Advice to Solicitors on Their Role in a Municipal Bond Issue
If you are in private practice, charge an appropriate fee to cover the time it will take you to diligently represent your client. The duties outlined in this article take time and involve your general expertise as the municipality's lawyer—you should be appropriately compensated.
• Post-issuance compliance is more important than ever; make sure your client is prepared to undertake its post-issuance responsibilities.
After a bond issue closes, there are requirements under the tax code and under the securities laws that continue to apply to the bonds. On the tax side, there are regulations governing the investment and spending of bond proceeds and the use of the bond-financed facilities. On the securities law side, there are requirements to make annual financial disclosures and special event disclosures with the Municipal Securities Rulemaking Board.
Both the Internal Revenue Service and the Securities and Exchange Commission strongly encourage issuers to adopt and follow written post-issuance compliance policies. And all of the regulators are becoming more and more aggressive in supervising the post-issuance requirements. Before the bond issue closes, you should work closely with bond counsel and the financial adviser to help the issuer develop these post-issuance compliance policies. After closing, you should work with your municipal client to make sure it takes these policies seriously and follows them.
When you are working on a financing, it may often have the feel of a nonadversarial proceeding, but the stakes for your client are very high. The success of the financing is often integral to your client's economic well-being. Approach the financing with part of your brain in an accommodating frame of mind to get the deal done, but you should also approach it in part as you would a piece of litigation for your municipality—be a little skeptical, ask questions and, above all, pay attention to your gut. If something bothers you, don't worry about your lack of expertise in public finance; do what you always do as solicitor—diligently look out for your municipal client.
David Unkovic and Donna Kreiser are public finance lawyers with McNees Wallace & Nurick with offices in Harrisburg, Lancaster, Scranton and State College, Pa. The firm regularly serves as bond counsel for state agencies, local governments, authorities and school districts. Unkovic formerly served as the first state-appointed receiver for Harrisburg, and Kreiser formerly served as deputy general counsel to the Pennsylvania Governor's Office of General Counsel.