Dec. 20, 2005—The issuance of Tobacco Settlement Bonds will soon bring in $6.8 million for health care facilities in the Virgin Islands. The bonds will be backed by money received from a Master Settlement Agreement (MSA) signed in 1998 between major tobacco companies and various U.S. states and territories.
The Tobacco Settlement Financing Corporation, a local entity designed to handle tobacco settlement money, unanimously adopted a resolution to issue the 2006 series bonds at a meeting held at Public Finance Authority offices on St. Thomas Tuesday. By law, bond proceeds are to be divided among the Health Department—which will receive $1. 2 million per district–and the territory's two hospitals, who will receive $2.2 million each for the Charlotte Kimelman Cancer Center on St. Thomas and the Cardiac Care Unit on St. Croix.
Some of the proceeds going toward the Health Department—some $760,000—will be used for the purchase of a fully equipped ambulatory boat to bus passengers from St. John to St. Thomas. However, half of this cost will be financed by PFA bond proceeds earmarked for ambulatory services. Kenneth Mapp, PFA executive director and Corporation vice-president, could not say what the remainder of the Health Department's tobacco settlement money will be going toward.
Under the MSA, which Gov. Charles W. Turnbull signed in 2000, tobacco companies give participating jurisdictions cash payments over a period of 25 years in exchange for jurisdictions exempting the tobacco companies from future legal action. According to Mapp, the Tobacco Financing Settlement Corporation decided to leverage the amount of funds anticipated from MSA payments, and borrowed against them to finance certain projects.
In 2001, for example, the PFA floated $21.7 million in bonds backed by the U.S. Virgin Islands' share of the settlement money. The bond proceeds were earmarked for improving the territory's health care system.
After the meeting, Mapp said the Virgin Islands would get $50 million from tobacco settlement money over the 30-year period of time stipulated in the MSA. During the meeting, Jim Haddon, managing director of Citigroup Global Markets Inc. (the entity in charge of selling the bonds to investors), said up to $7.8 million in bonds from that settlement amount will be issued within the next four to six weeks.
Haddon further stated that neither the V.I. government nor local taxpayers have a financial obligation to repay the bonds, since they are backed by tobacco settlement money. "The only risk is to the investor," he said, speaking to members of the Corporation at Tuesday's meeting.
In other action, members of the Tobacco Settlement Corporation voted unanimously to settle their $15,000 to $16,000 debt to the PFA. After the meeting, Mapp explained that the money to pay off the debt also comes from tobacco settlement funds.
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