The claimant appealed the permit revocation but in August 2012, the Division of Hearings and Appeals upheld DOT’s decision. The claimant notes that although the administrative law judge held that, as a matter of law, the claimant could not invoke estoppel against DOT, the ALJ recognized the merits of the claim and directed the claimant to make a claim with the Claims Board for compensation. The clamant requests reimbursement for the loss of the billboards and the loss of future revenue that would have been generated by leases which ran until 2018 (two billboards) and 2020 (one billboard).
DOT recommends denial of this claim. The claimant is a worldwide outdoor advertising specialist doing business in 29 countries and across the US. In the late 1990’s, the claimant purchased two billboards from Cochran Sign Company and then applied for a permit for a third sign. The two original sign permits were approved based on false and misleading application materials regarding zoning submitted by the signs’ original owner. The claimant repeated that false and misleading zoning information when it applied for the third sign’s permit. In 2010 a subcontractor of the claimant, Good Tree Care, requested a permit to cut down trees on the highway near the billboards. In its permit application, Good Tree Care correctly identified the lands’ proper zoning category for purposes of outdoor advertising control. DOT states that this was the first time the claimant or the prior owners of the billboards disclosed the true zoning category of the property. DOT states that it investigated the discrepancy between Good Tree Care’s application and the original sign applications made by the claimant and prior billboard owners. DOT’s investigation concluded that the property was not eligible for billboard permits under state or federal law and DOT revoked the permits. Although the claimant attempts to blame DOT for the fact that the permits were issued in violation of the law, in fact, the permits were issued because the original applicant and Town of Wayne officials acted to circumvent state law. DOT notes that it is not uncommon for sign owners to “cheat” in order to erect illegal signs. DOT points to the fact that the claimant is a sophisticated actor in the industry and was aware of the risk when it purchased the signs. DOT believes that the claimant should have investigated the property prior to purchasing the signs. DOT states that the claimant can pursue a warranty claim against the company from which it purchased the signs or, if it waived warranty claims against the seller, then the claimant assumed the risk that the signs were illegal. Finally, DOT states that the claimant’s claim for the “loss” of the signs is baseless. The claimant has removed the signs, still owns them, and may erect them in a legal location. In addition, the claim for lost profits has no merit. The claimant has no right to make revenue from illegal billboards and should not seek to augment already ill-gotten gains by hitting up Wisconsin taxpayers for another $400,000.
The Board concludes there has been an insufficient showing of negligence on the part of the state, its officers, agents or employees and this claim is neither one for which the state is legally liable nor one with the state should assume and pay based on equitable principles. [Member Leibham dissenting.]
4. Wisconsin & Southern Railroad Company of Milwaukee, Wisconsin claims $160,371.86 for expenses incurred as part of the High Speed Rail project between June and November 2010. The claimant believes it is entitled to reimbursement under the principle of equitable estoppel. The claimant states it was assured by DOT that it would be reimbursed for the costs in incurred assisting DOT with the High Speed Rail project on an expedited basis. The claimant states that it relied on these assurances given by DOT before and throughout the negotiation process. The claimant states that the expedited timeframe for the negotiations was imposed by DOT and Amtrack. The claimant also states that it was given no choice about continuing negotiations because Amtrack stated it was legally authorized to seize the claimant’s rail lines for passenger service use, regardless of whether the claimant had a contract with DOT. The claimant notes that, while it is true that many of its expenses were incurred prior to the 10/5/10 execution date of the contract, multiple agreements were being negotiated with DOT and the claimant had no control over the order in which the agreements were negotiated. The claimant also notes that DOT specifically reassured the claimant that it would not be a problem to get federal funding to pay the claimant’s costs even though the various interrelated agreements had not yet been executed. As to DOT’s claim that it did not give prior approval for the expenses, the claimant notes that DOT representatives were present, working side by side with the claimant at the very meetings where those costs were incurred. The claimant believes it is disingenuous for DOT to assure the claimant it would be paid for the work, watch them perform the work, and now claim the work was not properly approved. Finally, the claimant notes that the fact that DOT ultimately received no federal funding for the project was the state’s choice and was an abrupt reversal of the repeated assurances made by DOT to the claimant. The claimant points to the fact that DOT’s response to this claim states that the state would have been eligible for federal reimbursement if DOT had already paid the claimant but that the claimant had not been paid because “the State/WisDOT process was not correctly followed in procuring those services.” The claimant notes that several times during the negotiation process, it suggested the project should be delayed until after the election in order to be clear about the state’s future plans, however, the claimant’s suggestion was rejected and the claimant was assured that the project would go forward regardless of the outcome of the election. The claimant states that it acted in good faith and relied upon the repeated assurances by DOT that it would be paid for this work and therefore requests reimbursement for these costs.
DOT reviewed the question of whether the construction contract on which this claim is based is legally valid. DOT has concluded that the contract is valid and binding on DOT despite the fact that it did not in any way properly follow applicable DOT directives or procedures. DOT notes that the effective date of the contract is 10/5/10 and the contract is not expressly retroactive and therefore does not contemplate payment of any expenses incurred prior to the effective date. DOT also notes that almost all of the expenses claimed in this matter are for work performed prior to the effective date of the contract. DOT states that it has no record of prior written approval for the work claimed in this matter. DOT notes that the hourly rates of pay for the claimant’s employees in the contract and the invoiced hourly rates do not match, which brings into question the amounts claimed on the invoices. DOT also points to the fact that the contract was for work performed by the claimant’s employees and specifically stated “[i]f it is necessary to retain any other contractor, the STATE will hire the contractor, with WSOR’s cooperation.” Two of the invoices submitted by the claimant are for outside contractors (an outside attorney and Knapp Railroad Builders) who were not hired by the state. DOT states that the board may also wish to consider the impact Article IV, §26 ¶(1) of the Wisconsin Constitution regarding a claim made for amounts in excess of what a contract allows. Finally, DOT states that it is arguable that some of these damages may fall under equitable principles, given the emphasis placed on rushing these contracts by the prior administration and the good faith of the claimant.