Chapter 62 of 2003
PART D3
Section 1. The tobacco settlement financing corporation act is enacted
to read as follows:
Tobacco Settlement Financing Corporation Act
Section 1. Short title.
2. The tobacco settlement financing corporation.
3. Definitions.
4. The sale agreement.
5. Powers of the corporation.
6. Bonds of the corporation.
7. State not liable on bonds or any ancillary bond facility.
8. Remedies of bondholders.
9. Tax exemption and tax contract by the state.
10. Agreement with state.
11. Bonds as legal investments.
12. Actions against the corporation.
13. Assistance to the corporation.
14. Preference for actions or proceedings against the
corporation.
15. Construction.
16. Severability clause.
Section 1. Short title. This act shall be known and may be
cited as the "tobacco settlement financing corporation act".
§ 2. The tobacco settlement financing corporation. There is
hereby created and established a subsidiary of the authority to
be known as the "tobacco settlement financing corporation" as a
public benefit corporation, separate and apart from the state.
The directors of the authority shall serve as the members of the
corporation and shall receive no additional salary or other
compensation, either direct or indirect, for serving as members
of the corporation, other than reimbursement for actual and
necessary expenses incurred in the performance of such person's
duties. Any one or more members of the board may participate in
a meeting of such board by means of a conference telephone or
similar communications equipment allowing all persons
participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in
person at a meeting. The corporation may delegate to one or more
of its members, or officers, agents and employees, such powers
and duties as the members may deem proper. Except as otherwise
expressly provided by this act, actions by the corporation and
the members of its board, and exercise of the corporation's
powers, shall be taken in the same manner and subject to the
same requirements, as are set forth or imposed under chapter 902
of the laws of 1972, as amended, for such actions and
performance by the authority and its directors. Notwithstanding
the existence of common management, the corporation shall be
treated as a separate legal entity with its separate corporate
purpose as set forth in section six of this act; and,
accordingly, the assets, liabilities and funds of the
corporation shall be neither consolidated nor commingled with
those of the authority. The corporation and its corporate
existence shall continue until six months after all its
liabilities have been met or otherwise discharged. Upon the
termination of the existence of the corporation, all of its
rights and property shall pass to and be vested in the state.
§ 3. Definitions. 1. "Ancillary bond facility" means any
interest rate exchange or similar agreement or any bond
insurance policy, letter of credit or other credit enhancement
facility, liquidity facility, guaranteed investment or
reinvestment agreement, or other similar agreement, arrangement
or contract.
2. "Authority" means the state of New York municipal bond bank
agency established in section 2433 of the public authorities
law.
3. "Benefited party" means any person, firm or corporation
that enters into an ancillary bond facility with the corporation
according to the provisions of this act.
4. "Board" means the members of the corporation.
5. "Bonds" means any bonds, notes, certificates of
participation and other evidence of indebtedness issued by the
corporation pursuant to section six of this act.
6. "Code" means the United States Internal Revenue Code of
1986, as amended.
7. "Complementary legislation" means sections 480-b, paragraph
(c) of subdivision 1 of section 481 and subdivision (a-1) of
section 1846 of the tax law.
8. "Consent decree" means the consent decree and final
judgment of the supreme court of the state of New York, county
of New York, dated December 23, 1998, as the same has been and
may be corrected, amended or modified, in the action entitled
State of New York, et al. v. Philip Morris Incorporated, et al.
(Index No. 400361/97).
9. "Contingent contractual obligation" means a contract under
which the obligation of the state is a contingent contractual
obligation as such term is used in section 67-a of the state
finance law.
10. "Costs of issuance" means any item of expense directly or
indirectly payable or reimbursable by the corporation and
related to the authorization, sale, or issuance of bonds,
including, but not limited to, underwriting fees and fees and
expenses of professional consultants and fiduciaries.
11. "Director of the budget" means the director of the budget
of the state of New York.
12. "Financing costs" means all costs of issuance, capitalized
interest, capitalized operating expenses and debt service
reserves, fees, cost of any ancillary bond facility, and any
other fees, discounts, expenses and costs related to issuing,
securing and marketing the bonds including, without limitation,
any net original issue discount.
13. "Investment securities" means, subject to or, as otherwise
provided in, the provisions of any contract with bondholders of
the corporation, (i) general obligations of, or obligations
guaranteed by, any state of the United States of America or
political subdivision thereof, or the District of Columbia or
any agency or instrumentality of any of them, receiving one of
the three highest long-term unsecured debt rating categories
available for such securities of at least one independent rating
agency, or (ii) certificates of deposit, savings accounts, time
deposits or other obligations or accounts of banks or trust
companies in the state, secured, if the corporation shall so
require, in such manner as the corporation may so determine, or
(iii) otherwise, in the discretion of the corporation,
obligations in which the comptroller is authorized to invest,
pursuant to either section 98 or 98-a of the state finance law.
14. "Interest rate exchange or similar agreement" means a
written contract entered into in connection with the issuance of
bonds or with such bonds outstanding with a counterparty to
provide for an exchange or swap of payments based upon fixed
and/or variable interest rates, and shall be for exchanges in
currency of the United States of America only.
15. "Master settlement agreement" means the master settlement
agreement, dated November 23, 1998, among the attorneys general
of 46 states, including the state, the District of Columbia, the
Commonwealth of Puerto Rico, Guam, the United States Virgin
Islands, American Samoa and the Territory of the Northern
Mariana Islands, on the one hand, and certain tobacco
manufacturers, on the other hand, and the subject of the consent
decree.
16. "Member" means any director of the authority including
each person that has been duly appointed to represent such
director at meetings of the authority from which such director
may be absent.
17. "Net proceeds" means the amount of proceeds remaining
following each sale of bonds which are not required by the
corporation to pay or provide for the financing costs.
18. "Operating expenses" means the reasonable or necessary
operating expenses of the corporation, including, without
limitation, administrative expenses of the corporation or
authority, the cost of preparation of accounting and other
reports, costs of maintenance of the ratings on the bonds,
funding of any operating expense reserve fund, if any, insurance
premiums, costs of any ancillary bond facilities, and costs of
annual meetings or other required activities of the corporation,
and fees and expenses incurred for professional consultants and
fiduciaries.
19. "Other assets" means assets and/or revenues, constituting
a portion of the state's share, other than the pledged tobacco
revenues, that are purchased pursuant to the sale agreement and
pledged by the corporation for the payment of bonds or an
ancillary bond facility.
20. "Other participating jurisdictions" means the fifty-seven
(57) counties of the state and the city of New York, which
together with the state, are entitled to receive settlement
payments under the consent decree.
21. "Outstanding", when used with respect to bonds, shall
exclude bonds that shall have been paid in full at maturity, or
shall have otherwise been refunded, redeemed, defeased or
discharged, or that may be deemed not outstanding pursuant to
agreements with the holders thereof.
22. "Participating manufacturer" means a tobacco product
manufacturer that is or becomes a signatory to the master
settlement agreement.
23. "Pledged tobacco revenues" means each such portion of the
state's share constituting tobacco settlement payments sold to
the corporation pursuant to section four of this act and pledged
by the corporation for the payment of bonds or an ancillary bond
facility.
24. "Qualifying statute" has the meaning given that term in
the master settlement agreement, constituting article 13-G of
the public health law of the state.
25. "Residual interests" means the income of the corporation,
and bond proceeds, if any, or reserves not previously paid to
the state, that are in excess of the corporation's requirements
to pay its operating expenses, debt service, sinking fund or
other redemption requirements, reserve fund, and any other
contractual obligations under any resolution or any ancillary
bond facility or that may be incurred in connection with the
issuance of the bonds.
26. "Sale agreement" means any agreement authorized pursuant
to this section in which the state provides for the sale of all
or a portion of the state's share to the corporation.
27. "State" means the state of New York.
28. "State representative" means the governor of the state
acting through the director of the budget.
29. "State's share" means all tobacco settlement payments
received by the state on and after January 1, 2004 and required
to be made, pursuant to the terms of the master settlement
agreement, by participating manufacturers to the state which
have not otherwise been allocated to any other participating
jurisdictions pursuant to the terms of the consent decree, and
the state's rights to receive such tobacco settlement payments
and other assets of the state and other payments received by the
state on and after January 1, 2004 and the state's right to
receive such payments, under any other agreement, contract,
statute or other provision available for sale or authorized to
be sold, and determined by the state representative to be
included in the sale agreement.
30. "Tobacco settlement financing corporation" or "the
corporation" means the corporation created by section two of
this act.
§ 4. The sale agreement. 1. The state representative, upon the
execution of a sale agreement on behalf of the state may sell to
the corporation, and the corporation may purchase, for cash or
other consideration and in one or more installments, all or a
portion of the state's share. Any such agreement shall provide,
among other matters, that the purchase price payable by the
corporation to the state for such state's share or portion
thereof shall consist of the net proceeds of the bonds issued to
finance such purchase price and the residual interests, if any.
The residual interests shall be deposited into the tobacco
settlement fund pursuant to section 92-x of the state finance
law, unless otherwise directed by statute; provided, however
that any residual interest derived from other assets shall be
applied as directed by statute. Any such sale shall be pursuant
to one or more sale agreements which may contain such terms and
conditions deemed necessary by the state representative to carry
out and effectuate the purposes of this section, including
covenants binding the state in favor of the corporation and its
assignees, including the owners of its bonds such as covenants
with respect to the enforcement at the expense of the state of
the payment provisions of the master settlement agreement, the
diligent enforcement at the expense of the state of the
qualifying statute, the application and use of the proceeds of
the sale of the state's share to preserve the tax-exemption on
the bonds, the interest on which is intended to be exempt from
federal income tax, issued to finance the purchase thereof and
otherwise as provided in this act. Notwithstanding the
foregoing, neither the state representative nor the corporation
shall be authorized to make any covenant, pledge, promise or
agreement purporting to bind the state with respect to pledged
tobacco revenues, except as otherwise specifically authorized by
this act.
2. Any sale of all or part of the state's share to the
corporation shall be treated as a true sale and absolute
transfer of the property so transferred and not as a pledge or
other security interest for any borrowing. The characterization
of such 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 share is transferred, nor by the
acquisition or retention by the state of a residual interest,
nor by any characterization of the corporation or its
obligations for purposes of accounting, taxation or securities
regulation, nor by the pledge of any other funds or assets of
the corporation to secure bonds, nor by any other factor
whatsoever.
3. On and after the effective date of each sale of any portion
(including all) of the state's share, the state shall have no
right, title or interest in or to the portion of the state's
share sold, and the portion of the state's share so sold shall
be the property of the corporation and not of the state, and
shall be owned, received, held and disbursed by the corporation
and not the state treasury. Notwithstanding section 92-x of the
state finance law, on the effective date of any such sale with
respect to tobacco settlement payments, the state through the
attorney general shall notify the independent auditor and the
escrow agent under the master settlement agreement that such
portion of the state's share has been sold to the corporation
and irrevocably instruct such independent auditor and escrow
agent that, subsequent to such date, such portion of the state's
share is to be paid directly to the indenture trustee for the
benefit of the owners of the bonds of the corporation which are
secured by a pledge of such amounts, until such bonds are no
longer outstanding pursuant to the resolution or related
indenture under which such bonds are issued.
4. The net proceeds of the bonds and any earnings thereon
shall never be pledged to, nor made available for, payment of
the bonds or any interest or redemption price thereon or any
other debt or obligation of the corporation. The net proceeds of
the bonds shall be deposited in the general fund as directed by
the state representative as specified in, or otherwise provided
for by, the sale agreement, and shall be used by the state
(either directly or by reimbursement of the general fund) for
any of the following purposes: (i) for health care purposes in
accordance with section 2807-v of the public health law,
including but not limited to the treatment of smoking-related
illnesses and for smoking cessation efforts, (ii) for any of its
capital purposes or for any of its capital programs, (iii) for
payment of debt service on any of its outstanding bonds or on
any state supported bonds, notes or other obligations or in
respect of debt service on any outstanding bonds, notes or other
obligations of local governments, school districts or public
benefit corporations for which state aid is applicable or
required to be paid or for which there is a contract subject to
state appropriation provided that such bonds, notes or other
obligations funded capital projects or programs, (iv) for other
grants to local governments, school districts or public benefit
corporations, or (v) to provide a revenue resource for personal
service expenses of the state and general state charges. With
respect to any bonds of the corporation, the interest on which
is intended to be exempt from federal income tax, the
corporation and the state representative may provide
restrictions on the use of net proceeds of the bonds and other
amounts in the sale agreement or otherwise in a tax regulatory
agreement only as necessary to assure such exempt status.
5. The director of the budget shall notify in writing the
chairs of the senate finance committee and the assembly ways and
means committee of any plans to sell all or a portion of the
state's share of tobacco settlement payments prior to entering
any sale agreement with the corporation. At the time this
notification is given, the chief executive officer of the
corporation and the director of the budget shall provide a
report to the chairs of the senate finance committee and the
assembly ways and means committee on a planned bond sale of the
corporation and such report shall include, but not be limited
to: (A) the maximum amount of bonds expected to be sold by the
corporation in connection with a sale agreement; (B) the
expected maximum interest rate and maturity date of such bonds;
(C) the expected amount of the bonds that will be fixed and/or
variable interest rate; (D) the estimated costs of issuance; (E)
the estimated level or levels of reserve fund or funds, if any;
(F) the estimated cost of bond insurance, if any; (G) the
anticipated use or uses of the proceeds; and (H) the maximum
expected net proceeds that will be paid to the state as a result
of the issuance of such bonds. Any such expectations and
estimates in the report shall not be deemed a substantive
limitation on the authority of the corporation contained in this
act.
§ 5. Powers of the corporation. The corporation also shall
have the power to:
1. sue and be sued;
2. have a seal and alter the same at pleasure;
3. make and alter by-laws for its organization and internal
management and make rules and regulations governing the use of
its property and facilities;
4. make and execute contracts and all other instruments
necessary or convenient for the exercise of its powers and
functions under this section and to commence any action to
protect or enforce any right conferred upon it by any law,
contract or other agreement;
5. appoint officers, agents and employees, prescribe their
duties and qualifications, fix their compensation and engage the
services of private consultants and counsel on a contract basis
for rendering professional and technical assistance and advice
provided that the chief executive officer of the corporation
shall be the chief executive officer of the authority and any
other officers or employees, if appointed, shall be those having
similar positions with the authority, provided, however, that no
such officer or employee shall receive any additional
compensation as a result of such appointment;
6. pay its operating expenses and its financing costs;
7. borrow money in its name and issue negotiable bonds and
provide for the rights of the holders thereof;
8. procure insurance against any loss in connection with its
activities, properties and assets in such amount and from such
insurers as it deems desirable;
9. invest any funds or other moneys under its custody and
control in investment securities or under any ancillary bond
facility;
10. as security for the payment of the principal of and
interest on any bonds issued by it pursuant to this act and any
agreement made in connection therewith and for its obligations
under any ancillary bond facility, pledge all or any part of its
revenues or assets;
11. with the approval of the state representative, enter into,
modify, amend, replace or renew any ancillary bond facility with
any person under such terms and conditions as the corporation
may determine including, without limitation, provisions as to
default or early termination and indemnification by the
corporation or any other party thereto for loss of benefits as a
result thereof and with respect to execution of any interest
rate exchange or similar agreement and prior thereto, adopt
guidelines and make the determinations set forth in subdivision
seven or eight of section six of this act; and
12. do any and all things necessary or convenient to carry out
its purposes and exercise the powers expressly given and granted
in this section.
§ 6. Bonds of the corporation. 1. (i) The corporation shall
have power and is hereby authorized from time to time to issue
its bonds in an aggregate principal amount not exceeding four
billion, two hundred million dollars ($4,200,000,000) plus the
amount of any financing costs, to provide sufficient funds for
achieving its corporate purpose, consisting of the purchase of
all or a portion of the state's share pursuant to section four
of this act and the payment or provision for financing costs.
The foregoing limitation shall not apply to bonds issued to
refund bonds. Provided, however, that no bonds may be issued
pursuant to the authority and power granted by this section,
except an issue of bonds in an amount not to exceed seven
hundred million dollars ($700,000,000) plus the amount of any
applicable financing costs, until the state comptroller shall
determine that legislative passage of the budget has occurred
for the current state fiscal year in accordance with the
provisions of subdivision 3 of section 5 of the legislative law.
Provided, further, no bonds, other than refunding bonds, shall
be issued pursuant to such authority and power on or after July
1, 2004.
(ii) Each issuance of bonds shall be authorized by a
resolution of the corporation, adopted by a majority of the
members of the board then in office without further
authorization or approval, provided, however, that any such
resolution authorizing the issuance of bonds may delegate to an
officer of the corporation the power to issue such bonds from
time to time and to fix the details of any such issues of bonds
by an appropriate certificate of such authorized officer. Every
issue of the bonds of the corporation shall be special revenue
obligations payable from and secured by a pledge of pledged
tobacco revenues and other assets, including those proceeds of
such bonds deposited in a reserve fund for the benefit of
bondholders, earnings on funds of the corporation and such other
funds and assets as may become available, upon such terms and
conditions as approved by the state representative and as
specified by the corporation in the resolution under which the
bonds are issued or in a related trust indenture.
(iii) The corporation shall have the power and is hereby
authorized from time to time to issue bonds, whenever it deems
refunding expedient, to refund any bonds by the issuance of new
bonds, whether the bonds to be refunded have or have not
matured, and to issue bonds partly to refund bonds then
outstanding and partly for any of its other corporate purposes.
The refunding bonds may be exchanged for the bonds to be
refunded or sold and the proceeds applied to the purchase,
redemption or payment of such bonds.
2. The bonds of the corporation of each issue shall be dated,
shall bear interest (which, under the code, in the opinion of
transaction counsel to the corporation, may be includable in or
excludable from the gross income of the owners for federal
income tax purposes) at such fixed or variable rates, payable at
or prior to maturity, and shall mature at such time or times, as
may be determined by the corporation and may be made redeemable
before maturity, at the option of the corporation, at such price
or prices and under such terms and conditions as may be fixed by
the corporation. The principal and interest of such bonds may be
made payable in any lawful medium. The resolution or the
certificate of the authorized officer shall determine the form
of the bonds, either registered or book-entry form, and the
manner of execution of the bonds and shall fix the denomination
or denominations of the bonds and the place or places of payment
of principal and interest thereof, which may be at any bank or
trust company within or outside the state. If any officer whose
signature or a facsimile thereof appears on any bonds shall
cease to be such officer before the delivery of such bonds, such
signature or facsimile shall nevertheless be valid and
sufficient for all purposes the same as if he had remained in
office until such delivery. The corporation may also provide for
temporary bonds and for the replacement of any bond that shall
become mutilated or shall be destroyed or lost.
3. The corporation with the approval of the state
representative may sell such bonds in such manner, either at a
public or private sale and either on a competitive or negotiated
basis. Provided, however, no such bonds may be sold by the
corporation at private sale unless such sale and the terms
thereof have been approved in writing by the comptroller. The
proceeds of such bonds shall be disbursed for the purposes for
which such bonds were issued under such restrictions as the sale
agreement and the resolution authorizing the issuance of such
bonds or the related trust indenture may provide. Such bonds
shall be issued upon approval of both the state representative
and the corporation and without any other approvals, filings,
proceedings or the happening of any other conditions or things
other than the approvals, findings, proceedings, conditions, and
things that are specified and required by this act.
4. Any pledge made by the corporation shall be valid and
binding at the time the pledge is made. The assets, property,
revenues, reserves or earnings so pledged shall immediately be
subject to the lien of such pledge without any physical delivery
thereof or further act and the lien of any such pledge shall be
valid and binding as against all parties having claims of any
kind in tort, contract or otherwise against the corporation,
irrespective of whether such parties have notice thereof.
Notwithstanding any other provision of law to the contrary,
neither the bond resolution nor any indenture or other
instrument by which a pledge is created or by which the
corporation's interest in pledged assets, property, revenues,
reserves or earnings thereon is assigned need be filed,
perfected or recorded in any public records in order to protect
the pledge thereof or perfect the lien thereof as against third
parties, except that a copy thereof shall be filed in the
records of the corporation.
5. Whether or not the bonds of the corporation are of such
form and character as to be negotiable instruments under the
terms of the uniform commercial code, the bonds are hereby made
negotiable instruments for all purposes, subject only to the
provisions of the bonds for registration.
6. At the sole discretion of the corporation, any bonds issued
by the corporation and any ancillary bond facility made under
the provisions of this act may be secured by a resolution or
trust indenture by and between the corporation and the trust
indenture trustee, which may be any trust company or bank having
the powers of a trust company, whether located within or outside
the state. Such trust indenture or resolution providing for the
issuance of such bonds may provide for the creation and
maintenance of such reserves as the board shall determine to be
proper and may include covenants setting forth the duties of the
corporation in relation to the bonds, the income of the
corporation, the related sale agreement with respect to the sale
of the state's share and the pledged tobacco revenues and other
assets. Such trust indenture or resolution may contain
provisions respecting the custody, safeguarding and application
of all moneys and securities, may contain such provisions for
protecting and enforcing the rights and remedies (pursuant
thereto and to the sale agreement) of the owners of the bonds
and any other benefitted party as may be reasonable and proper
and not in violation of law and may include any or all of the
rights, powers and duties of the trustee appointed by
bondholders pursuant to section eight of this act and limiting
or abrogating the right of the bondholders to appoint a trustee
under such section. It shall be lawful for any bank or trust
company incorporated under the laws of the state which may act
as depository of the proceeds of bonds or of any other funds or
obligations received on behalf of the corporation to furnish
such indemnifying bonds or to pledge such securities as may be
required by the corporation. Any such trust indenture or
resolution may contain such other provisions as the corporation
may deem reasonable and proper for priorities and subordination
among the owners of the bonds and other beneficiaries. Any
reference in this act to a resolution of the board shall include
any trust indenture authorized thereby.
7. The corporation may enter into, amend or terminate, as it
determines to be necessary or appropriate, any ancillary bond
facility (i) to facilitate the issuance, sale, resale, purchase,
repurchase or payment of bonds, interest rate savings or market
diversification or the making or performance of swap contracts,
including without limitation bond insurance, letters of credit
and liquidity facilities, or (ii) to attempt to manage or hedge
risk or achieve a desirable effective interest rate or cash
flow. Such facility shall be made upon the terms and conditions
established by the board, including without limitation
provisions as to security, default, termination, payment, remedy
and consent to service of process.
8. The corporation may enter into, amend or terminate, any
ancillary bond facility that it determines to be necessary or
appropriate to place the obligations or investments of the
corporation, as represented by the bonds or the investment of
reserved bond proceeds or other pledged tobacco revenues or
other assets, in whole or in part, on the interest rate, cash
flow or other basis approved by the corporation, which facility
may include without limitation contracts commonly known as
interest rate swap agreements, forward purchase contracts or
guaranteed investment contracts and futures or contracts
providing for payments based on levels of, or changes in,
interest rates. These contracts or arrangements may be entered
into by the corporation in connection with, or incidental to,
entering into, or maintaining any (i) agreement which secures
bonds of the corporation or (ii) investment, or contract
providing for investment of reserves or similar facility
guaranteeing an investment rate for a period of years not to
exceed the underlying term of the bonds. The determination by
the corporation that an ancillary bond facility or the amendment
or termination thereof is necessary or appropriate as aforesaid
shall be conclusive. Any ancillary bond facility may contain
such payment, security, default, remedy, termination provisions
and payments and other terms and conditions as determined by the
corporation, after giving due consideration to the
creditworthiness of the counterparty or other obligated party,
including any rating by any nationally recognized rating agency,
and any other criteria as may be appropriate.
9. Bonds or any ancillary bond facility may contain a recital
that they are issued or executed, respectively, pursuant to this
act, which recital shall be conclusive evidence of their
validity, respectively, and the regularity of the proceedings
relating thereto.
10. The corporation, subject to such agreements with
bondholders as may then exist (including provisions which
restrict the power of the corporation to purchase bonds), or
with the providers of any applicable ancillary bond facility,
shall have the power out of any funds available therefor to
purchase bonds of the corporation, which may or may not
thereupon be cancelled, at a price not substantially exceeding:
(i) if the bonds are then redeemable, the redemption price
then applicable, including any accrued interest; and
(ii) if the bonds are not then redeemable, the redemption
price and accrued interest applicable on the first date after
such purchase upon which the bonds become subject to redemption.
11. (i) Notwithstanding the provisions of any general or
special law to the contrary, and subject to the making of annual
appropriations therefor by the state, in order to assist in the
undertaking and financing by the corporation under this act, the
state representative is authorized to and shall enter into one
or more contingency contracts with the corporation upon such
terms as the corporation and the state representative shall
agree, so as to provide annually to the corporation the amount,
if any, as necessary to meet the debt service requirements on
one or more series of bonds, including refunding bonds, in any
year if the receipts from pledged tobacco revenues or from an
ancillary bond facility, if any, are inadequate and after
application of all collateral pledged therefor, including any
debt service and debt service reserve fund. Any contingency
contract shall terminate when there are no bonds benefited by
the contract outstanding in accordance with the trust indenture
under which such bonds are issued. The contract may provide for
(A) the corporation to request annually, not later than sixty
days prior to the commencement of the state's next succeeding
fiscal year, from the state the amount, as shall be certified by
an authorized officer of the corporation to the director of the
budget, to be provided by the state during its next succeeding
fiscal year pursuant to each contingency contract, and (B) for
the director of the budget on behalf of the state to include, as
a requested appropriation item, an amount equal to such
certified amount. Each contingency contract shall include text
to the effect that the obligations of the state thereunder shall
be deemed executory only to the extent of the moneys available
to the state and no liability on account of any such agreement
shall be incurred by the state beyond the moneys available and
appropriated for the purpose thereof.
(ii) The state, through the state representative, is hereby
authorized to enter into a contingency contract on the terms and
conditions and subject to the limitations of this section, it
being hereby determined that the additional net proceeds to be
received as a result thereof by the state are an important
public purpose to be achieved. The obligation of the state to
fund or to pay the amounts provided for in the contingency
contract, as in this section provided, shall constitute a
contingent contractual obligation and shall not constitute a
debt or state supported debt of the state within the meaning of
any constitutional or statutory provision and shall be deemed
executory only to the extent of moneys available; no liability
shall be incurred by the state beyond the moneys available for
such purpose and such obligation is subject to annual
appropriation by the legislature. The amounts paid to the
corporation pursuant to any such contract shall be used by it
solely to pay or provide for the payment of debt service on the
bonds of the corporation, including refunding bonds, if any.
12. Neither the members of the corporation nor any other
person executing the bonds or an ancillary bond facility of the
corporation shall be subject to any personal liability or
accountability by reason of the issuance or execution and
delivery thereof.
§ 7. State not liable on bonds or any ancillary bond facility.
Neither any bond nor any ancillary bond facility of the
corporation shall constitute a debt or moral obligation of the
state or a state supported obligation within the meaning of any
constitutional or statutory provision or a pledge of the faith
and credit of the state or of the taxing power of the state, and
the state shall not be liable to make any payments thereon nor
shall any bond or any ancillary bond facility be payable out of
any funds or assets other than pledged tobacco revenues and
other assets, if any, sold to the corporation and other funds
and assets of or available to the corporation pledged therefor,
and the bonds and any ancillary bond facility of the corporation
shall contain on the face thereof or other prominent place
thereon a statement to the foregoing effect.
§ 8. Remedies of bondholders. 1. Subject to the provisions of
section six of this act, in the event that the corporation shall
default in the payment of principal of, or interest on, or
sinking fund payment on, any issue of bonds after the same shall
become due, whether at maturity or upon call for redemption, or
in the event that the corporation or the state shall default in
any agreement made with the holders of any issue of bonds, the
holders of twenty-five per centum in aggregate principal amount
of the bonds of such issue then outstanding, by instrument or
instruments filed in the office of the clerk of the county of
Albany and proved or acknowledged in the same manner as a deed
to be recorded, may appoint a trustee to represent the holders
of such bonds for the purposes herein provided.
2. Such trustee, or any trustee appointed under this act, may,
and upon written request of the holders of twenty-five per
centum in principal amount of such bonds then outstanding shall,
in his or its own name:
(i) by suit, action or proceeding in accordance with the civil
practice law and rules, enforce all rights of the bondholders,
including the right to require the corporation to carry out any
agreement with such holders and to perform its duties under this
act;
(ii) bring suit upon such bonds;
(iii) by action or suit, require the corporation to account as
if it were the trustee of an express trust for the holders of
such bonds;
(iv) by action or suit, enjoin any acts or things which may be
unlawful or in violation of the rights of the holders of such
bonds; and
(v) declare all such bonds due and payable, and if all
defaults shall be made good, then, with the consent of the
holders of twenty-five per centum of the principal amount of
such bonds then outstanding, annul such declaration and its
consequences, provided, however, that nothing herein shall
preclude the corporation from agreeing that consent of the
provider of an ancillary bond facility is required for an
acceleration of related bonds in the event of a default other
than a failure to pay principal of or interest on the bonds when
due.
3. The supreme court shall have jurisdiction of any suit,
action or proceeding by the trustee on behalf of such
bondholders. The venue of any such suit, action or proceeding
shall be laid in the county of Albany.
4. Before declaring the principal of bonds due and payable,
the trustee shall first give thirty days notice in writing to
the corporation.
§ 9. Tax exemption and tax contract by the state. 1. It is
hereby determined that the creation of the corporation and the
carrying out of its corporate purposes are in all respects for
the benefit of the people of the state of New York and are
public purposes. Accordingly, the corporation shall be regarded
as performing an essential governmental function in the exercise
of the powers conferred upon it by this act. The property of
the corporation, its income and its operations shall be exempt
from taxation, assessments, special assessments and ad valorem
levies. The corporation shall not be required to pay any fees,
taxes, special ad valorem levies or assessments of any kind,
whether state or local, including, but not limited to, fees,
taxes, special ad valorem levies or assessments on real
property, franchise taxes, sales taxes or other taxes, upon or
with respect to any property owned by it or under its
jurisdiction, control or supervision, or upon the uses thereof,
or upon or with respect to its activities or operations in
furtherance of the powers conferred upon it by this act, or upon
or with respect to any fares, tolls, rentals, rates, charges,
fees, revenues or other income received by the corporation.
2. Any bonds issued pursuant to this act, their transfer and
the income therefrom shall, at all times, be exempt from
taxation.
3. The state hereby covenants with the purchasers and with all
subsequent holders and transferees of bonds issued by the
corporation pursuant to this act, in consideration of the
acceptance of and payment for the bonds, that the bonds of the
corporation issued pursuant to this act and the income therefrom
and all revenues, moneys, and other property pledged to pay or
to secure the payment of such bonds shall at all times be exempt
from taxation.
4. In the case of any bonds of the corporation, interest on
which is intended to be exempt from federal income tax, the
corporation shall prescribe restrictions on the use of the
proceeds thereof and related matters only as are necessary to
assure such exemption, and the recipients of such proceeds shall
be bound thereby to the extent such restrictions shall be made
applicable to them. Any such recipient, including, but not
limited to, the state, a public benefit corporation, a school
district or municipality is authorized to execute a tax
regulatory agreement with the corporation or the state, as the
case may be, and the execution of such an agreement may be
treated by the corporation or the state as a condition to
receiving any such proceeds.
§ 10. Agreement with state. 1. The state pledges and agrees
with the corporation, and the owners of the bonds of the
corporation in which the corporation has included such pledge
and agreement, that the state shall (i) irrevocably direct,
through the attorney general, the independent auditor and the
escrow agent under the master settlement agreement to transfer
all pledged tobacco revenues directly to the corporation or its
assignee, (ii) enforce its right to collect all moneys due from
the participating manufacturers under the master settlement
agreement and, in addition, shall diligently enforce the
qualifying statute as contemplated in section IX(d)(2)(B) of the
master settlement agreement against all tobacco product
manufacturers selling tobacco products in the state and that are
not in compliance with the qualifying statute, in each case in
the manner and to the extent deemed necessary in the judgment of
the attorney general, provided, however, that the sale agreement
may provide (a) that the remedies available to the corporation
and the bondholders for any breach of the pledges and agreements
of the state set forth in this clause shall be limited to
injunctive relief, and (b) that the state shall be deemed to
have diligently enforced the qualifying statute so long as 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 the state has failed to diligently enforce the
qualifying statute for the purposes of section IX(d)(2)(B) of
the master settlement agreement, (iii) neither amend the master
settlement agreement nor the consent decree or take any other
action in any way that would materially adversely (a) alter,
limit or impair the corporation's right to receive pledged
tobacco revenues, or (b) limit or alter the rights hereby vested
in the corporation to fulfill the terms of its agreements with
such bondowners, or (c) in any way impair the rights and
remedies of such bondowners or the security for such bonds until
such bonds, together with the interest thereon and all costs and
expenses in connection with any action or proceedings by or on
behalf of such bondowners, are fully paid and discharged
(provided, that nothing herein shall be construed to preclude
the state's regulation of smoking and taxation and regulation of
the sale of cigarettes or the like or to restrict the right of
the state to amend, modify, repeal or otherwise alter statutes
imposing or relating to the taxes), and (iv) not amend,
supersede or repeal the qualifying statute and the complementary
legislation, in any way that would materially adversely affect
the amount of any payment to, or materially adversely affect the
rights of, the corporation or such bondholders. The state
representative is authorized and directed to include this pledge
and agreement in the sale agreement and authorizes and directs
the corporation, as agent of the state to include this pledge
and agreement in any contract with the bondholders of the
corporation. Notwithstanding these pledges and agreements by the
state, the attorney general may in his or her discretion enforce
any and all provisions of the master settlement agreement,
without limitation.
2. Prior to the date which is one year and one day after the
corporation no longer has any bonds outstanding, the corporation
shall have no authority to file a voluntary petition under
chapter 9 of the federal bankruptcy code or such corresponding
chapter or sections as may, from time to time, be in effect, and
neither any public officer nor any organization, entity or other
person shall authorize the corporation to be or become a debtor
under chapter 9 or any successor or corresponding chapter or
sections during such period. The state hereby covenants with the
owners of the bonds of the corporation that the state will not
limit or alter the denial of authority under this subdivision
during the period referred to in the preceding sentence. The
corporation is authorized and directed as agent of the state to
include this covenant as an agreement of the state in any
contract with the bondholders of the corporation.
3. To the extent deemed appropriate by the corporation and
with the approval of the state representative, any pledge and
agreement of the state with respect to the bonds as provided in
this section may be extended to, and included in, any ancillary
bond facility as a pledge and agreement of the state with the
corporation and the benefited party.
4. The state acknowledges and agrees that the other
participating jurisdictions have rights and interests in the
consent decree. In recognition of the rights of the other
participating jurisdictions contained in the consent decree, the
state pledges that the sale of the state's share authorized by
this act shall in no way include or be deemed to include, and
the state shall not otherwise alter, limit, or impair, the
rights of the other participating jurisdictions including, but
not limited to, rights to receive payments, set forth in the
consent decree. Nothing in this act shall be construed to alter
the right of each of the other participating jurisdictions under
the consent decree to receive payments or to sell or assign some
or all of its interest in the manner deemed appropriate pursuant
to law by its governing body.
§ 11. Bonds as legal investments. The bonds of the corporation
are hereby made securities in which all public officers and
bodies of this state and all municipalities and political
subdivisions, all insurance companies and associations and other
persons carrying on an insurance business, all banks, bankers,
trust companies, savings banks and savings associations,
including savings and loan associations, building and loan
associations, investment companies and other persons carrying on
a banking business, all administrators, guardians, executors,
trustees and other fiduciaries, and all other persons whatsoever
who are now or may hereafter be authorized to invest in bonds or
in other obligations of the state, may properly and legally
invest funds, including capital, in their control or belonging
to them. The bonds are also hereby made securities which may be
deposited with and may be received by all public officers and
bodies of the state and all municipalities, political
subdivisions and public corporations for any purpose for which
the deposit of bonds or other obligations of the state is now or
may hereafter be authorized.
§ 12. Actions against the corporation. 1. An action against
the corporation for death, personal injury or property damage or
founded on tort shall not be commenced more than one year and
ninety days after the cause of action thereof shall have accrued
nor unless a notice of claim shall have been served on a member
of the corporation or officer or employee thereof designated by
the corporation for such purpose, within the time limited by,
and in compliance with the requirements of section 50-e of the
general municipal law.
2. The venue of every action, suit or special proceeding
brought against the corporation shall be laid in the county of
Albany.
3. Neither any member of the corporation nor any officer,
employee, or agent of the corporation, while acting within the
scope of their authority, shall be subject to any personal
liability resulting from exercising or carrying out of any of
the corporation's purposes or powers.
§ 13. Assistance to the corporation. The corporation may use
agents, employees and facilities of the authority and, with the
consent of the governor, comptroller or attorney general as the
case may be, the corporation may use agents, employees and
facilities of the state, paying to the authority or the affected
agency, office or department its agreed proportion of the
compensation or costs.
§ 14. Preference for actions or proceedings against the
corporation. Any action or proceeding to which the corporation
or the people of the state may be parties, in which any question
arises as to the validity of this act, shall be preferred over
all other civil causes of action or cases, except election
causes of action or cases, in all courts of the state and shall
be heard and determined in preference to all other civil
business pending therein, except election causes, irrespective
of position on the calendar. The same preference shall be
granted upon application of the corporation or its counsel in
any action or proceeding questioning the validity of this act in
which the corporation may be allowed to intervene. The venue of
any such action or proceeding shall be laid in the supreme court
of the county of Albany.
§ 15. Construction. This act and all powers granted hereby
shall be liberally construed to effectuate its intent and their
purposes, without implied limitations thereon. This act shall
constitute full and complete authority for all things herein
contemplated to be done. All rights and powers herein granted
shall be cumulative with those derived from other sources and
shall not, except as expressly stated herein, be construed in
limitation thereof. Insofar as the provisions of this act are
inconsistent with the provisions of any other act, general or
special, the provisions of this act shall be controlling.
§ 16. Severability clause. If any clause, sentence, paragraph,
section or part of this act be adjudged by any court of
competent jurisdiction to be invalid, such judgment shall not
affect, impair or invalidate the remainder hereof but shall be
applied in its operation to the clause, sentence, paragraph,
section or part hereof directly involved in the controversy in
which such judgment shall have been rendered.
Last modified: February 3, 2019