ATLANTA -- Officials in Palm Beach County, Fla., have taken an unusual step to ensure that women- and minority-owned firms have a place in underwriting the county's upcoming $50 million general obligation bond issue -- they have decided to break with their tradition of selling GOs competitively and arranged instead for a negotiated sale.
County Commissioner Carol Roberts yesterday said the commission voted last Tuesday by a 6-to-1 margin to sell through negotiation the first of two planned GO bond issues to fund the purchase of environmentally sensitive lands. She said the commission deviated from its long-standing policy of directing that GO bonds be sold competitively in order to encourage firms that it felt have been traditionally left out of the municipal bond market.
But she said the commissioners avoided establishing negotiated GO sales as a general policy."
"Palm Beach County wants to show it is serious about promoting on every policy level the development of minority- and women-owned enterprises," she said. "If the deal were done on a competitive basis, there would be no assurance of promoting this policy."
Ms. Roberts said the use of such a strategy is preferable to legislation or administrative guidelines that stipulate a specific amount of county work be awarded to minority - or women-owned firms. "I believe we should encourage such contracts on a case-by-case basis," she said.
The county official said the difference in issuance cost between a negotited and competitive deal is apt to be minimal. In addition, she said the negotiated sale makes sense for the county in other ways.
In particular, Ms. Roberts said a negotiated sale will help West Palm Beach County come to an aggreement with underwriters before the end of the current fiscal year, which ends Sept. 30. This will allow it to include the property tax increase that will pay for the bonds in the upcoming November tax bill.
The negotiated sale also will permit a formal closing after Sept. 30, if the bond validation extends beyond that date. Bond validation is a formal legal procedure that certifies the bond issue for sale.
In deciding to pursue a negotiated financing, the commission went counter to the recommendation of the county's financial staff. "we recommended a competitive sale because we felt it would be the most cost-effective borrowing," said John Long, Palm Beach County's director of special projects. "The commission obviously felt otherwise."
Ms. Roberts said the county chose on Tuesday a syndicate of three co-senior managers and five co-managers. The co-senior managers chosen were: Smith Barney, Harris Upham & Co., which also serves as book runner; Lehman Brothers; and Bear, Stearns & Co. The co-managers were: William R. Hough & Co.; PaineWebber Inc.; Prudential Securities Inc.; Smith Mitchell & Associates Inc.; and United Daniels Securities Inc. New York-based United Daniels is a minority-owned firm; and Seattle-based Smith, Mitchell is woman-owned. Ms. Roberts said it was the first time the county had included such firms in an underwriting syndicate.
Anita Mitchell, a senior vice president at Smith Mitchell and manager of the firm's Florida office in West Palm Beach, hailed the decision to proceed with a negotiated offering and the selection of her firm to the underwriting team.
"Obviously, we're real pleased," she said. "We think it sends out a signal that Palm Beach County has opened up its selection process to bring in firms that have traditionally not participated in its GO deals. We hope that other local governments will consider this approach."
Proceeds from the bond issue will be used to buy land from among 38 environmentally sensitive sites throughout the county. The sites proposed for acquisition total about $300 million in value, Ms. Roberts said. County voters passed a referendum in March 1991 authorizing the sale of $100 million of bonds to purchase the land.
Ms. Roberts said another bond issue probably would be sold this spring to fund the second $50 million authorized by the referendum. She said the county commission would vote separately on whether to conduct this sale on a negotiated basis but expects the policy decision made last week to be continued.
Palm Beach County's approximately $80 million of oustanding GO debt is rated AA-minus by Standard & Poor's Corp. and Aa by Moody's Investor's Service. The county last sold GOs in a $14.4 million negotiated sale in November 1988. That issue, said Mr. Long, was a refunding deal, and as such was a special situation that required negotiation.
He said all other sales of county GO debt have been sold on a competitive basis.