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Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1985 

                        CHAPTER 136-H.F.No. 191 
           An act relating to local and state government; 
          requiring prompt payment of local government bills; 
          amending Minnesota Statutes 1984, section 16A.124, 
          subdivisions 1, 5, and 8, and by adding a subdivision; 
          proposing coding for new law in Minnesota Statutes, 
          chapter 471. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1984, section 16A.124, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEFINITIONS.] For the purposes of section 
16A.124, the following terms have the meanings here given them.  
    (a) "Commissioner" means the commissioner of finance.  
    (b) "State agency" has the meaning assigned to it in 
section 16.011 16A.011.  
    Sec. 2.  Minnesota Statutes 1984, section 16A.124, 
subdivision 5, is amended to read: 
    Subd. 5.  [PAYMENT OF INTEREST ON LATE PAYMENTS REQUIRED.] 
(a) A state agency shall pay interest to a vendor for undisputed 
billings when the agency has not paid the billing within 30 days 
following receipt of the invoice, merchandise, or service 
whichever is later.  A negotiated contract or agreement between 
a vendor and a state agency which requires an audit by the state 
agency prior to acceptance and payment of the vendor's invoice 
shall not be considered past due until 30 days after the 
completion of the audit by the state agency.  Before any 
interest payment is made, the vendor must invoice the state 
agency for such interest.  
    (b) The rate of interest paid by the agency on undisputed 
bills not paid within 30 days shall be one and one-half percent 
per month or any part thereof.  
    (c) All interest penalties and collection costs must be 
paid from the agency's current operating budget.  No agency may 
seek to increase its appropriation for the purpose of obtaining 
funds to pay interest penalties or collection costs.  
    (d) Any vendor who prevails in a civil action to collect 
interest penalties from a state agency shall be awarded its 
costs and disbursements, including attorney's fees, incurred in 
bringing the actions.  
    (e) No interest penalties may accrue against an agency that 
delays payment of a bill due to a disagreement with the vendor; 
provided, that the dispute must be settled within 30 days after 
the bill became overdue.  Upon the resolution of the dispute, 
the agency must pay the vendor accrued interest on all proper 
invoices for which payment was not received within the 
applicable time limit contained in subdivision 3.  
    (f) The minimum monthly interest penalty payment that a 
state agency shall pay a vendor for the unpaid balance for any 
one overdue bill equal to or in excess of $100 is $10.  For 
unpaid balances of less than $100, the state agency shall pay 
the actual penalty due to the vendor. 
     Sec. 3.  Minnesota Statutes 1984, section 16A.124, is 
amended by adding a subdivision to read: 
    Subd. 5a.  [UNIVERSITY OF MINNESOTA; PAYMENT OF INTEREST ON 
LATE PAYMENTS AUTHORIZED.] The University of Minnesota may 
comply with the requirements of subdivision 5. 
    Sec. 4.  Minnesota Statutes 1984, section 16A.124, 
subdivision 8, is amended to read: 
    Subd. 8.  [APPLICABILITY.] Subdivisions 1 to 7 apply to all 
agency purchases, leases, rentals, and contracts for services, 
including construction and remodeling contracts, except for 
purchases from or contracts for service with a public utility as 
defined in section 216B.02 or a telephone company as defined in 
section 237.01 that has on file with the public utilities 
commission an approved practice regarding late fees.  
    Sec. 5.  [471.425] [PROMPT PAYMENT OF LOCAL GOVERNMENT 
BILLS.] 
    Subdivision 1.  [DEFINITIONS.] For the purposes of this 
section, the following terms have the meanings here given them. 
    (a) "Contract" means any written legal document or 
documents signed by both parties in which the terms and 
conditions of any interest or other penalty for late payments 
are clearly stated. 
    (b) "Date of receipt" means the completed delivery of the 
goods or services or the satisfactory installation, assembly or 
specified portion thereof, or the receipt of the invoice for the 
delivery of the goods or services, whichever is later. 
    (c) "Governing board" means the elected or appointed board 
of the municipality and includes, but is not limited to, city 
councils, town boards and county boards. 
    (d) "Municipality" means any home rule charter or statutory 
city, county, town, school district, political subdivision or 
agency of local government.  "Municipality" means the 
metropolitan council or any board or agency created under 
chapter 473. 
    Subd. 2.  [PAYMENT REQUIRED.] A municipality must pay each 
vendor obligation according to the terms of the contract or, if 
no contract terms apply, within the standard payment period 
unless the municipality in good faith disputes the obligation.  
Standard payment period is defined as follows: 
    (a) For municipalities who have governing boards which have 
regularly scheduled meetings at least once a month, the standard 
payment period is defined as within 35 days of the date of 
receipt. 
    (b) For municipalities whose governing boards do not 
regularly meet at least once a month, the standard payment 
period is defined as 45 days after receipt of the goods or 
services or the invoice for the goods or services, whichever is 
later. 
    (c) For joint powers organizations organized under section 
471.59, the standard payment period is within 45 days of the 
date of receipt.  
    Subd. 3.  [INVOICE ERRORS.] If an invoice is incorrect, 
defective or otherwise improper, the municipality must notify 
the vendor within ten days of the date of receipt.  Upon 
receiving a corrected invoice from the vendor, the municipality 
must pay the obligation within the standard payment period 
defined in subdivision 2. 
    Subd. 4.  [PAYMENT OF INTEREST ON LATE PAYMENTS 
REQUIRED.] (a) Except otherwise provided in this section, a 
municipality shall calculate and pay interest to a vendor if the 
municipality has not paid the obligation according to the terms 
of the contract or, if no contract terms apply, within the 
standard payment period as defined in subdivision 2.  The 
standard payment period for a negotiated contract or agreement 
between a vendor and a municipality which requires an audit by 
the municipality before acceptance and payment of the vendor's 
invoice shall not be begun until the completion of the audit by 
the municipality. 
    (b) The rate of interest calculated and paid by the 
municipality on the outstanding balance of the obligation not 
paid according to the terms of the contract or during the 
standard payment period shall be one and one-half percent per 
month or part of a month. 
    (c) No interest penalties may accrue against a purchaser 
who delays payment of a vendor obligation due to a good faith 
dispute with the vendor regarding the fitness of the product or 
service, contract compliance, or any defect, error or omission 
related thereto.  If such delay undertaken by the municipality 
is not in good faith, the vendor may recover costs and 
attorney's fees. 
    (d) The minimum monthly interest penalty payment that a 
municipality shall calculate and pay a vendor for the unpaid 
balance for any one overdue bill of $100 or more is $10.  For 
unpaid balances of less than $100, the municipality shall 
calculate and pay the actual interest penalty due the vendor. 
    Subd. 5.  [APPLICABILITY.] This section applies to all 
goods, leases and rents, and contracts for services, 
construction, repair and remodeling.  Purchases from or 
contracts for service with a public utility as defined in 
section 216B.02 or a telephone company as defined in section 
237.01 that has on file with the public utilities commission an 
approved practice regarding late fees are not subject to this 
section. 
    Sec. 6.  [EFFECTIVE DATE.] 
    Section 2 is effective for purchases and contracts entered 
into on or after January 1, 1986. 
    Approved May 17, 1985