BOSTON -- The Massachusetts Bay Transportation Authority's board of directors has decided to drop long-time bond counsel Palmer & Dodge and hire Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, according to sources familiar with the decision.

The sources said the decision to consider other firms for the bond counsel position was partially due to Palmer & Dodge's ethnic mixture.

"The firm that represents the authority should look something like the community it serves," said one source familiar with the selection process. "Palmer & Dodge has many partners, and there is only one black partner and one Latino partner and only one or two black associates."

According to the Martindale-Hubbell listing of firms, the firm consists of 159 attorneys.

The source said that the number of minority persons at Palmer & Dodge is "abysmal, even for Boston, and [the authority's board] is doing something about it."

Another source, speaking on the condition of anonymity, said the Transportation Authority's board met on Wednesday and decided to make the switch.

Wesley Wallace, Jr., treasurer at the authority, would not comment for this story. Attorneys at both Mintz Levin and Palmer & Dodge also would not comment.

However, Roger A. Vacco, a partner at Palmer & Dodge, did confirm that of the firm's 79 partners, one is African-American and one is Latino.

"Although the final decision is not yet public, it is my understanding that the deal is done and Palmer & Dodge is out," a Boston banker said.

Palmer & Dodge had served as the authority's bond counsel since the agency's inception in 1964.

Through the first three quarters of 1994, Palmer & Dodge was the 19th ranked bond counsel firm. Mintz Levin was ranked 53d, according to Securities Data Co.

The decision to change bond counsel came at a board meeting where a new financing was also discussed.

Next year, the authority plans to issue about $200 million in bonds to finance improvements to the Boston Engine Terminal, which the agency uses to repair and service all of its subway and train cars.

Although executives at the authority said the decision to sell municipal bonds for the project has not been finalized, several finance sources in Boston said bond financing appears likely.

One source at the authority said the repairs at the Boston Engine Terminal are crucial.

"It is unlikely that the building would meet the standards of the federal occupational safety and health laws," the source said. "People get hurt over there and the building is in really bad shape."

The source said the building is "a torch-trap disaster waiting to happen."

Originally, several sources at the transportation agency had predicted that bonding authorization for the terminal project would be included in the state legislature's $7 billion transportation bond bill, which became law in September. However, the committee on transportation in the state's House of Representatives refused to include the measure.

As a result, the authority worked with both Lehman Brothers and Goldman, Sachs & Co. to structure a separate lease-backed financing that could be eligible for backing by the federal government, sources said.

The authority has not yet approved the structure, but one source said that a program between transportation authorities and the Federal Transportation Administration allows the federal government to buy rail cars for public transport and assist with financing renovations.

However, one source said that the federal agency refused to help the authority because its maintenance facility is in such bad shape.

A lease-backed transaction may work best for the Massachusetts agency because it would not consume any of the authority's normal yearly bonding limit.

Also at the authority's meeting, the board of directors awarded a $165 million construction contract for the project to Kiewit Construction.

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