ATLANTA -- Despite strong objections from state Treasurer Mary Landrieu, a special committee of the Louisiana Bond Commission decided Wednesday that the Louisiana Public Facilities Authority could issue up to $75 million of hospital revenue bonds.
Landrieu, the commission's chairwoman, said she could not support the financing because the authority had named an underwriting syndicate led by Lehman Brothers without conducting a public bid process.
Other commission officials argued that the selection was "justified" because of the need to get the financing done quickly and to prevent New Orleans' charity hospital from losing accreditation. prevent New Orleans' charity hospital from losing accreditation.
But the treasurer argued that the bond commission has been committed since 1988 to the public bid method of choosing underwriters and bond counsel for negotiated state financings, and the departing from it now would set a dangerous precedent.
In addition to Lehman Brothers, the authority chose Howard, Weil, Labouisse, Friedrichs Inc. of New Orleans as co-senior manager. Foley & Judell of New Orleans was chosen bond counsel.
"I have no problem with the qualifications of those chosen or the need for the project, but I don't like abandoning our guidelines on the selection process," Landrieu said in a telephone interview Wednesday. "There was no reason to handle the public's business in this manner."
But in the end, Landrieu's was the lone vote against the financing, as the special committee voted 4 to 1 in favor of the deal.
The bond issue will fund the state's purchase of Hotel Dieu, a privately owned hospital in New Orleans. The purchase is the linchpin of Gov. Edwin Edwards' plan to close down the city's existing charity hospital complex.
Hotel Dieu would be the heart of a new state-operated charity care center, and another $200 million would eventually be spent to expand its capacity. The 240-bed hospital is currently owned by the Daughters of Charity, a Catholic order of nuns.
Although the Hotel Dieu financing must now be reviewed by the full membership of the bond commission, Landrieu conceded that final approval is "probably inevitable."
That approval could come as early as next Thursday, but most likely would not occur before the commission's next regular meeting, which has been set for Nov. 19.
Raymond Laborde, Gov. Edwards' commissioner of finance and administration and another member of the special committee, said the facilities authority's selection of underwriters was justified because of the need to move forward quickly with financing.
"In our negotiations with the Daughters of Charity, they were insistent that this thing not be left hanging," he said in a telephone interview Wednesday. "Everyone seems to agree that the purchase is in the best interests of the state and New Orleans."
In addition, the state cannot afford to delay the financing because the existing charity hospital may soon lose its accreditation if the plan to upgrade the system through the acquisition of Hotel Dieu is not in place, he added.
Laborde said he does not oppose, in principle, the commission's using a public bidding process to chose underwriters for negotiated financings involving state appropriation. "I have no problem with the principle," he said, "but I think that in this case it was in the state's
In when-issued trading, the 6% seven-year note was 9/332 higher, at 100 1/32-100 4/32, to yield 5.9%, down from the 6.01% average yield at Wednesday's auction.
Rates on Treasury bills were lower, with the three-month bill down three basis points at 2.79%, the six-month bill off three basis points at 2.89%, and the year bill seven basis points lower at 2.95%.
In other news, the New York Fed reported the federal funds rate averaged 3.20% for the week ended Wednesday, down from 3.41% the previous week.