Members of the New York State Senate finance staff will meet with their counterparts from New York City this week in an attempt to persuade city officials to sell more of their debt through competitive bidding, state and city sources said on Friday.
The meeting, scheduled to take place Thursday in Albany, will bring together officials from the city's Office of Management and Budget and the city's comptroller's office with staff members from the state Senate Finance Committee.
The city officials scheduled to attend include Mark Page, deputy director and general counsel for the city's budget office; Darcy Bradbury, the city's deputy comptroller for finance; and Dixie Hathaway, the comptroller's legislative counsel. They will meet with the staff of Abraham M. Lackman, director of fiscal studies for the state Senate.
Mr. Lackman said his office asked to meet with the city officials to determine if the city can limit the level of negotiated debt it sells. New York City is the nation's largest issuer of debt and negotiates the lion's share of its bonds and notes through a rotating syndicate of Wall Street firms. The city plans to negotiate the sale of about $1 billion of debt in October through a syndicate led by Lehman Brothers.
Thursday's meeting comes at a critical time for city finance officials, with state lawmakers having ended their 1992 legislative calendar deadlocked over several key bonding issues. These issues include a bill that would allow the city to renew its negotiated debt authority, and separate bills to allow the Long Island counties of Nassau and Suffolk to sell bonds for deficit financing.
City finance officials say the size and complexity of their deals, which often add up to $1 billion of bonds in a variety of types, forces them to negotiate their sales with investors rather than taking a chance of paying much higher interest rates because of a poorly bid auction.
However, Mr. Lackman said other large issuers of debt, including California, sell most of their debt through a competitive bidding process. He added that the city is missing an opportunity for substantial savings by not devoting at least a portion of its bond issuance to competitive bidding, given the recent strength of the municipal market.
New York City has not sold general obligation bonds competitively since February 1990. However, the city regularly sells tax anticipation notes and revenue anticipation notes by competitive bid.
"We've done some research on this, and we believe that the city can save money doing some of its bond issuance through competitive bidding," Mr. Lackman said. "We also believe there's some interest from city officials to do more competitive sales."
City officials would not say if they will increase the level of securities sold competitively. "Our position is that we do competitive bidding when it's appropriate," said Roger Anderson, bureau chief for debt issuance at the city comptroller's office. "Most of our deals are too big and complex" to bid competitively, he said.
The savings obtained through competitive bidding of securities is one of the more hotly contested subjects in the municipal market. Many academic studies show that competitive bidding offers most issuers lower costs than negotiated sale.
But many Wall Street investment bankers often counter that big issuers with stories to tell, such as New York City, must sell bonds through negotiation or face so few bids that they would be forced to pay above-market rates.