Tobacco pool is drawing in some smaller area counties
(July 5, 2000) -- Like lottery players opting for the upfront lump sum, numerous New York counties want a wad of cash now instead of decades of lawsuit settlement payments from the tobacco industry.
Several large counties, including Monroe, Erie and Westchester, already have sold or approved the sale to investment firms of the rights to years of tobacco payments. Now some smaller counties have either joined a New York state Association of Counties pool to do the same thing as a group, or are considering the merits of such a move.
The boards of supervisors in Livingston and Wayne counties decided last week to secure a place in the pool. Over the summer, officials in each county will debate whether to actually join the pool.
Wyoming County plans to start the procedure to join the pool this summer. Genesee County legislators voted last week to go ahead with the pool idea.
Ontario County officials also are debating the idea.
The idea, called "securitizing," requires each county to set up a nonprofit corporation to handle the money, which in turn requires public hearings and numerous legal steps.
"This is a complex, costly transaction," said Steve Aquarios of the Association of Counties. But small and mid-sized counties can share costs in such a pool, he said.
Prompting the securitization debate are the shrinking payments the counties expect to see in coming years from the tobacco companies. The money paid to New York state and the individual counties is based in part on cigarette sales and the financial health of the tobacco companies. If sales drop, or if federal and class-action lawsuits eat into company profits, New York counties get smaller checks.
"The problem we see is this $32 million we could get between now and 2030 is looking dimmer and dimmer literally as the months go by," said Genesee County Manager Jay Gsell. "It's the bird in the hand or two in the bush kind of thing."
Tobacco industry woes already are cutting into the cash counties get. Livingston County's most recent check from the settlement, $801,000, was about 12 percent lower than expected, county Administrator Nick Mazza said.
Not everyone is buying into the securitization concept, however.
The Orleans County Legislature has opted not to dive into the securitization pool for numerous reasons -- including the question of whether the county would be on the hook if the tobacco settlement payments to investors dry up.
"Bond holders aren't just going to give up," said county Administrator Stan Dudek. "We'd have at least defense costs, if not full liability."