New York City Republican mayoral candidate Rudolph Giuliani said if elected he will enact a major change in the way the city chooses firms to underwrite its bands.
Giuliani, in an interview with The Bond Buyer, said he would propose that the city select bond underwriters using a system similar to one used by officials in Kentucky. The system would delegate selection of underwriters to a panel of finance officials.
The mayor would have final approval of underwriter selection, but the selection process would largely be completed by the panel, he said. Giuliani said a similar system was also used by former mayor Edward I. Koch.
The panel, comprised of administration finance officials including deputy mayors, and the director of the city's office of management and budget, would develop the request for proposals for underwrites, and rank firms based on their bond-selling capabilities, Giuliani said.
City bond underwriters are now selected by the mayor and the comptroller, who have traditionally accepted campaign contributions from executives at these same firms.
Giuliani said a recent city investigation into the recommendation of Fleet Securities as a co-manager in the city's bond underwriting syndicate by the office of City Comptroller Elizabeth Holtzman demonstrates that the city's underwriter-selection process needs to be changed.
Holtzman recommended Fleet after her U.S. Senate campaign received a $450.000 loan from the firm's banking affilate, and the matter is being reviewed by the city's Conflicts of interest Board.
Candidate Giuliani, in the interview, also accused Mayor David Dinkins of showing favoritism to Wall Street underwriters that have contributed to the mayor's campaign.
Officials from the mayor's Office of Public Finance. and the Comptroller Finance Office did not return telephone calls. In the past, however, these officials said underwriter selections are based on a firm's ability to sell city debt.
"There was a reason these questions did not occur in the Koch administration, but now we have a myriad of questions under the Dinkins' and Holtzman administrations." Guiliani said.
Stephen Kagann, Giuliani's director of research, said one of the problems with the current underwriter selection system is that the mayor and the comptroller are directly involved in the underwriter selection process. He also said that procedures to rank firms are "are unknown."
In a memorandum on the Kentucky system. Kagann said: "The implementation of this approach would effectively isolate the mayor and the comptroller from the selection process. Under these circumstances, campaign contributions would have no effect on the selection process." Under these circumstances, campaign contributions would have no effect on the selection process."
Giuliani said that under his system the mayor would have limited access to the bond underwriting community. "We would require that any communication with the mayor about bond business be in writing." He said. "There will be no contact with committees other than the full committee in public or in writing."
Giuliani, who will face Dinkins in the mayoral election in November running on the Republican-Liberal lines, is not the only politician vying for city-wide office to propose changes in the debt-selling process.
State assemblyman Alan G. Hevesi, who is running against Holtzman in next week's primary run-off for Democratic comptroller, said he will propose selling most of the city's bonds through competitive sale. The city now sells most of its debt through negotiated bid. Hevesi said the negotiated process invites conflicts of interest.
