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.