A New Hampshire legislative commission last week found that tobacco securitization was one option that could generate $60 million to monetize state assets in the current fiscal year, but it failed to garner enough support from members to be recommended.

The commission, chaired by Sen. Lou D'Allesandro, D-Manchester, also looked at the sale of state-owned property and a lottery.

Public Research Advisory Group made a presentation to the commission on the feasibility of a securitization of tobacco settlement revenues in September. Based on their presentation, the commission concluded the state could issue $71.2 million of bonds pledging 17% of its future tobacco settlement payments over 20 years to raise net proceeds of $60 million.

The commission expressed concern that it was a costly option because interest rates on tobacco bonds would be higher than on its general obligation credit, costing $19 million in present value. It would also have to borrow to make the first debt-service payment because tobacco settlement funds have already been budgeted for fiscal 2011.

The commission said that the potential sale of state-owned properties needed further review because many came with encumbrances or legal issues that could pose obstacles. A proposal to sell state-owned properties to cities and towns found no takers among potential buyers. The sale of the state lottery was ruled out because of legal constraints, including a state constitutional requirement that all lottery funds be appropriated for school districts.

The commission recommended against entering into a sale-lease-back arrangement such as Arizona's sale of state buildings. The commission concluded that up-front payments from such transactions were not worth the long-term costs.

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