LOS ANGELES -- A Los Angeles city attorney said yesterday he fails to see merit in arguments that question the city's legal rationale for selling a convention center refinancing on a competitive basis.
A private attorney last week wrote a nine-page letter on behalf of Grigsby Brandford & Co. asking the city to reconsider its legal justification for determining whether certificates of participation should be sold competitively or by negotiation.
After reviewing the letter, "I don't find it persuasive," said Pete Echeverria, an assistant city attorney. He added that "I don't see anything" to alter his office's stance on the matter.
The Los Angeles Convention and Exhibition Center Authority in May voted to appoint a negotiated underwriting team, led by Grigsby Brandford, to handle the COP sale. City staffers supported the negotiated approach, citing the size and complexity of the refinancing.
This month, however, city administrative officer Keith Comrie and the city's financial adviser, Public Resources Advisory Group, reversed earlier recommendations favoring a negotiated sale.
The officials said a recent rally in tax-exempts and other favorable market developments convinced them that the city could now undertake the $400 million refinancing on a competitive basis at no additional cost when compared to a negotiated sale.
Investment bankers from various firms questioned that logic at a three-hour hearing on July 20 before the Los Angeles City Council Finance Committee.
The investment bankers said they failed to see empirical evidence justifying a competitive sale. Some also hinted that city leaders were sidestepping controversy, over selection of underwriters because the convention authority approved a different team than that recommended by a review committee.
Despite those arguments, the Finance Committee voted at the hearing to pursue a competitive sale. Committee members cited a city charter requirement stipulating competitive debt sales unless it can be demonstrated that it is in the city's financial interests to sell on a negotiated basis.
Last week's vote prompted Nelson E. Brestoff, a partner at the law firm of Radcliff, Rose & Frandsen, to write the letter on behalf of Grigsby Brandford. Among other things, Brestoff asked the city attorney's office to review a 1985 report that discussed the legal requirements applicable to how COPs are sold.
Based on his analysis of the report, Brestoff wrote that he believed there is "clear authority for the negotiated sale approach taken by the authority, and legal justification under the [city's] charter for the authority's selection of the underwriting team."
Brestoff, in an interview yesterday, said he had talked to Echeverria and concluded that "I doubt we disagree terribly with each other" on many points in the letter.
Among other things, Brestoff said, Echeverria agreed that the convention authority was within its rights and powers to assemble the underwriting team as it did.
During their conversation, Echeverria noted that neither the city council nor the authority can act, unilaterally in the process, Brestoff said. "They both have to concur," Brestoff said, which mean the authority will also have to approve the competitive sale approach.
In an earlier interview, Echeverria had said he disagreed with some of Brestoff's reasoning, partly on grounds that some of the arguments do not pertain to the transaction at hand.
For example, Echeverria questioned Brestoff's interpretation of a state bond pooling law in determining whether the COP sale is subject to the city charter.
It's totally off point" to make that argument, Echeverria said, because the state law addressed situations in which an authority bought bonds issued by other entities.
Echeverria said he planned to prepare a written response to Brestoff's letter, but had not had time to finish it by midday yesterday.
Echeverria said he also disagreed with Brestoff's claim that the city might be exposing itself to liability if it switches to a competitive sale.
Brestoff said the liability could stem from interfering with a "prospective economic advantage" provided by the authority's selection of the underwriting team.
"We always retain the right to reject proposals...or to do it differently," Echeverria said, and such power cannot be construed as interference.
Investment bankers who question the competitive sale approach are expected to make one more pitch today, when the full City Council is scheduled to consider the convention center issue.
