New York City officials yesterday told a state authority to shelve a proposed unrated $18.5 million revenue bond deal slated to provide budget relief to the city in fiscal 1991.
Thomas Appleby, president of the United Nations Development Corp., said yesterday that city officials informed him they do not want the sale to go forward. Consequently, today's UNDC board meeting to discuss and vote on the bond issue has been canceled, he said.
"The city was not comfortable with the terms" of the deal, Mr. Appleby said. He referred all questions about the proposed deal to city officials.
Mark Page, deputy director of the city's Office of Management and Budget, said interest costs on the deal, its structure, and the timing of the sale all played a role in the city's decision not to use it. He said he believed there was enough money in other gap closing measures to fill the hole.
One source in the city administration, who wished to remain anonymous, said city officials were concerned about the potentially high interest costs on the UNDC's small, tax-exempt revenue bond offering. There was some pricing talk of 9.75%, he noted.
The city was counting on about $16 million of the UNDC bond sale to assist it in closing a projected $465 million budget gap for fiscal 1991, which ends June 30.
The UNDC deal was similar to the $150 million revenue bond offering sold last year by the state's Battery Park City Authority to assist the city in closing its budget gap for fiscal 1990.
Another $50 million fiscal 1991 gap closing measure was recently shot down by city Comptroller Elizabeth Holtzman, who opposed using proceeds from yesterday's $675 million general obligation offering to capitalize interest costs on city bonds.
However, Mr. Page said, "It is my understanding [capitalizing interest] is still under consideration."
When Mayor David N. Dinkins first proposed the bond deal in his January financial plan, he had sought about $30 million from the one-shot revenue gainer for fiscal 1991 budget relief. The city would receive the money from the corporation in one lump sum by capitalizing future annual lease payments in the bond deal.
But the size of the deal was reduced after UNDC and city officials analyzed debt service costs and the security backing the offering.
Marsha L. Eisenberg, managing director and head of public finance at Merrill Lynch & Co., was handling the deal for the UNDC.
"They called us this morning and told the deal was off," Ms. Eisenberg said, adding that "the city never expressed" concerns about the terms of the deal to the firm.
Moody's Investors Service is the only rating agency the corporation has sought to rate its bonds, he noted. But this offering would have been unrated, Mr. Appleby said, since on this proposed deal, "We just thought that this was an issue that was subordinate to all our outstanding debt, and it wasn't in our interest to seek a Moody's rating."
He added, "Our board is interested in being helpful to the city and would like to help the city in fiscal 1992." The corporation was formed in 1969 to finance the development of the area surrounding the United Nations in midtown Manhattan.