The controversial decision by New York City Mayor Rudolph Giuliani to end preferences for minority-owned bond firms has produced so much anxiety that several have begun to question if trying for city bond deals is worth the trouble.

To be sure, Giuliani is not without powerful opposition tin his effort to force what his aides refer to as "merit-based selections" for city underwriters, financial advisers, and bond counsel.

City Comptroller Alan G. Hevesi, who must approve the selection of underwriters and advisers with the mayor's office, says he will actively pursue the inclusion of woman- and minority-owned firms as underwriters in city financings, and as financial advisers.

In addition, the New York City council will soon hold hearings to address the participation of minority-owned firms in all aspects of city business, according to a resolution recently submitted by Councilwoman Juanita Watkins.

Still, Giuliani's stance, a reversal of the inclusion policy of former Mayor David N. Dinkins and former Comptroller Elizabeth Holtzman, is roiling the community of bond firms owned by minorities. At least one executive from a top minority-owned firm questions whether he should maintain a New York City office, and others wonder whether City Hall is willing to accept them as equal players in the underwriter selection process.

"I think someone ought to think about what will happen if we lose an account like New York City," said Calvin Grigsby, president and chief executive officer of Grigsby Brandford & Co., a minority-owned firm. Grigsby Brandford, along with the minority-owned firm of Pryor, McClendon, Counts & Co., served as a senior manager on a $300 million issue sold last August designed to give both firms experience in handling the city's bond work.

Grigsby Brandford is based in San Francisco but has a regional office in New York City. In a telephone interview last week, president and chief executive Calvin Grigsby said the August issue gave the firm the prestige of completing, with little difficulty, an issue for one of the premier accounts in the municipal bond market.

"If we lose an account like New York City, we can go down," Grigsby said. "We can't keep the New York City office. There are ramifications and we still are studying how to handle this."

In recent weeks, Giuliani's policy sparked even greater fears among minority-owned firms when an angry public debate erupted between City Hall and the city comptroller's office over the selection of firms to serve as the city's financial adviser.

Giuliani said the city can save about $500,000 by hiring one firm, Public Resources Advisory Group, for the job. Hevesi said the workload makes necessary the hiring of two firms, Public Resources and P.G. Corbin & Co., a firm owned by Patricia Garrison-Corbin, an African-American woman.

Adding what many minority-owned firms perceive as insult to injury was the language used by deputy mayor John Dyson, who will advise the mayor on underwriter and financial adviser appointments, in belittling Hevesi's advocacy of Corbin. Saying that Public Resources gave the city a "firm bid" to complete all its financial advisory work, Dyson added that "the comptroller ought to know a bid from a watermelon."

Several executives at minority firms said the comment reinforced their worst fear: namely that, simply because of their race, they need not apply for city bond business.

At the moment, the mayor's office and the comptroller's office have agreed to hire both Public Resources and P.G. Corbin on a temporary basis. The firms will work jointly on the city account, as they did under Dinkins and Holtzman, until the two sides can reach an agreement on the issue.

Even the compromise did not pass without what several minority-owned firms viewed as yet another slight. When facing a deadline to complete a bond refunding before Aug. 1, the city chose to interview the seven senior underwriters appointed by Dinkins and Holtzman, but did not even call on Grigsby Brandford or Pryor McClendon, both of which were appointed senior managers for the August 1993 transaction.

The decision was brokered by Hevesi, Giuliani, and their top aides.

"I'm hurt more than anything else," Calvin Grigsby said. "I don't know what I have to do to prove I should be included like everybody else."

Bettye Lynn Smith, a spokeswoman for Pryor McClendon, said in a prepared statement that the firm believes "minority firms have proven their ability to senior manage transactions for the city of New York. Pryor, McClendon, Counts has served the city well in the past and looks forward to the opportunity to do so in the future."

Alphonso E. Tindall Jr., chairman of the National Association of Securities Professionals, a trade organization representing minority bond firms, said the group is "concerned" over the city's actions.

"It does not give me much comfort to see what's going on in the city where I work," Tindall said. "We are trying to wait and see what ultimately will happen. Woman- and minority-owned firms have worked and fought hard to obtain a place at the table."

Forrest Taylor, a spokesman for Giuliani on financial issues, did not return several telephone calls. However, a City Hall source, speaking on the condition of anonymity, said Giuliani will give a fair hearing to minority-owned firms as the city moves toward selecting a new team of underwriters.

During the last four years, low interest rates fueled record levels of issuance in the municipal bond market, and the share going to firms owned by women and minorities also grew. Securities Data Co. lists 65 firms in the municipal bond market as being majority-owned by women or minorities. And during this time, many states and city's have earmarked bond underwriting slots for such firms as part of their affirmative action policies.

Between 1989 and 1993, the level of negotiated deals underwritten by women and minority owned firms grew from $33.67 billion to $104 billion, according to Securities Data.

In New York City, the level of negotiated business completed by women- and minority-owned firms spiked under the Dinkins Administration, with these companies underwriting $3.5 billion in city debt in 1989, the last year Mayor Edward I. Koch was in office, to $6.45 billion in 1993, the last year Dinkins occupied city hall.

Now, despite the Giuliani Administration's promises of fairness, minority firms are worried. New York City is the nation's largest issuer of municipal bonds. And with many issuers, including New York City, looking to sell more debt competitively, minority firms say their business is likely to suffer.

Minority-owned firms and woman-owned firms rarely have enough capital to underwrite large competitive deals. Although Hevesi is looking for ways to include these firms in competitive deals;the controversy in New York City has only heightened fears that 1994 will be a very tough year.

"This has gotten so vicious, I wish I didn't have to bother with the city," one executive from a minority-owned underwriter said. "But I owe it to the firm to at least try."

Sharon R. King contributed to this article.

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