BILL NUMBER: AB 687 CHAPTERED 07/01/04 CHAPTER 91 FILED WITH SECRETARY OF STATE JULY 1, 2004 APPROVED BY GOVERNOR JUNE 30, 2004 PASSED THE SENATE JULY 1, 2004 PASSED THE ASSEMBLY JULY 1, 2004 AMENDED IN SENATE JUNE 30, 2004 INTRODUCED BY Assembly Members Nunez and McCarthy (Principal coauthor: Senator Burton) FEBRUARY 19, 2003 An act to add Title 12 (commencing with Section 1811) to Part 3 of the Code of Civil Procedure, and to add Section 12012.40 to, and to add Article 6.5 (commencing with Section 63048.6) to Chapter 2 of Division 1 of Title 6.7 of, the Government Code, relating to tribal-state gaming compacts, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 687, Nunez. Tribal-state gaming compacts: ratification and payment securitization. (1) Existing federal law, the Indian Gaming Regulatory Act of 1988, provides for the negotiation and execution of tribal-state gaming compacts for the purpose of authorizing certain gaming activities on Indian lands within a state. Existing California law expressly ratifies specified tribal-state gaming compacts. This bill would ratify amendments of tribal-state gaming compacts entered into by the State of California and the Pala Band of Mission Indians, the Pauma Band of Luiseno Mission Indians of the Pauma and Yuima Reservation, the Rumsey Band of Wintun Indians, the United Auburn Indian Community, and the Viejas Band of Kumeyaay Indians. The bill would also provide that specified acts and agreements related to the amended compacts are not projects for the purposes of California Environmental Quality Act. (2) Existing law sets forth the duties of the Infrastructure and Economic Development Bank and its board of directors generally in performing various financing transactions, including the issuance of bonds or the authorizing of the issuance of bonds by a trust, partnership, limited partnership, association, corporation, nonprofit corporation, or other entity, known as a special purpose trust. This bill would, upon a filing by the Director of Finance with the bank of the list of specified amended tribal compacts, called designated tribal compacts, authorize the bank to sell for, and on behalf of, the state all or any portion of the state's compact assets to a special purpose trust, which would be established as a not-for-profit corporation by the bill, except that the sale or sales would be limited to an amount necessary to provide the state with net proceeds of the sale not to exceed $1.5 billion, exclusive of capitalized interest on the bonds and any costs incurred by the bank or the special purpose trust in implementing the bill. "Compact assets" would be defined for these purposes as moneys required to be paid to the state under specified provisions of the designated tribal compacts, and the state's rights to receive those payments. This bill would provide that the members of the board of directors of the bank, the Director of the Department of Transportation, and the Director of General Services shall serve ex officio as the directors of the special purpose trust, and would authorize the special purpose trust to issue bonds on the terms it determines. It would also authorize the special purpose trust to enter into agreements with any public or private entity and to pledge the compact assets that it purchases as collateral and security for the bonds. It would specify that the bonds issued pursuant to these provisions shall not be deemed to constitute a debt of the state or a pledge of the faith or credit of the state, and set forth the rights of the affected Indian tribes and holders of bonds under these provisions. (3) Existing law establishes the Traffic Congestion Relief Fund and the Transportation Deferred Investment Fund in the State Treasury, and continuously appropriates the moneys in those funds for specified transportation purposes. This bill would require the net proceeds of the sale of the compact assets to be deposited in these funds in specified amounts for specified purposes and priorities, thereby making an appropriation. The bill would require that amounts deposited in the Traffic Congestion Relief Fund and the Transportation Deferred Investment Fund be applied as a credit to transfers from the General Fund that the Controller would otherwise be required to make to that fund. The bill would also require that when these amounts have been paid to these funds pursuant to the provisions of the bill, or by other appropriations or transfers, the revenues received thereafter are to be remitted to the California Gambling Control Commission for deposit in the General Fund. (4) This bill would declare that it is to take effect immediately as an urgency statute. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature hereby finds and declares both of the following: (a) The Governor is the designated state officer responsible for negotiating and executing, on behalf of the state, tribal-state gaming compacts with federally recognized Indian tribes located within the state pursuant to the federal Indian Gaming Regulatory Act of 1988 (18 U.S.C. Sec. 1166 to 1168, incl., and 25 U.S.C. Sec. 2701, et seq.) for the purpose of authorizing class III gaming, as defined in that act, on Indian lands within this state. The Governor has entered into amendments to certain tribal-state gaming compacts and has submitted a copy of those executed amendments to tribal-state compacts to both houses of the Legislature for ratification, and has submitted a copy of the executed amendments to the Secretary of State for purposes of subdivision (f) of Section 12012.25 of the Government Code. (b) The amended tribal-state compacts, among other things, require payments to the state in anticipation of the issuance of bonds to be secured by those payments. It is in the public interest and a matter of urgency to authorize, and to implement as soon as possible, the sale of the right to receive those payments and a portion of certain other payments under the compacts, and the issuance of the bonds by the purchaser of the assets, in order to ensure that funds will be available for the purpose of funding essential transportation improvements and projects in the state. SEC. 2. Title 12 (commencing with Section 1811) is added to Part 3 of the Code of Civil Procedure, to read: TITLE 12. TRIBAL INJUNCTIONS 1811. (a) Following the issuance of the bonds as specified in Section 63048.65 of the Government Code and during the term of the bonds, if it reasonably appears that the exclusive right of an Indian tribe with a designated tribal compact, as defined in subdivision (b) of Section 63048.6 of the Government Code, pursuant to Section 3.2(a) of that compact has been violated, the tribe may seek a preliminary and permanent injunction against that gaming or the authorization of that gaming as a substantial impairment of the rights specified in Section 3.2(a), in order to afford the tribe stability in its gaming operation and to maintain the bargained-for source of payment and security of the bonds. However, no remedy other than an injunction shall be available against the state or any of its political subdivisions for a violation of Section 3.2(a). The Legislature hereby finds and declares that any such violation of the exclusive right to gaming under Section 3.2(a) is a substantial impairment of the rights specified in that section and will cause irreparable harm that cannot be adequately remedied by damages. No undertaking shall be required on the part of the tribes in connection with any action to seek the preliminary or permanent injunction. (b) Notwithstanding any other provision of law, the parties to an action brought pursuant to subdivision (a) may petition the Supreme Court for a writ of mandate from any order granting or denying a preliminary injunction. Any such petition shall be filed within 15 days following the notice of entry of the superior court order, and no extension of that period shall be allowed. In any case in which a petition has been filed within the time allowed therefor, the Supreme Court shall make any orders, as it may deem proper in the circumstances. SEC. 3. Section 12012.40 is added to the Government Code, to read: 12012.40. (a) The following amendments to tribal-state gaming compacts entered into in accordance with the Indian Gaming Regulatory Act of 1988 (18 U.S.C. Sec. 1166 to 1168, incl., and 25 U.S.C. Sec. 2701 et seq.) are hereby ratified: (1) The amendment of the compact between the State of California and the Pala Band of Mission Indians, executed on June 21, 2004. (2) The amendment of the compact between the State of California and the Pauma Band of Luiseno Mission Indians of the Pauma and Yuima Reservation, executed on June 21, 2004. (3) The amendment of the compact between the State of California and the Rumsey Band of Wintun Indians, executed on June 21, 2004. (4) The amendment of the compact between the State of California and the United Auburn Indian Community, executed on June 21, 2004. (5) The amendment of the compact between the State of California and the Viejas Band of Kumeyaay Indians, executed on June 21, 2004. (b) (1) In deference to tribal sovereignty, none of the following shall be deemed a project for purposes of the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code): (A) The execution of an amendment of tribal-state gaming compact ratified by this section. (B) The execution of an intergovernmental agreement between a tribe and a county or city government negotiated pursuant to the express authority of, or as expressly referenced in, an amended tribal-state gaming compact ratified by this section. (C) The on-reservation impacts of compliance with the terms of an amended tribal-state gaming compact ratified by this section. (D) The sale of compact assets as defined in subdivision (a) of Section 63048.6 or the creation of the special purpose trust established pursuant to Section 63048.65. (2) Except as expressly provided herein, nothing in this subdivision shall be construed to exempt a city, county, or a city and county from the requirements of the California Environmental Quality Act. SEC. 4. Article 6.5 (commencing with Section 63048.6) is added to Chapter 2 of Division 1 of Title 6.7 of the Government Code, to read: Article 6.5. Tribal Compact Assets Securitization 63048.6. The definitions contained in this section are in addition to the definitions contained in Section 63010 and together with the definitions contained in that section shall govern the construction of this article, unless the context requires otherwise: (a) "Compact assets" means moneys required to be paid to the state under Sections 4.3.1 and 4.3.3 of the designated tribal compacts and the state's rights to receive those payments. (b) "Designated tribal compacts" means the amended and new tribal-state compacts, which are ratified by the Legislature, and that, among other things, require certain payments to the state in exchange for the exclusive right of the compact tribes to engage in certain gaming activities in their respective core geographic markets, all as specified in the amended and new compacts, and that are designated by the Director of Finance pursuant to subdivision (a) of Section 63048.65. (c) "Operating expenses" means the reasonable operating expenses of the special purpose trust and the bank, including, but not limited to, the costs of preparation of accounting and other reports, maintenance of the ratings on the bonds, insurance premiums, or other required activities of the special purpose trust, and fees and expenses incurred for professional consultants, advisors, fiduciaries, and legal counsel, including the fees and expenses of the Attorney General incurred in connection with the enforcement of the pledges and agreements of the state pursuant to Section 63048.8. 63048.65. (a) Upon a filing by the Director of Finance with the bank of a list of designated tribal compacts and the specific portions of the compact assets to be sold, the bank may sell for, and on behalf of, the state, solely as its agent, those specific portions of the compact assets to a special purpose trust. To that end, a special purpose trust is hereby established as a not-for-profit corporation solely for that purpose and for the purposes necessarily incidental thereto. The bank may enter into one or more sales agreements with the special purpose trust on terms it deems appropriate, which may include covenants of, and binding on, the state necessary to establish and maintain the security of the bonds and exemption of interest on the bonds from federal income taxation. The portion of the compact assets to be sold shall be an amount or amounts determined by the Director of Finance that are necessary to provide the state with net proceeds of the sale, not to exceed one billion five hundred million dollars ($1,500,000,000), exclusive of capitalized interest on the bonds and any costs incurred by the bank or the special purpose trust in implementing this article, including, but not limited to, the cost of financing one or more reserve funds, any credit enhancements, costs incurred in the issuance of bonds, and operating expenses. Those specific portions of the compact assets may be sold at one time or from time to time. (b) The special purpose trust may issue bonds, including, but not limited to, refunding bonds, on the terms it shall determine, and do all things contemplated by, and authorized by, this division with respect to the bank, and enjoy all rights, privileges, and immunities the bank enjoys pursuant to this division, or as authorized by Section 5140 of the Corporations Code with respect to public benefit nonprofit corporations, or as necessary or appropriate in connection with the issuance of bonds, and may enter into agreements with any public or private entity and pledge the compact assets that it purchased as collateral and security for its bonds. However, to the extent of any conflict between any of the foregoing and the provisions of this article, the provisions of this article shall control. The pledge of any of these assets and of any revenues, reserves, and earnings pledged in connection with these assets shall be valid and binding in accordance with its terms from the time the pledge is made, and amounts so pledged and thereafter received shall immediately be subject to the lien of the pledge without the need for physical delivery, recordation, filing, or other further act. The special purpose trust, and its assets and income, and bonds issued by the special purpose trust, and their transfer and the income therefrom, shall be exempt from all taxation by the state and by its political subdivisions. (c) (1) The net proceeds of the sale of compact assets by the bank shall be deposited in the following order: (A) One billion two hundred fourteen million dollars ($1,214,000,000) to the Traffic Congestion Relief Fund for the purpose of funding or reimbursing the cost of projects, programs, and activities permitted and necessary to be funded by that fund in accordance with applicable law in the following priority order: (i) Transfer of four hundred fifty-seven million dollars ($457,000,000) to the State Highway Account for project expenditures. (ii) Two hundred ninety million dollars ($290,000,000) for allocation to Traffic Congestion Relief Program projects. (iii) Three hundred eighty-four million dollars ($384,000,000) to be allocated equally, as funds become available, for both of the following: (I) To the Public Transportation Account for project expenditures. (II) For advanced repayments of local street and road projects due for funding in the 2008-09 fiscal year. (iv) Eighty-three million dollars ($83,000,000) to the Public Transportation Account for project expenditures. (v) Advanced funding of State Transit Assistance loans due for funding in the 2008-09 fiscal year. (B) To the Transportation Deferred Investment Fund, an amount up to the outstanding amount of the suspension of the 2004-05 fiscal year transfer of the sales tax on gasoline to the Transportation Investment Fund pursuant to requirements of Article XIX B of the California Constitution. (C) To the Transportation Deferred Investment Fund, an amount up to the outstanding amount of the suspension of the 2003-04 fiscal year transfer of the sales tax on gasoline to the Transportation Investment Fund pursuant to requirements of Article XIX B of the California Constitution. (2) Notwithstanding paragraph (1), if and to the extent it is necessary to ensure to the maximum extent practicable the eligibility for exclusion from taxation under the federal Internal Revenue Code of interest on the bonds to be issued by the special purpose trust, the Director of Finance may adjust the application of proceeds not eligible for exclusion from taxation among the authorized funds described in paragraph (1). The Department of Finance shall submit a report to the Legislature describing any proposed changes among the authorized funds in paragraph (1), and consistent with this paragraph, at least 30 days prior to issuing the bonds pursuant to this article. Amounts deposited in the Traffic Congestion Relief Fund pursuant to paragraph (1) shall be applied as a credit to transfers from the General Fund that the Controller would otherwise be required to make to that fund. Amounts deposited in the Transportation Deferred Investment Fund shall be expended in conformance with Sections 7105 and 7106 of the Revenue and Taxation Code, and the amounts so deposited shall also be applied as a credit to the transfers from the General Fund that the Controller would otherwise be required to make under those sections. The Legislature hereby finds and declares that the deposits and credits described in this subdivision do not constitute the use of the proceeds of bonds or other indebtedness to pay a year-end state budget deficit as prohibited by subdivision (c) of Section 1.3 of Article XVI of the California Constitution. Subject to any constitutional limitation, the use and application of the proceeds of any sale of compact assets or bonds shall not in any way affect the legality or validity of that sale or those bonds. (d) Funds received from amended tribal-state compacts, or new compacts entered into and ratified on or after the effective date of this article, pursuant to Section 4.3.1 of the amended compacts, or the comparable section in new compacts, as specified in those compacts, that are neither sold to the special purpose trust nor otherwise appropriated, and funds received as a result of the state's acquisition of an ownership interest in any residual interest in compact assets attributable to Section 4.3.1 of the amended compacts, or the comparable section in new compacts, as specified in those compacts, shall be remitted to the California Gambling Control Commission for deposit in the General Fund. (e) Funds received from amended tribal-state compacts, or new compacts entered into and ratified on or after the effective date of this article, pursuant to Section 4.3.3 of the amended compacts, or the comparable section in new compacts, as specified in those compacts, shall be held in an account within the Special Deposit Fund until those funds are sold or otherwise applied pursuant to this subdivision. From time to time, at the direction of the Director of Finance, any moneys in this account shall be deposited and applied in accordance with subdivision (c) or shall be deemed to be compact assets for purposes of sale to the special purpose trust pursuant to this article. If the Director of Finance determines that the bonds authorized pursuant to this article cannot be successfully issued by the special purpose trust, funds within the account shall be deposited in accordance with subdivision (c). In addition, all subsequent revenues remitted pursuant to Section 4.3.3 of the amended compacts, or the comparable section in new compacts, as specified in those compacts, and funds received as a result of the state's acquisition of an ownership interest in any residual interest in compact assets attributable to Section 4.3.3 of the amended compacts, or the comparable section in new compacts, as specified in those compacts, shall be used to satisfy the purposes of subdivision (c). When the amounts described in subdivision (c) have been paid to the funds named in that subdivision either pursuant to this article or by other appropriations or transfers, thereafter the revenues received by the state from Section 4.3.3 of the compact shall be remitted to the California Gambling Control Commission for deposit in the General Fund. (f) The principal office of the special purpose trust shall be located in the County of Sacramento. The articles of incorporation of the special purpose trust shall be prepared and filed, on behalf of the state, with the Secretary of State by the bank. The members of the board of directors of the bank as of the effective date of this article, the Director of the Department of Transportation, and the Director of General Services, shall each serve ex officio as the directors of the special purpose trust. Any of these directors may name a designee to act on his or her behalf as a director of the special purpose trust. The Director of Finance or his or her designee shall serve as chair of the special purpose trust. Directors of the special purpose trust shall not be subject to personal liability for carrying out the powers and duties conferred by this article. The Legislature hereby finds and declares that the duties and responsibilities of the directors of the special purpose trust and the duties and responsibilities of the Director of Finance established under this article are within the scope of the primary duties of those persons in their official capacities. The special purpose trust shall be treated as a separate legal entity with its separate corporate purpose as described in this article, and the assets, liabilities, and funds of the special purpose trust shall be neither consolidated nor commingled with those of the bank. 63048.7. Notwithstanding any other provision of this division, Article 3 (commencing with Section 63040), Article 4 (commencing with Section 63042), and Article 5 (commencing with Section 63043) do not apply to any bonds issued by the special purpose trust established by this article. All matters authorized in this article are in addition to powers granted to the bank in this division. 63048.75. Any sale of some or all of the compact assets under this article shall be treated as a true sale and absolute transfer of the property so transferred to the special purpose trust and not as a pledge or grant of a security interest by the state, the bank board, or the bank for any borrowing. The characterization of the sale of any of those assets as an absolute transfer by the participants shall not be negated or adversely affected by the fact that only a portion of the compact assets is transferred, nor by the state's acquisition of an ownership interest in any residual interest in the compact assets, nor by any characterization of the special purpose trust or its bonds for purposes of accounting, taxation, or securities regulation, nor by any other factor whatsoever. 63048.8. (a) (1) On and after the effective date of each sale of compact assets, the state shall have no right, title, or interest in or to the compact assets sold, and the compact assets so sold shall be property of the special purpose trust and not of the state, the bank board, or the bank, and shall be owned, received, held, and disbursed by the special purpose trust or the trustee for the financing. None of the compact assets sold by the state pursuant to this article shall be subject to garnishment, levy, execution, attachment, or other process, writ, including, but not limited to, a writ of mandate, or remedy in connection with the assertion or enforcement of any debt, claim, settlement, or judgment against the state, the bank board, or the bank. (2) On or before the effective date of any sale, the state, acting through the Director of Finance, upon direction of the bank, shall notify each tribe that has executed a designated tribal compact that the particular compact assets that have been sold to the special purpose trust and irrevocably instruct the tribe that, as of the applicable effective date and so long as the bonds secured by the compact assets are outstanding, the compact assets sold are to be paid directly to the trustee for the applicable bonds of the special purpose trust. Certification by the Director of Finance that this notice has been given shall be conclusive evidence thereof for purposes of this article. (3) The state pledges and agrees with the holders of any bonds issued by the special purpose trust that it will not authorize anyone other than an Indian tribe with a federally authorized compact to engage in specified gaming activities within the defined core geographic market of an Indian tribe that is a party to a designated tribal compact in violation of the designated tribal compact as ratified by the Legislature, unless adequate provision is made by law for the protection of the holders of bonds in a manner consistent with the indenture or trust agreement pursuant to which the bonds are issued. The state pledges to and agrees with the holders of any bonds issued by the special purpose trust that it will (A) enforce its rights to collect the compact assets sold to the special purpose trust pursuant to this article, (B) not amend any designated tribal compact or take any other action, that would in any way diminish, limit, or impair the rights to receive compact assets sold to the special purpose trust pursuant to this article, and (C) not in any way impair the rights and remedies of bondholders or the security for their bonds until, in each case, those bonds, together with the interest thereon and costs and expenses in connection with any action or proceeding on behalf of the bondholders, are fully paid and discharged or otherwise provided for pursuant to the terms of the indenture or trust agreement pursuant to which those bonds are issued. The special purpose trust may include these pledges and undertakings in its bonds. Notwithstanding any other provision of this article, inherent police powers that cannot be contracted away are reserved to the state. (b) Bonds issued pursuant to this article shall not be deemed to constitute a debt of the state nor a pledge of the faith or credit of the state, and all bonds shall contain on the face of the bond a statement to the effect that neither the faith and credit nor the taxing power nor any other assets or revenues of the state or of any political subdivision of the state other than the special purpose trust, is or shall be pledged to the payment of the principal of or the interest on the bonds. (c) Whether or not the bonds are of a form and character as to be negotiable instruments under the terms of the Uniform Commercial Code, the bonds are hereby made negotiable instruments for all purposes, subject only to the provisions of the bonds for registration. (d) The special purpose trust and the bank shall be treated as public agencies for purposes of Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure, and any action or proceeding challenging the validity of any matter authorized by this article shall be brought in accordance with, and within the time specified in, that chapter. (e) Notwithstanding any other provision of law, the exclusive means to obtain review of a superior court judgment entered in an action brought pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure to determine the validity of any bonds to be issued, any other contracts to be entered into, or any other matters authorized by this article shall be by petition to the Supreme Court for writ of review. Any such petition shall be filed within 15 days following the notice of entry of the superior court judgment, and no extension of that period shall be allowed. If no petition is filed within the time allowed for this purpose, or the petition is denied, with or without opinion, the decision of the superior court shall be final and enforceable as provided in subdivision (a) of Section 870 of the Code of Civil Procedure. In any case in which a petition has been filed within the time allowed, the Supreme Court shall make any orders as it may deem proper in the circumstances. If no answering party appeared in the superior court action, the only issues that may be raised in the petition are those related to the jurisdiction of the superior court. Nothing in this subdivision or subdivision (d) shall be construed as granting standing to challenge the designated tribal compacts. 63048.85. (a) The Legislature finds and declares that, because the proceeds from the sale of compact assets authorized by this article are not "proceeds of taxes" as that term is used in Article XIII B of the California Constitution, the disbursement of these proceeds is not subject to the limitations imposed by that article. (b) Compact assets shall not be deemed to be "State General Fund proceeds of taxes appropriated pursuant to Article XIII B" within the meaning of Section 8 of Article XVI of the California Constitution, Section 41202 of the Education Code, or any other provision of law. (c) Compact assets are not General Fund revenues for the purposes of Section 8 of Article XVI of the California Constitution or any other provision of law. 63048.9. This article and all powers granted hereby shall be liberally construed to effectuate its intent and their purposes. SEC. 5. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to ensure that sufficient funds are available when needed to fund essential transportation programs and to ensure that the revenues available under the amended tribal-state compacts ratified pursuant to this act are made available to the state as expeditiously as possible, it is necessary that this act take effect immediately.