Bond counsel selection in New York City likely to spark another clash.

New York City will soon issue requests for proposals to select a new bond counsel. setting the stage for what could be another battle between the two offices that must approve the appointment.

City officials say they will mail the RFPs in about two weeks to firms interested in the position. The three-year contract for the two firms that now serve as bond counsel will expire at the end of the year.

The current firms, Brown & Wood and the minority-owned Barnes, McGhee, Neal, Poston & Segue, were chosen in 1991 by former Mayor David N. Dinkins and former city Comptroller Elizabeth Holtzman.

The mayor and comptroller must jointly appoint bond counsel, financial advisers, and underwriters, and in the past both offices have agreed that their final choices would include minority-owned firms.

That is no longer the case. Mayor Rudolph W. Giuliani, Republican, and city Comptroller Alan GHevesi, a Democrat, have spent weeks debating the selection of financial advisers because Hevesi wants to include a minority-owned firm while Giuliani says only one adviser is needed.

City officials as well as lawyers involved in the selection process say a similar clash is likely to occur over the choiceof bond counsel.

"The comptroller has a simple mantra: inclusion," said one city source. "The mayor's office has said it wants the best firms based on merit. You come at it with those two axioms and it's hard to hit middle ground."

Paul Crotty, the corporation counsel who heads the city's legal department and serves as Giuliani's point man on bond counsel selections, said the mayor's office is committed to a "selection on the merits." Crotty would not comment on the potential for controversy.

"I can't predict that," he said. "The RFP will not specify one, two, or three" bond counsel. Crotty added that the use of two bond counsel is something that the mayor's office and the comptroller's staff "will have to discuss."

First deputy comptroller Michael Geffrard did not return telephone calls regarding the issue.

As a general practice, municipalities hire private law firms to provide legal opinions on bond issueS, even though nearly all large municipal bond issuers, like New York City, have their own legal departments. Investors often demand a higher yield on issues that do not have an independent legal assessment.

New York City is expected next month to sell more than $1 billion in bonds, using a senior manager from its new underwriting syndicate. But the city must first select a financial adviser, and both the mayor's office and the comptroller's remain deadlocked.

Hevesi says Public Resources Advisory Group and P-G. Corbin & Co., a firm owned by a black woman, Patricia Garrison-Corbin, are needed because the city generates too much work for one adviser.

Giuliani says only one firm is necessary, Public Resources, and that the cash-strapped city can't afford such inclusionary policies.

While controversy looms over the city's next move, executives from the city's current bond counsel team are keeping quiet on their prospects.

Homer Schaff, the partner at Brown & Wood who Works on the city account, said he "hopes to continue" his work with the city, but would not elaborate.

An attorney at Barnes McGhee declined comment on the matter.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER