This agenda item requests that Council approve the NM Opioid Allocation Agreement and authorize the City Attorney to sign the agreement on behalf of the City. It also requests a decision regarding whether to participate in a “regional” distribution of the funds or to receive the funding independent of any other governmental entity.
The State of New Mexico and 53 eligible cities and counties have entered into two settlement agreements with three large distributors and one manufacturer. The "Distributor Settlement" is the national settlement that City Council approved at its January 11 meeting. The Janssen/J and J Settlement is specific to NM and provides for a slightly higher settlement amount than the national settlement and also provides that all funds will be paid out within one year. Council also authorized the City Attorney to execute the agreement that the NM Attorney General was negotiating with J and J and that has been done.
The national agreements have a default distribution between state and local governments, but states and their local governments can agree to a different distribution. Most states have done so. The NM Attorney General's Office and local governments, primarily through the NM County Attorney's Association, have negotiated the settlement agreement that is attached to this agenda item. It provides for a distribution of 45% to the state and 55% to local governments IF all 53 of the eligible cities and counties agree to the Distributor and the J and J settlements. That 100% participation has been obtained.
The Distributor Agreement provides approximately $158.3M to New Mexico, to be paid out over 18 years. (see the attached “Distributor Settlement flowchart") The NM Allocation Agreement provides for a settlement administrator to be paid from that amount and the cost will be split 50/50 between the state and the local governments. It is not known what the cost for an administrator will be, but in looking at a handful of publicly available agreements from other states, none provide for more than 0.5% of the state's total allocation to cover administrative costs. Assuming a similar cost in New Mexico, that leaves approximately $157M with the “Local Government Share” being $86.35M.
$15% of that amount is set aside to a "Backstop Fund." The local governments in NM that filed suit against the three distributors all entered into contingency fee arrangements with outside counsel. The national settlements both set up funds from which outside counsel can apply for compensation. If they do not receive an amount equal to 15% of the amount the government entity is awarded, the backstop fund will supply the difference. Any funds left will be distributed to local governments.
The remaining $73.4M (approx.) will then be distributed to the 53 eligible local governments according to the allocation percentages determined in the national settlements. Based on Gallup's allocation percentage of 0.7722895935%, the City will receive approximately $567K to be paid out over the next 18 years. There should be some additional funding once outside counsel have been paid out of the "Backstop Fund."
The J and J Agreement provides $39M to New Mexico, all of which will be paid out within one year. (see the attached “J and J Settlement flowchart”) Using the same distribution percentages as discussed above, Gallup will receive approximately $141K within this calendar year.
The NM Allocation Agreement incorporates the same list of approved uses for the funding that is contained in the national settlements. It is attached to the agreement as "Exhibit B" but has the heading of “Exhibit E” at the top of the page.
The agreement also provides that the counties in which there is an eligible city and those cities have three choices for how their funding is distributed:
1. The default setting is that the county and any eligible city’s within that county are a single “region” that receives only one payment;
2. Notify the Attorney General before July 1 that the county and the associated cities want to receive their funding separately; or
3. Notify the Attorney General by July 1 that two or more counties and the associated cites have created a region consisting of all those entities, in which case a single payment will be made to the region.
Therefore, if the City wants to receive is allocation share independent of the County, we will need to notify the Attorney General’s Office prior to July 1. Similarly, if the City wants to participate in a joint effort with other governmental entities in addition to McKinley County, the Attorney General’s Office must be notified of that decision before July 1.