CHICAGO — A lot has changed in the municipal debt world in the 20 years since Clayton Gillette and the late Robert Amdursky first wrote “Municipal Debt Finance Law: Theory and Practice.”
A lot has changed just in the last few months.
So Gillette decided it was time for a formal edition update. To that end, Gillette tapped veteran Michigan bond attorney Allen Bass to help him pen the second edition.
“I’ve been doing annual updates ever since [1992], but given the turmoil and the fiscal situation of cities, my view and the publisher’s view was it would be nice to finally do a new edition that took into account the changes of the municipal debt world in the last 20 years,” said Gillette, who teaches law at New York University School of Law.
The second edition will feature sections on Chapter 9 bankruptcy — nearly unheard of at the time of the publication’s first edition — as well as local government fiscal stress and an expanded section on the federal trend toward increased disclosure.
“In 1992, it was quite clear that [municipal bonds] were very safe and not very sexy instruments,” Gillette said. “The first edition of the book did not mention Chapter 9, and the reason was, there wasn’t much reason to. Suddenly there is reason to.”
New legal developments have popped up in just the law few months in rulings on bankruptcy cases concerning Harrisburg, Pa., and Jefferson County, Ala., Gillette noted.
The emergence of more sophisticated structures used by bankers and attorneys, coupled with more cash-strapped local governments, have also changed the market, leading to the evolution of traditional general obligation and moral obligation pledges to appropriation-backed bonds.
“In the last 20 years, smart bond counsel and smart investment bankers have continued to create new and interesting ways to avoid debt limitations,” according to Gillette.
Bass will tackle federal securities law, with an emphasis on what he says is the Securities and Exchange Commission’s historical trend toward reform that has led to increased disclosure regulations.
“When you got back to the origins of the federal securities law in the New Deal, you find this reformist trend is very, very strong,” said Bass, a bond attorney with the Detroit-based firm of Lewis & Munday until January.
“It’s part of the SEC culture, but to my way of thinking it isn’t just merely interesting cultural history, it’s a perspective for viewing and approaching disclosure,” he said.
Despite many issuers’ dislike of federal disclosure requirements, “it’s better to jump rather than be pushed,” Bass said, adding that it’s better for the market in the long run.
“I question whether we would have so much potential for municipal defaults and municipal bankruptcies if there had been the kind of disclosure that the trend is going to,” he said.
Gillette and Bass have known each other since the mid-1980s.
Gillette said he asked Bass to work on the new edition because “it was clear to me that he had the perfect combination of a scholarly academic perspective and a practitioner’s sense of the practical aspects of municipal bond practice.”
The 2012 supplement to the first edition will be out in June. The second edition is set for 2013. Aspen Publishers is the publisher.
Robert Amdursky died shortly before publication of the first edition, but his name will continue to appear on the new edition.
