BILL NUMBER: SB 53 INTRODUCED
BILL TEXT
INTRODUCED BY Senator DeSaulnier
JANUARY 14, 2009
An act to amend Sections 63049, 63049.4, and 63049.5 of the
Government Code, relating to tobacco settlement moneys, and declaring
the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 53, as introduced, DeSaulnier. Tobacco settlement moneys:
Master Settlement Agreement.
Under existing law, states' attorneys general and various tobacco
product manufacturers have entered into a Master Settlement
Agreement, in settlement of various lawsuits, that provides for the
allocation of money to the states and certain territories. The state
has entered into a memorandum of understanding providing for the
allocation of the state's share of moneys to be received under the
Master Settlement Agreement between the state and the various local
governments of the state. The Attorney General, on behalf of the
state, has entered into the California escrow agreement with the
California escrow agent named in the agreement relating to the
division between the state and the participating jurisdictions of
amounts payable under the Master Settlement Agreement.
Existing law sets forth the duties of the California
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. Under existing law, the bank is authorized to
sell for, and on behalf of, the state all or any portion of the state'
s tobacco assets, as defined, to a special purpose trust consisting
of a not-for-profit corporation.
This bill would authorize the Attorney General to negotiate
amendments to the Master Settlement Agreement, the memorandum of
understanding, and the California escrow agreement, provided that
those amendments do not materially adversely alter, limit, or impair
the rights to receive tobacco assets sold to the special purpose
trust, nor in any way materially impair the rights and remedies of
bondholders or the security for their bond until those bonds,
together with the interest on the bonds and costs and expenses in
connection with any action or proceeding on behalf of the
bondholders, are fully paid and discharged.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 63049 of the Government Code is amended to
read:
63049. 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) "California escrow agreement" means the escrow agreement dated
April 12, 2000, as amended, between the Attorney General, on behalf
of the state, and the California escrow agent named in the agreement
relating to the division between the state and the participating
jurisdictions of amounts payable under the Master Settlement
Agreement.
(b) "Consent decree and final judgment" means, collectively, the
Consent Decree and Final Judgment entered in the Superior Court of
the State of California for San Diego County on December 9, 1998,
approving the Master Settlement Agreement, the memorandum of
understanding, and the orders entered by the court on January 18,
2000, and July 30, 2001, approving the Agreement Regarding
Interpretation of Memorandum of Understanding.
(c) "Master Settlement Agreement" means the settlement dated
November 23, 1998, as amended, among the attorneys general of 46
states (including California), the District of Columbia, the
Commonwealth of Puerto Rico, Guam, the U.S. Virgin Islands, American
Samoa, and the Commonwealth of the Northern Mariana Islands, and
Philip Morris Incorporated, R. J. Reynolds Tobacco Company, Brown and
Williamson Tobacco Corporation, Lorillard Tobacco Company, and the
other Subsequent Participating Manufacturers as defined therein.
(d) "Memorandum of understanding" means, collectively, the
memorandum of understanding dated August 5, 1998, as amended,
together with the Agreement Regarding Interpretation of
Memorandum of Understanding, as amended, among the state
and various local governments of the state to coordinate their
pending cases and to allocate certain portions of the recovery under
the Master Settlement Agreement.
(e) "Operating expenses" means the reasonable operating expenses
of the special purpose trust, including, without limitation, 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 and fiduciaries.
(f) "Tobacco assets" means all moneys required to be paid to the
state under the Master Settlement Agreement, as further provided in
the memorandum of understanding and the California escrow agreement,
and all of the state's rights to receive those payments.
SEC. 2. Section 63049.4 of the Government Code is amended to read:
63049.4. (a) On and after the effective date of each sale of
tobacco assets, the state shall have no right, title, or interest in
or to the tobacco assets sold, and the tobacco assets so sold shall
be property of the special purpose trust and not of the state, the
bank board, the State Public Works 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 tobacco 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, the State Public Works Board, or
the bank.
On or before the effective date of any sale, the state, acting
through its Attorney General, upon direction of the bank, shall
notify the California escrow agent under the Master Settlement
Agreement and the California escrow agreement that the sold tobacco
assets have been sold to the special purpose trust and irrevocably
instruct the California escrow agent that, as of the applicable
effective date, the tobacco assets sold are to be paid directly to
the trustee for the applicable bonds of the special purpose trust.
The state pledges to and agrees with the holders of any bonds issued
by the special purpose trust that it will not amend the Master
Settlement Agreement, the memorandum of understanding, or the
California escrow agreement, or take any other action, in any way
that would materially adversely alter, limit, or impair
the rights to receive tobacco assets sold to the special purpose
trust pursuant to this article, nor in any way materially
impair the rights and remedies of bondholders or the security for
their bonds until 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. The state
further pledges and agrees that it shall enforce its rights to
collect all moneys due from the participating tobacco products
manufacturers under the Master Settlement Agreement and, in addition,
shall diligently enforce the model statute as contemplated in the
Master Settlement Agreement (Article 3 (commencing with Section
104555) of Chapter 1 of Part 3 of Division 103 of the Health and
Safety Code) against all tobacco product manufacturers selling
tobacco products in the state and that are not signatories to the
Master Settlement Agreement, in each case in the manner and to the
extent necessary in the judgment of the Attorney General to collect
all moneys to which the state is entitled under the Master Settlement
Agreement. The special purpose trust may include these pledges and
undertakings in its bonds. Notwithstanding these pledges and
undertaking by the state, the Attorney General may in his or her
discretion enforce any and all provisions of the Master Settlement
Agreement, without limitation.
(b) Bonds issued pursuant to this article shall not be deemed to
constitute a debt of the state or a pledge of the faith or credit of
the state, and all bonds shall contain on the face thereof 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 thereof, 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, or 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 petition
shall be filed within 15 days following the notice of entry of the
superior court judgment, and no extension of that period may be
allowed. If no petition is filed within the time allowed therefor, 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
therefor, 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.
(f) The Attorney General may negotiate amendments to the Master
Settlement Agreement, the memorandum of understanding, and the
California escrow agreement, provided that those amendments do not
materially adversely alter, limit, or impair the rights to receive
tobacco assets sold to the special purpose trust pursuant to this
article, nor in any way materially impair the rights and remedies of
bondholders or the security for their bond until those bonds,
together with the interest on the bonds and costs and expenses in
connection with any action or proceeding on behalf of the
bondholders, are fully paid and discharged.
SEC. 3. Section 63049.5 of the Government Code is amended to read:
63049.5. The state acknowledges and agrees that its 57 counties,
the Cities of San Jose, Los Angeles, and San Diego, and the City and
County of San Francisco, commonly and collectively known as the
"participating jurisdictions," have rights and interests in the
memorandum of understanding. In recognition of the rights of the
participating jurisdictions of the state contained in the memorandum
of understanding, the state pledges that the sale of tobacco assets
authorized by this article shall in no way include and the state
shall not otherwise materially adversely alter, limit, or
impair the rights of the participating jurisdictions, including, but
not limited to, rights to receive payments, set forth in the
memorandum of understanding. Nothing in this article shall be
construed to alter the right of each of the participating
jurisdictions to sell or assign some or all of its interest, and
rights to receive payments, under the memorandum of understanding in
the manner deemed appropriate by its governing body.
SEC. 4. 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:
(a) The Attorney General is charged with enforcing the tobacco
Master Settlement Agreement on behalf of the state.
(b) In order to resolve ongoing disputes about payment obligations
under the tobacco Master Settlement Agreement, all 46 states which
are parties to the agreement, including this state, are required to
agree collectively to amend the agreement.
(c) One such amendment has already been approved by almost all the
states, but cannot go into effect until this state also agrees.
(d) Other amendments are currently being negotiated.
(e) In order for this state to benefit from nationwide settlements
that involve amending the Master Settlement Agreement, the Attorney
General needs the flexibility to agree to Master Settlement Agreement
amendments in a timely manner, provided that those amendments do not
materially adversely alter, limit, or impair the rights to receive
tobacco assets sold to the special purpose trust, nor in any way
materially impair the rights and remedies of bondholders or the
security for their bond until those bonds, together with the interest
on the bonds and costs and expenses in connection with any action or
proceeding on behalf of the bondholders, are fully paid and
discharged.
(f) In order to provide the Attorney General the needed
flexibility to resolve disputes about the Master Settlement Agreement'
s terms through amendments to the Master Settlement Agreement, it is
necessary that this act take effect immediately.