Municipal Finance Law
Though their adventures are unlikely to be portrayed in the latest John Grisham novel, municipal finance lawyers do engage in a special kind of heroics. They are the lawyers who procure funds to build schools, roads, libraries, public transportation systems, parks, and numerous other facilities provided by state and local governments that enhance our daily quality of life.
Instead of using taxes, which may unfairly appropriate current revenues, a municipality will often finance its major infrastructure projects by issuing municipal bonds. The municipal finance attorney may represent various parties involved in the bond offering, such as the municipality, the underwriter, or a financial institution. Municipal finance lawyers see the results of their efforts not in the bonds that are issued but rather in the school or library or bridge that is built.
Municipalities, including states, counties, school districts, special districts such as park districts, and statutory authorities such as the water reclamation authority or state highway commission, issue securities (debt obligations in the form of bonds, notes, or other securities) that are then sold to investors by underwriters. The underwriters, which include investment banks and other financial institutions, generally purchase an entire municipal security issue and then resell the securities to investors. (See the Securities Law chapter for further discussion of this process.) The proceeds that the issuer receives from the sale are then used to finance public projects such as airports, streets, and parks. The issuers may also loan the proceeds to non-profit corporations, such as hospitals, for building or renovation projects.
Municipal finance attorneys generally represent either the municipality issuing the securities or the underwriter who purchases and resells the securities to investors. There are many federal and state laws that govern when a municipality may or may not seek such financing. Municipal finance attorneys must be familiar with these provisions. They must also be comfortable working with federal and state tax laws, as complex tax issues arise and certain requirements must be fulfilled in order for a municipal bond to acquire tax-exempt status, a key selling point in offering the bonds to the public.
When a municipal finance attorney represents the issuing municipality, he or she drafts the documentation relating to the issuance of the securities, including documents that establish the validity of the securities and verify the federal tax exemption, as well as any applicable state tax exemptions. Municipal finance attorneys who assist the bond issuers may also advise the municipality concerning how to structure the bond issue to meet the municipality's financial and business needs, as well as how to satisfy the referendum or other local requirements authorizing the bond offering.
As with any offer of the sale of securities, those attorneys representing the underwriter usually draft the necessary documents to be submitted to the government, including documents to the Securities and Exchange Commission (SEC), a federal agency that administers securities laws. Another of the attorney's responsibilities is drafting the SEC Rule 10b-5 opinion, an opinion in which the underwriter confirms the accuracy of the information contained in documents that describe the municipal project to prospective investors. In addition, the attorneys for the underwriter often draft the contract between the underwriter and the issuer for the initial sale of the securities.
Reproduced from The Official Guide to Legal Specialties with permission. (c) 2000 Thomson Reuters/West. For additional information on this publication please visit 
http://west.thomson.com/products/law-students. Copyright granted via e-mail by Donna Gies, September 16, 2008.