Alan Hevesi, the Queens Democratic Assemblyman who will challenge Elizabeth Holtzman for the New York City comptroller's post, says he will introduce legislation that would force the city to issue more of its debt through competitive auction.
The city sells most of its bonds through negotiated sale.
City finance officials, including Holtzman, say the negotiated process saves the city money compared with a competitive sale because city deals are too large and complex to be effectively marketed in an auction.
But Hevesi, who announced his candidacy for comptroller yesterday, said the city can at least sell a portion of its debt competitively, and avoid any appearance of a conflict of interest that arises when large Wall Street firms contribute to the campaigns of politicians that chose bond underwriters.
Hevesi, who will run against Holtzman in the Democratic primary, said he will implement more competitive bidding on city GOs if he is elected comptroller.
"What we want to do is develop a general formula that determines when it is appropriate to do competitive bids," Hevesi said in a telephone interview. Hevesi acknowledged that it would be difficult to sell derivatives and variable-rate debt through a competitive bidding process, but he said most if not all of the city's fixed-rate general obligation debt could be sold through competitive bids.
Hevesi also said the legislation, which is currently at "the staff stage," will try to set guidelines for city officials selecting underwriters. He said the intent is to avoid conflict of interest because many underwriters contribute to the campaigns of these same officials.
Hevesi's announcement comes as the city is seeking to renew its authority from the state to issue bonds through negotiated bids.
The city is one of a handful of municipal government's in the state that can sell bonds by negotiating terms with underwriters.
But the city, which does this on an annual basis, must renew this authority before the legislative session ends in June.
Last year, the state Senate, controlled by Republicans, called on the city to sell more of its debt competitively and postponed passage of the legislation authorizing the extension of the city's negotiated powers.
Legislative sources say any proposal on this matter by Hevesi will be viewed as politically motivated because he is running against Holtzman.
Hevesi said the proposed legislation would force the city to sell bonds competitively "when it's appropriate." but he said it is too early to provide details of the bill.
In its last bond deal, a $900 million issue priced on Tuesday, the city sold about $500 million in fixed-rate GO bonds. Hevesi said a. large portion of those securities could have been sold through a competitive bid.
Hevesi is a senior member of the Assembly Ways and Means Committee, which is controlled by Democrats. Hevesi said he has the support of several of members of the committee including chairman Sheldon Silver, D-Manhattan.
Silver said yesterday that he agreed with Hevesi's efforts, and that the legislation will force the city to show why it can save money using a negotiated sale as opposed to a competitive sale.
Hevesi's legislative plans come and government investigations into negotiated bond deals in New Jersey and a city Department of Investigation probe into an underwriter selection made by Holtzman.
Holtzman, as city comptroller, selects city bond underwriters with Mayor David N. Dinkins. While Dinkins and Holtzman have relied on Wall Street for financial support, both say their underwriter choices are based on the firm's ability to sell debt and develop innovative financing techniques.