Nonprofit Corporation Financing

Nonprofit corporations comprise the schools, hospitals, and other public sector institutions for which Orrick’s Public Finance lawyers provide counsel on all legal and business matters related to the issuance of tax-exempt bonds.

Lawyers in Orrick’s Nonprofit Practice have been providing legal counsel to non-traditional issuers such as corporations that are just now establishing nonprofit status, and to organizations that may not even have the assets to qualify for a tax-exempt bond issuance under typical circumstances.

Orrick has acted as bond counsel for almost all of the tax-exempt financings for cultural institutions that have been done in New York and for numerous such financings in California. We also have extensive experience as bond counsel, underwriters’ counsel and institution counsel for colleges, universities, hospitals and other nonprofit organizations throughout the rest of the country.

As bond counsel to the Trust for Cultural Resources of the City of New York, we have participated in financings for the Museum of Modern Art, the American Museum of Natural History, Carnegie Hall, the Jewish Museum, the Guggenheim Museum, Channel 13, the New York Botanical Gardens, the Museum of Television and Radio, the Asia Society, the Manhattan School of Music, the Center for Jewish History, and the Museum of American Folk Art. We have also acted as counsel to the Museum of Modern Art with respect to certain issues arising in connection with its financings and as counsel to Carnegie Hall with respect to the negotiation of the agreements with banks providing credit enhancement for its bonds. Our work for the Trust has also included participating in the drafting of amendments to the Trust’s enabling legislation, including the amendments sponsored by Lincoln Center in 1997.

Orrick’s work for cultural institutions extends to the West Coast, where we have acted as bond counsel for financings for the Asian Art Museum, the Getty Museum, the American Center for Wine, Food and the Arts (COPIA), the Long Beach Aquarium of the Pacific, the Long Beach Museum of Art, the Los Angeles Children’s Museum, Oakland Museum, San Diego Museum of Art, San Diego Natural History Museum, San Francisco International Airport Aviation Museum and the San Diego Air and Space Museum, among others.

The above-referenced financings have included fixed rate bonds, variable rate bonds, and auction rate bonds. Credit enhancement and liquidity support have included letters of credit, bond insurance and standby bond purchase agreements. Projects have included construction of new facilities, renovation of existing facilities and the purchase of equipment and financing of operating expenses during periods of development. We have participated in the negotiation of financial covenants, including those with respect to meeting fund raising targets, establishing rates at particular levels and maintaining certain asset levels, and are fully aware of the tax issues raised by certain covenants. We have helped to fashion covenants to satisfy the requirements imposed by credit enhancers while balancing the competing limitations imposed under the federal tax code. We have also addressed the tax issues raised by contracts for the management of certain areas of a project (such as the dining and retail space) by a for-profit entity and leasing of space in the project to other unrelated not-for-profit or for-profit entities. We have worked to allocate institution equity to those portions of a project most likely to be used by for-profit entities.

Roger Davis, Chair of the Public Finance Department and head of its Nonprofit Finance Practice Group recently authored Nonprofit Corporations: Borrowing with Tax-Exempt Bonds to introduce and better inform, a broader range of nonprofits about the benefits of, and procedures associated with, obtaining, tax-exempt financing. To receive a complimentary copy of this publication, please contact publicfinance@orrick.com.