Staff members working for New York City Comptroller Alan G. Hevesi are finishing work on a policy that will determine when the city should competitively bid its general obligation bonds.
At the moment, the city sells the vast majority of its debt through negotiation, where a group of hand-picked underwriters sell securities by negotiating prices with investors.
But by JanUary, the city should have a policy that will increase its use of competitive bidding, officials in the comptroller's office said.
Patrice Mitchell, the city's deputy comptroller for finance, said she is working on a set of guidelines that the city will use to determine when it should sell bonds on a competitive basis.
Mitchell said details of the plan are not available, but the proposal will be flexible, allowing the city to issue debt through negotiated sales when poor market conditions make it difficult to bid bonds or when the city faces other obstacles to bidding its debt issues.
The policy will also address concerns raised by thinly capitalized woman- and minority-owned firms that they will find it difficult to participate in competitively bid bond issues. Mitchell said the policy will probably encourage large firms to include woman- and minority-owned firms in their competitive bidding syndicates.
"The plan will help us use the competitive process to lower the city's cost of borrowing," Mitchell said. "I can't say that you can always get a lower cost of borrowing, but we will develop parameters as to when to do a competitive sale versus a negotiated sale."
Hevesi, who was elected comptroller last year and took office in January, promised during his campaign against incumbent Elizabeth Holtzman to sell much more of the city's debt competitively.
At the time, Hevesi said that under certain market conditions, increased use of competitive sales can save the city money. Hevesi also said that the use of negotiated sales invites conflicts of interest because the city selects bond underwriters who are also major campaign contributors.
Hevesi's remarks about the need for more competitive sales came as Holtzman faced federal and city investigations over her March 1993 selection of Fleet Securities Inc. as a co-manager in the city's bond syndicate.
Underwriter appointments are made jointly by the mayor's office and the city comptroller's office. Holtzman selected Fleet after her campaign received a $450,000 loan from the firm's banking affiliate.
It is unclear where finance officials representing Mayor Rudolph W. Giuliani stand on the competitive bidding issue. The city's budget director, Abraham Lackman, could not be reached for comment yesterday, but several market executives said Hevesi did not need to wait a year after he took office to implement the plan.
Michael Shamosh, a municipal market strategist for Cowen & Co., said the city does not need a policy to sell bonds competitively because all the' major financial advisers know when it is appropriate to bid out debt, and when it's better to negotiate deals.
