ATLANTA -- Florida Gov. Lawton Chiles is nearing a decision on whether to push for a state law that would ban campaign contributions from municipal market participants vying for local governmental business, a key aide said yesterday.

Daniel M. Fuchs, Chiles' assistant director of cabinet affairs, said that the proposed bill, which has already been drafted, would extend to all local governments in Florida the administrative rules governing the participation of underwriters, bond lawyers, and financial advisers in state-level bond offerings.

The rules, which were adopted in October 1991, ban municipal market participants from being considered for state-level negotiated financings if they have made campaign donations to elected state officials or have engaged in fund-raising activities on their behalf.

Under the proposed law, to be considered for bond work at a local government in Florida, the market participant would have to certify to that government that it had not engaged in such activities on behalf of the government's elected officials.1

Like the 1991 administrative guidelines, the proposed law would bar most communication between municipal market participants and elected officials or employees at a local government entity when that entity is considering hiring candidates for municipal bond work. However, a verbal communication made on the record during a public meeting or a written communication that is made part of the record would not be prohibited.

Fuchs said this section of the proposed law would also apply to non-elective local governmental bodies in the state such as airport, port, and expressway authorities.

"What the governor would like to see is politics taken out of the bond underwriting process on all levels in Florida," said Fuchs. "He feels strongly that the present system is flawed and needs to be fixed by a change in state law."

He said that the governor was not spurred by any specific instances of local government abuses, but felt that the problem is "generalized and widespread."

Fuchs said the governor had explored simply broadening, by executive decree, the administrative rules now in place to make them also apply to localities, but was advised that this would not be allowable under Florida law.

The Chiles aide said a decision would likely be made by the end of the year on whether or not to pursue the matter in the upcoming regular session of the legislature, which convenes Feb. 8.

"We are fully aware that this will be a very tough fight because there are so many vested interests at stake here," he said.

At least one important state legislator, House Speaker Bolley L. Johnson, D-Milton, offered support yesterday for the proposal.

Johnson's press secretary, Kathy Putnam, said he "has no problem with the idea and would be supportive." She said Johnson "is aware that the bond industry itself is looking at reform, and this [the legislative proposal] fits in with this."

However, another state legislator, who declined to be identified, said yesterday that he had serious reservations about such a bill.

"I agree it is an area that we need to pay attention to, but I think making this into a law would be a case of state government dictating to local governments what they should be doing on their own," the legislator said.

A number of elected local government officials in the state contacted yesterday said that they had not heard of the bill and wanted to see the specific language before making further comment.

Municipal market participants also gave the proposal a mixed review.

"I am not against limitations on campaign contributions, but this seems a little extreme," said a bond attorney at a Tallahassee law firm. "It is unlikely that a proposal like this could become law before mid 1994. I don't understand why they just don't wait to see what the market itself comes up with before putting this bill on the table."

"Reform the industry, yes, but if this idea becomes law, it would create an amputation where what you need is surgery," said Anita Mitchell, senior vice president at Smith Mitchell Investment Group Inc. in West Palm Beach. "I also think that this would lead to an enormous battle in the courts on the grounds that it violates constitutional safeguards on freedom of speech."

Fuchs said that Chiles is aware of the revised political contributions rule approved last week by the Municipal Securities Rulemaking Board, but feels it alone would not solve the problem in Florida because it does not apply to financial advisers and bond attorneys. The rule bars contributions from underwriters that are designed to obtain or retain an issuers' bond business. The Securities and Exchange Commission must now review the rule and approve it.

In addition, Fuchs said that the proposed bill could be combined with a legislative proposal that would also seek statutory basis for the administrative rules approved in 1991.

Such proposed legislation was filed in late 1991 for the 1992 legislative session, but bogged down following worries about its legality. In particular, legislative attorneys expressed concern on the grounds that there is no specific Florida law that gives the cabinet the authority to impose a standard of conduct of people who are not state employees.

The cabinet, which is composed of the governor and the state's top six elective and appointed officials, sets administrative policy in Florida.

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