You have asked whether federal supremacy prevents the application of O.C.G.A. § 13-10-20 (Supp. 1992) which requires interest be paid to a contractor for any retainage withheld in public contracts for installation, improvement, maintenance, or repair of water or sewer facilities, whenever federal monies are involved in the project.

It is a rule of federal statutory construction "that Congress must express clearly its intent to impose conditions on the grant of federal funds so that the States can knowingly decide whether or not to accept those funds." Pennhurst State School v. Halderman, 451 U.S. 1, 24, 67 L.Ed.2d 694, 712, 101 S.Ct. 1531 (1981). Further, the federal regulations governing grant assistance for sewer projects provide for retainage of up to ten percent at the option of the grant recipient. See 40 C.F.R. [*2] § 35.937-10 and paragraph 7b, Pt. 35, Subpt. E, App. C-1. Accordingly, the determination to use or not use retainage, along with the specific provisions to be used, are expressly left to the discretion of grant recipient.

Therefore, it is my unofficial opinion that the provisions of O.C.G.A. § 13-10-20 are fully applicable to retainage for public contracts for installation, improvement, maintenance, or repair of water or sewer facilities in the State of Georgia, any time such retainage is withheld, whether or not the project is funded with federal funds.

If you need further assistance, please let me know.

Prepared by:

GEORGE S. ZIER,

Staff Attorney