Authorizes Erie county to establish a trust fund for investment and
expenditure of proceeds of tobacco asset securitization
financing from the sale of the county's right to receive its portion
of the state's allocable share of payments under the terms of
the Master Settlement Agreement and the Consent Decree and Final Judgment;
provides that monies shall only be used for the
county's share of medicaid expenditures and its contribution to the
Erie County Medical Center operating budget, debt service,
economic development, and regionalism/regional asset purposes; requires
an enabling resolution adopted by the county
legislature and approved by the county executive; provides for the
establishment of a non-profit local development corporation.
Eff. Date 06/23/2000
SPONSORS MEMO:
BILL NUMBER: A11161A
SPONSOR: Rules (Eve)
TITLE:
AN ACT in relation to
tobacco asset securitization financing by the
county of Erie, to authorizing
establishment of a trust fund for invest-
ment and expenditure
of proceeds from such financing, and to prescribing
and limiting powers
and procedures with respect to such fund.
PURPOSE:
This bill would authorize
the establishment by Erie County of a trust
fund for investment
and expenditure of proceeds from tobacco asset secu-
ritization financing.
SUMMARY
OF PROVISIONS:
This bill would authorize
Erie County to establish a tobacco asset secu-
ritization trust fund
for the investment and expenditure of proceeds
received by the County
from the sale of the County's right to receive
its portion of the State
of New York's allocable share of payments under
the terms of (i) the
Master Settlement Agreement entered into by partic-
ipating cigarette manufacturers,
forty-six states and six other U.S.
jurisdictions in November
1998 and (ii) the Consent Decree and Final
Judgment entered in
State Supreme Court for New York County in December
1998, as amended (such
right is hereinafter referred to as the "County's
Tobacco Asset")
Monies in the fund could
only be used for County debt service, enhance-
ments for economic development
in the County, the County's annual
payment of its local
share of Medicaid expenditures, its contribution to
the Erie County Medical
Center's operating budget, and enhancements in
regionalism and other
cooperative intergovernmental initiatives. The
fund would be established
by an enabling resolution adopted by the Erie
County Legislature and
approved by the Erie County Executive. The fund
would be held and administered
by a trustee, a trust company or bank
having the powers of
a trust company in the State, appointed pursuant to
the enabling resolution.
Monies in the fund would
be invested in general obligations of, or obli-
gations guaranteed by,
any state of the United States of America or
political subdivision
thereof or the District of Columbia, receiving one
of the two highest long-term
unsecured debt rating categories available
for such securities
by two independent rating services, or in accordance
with the provisions
of Section 11 of the General Municipal Law, subject
to any arbitrage agreements
by the County with bondholders of the corpo-
ration formed to purchase
the County's Tobacco Asset and securitize such
asset through the issuance
of such corporation's tax-exempt bonds.
EXISTING
LAW:
The County is not authorized
under existing law to establish such a
trust fund. Therefore,
the proceeds received by the County from the
sale of the County's
Tobacco Asset would be available for any valid
county purpose, subject
to appropriation by the County Legislature.
JUSTIFICATION:
The County plans to
securitize the County's Tobacco Asset through a
transaction similar
to the New York City, Nassau County and Westchester
tobacco asset securitization
financings which were completed in 1999.
This securitization
transaction will require corporation (the "Erie
Tobacco Asset Securitization
Corporation" or "ETASC"), in order to
provide a bankruptcy-remote
purchaser of the County's Tobacco Asset
which can issue tax-exempt
bonds to finance such purchase.
The deposit and investment
of such monies in a special-purpose trust
fund is necessary in
order to provide for the use of the resulting secu-
ritization proceeds,
over an extended period of time for the following
purposes: payment
of the County's long-term general obligation indebt-
edness, to enhance economic
development in the County, to stabilize the
cost to taxpayers of
the County's annual share of Medicaid expenditures,
to stabilize the cost
to taxpayers of the County's contribution to the
Erie County Medical
Center operating budget, to enhance regional cooper-
ation and encourage
inter-governmental initiatives which reduce the
overall cost of government.
The investment of such
monies in certain tax-exempt obligations as
described above would
enable ETASC to issue its bonds on a tax-exempt
basis under federal
tax law, even though the monies will be expended
over an extended period
of time. The eligibility criteria for such
investments, being the
two highest long-term unsecured debt rating cate-
gories available for
such securities by two independent rating services,
or in accordance with
the provisions of Section 11 of the General Munic-
ipal Law, will safeguard
such monies for future expenditure by the Coun-
ty.
The passage of this
legislation is critical to the County's efforts to
complete its planned
securitization transaction as soon as possible. In
addition to providing
the funding source for various County purposes,
the securitization will
enable the County to transfer, to ETASC's bond-
holders, the risk of
being financially dependent on the continued
viability of the domestic
tobacco industry. In view of the pending liti-
gation in Florida, California
and many other states against the domestic
tobacco industry, as
well as the U.S. Justice Department lawsuit, the
potential for multibillion
dollar liability and industry bankruptcy
threatens the County's
future receipt of payments under the 1998 Master
Settlement Agreement
and the 1998 Consent Decree and Final Judgment.
Securitization will
make it feasible for County taxpayers to realize the
benefits of the Tobacco
Asset over an extended period of time, regard-
less of the ultimate
fate of the domestic tobacco industry. Various
other entities are currently
preparing their own securitization bond
issues. In order for
the County to be assured that it can access such
market for risk transfer
and funding purposes, on terms which are cost-
effective to the County,
it is necessary to obtain passage of this
legislation and then
complete local implementation of the securitization
transaction.
LEGISLATIVE
HISTORY:
New bill.
FISCAL
IMPLICATIONS:
None to the state.
EFFECTIVE
DATE:
Immediately.
CHAPTER TEXT:
LAWS OF NEW YORK, 2000
AN ACT
in relation to creating the tobacco asset securitization trust
fund
act of the county of Erie, authorizing the establishment
of a
trust
fund for investment and expenditure of
proceeds from such
financing,
and prescribing and limiting powers and procedures
with
respect
to such fund
Became a law June
23, 2000, with the approval of the Governor. Passed on
Home
Rule request pursuant to Article IX, section 2(b)
(2) of the
Constitution
by a majority vote, three-fifths being present.
The
People of the State of New York, represented in Senate and Assem-
bly, do enact as follows:
Section
1. This act shall be known and may be cited as the "tobacco
asset securitization
trust fund act of the county of Erie".
§
2. Definitions. As used in this act, the following words and
terms
shall have
the following meanings, respectively, unless the context
shall indicate
another or different meaning or intent.
(a)
"Budget director" means the director of the division of
budget,
management, and
finance of the county.
(b)
"Consent Decree" means the Consent Decree
and Final Judgment
relating to the
Master Settlement Agreement, entered in supreme court of
the state for
New York county on December 23, 1998, as amended.
(c)
"Corporation" means the not-for-profit local development
corpo-
ration
incorporated by the county executive for the purpose of securi-
tizing the tobacco
asset.
(d)
"County" means the county of Erie.
(e)
"County debt service appropriation" means the county's
annual
budgeted
appropriation in an amount equal to the amount the county owes
for annual debt
service on its outstanding general purpose general obli-
gation bonds.
(f)
"County executive" means the county executive of the
county of
Erie.
(g)
"County legislature" means the county legislature of the county of
Erie.
(h)
"Economic development appropriation" means the county's
annual
budgeted appropriation
to encourage economic development in Erie county.
(i)
"Enabling resolution" means a resolution adopted by the
county
legislature and
approved by the county executive establishing the tobac-
co asset securitization
trust fund in accordance with this act.
(j)
"Master Settlement Agreement" means the Master Settlement Agree-
ment entered
into by participating cigarette manufacturers, forty-six
states,
and six other jurisdictions of the United States of America on
November 23,
1998.
(k)
"Medicaid appropriation" means the county's annual budgeted appro-
priation in an
amount equivalent to the amount the county is charged
back for
its share of medical assistance payments made to providers
through the state
payment system for services rendered to
eligible
persons.
EXPLANATION--Matter
in italics is new; matter in
brackets [-] is old law
to be omitted.
CHAP. 105 2
(l)
"Medical center contribution appropriation" means the
county's
annual budgeted
appropriation to the Erie county medical center for bad
debt and charity
costs and other non-reimbursable operating costs.
(m)
"Regionalism/regional asset appropriation" means
the county's
annual budgeted
appropriation to promote cooperation among government
entities and
to preserve regional assets.
(n)
"State" means the state of New York.
(o)
"Tobacco asset" means the county's right to receive its portion of
the state's
allocable share of payments under the terms of the Master
Settlement Agreement
and the Consent Decree.
(p)
"Tobacco asset securitization financings" means
transactions
comprising
the issuance of bonds by the corporation
to finance the
corporation's
purchase of the tobacco asset from the county.
(q)
"Tobacco asset securitization trust fund" or "fund" means the fund
so entitled which
is held by the trustee and is described and provided
for in section
three of this act.
(r)
"Trustee" means any trust company or bank having the powers of a
trust company
in the state, appointed by the county legislature in the
enabling
resolution, and any successor trust company or bank having the
powers of a trust
company in the state which may be substituted in its
place pursuant
to such resolution.
§
3. Authorization for fund. Notwithstanding the provisions
of any
other law, general,
special or local, (a) the county is hereby author-
ized and
empowered to establish and maintain with the trustee a tobacco
asset securitization
trust fund for the purpose of investing
the
proceeds
received by the county from tobacco
asset securitization
financings and
paying a portion of the county debt service appropri-
ation,
the economic development appropriation, the medicaid appropri-
ation,
the medical center contribution appropriation,
and the
regionalism/regional
asset appropriation. As hereinafter set forth, the
county is hereby
further authorized and empowered to determine (i) the
amount or amounts
of such proceeds to be deposited in such fund pursuant
to the
enabling resolution, and (ii) the time
or times that such
proceeds should
be deposited therein and other terms, conditions, and
requirements
of the fund as the county legislature and county executive
shall determine,
pursuant to the enabling resolution, to be in the best
interest
of the county. For and with respect
to each fiscal year
commencing after
the fiscal year in which the fund has been established,
the budget director,
pursuant to the enabling resolution, shall certify
to the
trustee the county debt service appropriation,
the economic
development
appropriation, the medicaid appropriation, the
medical
center
contribution appropriation, and the regionalism/regional asset
appropriation
for such fiscal year, pursuant to the adopted county budg-
et and any and
all subsequent resolutions for such fiscal year,
the
amount
or amounts and the time or times for deposit of
the proceeds
therein, and
such other matters with respect to the operations of
the
fund as
may be required by the enabling resolution. Nothing herein,
however, shall
preclude the county or its duly authorized officers from
causing
additional amounts from other sources to be deposited
in the
fund.
(b)
Appropriations to and from the fund in a manner consistent
with
the enabling
resolution shall be made only for the payment or payments
of all or a portion
of the county debt service appropriation,
the
economic
development appropriation, the medicaid appropriation,
the
medical center
contribution appropriation, and the regionalism/regional
asset appropriation,
in the respective amounts certified by the budget
3 CHAP. 105
director, pursuant
to the adopted county budget and any and all subse-
quent resolutions
for such fiscal year.
(c)
The trustee shall from time to time withdraw from the
fund all
such respective
amounts certified by the budget director, pursuant to
the adopted
county budget and any and all subsequent resolutions for
such fiscal year,
for the payment or payments, as the same shall be due,
of the county
debt service appropriation, the economic
development
appropriation,
the medicaid appropriation, the medical center contrib-
ution appropriation,
and the regionalism/regional asset appropriation,
and shall
cause the amounts so withdrawn to be applied to such payments
as and when due.
(d)
All monies in the fund shall be
invested, subject to the
provisions
of any contract with bondholders of the corporation, (i) in
general obligations
of, or obligations guaranteed by, any state of the
United
States of America or political
subdivision thereof or the
District of Columbia
receiving one of the two highest long-term unse-
cured debt
rating categories available for such securities by two inde-
pendent rating
services, or (ii) notwithstanding the provisions
of
clause
(i) of this subdivision, in accordance with the provisions
of
section 11 of
the general municipal law.
(e)
The tobacco asset securitization trust fund and all
moneys or
securities
therein or payable thereto in accordance with this act are
hereby declared
to be county property devoted to essential governmental
purposes
and accordingly shall not be applied to any purpose other than
as provided herein
and shall not be subject to any order, judgment,
lien, execution,
attachment, setoff, or counterclaim by any creditor of
the county other
than a creditor for whose benefit such fund is estab-
lished
and maintained and who is entitled thereto under and pursuant to
this act.
(f)
The fund shall be established by the county legislature pursuant
to an
enabling resolution making such determinations and providing for
the establishment
and maintenance thereof and such terms and conditions
thereof
and other matters as to its operations as authorized by or not
inconsistent
with this act. Such enabling resolution shall be adopted by
majority vote
of all the members of the county legislature and approved
by the
county executive and shall take effect immediately
upon its
adoption and
approval. The county may amend, supplement, or otherwise
repeal
all or any part of the enabling resolution by subsequent resol-
ution; any subsequent
enabling resolution shall also be adopted
and
approved
in the manner set forth above and may incorporate by reference
any of the terms
and conditions of the enabling resolution.
§
4. Superseder. In the event of any inconsistency or conflict
with
the charter
or administrative code of the county or any other
law,
general, special,
or local, the provisions of this act shall prevail.
§
5. Severability. If any section, part or provision of this act shall
be declared unconstitutional
or invalid or ineffective by any court of
competent
jurisdiction, such declaration shall be limited
to the
section, part
or provision directly involved in the controversy in which
such declaration
was made and shall not affect any other
section,
provision or
part thereof.
§
6. This act shall take effect immediately.
CHAP. 105 4
The Legislature
of the STATE OF NEW YORK ss:
Pursuant
to the authority vested in us by section 70-b of the Public
Officers Law,
we hereby jointly certify that this slip copy of
this
session law was
printed under our direction and, in accordance with such
section, is entitled
to be read into evidence.
JOSEPH L. BRUNO
SHELDON SILVER
Temporary
President of the Senate
Speaker of the Assembly