March 26, 2009, Introduced by Rep. Kennedy and referred to the Committee on Tax Policy.
A bill to amend 2005 PA 226, entitled
"Michigan tobacco settlement finance authority act,"
by amending sections 5 and 8 (MCL 129.265 and 129.268), section 8
as amended by 2008 PA 101.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 5. The authority shall exercise its duties
independently
of the state treasurer. The However,
the staffing,
budgeting, procurement, and related administrative functions of the
authority shall be performed under the direction and supervision of
the state treasurer.
Sec. 8. (1) The state budget director with the approval of the
state administrative board may sell to the authority, and the
authority may purchase, for cash or other consideration and in 1 or
more installments, all or a portion of the state's tobacco receipts
pursuant to the terms of 1 or more sale agreements. In the
alternative, the state budget director with the approval of the
state administrative board may sell all or a portion of the state's
tobacco receipts for cash or other consideration to a person or
persons other than the authority, if the terms of the sale
agreement to sell the state's tobacco receipts are in the best
interests of this state and the net proceeds of the sale will not
exceed $400,000,000.00. If the sale to a person or persons other
than the authority is in the best interests of this state, the
state administrative board shall approve the terms of the sale
agreement. The sale agreement or combined sale agreements shall
provide for the sale of that portion of the state’s tobacco
receipts sufficient to provide net proceeds to the state in the
amount
of $815,000,000.00 $816,000,000.00, of which $400,000,000.00
shall be deposited to and held, used, and expended by the state
treasurer in the manner provided for in the Michigan trust fund
act, 2000 PA 489, MCL 12.251 to 12.260, $207,800,000.00 shall be
deposited in the state school aid fund established by section 11 of
article IX of the state constitution of 1963, and the balance shall
be deposited in the general fund.
(2) A sale agreement or combined sale agreements under this
section may also provide for refunding, refinancing, and the sale
by this state of residual interests sufficient to provide net
proceeds to the state in the amount of $60,000,000.00. Any net
proceeds resulting from a refunding or refinancing of bonds issued
under this act prior to the effective date of the amendatory act
that added this subsection or the sale of residual interests
existing on or after the effective date of the amendatory act that
added this subsection shall be deposited in the general fund.
(3) Any sale agreement shall provide that the purchase price
payable by the authority to the state for TSRs shall consist of the
net proceeds and the residual interests, if any. In addition, any
sale shall be pursuant to 1 or more sale agreements that may
contain the terms and conditions considered appropriate by the
state budget director to carry out and effectuate the purposes of
this section, including without limitation covenants binding this
state in favor of the authority and its assignees, including
without limitation the owners of the bonds and benefited parties,
including a requirement that the state enforce the provisions of
the master settlement agreement that require the payment of the
TSRs, a requirement that the state enforce the provisions of the
qualifying statute, a provision authorizing inclusion of the
state's pledge and agreement, as set forth in section 11, in any
agreement with owners of the bonds or any benefited parties, and
covenants with respect to the application and use of the proceeds
of the sale of the state's tobacco receipts to preserve the tax
exemption of the interest on any bonds, if issued as tax-exempt.
The state budget director in any sale agreement may agree to, and
the authority may provide for, the assignment of the authority's
right, title, and interest under the sale agreement for the benefit
and security of the owners of bonds and benefited parties.
(4) A sale agreement may provide that the remedies available
to the authority and the bondholders for any breach of the pledges
and agreements of this state set forth in subsection (3) shall be
limited to injunctive relief and that this state shall be
considered to have diligently enforced the qualifying statute if
there has been no judicial determination by a court of competent
jurisdiction in this state, in an action commenced by a
participating tobacco manufacturer under the master settlement
agreement, that this state has failed to diligently enforce the
qualifying statute.
(5) The approval of the state administrative board shall be
made by a resolution adopted by the state administrative board and
that approval together with the sale agreement made pursuant to
that approval shall be conclusively presumed to be valid for all
purposes unless challenged in an action brought in the court of
appeals within 30 days after the adoption of the resolution. All
challenges shall be heard and determined as expeditiously as
possible with lawful precedence over other matters. Consideration
by the court of appeals shall be based solely on the record before
the state administrative board and briefs to the court shall be
limited to whether the resolution conforms to the constitution and
laws of this state and the United States and is within the
authority of the state administrative board under this act.
(6) A sale of all or a portion of the state's tobacco receipts
to the authority under a sale agreement shall be treated as a true
sale and absolute transfer of the state's tobacco receipts
transferred and not as a pledge or other security interest for any
borrowing. A sale agreement that expressly states that the transfer
of all or a portion of the state's tobacco receipts to the
authority is a sale or other absolute transfer signifies that the
transaction is a true sale and is not a secured transaction and
that title, legal and equitable, has passed to the authority. The
characterization of a sale as an absolute transfer by the
participants shall not be negated or adversely affected by the fact
that only a portion of the state's tobacco receipts are
transferred, or by the acquisition or retention by this state of a
residual interest, or by the participation by any state official as
a member or officer of the authority, or by whether the state is
responsible for collecting the TSRs or otherwise enforcing the
master settlement agreement or retains legal title to the portion
of the state's tobacco receipts for the purposes of these
collection activities, or by any characterization of the authority
or its obligations for purposes of accounting, taxation, or
securities regulation, or by any other factor whatsoever. A true
sale under this act exists regardless of whether the authority has
any recourse against this state, or any other term of the sale
agreement, including the fact that this state acts as a collector
of the state's tobacco receipts or the treatment of the transfer as
a financing for any purpose.
(7) On and after the effective date of each sale of TSRs, the
state shall have no right, title, or interest in or to the TSRs
sold, and the TSRs sold shall be property of the authority and not
of this state, and shall be owned, received, held, and disbursed by
the authority and not this state. On or before the effective date
of a sale described in this subsection, this state through the
state treasurer shall notify the escrow agent under the master
settlement agreement that this state has sold all or a portion of
the state's tobacco receipts to the authority, including, if
applicable, a statement as to the percentage sold and shall
irrevocably instruct the escrow agent that, subsequent to the date
specified in the notice, that portion of the state’s tobacco
receipts are to be paid directly to the authority or the trustee
under the applicable authority resolution, trust agreement, or
trust indenture for the benefit of the owners of the bonds and
benefited parties until the authority's bonds and ancillary
facilities are no longer outstanding. Once the bonds or ancillary
facilities are no longer outstanding, an officer or agent of this
state who shall receive any TSRs shall hold them in trust for the
authority or the trustee, as applicable, and shall promptly remit
the same to the authority or the trustee, as applicable.
(8) The net proceeds and any earnings on the net proceeds
shall never be pledged to, or made available for, payment of the
bonds or ancillary facilities or any interest or redemption price
or any other debt or obligation of the authority.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 95th Legislature are
enacted into law:
(a) Senate Bill No.____ or House Bill No. 4716(request no.
02788'09).
(b) Senate Bill No.____ or House Bill No. 4719(request no.
02892'09).
(c) Senate Bill No.____ or House Bill No. 4717(request no.
02893'09).
(d) Senate Bill No.____ or House Bill No. 4720(request no.
02894'09).