This case study is based on North Carolina law. Terms and procedures will vary state to state, but the concepts are generally true throughout the country.


The new finance officer and newly-elected mayor are meeting with bond counsel to discuss financing the mayor’s new pet project.

Project Description:

New Performing Arts Center/Parking Deck

Cost: $30 Million

At 68,000 square feet the PAC will accommodate large-scale performances by bands, orchestras, theaters, dances, and visual arts groups. This state-of-the-art facility will include a spacious lobby that features an art display system, a 1,200-seat main auditorium, a 250-seat black box theater, a dance studio, dressing rooms, and multi-purpose rooms. Additional amenities include a 400-car parking garage and landscaped plaza with three distinct gathering spaces designed for outdoor performances.

So you want to build a performing arts center, now what?

This case study is based on North Carolina law. Terms and procedures will vary state to state, but the concepts are generally true throughout the country.


Why do I need bond counsel anyway? We have a City Attorney. Isn’t that his job?

  • What we do, and how we do it:
    • Organization as a client
    • What are bonds?
    • Why you need bond counsel:
      • A single transaction can have many moving parts and players.
      • For example, a typical transaction often includes:
        • Lenders, borrowers, overlapping jurisdictions, securities law, tax taw, and/or NABL standards


I want to build a project, now what?

  • What kind of project?
    • Cost
    • Goals: short term and long term


Why can’t I just go down to the Bank and borrow money like I’ve always done?


Do I have the authority to borrow money as a local government?

  • Dillon’s Rule
    • A municipality may only exercise those powers expressly granted to them, those necessarily or fairly implied in or incident to powers expressly granted, or those essential to the declared objects and purposes of the corporation. This includes the “reasonable selection method”, which allows a municipality to select the best method for exercising its power.
  • “Cubbyholes”



What are the different ways we can borrow money?

There are 3 sources for money:

  • Enterprise Revenues
  • Taxes
    • GO Bonds
    • Installment Financing
  • Alternative Funding Sources


Enterprise Revenues

  • Revenue Bonds (S. 159, Art. 5)
    • Security: Revenues from financed projects or systems to which financed assets become a part = fees must be related to the project
    • Projects: Projects that generate revenues (S. 159-81); Special Assessments (G.S. 160 A, Art. 10; G.S. 153 A, Art. 9)
    • Voter Approval: No
    • LCG Approval: Yes
    • Sale type: Usually public or USDA/ negotiated
    • Limit on amount: covenants


Taxes: Property and Sales

  • GO Bonds
    • Security: full faith and credit of the unit
    • Projects: all capital projects unit has authority to undertake (S. 159-48)
    • Voter Approval: usually
      • No vote is required when:
        • refunding outstanding GO Bond or GO bond anticipation notes
        • issuing 2/3 bonds
      • LCG Approval: Yes
      • Sale type: Public/Competitive
      • Limit on amount: No debt limitations


If GO Bonds are so great, why don’t we just do those?

GO bonds typically require a bond election, can be difficult to get the necessary political and community support.


Why wouldn’t we want to take it to the voters?

            Voters can be unpredictable.

  • Installment Financing (S. 160A-20),
    • Collateral
      • In NC the project must be purchased, improved, or some combination of the two in conjunction with the financing
    • Annual appropriation


Are there any outside funding sources available? How can I get other people to pay for the project?


Alternative Funding Sources:   Other People’s Money

  • Interlocal Government Agreements
  • Grants (“Free Money”)
    • Government
    • Private
  • “Pay for Success” programs
    • Also referred to as social impact bonds, these performance driven programs are innovative contracting models that drive government resources toward high-performing social programs. They track the effectiveness of programs over time to ensure that funding is targeted towards programs that are measurably improving the lives of those most in need.
  • 501(c)(3)
    • Debt backed other people’s money. Charter schools, hospitals, universities, etc.


Why can’t the 501(c)(3) just borrow the money?


Why can’t we just guarantee the loan?

            A municipality can’t sell its credit.


Is it more beneficial to renovate a building we already have?



How do I know which option/plan is right for my town and this project?

  • Cheapest
    • The cheapest option is not always the best option. Often clients focus on saving money and ignore other important factors.
  • Easiest
    • Must look at statutes, regulations, “policies”, LGC

Factors to consider:

  • Political
    • Political buy-in from board
  • Community
    • Community support
    • Voting
    • Public Hearing


Do we need to have a public hearing for this?

Maybe. A public hearing may be required depending on which financing method you select. Public hearings, even when not required by statute, can be a good way to get community buy-in for your project.


If I’m having trouble getting community or political buy-in can you help me?

Yes. We’re always happy to make presentations to boards and staff about specific financing options that are being considered. We’re also available to participate in public hearings and town meetings. If you’re trying to reach a particular subset of your community, we’re happy to facilitate community conversations. These conversations provide a safe space for a community to come together for structured dialogue about common values- past, present, and future.



Is there a way we can get those who are benefitting from the project to pay for it?

Where will the money come from?

  • Associated revenue streams
    • Can use enterprise revenues for repayment whether or not use finance through revenue bonds.
  • Debt service funds
  • Special Assessment revenue bonds
  • Service Districts
  • Incremental Revenues
    • TIF
      • The project will increase revenues, property values, within the area surrounding the project. These funds can be pledged for repayment.
    • Synthetic TIF



Professional Development


As a student you’re eligible for free membership in the North Carolina Bar Association. This includes membership in the YLD and membership in one section. If you’re interested in local government, consider membership in the Land Use or Local Government section (

NABL scholarship:

The National Association of Bond Lawyers offers a scholarship to law students interested in pursuing a career in bond work. (

Professionalism/ Ethics:

Advising on matters that are not strictly legal (Rule 2.1)

Public Records Law (G.S. 132)

Open Meeting Law (G.S. 143, Art 33C)

Confidentiality (Rule 1.6)

“Just because it’s a public record, that doesn’t mean it’s not confidential”

Legal References:


Local Government Finance (G.S. 159)

Cities and Towns (G.S. 160A)

Counties (G.S.153A)

About Us:


Sanford Holshouser, LLP: We’re always happy to talk with students and offer advice. Please feel free to contact us.


Bob Jessup:

Brian Crawford:

What we do:

  • Public Finance
  • Community Economic Development
  • Affordable Housing
  • Board Effectiveness Trainings and Community Conversations

Sanford Holshouser LLP Blog

“Just because it’s a public record, that doesn’t mean it’s not confidential”




[sample bond counsel engagement letter for a project like that described in the scenario; this contemplates a transaction with a lot of bells and whistles, but this gives you some idea of the scope of work for the bond counsel and some of the professional responsibility issues that ought to be addressed in an engagement letter. Many “form” engagement letters you can find will cover a variety of other issues not necessarily pertinent to this engagement (for example, use of money in trust accounts).]

November 15, 2016

By Electronic Mail


Finance Officer

Jefferson County


Jefferson County, North Carolina –

Service as Bond Counsel for Arts Center Financing


Dear __________:

Thank you for giving us at Sanford Holshouser this additional chance to work with you and for Jefferson County as bond counsel on the planned installment financing for the new arts center. We appreciate the opportunity and the County’s continued confidence in us. I am writing now to confirm our understanding with respect to the scope of our work and our fee arrangements.

Our Firm will represent the County as bond counsel in connection with the proposed authorization and issuance of limited obligation bonds representing interests in the County’s installment payments. We understand the County plans to use approximately $30.0 million of financing proceeds for the new performing arts center – parking deck project, and to use additional proceeds to pay financing costs and other related costs. We understand this bond issue is planned as a public offering to close as early as next May.

Our job as bond counsel will include providing legal advice to the County, preparing the appropriate financing documents and coordinating the financing process with the County and the other financing participants. At the closing of the bond issue, we will deliver our legal opinion as to the general enforceability of the County’s repayment obligations and as to customary matters of federal and North Carolina tax law.

Attachment A to this letter describes the planned scope of our work in more detail. As you know, we have already completed some of the work described in the attachment, and other aspects of the work are well underway. Please let me assure you that the scope of work described in the attachment is consistent with the scope of our work on similar financings for other local governments.

Our fee for acting as the County’s bond counsel will be $xxxxxxxx. This fee includes all our expenses. We will deliver a bill for our fee at the closing, and we will ask that the County authorize the bond trustee to pay our fee directly from bond proceeds at closing.

If the form of the transaction takes a major change, then we will discuss with you an appropriate fee for the new scope of work. If for any reason the County decides not to proceed with the bond issue, or proceeds with another bond counsel, we would then expect to be compensated for our time actually spent from the beginning of the process, plus our out-of-pocket expenses.

*     *     *     *     *     *     *     *     *

I hope you will find this letter to accurately set forth your understanding of our arrangements. Please call me if you have any questions or comments about any of the information in this letter. Otherwise, if the County accepts these terms, please have a copy of this letter signed in the space below, and then please return a copy to me (a faxed or scanned copy, or one sent by first-class mail, will be sufficient). This will indicate the County’s acceptance of our proposed scope of service and our fee arrangements.

Thank you once again for this additional opportunity to work with you and for Jefferson County.


Very truly yours,


Robert M. Jessup Jr.

cc:       [County Attorney]

(by electronic mail)


Accepted and approved:

Jefferson County, North Carolina


By: _____________________________


Printed name: _________________________


Title: ________________________________

Attachment A – Description of the Scope of the Work

We look forward to working with you on this financing. As bond counsel for Jefferson County in this transaction, our responsibilities will be as follows:

*          examining the applicable law;

*          advising the County as to legal matters concerning the financing;

*          preparing the primary financing documents;

*          drafting all necessary proceedings of the County Board and a notice for publication of the required public hearing;

*          coordinating with the County Attorney as to his required work;

*          discussing and negotiating draft financing documents with the underwriter, the bond trustee and their respective counsel, and with the bond rating agencies as appropriate;

*          helping to coordinate the financing process with staff of the North Carolina Local Government Commission and the County’s financial adviser;

*          coordinating the work of the separate attorneys hired to acquire the real estate title insurance policy that is required as part of the financing plan, as well as the attorneys hired to work as counsel to the required nonprofit financing corporation;

*          preparing documents required for the bond closing, including a certificate describing the planned use and investment of bond proceeds to document compliance with applicable federal tax rules;

*          reviewing, on the County’s behalf, the closing documents prepared by others;

*          collaborating with all parties as to closing arrangements and supervising the closing;

*          delivering our legal opinion at the closing evaluating the validity of the County’s repayment obligations and the tax treatment of interest payments made by the County under federal and North Carolina tax law;

*          delivering at the closing a supplemental legal opinion to the bond underwriter as to matters related to the bond offering, a letter to the bond trustee for its reliance on the primary legal opinion, and any other supplemental opinions that may become necessary;

*          preparing and filing the required I.R.S. Form 8038-G; and

*          preparing complete sets of the financing documents for all parties.

Our engagement does not include any work related to real estate matters, including obtaining title insurance commitments or policies or doing any research as to title matters. In addition, our engagement does not contemplate our representing the nonprofit financing corporation that is needed for this transaction. Please also note that we are not financial advisers, and the County should not look to us, or rely on us, for financial advice.

The County’s application to the Local Government Commission is the County’s responsibility. The application requires that we submit the forms of the financing documents and this fee arrangement letter, but the other forms and materials must be completed by County representatives.

Similarly, the preliminary and final official statements that are part of the bond offering process are the County’s responsibility. The document is primarily managed by the underwriter’s counsel, but it is the County’s responsibility under the federal securities laws to assure that the official statement is correct and complete in all material respects. Except as noted below, we will not assume or undertake responsibility for the preparation of the official statement, and we will not perform any investigation to determine its accuracy, completeness or sufficiency. We will not review the County’s financial condition, the feasibility of the financed projects or the adequacy of the security provided to bond owners, and we will express no opinion on these matters.

As part of our work as bond counsel, however, we will prepare summaries of bond documents and a form of our legal opinion to be included in the official statement, and we are responsible for those items. We will also review or prepare, and approve, any other descriptions in the official statement of (1) the terms of the bonds and the financing documents and (2) our legal opinion.

We represent the County as a separate entity. We do not represent any individual officer or individual governing board member of the County. Our professional duty of confidentiality, for example, runs only to the County as an entity and not to any individual representative. In some cases the rules of professional responsibility for lawyers may require us to share information received from a County representative with other County representatives, or directly with the County Board. We will take direction for our work from the Finance Officer unless we are directed otherwise by the County Attorney or the County Manager.

Although we serve as bond counsel to the County, it is our responsibility to deliver legal opinions at the closing that are objective; that is, they are to set forth our evaluation of the legal matters at issue without regard to the County’s financial or other interests. We will not represent any other party to the transaction, including the County’s financial adviser, although we will of course explain and discuss our view of the applicable law and requirements for compliance with all parties.

We generally consider our engagement as concluded with the bond closing, except for the completion of miscellaneous “post-closing matters,” such as completing bond transcripts. Our Firm and the County may identify other matters prior to the closing that have to be completed after the closing. Otherwise, after the bond closing any work on matters such as arbitrage rebate, document revision, loan modifications or refinancings, IRS or SEC inquiry, tax law compliance or continuing disclosure would have to be the subject of a separate agreement between the Firm and the County. After the closing, we will also ask the County to provide an evaluation of our work.

Please let us know if we can in any way clarify our role.

Sanford Holshouser LLP