Knowledgebase-Paying Interest on Contractor's Performance Bonds Deposited in Cash and Taking up Business Not Contained in the City Council Agenda


Information Product

Title:Paying Interest on Contractor's Performance Bonds Deposited
in Cash and Taking up Business Not Contained in the City
Council Agenda
Summary:MTAS was asked whether a city is required to pay interest on contractor’s performance
bonds deposited in cash and, at regular meetings, can the city council take up business
not contained in the agenda.
Original Author:Hemsley, Sid
Co-Author:
Product Create Date:09/16/96
Last Reviewed on::10/27/2009
Subject:City council--Procedure; Contractors; Meetings--Planning and management; Performance bonds
Type:Legal Opinion
Legal Opinion:

Reference Documents:

Text of Document: September 16, 1996

You have two questions:

1. Is a city required to pay interest on contractor’s performance bonds
deposited in cash?

2. With respect to regular meetings, can the city council take up business
not contained in the agenda?

The answer to both questions is yes.

Question 1.

Last Thursday I cited to your secretary Tennessee Code Annotated,
section 12-4-201. That statute applies to any public contract let by any city, county or state
authority. Subsection (5) provides that if the contractor’s performance bond is deposited in
cash, the contracting authority must pay to the contractor interest at the same rate that interest
is paid on funds invested in a local government investment pool established pursuant to
Tennessee Code Annotated, section 9-7-704, for the contract period.

Question 2.

Most cities have by ordinance adopted some recognized rules of procedure,
in virtually all cases Robert’s Rules of Order, Revised (RROR) or Robert’s Rules of Order,
Newly Revised (RRONR). I have checked the your Municipal Code and find no evidence that
the city has by ordinance adopted rules of procedure of any kind. However, the city council
may have by motion or resolution adopted RROR or RRONR. If that is so, RRONR, Sec. 40
prescribes an agenda, one item of which is “New Business.” Under "New Business" any member
of the legislative body can introduce new business. Nothing in RRONR, including Sec. 40,
appears to require that members of the legislative body "get on" the agenda before council
meetings in order to introduce new business.

RRONR, Sec. 40 provides that the agenda is adopted by majority vote,
and that after it has been adopted, it can be changed only by a suspension of the rules by two-
thirds vote, or by unanimous consent. [Emphasis is mine.] The distinction between the two is
that the latter does not require a formal vote. The legislator who wants to introduce a proposal
out of order by unanimous consent simply says something along the lines, “With the unanimous
consent of the board I would like to introduce....” If there is no objection the legislator simply
proceeds with his introduction.

With respect to the effect of an agenda promulgated before a regular
meeting, RRONR, Sec. 40 says:

In some organizations, it is customary to send each member, in advance of a meeting, an
order of business or agenda, with some indication of the matters to be considered under each
heading. Such an agenda is often provided for information only, with no intention or practice of
submitting it for adoption. Unless a precirculated agenda is formally adopted at the session to
which it applies, it is not binding as to detail or order of consideration, other than as it lists
preexisting orders of the day, or conforms to the standard order of business, or an order of
business prescribed by the rules of the organization. [Emphasis is mine.]

But let us assume here that the city council has adopted--or follows--
some other rules of procedure governing the agenda, that those rules do not contain an item
for new business, or that they otherwise restrict the introduction of new business unless the
business is on the agenda before the meeting begins. In Bradford v. City of Jellico, 1 Tenn.
Chan. App. 700 (1901), an ordinance was challenged on the ground that it was passed in
violation of the rules of procedure adopted by the council. The principal rule of procedure at
issue required that an ordinance passed on first reading be sent to committee before being
passed on second reading. Another rule permitted the rules of procedure to be suspended
upon the unanimous consent of the city council and mayor.

In rejecting the challenge to the ordinance, the Court acknowledged
that, “...where a municipal charter, or the law governing its legislative operations, requires a
certain formality or mode of procedure to be followed in the enactment of municipal laws or
ordinances, such charter requirement or law is mandatory.” [At 719.] However, said the
Court, here:

....these rules of order for the government of the city council are
mere rules of procedure adopted by itself for its guidance and convenience. They are no part
of its legislative or legal charter, and rest upon no positive prescription of the statutes of the state.
Being rules of procedure adopted by the council for its own convenience and government in
the enactment of ordinances, it is competent for the council to waive them, and certainly this
is so with the consent of all the council present. This consent is assuredly sufficient, if it be
expressly given, and such consent, in our opinion, may be implied. If an ordinance be legally
passed on two readings at the meeting at which it is introduced, and at the next meeting it is
put upon its passage on its third and final reading without objection by any member of the
council present, based upon its nonreference to a committee, this is, in legal effect, equivalent
to a waiver of the rule requiring a reference to a committee except by unanimous consent of
the council. [At 719.]

Under Bradford, it appears that if the city council has adopted rules of
procedure governing the agenda, it could, simply by implied unanimous consent (or by any
other means prescribed by the rules), suspend those rules.

In addition, although I can find no law on this point, I suspect that any
rules of procedure for regular meetings that unduly restrict individual council members from
introducing proposals without the approval of the council unless their proposals are on the
agenda would not get very far in the courts.

Let me know if I can help you further in this or any other matter.

Sincerely,

Sidney D. Hemsley
Senior Law Consultant

SDH/

Please remember that these legal opinions were written based on the facts of a given city at a certain time. The laws referenced in any opinion may have changed or may not be applicable to your city or circumstances.

Always consult with your city attorney or an MTAS consultant before taking any action based on information contained in this database.