Q: Why did you change your mind and recommend that the utility bond issue be sold on a competitive basis after the state attorney cleared county officials of steering the deal?
A: After state attorney Coe's report came out, my first conclusion was to go ahead and follow the recommendation of the Finance Committee [a group of five members from county officials' staffs whose duties include making recommendations about bond syndicates] and urge that we go forward with the bond issue on a negotiated basis. I considered the report a complete vindication.
But then some news stories in the local press here came out that were almost cynical about our bond operations -- so I became very sensitive about having to continue dealing with coverage suggesting that somehow our selection process was inappropriate. At the same time, we saw the lobbyists return in full force, roaming the halls here and lobbying the commissioners on behalf of some of the underwriters. I knew this wouldn't let up.
So what it came down to was that I was just terribly uncomfortable that we would be before the commissioners debating the same issues that had been before the state attorney. I thought we had enough votes to pass what I'd recommend, but I was also concerned that there would be at best a postponement, at worst defeat of the proposal.
So in my concern for the staff and for the image and reputation of the county. I changed my recommendation.
Look, our overriding purpose in this transaction has been to save money for the taxpayers and rate-payers. We realized we were never going to get it to market if we kept debating the merits of the selection process.
Q: What are the lessons of this controversy?
A: In hindsight, knowing the vicious mentality of whoever wrote that memorandum, I realize I didn't fully appreciate the intensity of feeling and competition out there.
The state attorney has recommended we have a written policy on underwriter selection. We should have had that, no question about it.
I would also have had the Finance Committee make a better paper trail, have better documentation. Because it would have been nice not to have to say that [Michael Merrill, the county's bond manager and member of the Finance Committee] this or that and that I believe what Mike said. It would be better to say Mike wrote this, and have it out there in print.
I'm sure there was no additional information from Morgan Stanley sent to us after the [requests for proposals] were returned that wasn't also included in Morgan Stanley's original submission. I think we can also demonstrate that the estimated savings in the Morgan Stanley proposal was confined to the same things that the other proposers utilized,
But it would be better to have more documentation of all this.
Q: Some observers say your decision sends a signal that all a disgruntled competitor has to do is fax an anonymous accusation and Hillsborough County will reverse a staff recommendation.
A: Well, conceivably that could happen again. But let me assure you, one other thing is going to happen before I recommend that we negotiate a deal -- and that is an understanding with the commissioners that they have confidence in the staff and in the process.
Because if they don't, I'm not going to bring them another negotiated deal. Also by the time we come to the next deal, I hope we'll know who it was that sent the memo and we will have put an end to this kind of behavior by showing what occurs to people who are so wicked and malicious about their activities.
Q: It sounds like you are saying there is a strong possibility that there could be no more negotiated sales in the county.
A: No, I hope not. I know that sometimes this kind of sale is clearly in the best interests of the county and the taxpayers.
But we just have got to find a way, and I'm searching for it, to convince the commissioners that the staff does know what it's doing. If they want to second-guess us, then they must do it forthrightly and not do it because of information that is passed to them by anonymous calls or letters or by people who are unhappy with the outcome in some way.
We have had this problem, you know, not just in bond issues, but in a lot of other areas, from getting health insurance coverage for county employees to buying furniture.
The difference is that when you have the kind of controversy we've had in connection with a bond issue, you risk an unfavorable image in the financial world -- and that when the bonds would finally be issued they would be under a cloud, which might affect our ratings, which might also affect the future of our operations.
So I feel strongly that until we can come to some terms with the commission on this issue, I will recommend competitive sales.
Q: You have raised the issue of the sender of the anonymous fax. Do you have any idea who this person is, and, if so, what action you might take?
A: Yes, I have an idea of who might have sent the fax, but I can't give you any further details.
If I can get enough information to prosecute or to take action against the sender, I intend to do that. And I'm hoping that, if there is some other investigation going on, that it will somehow develop something. If there is a civil suit, I'm going to try to intervene in it to get access to discovery processes. In other words, I am making as many private inquiries in key places as I can possibly make.
If we do locate that person, and can establish who masterminded this, appropriate action could include a lawsuit or an attempt to get their license.
Q: Under what circumstances, in your opinion, are negotiated sales superior to competitive ones?
A: Well, I know from other experiences that a strict competitive bid method often does not get you the best price. Because each one of the bidders bet that the other won't go to the bottom dollar.
I'm not saying the bidders are in collusion -- it's just sort of an unspoken thing that a public entity is not going to get the bottom-dollar bid.
Another thing about negotiation is that [without it] you eliminate any innovation. As issuer, you make up your own deal and you bid it competitively, and that is all there is to it. You eliminate the possibility of a brilliant cost-saving idea such as we discovered in the refunding of the first utility bonds.
Also, with negotiated pricing, you can go to market at the time of your choice. If you bid it competitively, you set a date when it has to happen -- and that can be the very worst date in the whole year. So there are some risks if you don't go negotiated.
On the other hand, a big risk that you don't take by going the competitive bid route is the charge that you are favoring somebody. Because the bids are there for the whole world to see and they are opened in full view and analyzed there.
But again, you do take the risk that maybe we didn't get the very best price that was available. I always worry about that when we take the competitive route.
Q: What do you think the investment bankers seeking county, business should learn from this controversy? How should they conduct themselves if they want to get business here?
A: Hillsborough County is working hard to build a reputation for integrity and non-corruption and fair dealing. We are in sound fiscal condition; we live within our means.
I want very much for the process of selecting professionals on our bond financings to fit in with the rest of our efforts to maintain our reputation -- and I would like the investment community to understand that, and if they have any questions about it to come to me and talk to me.
When I talk to them, they tell me how great we are, but apparently that is not what they say, what some of them are saying, to the commissioners, or the press or anonymous memo writers.
So the message I would like to send out is to stop the innuendos and backbiting. If the banking community continues this kind of behind-the-scenes activity, we might just have to bid everything competitively.