Joint Powers Authorities: Issues of Viability, Control, Transparency, and Solvency*

"Vertical Joint Powers Authorities with a single controlling entity, such as a city council, have the potential to use this organizational structure as a shell company to avoid other legal constraints on the controlling entity and to obfuscate taxpayer visibility." Response: SOCWA disagrees wholly with Finding 4 with respect to the purpose, structure, functions and activities of SOCWA. As described by the Grand Jury's terms in the report, SOCWA is a "Horizontal JPA," and owns and operates three wastewater treatment plants, and two major ocean outfall disposal systems, serving 10 member water and special districts and cities in South Orange County. SOCWA is governed by the 10 member board of directors, which meets monthly to conduct SOCWA's business. It is not a 'shell entity' and is fully within the purpose and authority of the Joint Powers Act, conducting a common purpose for its members through the terms of a Joint Powers Agreement and associated project committee agreements that set forth detailed terms for SOCWA's ownership and operation of these POTW systems. SOCWA, a consolidated successor entity to two separate joint powers agencies, was originally formed for the purpose of constructing, financing (through Clean Water Act grants) and operating regional wastewater treatment, conveyance and disposal facilities for the benefit of South Orange County. SOCWA offers no opinion as to other JPAs.

"Vertical Joint Powers Authorities in which the controlling entity transfers assets from itself to a Joint Powers Authority for the purpose of obtaining additional funding, or signs a long-term lease to a Joint Powers Authority to obtain assets, are avoiding transparency and are not acting in the best financial interest of the taxpayers." 34156 Del Obispo Street • Dana Point, CA 92629 • Phone: (949) 234-5400 • Fax: (949) 489-0130 • Website: www.socwa.com A public agency created by: CITY OF LAGUNA BEACH • CITY OF SAN CLEMENTE • CITY OF SAN JUAN CAPISTRANO • EL TORO WATER DISTRICT • EMERALD BAY SERVICE DISTRICT IRVINE RANCH WATER DISTRICT • MOULTON NIGUEL WATER DISTRICT • SANTA MARGARITA WATER DISTRICT • SOUTH COAST WATER DISTRICT • TRABUCO CANYON WATER DISTRICT The Honorable Glenda Sanders Presiding Judge of the Superior Court September 3, 2015 Response: While there may be support for this finding (which SOCWA is, in any case, unaware of), SOCWA disagrees wholly with Finding 5 as to the functions and activities of SOCWA. As described by the Grand Jury's terms in the report, SOCWA is a "Horizontal JPA" and is funded in accordance with its Joint Powers Agreement and related project agreements through an annual budget, established and approved by a vote of its member agencies, with ratifications by those members' own boards and councils. Each SOCWA member agency provides funding for SOCWA's wastewater operations via public and transparent processes for setting sewer service rates, and also by the application of other funding and revenue sources consistent with State and local laws. SOCWA offers no opinion as to other JPAs. Grand Jury Recommendations