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Exception 4 permits any number of
<br />contracts in any year as long as
<br />any one does not involve more than
<br />$5,000; exception 7 also permits any
<br />number of contracts in any year but
<br />applies an aggregate limlt of $5,000 a
<br />year.
<br />
<br /> d. Exception 4 applies to any city
<br /> regardless of size; exception 7 applies
<br /> only to cities of less 5,000 population.
<br />
<br /> Thus if exception 4 applies, there is no need
<br />to look to exception 7 even though the city has
<br />fewer than 5,000 people. See Laws 1978, Ch. 651.
<br />
<br /> Other limited exceptions apply to port
<br />authorities and housing and redevelopment
<br />~.uthorities. Since they are not of general interest,
<br />~hey are not discussed here.
<br />
<br /> Kinds of Contracts Affected
<br />
<br /> 'The unlawful interest statutes apply to all
<br />kinds of contracts - formal or informal, for goods
<br />cr for services. A franchise is included within its
<br />prohibitions. ($ingewald v. Minneapolis Gas Co.,
<br />274 Minn. 556,142 N.W. 2d 739, 1966.) Contracts
<br />h0VO,Vmo real estate come within the scope of the
<br />statutory prohibition (see A.G. Op. 90A-1, LMC
<br />130d, Sept. 28, 1955), although 'such contracts
<br />.~re ordinarily regarded as inherently different
<br />from those invoJving goods which can be secured
<br />substantially in duplicate, in kind, quality, and
<br />price from several sources on the open market.
<br />The statute applies not only where the city acts
<br />a.s purchaser or payor but also where the city is
<br />the seller or payee. (A.G. Op. 90A-1, LMC 130d,
<br />April 14, 1960; A.G. Op. 90E-5, LMC 130d,
<br />Aug. 30, 1949; A.G. Op. 416-B, LMC 130d,
<br />,1 une 30, 1954.)
<br />
<br /> Because it is sometimes'considered unreason-
<br />able to deprive a city of a desirable piece of pro-
<br />perty when the owner is a council member, a
<br />third party transfer has occasionally been' resorted
<br />to in order to effect a conveyance. In general,
<br />the procedure then followed is to transfer the
<br />land to a third person who records it in his name
<br />and conveys it to the city -- the method often
<br />employed for the transfer of real estate between
<br />husband and wife. Such conveyances are, of
<br />course, essentially circumventions of the statutes
<br />and are invalid on this ground except in those
<br />
<br />-3-
<br /> instances where there has been a good faith trans-
<br /> fer and it can be honestly said that the council
<br /> member is not in any way financially interested in
<br /> the sale of the property to the city. Where the
<br /> third party device is used to capitalize upon
<br /> knowledge gained as a public officer, the city
<br /> may rescind in whole or may keep the property
<br /> and require the officer to pay over to it his pro-
<br /> fits from the transaction. It i~s immaterial that.
<br /> the officer may not have affirmatively used his
<br /> influence in favor of the decision to .buy the
<br /> property or that the purchase price paid by the
<br /> city was not excessive. (See~ City oflklinneapolis v.
<br /> Canterbury, 122 Minn. 301,142 N.W. 812, 1913.)
<br /> The preferable approach to this problem .is to use
<br /> eminent domain procedures, at least to 'the point
<br /> where the value of the property is est. ablishcd by
<br /> Commissioners appointed by the Court.
<br />
<br /> What is a Prohibited Interest ' .'.. -- -
<br />
<br /> The general statute applying t~ all m.unici- ..
<br /> palities (M,S. 471.87) applies whenever the-officer
<br /> has a personal financial interest in the transaction ...
<br /> or' personally .benefits financially from it. The
<br /> Statutory City Code prohibits a council member
<br /> from being ."directly or indirectly interested" '
<br /> in a contract made by the council. (M.S. 412.311.) '"
<br /> Statutory provisions similar to the statutory code
<br /> provision apply to counties and towns, and some'"'-'
<br /> home rule cities have comparable provisions in
<br /> their charters. Because other home rule cities ar~
<br /> subject only to M.S. 471.87 ff., the two provisions ~. '
<br /> are discussed separately in this section. P~esumably -.
<br /> all types of interest in contracts affected by the
<br /> general statute are included in the official interest ·
<br /> section of the statutory code, but the latter is.
<br /> broader. --
<br />
<br /> When the statutory exceptions do not ·apply,
<br /> paid employment of council members as employees ' '
<br /> of the municipal liquor store, superintendent of
<br /> the waterworks system~ laborers on force account,
<br /> street_ commissioner, city marshal, caretaker of the
<br /> city hall, or in similar positions clearly involves. '
<br /> a prohibited interest and is banned by the unlaw-
<br /> ful interest statutes. There are numerous rulings ·
<br /> of the Attorney General to this effect. Holding· -.-
<br /> stock in a corporation which enters 'into a con-
<br /> tract w~th the city involves an unlawful interest.." ..
<br /> {A.G. Op. 90E-1, LMC 130d, May t2, 1976;.
<br /> A.G. Op. 90A-3, Nov. 20, 1963.) A council mem-
<br /> bet who isa subcontractor has an unlawful interest. ..
<br /> (A.G. Op. 90A-1, LMC 130d, May 16, 1952.)
<br /> A member of a governing body has a voluntary
<br /> personal financial interest in a governmental
<br /> contract with a court reporting firm when the '
<br /> · -member receives a percentage of the money '-
<br /> received by associates in the firm for each re-
<br /> porting job done under the agreement. (A.G. -~'
<br />- Op.90b, LMC.130~, Aug. 8, 1969.) ....
<br />
<br /> On the other hand, the 'Attorney General. ~"
<br /> has ruled that if a council member is an employee. "'
<br />
<br />
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