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HomeMy WebLinkAbout10031ORDINANCE NO. 10031 AN ORDINANCE APPROVING AND AUTHORIZING THE MAYOR TO SIGN THE FOLLOWING FOUR SETTLEMENT AGREEMENTS CONCERNING THE RECOVERY OF SETTLEMENT FUNDS BY THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION, AS A RESULT OF THE OPIOID CRISIS: (1) COLORADO OPIOIDS SETTLEMENT MEMORANDUM OF UNDERSTANDING; (2) SETTLEMENT PARTICIPATION FORM PERTAINING TO JOHNSON & JOHNSON – JANSSEN; (3) DISTRIBUTOR SETTLEMENT PARTICIPATION FORM AND (4) LOCAL GOVERNMENT OPIOID ESCROW AGREEMENT BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO that: SECTION 1. The following four (4) settlement agreements concerning the recovery of settlement funds by the City of Pueblo, a Colorado municipal corporation, as a result of the opioid crisis, attached hereto, having been approved as to form by the City Attorney, are hereby approved: 1. Colorado Opioids Settlement Memorandum of Understanding 2. Settlement Participation Form pertaining to Johnson & Johnson - Janssen 3. Distributor Settlement Participation Form. 4. Local Government Opioid Escrow Agreement SECTION 2. The Mayor is hereby authorized to execute said Agreements for and on behalf of the City and the City Clerk is authorized to affix the seal of the City thereto and attest same. SECTION 3. The officers and staff of the City are authorized to perform any and all acts consistent with this Ordinance and the attached Agreements to implement the policies and procedures described herein. SECTION 4. This Ordinance shall become effective on the date of final action by the Mayor and City Council. Action by City Council: Introduced and initial adoption of Ordinance by City Council on October 12, 2021. Final adoption of Ordinance by City Council on October 25, 2021 . President of City Council Action by the Mayor: ☒ Approved on October 26, 2021 . □ Disapproved on based on the following objections: _ Mayor Action by City Council After Disapproval by the Mayor: □ Council did not act to override the Mayor's veto. □ Ordinance re-adopted on a vote of , on □ Council action on _______ failed to override the Mayor’s veto. President of City Council ATTEST City Clerk City Clerk’s Office Item # R-7 Background Paper for Proposed Ordinance COUNCIL MEETING DATE: October 12, 2021 TO: President Lawrence W. Atencio and Members of City Council VIA: Marisa Stoller, City Clerk CC: Mayor Nicholas A. Gradisar FROM: Daniel C. Kogovsek, City Attorney SUBJECT: AN ORDINANCE APPROVING AND AUTHORIZING THE MAYOR TO SIGN THE FOLLOWING FOUR AGREEMENTS CONCERNING THE RECOVERY OF SETTLEMENT FUNDS BY THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION, AS A RESULT OF THE OPIOID CRISIS: (1) COLORADO OPIOIDS SETTLEMENT MEMORANDUM OF UNDERSTANDING; (2) SETTLEMENT PARTICIPATION FORM PERTAINING TO JOHNSON & JOHNSON – JANSSEN; (3) DISTRIBUTOR SETTLEMENT PARTICIPATION FORM AND (4) LOCAL GOVERNMENT OPIOID ESCROW AGREEMENT SUMMARY: This Ordinance approves and authorizes the Mayor to sign four (4) agreements concerning the recovery of settlement funds by the City as a result of the opioid crisis. PREVIOUS COUNCIL ACTION: Not applicable to this Ordinance. BACKGROUND: While Colorado’s local governments are currently being asked to participate in recent settlements with the “Big 3” Distributors (AmerisourceBergen, Cardinal Health, and McKesson) and Johnson & Johnson, the Colorado MOU is intended to apply to all current and future opioid settlements. A. Allocation of Settlement Funds The Colorado MOU provides the framework for fairly dividing and sharing settlement proceeds among the state and local governments in Colorado. Under the Colorado MOU, settlement proceeds will be distributed as follows: 1. 10% directly to the State (“State Share”) 2. 20% directly to Participating Local Governments (“LG Share”) 3. 60% directly to Regions (“Regional Share”) 4. 10% to specific abatement infrastructure projects (“Statewide Infrastructure Share”) Under the Colorado MOU, all settlement funds must be used only for “Approved Purposes,” a long and broad list that focuses on abatement strategies. These strategies emphasize prevention, treatment, and harm reduction. Some examples of these strategies include training health care providers on opioid use disorder (“OUD”) treatment and responsible prescribing, expanding telehealth and mobile services for treatment, and increasing naloxone and rescue breathing supplies. The list of Approved Purposes is broad enough to be flexible for local communities, while ensuring that settlement funds are used to combat the opioid epidemic. The list of Approved Purposes is attached as Exhibit A to the MOU, unless the term is otherwise defined in a settlement. B. General Abatement Fund Council A General Abatement Fund Council (the “Abatement Council”), consisting of representatives appointed by the State and Participating Local Governments, will ensure that the distribution of opioid funds complies with the terms of any settlement and the terms of the Colorado MOU. The Abatement Council will consist of 13 members, seven appointed by the State and six appointed by the Participating Local Governments. C. Local Government Share (20%) Twenty percent of settlement funds will be paid directly to Participating Local Governments. Exhibit D to the Colorado MOU lists the percentage to each County Area (that is, the county government plus the municipalities within that county), and Exhibit E further breaks down those allocations to an intracounty level using a default allocation. The allocations to each County Area in Exhibit D are based on three factors that address critical causes and effects of the opioid crisis: (1) the number of persons suffering opioid use disorder in the county; (2) the number of opioid overdose deaths that occurred in the county; and (3) the amount of opioids distributed within the county. The intracounty allocations in Exhibit E are a default allocation that will apply unless the local governments in a County Area enter into a written agreement providing for a different allocation. These allocations are based on a model, developed by health economist experts, which uses data from the State and Local Government Census on past spending relevant to opioid abatement. Participating Local Governments will provide data on expenditures from the LG Share to the Abatement Council on an annual basis. If a local government wishes, it may forego its LG Share and direct it to the Regional Share. A local government that chooses not to participate or sign onto the Colorado MOU will not receive funds from the LG Share and the portion of the LG Share that it would have received will instead be re-allocated to the Regional Share for the region where that local government is located. D. Regional Share (60%) Sixty percent of settlement funds will be allocated to single- or multi-county regions made up of local governments. These regions were drawn by local governments to make use of existing local infrastructure and relationships. The regional map is shown below, as well as in Exhibit C to the Colorado MOU: Allocations to regions will be calculated according to the percentages in Exhibit F. Each region will create its own “Regional Council” to determine what Approved Purposes to fund with that region’s allocation from the Regional Share. Regional governance models are attached to the Colorado MOU as Exhibit G. Each region may draft its own intra-regional agreements, bylaws, or other governing documents to determine how the Regional Council will operate, subject to the terms of the Colorado MOU. Each Regional Council will provide expenditure data to the Abatement Council on an annual basis. A local government that chooses not to participate or sign onto the Colorado MOU shall not receive any opioid funds from the Regional Share and shall not participate in the Regional Councils. E. State Share (10%) Ten percent of settlement funds will be allocated directly to the State for statewide priorities in combating the opioid epidemic. The State maintains full discretion over distribution of the State Share anywhere within the State of Colorado. On an annual basis, the State shall provide all data on expenditures from the State Share, including administrative costs, to the Abatement Council. F. Statewide Infrastructure Share (10%) Ten percent of the settlement funds will be allocated to a Statewide Infrastructure Share to promote capital improvements and provide operational assistance for the development or improvement of infrastructure necessary to abate the opioid crisis anywhere in Colorado. The Abatement Council shall establish and publish policies and procedures for the distribution and oversight of the Statewide Infrastructure Share, including processes for local governments or regions to apply for opioid funds from the Statewide Infrastructure Share. G. Attorneys’ Fees and Expenses Paid Through a Back-Stop Fund To a large extent, the national opioid settlements occurred because of the pressure that litigating entities and their counsel exerted on defendants through their lawsuits. The attorneys’ fee provision equitably allocates the cost of attorneys’ fees, while also allowing non-litigating entities to share in the 25% premium for releases by the litigating entities in the “Big 3” Distributor and Johnson & Johnson settlements. The work that was done by the litigating entities and their law firms in the litigation has substantially contributed to achieving the settlements that are currently being offered and those that are anticipated in the future. The Attorney General and local governments have agreed to a “Back-Stop Fund” for attorneys’ fees and costs. Before a law firm can apply to the Back-Stop Fund, it must first apply to any national common benefit fee fund. The Back-Stop Fund will only be used to pay the difference between what law firms are owed and the amount they have received from a national common benefit fee fund. Attorneys’ fees are limited to 8.7% of the total LG Share and 4.35% of the total Regional Share. No funds will be taken from the Statewide Infrastructure Share or State Share. A committee will be formed to oversee payments from the Back-Stop Fund. The committee will include litigating and non-litigating entities. Importantly, any excess money in the Back-Stop fund, after attorneys’ fees and costs are paid, will go back to the local governments. H. Participation in the Colorado MOU and Expected Timeline The MOU was designed to ensure that as many local governments as possible would agree to its terms. Strong participation from local governments is needed to receive the full settlement payments for all of Colorado. On August 26, 2021, Colorado Attorney General Phil Weiser signed the MOU. It is projected that settlement funds from the “Big 3” Distributor/Johnson & Johnson settlements could be made available as soon as July 2022 and will be distributed within Colorado according to the MOU. Along with the MOU, each local government will need to sign a Subdivision Settlement Participation Form for each of the settlements (the “Big 3” Distributor settlement and the Johnson & Johnson settlement) releasing their legal claims and stating they are participating in the settlements. In addition, a Colorado Subdivision Escrow Agreement should be signed to ensure legal claims are released only when 95% participation by certain local governments has been reached. That 95% participation threshold is important because it triggers certain amounts of incentive payments under the settlements and signals to the settling pharmaceutical companies that the settlements have wide acceptance. FINANCIAL IMPLICATIONS: Funds from the Big 3 and Johnson & Johnson settlements will be distributed over a period of years. The Big 3 distributors will pay a maximum of $21 billion over 18 years, while Johnson & Johnson will pay a maximum of $5 billion over no more than nine years. In total, up to approximately $22.8 billion in settlement proceeds will be payable to state and local subdivisions nationwide. Each state receives a percentage of that recovery, and Colorado’s maximum share from these settlements will likely be more than $300 million. Colorado will receive its maximum share of settlement payments only if enough local governments sign on to the deal. The settling defendants have the option to “walk away” from the deals if there is not enough participation, so it is important that a “critical mass” of local governments signs on soon. Otherwise, the entire deal could fall through. If the City waives and releases its claims against the Opiod manufacturers and distributors by signing the 4 settlement agreements, the City will be entitled to receive settlement proceeds from the following two (2) funds: 1. Local Government Share (20% of total): Pueblo County will receive 5.6757% of the Local Government fund, approximately $3,405,420. 2. Regional Share (60% of total): The Southeast Region (Region 19) will receive 7.4580% of the regional allocations, approximately $13,424,400. BOARD/COMMISSION RECOMMENDATION: Not applicable to this Ordinance. STAKEHOLDER PROCESS: Not applicable to this Ordinance. ALTERNATIVES: City Council could decide not to support the settlement. RECOMMENDATION: Approval of the Ordinance. Attachments: Proposed Ordinance 4 proposed Settlement Agreements.