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: Disagrees wholly with the finding. The Orange County Public Financing Authority (OCPFA) and the South Orange County Public Financing Authority (SOCPFA) were established to provide for the financing of public capital improvements. The OCPFA and SOCPFA operate in accordance with the California Government Code, commencing with Section 6500 (The Joint Exercise of Powers Act). The Orange County Board of Supervisors (Board) acting as the governing body of the OCPFA and SOCPFA, considers and approves the issuance of debt at a public meeting that is agendized and noticed. Prior to Board consideration, debt issuance is publicly agendized, reviewed and approved by the Public Financing Advisory Committee (PFAC). PFAC is an advisory committee made up of five public members appointed by each Board member, the Auditor- Controller, Treasurer-Tax Collector, and County Executive Officer.

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. Disagrees wholly with the finding. The OCPFA and the SOCPFA are transparent Response: in the debt issuance process, as described in the response to F.4. and in post bond issuance financial reporting and compliance. OCPFA and SOCPFA debt are reported in the Long Term Obligations Note to the Basic Financial Statements, the Supplemental Information Section of the Comprehensive Annual Financial Report (CAFR), and the Annual Financial Transactions Report to the State Controller. SOCPFA debt issued, under the Marks-Roos Act, is reported annually to the California Debt and Investment Advisory Commission (CDIAC). SOCPFA debt issued, under the Marks-Roos Act, refunds pools of two or more Community Facilities Districts (CFDs) for interest rate savings, achieving economies of scale through one debt issuance instead of administrative cost of multiple debt issuances. For example, the interest rate savings and decreased administrative cost of refunding provided direct annual savings to the taxpayers in the Ladera Ranch CFDs refunded through SOCPFA in 2014. Continuing Disclosure Annual Reports (CDAR) in accordance with each bond continuing disclosure certificate, are posted on the Electronic Municipal Market Access (EMMA) website, at www.msrb.emma.org, as well as the County of Orange website at Orange County, California - Continuing Disclosure Reports (http://ocgov.com/gov/ceo/deputy/finance/public/continuing disclosure reports) RECOMMENDATIONS AND RESPONSES: All Joint Powers Authorities should take the following actions to insure