Municipal Bonds (“Muni bonds”) are financial instruments used by communities to pay for public purposes such as necessary government services and desirable community facilities. For example, as a community, we vote for necessary subdivisions of local government to provide for roads, water and sanitation, schools, police and fire protection districts, and we vote to provide for desired subdivisions of local government such as parks and recreation, social welfare facilities for poor or troubled people, libraries and the like. Each subdivision of government operates by a dynamic pull and tug between the elected officials and the voters/taxpayers.
Public purposes and private purposes are sometimes easy to distinguish, sometimes not. Elected officials and taxpayers may view differently how money from public Muni bonds should be spent. Conflicts arise when rules of the Internal Revenue Code or other statutes are violated, or perceived to be violated, during the course of a public works project. For example, a town decided to use Muni bonds to build and to operate a public parking garage in its downtown to provide relief from street congestion. The main beneficiary of the new garage was an adjacent business which negotiated a discount daily rate for its numerous employees, who otherwise would have created a large part of the street congestion. Is the garage a public purpose or private purpose facility? The answer can be figured out only by using a couple of complicated formulae prescribed by the Internal Revenue Code.
Steps necessary to obtain a Muni bond and to spend its proceeds, fraught with legal hazards and personal attacks by opponents, include: public meetings, vote by council or board to have a public referendum to approve a public works project and its Muni bond financing, drafting ballots, electioneering for or against the public referendum, on-going public meetings, drafting public contracts with brokerages and builders and service providers, due diligence to insure the contracts do not violate the Internal Revenue Code and numerous other statues, spending the money on schedule, paying the buyers of the Muni bonds on time, prosecuting or defending lawsuits, more public meetings and communicating appropriately with the press.
Specialized firms such as ours bring together the diverse skills needed – legal, accounting, public relations, record keeping, auditing, quality control, ISO compliance – whether you are a member of local government, a special district or a citizens group.