The Tuolumne County Board of Supervisors gave approval Tuesday morning to a concept that would sell its rights to money the county annually receives for tobacco litigation settlements, and in turn receive a pay-off in one lump sum.
During the first of two public hearings on the topic, the supervisors today voted 3-to-2 in flavor of continuing researching this idea.
The estimated $7.1 million dollars received in one lump sum could be used to buy new equipment and would go towards the day-to-day operations of the county.
According to Assistant County Administrator Craig Pedro, if the county continued as is, and received the annual payments, over the next 18 years, the total amount received would be about $12.8 million, assuming the revenue stream isn´t interrupted.
Pedro said the $7.1 million pay-off would be made available by the sale of bonds. The money would be put into a fund and invested.
If the pay-off is approved by the board and certain investments and repayments within county departments are achieved, the county could see that initial $7.1 million sum leveraged to $16.5 million by fiscal year 2008, Pedro said.
Tuolumne County would be one of about 20 other counties statewide participating in the California Statewide Communities Tobacco Securitization pool.
The county could then use the money “in a creative manner,” Pedro said, such as establishing an endowment fund for operating expenses, capital equipment purchases, or a combination of the two.
The litigation funds are based on tobacco use, and according to Pedro, the revenue amount distributed to the counties is uncertain.
The original settlement was based on the cost of smokers on each county´s health care system.
In the past three years, Tuolumne County has directed the money received to Tuolumne General Hospital´s operations. The one lump sum would not have to be solely directed to health care services, said Tuolumne County Counsel Gregory Oliver.
Supervisor Dick Pland seemed in favor of the idea, saying the county could be taking a chance relying on the income stream from the tobacco litigation funds.
“Are we really willing to gamble? It´s a pig in a poke,” he said.
Board chairwoman Laurie Sylwester said it´s the citizens that are usually hurt when a wrong decision is made.
“If we edge out to the front and put our county first in line and get our money, I´m afraid the citizens, somewhere, are going to be left holding the bag if it fails,” Sylwester said.
“If the whole tobacco (fund) fails and flops, I have to say I think the county should be standing in line with everyone else to say we´re not going to get that money anymore,” she commented to the board.
The public hearing will resume next Tuesday at 10 a.m.in the supervisors chambers. The supervisor´s will make their final decision on the securitization issue at that time.