CHICAGO - Two years after Mayor Richard Daley of Chicago began playing Santa Claus with money that underwriters planned to spend on closing dinners for bond deals, few issuers have followed his lead.
Bond firm officials could identify only two other municipal issuers that have required underwriters to give the money to charities - Denver and Cook County, Ill. Since Daley announced the requirement in 1990, Chicago has distributed nearly $200,000 to charitable organizations.
"I think it's a unique creation of Chicago," said one public finance official with a Wall Street firm.
Daley's program inspired Denver in October 1991 to begin substituting charitable contributions for closing dinners for its airport revenue bond issues, according to Venita Vinson, chief of staff to Denver Mayor Wellington Webb. Vinson said the city's financial adviser, Chicago-based LS Financial Group, brought Daley's program to Denver's attention.
"It's sort of a share-the-wealth concept," Vinson explained.
So far, Denver has collected $10,000 from bond underwriters to give to services for children and senior citizens, Vinson said. She added that the city's mayor plans to continue the program for future bond issues that would ordinarily have a closing dinner.
Cook County, Ill., which encompasses Chicago, last year began its own program to funnel closing dinner money to charities, according to Phillip Peloquin, executive vice president of Public Sector Group, the county's financial adviser.
He said that Richard Phelan, president of the Cook County Board, began the program in conjunction with a four-year, $958 million bond-financed capital building program and expanded it to the county's annual issuance of tax anticipation notes.
In lieu of a closing dinner, a less expensive lunch is held, Peloquin explained. The leftover money, which has been in the thousands of dollars, goes to charities in the county, he said.
Some public finance officials said Daley's idea has not caught on with other municipalities because fewer issuers are having closing dinners.
Bill Morris, a senior vice president at George K. Baum & Co., said bond closing dinners became "extremely lavish social events" that have very little to do with the actual closing of the deal.
"Clearly it was something that outlived its usefulness," he said.
One city that has found more money for social services by banning the dinners is New York City. Darcy Bradbury, deputy comptroller there, said that in the 1980s the city ceased allowing closing dinners, gifts, and entertainment associated with bond deals.
Bradbury pointed out that the underwriters' charitable contributions in New York City are part of the underwriter selection process in that requests for proposals ask about their commitment to and involvement in helping the city.
As for Chicago, in the last month Daley has distributed $115,823 from underwriters out of $852 million of debt that the city sold in seven issues this year. The recipients of the funds, which come in part from money that would have been used for closing dinners, included homeless shelters, educational programs for children and adults, a home for people with AIDS, and a food depository.
Walter Knorr, Chicago's comptroller, said the contributions were "the best use of some of the underwriters' spread" because they benefit the community.
Firms making the donations were Muriel Siebert & Co., in New York City; Smith Barney, Harris Upham & Co.; Hamilton Investments; PaineWebber Inc.; Merrill Lynch & Co.; Lazard Freres & Co.; Dean Witter Reynolds Inc.; George K. Baum & Co.; and Prudential Securities.
The response by underwriters to Daley's program has been generally positive.
"I think it's great," said Alex Rorke, a managing director at Dean Witter. "It's much better to do something helpful than have a dinner. If there was any time period that charities have needed help it's been the last couple of years."
In the case of Muriel Siebert & Co., a $37,323 contribution to three Chicago charities did not come in lieu of a closing dinner. Instead, the money came from 50% of the underwriting fees the woman-owned securities firm earned as a co-manager for a Chicago water revenue bond refinancing.
The firm also donated $190,000 last week from fees earned in Los Angeles County and California deals to start a loan program in Los Angeles for women-owned businesses affected by the riots.
Muriel Siebert, president and chairwoman of her namesake firm, said that under her firm's two-year-old Siebert Entrepreneurial Philanthropic Plan, the firm has donated over $1 million in underwriting fees to charities across the county.
"There's enough profit in these deals and there's enough crying need," she said. "All you have to do is look at the finances of cities and states and the impact of the recession. These are our customers and we should be helping our customers.