Despite "deep reservations" about a proposed state buyout of the Long Island Lighting Co., New York State Gov.-Elect George Pataki plans to study the matter.
On Thursday, Pataki announced that he has formed a 15-member task force to "investigate the feasibility of and alternatives to a state takeover of the Long Island Lighting Company," according to a press release. The group will be cochaired by state Sen. James Seward, R - Milford, and Frank Zarb, a former top Wall Street executive and chairman of Alexander & Alexander Services Inc. Zarb also served as a senior official in the U.S. Energy Department.
A month before he lost the gubernatorial race on Nov. 8, Pataki's Democratic opponent, Gov. Mario Cuomo, proposed a $9 billion bond-funded buyout of Lilco.
Some political observers, including many Republicans in the Pataki camp, called the move a ploy to win votes on Long Island. But Cuomo said the state would buy Lilco only if it could achieve an immediate 10% reduction in Long Island electric rates.
Pataki said that no further steps toward a public takeover should be taken until the task force has completed its work.
"I have deep reservations about saddling the taxpayers with a $9 billion debt. If a state takeover is found not to be feasible, other alternatives should be formulated ... to provide financial relief to Long Island ratepayers," Pataki said in the release.
New York municipal market palyers have questioned the feasibility of flooding the market with $9 billion of tax-exempt bonds in one year, as the Cuomo plan proposes. In addition, they said Lilco's nearly $2 billion unpaid federal tax liability could boost the size of the deal to $11 billion.
George Marlin, a portfolio manager and former Conservative Party candidate for New York City mayor, has said he is skeptical about the buyout plan. "In my judgment, this could force local municipalities to pay more to borrow" and shift the burden of Lilco's finances onto taxpayers, said Marlin, who is also a task force member.
Other task force members include: Terry Agriss, president of the New York State Environmental Facilities Corporation; Bernadette Castro, a 1994 Republican U.S. Senate nominee; and Lewis Eisenberg, a commissioner of the Port Authority of New York and New Jersey.