New York City yesterday formally selected four firms to serve as senior managers for its general obligation bond syndicate, while its Water Authority selected two firms to serve as senior managers for its underwriting team.

The city, which has ranked as the municipal market's largest issuer during the past two years, selected Goldman, Sachs & Co., J.P. Morgan Securities Inc., Merrill Lynch & Co., and Prudential Securities Inc. as senior managers to sell its GO bonds.

The New York City Water Finance Authority selected Lehman Brothers and Paine Webber Inc. as its senior managers.

For its GO syndicate, the city also created a special underwriting bracket, known as its senior co-manager group. The city appointed Artemis Capital Group Inc.; Bear, Stearns & Co.; CS First Boston; Chemical Securities Inc.; Donaldson, Lufkin & Jenrette Securities Corp.; First Albany Corp.; Grigsby Brandford & Co.; Morgan Stanley & Co.; Smith Barney Inc.; and Pryor, McClendon, Counts & Co. to this category.

The Water Authority also selected four firms as senior co-managers: Dillon Read & Co.; First Albany Corp.; WR Lazard, Laidlaw & Mead Inc.; Reinoso & Co.; and Smith Barney.

The selections are made jointly by staff members representing Mayor Rudolph W. Giuliani, and city Comptroller Alan G. Hevesi. In a joint press release, Giuliani and Hevesi said the city intends to reward firms in the senior co-manager groups with senior manager appointments if they outperform other syndicate members.

The appointments did not come as a surprise for municipal market participants. The Bond Buyer reported more than a week ago that the city had tentatively agreed on the senior managers for both syndicates.

The selections will cover bond issues occurring over the next two years, city officials said. Each firm will probably serve as senior manager on two deals. The city is planning a GO deal of more than $1 billion in November, but has yet to select a firm as senior manager for the transaction.

The sale comes as Giuliani is preparing a modification to the city's fiscal 1995 budget. City hall officials say the mayor will release a plan detailing about $800 million in cuts and other measures to close a budget gap of more than $1 billion.

Despite its budget woes, New York City is widely regarded as the municipal market's premier issuer, and competition is fierce to win appointment to the city's top underwriting categories.

While tighter spreads have made senior manager appointments less lucrative, the city in recent years has emerged as the municipal market's largest issuer and will sell billions of dollars of debt into the future.

As a result, firms that win senior manager roles often rank among the top underwriters in the business, a distinction that aids them in winning underwriter roles with other municipal issuers.

In a prepared statement, Giuliani said the city reduced the number of senior managers in this year's syndicate "to reap the benefits of a more competitive environment that will lead to more individualized attention for the city's financing needs." Last year, former Mayor David N. Dinkins and former city Comptroller Elizabeth Holtzman selected seven senior managers for the city's GO syndicate.

The underwriter announcements failed to include official resolution of which firm will act as the city's financial adviser for its GO bond sales. Disagreement over this issue delayed the official financial team announcements for more than a week.

The mayor's office and the city comptroller's office have been battling over the adviser slot for months. Giuliani wants one firm, New York City-based Public Resources Advisory Group.

Hevesi says two firms are needed, Public Resources and P.G. Corbin & Co., a Philadelphia-based firm.

At the moment, the two sides appear deadlocked. Abraham Lackman, Giuliani's budget director, said the city will soon announce a final decision on the financial adviser appointment.

Michael W. Geffrard, Hevesi's first deputy comptroller, said the matter is largely resolved, and that Corbin will stay aboard as the comptroller's financial adviser. He would not elaborate. City sources said the city comptroller's office will probably pay for P.G. Corbin's services, while Public Resources will receive its compensation from the city's expense budget.

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