Bonita Canyon Public Facilities Financing Authority of Orange County*

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: The Authority disagrees wholly with this finding as it relates to the Authority. The Authority members include two public agencies, each controlled by a separate Board or City Council. The Authority formed a CFD (with voter consent) with the sole purpose of levying special taxes to provide repayment of the Authority bonds issued for the facilities outlined in the Authority formation documents. Therefore the Authority does not have a "vertical" structure, but rather a "horizontal" structure as described in the Report.

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. Response: The Authority disagrees wholly with this finding as it relates to the Authority for the reasons previously stated, relative to the purpose and activity of the CFD being limited to the authority formation documents.