LEASES IN CALIFORNIA: THEIR FORM AND FUNCTION

ALIFORNIA

C EBT D DVISORY ACOMMISSION

LEASES IN CALIFORNIA: THEIR FORM AND FUNCTION

Consultant Transocean Funding

Cole & Associates Gastor & Snow

Public Resources, Inc.

STATE OF CALIFORNIA

CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION

915 CAPITOL MALL, ROOM 400 P.O. BOX 942809 SACRAMENTO, CA 94209-0001 TELEPHONE: (916) 653-3269 FAX: (916) 654-7440

March 1, 1991

MEMBERS

Kathleen Browns State Treasurer

Pete Wilson Governor

Gray Davis State Controller

Robert G. Beverly State Senator

Newton R. Russell State Senator

Jim Costa State Assemblyman

Patrick J. Nolan State Assemblyman

Thomas C. Rupert Treasurer, City of Torrance

Richard B. Dixon Chief Administrative Officer Los Angeles County

As part of an ongoing effort to provide state and local governments with the latest information on debt issuance and management, the California Debt Advisory Commission is pleased to issue Leases in California: Their Form and Function. The report focuses on the use of tax-exempt leasing to meet the real property and equipment needs of public entities.

While the use of tax-exempt leasing in California represents a recognized alternative to more traditional forms of financing such as pay-as-you-go and bonded indebtedness, little has been written about the form and function of public leasing arrangements. This report attempts to fill that void by providing some insight as to why public agencies employ leases, the types of leases which are entered into, and the purposes for which leases are used. The report also discusses the legal, regulatory, and tax considerations associated with tax-exempt leasing.

It should be noted that the overriding purpose of this report is to serve the informational and educational needs of state and local agencies which utilize taxexempt leasing to meet their capital and equipment needs and for those agencies which may be considering such arrangements. The report does not attempt to evaluate the appropriateness or cost-effectiveness of various types of lease arrangements, nor does it advocate leasing over other forms of financing.

Recognizing the importance, however, of providing policy direction on this issue, the Commission will make available a companion piece, Leases in California: Summary and Recommendations, to provide recommendations regarding further research and policy development that may be appropriate with regard to tax-exempt leasing in this state.

Leases in California March 1, 1991 Page 2

In closing, I would like to acknowledge the efforts of the many fine individuals and firms who worked on this report, including Russell Lombard and James Dudick of Transocean Funding, Inc.; Lisa Cole of Cole & Associates; Joshua Cooperman of Gaston & Snow; Robert Butler of Public Resources, Inc.; and Eileen Park, Martha Riley, and Janae Root of the Commission's staff.

Sincerely,

KATHLEEN BROWN California State Treasurer Chairperson, California Debt Advisory Commission

California Debt Advisory Commission

The California Debt Advisory Commission is the state's clearinghouse for public debt issuance information. The Commission was created by the California Legislature in 1981 to assist state and local government agencies with the monitoring, issuance, and management of public debt.

The California Debt Advisory Commission members include:

Kathleen Brown California State Treasurer and Chairman

Pete Wilson Governor or

Thomas W. Hayes Director

Department of Finance

Gray Davis State Controller

Robert G. Beverly State Senator

Newton R. Russell State Senator

Jim Costa State Assemblyman

Patrick J. Nolan State Assemblyman

Richard B. Dixon Chief Administrative Officer

Los Angeles County

Thomas C. Rupert Treasurer

City of Torrance

Additional information concerning this report or the program of the California Debt Advisory Commission may be obtained by contacting:

Steve Juarez Executive Secretary

California Debt Advisory Commission (916)324-2585

LEASES IN CALIFORNIA: THEIR FORM AND FUNCTION

A Study Prepared for the California Debt Advisory Commission

September 1990 Transocean Funding, Inc.

Cole & Associates Gaston & Snow

Public Resources, Inc.

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