Legislators learn of plan to invest tobacco money
LITTLE VALLEY - Cattaraugus County could be debt-free in 18 years, and have $7.8 million left over, by using tobacco-settlement money to create a capital reserve account.
During a committee meeting Wednesday, Cattaraugus County legislators learned of a plan to buy out their share of a national settlement from tobacco companies and how to invest the money.
Treasurer Joseph G. Keller detailed how to create a capital reserve fund, which would secure a portion of the tobacco money each year. Added to a projected increase in sales taxes and repayments of previous debts, the money would be invested and create a reserve credit each year, including $1.2 million by Dec. 31.
The county is one of several to hear a presentation from representatives from the state Association of Counties; First Albany Corp., an investment firm; and investment attorneys regarding a buyout plan.
The county is scheduled to get about $42 million over 25 years from the tobacco settlement and has already received $1.8 million.
A buyout would bring $14.6 million up front and create a $5 million residual over 30 years.
The county must have a plan to spend any up-front money and cannot use it to directly reduce taxes.
Under Keller's plan, the county would apply $4 million toward paying off a 1994 bond; meet its remaining obligation of $7.1 million to Jamestown Community College for an expanded campus in Olean; provide $263,000 for new showers at the Onoville Marina; use $220,000 to expand the veterans cemetery in Olean; and spend $3 million for road and bridge projects.
The plan would eliminate the need to borrow each year for roads and bridges, Keller said. Up to $26 million could be saved in interest by not borrowing $70 million through bonding projects.
For example, the county borrowed $905,000 last year for road construction. Before the bond expires in 15 years the interest will increase the total money borrowed to $1.2 million, he said.
Paying off the JCC debt up front would save the county $2.8 million in interest, Keller estimated.
The county must decide by Sept. 15 whether to sell the tobacco money.
The next step would be to create a local development corporation, which would authorize the sale of the assets through bonds and then pass the money back to the county to implement the capital reserve proposal.