Puff the Magic Money Source

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Smokers are addicts who won’t quit even though they know that – in the long run – the activity will be bad for them.

Governments that use smoking money won’t quit even though… deep down… they know that using the cash isn’t good for them. This comes to mind as Monroe County, once again, made use of the tobacco settlement money as a revenue source for its budget.

Can you compare a smoking addiction to the continual use of tobacco cash to balance budgets? On some levels – that’s probably unfair. After all, county government budget planners in this state have to deal with a serious and difficult financial squeeze being put on them by state mandates. Who would blame them for trying to alleviate those pressures.

But there are other levels where the comparison may make some sense.

Here’s what I mean.

While society has demonized cigarette use, smoking still isn’t illegal (although you better find a cave these days to do it in or maybe move to Greece).You probably know a smoker in your life. That person probably tells you how they ought to quit puffing away… but the person keeps lighting up anyway. Surely you’ve heard some, or all, or the reasons why.

The interesting reason for me is to alleviate stress… to deal with pain.

That brings us to the smoking money – more specifically the proceeds gained by governments of all sorts through the lawsuit against tobacco companies charged with covering up the ill-effects of smoking. Back in the late 1990’s, tobacco companies settled their legal action with some 40 state attorneys general (including one in the Empire State who wants to be our next governor.

In New York, counties were going to get a piece of that tobacco money action. Monroe County’s would be gaining something like $760 million in annual payments over decades. But rather than taking that money over the long haul, the county entered into an arrangement that would give it cash up front, although far less than what they might have gotten over time.

That added up to about $142 million. Monroe County officials at the time had some very high-minded ideas for its use. Pay off old debts. Pay off building a new county jail expansion. Put aside some for a planned juvenile justice center.

But then came 2003, when the county’s budget began tightening up. So then-County Executive Jack Doyle turned to that settlement money. He used some of those proceeds to… well… to fill a hole in the budget (a City Newspaper article from that time laid it out nicely).

Consider this the first big drag off that tobacco fund money. Soon the term "securitization" found its way into county budget conversations. A county created board – the Monroe Tobacco Asset Securitization Corp. – was empowered to make decisions on selling bonds on the open market based on what the county would get down the line from the tobacco settlement fund. And boy, have there been buyers.

Last year, County Executive Maggie Brooks grabbed $51 million from the "securitization" of tobacco settlement money. That was used to help fill a budget gap. Then this month we see once again how the county wants millions from the tobacco settlement. Once again to help cover projected budget shortfalls.

So what’s the problem? Using tobacco settlement money for a government budget isn’t illegal. Neither is repeated use of the funds. And sucking down the money now for the budget isn’t the same as sucking down cigarette smoke. No, not in the sense that it is eroding health.

But this "securitization" is doing something to deal with anxiety… to deal with pain. Basically it’s putting off the anxiety by putting off that pain.

The tobacco settlement cash fills in budget divots while never addressing the systemic problems that are causing this county government to continually find itself with shortfalls. The tobacco cash seemingly helps put off nasty decisions. Use it now and you don’t have to pull from some place else (like the wallets of taxpayers or the budget of county services).

Understand, however, that the tobacco settlement "securitization" means that Monroe County (and the many other governments that do this) is getting cents on the dollar. So it’s something like a quick fix – akin to that 10 minutes puffing away.

Meanwhile it has been more than three years since the Blue Ribbon Commission on Monroe County Finance issued its report on county fiscal troubles. More than three years since the crystal clear warnings in that report – that Monroe County has to readjust itself on a fundamental level.

Monroe County leaders have talked about the need for this fundamental change. The latest came when Brooks announced that in 90 days she would issue a plan for dealing with the budget problems down the road. Will it feature concrete proposals? It needs to. Will it mean that the county will begin hammering away not only on internal financial problems… but on a state government that is leaning too heavily on it? It should.

Why is it taking so long? Well, the quick fix still remains.

Let’s hope this is the year that county government stops talking like the smoker who says they are going to quit… really soon.

Because you know what the doctor says in reply – the clock is ticking.

No, the tobacco settlement money isn’t a direct cause of ill-health.

Just the fact that by using it, the county delays getting at the problems that are eroding fiscal stability.

Leg Leaders React to Brooks’ State of the County Speech

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In her State of the County message this week County Executive Maggie
Brooks made a deadline – she gave herself 90 days to produce a plan to
get the county out of a fiscal rut.

She made a promise – she would not sell off Monroe Community Hospital – the county’s publicly-run long term care facility.

And she made an observation — to learn from neighboring Onondaga County how to cut social service spending.

We talked with the Republican and Democratic leaders in the Monroe County Legislature about it. Click right here to take a listen.

Maggie, Can You Help Us Forget

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We needed something to wash out the taste left behind by the ferry closure.

So why not the state of the county message?

Maggie Brooks sprung the speech on us – but couldn’t we use the diversion? And there she was, in the County Legislative Chambers… smiling… calling us her "fellow taxpayers." (Just as an aside: I know that her speechwriters probably like Brooks using the phrase – "fellow taxpayers." It’s a subtle way to remind us that she keeps our tax bills top of mind. But doesn’t it make you just a bit uneasy to be labeled by the fact that you put money into government coffers. What’s next – "fellow county road users"?)

The speech seemed like a great opportunity to make us forget about the failed big boat.

And portions of the talk seemed to do the trick. When the county executive announced that she wouldn’t sell or privatize the county operated long-term care facility – Monroe Community Hospital  – it was enough to make even a liberal Democrat and former county executive candidate glow.

"I was delighted with the pledge," said Bill Benet, a 27-year legislator who was pushed out last month because of term limits. Benet ran for county executive in 1999. (Benet appeared on a post speech analysis program on WXXI-AM Wednesday night)

And yet, a bit of the ferry hangover seemed to catch me – even with this piece of news. I fixated on Brooks’ call for a financial review board of the community hospital that would scrutinize the books and come up with ways to make it more cost effective. That would help the county lower what it gives the hospital operation as a subsidy.

Subsidy. The very word conjured up visions of ferry business plans and promises that the ferry would never need a subsidy. It made me think of government bailouts.

Couldn’t a financial review board for the hospital mean the possibility that they discover the hospital is too expensive an operation? Couldn’t that lead to a shut down?

Benet helped calm me down.

"She told us that it wouldn’t be sold… end of discussion, end of debate," Benet said. "I don’t think her commitment could have been any clearer."

But then the former legislator continued: "The point where the ferry did come to mind was Renaissance Square."

Brooks took time in the speech to extol the virtues of building a new complex downtown – one that would include a performing arts center, a bus terminal and a community college campus. She called it a bold initiative… something that would have once described the ferry project.

Now the boat loomed over the discussion. Benet said that no one has described how the county and the Rochester-Genesee Regional Transportation Authority might cover increased operating costs to operate the service through such a facility. And no one has explained if government would be willing to (gasp) subsidize a performing arts center if the money it makes can’t match the money it spends.

Sean Hanna, a former Republican county legislator (who appeared with Benet), tried to find some separation between the failed boat and the proposed Renaissance Square effort. He said that experts on many levels have been pouring over the complex. It’s far more planned than the ferry.

But it was too late. By this point the damn boat had become insinuated itself. And it dawned on me that it would take some time for this community to get by that gigantic vessel.

Are the Watchers Paying Attention?

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This podcast of the Political Notebook discusses the idea that those designated to watch weren’t looking when the ferry deal came to light a year ago.

City Council, the Rochester Ferry Company board, the press — all paid little attention to specifics of the plan (like the deal with the Toronto Port Authority for terminal space) until Bob Duffy killed the plan.

This podcast also looks at local Democrats and the tall order they have to try and unseat sitting Republican Congressional Representatives.

Give a listen – then come on back and give me your thoughts.

Duffy Stands By Ferry Call

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Just a quick note on the Bob Duffy interview on WXXI’s Need to Know program, (which airs in Rochester on Friday night at 9 p.m. or Sunday afternoon at 12:30 p.m.). It was all about the Ferry – and Duffy made his case for why it had to end.

Duffy said his administration  negotiated an agreement with the Australian lenders, EFIC (or Export Finance and Insurance Corp.) to delay payments on the $40 million loan the city took out a year ago to purchase the vessel. That will give the city more breathing room as it works to shut down the ferry and close the books on the venture. You can read the story here.

You can listen to the full Need to Know interview with Duffy on the ferry closure here.

What Did We Know About the Toronto Deal?

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What did we know and when did we know it?

And who is "we?"

That’s the question over a now well-publicized deal that the Rochester Ferry Company made with the Toronto Port Authority — the lease deal to dock at the Canadian port and use the terminal.

It’s fast becoming part of the story that somehow no one knew about the lease deal. And yet anyone could have known – if they just looked.

It started on Tuesday when Mayor Bob Duffy made his announcement to the press about getting the city out of the ferry business. Duffy said that his staff "discovered" a contract with the Toronto Port Authority that has the Rochester Ferry Company paying Toronto $250,000 a year for the use of the Canadian terminal. Part of that "discovery" was also a per passenger fee of $1 and a per vehicle fee of $3 charged by the Toronto Authority.

From there came an editorial on the community’s lack of knowledge about the deal.

Then a radio talk show host used the word "deception".

But here’s the thing – a short stroll on the Internet produced at least two documents in late 2004 that plainly stated the intention of the city to enter into a lease agreement with Toronto’s authority for the terminal.

One was the business plan authored by the then-Environmental Services Commissioner Ed Doherty. The date of the draft report is November 18, 2004. The first page of the report talks about how the Toronto Port Authority would enter into a lease agreement to allow Rochester to use its terminal (the plan talks about Toronto doing this deal with the forerunner of the Rochester Ferry Company – The Rochester Port and Ferry Authority). The document also includes a $200,000 annual cost for leasing the Toronto terminal (that’s on page 15).

Then came a December 20, 2004 review of the business plan by TranSystems Maritime Strategy International. This was the company hired by City Council to consult the city on the ferry business plan. On page 15 of that study, it lays out the agreement in far more detail. It states that Toronto Port Authority would get $250,000 (Canadian dollars). It also lays out in detail the passenger and vehicle fees that Duffy spoke of… it’s called wharfage or passenger use fees (and, by the way, the $1 per passenger and $3 per car fees are also in Canadian dollars).

So the Toronto lease agreements were part of two documents easily obtainable through the calendar year of 2005. Admittedly, we may not have seen any coverage of this deal. And who is to blame for that? Perhaps the press shares some of the burden. We knew about these documents. We could have pressed the mayor or any member of that ferry company board about the Toronto lease deal. And, yet, for whatever reason, we passed up the opportunity. Until now. Until the Duffy administration talked about the Toronto lease deal.

Put in this context this piece of the story is quite different. In fact, it sounds like a lesson for the watchers of the project. I spoke with Johnson a number of times in 2005 and never raised the issue. And there were times when the sole reason was the ferry project. It’s even harder to imagine that people sitting on the board of the Rochester Ferry Company didn’t have these documents in hand… and didn’t press that issue.

In his column on Thursday, Mark Hare writes that the information on the Toronto lease "may have been public information, but most of the public didn’t know." That is very true. And what does that say?

Finally, let’s put the information into perspective. The real story remains the over-arching arguments made by Mayor Duffy to discontinue the service. Of course, the real and vital question to answer was whether the city wanted to borrow more money to keep the venture going after two miserable years. A business decision, in the end.

So let’s stick to business. To the dollars and cents. Whether it was worth the risk or not.

The business value of the lease deal could be part of the argument — was it wise? Should we have agreed to it?

But no one can claim – or infer – that it was kept from the public.

Bon Voyage

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City Council President Lois Giess peered down from the third floor at City Hall as Mayor Bob Duffy put an end to the city’s support of a Fast Ferry service.

As Duffy wrapped up, I asked Giess how long the subsequent meeting of the City Council would be. The council planned to meet to remake the Rochester Ferry Company board.

"Short," she said. "We have board members to appoint… to sell a boat."

She and other City Council members had a stoic look as Duffy addressed the press in the City Hall atrium. He told the assembled that making his decision called for answering four questions:

1) Could the city afford this venture?

2) Did the ferry have a sound business and marketing plan?

3) Was there a likelihoodof success?

4) Was this the best way for the city to spend $51.5 million?

He said the answer on all counts was – no.

Here are some other questions to ask as we see the ferry as a city venture drift on:

What would have been wrong in selling the ferry as a city-subsidized service? The paradigm had always been the ferry would sustain itself. That’s how it was sold in the first year – when the private group Canadian American Transportation Systems lost millions. And that’s how then- Mayor Bill Johnson sold it when the city borrowed money to buy the vessel and run it. In 2004, Johnson said he didn’t think it necessary to sell the public that way because the earnings would cover the costs.

Later in the year, he that maybe it wasn’t wise to say that the ferry wouldn’t need city support.

But then in December, when he and Councilman Ben Douglas announced a plan to borrow more money to keep the ferry running, the self-sustaining mentality seemed back in play.

Would people in the city been more resistant to a ferry venture that, up front, called for city bucks? Maybe. But wouldn’t the community have been more accepting of losses if the city could have convinced the public to go along with it?

Under Duffy’s not-so-great "best case scenario," he had the ferry losing roughly $2.7 million. Could people in Rochester have accepted that amount? We’ll never know now.

Are we willing to pay it out now or borrow on a gamble? City Councilman Adam McFadden was one of a number of council members who were not thrilled with the sudden pull out from the project. McFadden said the boat should have been allowed to run another year by borrowing the $11.5 million requested. And then he pointed to Duffy’s call for $.9.5 million from the city’s reserve fund to pay off debts associated with the ferry and for costs in peddling the boat

To him these options were equivalent. "All this city’s got going is its reserve fund and its (good) credit rating," he said.

But in reality these options give very different vibes. Pulling from the reserve to close down shop means grabbing money in the bank. It also means being ultra-conservative, believing that there is no way the investment will take off. Borrowing that money says that the ferry could pick up steam. But it prolongs the financial agony if it continues to flounder.

And ultimately this gets to whether government really belongs in the game of risking the public coffers on ventures like this. Go ahead and apply this argument to the High Falls district… a Performing Arts Center in a Renaissance Square… even running a government bus service.

Was no one going to share the burden? Monroe County has tip-toed around that ferry project for years. Toronto clearly has no interest in it (and Duffy even said that there were agreements in place to pay the Toronto Port Authority money to take passengers).

During the Douglas-Johnson news conference last month, the plan called for tapping other governments on the shoulder for financial help with the ferry. Duffy seemed willing to try it as well. Or at least until this announcement. Clearly his administration believed they’d get nowhere with other governmental agencies.

What could we use $51.5 million for? Duffy posed that question and gave answers like — more than 500 police officers outfitted with cruisers and more the 700 houses made lead safe. But this is one question not worth posing. The city will never see $51.5 million now that it’s getting out. They will sell that boat to pay back part of the initial $40 million in borrowing. They’ll yank money out of reserves (if the City Council approves).

And finally remember awhile back when this space asked what is the Rochester Ferry Company? We said then that it’s the city.

Now we know that it’s a collection of pallbearers.

Don’t Count on DeLay

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You can see it in their eyes… in their tone of voice. Democrats see an opening to win back the House just as the door is closing on Tom DeLay.

Upstate Democrats who want to defeat local incumbent Republicans – especially in the Rochester region – are buoyed by the GOP’s ethical missteps (here’s a link from the Democratic-leaning Daily Kos)

"This is a whole new year… a whole new time," said Rep. Louise Slaughter, a Democrat in Congress from Fairport – one of the few from upstate. "None of the conventional wisdom applies."

Slaughter made the GOP’s DeLay-Duke-Abramoff problems the centerpiece of her national radio response to President George Bush’s radio address last weekend.

And she represents a shining example within the Democratic Party of someone who can take on and defeat an incumbent. She’s done it three times through her long political career – from county legislature to Congress – taking down Fred Eckert in 1986 to win her House seat.

So Louise ought to know about whether the climate is right for incumbents to be knocked off. What advice does she give to people like Dan Maffei (who wants to take down Republican Rep.Jim Walsh); Jack Davis (who wants to defeat GOP Rep.Tom Reynolds) and Eric Massa (a challenger to Republican Rep. Randy Kuhl)?

"These people aren’t going to need any advice," she said.

Really? Well, Slaughter believes that individual candidates have their own strengths (for example, Davis has his own financial resources and Maffei has Washington contacts by virtue of being a staffer on the Hill). She also believes the Democratic Congressional Campaign Committee will have ample cash on hand to help challengers. And, in New York, Eliot Spitzer may be a strong head of the Democratic ticket in 2006.

But here is the thing that’s hard to shake. Democrats can’t bank on the ethical charges alone. This isn’t the age of Watergate, when a scandal took us by surprise. Sadly, we are far more cynical about politicians. The names of those who have been in ethical trouble over the years – Jim Wright, Dan Rostenkowski, Newt Gingrich – are many. And those problems didn’t really spurred on change in voting patterns.

The 1994 Republican revolution may have been built partly on claiming that Democrats long in power have become corrupt. But the real reason for the conservative gain was that the electorate embraced the conservative ideals spoken then.

Have the Democrats staked out an ideological position that will grab voters, that will pull them in? That’s the chore left not only to the DCCC, but to the challengers like Maffei, Massa, Davis or Ken Howard and Paloma Capanna.

The Republican ethical problem opens a door. But the salesmen better have a good pitch or the door will quickly shut again.

Pataki’s Poppies

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Before you read on – click here to take a listen to an interview with Erika Rosenberg. She covered Albany government for Gannett News Service for years before returning to Rochester to keep an eye on the State Capitol as part of the Center for Governmental Research. This interview was done for WXXI’s Need to Know (Jan. 6).

George Pataki gives us another of his State of the State speeches – and once again the actress Margaret Hamilton jumps to mind.

You remember Hamilton – the 1939 artist behind one of the great celluloid villains… the Wicked Witch of the West. More specifically, I hear Pataki and I think of the witch peering through her crystal ball as the heroes of the Wizard of Oz come to the edge of the forest and see Oz itself. They must run through a field of flowers. Poppies.

"Poppies … poppies … " the witch hisses as she casts a spell. "Poppies will put them to sleep … sleep … now they’ll sleep."

Now Pataki’s speech doesn’t necessarily put you in need of a pillow. Instead the message is like all those pretty flowers in the field. And like Dorothy – we barely realize how we’re being lulled into this false sense of comfort. As if there are no problems in New York. Everything is just fine in upstate. Right? Sure.

So to look at this speech we’ll need a little help from Albany-watcher, Erika Rosenberg of the Center for Governmental Research… just so we don’t fall asleep in the field. Rosenberg calls his speeches "feel good, upbeat assessments of the state" and suggests that you take it with a grain of salt.

Good advice to follow for Pataki’s latest and last version. The 2006 model is clearly being showcased not just to a New York audience but to a national one. And yet there are small kernels of a message inside the grand fluff. Here’s but a few:

George’s Appeals to Conservative Nation, Part I – A nod to the death tax – Pataki brought out the laundry list of tax cuts in this latest version. But his repeal of the Estate Tax sounds so much like Inside-the-Beltway Republican rhetoric that it’s hard not to notice.

To be fair, Pataki has moved on the state’s Estate Tax before. He and the state legislature rolled back the so-called extra estate tax imposed on New York residents. But New York remains one of about 20 states that imposes some kind of state estate tax . (this link on Connecticut’s tax highlights those states who still have it in place)

Rosenberg said that in the five years she covered Albany she never remembered Pataki taking the time to mention a cut in the Estate Tax in his opening speech.

And she points out that Pataki’s litany of tax cuts in general is the "first salvo" in the battle to decide what to do with the first surplus the state has seen in awhile – roughly $2 billion. Use it to cut the state’s massive debt? Spend it on social programs? No. Pataki is clearly aiming the money for reducing the tax rates. That’ll play good in the nation’s heartland, no doubt (as long as they forget that New York remains one of the highest taxed states in the nation).

Pataki wanted us to hear about his about his "family friendly" tax policies. But that tax talk appears to get nearer to the national Republican family.

George Gets Medieval on Big Oil – Or so it would sound. Really, he called for New York to take the lead in breaking the dependence on foreign fuel – to free us from international regimes with oil reserves who might also sympathize with terrorists. This also sounds very national in scope.

He’ll do this in New York by making alternative fuels tax free. Hey, isn’t ethanol an alternative fuel? I’ll bet Iowa – the corn growing state that it is – would love a guy who talks about making grain-related products like ethanol tax free. Probably would be great for a presidential candidate to talk about in a state that acts as THE early bell-weather for the 2008 presidential race

Pataki also wants to put alternative fuel pumps at stations along the Thruway. To Rosenberg, it appears difficult for Pataki to achieve these grand plans. We’ll see if the follow-through follows the words.

Reform? What Reform – A year ago there were seven proposals to revamp the operation of state government contained in Pataki’s State of the State message. There was lobbying reform and clamping down on state authorities (Trust me, it’s there.. you have to go to the bottom of the text).

This year? Nothing.

In fact, what’s interesting is that he raised expanding a program that has come under scrutiny for needing reform – Empire Zones. He wants an Empire Zone in every county. This would allow for a more level playing field for counties in New York, supporters of such a move believe.

But just a few months earlier, Monroe County was complaining because of new rules that would tighten up the Empire Zones. This reform came after downstate Assemblyman Richard Brodsky (now an attorney general candidate) focused on Monroe County’s Empire Zone effort and complained that it was being misused.

So is the reform effort – born out of the Brennen Center for Justice report that called New York’s Legislature dysfunctional – dead? Sounds like it if you listen to Pataki.

But hey… as Rosenberg put it, the State of the State is really just like the first day of school. All the kids returning to class, showing off the new clothes mom and dad bought them. Then it’s business as usual.

Now we need the budget message – a more realistic speech. Think of it like Glenda the Good Witch’s snow falling – that should shake all that poppy dust from our nostrils.