CHICAGO - Minnesota lawmakers approved a measure this week that would require local government issuers to pay bond counsel fees based on factors other than a percentage of the amount of the bond issue.

Gov. Arne Carlson is reviewing the bill and has not taken a formal position on it, according to Brian Dietz, Carlson's spokesman.

Drew Kintzinger, president-elect of the National Association of Bond Lawyers, said that he was not aware of any other states that have passed legislation addressing how bond counsel fees should be paid.

The Minnesota measure that was passed Monday would require that a bond counsel be paid "fair and reasonable fees," based on time, labor, expertise, and the complexity of a bond issue. A bond counsel's responsibilities on a certain issue, the results of a bond sale, and the amount of an issuer's assets could also be considered in determining bond counsel fees, according to the measure.

John Tunheim, chief deputy attorney general for the state, said that the measure requires local governments to follow the lead of the state, which pays its bond counsel fees on an hourly basis.

"This legislation essentially puts into the statutes the practices of the attorney general's office," Tunheim said. "It is designed to change the practices of local attorney to follow this type of process rather than pay on a percentage amount of the deals."

Tunheim said that Sen. Gene Merriam, D-Coon Rapids, drafted the legislation after observing how much local governments pay for legal advice.

Peggy Ingison, the chief fiscal analyst for the Senate Finance Committee, said that the legislation was introduced in March partly because some lawmakers felt that bond counsels received large fees on recent debt refundings that required very little work or risk.

Ingison noted that the measure is modeled after the payment of probate lawyers' fees, which are based on factors other than the size of an estate.

Tunheim said that Merriam agreed with the state's contention that paying bond counsel fees based on other factors, including the hourly rate, is a, better way of compensation that can eliminate "outrageously high fees" on issues that are less complex in nature. However, he said that the measure could also increase the amount of fees an issuer would pay on smaller, more complicated deals.

Thomas Hay, a partner at Dorsey & Whitney, which has worked on state bond issues, disputed the perception that bond counsels in the state are making hefty profits on bond deals.

"The idea that someone is making a killing doesn't reconcile with the facts," Hay said. He noted that his firm provides the state with legal assistance throughout the year and not just on specific bond issues.

Kintzinger, who is also a partner at Briggs and Morgan in Minneapolis, said he believes bond counsel faily bill issuers in the state. He said that the bond counsel community does not oppose the legislation in any organized manner.

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