Washington Administrative Code Title 465 - Tobacco Settlement Authority
1. Background: What is the Tobacco Settlement Authority (TSA)?
The Tobacco Settlement Authority was created by the Washington State Legislature in 2002. Its main goal was to manage and securitize future payments that the state would receive from tobacco companies under the Master Settlement Agreement (MSA). The MSA is a nationwide legal agreement from 1998 where tobacco manufacturers agreed to pay states large sums to compensate for healthcare costs related to smoking.
Washington wanted to turn future MSA payments into immediate cash by selling bonds backed by those future revenues. The TSA was set up as a public body with the power to issue these bonds, enter into contracts, and administer the securitization.
2. Legal Framework: RCW 43.340
The Authority was created and governed by Chapter 43.340 of the Revised Code of Washington (RCW). Here are key points from the statute:
Creation and purpose: The TSA was established as a public entity whose purpose is to enhance the state’s ability to securitize tobacco settlement revenues to help fund health care and other programs.
Powers: The TSA can issue bonds and other debt instruments secured by the state's MSA payments, enter contracts, hold and manage funds, and perform all necessary acts to carry out its purpose.
Limitations: The TSA cannot impose taxes, cannot exercise eminent domain, and its bonds are non-recourse to the State, meaning the State isn’t directly liable for the TSA’s debts.
Board: The TSA is governed by a five-member board appointed by the Governor.
Dissolution: The TSA must dissolve when all bonds and obligations are satisfied, transferring any remaining assets back to the State.
3. Washington Administrative Code (WAC) Title 465 — What Does It Do?
The WAC Title 465 implements the statute by establishing administrative rules for TSA’s operations. These rules cover:
Governance and meetings: How the board meets and conducts business, including public meeting requirements.
Public records: Procedures for handling public records requests.
Environmental compliance: How TSA’s actions relate to Washington’s environmental laws (like SEPA), often exempting financing actions from environmental review.
Ethics: Requirements for board members and staff regarding ethics and conflicts of interest.
The WAC ensures transparency and procedural consistency for TSA’s actions in line with the statute.
4. Case Law Involving the Tobacco Settlement Authority
There is limited direct case law specifically about the TSA and WAC Title 465, but several important cases touch on related tobacco settlement or state revenue issues that help illuminate legal principles applicable to the TSA:
Case Example 1: State v. American Tobacco Co.
This case addressed disputes about whether certain cigarette sales, particularly on tribal lands, were subject to state taxes or tobacco escrow payments.
It clarified that tribal excise stamps paid under compacts are not equivalent to state excise taxes.
This distinction affects the revenue that the State receives, which in turn impacts the payments securitized by the TSA.
Case Example 2: Matheson v. Gregoire
This case dealt with agreements between Washington State and Native American tribes regarding cigarette taxation and tobacco sales.
It underscored the complex interplay between tribal sovereignty and state revenue collection efforts related to tobacco products.
Such decisions influence how the TSA forecasts and securitizes future revenue streams.
5. Legal Issues and Principles
Statutory Limits: The TSA can only act within the powers granted by the statute, and attempts to expand its powers (e.g., imposing taxes or exercising eminent domain) would be invalid.
Bond Liability: Because TSA bonds are non-recourse to the state, bondholders bear the risk that tobacco payments may be less than expected. This protects state taxpayers but requires strict adherence to contractual and statutory terms.
Environmental Exemptions: The TSA’s bond issuance and financing activities are generally exempt from environmental review under state law, simplifying administrative procedures.
Public Transparency: Through WAC Title 465, TSA must comply with open meetings and public records laws, ensuring governmental accountability.
Dissolution and Asset Transfer: When the TSA completes its purpose, it must dissolve and transfer assets back to the state, avoiding indefinite operation.
6. Recent Developments
The TSA dissolved in 2024 after paying off its bonds, and all remaining rights under the MSA and other assets were returned to the State.
With its dissolution, any disputes about remaining contractual obligations or assets would be handled by the State itself.
Summary
The Washington Tobacco Settlement Authority was a specialized public agency created to monetize tobacco settlement payments by issuing bonds. Its statutory and administrative framework (RCW 43.340 and WAC Title 465) set out clear powers, limits, and procedures, balancing the need for efficient financing with public accountability and legal constraints. Although case law directly on the TSA is limited, related court decisions around tobacco revenue and tribal agreements influence the financial environment in which the TSA operated.
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