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Home My WebLink About10/13/1999 BAKERSFIELD Patricia J. DeMond, Chair Mike Maggard Mark Salvaggio Staff: Darnell Haynes SPECIAL MEETING NOTICE AGENDA BUDGET AND FINANCE COMMITTEE of the City Council - City of Bakersfield Wednesday, October 13, 1999 12:00 noon City Manager's Conference Room Second Floor - City Hall, Suite 201 1501 Truxtun Avenue, Bakersfield, CA 1. ROLL CALL 2. APPROVAL OF AUGUST 20, 1999 AGENDA SUMMARY REPORT 3. PUBLIC STATEMENTS 4. NEW BUSINESS A. REVIEW AND COMMITTEE RECOMMENDATION REGARDING REQUEST FROM KERN COUNTY FOR AIRPORT TERMINAL FUNDING - Tandy B. REVIEW AND COMMITTEE RECOMMENDATION REGARDING REQUEST FOR FUNDING FOR GREATER BAKERSFIELD 2020 VISION PROJECT - Stinson C. REVIEW AND COMMITTEE RECOMMENDATION REGARDING REQUEST FOR FUNDING FROM BOB ELIAS HALL OF FAME - Stinson D. REPORT AND COMMITTEE RECOMMENDATION REGARDING PROFESSIONAL TEMPORARY EMPLOYEE PILOT PROGRAM - Hayden E. SET FUTURE MEETING DATES - Haynes 5. ADJOURNMENT DH:jp FILE COPY DRAFT BAKERSFIELD Alan Tandy, City i~nager Mike Maggard Staff: Darnell Haynes Mark Salvaggio AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Friday, August 20, 1999 12:00 noon City Manager's Conference Room 1. ROLL CALL Call to Order at 12:10 p.m. Present: Councilmembers: Patricia J. DeMond, Chair; and Mark Salvaggio Absent: Councilmember, Mike Maggard 2. ADOPT JULY 19, 1999 AGENDA SUMMARY REPORT Adopted as submitted. Councilmember DeMond made note that Councilmember Maggard did review the agenda prior to the meeting. 3. PRESENTATIONS None 4. PUBLIC STATEMENTS None 5. DEFERRED BUSINESS A. UPDATE OF AGREEMENT AND SECOND DEED OF TRUST WITH THE BAKERSFIELD MUSEUM OF ART Councilmember Maggard was apprised of the sole subject on the agenda prior to the meeting and was supportive of the meeting proceeding without his attendance. The City of Bakersfield's ("City") donation of property to the Bakersfield Museum of Art for the sum of $5,000 was to support their stated objective to remain in Central Park and enlarge DRAFT BUDGET AND FINANCE COMMITTEE Friday, August 20, 1999 Page -2- the facility. The sales agreement, as approved by both parties in September of 1997, included a clause which reverted the property to the City in the event it ceased to function as a museum. Committee Chair DeMond stated it was her understanding that should the museum decide to sell to a third party at some future date, the existing legislative body in place at that time would have the option to exercise the right of first refusal. Deputy City Attorney Gennaro, stated the answer was yes. In October 1998, the Museum's director contacted City staff and indicated it was their desire to enlarge the facility in one phase, instead of in stages, as originally contemplated. This would require that bank financing be obtained. A request for additional property and funding from the City was also included. Over a period of several months, staff, museum representatives and Attorney Terence Werdel, legal counsel for the Museum, deliberated the issues. After an extended period of time, the focus was pdmadly on how to remove the reverter clause while protecting the City's interest. .The subject was reviewed and discussed during Committee meetings on February 8, March 29, and May 17, 1999. At the July 19, 1999 meeting, an agreement appeared to be reached to eliminate the reverter clause and giving the City a right of first refusal. A final draft of the proposed amendment was forwarded to Attorney Werdel for examination. The Committee's meeting on August 20, 1999 remained scheduled as this subject was the only item on the agenda to affirm the amendment, and forward it to the Council for action on August 25, 1999. Committee Chair DeMond stated it was her understanding that should the Museum cease to function as such, or a decision was made to sell to a third party, the legislative body in place at that time would have the option to exercise the right of first refusal. Deputy City Attorney Gennaro stated the answer was yes. Attorney Werdel then indicated concern the term "right of first refusal" was too vague and unenforceable. There also was discussion regarding the method and what an appropriate basis for valuing the property would be in the event a cause for reversion would occur. Attorney Gennaro read language clarifying the City's intent. The "Beneficiary," which is the. City, "shall have the option of first right of refusal to purchase said property." The purchase price is to be based upon an appraisal prepared in accordance with the Uniform Standard of Professional Appraisal Practice (USPAP). There was agreement that three (3) appraisals would be obtained, with the City paying for one. There was also agreement the methodology to be utilized would be determined by the appraisers at the time such action would be required. AGENDA SUMMARY REPORT DRAFT BUDGET AND FINANCE COMMITTEE Friday, August 20, 1999 Page -3- The Committee asked if there were any further general issues of legal language that needed to be worked out. There was agreement that the Committee, Museum representatives and staff felt comfortable with the proposed concepts. Committee Chair DeMond called for the motion. It was unanimously approved and staff was directed to forward the finalized agreement to the full Council for consideration at the August 25, 1999 Council meeting. 6. NEW BUSINESS None 7. COMMITTEE COMMENTS The Committee's thoughts were expressed by Committee Member Mark Salvaggio when he stated everyone felt the Museum should remain in Central Park and hoped this agreement would facilitate that objective. 8. ADJOURNMENT The meeting was adjourned at 12:30 p.m. Staff present:City Attorney, Alan Tandy; Assistant City Manager Alan Christensen; Assistant to the City Manager Damell Haynes; City Attorney Bart Thiltgen; and Deputy City Attorney, Virginia Gennaro. Others present: Chades Meyer and Terence Werdel, Bakersfield Museum of Art; Gene Tackett; and Richard Chang, Bakersfield Californian. cc: Honorable Mayor and City Council DV~-I:al S:\Darnell\Bud and Fin\BF99aug20minutes.wpd BAKERSFIELD MEMORANDUM September 24, 1999 TO: Budget and Finance Committee ~ FROM: Alan Tandy, City Manager ~/ / SUBJECT: Air Terminal Funding - BrOad Range of Options Depending upon the priority the Committee and City Council place on this issue, the following are the broad-based options available to the Council. They are not prioritized or in any order: A) Keep the transfer of the Municipal Airpark and $500,000 fund balance open for a year or two. Perhaps in time, the County will consider the offer more positively. B) If the project is an extremely high priority, agree to the $3,000,000 funding on the 20-year debt retirement basis at the estimated cost of $309,200 per year at 6% interest. C) Recommend that the County use the $8,000,000 in new money from the tobacco settlement for this high priority project. If it is not received, or if its use .becomes restricted making the terminal ineligible, then agree to B, above. D) It is early in the fiscal year. Hold on any decision until more information becomes available, discretionary funds become available to the City, the tobacco tax settlement becomes more clear, etc. AT:al BAKERSFIELD CITY MANAGER'S OFFICE MEMORANDUM September 24, 1999 TO: BUDGET & FINANCE COMMITTEE FROM: ALAN TANDY, CITY MANAGER SUBJECT: AIRPORT FINANCING The County Airport Director is asking for $3.0 million, either as a cash contribution over a few years, or that amount in principal payment, with us to retire both principal and interest on a loan. They need the funds by 2003. I have indicated that, from my perspective, I could recommend a transfer of $500,000 with the airpark, and that we could study, for six months, a contribution of up to another $1.5 million. The County Board of Supervisors, at the joint City/County meeting on September 13th, effectively rejected the airpark portion, thus making it $500,000 more difficult to assist the project, since we should not transfer the airpark's fund balance, if we still own the airpark. Policy Priority The biggest question on the subject of what we can contribute is how high is it on the Council's priority list. It is in the Council goals, but so are road repairs, gang control, and enhancements to the Arena/Convention Center area and downtown, among many others. So, in the big picture, where is it? Would you cut public safety personnel to assist the County? Other needed City capital improvements? Is it a priority over a possible downtown project that might carry even greater impact than Centennial Garden? Or, is it your desire to make only an affordable, no harm, contribution to express symbolic support? The place where it falls within this range is critical to what we can do. Subsets of the policy priority question include: 1) Would the voters approve a tax for it? The cost would be $6.10 per "average" valued home in the metro area. 2) Can the County fund it without us? Their budget is four times ours and they have owned and operated it for a very long time. The County is also scheduled to received over $25 million dollars in new, unrestricted funds from the tobacco tax settlement during the indicated time frame. To show what various levels of contributions would cost in an average year, we provide the Budget and Finance Committee September 16, 1999 Page 2 following: 1) Based on the last five year average, the new one time monies in the Capital Outlay Fund are $2.1 million per year. This would be the most likely place that the airport would fit. Note - this is an average; in theory it could be far less or more than the average in any given year. 2) A listing of last year's unfunded capital outlay requests is attached. Of course, monies available and priorities for the use of monies will change before next budget year, so take this as a sample of what it might mean if we prepared next year's budget today. a) With an average year's funding available, we could (without airport) fund Items 1-25 on the attached list. b) If we funded the County's request for $3.0 million all in one year, nothing on the list could be funded. In fact, we would be $900,000 short. c) If we funded the $3.0 million in three annual increments of $1,000,000 each, we could get to Item 10 on the list and comparable cuts would be needed the next two years. d) If we participated in the County's loan program for 20 years to pay off $3.0 million in principal, along with interest at 6%, the twenty annual payments would be + $309,000 per year. Under this example, we could fund the list through Item 19. Comparable impacts would take place the next nineteen years. e) If we participated at the maximum level I have recommended we study, of $1.5 million, the above calculations would be: i. If all $1.5 in Year 1, we could fund to Item 6 on the list. ii. If we paid $500,000 for each of three years, we could fund to Item 17 on the list, with comparable costs for the two years thereafter. iii. If we participated in the County loan program for 20 years to pay off $1.5 million in principal, along with interest at +6%, the twenty annual payments would be + $152,500 per year. That would let us fund through Item 23 on the list, with comparable cuts for the following nineteen years. 3) Of course, the above are based on "average" conditions over the ~ast five years. ~t is possible that none of the $2.1 million will be there, and that the amount funded Budget and Finance Committee September 16, 1999 Page 3 would have to come from operating cuts n the General Fund. It is also possible that we will get a windfall from an unexpected source, and that the full list could be funded, along with the Airport contributi°n. Please remember, this is a sample of impacts, based on last year's unfunded requests and an average one time revenue assumption. Demands (for streets, gang control expenses, etc.) may go up. Revenues may go down, depending on a variety of conditions that occur during the year. Also, priorities and revenues will vary with new information each year. Other Possible Sources Our budget is large and complex. Legally and theoretically, there are other places a contribution could come from, including: a) The General Fund operating budget - This would not be recommended, as it could endanger key City services. b) Facilities Replacement Reserve - This was set aside by the City Council in a year when we had $4.0 million in unexpected HVAC repairs at the Convention Center. This would not be recommended, as it is intended to be for City owned facilities. c) Unexpected Windfall - we could win a big legal case, get a major insurance rebate, pull off a creative settlement to an issue, etc. The problem is, will it happen, and if it happens, will it be timely - soon enough for the County to plan on it? Summary The bottom line is, of course, how large a priority is the project for the City Council? How much risk is the Council willing to take in terms of other capital projects and/or the operating budget to finance the project? More discussion needs to take place, at both the committee and full Council levels. AT:rs Attachment TO: '"' 'Man Tandy, Ci~-Man~er*' ~ ":'. ..,. :-.r,' .:. :..:-.~.~;:: ?., 4.,-...:, .- :. . . . :. .-. . .:,.: . . . ~... ....:~[.t:.( , T.':;:~ 2000 2001 P'r0pbsed C. I. P." CaPital. ou~ay FUn~d' .'?...'..~. :" Afla~ed for your ir,[a~ation is the proposed fls~l year 2~2001' list of ~pital improvement proje~s whi~ ale ~i~lly budgeted' in ~e ~pital oalay ~nd... Over the ~ent and Prior four (4) years ~e C~ has been able to ~nd an a~erage of '$2.1 million in ~p~al o~lay ~nded'proje~s ea~ year. As you ~ow, the ~pital o~lay fund is supposed by nqn~ffing one time revenues. ~ese non-re,fling revenues are usually tran~effed to ~pital improvement or other funds to finan~ one time expend~ures, after ~e amounts have been ~ed. ' 1. Roof Repairs Various Bldgs. Var ~ 50,000 2. Prope~ For Fire Station 12 3 250,~0 3. Fire Station B V~ite Lane 6 ~ 15'0,000 4. HVAC Upgrade PD Comm Ctr. 2 26,000 5. Traffic Preemption Var ~ 78,500 6. Repaving Fire Station 7 6 94,000 7. Jefferson Cou~ ReSudacing [ ~ 29,300 8. JasCo Tennis CouPs ' 45,000 9. Enclose Turnout Lockers 5,6 ~ 15,000 10. ~AC Upgrade Ci~ Hall 2 430,000 11. Hose Tower Station 13 6 ~ 19,000 12. MDC/A~'s CW ~,450 13. Elevator Upgrade-~nex Bldg. 2 $ 65,000 14. Me~anine ~ P St. Stor. Bldg.. 2 $ 60,000 15. Beale Cou~ Resu~ace 2 $ 12,500 16. Dev. Svc. Repla~ p~g Garage Fen~ 2 $ ~,000 17. Playground Renovations -ADA Var $ 200,000 18. Pool Renovations Var $ 1~,000 19. JasCo Pool Heater 2 $ 50,000 20. MLK Center Painting 1 $ 37,000 A. Tandy Capital Outlay Fund August 25, 1999 ' ' page 2 ' ~ '--' : .~., .. "',::'. ,: ', ,:.-.. . .: ...~ . 21. -Silvercreek Skate Area ' 6" .. $. 50,000 22: Yokuts Park Stage Area "" 5..$. 25,000 23. Beale Park Driveway ..'"' 2 · $. 30,000 24.' Beach SkateboardLighting 2 $ 20,000 25. Beach Park PlaygrOund Impvmts. 5 $ 100,000. 26. Facilities Replacement Reserve CW $. 500,000 27. - ' Remodel M.I.S. 2 $.' 90,000 28. Park' AcqUisition ~E Area 3 $ 100,000 29. Stockdale/Buena Vista Park 4 ' ;~.~' 30. Replace SCBA Air Compressor 2 $ 68.0OO Total cc: J.W. Stinson A. Christensen MEMORANDUM TO: Alan Tandy, City Manager · , C o f,. FROM: Gregory J. Klimko, Finance Dire DATE: August 31, 1999 SUBJECT: AIRPORT This is in response to your e-mail request of August 26, 1999. The source of funding the acquisition and improvements at the Bakersfield Airport on Union Avenue is attached. This annual debt service for a $15 million General Obligation (G.O.) Bond issue for a new County air terminal and ancillary facilities is approximately $1.25 million. This amount is- a little higher than other G.O. Bond issues since facilities built with tax exempt bond proceeds which benefit private entities (airlines) are subject to the Alternative Minimum Tax (AMT) which is reflected in the bond interest rates. I contacted the County's Assessor's Office in order to determine the 1998-99 assessed value (AV) within the greater Bakersfield area. We agreed the quickest way was to use school districts which resulted in a $17.5 billion AV in the metro area. Detail information is as follows: School District Assessed Value Bakersfield $ 4,555,694,000 Beardsley 867,229,000 Edison 219,691,000 Fairfax 255,026,000 Fruitvale 961,072,000 Greenfield 853,030,000 Lakeside' 369,964,000 Norris 452,561,000 Panama - B.V. 3,808,308,000 Rio Bravo-Greeley 410,513,000 Rosedale 1,004,472,000 Standa rd 3,629,057,000 Vineland 92,742,000 Total $17,479,354,000 With annual debt serviCe estimated to average $1,253,400 the annual additionaI tax on ... an $85,000 median priced home would be approximately $6.10 or stated another waY $7.18 per $100,000 of Assessed Value. ', ~ ~ I hope this informatiOn meets your needs. ~-~ City of Bakersfield Airport Fund Federal Grant Revenue & City Transfers 1985186-1998199 Federal City Description Grants · Contributions Totals 1985-86 2,000,000 540,000 * 2,540,000 1986-87 1,481,776 .......... 1,481,776 1987-88 424,719 50,000 * 474,719 1988-89 211,559 483,030 * 694,589 1989-90 1,944,238 .......... 1,944,238 1990-91 1,726,752 .......... .1,726,752 1991'92 807,421 435,500 ** 1,242,921 1992-93 187,699 881,470 ** 1,069,169 1993-94 252,449 .......... 252,449 1994-95 130,598 265,000 ** 395,598 1995-96 17,862 .......... 17,862 1996-97 617,236 .......... 617,236 1997-98 .......... 1998-99 .......... Totals 9,802,30~9 2,655,000 12,457,309 Analysis Capital Improvements 9,802,309 1,640,600 11,442,909 Operations .......... 479,764 479,764 Availiable Balance 6/30/99 .......... 534,636 534,636 Totals 9,802,309 2,655,000 12,457,309 * Revenue Sharing Fund ** General Fund S ' Dam,"'t ',;reg*W~ht . ,~ortFttnd wb3 0~.." '~ ~u~.dl.l~ i~:38PM 6LORGE K BAUM & CO NO. 169 P.~/2 KernCo ~1~,000,000 1 I Ne.~l Kern County. California ~-A~-~, General Obligation Bonds 12,16 PM {Airport Projeot) Serl®e 2000 Annual Rata Interest P & I P & I Date PrlnelpaJ .... 0e/01/00 329,313.54 329,313.54 12/01/00 460,000 3.800 396,176.25 866,176.25 1,184,489.79 08/01/01 386,436.25 388,436.26 12/01/01 480,000 4.200 386,'436.25 866,436.25 1,252,872.50 06/01/02 376.366.25 376,356.26 12/01/02 500,000 4.350 378,356.25 876,358.25 1,262,712.50 06/01/03 365,481.25 385,481.26 12/01/03 525,000 4.450 385,4~'~ .26 890,481.25 1,255,962.50 06/01/04 363,800.00 363,800.00 12/01/04 545,000 4.660 363,800.00 · 898,800.00 1.262.600.00 08/01/05 341,401.26 341,401.26 12/01/05 570,000 4.850 341,401.25 911,401.26 1,252,802.50 06/01/06 328,148.75 328,148.76 12/0 1/06 800,000 4.750 328,148.75 928,148.75 1,258,297.50 06101/07 313,898.75 313,898.75 12/01/07 825,000 4.860 313,898.75 938,898.75 1,252,797.50 06101/08 298,742.50 298,742,50 12/01/08 655,000 4.950 298.742.50 953.742.50 1,252,485.00 06/01/09 282,531.26 282,531.25 12/01/09 690,000 5.050 282,631.25 972,531.25 1,255,062.50 06/01 I10 265,108.75 265,108.75 12/01/I0 725,000 6.200 265,106.75 990,108.75 ! .265,217.50 06/01/11 249,258.76 246.258.75 12/01/11 780,000 6.300 248,258.75 1,006,258.75 1,252,517.50 06~ 1 I12 226.118.75 226,118.75 12/01/12 800,000 5.750 226.118.75 1,026,118.75 1,252,237.50 08/01/13 203,118.'/5 203,118.75 1 2/01/13 860,000 5.760 203.118.75 1.053,118.75 1,256,237.50 06/01/14 178,681.25 178,881.25 12/01114 895,000 5.750 178,881,25 1,073,881.25 1,252,362.50 08101115 152,960.00 152,950.00 12/01/15 960,000 5.750 152,950.00 1,102,950.00 1,255,300.00 06/01/16 125,037.50 125,837.50 12/01118 1,005,000 5.750 125,637.50 1,130,837.50 1,256.275.00 08101/1 7 98,743.75 96,743.75 12/01/17 1,060,000 5.750 96,743.75 1,156,743.75 1,253,487.50 08101/18 66,268.75 66,268.75 12/01118 1,120,000 5.750 66,288.75 1,188,268.75 1,252,537.60 06101/19 34,068.75 34,068.75 12/01/19 1,185,000 ' 5.760 34,068.75 1,219,088.76 1,253,137.50 15,000,000 10,007,992.29 25,007,992.29 25,007,992.29 Dated 01/01 ~O Average Coupon 5.526987 NIC 5.526987 SettJement 01/01/00 TIC 5.486429 Arbitrage Yield 5.486429 Bond Years 181,076.00 Aversge Ufa 12.07 Accrued Interest 0.00 George K. 8eum & Company 8/31 BAKERSFIELD CITY MANAGER'S OFFICE MEMORANDUM September 1, 1999 TO: Alan Tandy, City Manager FROM: John W. Stins~sistant City Manager SUBJECT: Tobacco Settlement Attached is a copy of the State Legislative Analyst's Office report on the Tobacco Settlement which was provided to me by the County Administrative Office. As detailed in 'the transmittal memo and the report, the County anticipates receiving $9.24 million on June 30, 2000. They will continue to receive approximately $8 million each year fi.om the settlement for the next 20 to 25 years. These funds are in no way restricted as to their use by the County. They also have not included any of these funds in their current budget, since they do not anticipate receiving them from the state until next fiscal year. In addition to these funds the County also receives funds pursuant to the recently passed Proposition 10. They will receive $11.7 million for fiscal year 1999-00. These funds are completely separate from the Tobacco Settlement funds in that they are restricted in their use for child development programs and are controlled by the new created Children and Family First Commission. FAX 805 8~8 ~XgO ~ ¢0 ~J)MI~ ~00! FACSIMILE TO: $ohn Stin.qcm Of: CA~y of Fax: 661.852.2052 Pnges: 18, including Us cover Date: August 3t, 1999 The following is the LAO's repo~ on the settlen~nt. A~ you can see on page 15, Ke~n ts a~. 'cl..l~n.g approxinn~tely S~24 mill~_~_ on J~. 30. 9r~3. (I 9~8 a_.__d 2000 payment). The s,~r~e mr tutu~e ~a~' est~tat~d payments is also provided on page 15. Comm~q%n. This n~ne¥ is not ¢ontroUed by the Board. The n~w C~e~n and Families Ftrst Commission ha~ total authority over these t~nd~. Let me know if yuo have any ques~io,,~. 08/31./00 T~ 00:44 FAX 005 808 31.00 Kl~tb? CO .a.J)MXN ~002 What Will h Mean for Califoruja? The T(~bacco Settlement Page I of 17 What Will It Mean for California? The Tobacco Settlement Introduction ~ aUorneys general of most states and the major United States tobacco companies lmvc agreed to settle more than 40 pending lawsuits brought by states against the tobacco industry. In exchange for bopping their lawmits and agreeing not to sue in the future, the states will receive billions of dollars in payments from the tobacco companies and thc companies will restrict their rnaflceting activities and establish new ¢ffot'~ to cm'b tobacco ¢ons,m.ntion. Major Findings L~ ~s ~po~t. ~,e review, the agx~ement and its po~ntial impact on California, answer a number of questions about how tl~ agreement would work, and raise a number of issues for consideration b~ the Legislature. Considerations The ~t~m~, is r, ojee~ u~ ~s.*'t for the Legislature paymcat~ to cat,oma or s25 bmieo through 2025. The amount will be between the state and local gove. nunenL~ (all 58 counties and roux cities). There a~c no restrictions on thc us~ of thc money. There are. however, a number of uncertainties surrounding how much money Caiifomia will actually receive. The 1999.00 Governor's Budget assumes the receipt of $$62 miUion in hup://www.1 ao.ca, gov/O 11499_tobacco_serdemenchunl 8/3 [ Joh~. StinSon; 0-O0-00003.'GTF W'nat Win ~r Mean ~r Cali~orma? The To .b._~,~x-~_ Sctt/cmcm Page 2 o~ 17 thc bodg~ year, which is equivalcn~ to · e first two paymcm~ to ti~ state. AJthough Lbe settlement does not ord~ m rake effect, we suSge, s~ that d~e · RecofnJze the uncertainties dedicate the settlement monies to support spec~ new on~oln~ · Conm3der the additional · ' settlemen~ FeYeuues tlLut will acc2~e to Jocu] 8overnm~ Ioe~! goYemment fiscal Feller In the hture. · MonJtoF new national antib)bacco pro,l-am Jn oFder to complement cxlsting state efforts. On November 16, 1998, thc attomgTs general of eight states (inclu~nff CatEornia) and the n,~ion's four major tobacco companies agreed m set, lc mor~ rh~,, 40 pending lawsuits broul~ht by s~ates against the tob~'__eo industry. The agreement will result in significant new revenues to the state and local 8overnm~uts. In addition, it could result in reductions in smoking by citizens and thus have positive impacts on public health. In this report, wc review the settlement agreement and its pot=ntial impact on CalLfomia, answer a number of questions about how the scttlcment would work, and raise a number of issues for coniidermion by the Legislature. Summary,of the Settlement The settlcalcllt agra-men! calls for financial paymeuts to the states, thc creation of a aatiollal foundahon to devclop an aati.smokin8 advertising a~d education program, and the establishment of certain advertl,i,~ restrictions to bcncfit pubtic health. Figure I summ3rizes the key features of the asp~mcnt, ms,y of which arc discussed ia more dexall below. http:/Avww.lao.ca, gov/O 11499_robacco_settlcmcnt .hunl 8/31,'99 · [J-0hn ~/v. StinS6~'-'00000004;GiF 08/31/09 TI~ 09:44 F.~T, 8OS 668 3190 ~ CO .~DMIN ~004 What Will It Mean for California? The T .obacco Settlement Pa~ 3 of 17 ~Figure 1 Key Features of the Tobacco · P~ to ~. Rcqui~ d~ tobacco -- ma~ufactttrers to make palm3enl~ m the st~L~ in perpetuit% with cbc payments totaling aa estimated $206 billion throagh 2025. · Narmraz/Fo~m/m~oa. Creatas ;m industry- funded foundatiou whose primary purpose will i be to ctcv¢lop an advertising and education prol~ram to counlzr tobacco use. I · ~en/s~S R~O-/cgo~. Places aclvcnisin~ restrictions on tobacco manufacturers, including bans on cartoons, targeting of youth, outdoor advcrzising, and apparel and mc't'~han~ with brand rtamc logos. · Co~or~ Sponsorsh~s ofE.en~. Resuicts tobacco com~3~fics to on~ l~nd name sponsorship per year. · Tobacco Company AffitiattdOrgantzattant. Disba~d~ fl3a Tobacco lr~timte and n~w w,de orgaaizafio~. · Limit on Lobbying. Prol~bit~ the tobacco maauf-,ctu~rS and their [obbyi~ from opposing ': proposed laws in~ended to limit youth ~.cass ~-d': usc of tobacco pmduc~. · Access to Documentt. Rrqui~ the tobacco companies to open a web~ite which includes all documents produced in smoking.and health- How Many Starts Art Part of th~ Agreement? Nationally, th~ arforney$ general of 46 ~ and , various territories have now.~igned on to d~ settlement propo~al. The remaining four states-Florida. M~nneso~, Miszi~ippi. and Texz~--had previously settled, their cases with the tobacco inclustt, y. What Companlez Are Part of the Agreement? The four major tobacco compani~ that ~cgo~i~¢~_ agrceme_._[ am Brown & Wil~iamson Tobacco Corporation, Lorillard Tobacco Company, Philip Morr~$ l~corlx)ra~ed, and ILl. l~Tnoids Tobacco Company. ~ four m~o~ffacturc~ accotmt for morc than 95 percc~t of d~ to~al salu of cisaret~ nationally. Since the relea~ ofth~ httP://www.lao.ca-gov/011499_to 'bacco_settl~meathtr~l ' 8/31,/99 05/31.,'99 T~ 09:45 F.~ 805 868 3190 KERN CO ADMIN ~005 ~t W~ It ~ for C~fo~a? ~ T~co Sc~ut P~e 4 of 17 Do~ ~ 5~ Rf~d co~i~r ~ ~ ~ m ~ ~n~ ~te whose ~u~ ~ ap~ved se~lemen~ Mone Pro sio of Se ement ~se ~a~on ~~ Ove~ew of Mo~ ~O~SiO~ ~ount of ~g per y~ ch~g~ consi~ly o~r ~e. ~fornia's sh~ of.t~ 1998 ~t ~ ' se~emenu New Yo~ ~J~8 ~ough 2025 " ~ln Mgtio~) huP://www.lao.ca- gov/O 11499_tobacco_.settleraent.html 8/'31/99 ~t Will It M~ f~ ~o~a? ~ Tob~ So,leant Pa~ 5 of 17 ~, ~d ~ J~ b ~ y~r. ' . . 1999~ s~e's 1~8 p~ent (S153 ~llion) ~R ~ pn~ent (~ million). ~ ~ ~ Mono? Scv~ ~f~ju~&c~on~, ~cl~g L~ ~g~ Co~ ~d ~ of ~ ~c~o, h~ f~ ~ir own laws~ a~t ~ ~b~co ~~. ~ Aunt 5, t995, ~ A~ey ~ en~ into a ~dum of UnderdOg ~O~ gov~n~ ~ c~ ~r ~w~ wi~ ~ state's ~uit ~d provide f~ ~m~ ~ s~ ~d ~ 1~ govemm~ ~ sign onto ~ ~, ~s, ~ c~ ~ b~on to ~ ~ p~u~t ~ ~ tob~o ~e~nt would ~ ~t ~m~ ~ gov~m~ ~ ~h ~ei~g $12.5 billion. ~e 1~ s~ ~1 ~ ~ split ~n t~ co.des ~d s~ ci~. Un~r ~ ~ of~ MOU, ~ ~'s 58 co~es ~ ~ive ~ ~nt of ~ 1~ sh~, or $11.~ b~ion. ~ ~H ~ dh~t~ ro ~ ~des b~ on ~pula~o~ T~ ~g 10 ~n~ or $1.25 b~io~ w~ ~ split equally ~ong fo~ ~geles, S~ D~go, S~ F~, ~d S~ J~ The MOU ~u ~e ~ove~ to ~ ci~ w~ ~uld have ~ ~ in~nt law.it p~t ~ a s~c p~hi~ of ~f~i~ C~. L~ ~~ do n~ ~i~ly ~ ~ ~un~ u~ ~yjo~ ~e ~nt i~ ~r~, To ~e ~tent ~ ~ m~ or ci~ ~s~ n~ m p~ci~, ~ mo~ ~at ~ ~d have othe~i~ r~ived would ~ ~bu~ to ~e ~ ~d I~ gove~en~. A~n~x 1 ~des a b~down of~c ~9~d $~2.5 hilton gong to ~e ~ ~ ~ of ~e l~t govc~cn~ join ~o sedco= of ~ ~ie~y t~ s~s. S~y, C~ia's MOU ~ 1~ govem~n~ ~s M~y of t~ ~ ~d 1~ laws~ (~cl~ing C~o~'s) had ~ught ~ov~ ~m ~ m~o comp~s of ~ mb~ml~d ~ ~ cm~ (such ~ Medi~) ~ by s~s ~d ~v~men~. ~ ~ement a~t ~d C~ifo~'s MOU wi~ ~e l~ gov~n~ ~ ~t s~i~ ~ ~y of ~e ~ci~ ~y~nm by ~ ~mp~ies ~ ~ m~bu~ sta~ ~d l~fl go~n~ for such co$~, Ab~t ~ific ~on ~ ~ M~sla~'~ f~ds ~eiv~ by ~ s~e 6om ~ ~fle~t wo~d ~ d~ into ~e ~ne~ Fund. B~ause ~e moji is not ~ p~d of ~, it ~fld http://www.lao, ca.gov/O11499_tobacco_s~ttlemcnt.html ~ 1/99 ~un~ u mv~u~ f~ p~ of c~afi~ ~ minim gu~e ~d= Pr~ 9~ ~ would b~g ~ F~ mvcnu~ ~er ~vcnu~ ~ ~ond cu~nr ~ ~v~ ~e for ~ ~n~ ~ ~ s~ ~e t~co ~cou~ ~wev~, ~ of ~ ~fl~ would ~ ~ibu~ to ~ s~s ~m ~ ~ ~om '~ a~y~' ~ ~ in ~ ~t n ~n~ ~v~ ~ ~ ~e~, but it ~ l~ety ~t it s~'s 1999~ ~ ye~). ~ ~ of~ ~nL ~ to~o co~anies ~Y~. ~e ~t payment of $2.~ bi.on wu p~d to ~e ~w ~count by ~e ~d of 1~8. ~o~ u~nt ~n~ of $2.4 b~Hofl w~l 2~3. ~u~ pay~n~ ~ bcg~ ~ Ap~ 15, 2~ ~d will ~ m~ in ~ foHow~g ~~: * 2~: ~ b~. * ~l: ~ bi.on. * 2~2017:$8.1 b~ion. .. * 2018 ~R ~u~y ~e~: S9 b~on. UneeF~fl~ ~ng Money ~ C~o~ O~ ~vi~ fi~s th~ ~ ~ a n~ of f~to~ ~at c~ld have ~ imp~ on ~c ~ of ~l~s av~able ~ ~Hfo~ ~ally ~ ~e t~ sta~ ~iving le~ money ~ ~jec~ or ~eiving money wi~ ~ct~ ~es. ~ ~o of the ~c~nfies ~d acm~y r~ult in ~ s~ ~i~ng ~ ~fley. ~fluce ~ pay~n~ ~ ~ s~ ~ ~ event ~ ~o~ ~ ~ to~co ~mpanies by No~m~ 30, 2~. S~y, lc~s~on ~ pm~i~ f~ ~y~n~ by ~ robie m~ufact~ (whe~ by ~, ~ oth~ ~), wh~h ~ fe~ gove~ent ~n mak~ ava~able ~://w~.]ao.~gov~114~mb~c~e~nt.h~ OS'"3A/99 1'1.,'~ O0:.l? FAX 805 8~& 3/90 ~ CO M)lf'rN ~OOe, What Will h Mean for 'California? The Tobacco Settlement Pa~ ? of 17 r~la~, tobacco-l~lated, or for ~cted putpol~, the tobacco companies could offs! ~ payments to the sta~.s by that amount. Umi~r this scenario, the state might r~w.¢ive the sam~ overall amount of money it would hav~ o~ received, but with the federal governm~ s~'~tting the prioritie~ or wi& ~ignificaat string~ auached. Nettler thc Congress nor the lh~idem hav~ any iatcntion to taint such actions at thh time; nevenheles.s, such actions ~emain a possibility in the future. Actions of tl~ F~l~ral Government to 5e~lt P, eOnbursement for Health Care Costs, TI~ f~leral governme~lt shares with the stales the costs of the Medicaid Program (Medi-Cal ia California}. Although the saP, lemout with the gta~s is not baaed on reimburxing stales for costs of tobacco-related ~ under Medicaid, federal law generally requires fedend agencies to seek reimbursements for the fedex-al share of any Medicaid costa. As a conscqueace, it is possibl~ that the federal government could seek reimbursement for its tobacco-related Mexiicald costs, either by seeking a share of the stales' settlement funds or by taking legal action against tobacco compani~ in federal court. To the extent that fedoral auth~ti~ ar~ successful in obtaining pan of th~ settlem~t funds, this would reduce the amount of funds retaiaed by the states. In addition, to the extent tl~ a federal court action results ia a large payout by the tobacco companies to the federal gnvemmem, th~ companies may become leas solvent and less able to make the payments to the staxea as specified in the states' se~ement. Federal authorities have not indicated whether they plan to undzc, aka actions relative to this settlement. However, ia response to a previously proposed settleraent, they had lmiicated that they w~uld ~ a share of..the funds. Drop in Cigarettt 5al~#. The settlement agreement contains provisions that allow the tobacco companies to decrease the amount they pay to the states if the nationwide sales of cigaret~s decrease. gpeci~cally, each year the amount of the paymeat to the stat~s will be adjus~d based on the volum~ of cig'aix, t~ shipped within the U.S. for sale. To the extent that this volume drops, the payments to s~e~ will decrease over time. The tobacco companies have rai~ed their price per pack by 45 cents in order to pay for the settlement. To the axtent that the increase in the price per pack reduces the amount of cigarettes cor~umed, the'payments to the states would decrea.~ over time. This volume adjustment is based on nat~onwMe sales, not just sales within Caldomia. This could minimize any negative financial impact on Califoraia since tobacco sates are more likely to dexline faster in California than ia the rest of thc country due to (1) the additional 50 cents per pack tax placed on cigaretms tn:ginning on lanuary 1, 1999 as a result of Proposition 10 (discua.~cl in greater detail below), and (2) the existing anti.~moking campaign that already exists ia California that ia fhnded from Proposition 99 monies. Lawzuits by Nonparticipating l.~¢al Governments. If a local govemmeat does not join in the settlement but rather continues with a lawsuit again.st the tobacco companies, the local government would not receive any funds from the settlement. The sha~ that they would be eligible for under terms of the MOU would b~ divided by the state and tl~ otl~r participating local governmeals. However, any award, judgment, or settlement won by a nonparticipating local government would be otfset against tobacco companies' payments to the entire stare. At this time, based on informal discussions with local governmet~ts, it seems likely that most, if sot 'all, local govereme~ts in California wiU participate in the state s~alement. Tobacco Compan]Baaltruptcy. The tobacco settlement was entered into with the U.S. manufacturing subsidiaries of the tobacco companies. As a consequeuc~, Iheparent companies are not responsible for payments to the stat~ should one of thc subsidiaries go banknipt. Banleruptcy by I hltp://www.lao.ca, gov/011499_tobacco_se~ement, htrnl ~ i/99 : 08/3X/90 TI.~ 09:48 F.L~ 805 088 3/.90 ~ ¢0 ~I)MXN ~00g ~ Will ~t M~ for ~ifo~a? ~ Tob~ ~fle~nt ~8e 8 of X7 ~S ~ ~mw ~uu~ ~r ~ y~ ~v~t to ~ amoun~ p~d by t~ ~ci~ T~s ~ib~i~ of ~ pa~n~ due to a ~]~c a~ly to ~e co~cs. 5ho~ ~ir ~kct ~ S~ wo~d not ~ve ~y ~on~ m~cs, but ~ sh~ ~d by in~ co~ wo~d ch~se. con~bu~on w~ ~o ~ acc~t ~h s~'s coniston to si~fi~ ~on of ~ s~ conU~u~on. Howcv~, ~c f~t ~at ~c C~o~a AR~y G~ne~ wu one of ~ ci~[ aff~cys ~ ~at nc~t~d s~'s c~e ~s~ ~ comp~ may o~ any Inc~ ~ to InCa A~e~. ~c pa~ncq ~ ~ c~dy ~t~ ~oua~ duo to ~ inflation ~jus~nL ~a~r. ~, ~ ~e cxtcnt ~at ~ volume of cig~Ecs S~ ~n ~ U.S. d~s not ~case, Leg~ ~pU~ons of ~e.Se~ement ~ tob~co sct~cmcnt a~nt ]i~ly brings ~ a ~o~ v~o~ s~c a~ l~ govc~t Uti~on as~iq~ tho ~b~co comp~i~ ~d h~ a n~r of leg~ impii~io~. A~om~ ~ ~cd a laws~[ M~st ~ ~jor to~co com~i~ Co~ contras f~ ~ of ~on. ~ .qhown in F~ 3. By ~ ~ of ~ se~e~nt y~ to ~ ~s~ by ~e co~ Page I 08/31/99 'rl.~ 09:48 F.~..[ 8o$ 868 3x00 ~ CO M)IIIN ~Ol0 What Will It Mean fo~ California? The Tobacco So,lemon! Pax 9 of 17 ~ Caliroruh Alletaxt in lb Lawsuit A--~-* ,'~- '~~ · Recover~ ofTokaeeo. R~lat~dM~lk. Cal ~. The s~a~c sought ~bursement for beal~l ca~ servic~ provided over the p~ ~ years to Ca~ tm~efici~ries who suffer ~ illnesses cau.~ezi by tobacco produc~. T~is allegation was Fr~.viously ~l~;~;sed by thc court. · ~tola~o~ oj'$Mte Ana'-D~r~r Laws. Tobacco firms (1) conspired to not develop or market safer cigarettes and tobacco products ~ (2) conspLrcd to not compete on the basis of relative product safety. Tiffs allegation was awaiting action by thc · $~ola~on~ oJ'~azta Consumer PMeect~on La,v,. Tobacco firms conducted deceptive, unlawful, and unfair business practices by (1) making misr~tatton$ and deccptivc staten~nts to sell thcir producr~ (2) tar~cting minors to buy cigarettes, (3) manipulating lcvels of nicotine without adequate disclosure, and (4) iml~roperly suppressing evidence about the health impacts of product. This allegation was awaiting action by the court, * Viol~Eo~ of Sarte Faint C'~ Act. Tobacco firms improperly sealed certain , docun~nts and ~ccords which would othcrwise have been ava[lablc to infur~n California authorities of thc companies' wrongdoings. ~ alleSatJon was previously dismisse(t by the court. Ulx~n al:~vaiof thc consent decree in the state court, the state's case against the tobacco coiI~es w~l bc cousidere~t sealed. As prcviousJy.irulicated, the San Dicgo Superior Court approved consent ~ on I)ecemb~r 9 and thc settlement becomes final 60 days later unless the court order is ch'allengcd during that period. Thc set~lcn%-nt agreement generally re Jesses th~ signing tobacco cotvq)anie, s from any future lawsuits by thc state and local governments that pazticipate ~n the scttlcmcnL How I~ the Sel~lem~nt Dfj~ereat From a Resolu~on Re~ultfng From a 2Vrf~? h is difficult to say with a high level of certainty how a ~ on CalLfornia'$ lawsuit against thc tobacco companies would have ended. It seems unlikely, hcwevez, ~ha! a court would have ordered proVisions t~latcd to public health that the tobacco companies subscclucntly agreed to in thc settlement (for exaalplc, t*~ on advcrtising and corporatc sponsorship). It is not clcaz whether [ho moncta~/provLfions provided in .the settlement agreement arc ~..ater than the state would have obtained L~ it had won its case in court.' Howcvcr, because the companies have agreed to the settlcmcnt, it ia likely that money will flow to the state mo~e quickly and easily .~nce cbc companies would likely have appcalcd a court decision. C. aa Col~forn~an~ F~ie I~nvsui~ a~ Individuals or ~n Cia. s Action I~o, su~ Aga~n~ the Tobacco Corapani~s? V~le the settlement places restrictions on future lawsuits by g~verD, z~ental entities, lawsuits by individuals and classes of individuals again.st the tobacco companies could still go http://www.lao.ca.gov/011499_tobacco_settIement, hm:d 8/31/99 ...... 00000011.GIF ....................... 08/~l/gg Tt~'B 08:~g FA.T 805 668 3190 ~ C0 ~J)MXN I~01X What Will It Mean for CaUt'oa~a? The Tobacco $cUlemeut PMc I0 of 17 ~ren~ ~F~ ~e Sa~Z~.~ Be g~re~? The a~mc~ ~ ~ sam ~ w~ ~ ~ ~ ~ or~, ~ ~ ~y ~ ~, civ~ con~ ~ ~mi..~ ~ ~ c~ ~~. .. ~ M~h 31, l~, ~ ~c~ ~~ w~ ~y ~ miUion w~ch ~ ~ u~ ~ ~ ~ s~ in ~f~g ~d imp~ng ~ ~t ~d m ~v~g~ ~ ~ ~ ~ Sl30,~ ~ y~ ~ ~ f~ ove~ ~ ~s~ed ~i~ m~to~g ~ ~.Ri~l~ o iom Se ement ~ ~uce ~a~ ~d ~us ~ve pubJic ~ Fi~re 4 sum~ ~ ~jor ~b~ ~ ~d ~o~ of ~ ~. ~J~r._l)rovisl~us Related to PubUc Health · Restrictions on Adverfisin~ o Bans use of cartoon eAaracr~,; in advertising. o Prolu'bics tm'get/agyou~A ~n adve~siug, promotions, Or m'~keting. o Bans outdoor advcn'~mg mcludla§.bUlboard.% and p!ac~u~ds in arcna.s~- s'~cLiumc~ shopping malls, and video game arcades. , o Limi~ size of advertiSing out~ide reMil e~talJlishmer~ io 14 square feet. o Ba~q Uu~ edverfi~ing. ' .... · Rest~Jctiofls on l~'oduct ~and Spollsor3h~ o Bans distribution and ~a/,e of'~w~arei and mercha'ndhe wi~h brand -- name logos, beghu~g July l, 1999. o Bans puymcucs to promote tobacco producf~ i~ mopies, teIev~ton ;bows, ~heafer productions, live or recorded music performances, and videc~ and video game~. http'J/www.la~.ca.gov/O] 1499_tobacco_s~ttiement.html 8/31/99 06/31/g9 TI.,'E 09:4g FAX 803 $$8 3190 ~ CO Al)YIN 1~1012 ~ ~ W~ ~ Me~ for ~fo~a? ~ T~ S~e~ ~e Il of 17 (~ ~at ~ cxp~). . o B~ ~ob~~r~ ~~. · New NaU~ a~t m~~ ~. · ~r ~r ~r ~ R~. o ~ohibi~ te~o p~uc~. r~g ~ h~a~ co~s~e~ of ~o~g. It is unknown h~w effective these provisions will be. h should be noted, however, that some of thc efforts chat wUl be-establ~sbed as a ~sult-of thc seulem~nt, Such as adv~ising and education programs t~ combat smoking, already exist in California and are supported .with Proposition 99 funds. Differences Between the Settlement and Previous Agreements The current agreement is the culmination of effort.~ to ~ettle state lawsuits against the tobacco compani~ e~ have been ongoing for several years. The 1997 "Global Settlement'* la mid-199~, the attorneys general of~) states and the companies worked out thc so-called *global settlement" agreement. Under this ag~ement, the Companies would have made major moneta~ http://wwwJao.ca, gov/011499_tobacco_scttlement, htm~ 8/31/99 ' J°hn~W--StinS0~':' 00000013 GIF 06/31/99 TL~ 09:$0 F.tT,. 805 888 3190 KI~.N CO .fd)MXN ~0J. 3 ~ ~ It Me~ f~ ~fo~a? ~ T~o SeCant P~ 12 of 17 ~y~ ~ ~ ~t~. ~ ~ wo~ ~ ~ ~ge for ~n ~t of h~ by ~n~ w~ wo~ ~ ~en~ ~d ~ of ~ ~fig~on ag~ ~ t~ pl~ ce~ m~c~ on ~ ~on a~ ~ indu~. ~u~g ~ ~ ~ ~, ~d ~ ~ ~ on ~a~ ~. Ai~ou8h f~ lc~ w~ ~t ~e gl~ ~~ M well M le~on ~ went f~ ~yo~ ~ ~~ not ~s ~y le~. ~e ~t m~ ~ffi~t m~ no leg~l~ ~ ~ ~. a~ ~ich h S2~ ~ over ~ ~. ~ a ~blic ~ ~g ~ly ~ ~t ai~ifi~t ~li~ diff~ ~ con~ ~w~ ~ ~~ on ~ content of to~o comp~ ~ng ~ ~ ~mp~ if you~ s~g did not d~line over t~. ~wev~, ~y ~ ~t ~e~nt ~1~ ~H~t of a n~o~ ~unda~ to study you~ ~g ~d ~d ~o~g adv~g. S~em~ W~ ~ F~r O~ As ~c~ e~r, fo~ ~t~ ~o~ ~ ~si~ai~i, ~d Text) ~I ~ve ~o~y ~ ~e~ ~es ag~st &e tobacco comp~es wi~ ~ondifio~ ~ prov~io~ ~ to ~ of · e ~nt se~c ~e ~nt of mo~y pmje~ for C~ff~nia u~r ~e cu~t ~t~ a per ~ ~a, is simil~ to ~ ~ ~oj~d for Flori~ ~d Text. Howcvcr, w~ch w~ ~ f~t s~ ~ file a law~ ~d in Mlnn~ola, w~h ~d j~t pfi~ ~ ~ ~ of~ ~, ~e ~ ~ta ~o~ were much ~ ~ for ~ffor~ ~ ~ c~t m~ a~mcnL Relafio~p of ~e Se~ement to ~oposifion 10 ~si~on 10, enid by ~ vo~ ~ ~ Novem~r 1998 el~on, c~d ~ ~f~a ~ F~es F~t ~ ~s prog~ will fund ~ly c~l~o~ develop~at pm~mn ~vcnu~ gene~d by ~c~es ~ ~e s~ exc]~ ~ on cig~ ~d o~er tob~o ~. ~u~ ~c~es ~ excise ~ ~ ~g~R~a by 50 ~n~ ~ p~k ~ginn~ng 1~u~ I, 87 ~n~ ~ ~ ~e ~u~ ~o w~ ~c~ ~ exci~ ~ on ~ ~ of tob~ (such ~ ~g~, c~ng taboo, pi~ mbac~, ~ snu~ be~g J~y 1, 1~9. ~v~ue$ to ~e at~e ~d 1~ ~ove~n~ ~ C~ifomia. theft si~ ~ ~. ~ ~j~ &ffe~e ~n ~ ~o iS ~ Pm~sifion 10 mv~ues c~ only be us~ for a~i~ed ~l~ated by 1~ co~on~ wh~e~ ~r~ ~ no ~cfiona ~ the u~ of ~e ~a~ se~e~nt ~ 5 comp~ ~e ~jor ~ of the m~cco ~e~nt ~d Pro~sifion 10. A~n~ 2 shows ~ ~6m~ of ~e ~u~ to t~ ~di~dual counti~ ~sul~ng from ~e me~ f~ 199~ 06/31/90 TtTE 09:$1 FAX 805 866 3190 KERN CO .O)M[N 1~1014 ~R~lat Will It ~ f~ C~o~a? ~ To~co Select P~ 13 ~ 17 (P~'Y~ ~~) ~d 1~ (~fl-y~ ~plemc~), ~or ~o~ ~~ ~ Pro~i~on lO, p~ ~ o~ ~ ~ Pm~s~n 10: ~ ~g~e P~y ~ I~ I~m~? How ~s It Work ~ ~ ~ ~ ~m._~n of Tobacco Settl~ l0 _ Tobacco Settlement Pro._position 10 Revenue ~ $$00 mill!e~l tO $! billion annually, $"690 miLli"~'~n in 1999-00 q~lit 50-50 between state and local declining slightly in subsequent ove~llxnents Use of funds No ~cstdctions Restricted to child dev~opment ProJected.revenue Si83~ificant ~nty, especially in Likely to decline slowly Control of ftmds Slate and locally elected o~cials .CountT-appointcd commission ~ and state commission New state tax on tobacco ~cluct$ 1999-00 - ~ lanu._.__~__l, 1999 What Should the Legislature Do? A~ indicated previously, the a~nt does not require any action 137 thc L¢~islnvure ~n order to take effect. However, thc a~ment raises a number of issti¢s t~mt thc Legislature will need to consider. Recognize FundinR Uncertainties in the Long Run Despite the uncertainties oudincd nl~3vc, wc b~llev¢ thnr it i~ relatively certain that thc state will receive duc projected amounts of revenues from tbe ~ctflcment at least in thc $1~ tun (the next three ye~$ or so). However, ~evernl of the uncertainties, such as potential declines ~n ~moking and future actions of ~ ~c~lcrnl government, ffm~.thc long-term funding lcvch much more quc.~on~l¢. Given the Iong-tc~m uncertninties about the revenues, we recommend that the Lc~slatum re,rain ~om dedicating thc tobacco settlement mon~es to support 5'pccific new ongoing progra.ms. Ra~, we believe that it would bc · ' more fiscally prudent to ~cxat~Jnc thc $ctlJcmcnt projecrfon.~ t.~suLM~ continue to deposit ~ money in thc General Fund without specific cat'marki~g for a poz~icular pros~dm. Should the Le~slature wish to establish new prog~m~, such programs should ¢om~¢ for revcnu~ i=rom the Gener~! Fund with atl other legislafive priorities. Our recommended approach cori~i<tent with thc Governor's I ~-00 budget prolx~. Recognize Benefit to Locnl Governments Since thc prol~rt7 t~t s~fls of thc early 1990~, the Legislature hn~ token ma~7 ac~ons to bolster the ht~p://www, bto.ca, gov/O l l,t99_tobacco_sc~cmcnt.html 8/31/99 John W Sbnson 0-0000015 GIF ............................ Pag& 1 t 08/'31/99 TT.~ 09:$X I:'.,,LT 805 86,6 3100 ~ CO .4J)MXbT I~IOX$ Whaz Will It Me.~ for California? Th~ Tobacco Seu~ment P.a~ 14 of 17 ~ conditioa of Caiifomh's local Soverm~. For camNe, the L~ has ~ citi~ and counti~: Pmpusttioa 1'/2 sa~ tax revenues, relief from triai court funding mfom~ ami l~ro~ams ~ Sul~ort local hlw eagomemeat, Combined, these revenues off'se~ more dlaa 60 percent of thc ongoing revenue loss due to the propezW mx..qhi~ For 1998-99, we estim~ th~ dM "net haan' ~o local govcrnmeo~s associated wt~ &c ~:crty tax shift is about 51.4 billioa. A.s shown in Figure 2. the tobacco sc~ement is expected to provide to local ~ovemments S1~3 mil]ion in thc first year, risin~ to &bout $.r~0 million aanually within a few years. In the case of some C.~L~mia cities end counties, these semement revenues will re~toro (or improve) th~ localit~s fiscal condition relative to the locali~y's fiscal condition prior to thc property tax shii~. Other cities and counties, while stiU benefiting sisnificantly from the cigarct~ scttl~mmt, will not find thai these settlement rovefmes fully 'make up" the fiscal hole ~ by the property tax shift. As.thc LegLqlatare contemplates proposah for local fiscal relief in thc future, we r~commcnd ti~ the Lcg~slaIure keep in mind these additional financial resources provided through tim settlement. Monitor New National Antitobacco Programs The serrlemeat establishes a national foundation to comb~r smoking and includes a total of $1.45 billioa in payments f~'om the tobacco companies for es~li.qhm,~_.nt ufa mUional tobacco coatrol public education campaign and ~ millioa per year to study programs to reduce teea smoking. It is not cleaz how ~hesc monies will be used at this time.. However, it seems likely that such efforts could complement or supplement the s~are's e. xi~ing efforts t~ curb tobacco consumption. For this reason, it will be important for the admin]strarlofl and the Legislature to closely monitor implemcnLsflon of these provisions of the settlement end rn~,~, adjus~men~q to r~ state's programs as necessary. Consider Adopting the Model Legislation Included The so. lament agreement includes raodcl lcgi~a~ioa ~a~ would protect the p'aymen~s made to thc sta£c from docre~i~ as a. re.quit of loss of market, share or entry into the marke[ by new tobacco companies. La view of this fiscal issue, we believe that the Legislature may waat to consider cna~ting the model lesislarloo. Conclusion The tobacco se. ttlcment will resuJt in si~sificant additional resources to Caiiforn~'s s~ate ~d local governments. As the Legislature debates its al~roach toward utiiiziflS these funds, it i~ critical that tho uncertainties surrounding t]~ level of funds the state will receive in thc future be r~n into acCOUllL Appendix I http://www.lao.ca.gnv/O 11499_tobacco_settlcmcnchtml 8/3 ,..[J0hn~ .W.:~t_i~'h. 00000016.GIF ....... page What Will It Mean for California? The Tobacco Settlement Page 15 of 17 4 3 $ § http:ffwww.lao.ca, gov/O 11499_tobacco_settletnent.hr. ml 8/31/99 jJoh~l"W.-Stin.s~ oooooo17 n - GIF 05."31.:99 *1"1.~ 09:$2 F.~,..~ ~05 $0~ 3190 ~ CO .~d)l~lN I~10.1,? What Will It Mean for Califoraia? The Tobacco Scttlemcnt Page 16 of 17 1 Appendix 2 C~lma 1~] 3~ S~ Ben~ I ~6.] Glen ""' " [_J_~fi ~E~tinson - O00OO01~:~IF .............................................................................. P~'g~ i I 00/31!99 TUll 00:$3 F.t.~ 005 660 3X90 []~:R.N* CO .~MXN ~0X8 ~¢ (~0) ~ a ~~ o~ce w~ pr~M~f~¢~ This m~R ~ ~, ~ ~ ~ ~ R-m ~ ~ ~o~ ~ ~ice to the ~e. =~Ee, ~ ~vaii~E oa ~ ~O's ~ ~.]ao.~g~. ~ ~O ~ 1~ g ~ 1~, Sa~co, ~ 95814. hnp://w'ww.lao.ca.gov/011499_tobacco_s~.~cment, html 8/31J99 . VIS!ON2020 Alan Tandy City Manager City of Bakersfield Dear Alan: As we discussed earlier, and as outlined at the joint city council and board of supervisors meeting, Greater Bakersfield Vision 2020, Inc. is a broad based community effort to create a Vision for the Greater Bakersfield area and set in motion efforts to realize the Vision. The Vision will be created through a collaborative, consensus-based process involving business, the City of Bakersfield, the County of Kern, the non-profit sector, and the community at large, including our youth. We are very excited about the enthusiasm with which this effort has been received by the city and county government officials and staff, and look forward to your participation in this very important process for the future of our community. We hope that the City of Bakersfield, as an integral part of this process, will join the Visionary businesses and organizations that have already committed financial support to launch this .effort and secure the resources needed to see this process through to its successful conclusion. Many of these organizations have elected to pledge funds over the 15 month term of the project, providing half of their contribution this year and half next in order to lessen the impact on any one budget cycle. With that option available, we hope that, as a major player, the city will be able to commit at least $50,000.00 to Greater Bakersfield Vision 2020. Thank you for your support, at whatever level you are able to participate. Very truly yours, September 23, 1999 ~ SPORTS ~ '. '.' ~,~. HALL OF "~ FAME City of Bakersfield 1501 Truxtun Avenue BOARD OF DIRECTORS Bakersfield, CA. 93301 PRESIDENT ANGELO HADDAD Dear Mayor Price: ' VICE PRESIDENT GERRYCONGDON TWO decades ago, the Bob Elias Kern County Sports Hall of SECRETARY Fame paid $10,000 for the construction and signage of what ~EFF SHOWERS was intended to be the permanent venue in the Convention TREASURER Center to display the plaques and sports memorabilia of the MERV ALEXANDER inductees to the Hall of Fame. · h, ~ ,h, The Bob Elias Kern County Sports Hall of Fame was founded February 17, 1966 to honor athletes, coaches, and sports BOARD MEMBERS benefactors for their achievements and contributions which JEFFCHARLIECRAIGEvANS brought state, national, or international recognition to the DAVIDFANUCCHI County of Kern and most often to the City of Bakersfield. The CHARLES GRAVISS A~HOLLOWA¥ Hall of Fame was named after Iongtime local sports JOE HAGGERTY JOHN HALE broadcaster Bob Elias whose motto was, "You don't have to BUDGEHARoLDLOUSTALOTMAi. LOCK take part in a sport to be a good one!" D. PATRICK MILLS HOWDY MILLER WOODY MORRISON To date, 137 men and women who were either born, educated, RAUL RANGEL DON ROBESKY or spent a significant portion of their athletic career in Kern FRED STRICKLER PATWENNIHAN County and Bakersfield have been inducted into the Hall of Fame. DIRECTORS EMERITI GILDONBIsHopBARKLEY When the City constructed Centennial Garden which opened DOUG ~N~E¥ last October, the current venue of the Hall of Fame became EARLE GIBBONS DON HART obscured and essentially not accessible to the viewing public DON HARRISON RUSS KN~n:EN attending events at both the,Convention Center and "The HERBLOKENDAvEPARKER Garden" due to the nature of the construction connecting the LARRY PRESS two ,,;,,.,,,.,~o HERMAN RIESE HAROLD TABER JR. P.O. Box 234 Bakersfield, CA 93302 "You don't have to take part in a sport to be a tided one" .Page Two Centennial Garden is the ideal place to house the Hall of Fame venue. The new venue could be located on the east side of the facility (the "Wall of Fame" is located on the west side of the facility). The new Hall of Fame venue could also accommodate an area to recognize various athletic teams' (or individuals') achievements such as last years little league world championship baseball team. Hall of Fame Board President Woody Morrison and I met with City Manager Alan Tandy and "Jerry" Jacques La Rochelle, Engineering Service Manager of the Public Works Department on August 11 ~ to discuss the logistics of locating the Hall of Fame venue in "The Garden." After discussing two possible construction and design scenarios ranging from $30,600 to $50,000, we felt the former would be sufficient and would accommodate both the present 137 inductees and future inductees for at least the next 15 years. A copy of one of the two display areas, which are both the same and have been approved, is enclosed for your reference. We, as the Board of Directors of the Bob Elias Kern CoUnty Sports Hall of Fame, find ourselves in a difficult position. We initially invested $10,000 for what we understood was to be the permanent home for our inductee plaques and sports memorabilia, but due to circumstances beyond our control, we no longer have an appropriate venue. Because we are a non profit organization with very limited .resources, namely ticket sales fo~' the annual Inductee Dinner and occasional fund raising golf tournaments, we are not in a position to fund the entire $30,600 cost. We would like to ask the City of Bakersfield to contribute $20,000 to $25,000. We can arrange to cover the balance of the cost. Your favorable consideration of our request would be most appreciated. ~~AngeloA...Raddad ~~_~(. ~ Immediate Past President ~cc: Mr. Alan Tandy City Manager Wall mou tted 2 g 2 Wall mc ~nted plaque door~ door~ plaq~, es l Rotatable Mernorabi , display Se~on / Siding storage Siding storage 5'6" 5'6" 4' 8" 4' 8" 4' 8" 4' 8" 30 feet extending from pillar to pillar--each bay is 8 feet in height and the cabinet is 16" deep ESTIMATED COST $15,300 EACH