DALLAS -- The Texas Public Finance Authority will hear proposals from five underwriters on July 17 on how the state should structure its long-awaited master lease program.

Glen Hartman, executive director of the authority, said the short-listed firms will outline proposals of how the anticipated $20 million, tax-exempt financed program should operate.

The firms scheduled to make presentations are: Grigsby Brandford Powell Inc. of San Francisco; J.P. Morgan and Estrada Securities of Dallas, a proposed joint venture; Lehman Brothers; Rauscher Pierce Refsnes Inc. of Dallas; and Merrill Lynch.

A decision could be made this fall, but it is not yet certain how long the winning underwriter will stay with the program. "We really haven't gotten down to discussing the tenure," Mr. Hartman said.

Under the program. the state would arrange its own financing for equipment purchases, rather than relying on vendors or other sources. The authority expects its initial program to total $20 million, though state officials estimated in 1988 that the program could grow to be $150 million a year.

State lawmakers first authorized the master lease program in 1989, after a study found the state could save at least $200,000 a year under a $25 million program. Auditors had found the state pays an average of 10% interest rates under easy financing agreements with contractors selling equipment to Texas. In fact, their study found the state sometimes paid as much as 18% -- nearly triple the rates on short-term bonds.

Mr. Hartman said the board has not yet decided how its master lease program should be structured but is studying whether to use a commercial paper program or to use some type of interim financing that would be rolled into a fixed-rate bond with a five-to-seven-year maturity. He said the program could be ready to finance a state equipment program by late this year.

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