Best Practice: Selecting Bond Counsel

Professional service contracts die a long and hard death in local governments, especially if that relationship has been in a local contract for a significant length of time. In my tenure in local governments, some of the longest-running contracts in public finance are bond counsels, financial advisors, and auditors. Some of these have significant ties to certain communities, and those relationships spread deep rather than through political, friendships, or institutional knowledge.

Sometimes, this institutional knowledge is invaluable, especially in situations where staff turnover has been extremely high. These professionals understand the history, complexity, and structuring of certain deals that without their knowledge, that history no longer exists.

However, like anything without regular competition, several things can occur that are not of value to the organization. Things like: price creep and a decrease in customer service due to familiarity.

Price creep can easily occur without regularly going to the market and keeping professional services true to market prices. As the saying goes, familiarity breeds contempt, and this can easily occur with organizations that don’t hold professional service contracts accountable.

Bond counsel is certainly an important professional service that most entities have, especially if they are accessing the debt market. They are extremely important to ensuring that local governments follow legal and regulatory requirements due to the issuance of debt and most importantly, advising on the tax status of issued debt.

I have been blessed with great bond counsel in my career. Only one of them fell into the latter category, primarily because pricing was significantly higher than market, and familiarity with the organization had led to poor customer service. Let’s just say Jim Bob was a cantankerous counsel and did not provide needed items when requested without throwing a fit. Political relationships helped to smooth over any rough edges. Once those dynamics changed, the City went to market and ended up with a great, professional counsel who provided significantly better customer service than the previous one.

Going to market is a great thing for professional services. While you might not want to change the relationship, it keeps the pricing and the service at high levels.

GFOA recommends that issuers select a bond counsel based on merit using a comprehensive process and reviewing those relationships periodically. The competitive process utilizes a request for proposal or request for qualifications, which allows issuers to review the qualifications of the firms to find one with the experience needed based upon their community needs. As a Finance Director, you regularly require their knowledge and expertise to protect the organization from violations and preserve credibility within the market.

Selecting bond counsel is one of the most critical decisions a public finance director can make when issuing debt. Bond counsel ensures compliance with laws and regulations, supports transparency, and provides the legal opinions that investors trust. By following the GFOA’s best practices, finance directors can streamline this process while safeguarding their organization’s interests. 

Start by implementing a competitive procurement process to ensure transparency and fairness. Outline clear evaluation criteria that prioritize qualifications, relevant public finance experience, and cost—not just price. This approach ensures that the selection process reflects fiscal responsibility while securing high-quality legal services. 

Conduct thorough due diligence by reviewing references, past performance, and specialized experience in public finance law, tax law, and securities regulations. This is essential to avoid costly errors and delays in the issuance process. 

Once bond counsel is selected, negotiate a formal engagement agreement that clearly defines the scope of services, responsibilities, and fees. Transparent terms prevent misunderstandings and align expectations. Be particularly vigilant about conflicts of interest, ensuring the bond counsel’s loyalty is solely to your organization. 

For long-term success, focus on relationship-building with your chosen counsel. A strong partnership allows for more efficient and cost-effective transactions in the future while fostering institutional knowledge that benefits your government over time. 

Finally, as a finance director, I continually advocate for balance: securing expertise and value while maintaining fiscal discipline. Leveraging these best practices not only reduces risk but also demonstrates accountability to taxpayers and stakeholders. 

By applying these strategies, public finance directors can ensure legal compliance, minimize financial risks, and maintain their organization’s credibility in the eyes of investors and the public. 

By adhering to these best practices, public finance directors not only enhance the integrity of their bond issuance processes but also build a foundation of trust with stakeholders, including elected officials, taxpayers, and investors. Thoughtful selection and management of bond counsel demonstrate a commitment to transparency, accountability, and financial stewardship—cornerstones of effective public finance leadership. In an era where public scrutiny is higher than ever, these steps ensure that your organization remains compliant, cost-effective, and well-positioned to meet its long-term financial goals.