Saturday, July 7, 2018
Contra Costa [County] grand jury blasts unchecked government agencies writing their own checks
An obscure government agency, the Joint Powers Authority, can take on significant debt without oversight from the county, the state or the voters, according to a recently released Contra Costa civil grand jury report.
The report — titled “Joint Powers Authorities: Transparency and Accountability” — was marked more by what the grand jury found to be a lack of information on Joint Powers Authorities. These agencies, or JPAs as they are known, are essentially agreements between two or more government agencies to collaborate and create a third agency to provide a service or combine their monies for a large project.
Among the most important findings were that an unknown number of JPAs in Contra Costa County have taken on an unknown amount of debt that did not need voter approval and can exceed debt ceilings imposed on regular government agencies. The county and its 19 cities have at least $1.5 billion in public debt.
“The JPAs, they don’t need to go out to the people for voter approval, they just publish what they will do and voters have 30 days to fight it,” said Mario Gutierrez, foreman for the county’s grand jury.
Normally, cities, schools and counties can’t borrow more than they take in each year unless two-thirds of the voters approve. However, JPAs aren’t bound by the same rules and can take on more debt than they make as long as voters do not notice the local ordinance on the council meeting agenda and then initiate a referendum within 30 days. The grand jury stated that this rarely occurs.
There is no single entity responsible for tracking these JPAs, though some steps have been taken since the report was issued.
JPAs come in different sizes, from a single city to the entire state, as well as functions, such as providing services or financing. Some are formed to pool resources for larger services, such as the East/Central County Wastewater Management Authority. Others are formed to finance large projects, such as the State Route 4 Bypass Authority. There are JPAs for wastewater, healthcare, fire protection, financing, recreation, a Delta ferry for island hopping, habitat conservancy and schools.
The grand jury focused on only the financial JPAs, but could not get a consolidated list from the county or the state. So it sent out public information requests to the 19 cities and found there were 66 JPAs in the county, and 23 of them focused on financing.
A list sent from the state controller’s office on Tuesday found that there were 42 JPAs in the county. Neither the state, nor the county truly knows how many of these there are, nor how much debt they have taken on.
These agencies are different from community service districts, which derive their authority from the state and voters and are overseen by the Local Agency Formation Commission. In 2017, a bill was passed that required LAFCO to collect JPA agreements.
“We have no authority over JPAs. We can’t form them or disband them, we’re just a repository,” said LouAnn Texeira, executive officer of the county’s LAFCO. “We have the ones we collected on our website, but the focus for LAFCO is for municipal services, not financing mechanisms.”
Texeira said that LAFCO recently asked the cities for more information on their JPAs and received back statements on 36 JPAs in the county.
She confirmed that JPAs don’t need voters to agree to new debt, but also likened this to service districts that are formed for new developments. Before homes are built, the city may require the developer to pay for city services to the area that is being developed.
“There’s a deal with one developer rather than 500 homeowners. If the developer agrees to it, then it passes and then the costs are passed on to the homeowners,” Texeira said.
Of the $1.5 billion in public debt held in Contra Costa County, it’s unclear how much is from JPAs and has been passed down to the individual cities or districts and then to the residents. The only way to discover that is through a financial report on the municipal bond markets, which lists publicly available debt for purchase. This does not account for private offerings to private investors.
The concerns have a basis in Bay Area history. In 2016, the former financial services director for the Association of Bay Area Governments, a Bay Area-wide JPA, pleaded guilty to stealing close to $3.9 million when he was in charge of bonds through the ABAG Finance Authority for Nonprofit Corporations.
The grand jury also focused on 12 JPAs in the county that it labeled “circular,” where the two agencies joining together were actually run by the same city. Such is the case with cities and their former redevelopment agencies, which took on debt in the past to refinance city areas, but were disbanded by the state in 2012. In all 12 cases, the city council has the authority over the city, the successor agency and the financing JPA. In several cases, the city manager and city clerk were the only signatures needed from both agencies for the JPA to then take on more debt.
“In one case, the same individual signed for both the city and its (redevelopment agency),” the report read, but did not identify which city.
Those cities are: Antioch, Brentwood, Concord, El Cerrito, Hercules, Pinole, Richmond and San Pablo. Lafayette, Pleasant Hill and San Ramon formerly had these same types, but their agencies are have dissolved, though the debt remains.
No state or county agency is in charge of overseeing any audits or operations of JPAs, according to the report. The Secretary of State, State Controller, California Debt and Investment Commission and LAFCO only accept these reports.
On June 13, the State Controller’s office uploaded more specific data on the finances of the JPAs to its website.
It is unclear if these numbers represent the total amount or a snapshot at this time.
July 4, 2018
East Bay Times
By Aaron Davis