Giuliani to reverse policy favoring firms owned by minorities, women.

Undoing a four-year-old policy, the administration of New York City Mayor Rudolph Giuliani plans not to give preference to firms owned by minorities or women when appointing city bond underwriters, bond counsel, and financial advisers, city officials said yesterday.

The move, however, could face opposition from city Comptroller Alan G. Hevesi, who said he will actively pursue inclusion of minority- and woman-owned firms.

At the moment, Giuliani's finance staff is preparing to abandon the policy instituted by former Mayor David N. Dinkins and former city Comptroller Elizabeth Holtzman of systematically including firms owned by women and minorities in city bond syndicates.

Instead, Giuliani staffers plan to reestablish a policy advocated by former Mayor Edward I. Koch. Under Koch, who served as mayor from 1978 to 1989, the city "encouraged" women- and minority-owned firms to compete in the selection process but did not set aside specific roles for these firms, city officials said.

"We will consider who the candidates are and their qualifications," said city corporation counsel Paul Crotty, who, with budget director Abraham Lackman and finance commissioner Mark Shaw, will form a committee to recommend city underwriter appointments to Giuliani.

City officials say deputy mayor for finance John Dyson may also join the committee.

"We're not ruling anybody [any firms] in at the beginning, and we're not ruling anybody out at the beginning," Crotty said. "We are going to encourage people to participate and then we'll see what the results are. We intent to do merit selections."

Several executives working at minority-owned firms who spoke anonymously about Giuliani's position said they have yet to receive official word about Giuliani's proposed approach.

One executive said her firm has gained sufficient experienced in recent years to compete against more established firms. "Hopefully, the experience certain firms have been given will be taken into account," the executive said.

The vast majority of the selections of the city's bond underwriters, financial advisers, and bond counsel are completed jointly by the mayor's office and the city comptroller's office.

As a result, Giuliani's position will likely run into some formidable opposition from Hevesi, who has said that as a matter of course, he intends to include minority- and women-owned firms in city financial positions.

In March, Hevesi's point man on bond underwriter selections, first deputy comptroller Michael Geffrard, refused to approve a financing for the city Educational Construction Fund unless a minority firm served in a senior position on the bond issue's syndicate.

"We feel strongly about the policy of inclusion and we think it makes good business sense," Geffrard said. "We think it's in the best interests of the city to have a diverse group of firms selling city bonds so we can reach as many different potential buyers as possible."

Officials in City Hall said earlier in the week that the Giuliani Administration has yet to discuss its position officially with the comptroller's office. Several of these officials said the matter is one that will probably be finalized after negotiations with the comptroller's finance staff.

In fact, Crotty says the city finance staffers are reviewing what value if any emerged from Dinkins and Holtzman's policy to create special categories of bond counsel, financial adviser, and bond underwriters for firms owned by minorities and women.

"I'm not going to prejudge anything," Crotty said. "Sometimes it makes sense to have two" firms in these roles, he said. "But if you're not getting anything for your money, why do it?"

Crotty also said that any position advocated by the mayor's staff must be approved by the comptroller's staff before it becomes part of the underwriter selection process. "They can't move without us, and we can't move without them," he said.

Still, city sources, speaking anonymously, said that Giuliani remains philosophically opposed to creating special roles for women- and minority-owned firms. "Preferential treatment is out," a source said.

Giuliani's position emerges as officials from his administration and those representing Hevesi are putting the final touches on a request for proposal document for the selection of a new syndicate to underwrite the city's general obligation bonds.

City officials said they will mail the document later this week or early next week, launching one of the toughest underwriter competitions in the municipal market.

In recent years, New York City has ranked as the municipal market's largest issuer. Bankers, lawyers, and financial advisers regard selection to its various city bond syndicates as a matter of prestige and an opportunity to make money.

On May 25, city officials mailed out their RFP for the selection of a new financial adviser for the city's general obligation bond sales. The city will mail the RFP for underwriters later this week, or early next week and select a new bond counsel some time in the fall, city officials and Wall Street sources said.

Under Dinkins and Holtzman, the city carved out special roles for firms owned by minorities and women firms as bond underwriters, financial advisers, and bond counsel.

More than half a dozen minority- or women-owned firms served as co-managers in the city's GO syndicate. And in August 1993, the city created a special GO bond issue where for the first time it appointed two minority co-senior managers, Grigsby Brandford & Co. and Pryor, McClendon, Counts & Co.

Also last summer, the New York City Municipal Water Finance Authority used the minority firm of WR Lazard, Laidlaw & Mead Inc. as a senior manager for a fixed-rate transaction and Artemis Capital Group Inc., a woman-owned firm, as senior manager to sell variable-rate bonds.

The position taken by Dinkins and Holtzman reversed the policy of their predecessor, Koch.

In a telephone interview yesterday, Koch said he was not directly involved in the selection of bond underwriters, financial advisers, and bond counsel. Instead, Koch said, he relied on a team of fiscal advisers to make the appointments.

Koch said, however, that these officials would only "seek out" woman- and minority-owned firms as contractors to perform a variety of functions for the city, including bond underwriters, bond counsels, and financial advisors.

"My position was you don't get points for being black or white," Koch said. "No preferential treatment, but we would seek out minority bond companies and if they were equal to their competition, I'm sure some of them were selected."

Former city Comptroller Harrison J. Goldin said his office made attempts to include minorities in various financing roles, including investment advisory positions for the city's pension fund.

But Goldin, who served in that position from 1974 to 1989, and shared much of the financial decision-making with Koch, did not advocate creating specific positions for minority- and woman-owned firms.

"I most emphatically did not have quotas, I did not have euphemisms for quotas, and I did not have specific slots we set aside for people," Goldin said. "What we did do though was make a real effort to give minority firms an opportunity. We were not passive about it. We tried to do it, and we did."

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