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Black-Owned Firm Picked to Sell L.A. Bonds : Government: Many hail the selection for $500-million sale as a civil rights breakthrough. But a City Council dissenter charges that the deal was engineered by 'an army of lobbyists.'

July 28, 1993|JAMES RAINEY | TIMES STAFF WRITER

A black-owned investment banking firm was chosen Tuesday by the Los Angeles City Council to manage the largest bond sale in the city's history--an action heralded by supporters as a civil rights breakthrough but denounced by critics as being contrary to the city's financial interests.

Powered by one of the most intensive City Hall lobbying campaigns in recent memory, San Francisco-based Grigsby Brandford & Co. won the right to manage the sale of up to $500 million in bonds to refinance the expansion of the Los Angeles Convention Center.

The 11-4 vote in favor of the firm came despite a report from a city financial consultant that said the council might save money by awarding the sale through competitive bid. Councilman Zev Yaroslavsky, chairman of the Budget and Finance Committee and leader of the fight for competitive bidding, called the action "a disgrace to the democratic process" that had been engineered by "an army of lobbyists."

The victory means that Grigsby Brandford will make close to $1 million in fees, according to a city official, and join a select group of mostly East Coast investment banking houses that usually manage such large bond offerings.

One city official had compared the firm's selection to Jackie Robinson breaking the race barrier in baseball.

"For the first time, a firm like ours in California has been able to break the glass ceiling," company Vice Chairman Napoleon Brandford III said after the vote. Brandford predicted that the choice would pave the way for other minority-owned and California-based firms to manage large bond sales.

Councilman Richard Alatorre concurred. "There will be reverberations of this throughout the bond markets," Alatorre said. "I think this will open things up; that is the significance."

Alatorre voted for the San Francisco firm, along with council members Mike Hernandez, Laura Chick, John Ferraro, Richard Alarcon, Mark Ridley-Thomas, Rita Walters, Nate Holden, Hal Bernson, Jackie Goldberg and Rudy Svorinich Jr. Yaroslavsky voted for competitive bidding, along with council members Ruth Galanter, Marvin Braude and Joel Wachs.

The vote ended a protracted and contentious struggle. City officials hope that, in the end, they will save $15 million to $20 million by refinancing bonds already issued to rebuild the Convention Center.

The competition began with the city's financial experts recommending New York-based Goldman, Sachs & Co. to head the syndicate of investment banking firms to sell the bonds. Grigsby Brandford and others would have played lesser roles.

But the citizens commission that operates the Convention Center rejected that advice and, pointing to the goals of channeling business to Californian and minority-owned firms, recommended Grigsby Brandford.

Miffed officials at Bank of America, the leading seller of most city bonds in recent years, complained that the selection had been unduly influenced by politics. The state's largest bank withdrew from the competition in May.

The extent of Grigsby Brandford's lobbying efforts will not be fully known until city-required spending reports are filed. But the firm contributed nearly $31,000 to City Council members and former Mayor Tom Bradley from 1984 through last year. It also gave $5,000 to the transition effort of Mayor Richard Riordan.

In recent weeks, lobbyists led by former Councilman Arthur K. Snyder have led the campaign for the minority firm in repeated meetings with council members.

The firm suffered a temporary setback earlier this month when the city's financial adviser proposed competitive bidding, rather than private negotiations, to select the bond sellers. The city's chief consultant, David Rush, said bidding would assure savings that would be at least equal to a negotiated deal and perhaps save as much as $2 million because competition could drive interest rates down.

But Grigsby Brandford and most of its competitors argued that a negotiated sale would actually produce the greater savings. The firm said bidding would cripple its chances to lead the sale because it could not have produced the required deposit of up to $50 million.

"It doesn't matter how deprived one firm is or how privileged another is," Councilman Braude said Tuesday. "Our duty is clear: Let's save money for the taxpayers."

But others argued that the question of the best financial deal was unclear and that they preferred to take a socially progressive step and support the minority firm. "They are capable. They are minority. They are the only California-based company," Alatorre said. "Why not give them a chance?"

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