DALLAS -- There is peace again at Houston City Hall.
Mayor Robert Lanier and Controller George Greanias yesterday signed a memorandum of understanding ending the legal fight over a plan to use variable-rate bonds to settle legal claims. As part of the deal, the mayor agreed to seek voter approval for an estimated $25 million issue.
"The cause of the disagreement was over whether it was the city officials or the taxpayers who determined when debt is issued," said Mr. Greanias, who had insisted judgment bonds be approved by voters. "This gives taxpayers what they deserve."
Mr. Lanier was unavailable for comment yesterday, but a spokes-man said the mayor was pleased the agreement resolves several issues.
Although the pact has no direct impact, some hope it will clear the way for the sale of $450 million of general obligation refunding bonds as early as the week of June 15. The deal would restructure city debt as part of a plan to balance the fiscal 1993 budget by freeing tax monies now used to pay debt service. The issue will be sold by a group led by Goldman, Sachs & Co.
City officials are reportedly still discussing the deal's final structure, and several details remain unresolved. "I've not called any rating agencies yet about meetings," said Tom Masterson, chairman of Masterson, Moreland Sauer Whisman Inc. of Houston, the city's financial adviser.
The three-page agreement calls for an end of the court fight between the city and Mr. Greanias over the legality of using short-term general obligation bonds to pay legal judgments without voter approval.
The mayor insisted that state law allowed such bonds to be used without a vote, but part of the agreement calls for an election seeking voter approval of up to $25 million in bonds for that purpose.
City officials said an election could be held as early as August.
Houston officials had planned to issue $17.7 million in variable-rate bonds, but were forced to pay half those legal claims with cash after the controller successfully stalled the bond sale in court. The matter was set for a new trial on July 13 in state district court.
Finally, the pact between the two officials is more far-reaching in that the mayor and controller "will commit generally to consult on fiscal matters and to work cooperatively wherever possible to resolve disputes."
Specifically, the mayor has agreed to continue procedures adopted by the Houston City Council in 1987 that govern the city's financial working group.
Mr. Greanias had objected to departures from those procedures, saying he was being circumvented on city fiscal matters. Late yesterday, he declined to say the agreement was a victory for his office, though he conceded that as recently as last month there were efforts to "reduce this office to shuffling paperwork."
In terms of the bond sale, one source had said the schism in city government would not legally have prevented it, but that a feud made it difficult to proceed with a major debt restructuring.
Despite yesterday's agreement, the mayor and controller remain divided over the plan to extend the average life of the city's debt by restructuring an estimated 41% of the total $1.1 billion GO debt outstanding.
The mayor has said the plan would let the double-A rated city free an estimated $35 million a year initially to balance the budget without a tax increase or cutbacks.
But Mr. Greanias has opposed the plan as a short-sighted departure from the city's policy of historically paying off 74% of its debt in the first 10 years.
