ATLANTA -- The Florida Housing Finance Agency last Thursday became the nation's first bond issuer to give final approval to sweeping rules that curb campaign contributions from underwriters and bond lawyers.
"By finalizing the rules, we have charted a new path in Florida that we hope other issuers will follow," said William Sadowski, a member of the agency's board and secretary of the state's Department of Community Affairs, which oversees the housing authority.
Mr. Sadowski said the rules were unanimously adopted by the agency's board of directors.
"We are telling members of the bond industry once and for all that if you come into this state and want to do business with this agency, that you are going to have to obey our strictures regarding campaign financing," he added.
Investment bankers were subdued in their response to formal approval of the rules, with most already reconciled to their passage, according to one manager of the Florida public finance office of a large New York-based investment banks.
But the banker, who declined to be identified, said active opposition to the rules will likely surface in the form of a lawsuit.
"I think the bankers and lawyers know how strongly Gov. Chiles is behind this and just don't want to fight him on it at this point,: he said. "But I'll bet there will be a lawsuit down the line from some firm or individual that sees this as an infringement on their constitutional right to contribute to political campaigns. And I'll bet that lawsuit comes this fall."
But Mr. Sadowski said the rules would survive a court challenge because there is clear legal precedent for them.
The agency's approval of the proposal comes about four months after Gov. Lawton Chiles began a bond-reform crusade. In late March, the governor in a letter called on Mr. Sadowski to sever any link between politics and the awarding of state housing bond contracts in Florida.
About a month later, Gov. Chiles directed William Sweeney, who oversees the state's Division of Bond Finance to propose similar guidelines for all state bond issance. Three weeks ago, he cabinet endorsed a draft of rules submitted by Mr. Sweeney. The seven-member cabinet consists of the governor and the state's top administrative and elective officials.
"Gov. Chiles is very pleased that these rules have been approved," Kathy Putnam, the governor's deputy press secretary, said on Friday. "This has been an important issue for him."
The housing agency's action last week marks the first time a bond issuer has formally enacted such guidelines.
According to the new rules, the housing agency now officially bars investment and law firms "and their officers, directors, and employees" from making campaign contributions or engaging in fund-raising activities for the governor or state-level elected officials in Florida.
In addition, investment bankers and bond lawyers will also be barred from holding informal discussions with agency officials about whether they would be hired for state bond business.
Officers and members of the authority itself will also be prohibited from engaging in fund-raising activities on behalf of candidates for governor or cabinet positions.
Finally, the rules also set detailed guidelines for selecting underwriters for agency offerings. Those guidelines include a formal submission of written proposals by firms that want to serve as senior bankers to be followed by a review of those proposals and oral interviews. In addition, each year the chosen group of senior underwriters will be reviewed.
"We wrote the rules to cast a very broad net covering anyone who gets a fee for bond work with the agency," Mr. Sadowski said. he noted there was a brief discussion of the applicability of the rules to underwriter's counsel before the board approved the rules by an 8-0 vote.
The agency rules should become a formal part of Florida's state administrative code in about five to six weeks, according to the agency's executive director, Mark Hendrickson, following publication of the rules in the Florida Administrative Weekly. Anyone wishing to appeal the rule will be given the opportunity to do so
Mr. Hendrickson said he had talked with "tons" of officials in other states interested in the agency's guidelines, including those overseeing bond issuance in Texas, California and Kansas.
But he noted that an uphill fight is likely to await those outside Florida who try imposing rules resembling those enacted by the agency.
"Getting these kinds of rules enacted is not easy because there are a lot of vested interests [which oppose them]," he said. "What has made it happen in Florida is the strong leadership from Gov. Chiles. This is something he really wanted to happen."