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.
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