Agenda Report
Fullerton City Council
MEETING DATE: November 21, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: Eric J. LEVITT, city manager
RICHARD D. JONES, ESQ., JONES MAYER
MELISSA B. BALLARD, ESQ., JONES MAYER
PREPARED BY: MELISSA B. BALLARD, ESQ., JONES MAYER
SUBJECT: OPIOID LITIGATION SETTLEMENT FUNDS DISTRIBUTION
SUMMARY
Staff seeks City Council direction regarding distribution of opioid abatement settlement funds from national settlements with opioid distributors McKesson, AmerisourceBergen and Cardinal and opioid manufacturer Janssen directly to City or let funds continue to default to the County of Orange for opioid abatement uses.
RECOMMENDATION
City to receive annual abatement funds directly in 2024.
CITY MANAGER REMARKS
The City Manager requests the City Council to authorize the City to elect to switch the receipt of Opioid settlement funds from the County of Orange to the City of Fullerton.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statements:
Fiscal and Organizational Stability
Public Safety.
FISCAL IMPACT
The recommended action would result in the City directly receiving and retaining abatement settlement funds rather than directing funds to the County of Orange. The following outlines the estimated amount of abatement settlement funds received by the City:
Receipt of settlement Subdivision Funds would continue to go directly to the City.
Appropriation of funds would occur at a City Council meeting in January 2024.
Distributors annual payments would continue through 2038 and from Janssen through 2031. This would allocate any annual allocation from the Mallinckrodt bankruptcy directly to the City. Staff recommends this election in light of recent CVS, Walmart, Walgreens, Allergan, Teva and Kroger settlements. The City can switch the election back to allocate the money to the County in the future.
DISCUSSION
Overview
The Distributors and Janssen reached settlements in the national litigation to provide funds for opioid epidemic abatement in California and throughout the United States. All qualifying public entities and others reached this settlement on a national level. Litigating cities, such as Fullerton, receive additional funds.
The Distributors’ national settlement totals $21 billion and Janssen’s amount totals $5 billion, for a combined total of approximately $26 billion. The national settlement with CVS, Walmart, Walgreens, Allergan and Teva totals about $18.5 billion and Kroger’s settlement totals about $1.2 billion.
The City’s Settlement Allocation
The Distributors and Janssen allocation to the City totals approximately $3,122,379 paid over the course of 18 years, funded through two funds entitled an Abatement Fund and a Subdivision Fund.
The estimated amount of the next Abatement Fund payment in 2024 equals $158,508.52.
Abatement Fund Uses
The City can only use funds received from the Abatement Funds for approved abatement uses including, for example, naloxone training, opioid abuse treatment services, services for opioid addicted pregnant people, treatment for neonatal abstinence syndrome, prevention programs, treatment for incarcerated people, data collection and research. The City can earmark the funds for future use.
Additionally, the City must use at least 50% of the money from the Abatement Funds for “High Impact Abatement Activities” which include:
provision of matching funds or operating costs for substance use disorder facilities within the Behavioral Health Continuum Infrastructure Program creating new or expanded Substance Use Disorder (SUD) treatment infrastructure addressing needs of communities of color and vulnerable populations (including sheltered and unsheltered homeless populations) disproportionately impacted by SUD diversion of people with SUD from the justice system into treatment, including by providing training and resources to first and early responders (sworn and non-sworn) and implementing best practices for outreach, diversion and deflection, employability, restorative justice and harm reduction interventions to prevent drug addiction in vulnerable youth.
Re-Allocate Abatement Funds Directly to the City?
Factors to consider in deciding whether to have the Abatement Fund monies go directly to the City or to continue to default to the County include:
Does the amount of the settlement justify the administrative costs and time required to accept the direct payment? Does the City offer the services and/or have the infrastructure to spend the money in accordance with the prescribed uses? If the City does not offer those uses it may find it difficult or impossible to spend the settlement funds properly.
Does the City have the ability and/or infrastructure to undertake the reporting required under the settlement? The City must create and submit annual reports regarding the use of these funds if the City receives the funds,.
Subdivision Fund – Additional Funds for the City as a Litigating City The City also receives Subdivision Funds for future opioid remediation, to reimburse past opioid related expenses and to pay the reasonable fees and expenses of the Special Master administrating the settlement and retained counsel. These Subdivision Funds do not default to the County and will continue to go directly to the City.
Opioid Litigation Settlement Funds Distribution
November 21, 2023 – Page 2