As New York City moves ahead with a $750 million refunding, officials continue to haggle over the way in which one of the city's financial advisers will get paid for its work on the bond issue.
The issue, scheduled for pricing tomorrow, has been marred by controversy. City officials say the issue will produce $225 million in budget relief, largely by extending maturities of existing debt. Budget monitors deride the move as a fiscal gimmick.
In recent weeks, officials from the mayor's office and the city comptroller's office have battled in public over the selection of firms to serve as a financial adviser on the refunding issue. Both offices must jointly select bond underwriters and financial advisers for the city's bond issues. Comptroller Alan G. Hevesi wants to appoint two firms to the post; Mayor Rudolph W. Giuliani says that only one is needed.
Now, on the eve of the refunding, a few controversy has emerged, with both city offices providing different stories of the way in which they will pay for the advisory work.
Officials from Hevesi's office say the city will pay the issue's financial advisers, Public Resources Advisory Group and P.G. Corbin & Co., with proceeds from tomorrow's bond sale.
Paying financial advisers and underwriters with bond proceeds is common in the municipal bond market. Staff members from the comptroller's office say the Giuliani Administration agreed to use the sale's proceeds to make payment as part of a compromise that allowed Public Resources and P.G. Corbin to jointly work on several upcoming bond deals until a final decision on selecting a single financial adviser can be made.
Yesterday, however, mayoral aides said that only Public Resources will receive payment from the issue's proceeds, and that P.G. Corbin will be paid out of the comptroller's budget, a move opposed by Hevesi.
"What we agreed to was that both firms would be paid basically the same way," said one source from the comptroller's office, who asked not to be quoted by name. "That's what we agreed to, and that's what we intend" to do.
A mayoral aide downplayed the latest development. The aide said the details of the compromise reached last week will ultimately be worked out to both parties' satisfaction. "This is just BS between the staffs," the aide said.
Still, other Giuliani staff members say that under the compromise, Hevesi agreed to pay for P.G. Corbin's services out of his own pocket, and that the mayor is simply holding Hevesi to his promise. "There's a real difference of opinion here," a City Hall source said.
The disagreement over how to pay for Corbin's services represents the most recent snag in a hostile public dispute between the mayor and the comptroller on the issue of selecting a financial adviser for the next two years.
Until last week, the two officials -- who must jointly approve most city financial decisions -- remained in a standoff, with Hevesi calling for the appointment of Public Resources and P.G. Corbin, and Giuliani supporting only the selection of Public Resources.
The debate took on racial overtones after The Bond Buyer reported that deputy mayor John Dyson criticized Hevesi's position, saying that the comptroller "ought to know a bid from a watermelon." P.G. Corbin is owned by an African-American woman, Patricia Garrison-Corbin.
Last Tuesday, the parties reached a compromise, agreeing that both firms will work jointly on the refunding issue and others over the next three months. Under the plan, each side will have a firm advising it, with Giuliani using Public Resources and Hevesi relying on P.G. Corbin.