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Financing for Environmental Compliance

Step Seven: Select Financial Options - Roles and Responsibilities of Unusual Firms Involved in a Municipal Bond Transaction

A team of professionals is required to obtain municipal financing via the bond process. The Bond Buyer's Municipal Marketplace, commonly known as "The Red Book", is a source of current and accurate information of municipal bond professionals. A copy of The Red Book can usually be obtained at the municipal or local university library.

The following is descriptions of the roles and responsibilities of the usual professionals involved in the bonding process.

Financial Advisor

The role of an independent financial advisor is to serve as an advocate for the issuer and provide the issuer with the information necessary to make intelligent, informed decisions. This person should know how to structure the financing to get the best rate for the community. They review and give advice on the bond underwriter’s proposals and reviews documents from underwriter, underwriter’s counsel and bond counsel. They coordinate the bond issuance process. A financial advisory should be an independent and objective bond market expert with no financial ties to underwriting or investment management industry. Usually receives a flat fee rather than a percentage of the bond issue

Municipal Counsel

Municipal counsel represents the community’s interest. Together the bond counsel and municipal counsel work on matters such as federal and state law and tax approvals, ensuring that proper legal procedures are being followed.

Paying Agent

The paying agent plays an important practical role in the bond issue: it sees that funds are properly distributed according to the intended purpose of the bond issue. For example, the paying agent applies the balance of the bonds' proceeds to the construction project's accounts, or it applies the proceeds to debt holders if the bond issue is meant to refund prior debt.

Bond Underwriter

A Bond Underwriter is a financial institution (investment bank or commercial bank) which purchases a new issue of municipal securities for resale. The underwriter may acquire the bonds either by negotiation with the issuer or by award on the basis of a competitive bidding.

Underwriter's Counsel

The Underwriter's Counsel is a firm of municipal bond attorneys hired by the underwriter to prepare the official statement in a negotiated underwriting and review all documents.

Bond Counsel

Bond counsel's role is that of an independent expert who provides an objective legal opinion on the validity (a state law issue) and tax exemption (usually both a federal and state law issue, but primarily a federal tax law issue). Bonds cannot be sold without the opinion of a recognized bond counsel.

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