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Office of the Revisor of Statutes

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

  
    Laws of Minnesota 1993 

                        CHAPTER 315-S.F.No. 580 
           An act relating to government; providing for the 
          preparation and review of accounts; providing for 
          duties of the state auditor; providing for the costs 
          of examinations; defining the limits to various types 
          of compensation; providing procedures for the 
          satisfaction of claims; providing procedures for the 
          removal of city managers; limiting certain high risk 
          investments; providing for severance pay and other 
          benefits in certain cases; exempting Hazel Run from 
          annual audit for the year 1992; amending Minnesota 
          Statutes 1992, sections 6.56; 16B.06, subdivision 4; 
          43A.17, subdivision 9, and by adding a subdivision; 
          340A.602; 375.162, subdivision 2; 375.18, by adding 
          subdivisions; 412.271, subdivision 1, and by adding 
          subdivisions; 412.641, subdivision 1; and 475.66, 
          subdivision 3, and by adding subdivisions; proposing 
          coding for new law in Minnesota Statutes, chapters 6; 
          465; and 471. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  [6.551] [EXAMINATION OF GRANTEES AND 
CONTRACTORS OF LOCAL GOVERNMENTS.] 
    The state auditor may examine the books, records, 
documents, and accounting procedures and practices of a 
contractor or grantee of a local government pursuant to section 
16B.06, subdivision 4.  The examination shall be limited to the 
books, records, documents, and accounting procedures and 
practices that are relevant to the contract or transaction with 
the local government. 
    Sec. 2.  Minnesota Statutes 1992, section 6.56, is amended 
to read: 
    6.56 [COST OF EXAMINATION, PAYMENT.] 
    Subdivision 1.  [DEFINITION.] As used in this section, 
"political subdivision" means any county, home rule charter or 
statutory city, town, school district, metropolitan or regional 
agency, or other special purpose district of the state of 
Minnesota. 
    Subd. 2.  [BILLINGS BY STATE AUDITOR.] Upon the examination 
of the books, records, accounts, and affairs of any county, 
city, town, or school district political subdivision, as 
provided by law, such county, city, town, or school district 
political subdivision shall be liable to the state for the total 
cost and expenses of such examination, including the salaries 
paid to the examiners while actually engaged in making such 
examination.  The state auditor may bill such county, city, 
town, or school district political subdivision monthly for 
service rendered and the officials responsible for approving and 
paying claims are authorized to pay said bill promptly.  Said 
payments shall be without prejudice to any defense against said 
claims that may exist or be asserted.  The general fund shall be 
credited with all collections made for any such examinations, 
including interest payments made pursuant to subdivision 3.  
    Subd. 3.  [PAYMENT OF INTEREST ON LATE PAYMENTS 
REQUIRED.] (a) A political subdivision shall pay interest to the 
state auditor for undisputed billings when the political 
subdivision has not paid the billing within 60 days following 
receipt of the invoice.  A negotiated contract or agreement 
between a political subdivision and the state auditor which 
requires an audit by the political subdivision before acceptance 
and payment of the state auditor's invoice shall not be 
considered past due until 60 days after the completion of the 
audit by the political subdivision.  Before any interest payment 
is made, the state auditor must invoice the political 
subdivision for the interest. 
    (b) The rate of interest paid by the political subdivision 
on undisputed bills not paid within 60 days shall be 1.5 percent 
per month or any part of a month. 
    (c) No interest penalties may accrue against a political 
subdivision that delays payment of a bill due to a disagreement 
with the state auditor over the validity of the bill if the 
dispute is settled within 60 days after the bill became due.  
Upon the resolution of the dispute, the political subdivision 
must pay the state auditor accrued interest on all proper 
invoices for which payment was not received within 60 days 
following the receipt of the original invoice.  
    (d) The minimum monthly interest penalty payment that a 
political subdivision shall pay the state auditor 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 political 
subdivision shall pay the actual penalty due to the state 
auditor. 
    Sec. 3.  [6.745] [SUMMARY BUDGET DATA TO THE STATE 
AUDITOR.] 
    Subdivision 1.  [CITIES.] Annually, upon adoption of the 
city budget, the city council of each home rule charter or 
statutory city shall forward summary budget information to the 
office of the state auditor.  The summary budget information 
shall be provided on forms prescribed by the state auditor.  The 
office of the state auditor shall work with representatives of 
city government to develop a budget reporting form that conforms 
with city budgeting practices and provides the necessary summary 
budget information to the office of the state auditor.  The 
summary budget data shall be provided to the office of the state 
auditor no later than December 31 of the year preceding each 
budget year. 
    Subd. 2.  [COUNTIES.] Annually, upon adoption of the county 
budget, the county board shall forward summary budget 
information to the office of the state auditor.  The summary 
budget information shall be provided on forms prescribed by the 
state auditor.  The office of the state auditor shall work with 
representatives of county government to develop a budget 
reporting form that conforms with county budgeting practices and 
provides the necessary summary budget information to the office 
of the state auditor.  The summary budget data shall be provided 
to the office of the state auditor no later than December 31 of 
the year preceding each budget year. 
    Sec. 4.  Minnesota Statutes 1992, section 16B.06, 
subdivision 4, is amended to read: 
    Subd. 4.  [SUBJECT TO AUDIT.] A contract or any 
disbursement of public funds to a provider of services or a 
grantee made by or under the supervision of the commissioner, an 
agency, or any county or unit of local government must include, 
expressly or impliedly, an audit clause that provides that the 
books, records, documents, and accounting procedures and 
practices of the contractor or other party, relevant to the 
contract or transaction are subject to examination by the 
contracting agency, and either the legislative auditor or the 
state auditor as appropriate.  If the contracting agency is a 
local unit of government, and the governing body of the local 
unit of government requests that the state auditor examine the 
books, records, documents, and accounting procedures and 
practices of the contractor or other party pursuant to this 
subdivision, the contracting agency shall be liable for the cost 
of the examination.  If the contracting agency is a local unit 
of government, and the grantee, contractor, or other party 
requests that the state auditor examine all books, records, 
documents, and accounting procedures and practices related to 
the contract, the grantee, contractor, or other party that 
requested the examination shall be liable for the cost of the 
examination.  A state contract made for purchase, lease, or 
license of software and data from the state is not required to 
contain that audit clause.  
    Sec. 5.  Minnesota Statutes 1992, section 43A.17, 
subdivision 9, is amended to read: 
    Subd. 9.  [POLITICAL SUBDIVISION SALARY COMPENSATION 
LIMIT.] The salary and the value of all other forms of 
compensation of a person employed by a statutory or home rule 
charter city, county, town, school district, metropolitan or 
regional agency, or other political subdivision of this state, 
or employed under section 422A.03, may not exceed 95 percent of 
the salary of the governor as set under section 15A.082, except 
as provided in this subdivision.  Deferred compensation and 
payroll allocations to purchase an individual annuity contract 
for an employee are included in determining the employee's 
salary.  Other forms of compensation which shall be included to 
determine an employee's total compensation are all other direct 
and indirect items of compensation which are not specifically 
excluded by this subdivision.  Other forms of compensation which 
shall not be included in a determination of an employee's total 
compensation for the purposes of this subdivision are: 
    (1) employee benefits that are also provided for the 
majority of all other full-time employees of the political 
subdivision, vacation and sick leave allowances, health and 
dental insurance, disability insurance, term life insurance, and 
pension benefits or like benefits the cost of which is borne by 
the employee or which is not subject to tax as income under the 
Internal Revenue Code of 1986; 
    (2) dues paid to organizations that are of a civic, 
professional, educational, or governmental nature; and 
    (3) reimbursement for actual expenses incurred by the 
employee which the governing body determines to be directly 
related to the performance of job responsibilities, including 
any relocation expenses paid during the initial year of 
employment. 
    The value of other forms of compensation shall be the 
annual cost to the political subdivision for the provision of 
the compensation.  The salary of a medical doctor or doctor of 
osteopathy occupying a position that the governing body of the 
political subdivision has determined requires an M.D. or D.O. 
degree is excluded from the limitation in this subdivision.  The 
commissioner may increase the limitation in this subdivision for 
a position that the commissioner has determined requires special 
expertise necessitating a higher salary to attract or retain a 
qualified person.  The commissioner shall review each proposed 
increase giving due consideration to salary rates paid to other 
persons with similar responsibilities in the state and nation.  
The commissioner may not increase the limitation until the 
commissioner has presented the proposed increase to the 
legislative commission on employee relations and received the 
commission's recommendation on it.  The recommendation is 
advisory only.  If the commission does not give its 
recommendation on a proposed increase within 30 days from its 
receipt of the proposal, the commission is deemed to have 
recommended approval. 
     Sec. 6.  Minnesota Statutes 1992, section 43A.17, is 
amended by adding a subdivision to read: 
    Subd. 11.  [SEVERANCE PAY FOR CERTAIN EMPLOYEES.] (a) For 
purposes of this subdivision, "highly compensated employee" 
means an employee of the state whose estimated annual 
compensation is greater than 60 percent of the governor's annual 
salary, and who is not covered by a collective bargaining 
agreement negotiated under chapter 179A. 
    (b) Severance pay for a highly compensated employee 
includes benefits or compensation with a quantifiable monetary 
value, that are provided for an employee upon termination of 
employment and are not part of the employee's annual wages and 
benefits and are not specifically excluded by this subdivision.  
Severance pay does not include payments for accumulated 
vacation, accumulated sick leave, and accumulated sick leave 
liquidated to cover the cost of group term insurance.  Severance 
pay for a highly compensated employee does not include payments 
of periodic contributions by an employer toward premiums for 
group insurance policies.  The severance pay for a highly 
compensated employee must be excluded from retirement deductions 
and from any calculations of retirement benefits.  Severance pay 
for a highly compensated employee must be paid in a manner 
mutually agreeable to the employee and the employee's appointing 
authority over a period not to exceed five years from retirement 
or termination of employment.  If a retired or terminated 
employee dies before all or a portion of the severance pay has 
been disbursed, the balance due must be paid to a named 
beneficiary or, lacking one, to the deceased's estate.  Except 
as provided in paragraph (c), severance pay provided for a 
highly compensated employee leaving employment may not exceed an 
amount equivalent to six months of pay. 
    (c) Severance pay for a highly compensated employee may 
exceed an amount equivalent to six months of pay if the 
severance pay is part of an early retirement incentive offer 
approved by the state and the same early retirement incentive 
offer is also made available to all other employees of the 
appointing authority who meet generally defined criteria 
relative to age or length of service. 
    Sec. 7.  Minnesota Statutes 1992, section 340A.602, is 
amended to read: 
    340A.602 [CONTINUATION.] 
    In any city in which the report of the operations of a 
municipal liquor store has shown a net loss prior to interfund 
transfer in any two of three consecutive years both (1) a net 
loss and (2) that no contribution to other municipal funds has 
been made from the net income of the operation, the city council 
shall, not more than 45 days prior to the end of the fiscal year 
following the three-year period, hold a public hearing on the 
question of whether the city shall continue to operate a 
municipal liquor store.  Two weeks notice, written in clear and 
easily understandable language, of the hearing must be printed 
in the city's official newspaper.  Following the hearing the 
city council may on its own motion or shall upon petition of 
five percent or more of the registered voters of the city, 
submit to the voters at a general or special municipal election 
the question of whether the city shall continue or discontinue 
municipal liquor store operations by a date which the city 
council shall designate.  The date designated by the city 
council must not be more than 30 months following the date of 
the election. 
    Sec. 8.  Minnesota Statutes 1992, section 375.162, 
subdivision 2, is amended to read: 
    Subd. 2.  The county board may authorize an imprest fund 
for the purpose of advancing money to officers or employees to 
pay their actual and necessary expenses in attending meetings 
outside the county or for other travel that is related to the 
performance of their job duties.  The county board shall appoint 
a custodian of the fund who shall be responsible for its 
safekeeping and disbursement according to law.  Attendance at 
meetings and other travel outside the county shall be authorized 
in advance by the county board.  At a meeting of the county 
board in the month after a meeting approved travel outside the 
county, the officer or employee shall submit an itemized claim 
for the actual and necessary expenses incurred and paid in 
attending the meeting related to the approved travel.  The 
county board shall act upon it as in the case of other claims 
and a warrant shall be issued to the officer or employee for the 
amount allowed.  The officer or employee shall use the proceeds 
of the warrant to repay the amount advanced from the fund.  If 
the amount approved by the county board is insufficient to repay 
the advance, the officer or employee shall be personally 
responsible for the difference.  
    Sec. 9.  Minnesota Statutes 1992, section 375.18, is 
amended by adding a subdivision to read: 
    Subd. 1a.  [DEFINITION.] For purposes of this section, a 
"county administrative official" shall mean a county auditor, 
treasurer, auditor-treasurer, administrator, coordinator, 
manager, a clerk/administrator, or a senior fiscal officer. 
    Sec. 10.  Minnesota Statutes 1992, section 375.18, is 
amended by adding a subdivision to read: 
    Subd. 1b.  [DELEGATION OF AUTHORITY FOR PAYING CERTAIN 
CLAIMS.] A county board, at its discretion, may delegate its 
authority to pay certain claims made against the county to a 
county administrative official.  County boards opting to 
delegate their authority to review claims before payment 
pursuant to this subdivision shall have internal accounting and 
administrative control procedures to ensure the proper 
disbursement of public funds.  The procedures shall include 
regular and frequent review of the county administrative 
officials' actions by the board.  A list of all claims paid 
under the procedures established by the county board shall be 
presented to the board for informational purposes only at the 
next regularly scheduled meeting after payment of the claim.  A 
county board that delegates its authority to pay certain claims 
made against the county must adopt a resolution authorizing a 
specified county administrative official to pay the claims that 
meet the standards and procedures established by the board.  
This subdivision does not apply to a home rule charter county 
for which the county charter provides an alternative method for 
paying claims made against the county. 
    Sec. 11.  Minnesota Statutes 1992, section 412.271, 
subdivision 1, is amended to read: 
    Subdivision 1.  [METHOD.] No disbursement of city funds, 
including funds of any municipal liquor dispensary operated by 
the city, shall be made except by an order drawn by the mayor 
and clerk upon the treasurer.  Except when issued for the 
payment of judgments, salaries and wages previously fixed by the 
council or by statute, principal and interest on obligations, 
rent and other fixed charges, the exact amount of which has been 
previously determined by contract authorized by the council, and 
except as otherwise provided in subdivisions 4 and, 5, and 8, no 
order shall be issued until the claim to which it relates has 
been audited and allowed by the council.  
    Sec. 12.  Minnesota Statutes 1992, section 412.271, is 
amended by adding a subdivision to read: 
    Subd. 7.  [DEFINITION.] For purposes of this section, a 
"city administrative official" means a city manager, 
administrator, treasurer, senior fiscal officer, clerk, or 
clerk-treasurer. 
    Sec. 13.  Minnesota Statutes 1992, section 412.271, is 
amended by adding a subdivision to read: 
    Subd. 8.  [DELEGATION OF AUTHORITY FOR PAYING CERTAIN 
CLAIMS.] A city council, at its discretion, may delegate its 
authority to pay certain claims made against the city to a city 
administrative official.  City councils opting to delegate their 
authority to review claims before payment pursuant to this 
subdivision shall have internal accounting and administrative 
control procedures to ensure the proper disbursement of public 
funds.  The procedures shall include regular and frequent review 
of the city administrative officials' actions by the council.  A 
list of all claims paid under the procedures established by the 
city council shall be presented to the council for informational 
purposes only at the next regularly scheduled meeting after 
payment of the claim.  A city council that delegates its 
authority to pay certain claims made against the city must adopt 
a resolution authorizing a specified city administrative 
official to pay the claims that meet the standards and 
procedures established by the council.  A city council of a city 
that does not prepare annual audited financial statements which 
have been attested to by an independent certified public 
accountant, public accountant, or the state auditor, may not 
delegate its authority for paying certain claims against the 
city pursuant to this subdivision. 
    Sec. 14.  Minnesota Statutes 1992, section 412.641, 
subdivision 1, is amended to read: 
    Subdivision 1.  The city manager shall be chosen by the 
council solely on the basis of training, experience, and 
administrative qualifications and need not be a resident of the 
city at the time of appointment.  The manager shall be appointed 
for an indefinite period and may be removed by the council at 
any time, but after having served as manager for one year the 
city manager may demand written charges and a public hearing on 
the charges before the council prior to the date when final 
removal takes effect.  A demand for written charges and a 
hearing must be made within seven days of notification of the 
council's intent to remove the city manager.  The council shall 
set a date and a reasonable time for a public hearing, which 
must be held within 30 days of the demand and may not be 
reconvened or recessed until a further date, absent approval of 
the council.  The council shall notify the city manager within 
five days of the hearing, of the council's decision to retain or 
remove the city manager.  The decision of the council is final.  
Pending such hearing and removal, the council may suspend the 
manager, with or without pay, at the council's discretion, from 
office.  The council may designate some properly qualified 
person to perform the duties of the manager during absence or 
disability.  
    Sec. 15.  [465.722] [SEVERANCE PAY FOR HIGHLY COMPENSATED 
EMPLOYEES.] 
     Subdivision 1.  [DEFINITIONS.] For the purposes of this 
section, the terms defined in this subdivision have the meanings 
given them. 
    (a) "Local unit of government" means a statutory or home 
rule charter city, county, town, school district, metropolitan 
or regional agency, or other political subdivision. 
    (b) "Wages" has the meaning provided by section 3401(a) of 
the Internal Revenue Code of 1986, as amended through December 
31, 1992.  
     (c) "Highly compensated employee" means an employee of a 
local unit of government with estimated annual wages that: 
    (1) are greater than 60 percent of the governor's annual 
salary; and 
    (2) are equal to, or greater than, 80 percent of the 
estimated annual wages of the second highest paid employee of 
the local unit of government. 
    Subd. 2.  [LIMITS ON SEVERANCE PAY.] Notwithstanding any 
contrary provision of section 465.72, subdivision 1, severance 
pay for a highly compensated employee includes benefits or 
compensation with a quantifiable monetary value, that are 
provided for an employee upon termination of employment and are 
not part of the employee's annual wages and benefits and are not 
specifically excluded by this subdivision.  Severance pay shall 
not include payments for accumulated vacation, accumulated sick 
leave, and accumulated sick leave liquidated to cover the cost 
of group term insurance provided under section 471.61 to 
retiring employees.  Severance pay for a highly compensated 
employee does not include payments of periodic contributions by 
an employer toward premiums for group insurance policies.  The 
severance pay for a highly compensated employee must be excluded 
from retirement deductions and from any calculations of 
retirement benefits.  Severance pay for a highly compensated 
employee must be paid in a manner mutually agreeable to the 
employee and the governing body of the local unit of government 
over a period not to exceed five years from retirement or 
termination of employment.  If a retired or terminated employee 
dies before all or a portion of the severance pay has been 
disbursed, the balance due must be paid to a named beneficiary 
or, lacking one, to the deceased's estate.  Except as provided 
in subdivision 3, severance pay provided for a highly 
compensated employee leaving employment may not exceed an amount 
equivalent to six months of wages. 
    Subd. 3.  [EXCEPTIONS TO MAXIMUM ALLOWABLE SEVERANCE PAY 
FOR A HIGHLY COMPENSATED EMPLOYEE.] Severance pay for a highly 
compensated employee may exceed an amount equivalent to six 
months of wages if: 
    (1) the severance pay benefit is included in an employment 
contract between the employee and the local unit of government 
that is in effect on the effective date of this section, and the 
termination of employment occurs before the expiration date of 
said contract; 
      (2) the severance pay is part of an early retirement 
incentive offer approved by the governing body of the local unit 
of government and the same early retirement incentive offer is 
also made available to all other employees of the local unit of 
government who meet generally defined criteria relative to age 
or length of service; 
     (3) the governing body of a local unit of government adopts 
a resolution certifying that: 
     (i) the highly-compensated employee was a full-time 
employee of the local unit of government for the entire period 
between January 1, 1983, and December 31, 1992; 
    (ii) the highly-compensated employee was covered by one or 
more employment contracts or agreements which entitled the 
employee to specified severance pay benefits throughout the 
entire ten-year period specified in clause (i); 
     (iii) the employment contract or agreement in effect on 
December 31, 1992, will, at the time of the employee's 
separation from employment with the local unit of government, 
result in a severance payment that exceeds the limits specified 
in subdivision 2; and 
     (iv) the amount of severance pay that exceeds the limits 
specified in subdivision 2 was based on a commitment to provide 
the employee with a specified severance guarantee in lieu of a 
higher level of some other form of compensation; or 
    (4) the commissioner of employee relations has determined a 
position within a specific local unit of government requires 
special expertise necessitating a larger severance pay guarantee 
to attract or retain a qualified person.  The commissioner shall 
develop a process for the governing body of a local unit of 
government to use when applying for an exemption under this 
clause.  The commissioner shall review each proposed exemption 
giving due consideration to severance pay guarantees that are 
made to other persons with similar responsibilities in the state 
and nation. 
     Nothing in this subdivision shall be deemed to allow total 
severance payments for a highly compensated employee that exceed 
the limits established in section 465.72. 
     Subd. 4.  [GOVERNING BODY MUST APPROVE CERTAIN PAYMENTS; 
TIME FOR RECISION.] Notwithstanding section 13.43, subdivision 
2, any payment to a highly compensated employee for settling 
disputed claims, whether or not the claims have been filed, or 
any payment to a highly compensated employee for terminating a 
written employment contract, must be approved by the governing 
body of the local unit of government during a public meeting.  
The financial terms of a payment made pursuant to this 
subdivision must be made public at the meeting.  The effective 
date of the governing body's approval of a payment made pursuant 
to this subdivision shall be 15 days after the date of the 
public meeting.  The governing body of a local unit of 
government approving a payment pursuant to this subdivision, or 
the employee to whom the payment is to be made, may rescind or 
reject the payment, prior to the effective date of the governing 
body's approval. 
    Sec. 16.  [471.666] [PERSONAL USE OF PUBLICLY-OWNED 
AUTOMOBILES PROHIBITED.] 
    Subdivision 1.  [DEFINITIONS.] For purposes of this 
section, the following definitions shall apply: 
    (a) "Local government vehicle" means a vehicle owned or 
leased by a political subdivision of the state of Minnesota or 
loaned to a political subdivision. 
    (b) "Political subdivision" means a statutory or home rule 
charter city, county, town, school district, metropolitan or 
regional agency, or other special purpose district of this state.
    (c) "Local government employee" or "employee" means an 
individual who is appointed or employed by a political 
subdivision, including all elected officials of political 
subdivisions. 
    Subd. 2.  [RESTRICTED USES.] A local government vehicle may 
be used only for authorized local government business, including 
personal use that is clearly incidental to the use of the 
vehicle for local government business.  A local government 
vehicle may not be used for transportation to or from the 
residence of a local government employee, except as provided in 
subdivision 3. 
    Subd. 3.  [PERMITTED USES.] A local government vehicle may 
be used by a local government employee to travel to or from the 
employee's residence: 
    (1) in connection with work-related activities during hours 
when the employee is not working; 
    (2) if the employee has been assigned the use of a local 
government vehicle for authorized local government business on 
an extended basis, and the employee's primary place of work is 
not the local government work station to which the employee is 
permanently assigned; or 
    (3) if the employee has been assigned the use of a local 
government vehicle for authorized local government business away 
from the work station to which the employee is permanently 
assigned, and the number of miles traveled, or the time needed 
to conduct the business, will be minimized if the employee uses 
a local government vehicle to travel to the employee's residence 
before or after traveling to the place of local government 
business. 
    Subd. 4.  [EXCEPTIONS.] This section does not apply to 
public safety vehicles that are owned or leased by a political 
subdivision. 
    Sec. 17.  Minnesota Statutes 1992, section 475.66, 
subdivision 3, is amended to read: 
    Subd. 3.  Subject to the provisions of any resolutions or 
other instruments securing obligations payable from a debt 
service fund, any balance in the fund may be invested 
    (a) in governmental bonds, notes, bills, mortgages, and 
other securities, which are direct obligations or are guaranteed 
or insured issues of the United States, its agencies, its 
instrumentalities, or organizations created by an act of 
Congress, excluding mortgage-backed securities that are defined 
as high risk pursuant to subdivision 5, or in certificates of 
deposit secured by letters of credit issued by federal home loan 
banks, 
    (b) in shares of an investment company (1) registered under 
the Federal Investment Company Act of 1940, whose shares are 
registered under the Federal Securities Act of 1933, and (2) 
whose only investments are in (i) securities described in the 
preceding clause, except that mortgage-backed securities defined 
as high risk pursuant to subdivision 5 do not apply to shares of 
an investment company, (ii) general obligation tax-exempt 
securities rated A or better by a national bond rating service, 
and (iii) repurchase agreements or reverse repurchase agreements 
fully collateralized by those securities, if the repurchase 
agreements or reverse repurchase agreements are entered into 
only with those primary reporting dealers that report to the 
Federal Reserve Bank of New York and with the 100 largest United 
States commercial banks, 
    (c) in any security which is (1) a general obligation of 
the state of Minnesota or any of its municipalities, or (2) a 
general obligation of another state or local government with 
taxing powers which is rated A or better by a national bond 
rating service, or (3) a general obligation of the Minnesota 
housing finance agency, or (4) a general obligation of a housing 
finance agency of any state if it includes a moral obligation of 
the state, or (5) a general or revenue obligation of any agency 
or authority of the state of Minnesota other than a general 
obligation of the Minnesota housing finance agency.  Investments 
under clauses (3) and (4) must be in obligations that are rated 
A or better by a national bond rating service and investments 
under clause (5) must be in obligations that are rated AA or 
better by a national bond rating service, 
     (d) in bankers acceptances of United States banks eligible 
for purchase by the Federal Reserve System, 
     (e) in commercial paper issued by United States 
corporations or their Canadian subsidiaries that is of the 
highest quality and matures in 270 days or less, or 
     (f) in guaranteed investment contracts issued or guaranteed 
by United States commercial banks or domestic branches of 
foreign banks or United States insurance companies or their 
Canadian or United States subsidiaries; provided that the 
investment contracts rank on a parity with the senior unsecured 
debt obligations of the issuer or guarantor and, (1) in the case 
of long-term investment contracts, either (i) the long-term 
senior unsecured debt of the issuer or guarantor is rated, or 
obligations backed by letters of credit of the issuer or 
guarantor if forming the primary basis of a rating of such 
obligations would be rated, in the highest or next highest 
rating category of Standard & Poor's Corporation, Moody's 
Investors Service, Inc., or a similar nationally recognized 
rating agency, or (ii) if the issuer is a bank with headquarters 
in Minnesota, the long-term senior unsecured debt of the issuer 
is rated, or obligations backed by letters of credit of the 
issuer if forming the primary basis of a rating of such 
obligations would be rated in one of the three highest rating 
categories of Standard & Poor's Corporation, Moody's Investors 
Service, Inc., or similar nationally recognized rating agency, 
or (2) in the case of short-term investment contracts, the 
short-term unsecured debt of the issuer or guarantor is rated, 
or obligations backed by letters of credit of the issuer or 
guarantor if forming the primary basis or a rating of such 
obligations would be rated, in the highest two rating categories 
of Standard and Poor's Corporation, Moody's Investors Service, 
Inc., or similar nationally recognized rating agency.  
     The fund may also be used to purchase any obligation, 
whether general or special, of an issue which is payable from 
the fund, at such price, which may include a premium, as shall 
be agreed to by the holder, or may be used to redeem any 
obligation of such an issue prior to maturity in accordance with 
its terms.  The securities representing any such investment may 
be sold or hypothecated by the municipality at any time, but the 
money so received remains a part of the fund until used for the 
purpose for which the fund was created. 
    Sec. 18.  Minnesota Statutes 1992, section 475.66, is 
amended by adding a subdivision to read: 
    Subd. 5.  For the purposes of this section, "high risk 
mortgage-backed securities" are: 
    (a) interest-only or principal-only mortgage-backed 
securities; and 
    (b) any mortgage derivative security that: 
    (1) has an expected average life greater than ten years; 
    (2) has an expected average life that: 
    (i) will extend by more than four years as the result of an 
immediate and sustained parallel shift in the yield curve of 
plus 300 basis points; or 
    (ii) will shorten by more than six years as the result of 
an immediate and sustained parallel shift in the yield curve of 
minus 300 basis points; or 
    (3) will have an estimated change in price of more than 17 
percent, as the result of an immediate and sustained parallel 
shift in the yield curve of plus or minus 300 basis points. 
    Sec. 19.  Minnesota Statutes 1992, section 475.66, is 
amended by adding a subdivision to read: 
    Subd. 6.  (a) For the purpose of this subdivision, the term 
"broker" means a broker-dealer, broker, or agent of a 
municipality, who transfers, purchases, sells, or obtains 
securities for, or on behalf of, a municipality. 
    (b) Prior to completing an initial transaction with a 
broker, a municipality shall provide to the broker a written 
statement of investment restrictions which shall include a 
provision that all future investments are to be made in 
accordance with Minnesota Statutes governing the investment of 
public funds. 
    A broker must acknowledge receipt of the statement of 
investment restrictions in writing and agree to handle the 
municipality's account in accordance with these restrictions.  A 
municipality may not enter into a transaction with a broker 
until the broker has provided this written agreement to the 
municipality. 
    The state auditor shall prepare uniform notification forms 
which shall be used by the municipalities and the brokers to 
meet the requirements of this subdivision. 
     Sec. 20.  [ROLLOVER EMPLOYMENT CONTRACTS.] 
    Subdivision 1.  [APPLICABILITY.] This section applies only 
to employment contracts that are in effect on the effective date 
of this act, or have been signed prior to the effective date of 
this act, and does not apply to employment contracts that are 
signed on or after the effective date of this act. 
     Subd. 2.  [ACTIONS BY GOVERNING BODY.] (a) The governing 
body of a political subdivision may not agree to extend an 
existing employment contract with an employee of the political 
subdivision, or a group of employees of the political 
subdivision.  If the governing body of a political subdivision 
is a party to an existing employment contract which requires the 
governing body to take action to prevent an automatic extension 
of the contract, the governing body shall take the action 
specified in the contract to prevent the automatic extension of 
the contract. 
     (b) The governing body of a political subdivision that is a 
party to an employment contract affected by paragraph (a), may, 
at its sole discretion, agree to enter into a new employment 
contract with the affected employee or employees.  The new 
employment contract shall conform to the provisions of this act. 
     Sec. 21.  [EXEMPTION FROM ANNUAL AUDIT.] 
    Notwithstanding Minnesota Statutes, section 412.591, 
subdivision 2, the city of Hazel Run is exempt from the annual 
audit of the city's financial affairs for the 1992 year. 
    Sec. 22.  [SEVERABILITY.] 
     If any section of this act is found unconstitutional, that 
finding does not affect the constitutionality of the remaining 
sections. 
    Sec. 23.  [EFFECTIVE DATE.] 
    Section 19 is effective January 1, 1994. 
    Presented to the governor May 17, 1993 
    Signed by the governor May 20, 1993, 3:47 p.m.