Heavily Lobbied Council Selects Underwriters for Energy Plant

The Los Angeles City Council, buffeted by an intense lobbying campaign, chose two New York-based investment firms Tuesday as the principal underwriters for a $200-million trash-to-energy conversion plant that the city plans to build.

The council, in naming the firms of Smith Barney, Harris Upham & Co. and E.F. Hutton & Co. along with two minority-owned investment companies, ran into a buzz-saw of criticism over the handling of the lucrative contract.

City Administrative Officer Keith Comrie accused some of the successful firms of engaging in an “inappropriate” lobbying campaign to try to pressure city staff members and council members. He didn’t name any firms.

The bond package could involve more than $5 million in business for the underwriters, including as much as $800,000 in management fees. Those fees will be split among Smith Barney, as the senior firm; E.F. Hutton, and the minority-owned firms of Daniels & Bell and Grigsby, Brandford & Co.

In choosing Smith Barney and E.F. Hutton, the council rebuffed the recommendations of a selection committee, headed by Comrie, that had ranked Merrill Lynch, Pierce Fenner & Smith and Salomon Bros. Inc. as the two top firms.

Comrie said he believes competitive bids should be used in the future to avoid intense lobbying that fosters a selection “not based on merit.”

Consultants to some of the winning firms acknowledged that the lobbying was intense around City Hall but denied using any strong-arm tactics. “We don’t employ those kind of tactics,” said J. Steven Rhodes, vice president of public finance for Smith Barney. “We just tried to lay out the facts.”

Some council members also bristled at the criticisms.

Councilman David Cunningham told Comrie not to “impute any ulterior motives” to him and others who voted for the other firms. He argued that the winning firms had more experience in the bond underwriting field although none of it was in California--a factor that Comrie’s committee had cited in choosing the other firms.

Councilman Gilbert Lindsay, the head of the Public Works Committee, also pushed for the winning firms after decrying the lobbying charges.

The energy project--nicknamed LANCER for the Los Angeles City Energy Recovery project--will be located in Lindsay’s 9th Councilmanic District on a 13-acre site at 41st and Alameda streets.

The underwriting firms will help shape the proposal that will lead to the selection of the firm that will build and operate a plant that is supposed to burn 1,600 tons of rubbish a day and produce electricity.