3.8 Joint Exercise of Powers Agencies
A joint exercise of powers agency or authority (JPA) is a separate governmental entity formed by two or more governmental entities. A JPA is created by an agreement (generally called a “Joint Exercise of Powers Agreement” and referred to as a “JPA agreement”) among the governmental entities forming the JPA (JPA members). Once established, the JPA is an independent governmental entity separate from the JPA members, with its own governing board, officers, bylaws, conflict of interest code, and treasury, although the governing board, officers, and staff of the JPA are usually representatives from the governing boards, officers, and staffs of one or more of the JPA members. California JPAs have two sources of powers: (1) those powers common to its members and assigned to the JPA, and (2) independent powers granted to JPAs such as the powers granted in the Marks-Roos Local Bond Pooling Act of 1985 (the “Marks Roos Act”).
The laws governing JPAs are quite flexible and JPAs can be used for a variety of purposes. A single JPA can serve a variety of functions and can evolve over time. JPAs generally, however, are of one of three types: (1) a truly independent governmental entity, (2) a vehicle for joint action by JPA members, or (3) a financing vehicle.
An example of a truly independent JPA is one established to operate an enterprise serving a multi jurisdictional area (e.g., a regional treatment facility). Such a JPA generally has its own staff and employees and can often borrow on its own credit (i.e., on the strength of the revenue producing capability of the enterprise it operates).
An example of a JPA serving as a vehicle for joint action by JPA members is a JPA established to finance a project, the costs and benefits of which are to be shared by participating JPA members (e.g., a shared power generation facility). In this case, the officers and staff of the various JPA members work in partnership to manage the affairs of the JPA. Joint venture JPAs often need to rely on JPA member payments to repay JPA debt. Financing can, in this case, be done by the members jointly, with “step up” or other provisions obligating other JPA members to cover debt service if one JPA member cannot cover its share, or separately, with each JPA member borrowing on its own credit and making contributions or advances to the JPA.
The ability to use a JPA as a financing vehicle is derived largely from the Marks Roos Act (California Government Code Section 6584 et seq.). Under the Marks Roos Act, JPAs have a variety of powers designed to enable them to assist in the financing of “public capital improvements” (a broadly defined term). These powers include the power to buy, sell, and lease property, issue revenue bonds, and buy and sell local agency bonds and other debt obligations. Several financing JPAs with statewide scope have been established to assist borrowers by issuing bonds on a conduit basis. Financing JPAs are also often formed by a governmental entity to assist in its financings through a JPA agreement between it and a separate entity governed by its governing board, such as a JPA formed through a JPA agreement between a city and its housing authority. This is referred to as a “captive JPA.”
One use of a financing JPA is to pool credits. If, for example, a governmental agency was issuing debt payable from separate enterprises, the debt could be sold to the JPA, which would issue bonds backed by an undivided interest in all of the debt. JPAs can also be used for pool financings for multiple governmental entities. See Section 3.7.7, Pool Bonds. A financing JPA can also issue lease or installment sale revenue bonds instead of COPs. The governmental entity could, for example, enter into a lease or installment sale agreement with the JPA, which would issue bonds backed by the entity’s payments under the lease or installment sale agreement. See Section 3.3.9, Conduit Revenue Bonds and Section 3.6.4, Joint Powers Agency or Authority (JPA) Bonds and Other Issuances. Finally, a financing JPA can be used to avoid limitations in bond statutes. Competitive sale requirements, for example, can be avoided by selling bonds to the JPA for resale to the underwriters at a negotiated sale.