Statewide Joint Powers Authorities and Energy Prepay Bonds

Good morning, everyone:

As always, the views I express today are provided in my official capacity as Director of the Office of Municipal Securities, but do not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff. I want to thank you for inviting me, and all of you for your commitment to advancing education on municipal debt in California, including potential securities law issues, and the responsibilities of certain regulated entities1 to provide issuers with the information they need to make responsible financial decisions.

Today, I want to address a topic that has become increasingly important for California issuers and market participants: joint powers authorities. I'll also spend a few minutes addressing energy prepays - an emerging topic that also presents risks that municipal entities are not receiving the information they need from certain regulated entities.

Statewide Joint Powers Authorities

JPA Structure

As folks know, a Joint Powers Authority, or JPA, is a public entity created when two or more public agencies-such as cities, counties, or special districts-agree to jointly exercise powers common to each, such as the power to issue debt.2 In California, JPAs are authorized under the Joint Exercise of Powers Act.3

You may be wondering why the SEC is concerned about California JPAs - a seemingly state, or even local, issue. The answer is that the SEC is tasked with enforcing federal securities laws, which include the rules and regulations governing antifraud4 as well as issuer protection rules that govern the responsibilities that financial professionals have to state and local governments.5 My remarks today are focused on a specific type of JPA: bond issuing JPAs which are largely privately run and certain of their related housing specific entities. These JPAs issue a lot of bonds and the bonds issued by these types of JPAs have default rates that exceed those of more typical local governments or state level conduit issuers.6 For example, one JPA financed 14 essential housing projects with $2.5 billion in bond financing and now half of those projects have either defaulted, dipped into reserves to make payments or reported some other type of impairment.7 Another JPA has a default rate of 1%8 even though that is over 30 times the overall default rate for municipal bonds and over 100 times the default rate for general governmental bonds.9

And as we have taken a closer look at JPA financings in this state, including essential housing deals, over the past few years, the potential securities law concerns10 are myriad, touching nearly every deal participant from the JPA itself to its contracted staff/advisors, their outside attorneys, the project administrators, and even individual JPA member agencies. Although we first raised concerns regarding the comparatively high default rates,11 we are now very focused on the governance, transparency and accountability deficiencies that may be the building blocks of additional defaults and potential securities law violations that can harm investors and deliver fewer public benefits to taxpayers. We have also seen that investors as well as individual JPA member agencies are often unaware of how the JPAs are governed or the level of transparency they provide.12 These all have securities law implications for you as member agencies13 but also, in my view, contribute to a lack of faith in the integrity of the municipal securities market in California. The lack of transparency and accountability of these governmental entities and the fees and compensation that they pay is, in my view, highly unusual in a market characterized by open and accountable governmental issuers and contributes to the higher default rates and other issues associated with these California JPA deals.

California JPAs were originally intended to facilitate cooperation on projects of joint interest-such as regional infrastructure, public health, or self-insurance.14 For example, early JPAs helped cities and counties address public health crises by pooling resources.15 Even in the context of bond financings, one key advantage of a JPA - as opposed to a special district - for local governments is that they can retain control rather than being subjected to the superimposition of a special district created by the state legislature.16 JPAs derive their power from their members, not from the state legislature and the statutorily required JPA agreement is an agreement amongst the members and sets out the method or manner in which the power and purpose of the JPA will be accomplished or exercised.17 Today, however, certain bond-issuing JPAs in California are used as essentially for-profit statewide conduit issuers for municipal bonds, without, in my view, the levels of transparency and accountability typically associated with governmental borrowing or with any currently meaningful arrangements for governmental control.18 JPAs can be formed quickly, run by private entities with a profit motive, and have hundreds of member agencies statewide that have ceded control of any ability to influence governance or reliably receive basic information about the operations of the JPA.19

The California bond-issuing JPAs I am referring to are often governed by a board, typically composed of representatives that may be current or former governmental officials.20 However, in practice, those representatives are often acting in their personal - not official - capacity and day-to-day governance is delegated to private advisors.21 For example, Contra Costa County has noted that the Board of Directors of CMFA is not representative of its member agencies, consisting of two individuals from private municipal advisory firms, four retired public sector individuals, and two individuals actively employed in the public sector serving in their personal capacity.22 Additionally, the fee structure for those private advisors - essentially outsourced staff - is frequently tied to the amount of bonds issued, which incentivizes these firms to recommend deals for approval regardless of whether the deal makes financial sense or is in the best interest of the affected member agencies.23

This monetary incentive could also encourage private JPA staff and associated financial professionals to potentially falsely claim that municipal entities will not be able to accomplish a financing unless they use a privately-run JPA. Municipal entities should understand that there are many ways of financing conduit deals and that any person advising you to participate in a JPA offering by claiming it is the only financing option may not be fulfilling its obligation to make you aware of potentially more advantageous options, even if deal participants indicate that they have decided to use a specific JPA.24 For example, a municipal entity in California can use one of the state-level conduit issuers run by the California State Treasurer which have state-level accountability and transparency provisions.25 Additionally, some municipal entities have their own departments or divisions that can issue bonds, or they can form one, which gives the municipal entity maximum control over the financing plus direct accountability to local constituents. Both of these options may deliver a greater public benefit to the municipal entity at a lower cost even if they mean less compensation for the registered or unregistered MA proposing the privately-run JPA financing. The bottom line is that the privately-run statewide JPAs are far from the only option California local governments have to accomplish affordable housing transactions, other private activity bonds or any other financing intended to benefit the public. In my view, the mere fact that a JPA issues a lot of bonds that are purportedly for affordable housing or some other public benefit does not mean that they are actually delivering that public benefit or providing the same level of public benefit as more transparent and accountable governmental issuers.

Municipal Advisors, Fiduciary Duty, and Incentives to Overissue

Any person or firm that provides advice to a municipal entity about a bond issue is a "municipal advisor" under federal securities law, and owes you a fiduciary duty. This includes persons that advise or otherwise attempt to induce a municipal entity to utilize a privately-run JPA in connection with the issuance of municipal securities.26 This statutory fiduciary duty includes a duty of loyalty owed to the municipal entity and a duty of care owed to the municipal entity and any obligated person client.27 As noted above, in the context of these JPAs, a municipal advisor or any person who is claiming that a privately-run JPA is the only financing option may have to explain the pros and cons of all available options, including factors such as differences in the level of public benefit provided in a JPA financing versus alternatives, the initial and ongoing fees charged by the JPA and other associated professionals (including teams of bond counsel and underwriters), how much of the issuer fee is shared with member agencies (if any), the JPA's default history and the level of control that the municipal entity has over the JPA. Even though the JPA is the issuer of the bonds, the duties of anyone engaging in municipal advisory activity extend beyond just issuers to apply to any person who provides advice to, or on behalf of, a municipal entity.28 That means that the municipal advisor to the JPA has a fiduciary duty and that duty applies to advice they provide to member agencies and potential member agencies, absent an available exclusion or exemption. 29 In other words, because many of these JPAs and their advisors have a financial incentive to maximize issuance volume, decisions to approve a project may be influenced by a desire to earn fees rather than to approve projects that are in the best interest of member agencies or that provide the most public benefit at the lowest cost.

The potential profits are immense. For example, for the fiscal year ended June 30, 2025, firms advising California JPAs received fees for providing part-time staffing and operations ranging from around $3.1 million to over $11.9 million per JPA.30 Some of these firms are as small as two people,31 serve multiple JPAs at once,32 and are often also entitled to a portion of additional fees charged by the JPA such as "annual bond administrative fees" and "compliance monitoring fees."33 Even if the firm's engagement is terminated, they are often entitled to future administrative fees with respect to all bonds issued prior to termination of their service agreement, even though they are no longer performing work for the JPA.34 The two largest California statewide JPAs have retained almost $125 million in issuer fees since 2010.35 This is money that largely would have otherwise been available to public agencies to fund public services. The JPA's member agencies, on the other hand, are not entitled to any portion of those fees or receive just a small portion of the total issuance fee and even that is split between the host municipality and charitable organizations within that host municipality.36 Meanwhile, oversight of those fees by member agencies appears to be severely limited by boilerplate JPA member agreements. All of these factors together create potential disclosure concerns.

Disclosure Concerns

The structures and incentives I just described raise concerns for both primary and secondary market disclosure. In the primary market, the specific amount and nature of these "advisory" and other fees are often not clearly disclosed to investors.37 Instead, they are often combined with trustee and audit fees into an opaque "other administrative expenses" line item on financial projections, even though the specific fee amounts are known to the JPAs and their advisors.38 Depending upon the facts and circumstances, the initial and ongoing failures to properly disclose these fees could constitute a materially misleading statement in violation of the antifraud rules. The contingent nature of the fees is also often not disclosed.39 JPA members should also consider inquiring about whether the municipal advisors to the JPA are receiving transaction-based compensation such as fees based on the size of the bond issue, subordinate bonds or in-kind assets such as purchase rights which may raise other federal and state compliance concerns.40

Another major concern in the secondary market involves potential noncompliance with continuing disclosure requirements under Exchange Act Rule 15c2-12, which indirectly obligates issuers and obligated persons to file annual financial information and operating data, including audited financial statements, in many circumstances.41 If, for example, a JPA omits material information from its continuing disclosures that renders those disclosures materially misleading, such as information regarding material related party transactions, those omissions hinder the ability of investors and member agencies to understand a project's financial health and may constitute antifraud violations. Likewise, the failure to disclose related party transactions involving the receipt of subordinate bonds in exchange for in-kind assets such as purchase rights to an apartment project, certain intellectual property, and a business plan may also constitute violations.42

Financial Distress - the Larkspur Example

As noted previously, in recent years, several JPAs in California have been associated with municipal bond transactions that have produced financial distress, governance challenges, and concerns about the accuracy and transparency of information provided to municipal issuers and investors.43 Many of these problems have emerged in the context of "essential housing" programs, also known as workforce housing programs, where JPAs acquire apartment complexes using tax-exempt bonds and promise middle-income housing benefits to the communities that approve them.44 According to Municipal Market Analytics, essential housing transactions account for 19 of 45 (42%) currently impaired local housing borrowers, $3.12B of the total $3.75B (83%) in currently impaired local housing par, and virtually all (96%) of the growth in impaired local housing par since November 2023.45

One of the most salient examples involves the California Community Housing Agency (CalCHA) and the Serenity apartment project in Larkspur. After the City of Larkspur joined CalCHA with the expectation of CalCHA delivering rent-restricted units to middle-income households, the project failed to meet its core policy goals.46 Serenity never delivered a meaningful level of affordability: only 59% of the units were leased to income-qualifying tenants, and in many cases those tenants paid higher rents than non-qualified tenants, contrary to what the City had been promised.47 The project simultaneously required the City, Marin County, and other public agencies such as school districts and emergency services providers to subsidize CalCHA by foregoing approximately $3 million in property taxes annually, amounting to $14 million over five years, while CalCHA, its advisor, and the project administrator collectively earned roughly $7 million in fees during that same period despite Serenity's underperformance and the bonds defaulting.48 The project was ultimately sold at a $50 million loss for investors.49 Now, at least seven California essential housing deals have either defaulted, dipped into reserves to make payments, or reported some other type of impairment.50

Additionally, Larkspur's efforts to obtain information from CalCHA revealed structural issues that complicated their ability to oversee Serenity and CalCHA.51 CalCHA's board appeared to delegate its decision-making authority to GPM Municipal Advisors, a private advisory firm that also benefited from CalCHA's bond transactions.52 According to Larkspur officials, CalCHA and GPM provided minimal information, were difficult to engage, and failed to respond substantively to repeated requests for documentation and meetings.53 The City eventually concluded that the JPA's governance structure provided no effective means for it as a member to raise concerns or influence project administration, leading Larkspur to withdraw from CalCHA altogether.54

Liability Concerns

Municipal entities should also pay careful attention to the application of state law to these JPAs. For example, California's law generally prohibits public officials from having a financial interest in any contract that they make.55 The California Supreme Court has affirmed that that prohibition extended to independent contractors and consultants who functionally act as government staff for an agency, depending on the specific facts and circumstances.56 For example, contracted staff who prepare or shape the contract in which they have a financial stake could be subject to that conflict-of-interest law.57 The remedy for a violation of these rules is that the contract is invalidated. Why does this matter for securities law purposes? Because if the contracts that form the basis for investors to be paid are deemed to be invalid, then investors can't be paid. JPA member entities should be aware of whether this very significant risk is being disclosed in, at a minimum, JPA financings in which they play a part.

Additionally, California law requires that JPAs file certain agreements, amendments, and notices with various state regulatory bodies within certain timeframes as a prerequisite to issuing bonds.58 JPA members should be concerned about whether these additional state level requirements are being followed and whether the risks of not complying with these state laws are disclosed to investors.

It is also important to note that member agencies are not necessarily immune from liability for the actions of the JPAs of which they are a member. JPAs are comprised of, derive their power from and could not exist without, their constituent municipal entities, and neither the Joint Exercise of Powers Act nor the JPA member agreements limit the applicability of the federal securities laws to member agencies. Again, the Joint Exercise of Powers Act requires member agencies to agree on the method and manner by which the JPA accomplishes its purpose. The member agencies have the power to amend those agreements. The large number of members in an individual JPA does not relieve member agencies of this role, rather it requires, as is generally the case under the federal securities laws, compliance solutions tailored to the makeup of the entity.59 As noted above, one identified advantage of using a JPA is the ability to assert more local control.60 In other words, each member agency is a control person because they created, gave their powers to, agreed to the manner in which the JPA would be operated and remain members with the ability to amend the governance structure of, the very JPAs that potentially engage in a variety of securities law violations. Thus, member agencies that fail to properly oversee a JPA could be held liable for actions of the JPA that violate federal securities law as a "control person."61 Additionally, the Joint Exercise of Powers Act does not prohibit member agencies from directing or influencing the decisions of any JPA of which they are a member, again it anticipates that they will agree on the method or manner by which the agency accomplishes its purpose. It is important for local counsel to remember that contracting away oversight responsibilities may be OK under California law but a federal securities law analysis could find that member agencies are control persons due to their role as creators and members of these JPAs and their legislatively mandated role in determining how the agency will be operated.

In sum, municipal entities must remain vigilant when approached to join a JPA and about their ongoing membership in bond issuing JPAs for which they are already a member, particularly when non-governmental or profit-motivated entities will play the sole role or a significant role in making decisions about fees, compensation and the level of public benefit provided, managing properties, or determining disclosure practices. As discussed, those practices may result in violations of the antifraud provisions through material misrepresentations or omissions in initial and ongoing disclosures, potential control person liability for member agencies who cede oversight of the JPA to small, non-governmental staff with built-in conflicts of interest, violations of fiduciary duties owed to municipal entities, and unregistered municipal advisory activity by consultants and advisors. Without appropriate oversight over JPAs, municipal entities risk unknowingly, but negligently, allowing an agency that would not exist without their continuing participation to violate federal securities laws in a variety of ways while exposing themselves to potential liability under the federal securities laws, and exposing investors to elevated or substantial financial burdens while providing taxpayers with fewer public benefits than other governmental agencies.62

Energy Prepay Bonds

Next, I'd like to briefly discuss the fast-growing sector of energy prepay bonds, also known as energy prepays. Energy prepays have grown from a niche product to over 5% of the Bloomberg Municipal Index, surpassing $100 billion outstanding in 2025, with 37% average annual issuance growth.63

With energy prepays, the issuer uses bond proceeds to prepay an energy supplier-typically for a long-term supply of gas or electricity, often over 30 years.64 The funding recipient, a private entity, receives those funds and makes scheduled payments that ultimately support debt service.65 For the municipal entity, they are essentially trading their tax exemption in exchange for potential long-term energy savings for their ratepayers.

While the economics may seem attractive at first glance, municipal entities should know that energy prepays carry risks that differ significantly from traditional municipal credits. For example, most energy prepays have put features or extendible maturities shorter than the underlying energy agreement, requiring periodic remarketing.66 A failed remarketing during market stress could trigger termination mechanics, increase carrying costs, or disrupt secondary market pricing.67

Regarding disclosure, the fast growth in this sector means that more and more firms are approaching municipal entities preaching the benefits of energy prepays.68 That is why it is important for municipal entities and their advisors to carefully scrutinize the projected savings presented to them and to understand the potential for unrealized or smaller-than-expected savings as well as other less direct market consequences. As mentioned above, a municipal advisor has a fiduciary duty to its clients that includes a duty of care and, in most cases, a duty of loyalty which means that the financing should be in the best interests of their municipal entity client.69 This means, for instance, municipal advisors could calculate and present the value of the difference between the taxable and tax-exempt rate on the proposed deal, in order for the municipal entity to be able to properly compare the amount they are receiving against (i) the overall value of the interest savings being realized by the funding recipient; and (ii) the total amount of onetime and ongoing fees being paid on the deal. To be clear, the role of the SEC is not to second-guess any issuer's financial decision but to ensure that issuers are getting the information regulated entities are required to provide them so that they can make the best decision for themselves. But a municipal advisor's duty to act in the issuer's best interests70 is why it is so important that your advisor explains the true economics and risks of a prepay deal and provides sufficient information for you to make an informed decision in this fast-growing and complex sector of the market.

Conclusion

With that, I'd like to thank you all for joining me this morning. As government officers and municipal market participants, you are in the unique position of experiencing firsthand the evolving market sectors and practices that we just discussed. I urge you to remain critical, ask questions, and consult the resources available through the SEC, the MSRB, and FINRA. Our office runs a help line (202-551-5680), webpage (sec.gov/municipal) and email inbox ([email protected]), and we are here to support you as you navigate these evolving structures.

Thank you for your attention, and a special thank you again for hosting important educational programs for municipal issuers.

• 1The regulated entities discussed herein include municipal advisors, brokers, dealers, and municipal securities dealers.
• 2See Cal. Gov't Code § 6502 (2025).
• 3See Cal. Gov't Code §§ 6500-6539.9.1 (2025).
• 4See 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 17 CFR 240.10b-5.
• 5See Registration of Municipal Advisors, Exchange Act Release No. 70462 (Sept. 20, 2013), 78 FR 67468 (Nov. 12, 2013) ("Municipal Advisor Adopting Release") (addressing, among other items, the fiduciary duty applicable to municipal advisors).
• 6As of Aug. 19, 2026, $3.12 billion in outstanding essential housing par is impaired (technical and payment defaults) and the payment default rate is 3% of essential housing par outstanding. See Default Trends, Municipal Market Analytics (Aug. 19, 2026). By contrast, over the past decade, annual municipal default rates have sat between 0.03% and 0.15% of par outstanding. See Municipal Market Analytics Default Study, Municipal Market Analytics (2025).
• 7See Caitlin Devitt, Municipal Advisor for PFA, CalCHA defends distressed deals, The Bond Buyer (April 30, 2026) (referencing CalCHA).
• 8See Default Trends, Municipal Market Analytics (Aug. 26, 2026).
• 9See US Municipal Bond Defaults and Recoveries, 1970-2022, Moody's Investors Service (2023); Municipal Market Analytics Default Study, Municipal Market Analytics (2025).
• 10Potential securities law concerns include possible violations of the antifraud rules, fiduciary duties, Exchange Act Rule 15c2-12, SEC broker-dealer registration requirements, and MSRB rules.
• 11See Sanchez, Dave, Director, Office of Municipal Securities, Joint Powers Authorities and Other Topics for Market Participants, October 24, 2024, available at https://www.sec.gov/newsroom/speeches-statements/sanchez-remarks-california-bond-buyer-conference-102424.
• 12See Report From Ad Hoc Committee Reviewing the City's Membership in the California Community Housing Agency (CalCHA) and the Performance of its Larkspur Property, "Serenity at Larkspur" (November 1, 2024), available at https://www.cityoflarkspur.org/964/Ad-Hoc-Committee-on-CalCHA-and-Serenity.
• 13See discussion infra regarding "control person" liability. See also 15 U.S.C. § 78t; 17 C.F.R. § 240.10b-5.
• 14See California State Legislature Senate Local Government Committee, "Governments Working Together: A Citizen's Guide to Joint Powers Agreements," (Aug. 2007), available at https://sgf.senate.ca.gov/sites/sgf.senate.ca.gov/files/GWTFinalversion2.pdf.
• 15See id. at 10.
• 16See 1 Robert A. Fippinger, The Securities Law of Public Finance § 1:5.5 (4th ed. 2025).
• 17See Cal. Gov't Code § 6503.
• 18See generally Schifrin, Matt and Contreras, Isabel, California Scheming, Forbes, (December 2, 2021) available at https://www.forbes.com/sites/schifrin/2021/12/02/california-scheming-municipal-bonds-workforce-housing-crisis-luxury-apartments/?sh=4e785e643001. See also Joint Powers Authorities: Issues of Viability, Control, Transparency, and Solvency, Orange County, California (2015) available athttp://cams.ocgov.com/Web_Publisher_Sam/Agenda03_22_2016_files/images/O00616-000294A.PDF; Joint Powers Authorities In Nevada County: Who Are They and Who's Watching?, Nevada County, California (2022), available at https://www.nevada.courts.ca.gov/system/files/general/publication-sd-jpa-report.pdf; Conduit Bond Issuers 2012 Report, California State Auditor, available athttps://information.auditor.ca.gov/pdfs/reports/2011-118and2011-613.pdf.
• 19See CSCDA's website ("Currently, more than 530 cities, counties and special districts have become Program Participants to CSCDA - which serves as their conduit issuer and provides access to an efficient mechanism to finance locally-approved projects."), available at https://cscda.org/about/.
• 20See Cal. Gov't Code § 6507.
• 21See generally Schifrin, Matt and Contreras, Isabel, California Scheming, Forbes, (December 2, 2021) available at https://www.forbes.com/sites/schifrin/2021/12/02/california-scheming-municipal-bonds-workforce-housing-crisis-luxury-apartments/?sh=4e785e643001.
• 22See Report, Termination of Membership in Conduit-Issuer Joint Powers Authorities (Sep. 15, 2026), available at https://contra-costa.legistar.com/View.ashx?M=F&ID=15845113&GUID=5FAEDCAF-FCC5-4A9F-B308-DBA60C50FF91.
• 23See Schifrin, Matt and Contreras, Isabel, California Scheming, Forbes, (December 2, 2021) available at https://www.forbes.com/sites/schifrin/2021/12/02/california-scheming-municipal-bonds-workforce-housing-crisis-luxury-apartments/?sh=4e785e643001.
• 24See SEC v. Comer Capital Group, LLC and Brandon L. Comer, Litigation Release No. 25935, 2024 WL 360905 (Jan. 31, 2024) (settled action).
• 25See Report, Termination of Membership in Conduit-Issuer Joint Powers Authorities (Sep. 15, 2026), available at https://contra-costa.legistar.com/View.ashx?M=F&ID=15845113&GUID=5FAEDCAF-FCC5-4A9F-B308-DBA60C50FF91.
• 26See 15 U.S.C. 78o-4(c)(1); MSRB Rule G-42.
• 27See id.
• 28"Municipal entity" means, in part, "any State, political subdivision of a State, or municipal corporate instrumentality of a State or of a political subdivision of a State." See Exchange Act Rule 15Ba1-1(g). The definition of "municipal entity" is not limited to just issuers of municipal securities. See Municipal Advisor Adopting Release, 78 FR, at 67482 ("[T]he definition of ''municipal entity'' should not be limited to issuers of municipal securities. . . . [T]he definition of municipal entity does not otherwise limit itself to those entities that issue municipal securities.").
• 29See SEC v. Comer Capital Group, LLC and Brandon L. Comer, Litigation Release No. 25935, 2024 WL 360905 (Jan. 31, 2024) (settled action) (duty to inform municipal entity of options arises even if municipal entity indicates they have already chosen a particular option).
• 30See 2025 Financials - CMFA, available at https://www.cmfa-ca.com/wp-content/uploads/2026/03/California-Municipal-Finance-Authority-6.30.25-Issued-FS.pdf; 2025 Independent Auditor's Report, Financial Statements, and Supplementary Information - CSCDA, available at https://cscda.org/wp-content/uploads/2025/12/CSCDA-2025-Financial-statements.pdf.
• 31See Caitlin Devitt, The Public Finance Authority's Troubled Ownership Program, The Bond Buyer (April 23, 2026).
• 32See id.
• 33See 2025 Financials - CMFA, available at https://www.cmfa-ca.com/wp-content/uploads/2026/03/California-Municipal-Finance-Authority-6.30.25-Issued-FS.pdf; 2025 Independent Auditor's Report, Financial Statements, and Supplementary Information - CSCDA, available at https://cscda.org/wp-content/uploads/2025/12/CSCDA-2025-Financial-statements.pdf.
• 34See 2025 Independent Auditor's Report, Financial Statements, and Supplementary Information - CSCDA, available at https://cscda.org/wp-content/uploads/2025/12/CSCDA-2025-Financial-statements.pdf (prior advisor received over $3.1 million in fees for the year ended June 30, 2025 despite their service agreement with CSCDA terminating in 2015).
• 35See Audits and Transaction Reports, CSCDA, available at https://cscda.org/resources/ (approximately $57,757,595 in issuer fee revenue); Audited Financials, CMFA, available at https://www.cmfa-ca.com/resources/financials/california-municipal-finance-authority/ (approximately $46,155,121 in issuer fee revenue). These issuer fee amounts do not include annual fees, bond administration fees, application fees, etc.
• 36See Schedule of Fees - CMFA (June 12, 2026), available at https://www.cmfa-ca.com/wp-content/uploads/2026/06/CMFA-Fee-Schedule-06-12-26.pdf; Schedule of Fees - CSCDA (Dec. 2025), available at https://cscda.org/wp-content/uploads/2025/12/Fee-Schedule.pdf.
• 37See, e.g., Appendix I to CalCHA Serenity at Larkspur Official Statement, available at https://emma.msrb.org/ER1310370-ER1021163-ER1427137.pdf.
• 38See id. See also 2025 Financials - CMFA, available at https://www.cmfa-ca.com/wp-content/uploads/2026/03/California-Municipal-Finance-Authority-6.30.25-Issued-FS.pdf.
• 39See Statement of the Commission Regarding Disclosure Obligations of Municipal Securities Issuers and Others, Exchange Act Release No. 33-7049 (Mar. 9, 1994), 59 FR 12748, 12751 (Mar. 17, 1994).
• 40See Cal. Gov't Code § 53592 (requiring every financial advisory relationship involving local agency bonds to be evidenced in a written document that sets forth the basis of compensation and that prohibits transaction-based compensation). See also Guide to Broker-Dealer Registration, available at https://www.sec.gov/about/divisions-offices/division-trading-markets/division-trading-markets-compliance-guides/guide-broker-dealer-registration (explaining what constitutes unregistered broker-dealer activity).
• 41See 17 CFR 240.15c2-12. Rule 15c2-12 prohibits underwriters, subject to certain exemptions, from purchasing or selling municipal securities covered by Rule 15c2-12 in a primary offering, unless the underwriter had reasonably determined that the issuer (or obligated person) had undertaken in a written agreement or contract to provide specified annual information and event notices. See id.
• 42See id. See also MSRB Rules G-42(e)(ii) and G-42(f)(ix). Related party transactions give rise to specific risks of material misstatement of the financial statements, including the risk of fraud. See GASB 56, GASB Codification Section 2250, "Additional Financial Report Considerations," AU-C Section 550, and ASC Topic 850.
• 43See Caitlin Devitt, Municipal Advisor for PFA, CalCHA defends distressed deals, The Bond Buyer (April 30, 2026).
• 44See id.
• 45See Default Trends, Municipal Market Analytics (Aug. 19, 2026).
• 46See Report From Ad Hoc Committee Reviewing the City's Membership in the California Community Housing Agency (CalCHA) and the Performance of its Larkspur Property, "Serenity at Larkspur" (November 1, 2024), available at https://www.cityoflarkspur.org/964/Ad-Hoc-Committee-on-CalCHA-and-Serenity.
• 47See id.
• 48See id.
• 49See John Ramos, Larkspur Apartment Complex Meant for Middle-Income Housing Sold After Project Fails, CBS News (April 14, 2026).
• 50See Caitlin Devitt, Municipal Advisor for PFA, CalCHA defends distressed deals, The Bond Buyer (April 30, 2026).
• 51See Report From Ad Hoc Committee Reviewing the City's Membership in the California Community Housing Agency (CalCHA) and the Performance of its Larkspur Property, "Serenity at Larkspur" (November 1, 2024), available athttps://www.cityoflarkspur.org/964/Ad-Hoc-Committee-on-CalCHA-and-Serenity.
• 52See id.
• 53See id.
• 54See id.
• 55See Cal. Gov't Code § 1090 (2025).
• 56SeePeople v. Superior Court (Sahlolbei) (2017) 3 Cal.5th 230, 237-240.
• 57See id. at 240.
• 58See Cal. Gov't Code §§ 6503.5 & 6503.6 (2025).
• 59See, e.g., Disclosure Committee Report: Practices and Trends, Ernst & Young LLP (2021) (discussing disclosure committees in the context of public company financial reporting). See also Crafting Disclosure Policies, National Association of Bond Lawyers (Aug. 20, 2015), available at https://www.nfma.org/assets/documents/other.orgs/crafting_disclosure_policies.pdf ("disclosure policies should be tailored to the size, complexity, and other relevant features of particular issuers.").
• 60See 1 Robert A. Fippinger, The Securities Law of Public Finance § 1:5.5 (4th ed. 2025).
• 61See generally 15 U.S.C. § 78t; 17 C.F.R. § 240.10b-5.
• 62Although municipal entities may not be financially liable for payments on these conduit bonds, as discussed above municipal entities may face costs and liabilities related to the JPA governance failures that led to deficient disclosures.
• 63See Nuveen, Beyond the Rating: Energy Prepay Bonds Explained, available at https://www.nuveen.com/en-us/insights/municipal-bond-investing/beyond-the-rating-energy-prepay-bonds-unpacked.
• 64See id.
• 65See American Century Investments, Energy Prepays: Powering Yields, Variety in Muni Portfolios, available at https://www.americancentury.com/insights/how-energy-prepay-bonds-work/.
• 66See Jeff Lipton, Demystifying Energy Prepay Bonds, The Bond Buyer (May 29, 2026).
• 67See id.
• 68See Jessica Lerner, SMAs show growing interest in prepaid gas sector, The Bond Buyer (June 10, 2026).
• 69See 15 U.S.C. 78o-4(c)(1); MSRB Rule G-42.
• 70See 15 U.S.C. 78o-4(c)(1) ("A municipal advisor and any person associated with such municipal advisor shall be deemed to have a fiduciary duty to any municipal entity for whom such municipal advisor acts as a municipal advisor."); see also MSRB Rule G-42.