Proposition 71, passed by California voters in November, 2004, authorized the sale of $3 billion dollars worth of general obligation bonds by the State of California to finance embryonic stem cell research under the administration of the California Institute for Regenerative Medicine (CIRM) governed by the Independent Citizens' Oversight Committee (ICOC).
California State Treasurer Phil Angelides voted to authorize stem cell bond sales, is responsible for administering them, and has engaged the services of bond counsel Orrick, Herrington & Sutcliffe LLP to help him do that
According to
a December 21, 2004, article on the Cooley Godward web site "To facilitate this process, Proposition 71 establishes a committee, the California Stem Cell Research and Cures Finance Committee, to oversee the sale and issuance of bonds. Composed of several state officials, ICOC members and the ICOC Chairperson, the Finance Committee is charged with the responsibility of issuing bonds and determining the amount of bonds to be issued in each year."
California State Treasurer (and candidate for Governor of California) Phil Angelides, who is, as provided for in Proposition 71, a member of the California Stem Cell Research and Cures Finance Committee and who, in that role, voted to authorize the sale of the stem cell bonds, is responsible for overseeing the issuance of the general obligation and other
bonds authorized by the California Stem Cell Research and Cures Finance Committee, pursuant to the power vested in it by Proposition 71, at its May 9, 2005, meeting.
In
a July 15, 2005, press release from that law firm, it was announced that
Orrick, Herrington & Sutcliffe LLP has been reappointed by California State Treasurer Phil Angelides to act as lead bond counsel for state general obligation bond issues for a two-year term starting July 1, 2005. Orrick has held this position for more than 50 years."
lead bond counsel for the State of California addresses the issues
Robert Feyer, a partner in public finance in the San Francisco office of Orrick, has been [since 1986] the lead bond counsel for the State, handling issuance of general obligation bonds."
California Politics Today spoke yesterday with Mr. Feyer, who used that opportunity to explain in detail a number of aspects of the situation regarding the sale of bonds by the California Stem Cell Research and Cures Finance Committee to finance embryonic stem cell research under the direction of the ICOC/CIRM as provided for under the terms of Proposition 71.
You can listen to that conversation, in its entirety, by clicking
here.
You can listen to an excerpt from that conversation, in which Mr. Feyer talks about a "fuzzy area" within the "uncharted territory" at the heart of the process: the creation of an intellectual property regime that would allow the return of revenue to the State of California (as demanded by some stakeholders) while at the same time meeting Internal Revenue Service (IRS) standards that would allow the stem cell bonds to be sold with a tax-exempt status, by clicking
here.
Mr. Feyer also talked about
a proposal that "instead of having a direct stream of payments from Genentech go back to the State," would create a new, non-profit entity that would receive royalty payments from Proposition 71-funded research and "use it to subsidize health care for California citizens, low income California citizens….another idea is to have Genentech provide some of the drugs at a lower cost as a condition of getting this license."
During the interview, Mr. Feyer indicated that such questions regarding the status of Proposition 71 stem cell bonds as either tax-exempt or taxable bonds were an issue separate from those raised by
the lawsuit now pending to completely invalidate the sale of these bonds, whatever their status.
the ironic crux of the issue
The final paragraph of
Stem Cell Wars, Volume 1 concludes a discussion of the lawsuit now pending against the ICOC by saying:
"The essence of this case is that, under the terms of Proposition 71, the State of California was to issue and be responsible for the repayment of (at least) $6 billion to cover the cost of raising $3 billion from bond sales for the ICOC to spend, while the ICOC was to exist and operate independently of the bureaucratic and political control of the State of California, its elected officials, and the voter/taxpayers these officials represent."
In fact, in the wake of this interview with Mr. Feyer, we can see that the situation is even more complex, and, in a sense, ironic. Providing a return on investment to the State of California for its $6 billion investment in embryonic stem cell research through the ICOC/CIRM, unless Mr. Feyer, his colleagues, and the collectivity of stakeholders involved in this process can device a structure acceptable to the IRS, would
by its very existence jeopardize the tax-exempt status of the bonds that would be used to raise that money, thereby requiring the same State (and taxpayers) of California to offer these bonds at a higher interest rate and, consequently, spend more tax money to repay them.
So while
the "reverse validation action" now pending seeks to shut down
any stem cell bond sales on the grounds that the ICOC/CIRM can't have it both ways by accepting state funds while being exempt from state control, the conundrum revealed by this conversation with Mr. Feyer is that if California wants to get back money from its investment in stem cell research, it may very well need to pay a higher rate of interest (and a greater overall amount) as the price of being able to get any of that money back at all.
explore the backstory by reading and listening to Stem Cell Wars, Volume 1
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