One of Pennsylvania's chief economic development agencies has never named a minority-owned firm to one of its bond syndicates, even though the law creating the agency was amended last year to say it should.

Since its inception in 1987, the Pennsylvania Economic Development Financing Authority has completed 35 different transactions, totaling almost $800 million.

The authority helps private companies located in the state finance capital projects that enhance Pennsylvania's economy or protect its environment. The authority essentially lends its tax exemption to companies that plan on issuing bonds to fund these projects.

Generally, companies that turn to such conduit issuers choose their own underwriters to sell an issue. But in 1993, the state legislature amended the law creating the authority to encourage minority participation.

The amendment stated that: "Bonds may be sold at public or private sales for such price or prices as the financing authority shall determine subject to the requirement that the chairman shall ensure that minority-owned or minority-controlled firms shall have an opportunity to participate to a significant degree in any bond sale activities."

But according to Securities Data Co., no minority-owned firms have served on any of the seven taxable and tax-exempt issues, which total more than $432 million, that the authority has sold since the amendment took effect in December 1993.

The authority is also expected to bring $100 million of tax-exempt wastewater treatment revenue bonds to market on behalf of Sun Co. Goldman, Sachs & Co. and CS First Boston are underwriting the issue. However, the authority has not yet approved the bond allocation, said Andrew Greenberg, Pennsylvania's secretary of commerce and the chairman of the authority.

As for underwriter selection, Greenberg says it's the companies, not the state, that have final say in choosing underwriters. Despite the legislation, Greenberg said the state cannot mandate the inclusion of woman- or minority-owned firms in the authority's deals, and that the state has a strong record of including minority- and woman-owned firms in its general obligation bond issues.

Commerce Department officials point to the department's other economic development authority, the Pennsylvania Industrial Development Authority. This agency completed two issues in 1991 and 1994, totaling about $632 million, that included minority-owned firms on the bond syndicates.

Although the state tells firms like Sun Co. that it would like to see minority-owned firms play a role in the financing, Greenberg said the state cannot mandate this inclusion.

"The commonwealth's ability to encourage minority participation is greater when our credit is at risk," Greenberg said. "Where the commonwealth is the issuer, the senior state officials will sit down with the lead underwriter and say 'In assembling the syndicate, it's important for us to have minority professionals participating.'"

In addition, bankers. poInt out that Pennsylvania, which has many conduit issuers of tax-exempt bonds on the local level, differs from other states, such as New Jersey, that have just one such issuer. Pennsylvania has many such issuers on the local level.

The resulting competition makes the Pennsylvania Economic DeVelopment Financing Authority less able to dictate restrictions and requirements, such as inclusion of minority-owned firms, bankers say.

Bankers also point out that private companies are solely responsible for paying the interest and principal on the bonds, which makes it harder for the authority to justify its own underwriter preferences.

If the authority insisted on such requirements, a company seeking a conduit issuer could easily decide that havIng "Pennsylvania" stamped on the bond documents wasn't worth the costs of the requirements, and go to a local authority, bankers said.

"PEDFA has a little less muscle," one banker familiar with the authority said.

Moreover, the authority approves a project partly because it will create jobs, and so it is unlikely to nitpick about the composition of syndicates, sources familiar with the authority said.

But some bankers at minority-owned firms were skeptical of the authority's arguments, saying that the agency's behavior reflects an industry-wide tendency.

"Not only do I see this as a cause for concern, I see the whole exclusionary tendency of the industry as a cause for concern," said Malcolm Pryor, president of Pryor, McClendon, Counts & Co., a minority-owned Philadelphia-based firm.

Charles Gasparino contributed to this article.

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