List of those opting to exit membership of California JPAs small but growing
Donna Alberico
In California, there’s a list that, while small, has grown recently: local governments that have decided to stop being members of a bond-issuing joint powers authority or are weighing the possibility of a JPA membership exit.
Processing Content
For several years now, Dave Sanchez, director of the Securities and Exchange Commission’s Office of Municipal Securities, has been raising concerns regarding oversight of JPAs by member agencies.
A JPA is a public entity formed when two or more public agencies – such as cities, counties or special districts – agree to jointly exercise powers common to each of them, such as issuing debt, Sanchez said in recently published remarks. In California, the OMS director noted, JPAs are authorized under the Joint Exercise of Powers Act.
In his recent remarks, prepared in connection with an Oct. 15 appearance at The Bond Buyer California Public Finance conference, Sanchez pointed to the potential for “control person liability” to apply to member agencies, something he also alluded to in comments made in 2024.
In addition to Sanchez’s public comments, OMS has also contacted JPA member agencies directly about their roles in the oversight of JPAs of which they are members.
Peter Chan, a partner at law firm Baker McKenzie, said “it is not every day” that the OMS reaches out “with such a very pointed concern.” While that concern should be heeded, “to the extent there’s disagreement, obviously there should be transparent discussion with the [OMS] staff,” he said.
The SEC under Chairman Paul Atkins has made a “particular point that this SEC will not engage in regulation by enforcement,” according to Chan, who earlier in his career served as assistant regional director in the SEC’s Chicago Regional Office and was the
“Regulation by enforcement implies that there was no adequate notice prior to enforcement action,” Chan said. “So there is an argument here that the Office of Municipal Securities is providing notice…as a precursor to subsequent enforcement action if parties … do not heed the notice that’s being provided by the Office of Municipal Securities.”
Ed Fierro, a partner at Bracewell LLP, said that while it’s “not an everyday occurrence,” OMS in the past “has contacted issuers in connection with rulemaking or, as is the case here, when it has identified an area of concern.”
“That said, issuers are not required to meet with OMS,” said Fierro, who earlier in his career – and prior to Sanchez’s tenure – served as senior counsel to the director of the SEC’s OMS.
OMS reaching out to issuers doesn’t necessarily signal SEC enforcement action ahead, Fierro added.
“The enforcement division acts independently and decides whether to allocate limited agency resources using a variety of factors,” he said.
Still, it appears that, increasingly, Sanchez’s messaging regarding JPAs is prompting some to make moves. On Sept. 15, the Contra Costa County Board of Supervisors voted to terminate county membership in two JPAs, one of which was the California Statewide Communities Development Authority, also known as CSCDA. A staff report recommending termination that was issued prior to the board’s vote indicated that OMS had contacted the county on Sept. 30, 2025, seeking a meeting relating to oversight of JPA activities.
The staff report also said “the SEC has alluded to potential ‘control person liability’ of JPA member agencies for the conduct of the JPA pursuant to the Section 20a of the Securities Exchange Act of 1934.”
The Contra Costa County staff report was cited in separate letters to CSCDA Executive Director Felicia Williams from City of San Diego Chief Financial Officer Rolando Charvel and Greg Wagner, controller for the City and County of San Francisco.
San Diego “had never contemplated withdrawing from any Joint Powers Authorities” until the OMS contacted the city directly “and raised concerns regarding the extent of the city’s oversight … of the JPAs of which it is a member,” Charvel said in his Sept. 14 letter.
The Contra Costa County staff report, included as an attachment to his letter, “presents these concerns in more detail,” he said.
The San Diego CFO acknowledged the “valuable role” CSCDA “has served for the city with regard to CSCDA’s Statewide Community Infrastructure Program.” However, given “the OMS’ public concerns, the city determined in April 2026 that the most prudent approach for it to take would be to allow the known deals in the SCIP pipeline to continue to completion, and then withdraw from CSCDA, rather than accept the regulatory uncertainty associated with continued membership,” Charvel’s letter said.
Similarly, the San Francisco controller in his Oct. 13 letter acknowledged the “valuable role” CSCDA has served in connection with projects in that city. Wagner’s letter also included the staff report as an attachment and indicated that San Francisco had been contacted by OMS regarding the city’s membership in certain JPAs, including CSCDA.
“While we look forward to seeing CSCDA take concrete public steps to address the SEC’s concerns, in the meantime the city will continue to review whether its ongoing membership in the JPA serves the city’s interests,” Wagner’s letter said.
In an Oct. 26 press release, CSCDA said it was “pleased to report a productive meeting” with OMS’ Sanchez.
“We were pleased to have the opportunity to clarify a few distinguishing characteristics about CSCDA,” Williams said in the release. “We feel that the involvement of JPA members in appointing the CSCDA Commission helps address the ‘control person liability’
During the past few months, “CSCDA has received concerning reports from five member agencies that the SEC had contacted them and questioned their membership in CSCDA, their role in oversight, and ‘high bond default rates,'” CSCDA said in the release.
The meeting between CSCDA and Sanchez took place on Oct. 23 after OMS requested to meet, Williams said in a Nov. 2 email.
In his October public comments, Sanchez noted that his remarks were “focused on a specific type of JPA: bond issuing JPAs which are largely privately run and certain of their related housing specific entities.” Bonds issued by such JPAs have default rates exceeding those of more typical local governments or state-level conduit issuers, he said.
“Although we first raised concerns regarding the comparatively high default rates, 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,” Sanchez said in his October remarks.
“I appreciate SEC [OMS] Director Sanchez’s remarks to raise awareness of the pitfalls to local agencies and taxpayers of these types of conduit JPA financings as they relate to affordable housing,” Stephanie Andre, mayor of the City of Larkspur, California, said in an Oct. 16 statement.
In April 2025, the Larkspur City Council voted to end the city’s membership in the California Community Housing Agency, a JPA known as CalCHA for short. In her statement, Andre said she and Councilmember Scot Candell are proud to have led the investigation into “Serenity at Larkspur,” results of which Sanchez cited in his remarks.
Asked on Nov. 2 whether Larkspur has been contacted by the OMS or anyone at the SEC, the mayor declined to comment.
“The City of Larkspur will not comment on whether it has been contacted by the SEC regarding Serenity,” Andre said in a Nov. 2 statement. “The city’s reasons for withdrawing from CalCHA are detailed in the ad hoc committee’s April 16, 2025 report and are independent of any potential regulatory inquiries.”
