Contact: Sunny Mindel/Jennifer Chait (212) 788-2958
The final bill before me is Introductory Number 563, sponsored by Speaker Vallone and Council Member Berman. This bill represents the City Council's endorsement of a proposed plan by the City to sell its rights to receive the tobacco settlement funds to the recently formed Tobacco Settlement Asset Securitization Corporation.
The amount of debt that the City is able to incur is limited by the New York State Constitution. The most recent forecast of the City's indebtedness indicates that the City will reach the limit of its capacity to enter into new capital commitments in Fiscal Year 2000. Furthermore, a constitutional amendment, which would be required in order for the City to increase its debt limit, could not become effective until January 2002. Therefore, last January I announced a plan which would provide $2.5 billion in funding for the City's capital program and thereby help the City avoid reaching the constitutionally imposed debt limit.
The City of New York is entitled to receive over $200 million each year under the nationwide settlement of litigation between the four largest tobacco companies and 46 states. Under this proposed plan, the City will sell its right to receive these funds to the aforementioned Tobacco Settlement Asset Securitization Corporation, which will issue bonds secured by such funds. The net proceeds of the bonds will be transferred to the City in payment of a portion of the purchase price for the revenues sold to the Corporation, and will be used by the City to finance a portion of its capital program.
I have been advised by the law firm of Brown & Wood, which currently serves as bond counsel to the Corporation, that as Mayor, I already have the authority under existing law to sell the Tobacco assets without the need for a local law. However, I have been further advised by counsel that while not legally necessary, this local law, which merely represents the Council's endorsement of the proposed transaction I just outlined, will not in any way harm the Corporation's or the City's position before rating agencies, investors, fiscal monitors or the courts.
For the reasons previously stated, I will now sign the bill.