We’ve all been in meetings like this — I just didn’t know there was an accepted term for the phenomenon –

Imagine a city council meeting with three agenda items: a $100 million power plant zoning approval, a request to build a $10,000 bike rack for city sidewalks and a $100 proposal to buy refreshments for the annual picnic. The power plant discussion takes all of 3 minutes to reach approval, as does the refreshment budget. But the $1000 bike rack debate drags on for hours as council members debate the right materials, the best color scheme and the right way to announce the project.

I’ve taken this example from Startup Best Practices #6: Avoiding The Bike Rack Effect, by Tomasz Tonguz, at http://tomtunguz.com/the-bike-rack-effect/ In this post, Tonguz explains how governing board behavior is driven by the “sense of the tangible” – the tendency to give the most time and attention to issues to which we can relate in our everyday life, and to give less to broader issues that are outside the scope of our customary existence. So even if the rezoning is an issue that will have broader, more substantial and more long-term effect on the community, the large size and scope of that project may drive board members to avoid detailed discussion and analysis, and instead retreat to the safety of the bike rack discussion.

Tonguz cites several approaches to dealing with the bike rack effect, and other ideas are offered in the comments to the post. All are intended to cause the board to put more time and attention on the most important items. In my opinion, however, many of the suggested approaches are misguided in that they try to overcome the concept of the “sense of the tangible” cited in the post. I think instead we have to work with that sense of the tangible. A few ideas on how we can help the boards we work with keep their focus on the most important issues they confront.

You can’t finance a house without signing completed loan documents in front of an attorney, or at least a legal assistant under direct supervision (meaning generally, in the same room or maybe the next room) of an attorney. You can’t even finance a car without signing completed loan documents and at least having them notarized . . .  but now we close bond deals and installment loans for tens of millions of dollars without having complete documents in front of the signer, or without any two parties together in the same room.

Over the years we bond lawyers have allowed the North Carolina public finance practice to deteriorate so that we have documents signed at separate times, and in separate locations, and then exchanged electronically – and sometimes all that’s exchanged are electronic copies of signature pages, standing in for the complete documents. In fact, sometimes all the lawyer sends to the client are naked signature pages, which the lawyer then attaches to documents that may not even have been drafted at the time the signature page is signed. Completed sets of documents are then circulated to the parties only after the closing, and sometimes weeks or months later.

This practice is sloppy, it’s not what our clients deserve, and we have to change it.  Closings that occur without everyone meeting together will never go away, but we’ve gotten too casual about the problems inherent in these closings. This is especially true as it pertains to the use of naked signature pages, and we need to get on a better track.

At this time of year, as we move into budget season, I think it’s a good idea to remind folks of a local government’s authority to issue “two-thirds” general obligation bonds.

Under North Carolina law, a local government can issue general obligation bonds in a fiscal year – without the need for voter approval – for up to two-thirds of the net amount by which you paid down your general obligation bond debt in the prior fiscal year. So for example, if in the 2013-14 fiscal year you had a net reduction in your general obligation debt of $900,000, then in the 2014-15 fiscal year you can issue new general obligation bonds for up to $600,000.

It’s a fairly simple bond authorization process, although it does require a public hearing and LGC approval. In my experience the LGC staff will work with folks who want to use this financing approach to find a cost-effective way to issue the bonds. There’s a wide range of purposes for which you can use two-thirds bonds, and you don’t have to use the two-thirds bonds for the same purposes for which the old bonds were issued. Two-thirds bonds can often be structured with a 20-year repayment period.

Often people think their two-thirds bond capacity is too small to be of any use. But consider whether you might have a small project for which you were going to use your cash, or that maybe you were going to finance a different way – would two-thirds bonds help there? Or perhaps you have a large project for which two-thirds bonds might be an effective way to provide part of the funding. Finally, be sure to think about using two-thirds bonds with any other general obligation bonds you might be issuing, whether for new money purposes or for a refunding.

Please let us know if we can answer any questions for you about two-thirds bonds. You might also be interested in this article by Kara Milonzi of the School of Government staff, which addresses some other issues about two-thirds bonds. And by the way, I’m supposed to direct you to look at our disclaimer page as well.

Ever since the LGC started its project to write down rules for the allowed maturities on local government financings, I have been highly critical of the proposed rules as they apply when local government units want to refinance debt originally issued to the United...

A North Carolina local government recently sent out a request for proposals for bond counsel services. That RFP included the following question – a form of this precise question has been included in the form of a bond counsel RFP that’s been bumping around the State for several years now –

Describe the firm’s method of determining rates and fees, including how and when you would bill the City. Include the types of incidental expenses you would expect to have the City pay, including travel expenses. To the extent that it would not violate attorney-client privilege or any other privilege, please give several examples of fees charged for recent financings in North Carolina, or a similar jurisdiction.

A general question like this is almost guaranteed to elicit a general response that references the factors for fees included in the rules for lawyers’ professional responsibility – factors such as the time it takes to complete the work, the complexity of the matters involved, and the client’s time schedule. Now, this question is better than you usually see, because it does ask for examples of recent fees.

But it’s possible to do much better than that.

We now have the official calendar for meetings of the Local Government Commission for 2014. I thought a LGC Calendar Table might be handy. The calendar gives you the date 28 days prior to the meeting, because generally the Commission staff wants a fairly complete...

The Internal Revenue Service has rules in place that limit a local government’s ability to use financing proceeds to reimburse itself for project expenditures made before you actually close on your financing. Even those rules are now more than 20 years old, I often get questions about how those rules work. Also, we continue to find the occasional project in which a local government can’t go forward the way it wants to because it has failed to comply with these rules. So, I thought it might be worthwhile to provide this quick summary of the reimbursement rules.

One of the most common inquiries I see on a finance officers’ listserv I follow is for the form of an RFP that can go out to banks for quotes on an installment financing. I’ve attached here the form of an RFP I have used often with my clients. Now, updating this form...

There’s a law that says if you have a local government borrowing for more than $1 million that has to go to the LGC for approval, you generally need to send an advance notice to the General Assembly’s joint committee on local government 45 days prior to the LGC’s consideration of your application. Here’s a link to the statute. You’ll see there are some exceptions to the filing requirement; refundings are also exempt from the filing requirement.