CHICAGO -- Gov. Arne Carlson of Minnesota last week signed into law a measure that requires state and local government issuers to pay bond counsel fees based on factors other than a percentage amount of a bond issue.
The measure requires "payment of fair and reasonable" bond counsel fees, based on time, labor, knowledge, and experience. Issuers also must consider the complexity and novelty of a bond issue, a bond counsel's responsibilities, results of a bond sale, and the amount of an issuer's assets, according to the law.
The law, which takes effect Aug. 1, also requires the state auditor to evaluate the law's impact on cost and quality of bond counsel work during 1995 and 1996 and compared the results to 1992 and 1993 evaluations. The auditor must present his findings to the legislature by Nov. 1, 1997.
Drew Kintzinger, president-elect of the the National Association of Bond Lawyers, has said that he was not aware of any other states that have passed legislation regulating how bond counsel fees should be paid.
State Sen. Gene Merriam, a Democratic Farmer Labor member from Coon Rapids, said yesterday he drafted the bill because the public "should have an understanding of how much public policymakers are spending" on bond counsel work rather than accepting the payment of fees based on the amount of a bond issue.
Merriam said he drafted the legislation after finding out that the state last year spent more than $600,000 in bond counsel fees -- payments based on the amount of bonds sold. He then concluded that local governments must be paying millions of dollars.
Stephen Rosholt, a partner at Faegre & Benson in Minneapolis, said yesterday that he does not expect the measure to have a significant effect on the level of fees his firm will receive.
Another bond attorney, who did not want to be identified, said that he did not think the law was necessary because, in his experience, issuers "rarely base their bond counsel fees on the amount of bonds sold." He said that increasingly issuers are selecting bond counsel through a request for proposals process, which makes the pricing very competitive.
While the new payment system may eliminate high fees on larger, less complex deals, it may increase fees on smaller, complicated deals, John Tunheim, Minnesota's chief deputy attorney general, said.
The measure was modeled after the payment system for probate lawyers fees, which are based on factors other than the size of an estate, Merriam said.