ATLANTA -- The Kentucky Housing Corp.'s sale last week of a $74 million mortgage revenue bond issue over the objections of the state legislature's debt oversight panel could put the issuer on a collision course with state lawmakers, a legislator said yesterday.

"You can be sure that we will closely review the housing authority in the next regular session," said Sen. Tim Shaughnessy, D-Jefferson, a member of the debt panel, the General Assembly's Capital Projects and Bond Oversight Committee

Sen. Shaughnessy said lawmakers may consider revisions to the agency's charter when the General Assembly meets in January. He declined to be more specific.

Although the oversight committee has wide-ranging power over state borrowings when the legislature is in session, its actions are only advisory at other times. Kentucky lawmakers are not now in session.

Sen. Shaughnessy said the committee decided last Monday that it could not approve the housing bond issue because the deal would exceed the issuer's statutory borrowing authority and because some panel members feel it gives the appearance of favoritism.

The housing authority has issued about $1.2 billion in debt, but has only about $900 million in debt outstanding. Members of the oversight panel, the senator said, argued that the authority's statutory limit of $1.125 billion is defined by its debt issued rather than debt outstanding.

Sen. Shaughnessy said some committee members also objected to the bond issue because they felt it could be construed as a payoff to supporters of outgoing Gov. Wallace Wilkinson. On Dec. 10, Gov. Wilkinson will be succeeded by current Lieut. Gov. Brereton Jones, who was elected governor earlier this month.

"I can't help but believe this was one last attempt to grant a favor to political friends," Sen. Shaughnessy said. The senator said he referred in particular to the underwriter's counsel on the deal, Kutack, Rock & Campbell, which he characterized as the personal choice of the Wilkinson administration.

Sen. Shaughnessy said that new appointments to the board may be made in the next several months that could change the direction of the housing agency and help it avoid conflict with the legislature.

John Martinez, the housing authority's executive director, defended the negotiated sale, which was awarded last Thursday to a syndicate led by Bear Stearns & Co.

"I think the committee's disapproval was unjustified," he said. "I made the decision to sell the bonds because I felt we would be in a better position issuing now, in case the federal government cuts off mortgage revenue bonds at the end of the year." The federal tax exemption of single-family mortgage revenue bonds is currently scheduled to expire on Dec. 31, 1991.

The housing official said the oversight committee misconstrued the meaning of the legislation defining the authority's borrowing capacity. According to Mr. Martinez, the debt limit of $1.125 billion refers to outstanding debt, not debt issued. The housing agency, he said, will have a total of about $900 million in outstanding debt after sale of its latest deal, putting it well below the capacity limit.

In defending his interpretation, Mr. Martinez pointed to a ruling by state Attorney General Frederic J. Cowan in September 1990 that supported a definition of debt capacity based on outstanding debt. At that time, Mr. Cowan found that the legislature had intended to establish a revolving fund in which bonds redeemed or retired would be subtracted from bonds issued.

The housing official also rejected Sen. Shaughnessy's characterization of the bond issue as a payoff. "We chose Bear Stearns by an open process," he said. "They have the right to pick their own bond counsel -- though I will say that so far as I am aware, Kutak has always done a good job on the Kentucky transactions."

A spokesman for Gov. Wilkinson also rejected any suggestion that the housing agency deal was a pay-off. "Sometimes there is a lot of political hot air in Kentucky, and this is an example of it," he said.

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