In early 1999, New York's mayor and City Council leaders proposed to use revenues from the settlement of a state lawsuit against cigarette companies to rebuild and repair schools.

But now the administration is looking to use those revenues to help pay for projects meant to serve Staten Islanders. In its proposed budget for the fiscal year beginning July 1, the Giuliani administration seeks to dip into tobacco settlement bond proceeds for $150 million to pay Staten Island landfill closing costs, according to the Independent Budget Office. The proposal follows another administration decision, about a year ago, to use the tobacco money as collateral for a $154-million federal loan for upgrading Staten Island ferry service, a project that also encompassed improvements around the soon-to-open Staten Island minor league baseball stadium. While the administration initially wanted to pay for the landfill costs with funds drawn from the city's general capital funds, city comptroller Alan Hevesi objected to the idea. Hevesi contended then that the city may not borrow capital to cover short-term operating expenses such as those related to closing the garbage dump. Now Hevesi is criticizing the administration's proposed use of tobacco bond proceeds. His office said that ultimately this would saddle taxpayers with $174 million in interest costs over 30 years on top of the $150 million in borrowing. "This is a poor fiscal practice," said Hevesi, a Democratic candidate for mayor. Giuliani budget director Adam Barsky defended the use of tobacco borrowing for landfill closure as an "appropriate expense." Under the landmark tobacco lawsuit, cigarette companies agreed to pay $246 billion to all the states for cancer-related health care costs. The city started getting money from the tobacco settlement in 1999 at a rate of up to $250 million a year. The city's share will eventually total $6.7 billion. Despite the initial idea of reserving much of the cash for schools, the mayor and council decided to send the money to the city capital fund with no strings attached. Some people would like to see some of the tobacco money set aside to sustain money-losing health clinics targeted for shutdown in the budget. "If the city's Health and Hospitals Corporation had those dollars, it wouldn't have to propose to close school-based and community child health clinics," said Judith Wessler, a member of the Commission on the Public's Health System, a nonprofit group that lobbies for health care funds.

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