Los Angeles County drafting policy to encourage diversity on bond teams

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The Los Angeles County Board of Supervisors wants to bring more diversity to the finance teams that work on the county's multi-billion dollar bond program.

With that in mind, the supervisors gave the treasurer and tax collector 180 days to work with the county counsel and other relevant agencies to come back with recommendations for a public finance diversity and inclusion initiative.

The focus would be to include firms that have evidence of hiring and promoting women, LGBTQ individuals, disabled veterans and ethnic minorities.

Supervisor Sheila Kuehl co-authored with Supervisor Hilda Solis the motion approved unanimously by the five supervisors last week. Kuehl said she believes the county could do a better job of being inclusive and she wants to explore it.

“My opinion is almost everyone could do a better job than they are doing,” Kuehl said.

She added that she thinks there has been a false dichotomy in hiring bond counsel and underwriters that says you can’t both add diversity and keep an eye on the bottom line.

The policy would apply to bond and disclosure counsel, municipal advisors, trustees, insurance companies and underwriters. Though the county has a diversity policy and has a program to ensure that smaller firms can navigate the county’s contracting process for other areas, it doesn’t have anything aimed at public finance, she said.

Between its own robust bond program, and sales for which it acts as a conduit for other municipalities, Kuehl said the county could have a great impact in encouraging diversity.

“In the last nine years, we have issued $12.5 billion in debt and paid out almost $20 million in fees,” Kuehl said.

Los Angeles County is the largest county in the country and recently hit an all-time high of $1.6 trillion in assessed value in fiscal 2020, according to a Moody’s Investors Service ratings report released in July ahead of a $251.9 million sale of lease revenue bonds that closed Thursday. It adopted last month a fiscal 2019-20 budget of $32.5 billion.

The county issues between $500 million and $1 billion in short-term notes each year in addition to sales to support capital projects, according to the motion.

"The county has a prominent position and strong name recognition in the municipal debt markets," according to the motion. "For a small or emerging firm, or a firm that we would consider a Community Business Enterprise, working on a county financing — whether in first, second or third "chair" position — exposes the firm to bigger, more established players in the capital markets. Participating in a county financing also provides important experience that can help the firm compete for a more substantial role in future financings."

In researching the issue, the county also found that it has not explicitly included Lesbian, Gay, Bisexual, Transgender and Queer/Questioning individuals in its contracting equity programs, but stated through the motion that the council is making the determination that it should be.

“Clearly, we have anti-discrimination policies that include LGBTQ people, but we have not included it in our diversity efforts in contracting,” said Kuehl, who added that she’s an out lesbian.

As to why now, Kuehl pointed to the current make-up of the board saying they have generally been more interested in all aspects of diversity and inclusion. She noted that the board comprises four women and one man including an African-American, one Latinx and one gay person.

But Kuehl’s budget deputy Kieu-Anh Knig sparked the effort when he brought it to her attention that the county doesn’t have any real policy around this, she said.

In addition to looking at how they can encourage more diversity, the supervisors asked the treasurer-tax collector to draw up a way to make sure that it isn’t just the owner of a firm that is a minority, but that the entire firm has a diverse make-up.

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Sell side State and local finance Diversity and equality County of Los Angeles, CA California