The Niagara County Legislature appears ready to sell junk bonds, backed by future tobacco revenues, to pay off the county's current debts.
The Legislature's Administration Committee voted unanimously Tuesday to use the proceeds from the sale of the sub-investment-grade bonds, estimated at $19.3 million to $20.5 million, to retire existing debt.
The revenues would eliminate the need to budget for repaying $3.7 million in principal and interest on the general debt in 2006, and lesser debt payments in future years.
Budget Director Daniel R. Huntington said that this would shave 5.3 percentage points off the county's projected property tax increase for 2006.
Thus, if County Manager Gregory D. Lewis achieves his goal of presenting lawmakers with a tentative budget that shows a 9 percent rise in the tax rate, the increase would actually be only 3.7 percent once the new tobacco money is used.
The full Legislature has to decide Tuesday whether the county will sell the bonds on its own or join a multicounty pool being organized by the New York State Association of Counties.
Stephen A. Acquario, executive director of the association, presented the committee with the pool's $20.5 million plan Tuesday.
Last month, representatives of the Merrill Lynch brokerage firm pitched a stand-alone bond sale. Its updated estimates, presented Tuesday, called for a $19.3 million payment to the county.
County Treasurer David S. Broderick said the county projects $24.1 million in principal and interest payments on its debt between now and 2014. However, that amount would be lowered if the debt is paid off all at once because interest costs would be less. "That's a good use of the money, because you won't have a property tax increase when the tobacco money runs out," he said.
Lewis endorsed the deal, too. "This approach is very favorable to the county," he said.
Five years ago, when the county sold $47 million worth of bonds backed by its share of the national settlement with the major tobacco companies, it retired almost all the debt it had at the time -- $23 million. However, further borrowing has pushed the county's total debt higher than it was in 2000.
Technically, the decision on whether to join the multicounty pool or go it alone with Merrill Lynch rests with the three-member board of directors of a corporation that was set up to sell the bonds in 2000.
However, "they'll be attuned to what the Legislature wants," Lewis said. The board includes Broderick, Legislature Chairman William L. Ross, C-Wheatfield, and retired Sheriff's Department Investigator Roger Andrews.
By the time the full Legislature meets Tuesday, an analysis of the two deals will have been prepared by Fiscal Advisors & Marketing, the county's financial consulting firm.