The debt committee of the Government Finance Officers Association approved recommended practices on public-private partnerships and the selection of bond attorneys last week.
At its winter meeting here, the committee on governmental debt management also approved a public policy supporting legislation pending in both houses of Congress that would allow thrifts and credit unions associated with the Federal Home Loan Bank system to provide letters of credit for small tax-exempt economic development bond issues.
A public policy supporting pending federal legislation to prohibit the patenting of tax strategies, techniques, and technologies was approved by the committee as well. [See related story on page 6.]
The recommended practices must still be approved by the GFOA executive board, which next meets in the spring, while the public policies must be approved by the executive board and the group’s full membership at their annual meeting in June.
The P3 recommended practice is mostly meant to help define the term, which has traditionally been associated with projects such as tax-increment financing transactions, but now encompasses more recent trends like the long-term leasing of tolling rights on highways by private entities.
“These transactions present a fundamentally different set of opportunities, risks and concerns for governmental participants than the traditional P3s do,” the RP states.
The RP for P3s recommends that finance officers ensure that the government’s participation in the partnership does not bring excessive and unbalanced risk to the public, and suggests that the government prepare a comprehensive list of potential issues that may effect it. The RP also calls for the government to have sufficient in-house and outside expertise to evaluate such issues to make sure that the partnership is beneficial to both the public and private partners.
The committee revised its existing RP on the selection of bond counsel. Among the noteworthy revisions is an added recommendation that elected officials not be part of the evaluation or selection teams states and localities form to appoint bond attorneys, in order to remove any appearance of conflicts of interest from political contributions “or other activities.”
The RP, which was last updated in 1998, also recommends that bond counsel fees not be paid on a contingent basis to remove the potential incentive for bond counsel to render legal or tax opinions “that would result in the inappropriate issuance of bonds.”
“However, this may be difficult given the financial constraints of many issuers,” the RP added.
The Federal Home Loan Bank legislation supported by the debt committee currently has the backing of about 20 national groups, including the National League of Cities and the U.S. Conference of Mayors, as well as about 75 state agencies. If passed by Congress, it would allow any of the 8,100 member lenders of the FHLB system to issue letters of credit, which could be used to insure small tax-exempt industrial development bond deals or transactions involving small nonprofit health care facilities, colleges, or universities, according to its supporters.
The legislation would put the FHLB system on the same level as Fannie Mae and Freddie Mac, two other government-sponsored enterprises that are permitted to issue letters of credit in support of tax-exempt bonds. Currently, only housing bonds can be backed by a federal guarantee and still retain their tax-exempt status.