WASHINGTON -- Texas housing officials are expected to propose draft rules this month that would make theirstate the second in the nation to curb campaign contributions by bond underwriters and lawyers.
The proposals, which have not been spelled out, but which are expected to be nearly identical to standards adopted by Florida's housing finance agency in late July, will be unveiled for the first time at a board meeting of the Texas Department of Housing and Community Affairs in mid-September, said Virginia Brown, interim director of the department's housing division.
"We're looking at something very similar to Florida," Ms. Brown said about the Florida housing agency's rules. "Gov. Ann Richards is very enthusiastic about the idea," she said, noting that Texas's new governor has been very strong on enforcing ethics rules. "This fits right into her plan."
"There is a concern in government overall" about business being obtained by political favoritism, Ms. Brown added. "It's the way that politics has evolved over the years."
The Florida standards prohibit fund-raising and contributions to candidates running for governor and cabinet posts by investment bankers, bond attorneys, and others doing significant business with the state's housing finance agency. In addition, investment bankers and bonds lawyers are barred from holding informal discussions with agency officials about whether they would be hired for state bond business. Officers and members of the housing authority itself are limited in fund-raising activities on behalf of candidates for governor or cabinet positions.
Finally, the rules set detailed guidelines for selecting underwriters for agency offerings, including a formal submission of written proposals by firms that want to serve as senior bankers.
Gov. Lawton Chiles of Florida, who was the lightning rod behind the housing agency standards, has directed the state's Division of Bond Finance to propose similar guidelines for all state bond issuances. In early July, the cabinet endorsed a draft of rules submitted by the division.
Meanwhile, Ms. Brown said Texas housing officials will present a draft proposal for preliminary discussion as early as mid-September to the department's board, which is expected to be named imminently. She noted that her department was recently formed through a merger of the Texas Housing Agency and Texas Department of Community Affairs. She said further discussion on the proposal is likely later in the year.
Mark Hendrickson, executive director of the Florida Housing Finance Agency, said his agency's rules governing political contributions are expected to take effect the first week of October. He said a final public hearing on the rule, which was pushed by Gov. Chiles, is scheduled for later this month. But "for practical purposes, it's in effect" now, he said.
"When we are doing selections of underwriters or attorneys or service providers, we are making the selection" based on their pledging that they will abide by the rule, he said. The Florida agency issues more than $250 million of bonds a year to help finance both rental housing and low-interest mortgages.
Florida officials pushed ahead with the rules despite warnings from political observers that the state could easily be slapped with a lawsuit charging a violation of the First Amendment, which the Supreme Court has ruled covers campaign contributions by individuals. Some industry observers predict that while lawyers and bankers have expressed muted opposition so far, they may be waiting for the rule to becvome final to hit the state with a lawsuit.
"We paid careful attention to the [First Amendment] as a potential line of attack," Mr. Hendrickson said. "We feel we've built a case that we think is defensible," he said, noting that the state stands ready to prove that the rules provide an "overriding public purpose" as regards freedom of speech. "We tried to adopt this rule with great care by documenting the nature of that public purpose."
He said the division did some finetuning of the rules in response to comments. For instance, it relaxed a provision barring "ex parte" communications between agency officials and underwriters. The rule was revised only to bar informal conversations between state officials and prospective underwriters, after firms said it would hamper important routine communication between agencies and the underwriters they select.
