PHOENIX - California Attorney General Kamala Harris has issued another formal opinion on municipal bond practices, saying city attorneys who also provide bond counsel services may not be paid based on a percentage of a city's bond issuances.
The opinion, issued last week in response to a request from the Riverside County district attorney's office, determined that Government Code section 1090 prohibits an arrangement under which a contract city attorney's compensation for providing the city with additional bond counsel services is based on a percentage of the city's bond issuances.
Such California attorney general's opinions are advisory and not legally binding on courts, but are generally considered authoritative by the officers and agencies who have requested them and given respect by judges.
"Cities without sufficient legal work to support the employment of a full-time city attorney often contract with a private attorney to perform city attorney legal services at an agreed-upon rate," the opinion said. "We are informed that many such contract city attorneys include in their services contracts a provision that, should the city issue bonds during the contract period, the contract attorney will also act as 'bond counsel' for the city and be paid a percentage of the bond issuance for providing such services."
Such a practice is illegal because the law prohibits specified "city officers or employees" from being "financially interested in any contract made by them in their official capacity," the opinion said.
The opinion includes a legal analysis concluding that such lawyers, even though are hired on a contract basis, are "city officers," and that they have no exemption excusing them from compliance with the law, which is intended to prevent conflicts of interest stemming from personal gain.
"Under this broad definition, the city attorney here is financially interested in the bond contracts," the Attorney General's opinion said. "The attorney will be paid only if the bonds issue, and the attorney will be paid correspondingly more for a larger bond issuance, thereby giving rise to a temptation to influence the bond issuance process in a way that would maximize his or her compensation — even if the issuance of bonds, or the issuance of a larger amount of bonds, may not be in the city's best interest."
The opinion came just two days after another, in which Harris' office said that school and community college districts violate California law if they hire outside firms to campaign for bond ballot measures or purposely incentivize municipal finance professionals to advocate for passage of a bond measure.
The office of Riverside County District Attorney Michael Hestrin did not respond to a request for comment on the opinion.