The Nassau County, N.Y., Interim Finance Authority opposes the Long Island county’s plans to sell $120 million of tobacco settlement bonds to generate cash to aid the Nassau Health Care Corp., the chairman of the state oversight panel said yesterday.
Nassau County lawmakers on Monday voted 18 to 1 to approve a plan to sell up to $456 million of new and refunding tobacco bonds. Finance officials presented the transaction as a way to restructure about $290 million of outstanding settlement debt, freeing up about $16 million in trapping accounts, and provide nearly $100 million of aid to the HCC, which relies on county aid to cover operating losses. The deal would also finance a $25 million debt service reserve fund, capitalized interest, and issuance costs, county debt manager Jeff Nogid said yesterday.
In its comment statement, NIFA said that the transaction’s restructuring component is a “reasonable” means of freeing up the trapping accounts and taking advantage of favorable market conditions. However, NIFA expressed concern that the county would use $120 million of long-term debt for operating expenses.
“NIFA believes that an operational need, however legitimate, does not justify long-term borrowing,” the statement said. “Regrettably, Nassau County in the past issued long-term debt for operating expenses …. To start again down the path of borrowing for current expenses is not the fiscal direction that NIFA believes the county should proceed.”
While NIFA, which New York legislators created in 2000 to help Nassau better manage its finances, does not have authority to approve or reject county bond sales, state law requires it to comment on borrowing plans, said NIFA chairman Ronald Stack, who is also head of public finance at Lehman Brothers.
“The county knew our view on this — we work in partnership with county officials, we have a very good partnership, and we believe it’s important for us to say what our views are,” said Stack, who described yesterday’s formal statement as a “composite” of sentiments expressed by individuals on the seven-member board.
NIFA also said that the county’s plan for providing aid to the health care corporation lacks specificity. However, Tom Stokes, deputy executive for budget and finance, said the county is not simply handing the health care corporation a blank check. County Executive Thomas Suozzi announced that former deputy executive for budget and finance Arthur Gianelli would start today as the health care corporation’s chief operating officer. Gianelli will be charged with devising over the next 60-days a long-term strategy for the hospital corporation’s financial health.
“NHCC’s fiscal health is vital to the county’s fiscal health,” Suozzi said in a statement. “The county is the guarantor of the health system and so the better shape it’s in, the better shape we’re in.”
Stokes said that Gianelli — with the county’s input — will outline objective financial and management milestones, and that county aid to the corporation will be tied to the latter’s progress.
Bear, Stearns & Co. and Citigroup Global Markets Inc. are co-seniors on the tobacco settlement transaction, which is expected to price within the next two weeks. Orrick, Herrington & Sutcliffe LLP is the county’s bond counsel. Public Financial Management Inc. is its financial adviser.
