The Role of Bond Counsel in Public Agency Financing
John L. Kraft, Esq. Partner Lomurro, Davison, Eastman & Munoz, P.A.
Virtually all bonds issued by states and political subdivisions are accompanied by an approving legal opinion of a nationally recognized bond counsel. This is a law firm with an established reputation in the investment community for experience and reliability in municipal finance. The bond counsel’s approving legal opinion is the investor’s assurance as to the validity, security and tax-exempt status of the bonds. It states that the bonds are valid and binding obligations of the issuer enforceable in accordance with their terms and, when appropriate, that the interest income on the bonds is exempt from federal income taxes.
The assurances provided by the legal opinion stay with the bonds as long as they remain outstanding, passing from one owner to another. The owner of an outstanding municipal bond cannot expect to sell the bond unless he delivers with it a copy of the bond counsel’s approving legal opinion.
This chapter will explain the role of bond counsel in public agency financing by exploring the history of bond counsel, the purpose of bond counsel in the twenty-first century, the legal issues addressed by bond counsel and evolving issues in public finance law that will be addressed by bond counsel.
HISTORY OF BOND COUNSEL
The role of bond counsel can best be understood from an historical perspective. In the 1800s a number of states and ...