New York City Deputy Mayor John Dyson yesterday apologized for statements he made regarding a dispute over the selection of the city's financial adviser amid criticisms from city and state leaders that his statements were racially motivated.

A firestorm of reaction erupted in City Hall yesterday morning as public officials learned about his statement, with some officials calling for his resignation.

On Thursday, The Bond Buyer reported a conflict between the office of city comptroller Alan G. Hevesi and the administration of Mayor Rudolph W. Giuliani over the hiring of a financial advisory firm owned by a black woman.

Dyson used the word "watermelon" to describe a dispute with the city comptroller over the costs of hiring firms to serve as the city's financial advisers.

The firm, Philadelphia-based P.G. Corbin & Co., is supported by Hevesi's staff to join Public Resources Advisory Group, as the city's financial advisor. P.G. Corbin is owned by Patricia Garrison-Corbin.

Both firms served as the city's financial advisers under former Mayor David N. Dinkins and former city comptroller Elizabeth Holtzman.

Hevesi's staff said two firms are needed to handle the volume of financial work completed by the city. Staff representing Giuliani say only one firm is needed, Public Resources, and that hiring the other firm is a waste of money.

In explaining the mayor's position, Dyson said hiring one firm is cheaper, because Public Resources made a "firm bid" of $550,000 to to do all the work. Appointing P.G. Corbin would cost another $500,000, he said.

Dyson later said in a telephone interview with The Bond Buyer on Wednesday that the city is certain it can save money merely by hiring Public Resources based on its bid to do all the work for $550,000. Dyson said that "the comptroller ought to know a bid from a watermelon" and "a bid means if you accept the bid, that's what they've agreed to do."

The "watermelon" remark ignited criticism from city and state leaders, especially those representing the African-American community.

Amid charges that his remarks were racially motivated, Dyson yesterday apologized at a City Hall press conference.

"I used an expression we happen to use in upstate New York," Dyson said. "I apologize to those who took offense to that."

At a press conference, Giuliani defended Dyson, saying he is satisfied with the deputy mayor's side of the story. Giuliani said he believes Dyson that the comments were not made with race in mind.

"He was referring to a watermelon, which in and of itself is not racist," Giuliani said.

Despite these assertions, public officials immediately took Dyson to task. Comptroller Hevesi in a press release said the comment "demonstrates Mr. Dyson's apparent compulsion to create the public impression that he is a bigot."

New York State Comptroller H. Carl McCall, writing to Giuliani, criticized Dyson for "claiming that the only reason P.G. Corbin is under consideration is that the firm is minority-owned."

"If Mr. Dyson supports hiring only one financial adviser as a cost saving measure, that may be understandable. What is not understandable or acceptable is the derogatory and derisive racial comments he used to oppose the hiring of P.G. Corbin," the comptroller said in the letter.

City council speaker Peter Vallone, flanked by members of the council's Black and Latino caucus, called on Dyson to apologize or resign.

"In an attempt to be jocular, [Dyson] ended up being a jerk," Vallone said.

Vallone called the remark "a racist statement." After Dyson's apology Vallone said, "I think he's going to have to do a little more explaining."

Dyson has agreed to discuss his comments with the minority caucus, Vallone said.

Lost in the debate over Dyson's remarks is the need for the city to choose a financial adviser and underwriters for an important bond refunding scheduled for later this month. City officials say the bond refunding must take place before the end of the month in order to produce the $225 million in savings needed to balance the city's fiscal 1995 budget.

City officials say that without an financial adviser, they cannot complete the transaction. In the press conference, Giuliani said the city has an alternative plan to complete the refunding and glean the necessary savings, but he did not elaborate. Giuliani did not say if the plan involved the comptroller's office, which is needed on city bond deals.

City Hall sources say the mayor has proposed allowing Public Resources and P.G. Corbin to continue as financial advisors until the transaction is completed. However, sources say Hevesi's office is opposing the interim measure.

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