Suffolk may face restrictions in using tobacco money to help balance budget

A fiscal consultant to Suffolk County warns that county officials may face restrictions on a significant portion of the $14.4 million in tobacco settlement money they hope to use to help balance the proposed 2016 budget.

County Comptroller John Kennedy confirmed that Capital Markets Advisors, a firm Suffolk uses in borrowings and refinancings, has issued a memo indicating the county may be restricted in using from $5.8 million to $8.6 million to offset sales tax shortfalls in the $2.9 billion budget.

Kennedy said the consultants have indicated that a portion of the money is restricted because of provisions in a 2008 bond deal in which Suffolk sold the rights to future tobacco settlement money to private investors.

However, Kennedy said the law firm of Hawkins, Delafield and Wood, Suffolk's bond counsel at the time of the deal has indicated that the county can properly include the entire $14.4 million as revenue in the county budget. The county's current bond counsel, Harris Beach, has taken no position on the issue, Kennedy said.

"There's a difference of opinion on how much will be forthcoming and the matter is being reviewed by the county attorney," Kennedy said. Because of the dispute, Kennedy declined to provide Newsday with a copy of the Capital Markets memo and could not say how long it would take to resolve the issue.

County Attorney Dennis Brown said the situation was "still under review" and that he could not say how long a final determination might take.

The county legislature last week added the $14.4 million to Bellone's original budget proposal as one of several steps to overcome a projected $51 million shortfall in sales tax receipts for 2015 and 2016. Lawmakers also added $10 million in revenue for a higher mortgage filing fee, cut $10 million in bus service funding and reduced sales tax revenue estimates by $30 million.

Justin Meyers, a spokesman for County Executive Steve Bellone, said the administration is still reviewing whether to veto the legislative amendments. Meyers said any money from the settlement is not expected until April.

The new money from the nationwide 1998 tobacco settlement became available after State Attorney General Eric Schneiderman reached a $550 million agreement with tobacco companies to end a decadelong dispute over how part of the settlement was to be distributed.

Legis. Kevin McCaffrey, the Republican caucus leader, said he was not aware of possible restrictions on the money, but warned it is only part of a larger problem with the county budget. "We're going to see more and more flaws in the budget where revenue are overestimated and expenses underestimated," he said.

Presiding Officer DuWayne Gregory (D-Amityville) did not respond to a request for comment.