DALLAS--Houston plans to sell a $450 million general obligation refunding bond issue later this month in an attempt to balance the city's fiscal 1993 budget by restructuring its debt service needs.

An underwriting team led by Goldman, Sachs & Co. intends to price the double-A rated bonds the week of June 15 and close the deal before the July 1 start of the new fiscal year. The deal represents about 41% of Houston's total outstanding GO debt.

Sources close to city hall, however, said differences between Mayor Robert Lanier and Controller George Greanias must be resolved before the sale proceeds. One source said an agreement could be reached as early as this afternoon.

"Until the mayor and controller resolve their differences, I don't think you can say there is an issue," said one source, who declined to be identified.

A spokesman for the mayor, who has proposed the debt restructuring, said the deal would go forward. Meanwhile, Mr. Greanias would say only that he is studying the proposal, which he has opposed in principle.

"We're still reviewing the transaction," he said in a telephone interview. "That shouldn't be taken as a yes, no, or maybe."

At the center of the debate is the short-term benefit of the plan weighed against the long-term cost to taxpayers.

The plan by Mayor Lanier would divert $35.9 million in tax moneys to be used for operations next year, rather than debt service. All told, the plan would save an estimated $150.6 million in debt service through 1999, but eventually cost Houston taxpayers $146.6 million in new total debt service by the time the bonds are retired in 2012, city documents show.

"I don't think it's a wise move for the city," said Mr. Greanias, who has objected to the debt restructuring as short-term thinking. "It defers the cost down the road."

The mayor, however, has pointed to Houston's record of retiring an estimated 74% of its debt in the first 10 years. The level for many major cities is 50%.

Mr. Lanier persuaded the City Council on May 20 to approve the restructuring so Houston's debt retirement ratios match those of other cities. Under his plan, the average life of all city GO bonds would increase to 9.75 years from 6.98 years.

Houston has an estimated $1.1 billion in outstanding GO debt. The refunding will not affect a $500 million capital plan authorized last year by voters, though that debt could also be sold with a slower payback.

The mayor has said the savings can be used to close a projected deficit of $70.6 million in next year's budget.

But Mr. Greanias has opposed the plan, saying it is a radical departure from the city's long-held conservative practices. Besides eventually costing taxpayers $146.6 million in additional debt service, the deal has little present value savings, he said.

"They are saying the present value savings would be about 0.9%," he said. "The usual target is about 4%."

But others said the deal is not designed as an economic refunding. "We want to save money if we can, but the real goal is to free up funds that would otherwise be needed for debt service," said a member of the finance team. "Any present value savings would just be gravy."

According to a city memorandum on the plan, the refunding would generate a present-value savings of $3.93 million, or 0.8957%. The actual savings will depend on the final size of the issue and market conditions.

Wall Street rating analysts said they have not had an opportunity to review the refunding, though Mr. Lanier discussed the debt restructuring in general during meetings earlier this year.

In those meetings, analysts warned that the city should not extend the final maturities of the GO debt beyond the 20-year term Houston now uses. Under the mayor's plan, the refunding bonds would mature by 2012.

Disagreement over the GO bond restructuring is not the first policy split this spring over the city's debt practices. In April, Mr. Greanias refused to certify a proposed variable-rate bond sale to settle legal claims against Houston.

The city sued the controller, seeking to force his signature, but a state appeals court refused to hold Mr. Greanias in contempt of a court order that he sign off on a $17.7 million bond issue. As a result, the city was forced to settle half those claims with cash to avoid paying penalties.

While the city council still wants to use short-term debt for the remaining legal claims, Mr. Greanias is holding to his refusal and last week won a new trial on the issue. The hearing is set for July 13.

While that legal fight is disclosed in the offering documents for the proposed $450 million refunding, Mr. Greanias said his political disagreement with the mayor should not affect the upcoming bond sale.

"I don't see any reason the two should be yoked together," he said. "They are two very different things."

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