sr-092865-8aCITY OF SANTA MONICA
DATE:
T0:
FROM:
September 10, 1965
The Honorable City Council
Perry Scott, City Manager
SUP.JECT: Water Treatment Plant Financing Methods
As directed by the City Council we have been working with our special
legal counsel, O'Melveny & Myers, towards the formation of a non-profit
corporation as a means of financing our water treatment plant.
As a direct result of the research necessary to satisfy our special
counsel of the legality of proceeding by this method in our particular
and unique set of circumstances two conclusions have been reached.
One conclusion is that the non-profit corporation, if it must be
employed, would constitute a legally aceeptible method.
The other conclusion is that a less expensive and less cumbersome method
can be developed, and in but little more time than would otherwise be
required.
Your attention is respectfully directed therefore to the accompanying
letter wherein the development of this more desirable approach is
explored at some length.
The administrative staff concurs with this propose). and recommends that
we be directed to have prepared the necessary procedural ordinance for
introduction as soon as possible.
,%
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k._.l~ERRY"SCOTP
City Manager
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LAW OFFI']ES GF
O~MELVENY ~ MYERS
433 SOUTH BPIxiNG ST!a ECT
LOS ANGELES, CALIFORNIA 90013
TELEPHONE o2C-:'.20
CABLE ADDRESS"moms"
SeptE:m'o<?r
9th
1 9 6 5
Robert G. Cockins, Esq.
City Attorney
City call
Santa Monica, California
Lear Mr. Cockins:
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LOVI$ W. MYERSN92]. 1960
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MES L.sEE6E
PAVL PV SSELL
BEVERLY HILLS OFFICE
9601 WILSHIRE BOULEVARD
BEVERLY HILL6~OALIFORNIp 90210
TELEPHONE 2]3-4111
EUROPEAN OFFICE
4~PLACE DE LA CONCORDE
PARIS Ber FRANCE
TELEPHONE 266 39'33
OL1R FILE NVMBER
BM-0156
SAPdTA MONICA {CITY)
4JATER TREATMENT PLANT
LEASE LEASE-BACK
Our research inu~::a`~ ;.. ghat: 'chere is a sound
basis for arguing that the Ci~-r of Sa,~ita Monica could
proceed to use the Revenue.3ono: hati'r of 1941 without an
election to finance'the water treatment plant. The
theory of this is for the City of adopt a procedural
ordinance which would incorporate all of the Revenue
Bond Law of 1941 except the part requiring an election.
The customary referend~?m would apply to this ordinance.
The main authority on which we rely is Cit of Redondo
Beach v. ^1a;cpayers, etc., 54 Gal. 2d 12 19 0~-
We realize that this procedure is a departure
from past precedent. Actually, the City would be issu-
ing the revenue bonds under its "municipal affairs"
powers. The incorporation oa" parts of the Revenue Bond
haw of 1941 would be for convenience only. There are
several decisions that the issuance of bonds is a
"municipal affair". The open question, however, is the
power of the City Council to bind future City Councils
by contractual provisions. 7.'he critical provisions
involved in the revenue bond proceedings would be the
agreement to maintain rates at a sufficient level to
service the bonds and other promises which customarily
appear. in revenue bond ordinances and resolutions.
This problem of binding future City Councils has not
been directly presented in this context. For this
reason, it is our opinion, it would be necessary to
have the bond issue tested in court.
~2 - Robert G. Cockins, Esq.
9-9-65
it is reasonable to expect that such a case
would be of great importance to other charter cities in
the state, ror this reason we believe it would be desir-
able for Santa Monica to take the case to an Appellate
Court so that the precedent could be used by other cities.
Our idea tiaould be to begin the proceedings originally in
the Supreme Court of the State of California. -The form
of action would be a petition for writ of mandate to
compel the City Clerk to publish the notice inviting bids
on the bonds. With a reasonable amount of cooperation
t'.^.is procedure should not delay the project very much in
ccriparison with proceeding under the lease lease-back
procedure. ti^7e further believe that the cost of financing
would be 1ov:er.
We suggest that, if t'ne City decides to go ahead
with the revenue bond approach, that the League of Cali-
fornia Cities be informed so that it could take steps to
inform City Attorneys in other charter cities and so gain
support for the petition in the Supreme Court.
The fee of our office is locaer on revenue bonds
than it is for the more complicated 3ease lease-back. We
,could charge no fee for t~^~c- test cased however, there would
be some costs and expenses for printing briefs, etc.,
'sahieh the City .vould be required to pay. It is reasonable
to expect that the saving 'ln financing costs would more
tha.: cover the expenses of the test suit. The expense
items, however, are. small enough so that they should not
be significant in comparison to the importance of decid-
ing a legal problem this important to your City and
other charter cities,
Please let me know what the City wishes to do
in this matter. 3n t'r~e meantime we will suspend work on
the lease lease-back proceedings.
Very truly yours,
~~ ~"~
James t~larrer, Beebe
of O'MELVENY & MYERS
~~+iB : YES