Comptroller Liu Awards Management of $962 Million Bond Sale to Loop Capital Markets
Our Time Press Interviews John Liu Comptroller, City of New York.
Comptroller Liu, can you tell us what’s different about this process and what has happened in the past?
Would you believe that the way the city sells bonds, billions and billions of dollars each year is done by rotation, meaning a few of these really large companies, household names, actually take turns being the lead underwriter for these bond sales. There’s a fair amount of profit involved in being the lead underwriter. The problem with this method is that it’s the same people taking turns. I never understood why that had to be the case. So this particular bond deal, which ultimately turned out to be nearly $1 billion, was done by what is formally called a bakeoff, which is instead of having the same people take turns and just calling out the next one in line, we open it up to 14 companies who we have done business with and have a certain track record with the city and let them put proposals to be the lead underwriter.
It was competitive because all these proposals were evaluated on the merits and in the process the firm that gained the highest evaluation turned out to be a minority-owned firm, Loop Capital. I’m very happy with the result of this particular bond offering. First and foremost, it saved our taxpayers $82 million – essentially, this bond offering was a refinancing of previous bonds-secondly, it shows what can be achieved if we open up the process and let everybody get in on the level playing field. And in this case, we opened up the process and gave everybody a chance and a minority firm came out on top.
Is “rotation” a practice in other parts of the city’s contracting as well?
Well, first of all, would you believe they actually call this rotation
‘the Syndicate”. You can’t make this stuff up. Apart from that, I don’t know exactly where else in city contracting this concept of rotation occurs but I am going to bet that it is not only in bond underwriting that the city follows this kind of approach.
I really believe that the city’s purchasing power, i.e., the ability to put out billions of dollars worth of contracts every year, has the potential of not only creating jobs overall but to eliminate these historical disparities that exist within our city. Disparities in contracting the minority and women on firms as well as disparities in unemployment rates, where you have communities throughout the city who face much higher unemployment levels than the average for the city.
The question of minority grew out of the Civil Rights Movement, do you break out or can the Comptroller’s office do a break out of the minorities. Are they African-American, Asian or Latino?
There is not enough of that done. We have a Local Law 129 that sets goals for the different types of business ownerships such are the Latino-owned, African-American, Asian or women-owned. And they are broken down by type of business ex: construction or professional services, etc. These goals are laid out in Local Law 129 but it has been nearly impossible to track the city’s progress with regard to compliance with Local Law 129. So this is an issue that is at the top of my priorities and in the absence of readily available information, we are conducting studies in my office to start to get our arms around this problem.
There was a time when Dinkins was mayor that the city had a very strong minority contracting process. Does the Bloomberg Administration have a system for minority contracting?
Mayor Dinkins was one of the first, if not the absolute first, strong voice in this city to address this issue. The problem being the disparities in minorities getting contracts from the city. Mayor Dinkins put in place a set of concepts and procedures that in intervening years have not been upheld. What my office is focused on is continuing the legacy that Mayor Dinkins began 20 years ago.
Can you elaborate on what this kind of contract procedure could potentially mean for the Kings County community?
When we open the doors to more minority contracting, we open up economic opportunities to everybody, especially residents in the New York City neighborhoods and let me add that minority-owned firms have a strong track record of hiring people in our neighborhood.
The Department of Education changed how they purchase books. You mentioned the rotational aspect of bond buying, but the DOE put a high size limit to the companies that can sell books and African-American firms that had been selling to the city were lost. What kind of rules exist and can you have any effect on those rules that take minority firms out of the process?
It is unclear where else in city contracting this rotational concept is in practice. None-the-less, it is my goal to ensure that the way the city lets out contracts doesn’t discriminate in any way and, furthermore, that contracts are let out in a way that chips away at historical disparities. I’m very excited about what’s happening here and this is only the beginning.