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HomeMy WebLinkAbout1984 Journal .... Vol. 3 No. 1 Should Mandatory Redemption Be "Mandatory"? Case Study: New York State Public Authorities' Bond Redemption Policy · ...Frank Paukowits and Benjamin Lonner · .: -:: The "Stepped Coupon"--A New Method of Structuring Bond Issues ...Arch W. Roberts and J.. Allan Rudolph Loans-to-Lenders Revenue Bond Financing for Multifamily Rental Housing in California ...Peter J. Ross Tax-Exempt Commercial Paper: An Innovative Financing Technique. ...Christian McCarthy Credit Analysis Overview: General Guidelines in the Analysis of Municipal Bonds ...Sylvan G. Feldstein Index to Volume 2 a publication of PANEL PUBLISHERS ~ I / 23 be to the Stepped Coupon we iii erwhelmingly 'advantageous to , ~ market-place will be swift and i i · -~ Loans to Lenders Revenne Bond Financing for ~ Multifamily Rental Housing ~ in California PETER J. ROSS I. Overview A. Introduction This article describes a plan of financing whereby certain California governmental bodies can stimulate the development of multifamily rental housing within their respective, territorial 'boundaries through the issuance of tax-exempt revenue bonds. In essence, 'the plan seeks to pass the. lower borrowing costs of such issuers through to developers of multifamily rental property. As a result, loans could be made available to developers at a rate significantly below conventional market rates. The lower interest rates should reduce overall project development costs and may enable developers to charge rents which are low enough to be competitive for the area, yet sufficient to be profitable. '-.: B. Eligible Issuers Eligible issuers (the "Issuers") for the loans-to-lenders program described herein divide into three categories: (1) charter cities; (2) PETER J. ROSS is an associate with the law firm of Manatt, Phelps. Rothenberg & Tunney, (San Francisco office). Formerly, he was .with LeBoeuf. Lamb. Leiby & MacRae. He is a graduate of Yale University and attended law school at Emory, in Atlanta, Georgia. The author wishes to acknowledge theassistance of Harold E. Ro~ers, Jr., partner in Manatt, Phelps, Rothenberg & Tunney, m the preparation of this article. 24 / Municipal Finance Journal redevelopment agencies; and (3) the City of Los Angeles. General law cities and counties presently are not authorized to issue bonds for multifamily rental housing; however, both houses of the state have approved legislation which, if signed into law by the Governor, would permit the issuance of such bonds. C. Eligible Housing Developments The location, size nnd occupancy standards of the rental housing projects to be financed-with revenue bonds may be set by the Issuer, subject to federal tax and state law requirements. Under federal tax law, 20 percent of, all rental units f'manced with bond proceeds must (1) be occupied by tennnts having incomes not exceeding 80 percent of the median income for the area as determined. ~bY HUD and (2) be avnilable at an annual rental not exceeding 30~percen__t of the maximum annual income level of such tenants. In the case 0_f_"targeted area projects" (as defined in Section 103A(k) of the Internal RevenUe Code of 1954, as amended), the.20 .percent requirement may be reduced to 15 percent. These requirements must be maintained for a period of at least 20 years after the rental units are available for occupancy (not after the bonds are issued). State law and local ordinances may add further restrictions, all of which could adversely affect the ability of de- velopers to generate sufficient rental 'income to justify development costs---even with reduced borrowing costs. D. General Structure Basically, the Issuer would issue its revenue bonds and loan a major portion of bond proceeds to one Or more f'mancial institutions (the "Lenders"), 'to fund construction and 'permanent loans to developers of multifamily rental housing projects (the "Developers"). Accorclingly~ two sets of loans are involved: (1) the loan of bond proceeds to the Lenders (the "Lender Loans") and (2) the. Lender's loans to the Developers (the "Developer Loans"). Principal of and interest on the bonds are payable from payments of the Lender Loans; principal of and interest on the Lender Loans, in turn, are payable from payments of the Developer Loans. The bonds, the Lender Loans and thc Developer Loans will have parallel payment provisions and each will have terms of 10- 12 years. A loan with a 10- 12 year term is considered a permanent financing, yet the interest costs of such loan are significantly less than those associated with longer term financings. The payment schedule of each loan will be based on a permanent amortization schedule of 30-40 years, with a balloon payment in the tenth or twelfth year. Accordingly, the large portion of each loan will not be due until the housing projects have been in operation for several years and have had an opportunity to develop a positive cash flow. 1. Eligible Lenders include commercial banks, savings and loan associations, savings banks and insurance companies. .os Angeles. General law cities The bonds will never constitute a debt or liability of the Issuer. They are ~ issue bonds for multifamily ~ [ payable solely from the revenues and assets pledged therefor, principally ;tate have approved legislation .~[ from repayments of the Lender Loans. Although the Lender Loans [would permit the issuance of - constitute a general obligation of each Lender, that obligation alone usually. [ .~ is not sufficient to secure an "AAA" rating on the bonds, necessary for marketing purposes. That-rating may be. obtained by two principal means: ~ (1) a letter of credit or similar obligation of a financial institution having an "AAA" credit rating and/or (2) the collateralization of the Lender Loans of the rental housing projects ~ with certain other mOrtgages or federal direct or guaranteed securities, each set by the Issuer, subject to r federal tax law, 20 percent of having a value substantially in excess of the relevant Lender Loans. The "AAA" hi, St (I)be occupied by tenants rating will reduce the Issuer's borrowing costs, and this reduction will be he median income for the area passed through to the Developer. lble at an annual rental not ~ income level of such tenants. : II. State Bonding Authorization fined in Section 103A(k) of the for Eligible Issuers ~), the 20 percent requirement nents must be maintained for a A. Charter Cities its are available for occupancy Charter cities are empowered to issue revenue bonds for multifamily ~nd local ordinances may add ? rental housing if the city charter incorporates the home rule provision of :rsely affect the ability of de- Article XI, Section 5(a) of the California Constitution. That section autho- iome to justify development 'rizes charter cities, in the a. bsence of any charter restrictions to the contrary, to make and enforce all laws respecting "municipal affairs": It shall be coml~ent in any city charter to provide that the city governed llue bonds and loan a major thereunder may make and enforce all ordinances and regulations in res- peet to municipal affairs, subject only to restrictions and limitations lrde financial institutions (thc provided in their several charters and in respect to other matters anent loans to developers of they shall be subject to geueral laws .... velopers"). AccOrdingly, two ' proceeds to the Lenders (the The scope of a charter city's local autonomy, i.e., the definition of oans to the Developers (the "municipal affairs," is determined by the courts on a ease-by-case basis. No rest on the bonds are payable court has decided whether issuance of revenue bonds for muir[family housing ~1 of and interest on the Lender is a municipal affair. Under accepted analysis, the home rule grant should ? the Developer Loans. be considered sufficiently broad. ~loper Loans will have parallel Courts seem to apply a two-step approach in determining whether a ~of 10- 12 years. A loan with a charter city's local ordinance is protected by Article XI, Section 5(a). First, they nancing, yet the interest costs examine the state and local laws to determine if any conflict exists between ~e associated with longer term them. Conflicts have been found in the following instances: where the two n will be based on a permanent .laws were inconsistent with each other, see, e.g., $onoma County, etc. v. ith. a balloon payment in the County of Sonoma, 23 Cal. 3d 296 (1979); where local law dul~lieated a portion of each loan will not be state provision, see, e.g., Pil~oly v. Benson, 20 Cal. 2d 366 (1942); and where 3peration for several years and the state legislature has evidenced an intent to preempt the field, see, e.g., .~cash flow. Bishop v. City of San ffose, I Cal. Rptr. 56, 63 (1969); l~edevelol~ment Agency v. City of Berkeley, App. 143 Cal. Rptr. 633 (1978). In the absence ~ings and loan associations, savings of a conflict, both the local and state law should be upheld. · 26 / Municipal Finance Journal In the event of a conflict, courts will then inquire into the nature of the matter that the local law seeks to regulate. If the matter is a municipal affair; the local law will be upheld. See $onoma County, supra. If the local law infringes on a matter of statewide concern, the local law will be invali- dated. See generally, David, California Cities'and the Constitution of 1879: General Laws and Municipal Affairs, 7 H.C.L.Q. 643 (1980), Sato, "Munici- pa!Affairs" in California, 60 Cai. L. Rev. 1055 (1972). Courts have upheld local laws with extraterritorial effect as long as their impact upon matters of statewide concern was not "serious." See, e.g., Weekes v. City of Oakland, 21 Cal. 3d 386 (1978) (involving a local occupation tax). Although the California legislature has enacted a number of laws providing for the issuance of revenue bonds for multifamily rental housing (see, e.g., Cal. Health & Safety Code §§33750, et seq. (Deering); id. §§52055-56), it has not evidenced an intent to preempt the multifamily rental housing field. In at least one instance the state expressly has recognized and preserved the right of charter cities to issue revenue bonds for multifamily rental housing purposes. One such legislative pronouncement appears in Section 52053(b) of the Health & Safety Code concerning the power of local housing finance agencies to issue revenue bonds to provide long-term mortgage financing: [N']othing in this subdivision shall affect the authority conferred upon a charter city by its charter to issue revenue bonds to undertake a program of long-term mortgage financing for multifamily rental housing. Similarly, in A.B. 665, currently awaiting the Governor's approval, the legislature has stated: IT]he provisions of this chapter shall not be construed to limit or other- wise restrict the authority of chartered cities to issue bonds for the pur- pose of financing the construction or development of multifamily rental housing... ° In light of the above legislative expressions, a court could not' reasonably find that the state has evidenced an intent to preempt the field of multifamiy rental housing. Accordingly, state law cannot be said to restrict the issuance of multifamily rental housing revenue bonds by charter cities. In the unlikely event t-hat a conflict with state law is perceived, a court nonetheless may uphold a local ordinance on grounds that the issuance of revenue bonds for multifamily rental housing purposes is a "municipal affair" protected against inconsistent state laws by the home rule grant. Such a finding is supported by those cases which hold that the procedure for the issuance of revenue bonds is a municipal affair. See, e.g., Fritz v. City and County of San Francisco, 132 Cal. 373 {1901), City of Santa Monica v. Grubb, 245 Cal. App. 2d 718 (2d Dist. 1966). See generally, Sato, supra.at 1080..As additional support, analogy can be made to the muni- cipal tax cases which have established a strong policy of home rule fiscal * If signed by the Governor, A.B. 665 would enable all cities~general law and charter~to issue revenue bonds for multifamily rental housing. Loans-to-Lenders RevenUe Bond'Financing / 27 inquire into the nature of the . autonomy. See, e.g., Weekes v. City °fOaicland, '21 Cal. 3d 386 (1978); Ex If the matter is a municipal parteBraun, 141 Cal. 204(1903)~ na County, supra. If the local iR The bonds of charter cities and the Projects to 'be financed therewith are rn, the local law will be invali- .~. subject only to federal tax law requirements, unless the charter itself or the and the Constitution of 1879: -' local ordinance enacted .thereunder adds further restrictions. As a result of .Q. 643 (1980), Sato, "Munich ~ this 'flexibility, charter cities are .the most desirable issuing entities of 955 (1972). Courts have upheld : revenue bonds for multifamily rental housing. as their impact upon matters of g., Weetces v. City of OMc/and, ~ation tax). Redevelopment agencies are empowered to issue revenue bonds for ; enacted a number of laws multifarnily rental housing pursuant to the provisions of S.B. 99, codified at for multifamily rental housing ~ Cal. Health & Safety Code §§33750 et seq. (Deering). The enabling i33750, et seq. (Deering); id. language is contained in Section 33761, which provides: "'An agency may It to Preempt the multifamily issue revenue bonds for the purpose, of financing residential construction tance the state expressly has authorized by this chapter .... "Although not expressly provided, it is er cities to issue revenue bonds reasonable to presume that rental housing is contemplated within the ; such legislative pronouncement definition of "residential construction." "Residential construction" refers & Safety Code concerning the only to "residences," the definition of which' includes mUltifamily issue revenue bonds to provide residential structures, but does not distinguish between rental and owner- occupied dwellings. Id. §337530). .- authority conferred upon a The housing projects financed under S.B. 99 must satisfy the occupant- ~n~ to undertake a program eligibility requirements prescribed by Sections 33760 and' 33760.5. The unily rental housing, applicability of these requirements depends upon whether the project is ~the Governor's approval, the located within or outside a "project redevelopment area.": If the rental project is located within a project redevelopment area, there are no ~e construed to limit or other- .'s to issue boners for the pur- restrictions as to occupant eligibility. If the project is located outside a opment of multifamily rental project redevelopment area, all occupants must be "eligible for financial assistance specifically provided by a governmental agency for the benefit of occupants of the residence." Id. §33760. .s, a court could not' reasonably Section 33760.5 attempts to ease some of the hardships created by Section :ent to preempt the field of 33760 for redevelopment agencies operating in jurisdictions having a te law cannot be said to restrict population in excess of 600,000 persons. Such agencies may finance ~venue bonds by charter cities, multifamily rental housing developments outside a redevelopment project state law is perceived, a court area for persons of low or moderate income3 provided that (1) 20 percent of ~n grounds that the issuance of the rental units are committed to lower-income households and (2) 10 zing purposes is a "municipal percent of such units are committed to very low-income households. Section laws by the home rule grant. 33760.5 further provides that the above restrictions will not apply if federal which hold that the procedure rent subsidies become unavailable. At present, theSespecial provisions have icipai affair. See, e.g., Fritz v. effect only until January 1, 1983, unless extended by statute. ~al. 373 (190t), City of Santa '2d Dist. 1966). See generally, 2. A "redevelopment project area" means a project area as defined by Cal. Health & aa/ogy can be made to the muni- Safety Code §33320.1 for which a redevelopment plan has been adopted by ordinance pursuant tong policy of home rule fiscal to Section 33365 of that Code. Project areas must be located in blighted areas and must be selected by a planning commission for the community. all cities--general law and charter--to I 3. "Low or moderate income" is del'reed as 120 percent of the area median income. Cal. Health & Safety Code §33760.5(bi(Deering). 28 / Municipal Finance Journal As a practical matter, it may be very difficult to finance muitifamily rental housing developments with bonds of redevelopment. agencies~whether or not such developments are lOCated within redevelopment project areas. The restrictions added by S.B. 99 may severely ~ curtail the ability of a housing project to generate sufficient rental income to justify development costs. In the case of hoUSing developments in redevelopment project areas, the blighted conditions of such areas, may - force rents to be too low. On the other hand, rental income from housing · developments outside project areas will be reduced by virtue.of the more stringent occupant-eligibility requirements. C. City of Los Angeles Section 52055 of the Health & Safety Code specifically aUthorizes cities with populations exceeding 2,000,000 persons to issue revenue bonds for multifamily rental housing. At present, only the City· of Los Angeles qualifies. Section 52055 sets forth only one minor limitation on the housing projects to be financed thereunder: the rental units mUst be occupied by persons of low and moderate income. Until December 31,1981, counties' with populations exceeding 4,000,000 persons were empowered to issue revenue bonds for muitifamily rental hoUSing pursuant to the conditions of SectiOn '52056 of the Health & Safety Code. The "sunset" 'provision of Section 52056, however, .was not extended. Accordingly, Section 52056 no longer provides bonding authorization for multifamily rental housing. D. A.B. 66S' At present, general law cities and counties have no bondingautho _rizati.on for multifarnily rental housing. A.B. 665, if signed into law by the Governor, would provide that authorization. In addition, chapter cities would be per- mitted to avail themselves of the provisions of A.B. 665. Accordingly, A.B. 665 would moot any questions concerning the authority of charter cities to issue revenue bonds for multifamily rental housing. The requirements of A.B. 665 parrot those set forth in Section 103(b)(4)(A) of the .Internal Revenue Code. By .definition, then, under current laws, a tax-exempt revenue bond for multifamily residential housing would qualify under A.B. 665,' subject to the restrictions of A.B. 665 on the aggregate amount of multifamily rental housing bonds which may be issued.s 4. However, since the provisions of Section 103(bX4RA) are not incorporated by reference, A.B. 665 would be unaffected by an easing of the restrictions for federal tax-exemption. 5. As an alternative menns of financing multifamily rental housing, A.B. 665 permits cities and counties to contract with the California Housing Finance Agency ("CHFA") to sell the bonds of such city or county and to operate.a progrnm to fund construction and mortgage loans for multifamily rental housing developments within such city or county. This alternative subjects the management and construction of all developments financed thereunder to the supervision of the CHFA. '-~ Loans-to-Lenders RevenUe Bond Financing / 29 ifficult to finance multifamily A.B. 665 also allows cities and counties to apply not more than 10 percent bonds of redevelopment of bond proceeds to the development of commercial property for lease? ~ments are located within Such commercial_property must be located on the same parcel as, or the added by S.B. 99 may severely parcel adjacent to, a multifamily rental housing development. Any rents ~nerate sufficient rental income collected therefrom in exces.q of payments necessary for debt service, oper- : of housing developments in ating expenses and required reserves must be applied to reduce the rent conditions of such areas may charged on units reserved for lower-income and very low-income households. ~d, rental income from housing A.B. 665 limits the aggregate amount of bonds which may be issued for reduced by virtue of the more multifamily rental housing purposes to $900,000,000. This ceiling applies whether or not such bonds were issued pursuant to A.B. 665 or any other provision of law, including a city charter. By its terms, A.B. 665 would remain in effect until January 1, 1984, de specifically authorizes cities unless extended by a later enacted statute. ms to issue revenue bonds for rely the City of Los Angeles E~ Local Housing Authorities ninor limitation on the housing Local housing authorities of cities and counties created under the ental units must be occupied Housing Authorities Law, Cal. Health & Safety Code §§34200 et seq. are permitted to finance primarily slum clearance or loW-rent housing for persons ,opulations exceeding 4,000,000 of low income. Absent subsidization, such housing projects would not be bonds for multifamily rental financially feasible; the rental income generated thereby could not pay ~n 52056 of the Health & Safety development costs. on 52056i however, was not In addition, voter approval may be required for all such bonds of a local no longer provides bonding housing agency. Under Article XXXlV of the California Constitution, state [' public bodies are prohibited from developing, constructing or acquiring low-rent housing projects without voter approval. Although the state legislature has exempted from this restriction privately owned developments have no bonding authorizatign · in which not more than 49 percent of the rental units are available to gned into law by the Governor, persons of low income, the projects t° be financed by local housing c)n, charter cities would be per- authorities may not fall within this exception. There is, however, greater :)fA.B. 665. Accordingly, A.B. probability that this exception' would apply to the bonds of the other he authority of charter cities to issuers. ousing. those set forth in Section F. The RentaiHousingConstructionProgram e. By definition, then, under The Rental Housing Construction Program, described in SectiOns 50735 multifamily residential housing et seq. of the Health & Safety Code, provides additional authority pursuant he restrictions of A.B. 665 on to which cities, counties and redevelopment agencies can issue bonds to housing bonds which may be. finance multifamily rental housing projects. However, such issuers must first apply to and receive a commitment from the Department of Housing }(A) are not incorporated by reference, restrictions tbr federal tax-exemption. ' rental housing, A.B. 665 permits cities Finance Agency C'CHFA") to sell the km to fund construction and mortgage 6. This 10 percent limit reflects the Internal Revenue Code requirement that 90 percent fin such city or county. This alternative ("substantially all") of the proceeds of any industrial development bond be used to provide the ,elopments financed thereunder to the exempt facility (i.e., the housing developments). ,See Treas. Reg. §1.103-8(a)(1). 30 / Municipal Finance joUrnal and Community Development for an allocation of fUnds before such bonds can be issued'. Accordingly, the program neither provides certain bonding authorization for local issuers, nor, in the case of charter, cities, meaningfully expands the already existing authority to issue, multifamily rental housing revenue bonds. III. Federal Tax Exemption The tax exemption of revenue bonds for multifamily rental housing is provided in Section 103(b)(4)(A) of the Internal Revenue Code of 1954. At a minimum, such bonds must comply with this Section and the regulations thereunder, regardless of any requirements imposed by state bonding acts.' Section 103(b)(4)(A) of the Code, as amended by the Mortgage Subsidy Bond Tax Act of 1980, permits tax-exempt financing for residential rental property if individuals of "low or moderate" income are to occupy at least: (1) 15 percent o'f the rental units in the case of "targeted area projects" or .:~-.- (2) 20 percent of the rental units in the case of any other project. "Low or ~:-. moderate-income" is defined by Section 167(k)(3)(B) of the Code, which incorporates the standards set for Section 8 of the United States Housing Act of 1937, as income not exceeding 80 percent of the median income area as determined by HUD. "Targeted area residences" is defined in Section 103A(k) of the Code as a residence which is in (1)a qualified census tract (where 70 percent of the families in the tract have incomes which are 80 percent or less than the statewide median) or (2)an area of chronic economic distress' (as designated by the state and approved by the Secretary of HUD). Under Section 103(b)(4)(A) of the Code, this 20-percent/15-per- cent test must be satisfied for a period of at least 20 years following the completion of the housing project, whether or not the bonds are outstanding. The rental housing projects to be f'manced with tax-eXempt revenue bonds also must qualify as "residential real property'' under Treas. Reg. § 1.103- 8(b). Thus, the housing facilities must be available for public use and consist of complete living units, with living, sleeping, eating, cooking and sanitation facilities, which are not used on a transient basis. IV. Detailed Analysis of Financing A. Financing Documents As stated earlier, a loans-to lenders financing involves two sets of loans: (1) the loan of bond proceeds to the Lenders, and (2) the Lender's loans to 7. The bonds also must comply with the arbitrage provisions of Section 103(c) and those provisions which apply to industrial development bonds generally. Loans-to-Lenders Revenue Bond Financing / 31 ion of funds beforesuch bonds the Developers. These transactions necessitate three types of financing ither provides certain bonding doCUments: two with respect to each loan and a third with respect to the the. case of charter cities, bonds. In addition, if a letter of credit or similar obligation is obtained as authority to issue multifamily added security for the payment of the bonds, a fourth set of financing documents would be required. The following is a description of the basic documents contemplated by a :emption multifamily loans-to-lenders financing secured by a letter of credit. DOCUMENT DESCRIPTION multi family rental homing is BOND (1) Trust Indenture Agreement between the Issuer and tal Revenue Code of 1954. At a DOCUMENT trustee for the bondholders (the lis Section and the regulations "Trustee"). Issuer agrees to repay imposed by state bonding acts.? bonds from available funds and aded by the Mortgage Subsidy pledges program assets and revenues financing for residential rental to the Trustee as security. income are to occupy at least: LETTER OF (2) Application for Application by Issuer to letter of vf"targeted area projects" or CREDIT Letter of Credit credit bank to issue letter of ~of any other project. "Low or DOCUMENTS credit. ;7(k)(3)(B) of the Code, which ; of the United States Housing (3) Letter of Credit Agreement by letter of credit bank unconditionally and irrevocably to :ent of the median income area pay principal of and interest on the fidences" is defined in Section bonds. Issued to the Trustee for the ~ in (1) a qualified census tract benefit of the bondholders. tCt have incomes which are 80 LENDER (4) Lender Loan Agreement between Issuer and ~) or (2) an area of chronic LOAN COmmitment Lender. Lender commits to orig- and approved by the Secretary DOCUMENTS Agreement inate, and Issuer agrees to allocate ', Code, this 20-percent/15-per- to such Lender, specified principal at least 20 years following the amount of loans. Agreement is :ther or not the bonds are entered into before the bonds are. issued. with tax-exempt revenue bonds (5) Lender Loan Agreement between Issuer and ~y" under Treas. Reg. §1.103- Agreement Le~der providing for the actual loan available for public use and of bond proceeds. Lender's obliga- sleeping, eating, cooking· and tion to repay the loan is evi- [ransient basis, denced by a note which will be en- domed by Issuer to the Trustee. )f Financing (6) Reimbursement Agreement between Issuer and Agreement Lender obligating Lender to reim- burse letter of credit bank for any draws made byTrustee under the ing involves two sets of loans: letter of credit. ~, and (2) the Lender's loans to DEVELOPER (7) Deed of Trust Agreement by Developer to grant LOAN a lie~ on and security interest in the DOCUMENTS housing project to a Deed of Trust >rovisions of Section 103(c) and those 8e-nerally' trustee on behalf of the Lender. 32 / Municipal Finance Journal (8) Developer Note Mortgage Note by Developer tO the Lender evidencing obligation to re- pay the Developer Loan'. :, (9) Regulatory Agreement between the Developer, -.' Agreement Trustee and Issuer relating to the permitted use of the housing de- ~:'r velopment. Regulatory Agreement is necessary to ensure tax exemp- tion of the Bonds. " (10) Special Warranty Agreement by DeveloPer (i) to · Deed and Deed comply with occupant-eligibility Restrictions requirements fOr a period of twenty years and (ii) to maintain property as residential real property during lifetime of bonds. Agreement runs with the land and is binding upon any subsequent owner of the housing project. B. The Bonds 1. General The bonds will be issued in an amount sufficient to fund all of the Lender Loans, to pay issuance costs, and to fund a debt service reserve fund for the bonds. The actual size of the bond issue thus will depend upon the principal amount of loans each Lender commits to make to Developers. The interest rate on the bonds will be based on current rates at the time of marketing. The obligations of the Issuer relating to the bonds will be contained in a Trust Indenture with a qualified bank or institution acting on behalf of the bondholders (the "Trustee"). In particular, the Trust Indenture will: (1) pledge and assign all available funds and assets to the Trustee as security for the bonds; (2) Create various funds through which project revenues will flow; (3) set forth payment and repayment provisions; and (4) define events of default under which the Trustee can draw upon the letter of credit or other security for the bonds. 2. Security for the Bonds The bonds are payable from and secured by three sources of revenues: (1) repayments of the Lender Loans; (2) moneys held by the Trustee in the various funds and accounts created under the Trust Indenture; and (3) moneys drawn by the Trustee under the letter of credit (or other security obligation) and/or other collateral pledged to the payment of the bonds. The primary source of payment for the bonds is the repayments of the Lender Loans pursuant to individual Lender Loan Agreements. The Loans-to-Lenders Revenue Bond Financing / 33 Mortgage Note by DeVeloper to the maturity and payment provisions of the bonds and Lender Loans will be Lender ev/dencing obligation to re- virtually identical; prepayments of the Lender Loans will trigger pre- pay the Developer Loan. payments of the bonds. Agreement between the Developer, In the event that payments received from the Lenders are insufficient to Trustee and Issuer relating to the meet debt service on the bonds, the Trustee may withdraw moneys from the permitted use of the housing de- various funds and accounts established under the Trust Indenture. The velopmenL Regulatory Agreement Trust Indenture will Set forth the order in which such funds and accounts is necessary to ensure tax exemp- may be so used. A Debt Service Reserve Fund.usually will be established to tion of the Bonds. pay at least six months' to one year's interest on the bonds." The ultimate security behind the bonds is the letter of credit or.similar Agreement by Developer (i) to comply with occupant-eligibility obligation from a bank having an "AAA" rating and/or collateral pledged r~quiremen~s for a I~iod of twent~j by Lenders in the form of certain mortgage loans .Or/federal securities years and (ii)to maintain property having a market value substantially in eXcess-of the Lender Loan. The as residential real. property during actual collateral requirements will be dictated by the rating agencies and/or lifetime of bonds. Agreement runs the bank. with the land and is binding upon A loans-to-lenders financing may be structured to permit the bondholder¥ any subsequent owner of the (or the trustee acting on his behalf) to claim against the letter of. credit or housing project, the pledged collateral, or both, in :the event of default. If the bondholders can claim against the pledged collateral, the aggregate yield thereon is limited by the arbitrage rules to the yield On the bonds. See Rev. Rul. 78-348 (1978). This restriction necessitates the periodic revaluation of the collateral, since its yield continually changes. However, if the collateral is pledged ~ufficient to fund all of the Lender solely for the benefit of the letter of credit bank and the bondholders a debt service reserVe fund for the can proceed only against the letter of credit, then the problems associated mUS will depend upon the principal with collateral would be eliminated. This is the preferable alternative. ake to Developers. The interest rates at the time of marketing. 3. Funds ) the bonds will be contained in a The tYPical loans-to-lenders financing requires the establishment and institution acting on behalf of the maintenance of the following funds: lar,. the Trust Indenture will: (1) ·sets to the Trustee as security for FUND . SOURCE AND PURPOSE OF FUND ~ugh which project revenues will (1) Loan Fund Funded from bond proceeds and early prepayments t provisions; and (4) define events of Lender Loans. Applied to make Lender Loans and, ~raw upon the letter of credit or after 3 years from date of the bonds, to redeem the bonds. For convenience, Loan Fund may be divided into (1) separate"Lender Loan Accounts" and (2)a Contingency Account in the event a commitment to ~ . originate a Developer Loan is not full'flied. d by three sources of revenues: (l) (2) Cost of Issuance Funded from bond proceeds. Applied to pay issuance oneys held by the Trustee in the Fund . costs, including legal fees, printing expensesd e~c. /er the Trust Indenture; and (3) letter of credit (or other security :/io the payment of the bonds. S. If the Trustee is able to draw immediately under the letter of credit or other s~curity for le bonds is the repayments of the the bonds, the need for a Debt Service Reserve Fund may be obviated. Indeed, such Fund may no longer be "r~asonably required" within the mean/rig of Section 103(c) of the Internal Lender Loan Agreements. The Revenue Code. In such instance, moneys in such Fund could not be invested at unrestricted yield, thereby causing the Fund to become superfluous. 34 / Municipal Finance Journal (3) Revenue Fund Funded from payments and most prepayments of Lender. Loans, and investment income from other funds. Amounts representing prepayments of Lender Loans are used to redeem bonds. Other amounts are used to pay program expenses, principal and interest on the bonds, and to fund any deficien- cies in the Debt Service Reserve Fund. (4) Debt Service Funded from bondproceeds in an amount sufficient Reserve Fund to pay six months' to one year's interest on the bonds in the event of default. (5) Bond Fund Funded from transfers from the Revenue Fund and Debt Service Reserve Fund. Applied to pay debt service on the bonds. For convenience, Bond Fund may be divided into separate Interest, Principal and Redemption Accounts. C. The Letter of Credit The letter of credit would be issued to the Trustee on behalf of the bondholders in an amount sufficient tO pay when due, total principal of, premium, if any, and interest on the bonds. The Trustee would be entitled to draw on the letter of credit to pay debt service on the bonds in the event of default in the payment of a Lender Loan. Upon each draw, the letter of credit bank would have recourse against: (1) the defaulting Lender; (2) the collateral pledged by such Lenders; and (3) program revenues and assets held by the Trustee. These rights would be specified in the Application for Letter of Credit by the Issuer and in the Reimbursement Agreement between the letter of credit bank and the Lender. The letter of credit bank generally will charge between 50 to 100 basis points each year for its credit. This premium is a program expense, payable from the "spread" between the interest rate on the bonds and the interest rate on the Lender Loans. An alternative to a letter of credit security arrangement is a Collateral Purchase Agreement among the Issuer, the Trustee and a financial institu- tion having an "AAA" credit rating. Under this alternative, in the event of a default by a Lender in the repayment of the Lender Loan, the Trustee would have the right to sell, and the financial institution would be required to purchase, the collateral securing the defaulted Lender Loan. The purchase price would be an amount at least equal to the principal amount of the Lender Loan then outstanding, plus one year's interest thereon. The initial commitment and annual fee of such financial institution may be lower than the fee on a letter of credit. However, the Collateral Purchase Agreement will involve problems of valuing and revaluing collateral. Loans-to-Lenders Revenue Bond Financing / 35 ents and. most prepayments of D. The Lender Loans ;d investment income from other The Lender Loans will be made to each Lender in an amount equal to its representing i~repayments of commitment to originate Developer Loans. That commitment must be ! Used to redeem bonds. Other entered into prior to the issuance of the bonds since it largely will determine ~o pay program expenses, principal the size of the bond issue. As security for its commitment, each Lender will ~ bonds, and to fund any deficien- ~ice Reserve Fund. be required to pay a non-refundable commitment fee~ equal to approx- imately 2 percent of the principal amount of its commitment. The i proceeds in an amount sufficient commitment also will require that the Lender enter into a ~ubstan~ial to one year's interest on the bonds binding obligation to make a Developer Loan Within six months after ~ult. issuance of the bonds. This is a requirement for the tax exemption of the ifers from the Revenue Fund and bonds. See Treas. Reg. § 1.103-1~(b)(3). !rye Fund. Applied to l~ay debt The Lender Loan will be made pursuant to a Lender Loan Agreement with ds. For convenience, Bond Fund thc Issuer. That Agreement will require the proceeds of the Lender Loan to ,o separate Interest, Principal and be used for Developer Loans and will set forth the payment and prepayment mrs. terms'° of the Loan and other agreements of the Lender. The interest rate on the Lender Loan will be approximately five-eighths of 1 percent more than the interest rate on the bonds. The Lender's obligation to repay the Issuer will be evidenced by a note. the Trustee on behalf of the Assuming a letter of credit is used to secure the bonds, each Lender would ! when due, total principal of, enter into a Reimbursement Agreement with the letter of credit bank as a : The Trustee would be entitled condition of receiving a Lender Loan. Under that agreement, the Lender xvice on the bonds in the event would pledge to such bank collateral in the form of certain federal securities Upon each draw, the letter of and/or mortgages in consideration of the bank's issuance of its letter of ) the defaulting Lender; (2) the credit. As noted earlier, the requirements for the value of the pledged ) program revenues and assets collateral will be set by either the letter of credit bank, the rating agency ;peCified in the Application for for the bonds, or both, depending upon.whether the bondholders can claim le Reimbursement Agreement against that collateral. der. barge between 50 to 100 basis E~ The Deveioper Loan ils a program expense, payable : on the bonds and the interest As the final step in the financing, the proceeds of the Lender Loans will i be loaned to individual developers to construct multifamily rental housing ty arrangement is a Collateral projects. Each Developer Loan will be secured by a deed of trust on the Trustee and a financial institu- · project and will' be evidenced by .a note to the. Lender in the principal this alternative, in the event of amount of the Loan. As noted earlier, the payment and prepayment !the Lender Loan, the Trustee provisions of the Developer Loan will correspond to those of the Lender il institution would be required Loan. ,defaulted Lender Loan. The The rate of interest on the Developer Loan will be approximately 1 :lual to the principal amount Of percent more than the rate of interest on Lender Loans. In addition, the ~e year's interest thereon. The Developer may be charged a loan origination fee of approximately 2 ~ financial institution may be ~vever, the Collateral Purchase md revaluing collateral. 9. The commitment fee will be refundable only if the bonds are not issued by a certain date. or at less than a specified interest rate. 10. As noted earlier, these provisions will parallel the terms of the bonds. 36 / Municipal Finance Journal. percent, an annual servicing fee of approximately one-eighth of I percent and customary recording and title fees. These fees and the security interest in the projects will inure solely to the benefit of the Lenders and not to the bondh°lders or the Issuer. As noted earlier, operation of the housing developments must comply with federal law and state law requirements throughout the lifetime of the bonds and, in the case of tenant eligibility requirements, for a period of twenty years following the completion of the project. These requirements are enforced by means of two documents: (1) the Regulatory Agreement and (2) the Special Warranty Deed and Deed Restrictions. The Regulatory Agreement is the agreement of the Developer with the Issuer and Trustee to confOrm the rental housing projects to federal tax and state law standards. Upon a default of that Agreement, the Issuer or the Trustee will be able to re= - quire the Lender to accelerate payment of the deed of trust note and to foreclose on the deed of trust. In addition, the Issuer may be able to lease the rental units at a nominal rent. The Special Warranty Deed and Deed Restrictions enable the enforcement of the 20-percent/15-pereent tenant-occupancy requirement for a period of twenty years after completion of construction. The Deed Restrictions "run" with, and are an encumbrance on, the land and will bind the Developer and any subsequent owner of the project. V.. Conclusion Although legal mechanisms presently exist under California and federal Statutes for the issuance of municipal bonds to finance multifamily rental housing, occupancy restrictions and unfavorable interest rates have thus far severely curtailed the use of such financing. Hopefully, with the enactment of more liberal legislation presently being considered, an upturn in the econ- omy and lowering of interest rates, such multifamily rental housing finan- cing will become more prevalent. ' MANATT, PHELPS, ROTHENBERG & TUNNEY .......................................... LOS ANGELES, CA 90067 APR ~ ;~8~ L~HINGTO .... C. OFFICE .............................................. CiTY A QER,S ..................................................................... OFFICE ....................................... April 7, 1982 Los ANGeles {DOWNTOWN) ............................... VI~ ME:SSENGER Philip Kelmar, City Manager 1501 Truxtun. Avenue Bakersfield, California 93.301 Dear Philip: I very much appreciated the opportunity to appear before the Budget and. Finance committee to propose that this law firm be considered as bond counsel for your proposed multi-family revenue bond issue. As we-discussed, the underwriter, Bache Halsey Stuart Shields Incorporated, would prefer that we be bond counsel since this firm has been working with 'Bache in the develoPment of this program. Because of the time that we have spent and the reSearch that we have already done in this area we are prepared to move this transaction forward immediately. For your information, I am enclosing an article entitled 'Loans-lt~o'-iLender~s~ Re:venue ~BOnd Fina:nci:nq ;for · Mul:ti:famil:y iRental' HOUsin;g: in: :Cal~ifor~ia by Peter J. Ross of this firm which has just been published in' 'The .M~ni:c:ipal Finance' :Journal and sets forth all of the requirements for structuring a multi-family r.evenue bond issue. Additionally, the article' makes reference to all of the documents that must be prepared on behalf of the City in order to complete the transaction. This 'law firm has already prepared in draft form all of the documents referenced in the article which is the reason we are prepared to immediately proceed. I am also enclosing .for your information a copy of this firm's resume. {VIANATT, PHELPS, ROTHENBERG & TUNNEY Philip Kelmar, City Manager Page Two April· 7, 1982 · Once again,~ let' me .thank/y6u for your time and I will ' . Cor look forward to hearing f.r'~-~.~. ~i~ll/~l yours, Pet r ~./K~ly · of a! ~ttVP~elps, Rot e! )erg &.!Tunney PDK:bas Enclosures cc: Thomas A. Reilly, Bache Halsey Stuart Shields Incorporated (w/enc.) MANATT, PHELPS,~F~OTHENBEF~G & TUNNEY ATTO~::~NEYS AT LAW DESCRIPTION OE' MANATT, PHELPS, ROTHENBERG & TUNNEY I. INTRODUCTION Manatt, Phelps, Rothenberg & Tunney is a rapidly' growing firm of young lawyers. The firm has thirty-nine partners, three attorneys serving as of counsel, and fifty- seven associates, with seventeen additional lawyers joining the firm in the spring and fall of 1982. Sixteen clerks, from different law schools, will be spending the summer with the firm this year. The firm has grown from seven attorneys' in mid-1973,- and plans to continue its growth.. In the past year the firm opened a San Francisco office, specializing in municipal bonds, and an office, in downtown Los Angeles speci- alizing primarily in international corporate and banking. The firm also has a strong tradition of individual. participation 'in community activities.~ Over the years, law- yers in the firm have assumed significant responsibilities in a broad range of educational, political, civic,, charitable, professional, and social concerns. II. NATURE'OF PRACTICE The major areas of the firm's practice are corpor- ate, banking, energy, securities, and tax law; corporate and commercial litigation; entertainment and sports law; admin- istrative law; municipal bonds and-real estate. · MANAtt PhElPS, ROTHENBERG K; TUNNEY January 15, 1982 Page 2 In the corporate area, the'firm commonly serves as general corporate counsel_. In addition, it represents a 'number of clients on a specialized basis for such. matters as registration under and compliance with federal and.state securities laws, including registration of equity and debt offerings and limited par.tnership syndications, proxy con- tests, and tender offers, as well as other specialized corpo- rate representation in the areas of mergers and acquisitions, reorganizations and dissolutions. Among the firm's clients in. this area are approximately'sixty, financial institutions, ranging from small independent banks to large international bank holding Companies and foreign bank agency offices. The firm also represents corpOrations outside the banking area, including corporations engaged in the exploration for and development and production of oil and gas, as well as several large foreign companies, including Japanese trading companies. In the entertainment area, the firm represents record companies, television and motion picture production. companies, producers, directors, writers, artists and enter- tainers, and concert promoters. In addition, the firm repre- sents teams, leagues, and professional athletes in various sports. The firm's litigation department combines an excep- tionally diverse practice with a solid emphasis on'- the devel.- opment of the competence of its litigators. The department's practice extends to virtually every substantive area of com- mercial law, including contracts, business torts, securi- ties, antitrust, and real estate. The. department's practice includes litigation in several areas not~ always a part of a general corporate practice: white collar criminal defense, entertainment, and sports. New litigators are assigned a varied caseload, work closely-with senior lawyers on large cases, and take primary responsibility on smaller cases with a senior lawyer participating in an advisory capacity. This mix of cases promotes the department's dual objectives of comprehensive training and rapid assumption of responsibility. The firm represents clients before a variety of administrative and regulatory'agencies, encompassing both informal and formal agency actions. These-agencies include the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Comptroller of the-Currency, the. Internal Revenue Servi.ce-~ the Department of the Interior, MANATT. PHELPS, F~OTHENBERg' &'TUNNEY .- January 15, 1982 Page 3 the Franchise Tax Board, the California State Banking Department, the California. Department of Savings and Loan, the California Coastal Commission, the California Department of Corporations, the California Department of Real. Estate,~ and the State Board of Equ_ alization. The firm's municipal bond department engages in a broad spectrum of activities-representing cities, counties, 'and special districts in California and the West, princi- pally as bond counsel. Such activities include advising municipalities how best to finance Projects ranging from building to water and sewer facilities, andpreparing legal dOcumentation for the financing. The firm also engages in_ litigation to assist the~ municipalities in enforcing their rights under the bonds. .~ In the real estate area, the firm has had exten- sive experience in financing; real estate investment~trusts; sales; private and publicly offered real estate syndications; residential and commercial developments, including nation-. wide shopping center development; subdivisions, inc'luding condominium development and qualification;~- and landlord- tenant matters. Real estate clients include large construc- tion and development companies, developer~owners of commercial and residential properties, and major lending institutions. III. NEW LAWYERS ~ The firm seeks lawyers of the highest'caliber. Emphasis is placed on academic achievement,-and other experi- ence such as government service, clinical experience, and relevant work experience. Since the firm encourages the. production of legal services' of the highest quality and early client-contact, as well as participation in. the management of the firm, individual maturity and the ability and desire to assume responsibility are also of great importance to us. The firm's ninety-nine attorneys attended twenty- eight different law schools. Including the.attorneys join- ing the firm in 1982, twenty-three of'the firm's attorneys. were formerly summer cl~erks with the firm'. MANATT, PHELPS. ROTHENBERG ~ TUNNEY January 15, 1982 Page 4 IV.~ BIOGRAPHICAL INFORMATION Charles T. Manatt, 'born 'Chicago, Illinois, June 9; 1936; admitted to bar, 1962, California. Preparatory educa- tion, Iowa 'State University (B..S. 1958); legal education, George Washington University (J.~D. 1962). Member, Board of Editors, George Washington Law Review, 1960-62.. Chairman, California Democratic Party, 1971-.73, 1975-77; Southern Chairman, California Democratic Party, 1973-75; Chairman, Western States Conference Democratic Party, 1972-76; Demo- cratic Party National Committeeman, 1976--; Democratic Party Executive Committeeman, 1976--; Chairman,. National Finance Council of the Democratic National. Committee, June, 1978-80; Chairman, Democratic National Committee, 1980--; President, San Fernando Valley Bar Association, 1971; Member, Los Angeles County Bar Association Board of Trustees, 1978; Chairman of the Board of Directors of Fimst Los Angeles Bank, 1973--; Member, Board of Directors, Tiger International, 1980--; Member, Board of Directors, General Telephone Com- pany, 1980--; President, California Bankers Association, 1979-80. Member: Los Angeles County and American Bar Associations;- State Bar of Califomnia. Thomas D. Phelps,~ born Sigourney> Iowa, October 10, 1936; admitted to bar, 1963, Iowa; 1964, Califor~ia; 1979, U.S. Supreme Court. Preparatory education.,. Iowa State University (B.S. 1959); legal education, George Washington University (J.D. 1963). Member, Board of Editors, George Washington Law Review, 1961-62; President, American. Law Student Association, 1961-62. Director: Tokai Bank of California; Deauviile Restaurant, Inc. Foreign lawcounselor to the Tokyo firm of Nagashima & Ohno, 1978. Member: California Bankers Association and Western Independent Bankers Association; Los Angeles Area Chamber of Commerce; Town Hall; Japan American Society of Southern California; Advisory Board of Directors, California Museum of Science and Industry; Los Angeles County and American Bar Associa- tions; State Bar of California. (A-t Downtown L..A? Office.) Alan I. Rothenberg, born Detroit, Michigan, April 10, 1939; admitted to bar, 1964, California. Preparatory edu- cation, University o~ Michigan (B.A. 1960); legal education, University of Michigan (J.D. 1963). Assistant Editor; Michigan Law Review, 1962-63. Order of the COif. Member: Board of Governors, National Basketball Association, 1975-79;. Board of Governors, North American Soccer League, 1977-80. commissioner (Soccer), 1984 Olympics. Director:- First Los Angeles Bank; Bank of Newport; Newport Financial Ltd~; First' ~ MANATT, PHELPS, I~OTHENBERG & TUNNEY' ..' January 15, 1982 . . Page 5 Thrift of America; Wolf & Rissmi!ler Concerts. Member: Los' Angeles County, Beverly Hills, Century City (Member, Board of Governors, 1978--), and American Bar Associations (Chairman, Litigation Section. Committee on Entertainment, Sports and Media Litigation; Member, Executive.Committee, Sports Division, ABA Forum Committee on the Entertainment and Sports Industries.); State Bar of California. John V. Tunney, born New York City, June. 26, 1934; admitted~ to bar, 1959, Virginia; 1963, California; 1963, New York'. Preparatory education, Yale-University (A.B. 1956);. legal educa%ion, Academy of International Law, The .Hague, Netherlands (!957), University of Virginia (J.D. 1959). Member: The United States House.of Representatives, 1965-71.;. The United States. Senate, 1971-77; Board of Directors, Western Center on Law & Poverty, Inc. Member: American and New York State Bar Associations; Virginia State Bar; State Bar .of California. L. Lee Phillips, born New York, New-York, August 16, 1937; admitted to bar, 1959, District. of Columbia; 19.60, New York; .1964, California. Preparatory education, Corne.ll University .(A.B. 1957); legal education, Cornell University (J.D. 1959). Order of the Coi.f. Note Editor, Cornell Law Quarterly, 1957-59. Trial Attorney, Department'of Justice., Tax Division, 1959-63. Member: 5os' Angeles Copyright Society; Los Angeles County, Beverly'Hdlls, and American Bar Associations; District of Columbia Bar; New. York State Bar; State Bar of California. Barnet Reitner, born Brooklyn, New York, March 29, 1945; admitted to bar, 1971, California. Preparatory educa- tion, University of California at' Los. Angeles (A.B. 1.967); legal education, University of California at Los Angeles (J.D. 1970). Articles Editor, UCLA Law Review-, 19'69-70. Director, California. Korea Bank. Member', Advisory Committee to California State Banking Department on Banking Law and General Corporation Law. Member: Los Angeles County, Century City, and American.Bar Associations;'State Bar of California. Willie R. Barnes, born Dallas, Texas, December 9, 1931; admitted to bar,~ 1960, California.. Preparatory educa-- tion, University of California, Los Angeles (B.A. 1953); legal education~ University. of. California, Los Angeles (J.D. 1959). California Commissioner of Corporations, 1975-79. First Vice President, North American'Securities Administrators Association, 19.78-79. 'President, Midwest Securities Commis- sioners Association, 1978-79. Alumnus .of the Year, -UCLA Law MANATT, pHELpS, ROTHENBE-RG & TUNNEY January 15, 1982 Page 6. SchoOl, 1976. Member: Oil and Gas Industry Advisory Com- mittee and Real Estate Investment Advisory Committee, North American Securities AdministratOr's Association; State of California Securities Regulatory Reform Panel; Los Angeles County, Beverly Hills, Century City,'and American (Member, Committee on Commodity Regulation, Committee On Federal. Regulation of Securities, and State Regulation of Securities Committee) Bar Associations; State Bar of California. Brian J. O'Neill, born New York, New York, October 12, 1940; admitted to bar, 1966, California; 1968, District of Columbia. Preparatory education, University of Notre Dame.(A.B. 1962); legal education, Fordham. Law School (J.D. 1965). Trial attorney, National. Labor Relations Board, 1966-67. Assistant United States Attorney, Central Distric~ of California, 1970-74; Member, U.S. District Court Indigent Defense Panel, 1.977-78, 1980--. Member: California Attor- neys for Criminal Justice; Los Angeles County and American Bar Associations; Bar Association of the District of Columbia; State Bar of California. (At Downtown L.A. Office.) Michael Kantor, born Nashville., Tennessee, August 7, 1939; admitted to bar, 1968,' Florida;- 1972, District of Columbia; 1975, California. Preparatory'education, Vander- bilt University (B.A.. 1961); legal education, Georgetown University (J.D. 1968). Member, Georgetown Law Review'. State Chairman, Carter for President, 1980.. Director', Lega~ Services Corp., 1979--. Campaign Director, Brown for Presi- dent, 1976. Campaign Director, Senator Cranston Reelection, 1974. Member: National Legal Aid and Defender Association; American Bar Association; Florida State Bar; District of Columbia Bar; State Bar of California. Leslie S. Klinger, born Chicago,. Illinois, May 2, 1946; admitted to bar, 1.971, California. Preparatory educa-- tion, University of California, Berkeley (A.B. 19-67); legal education, University of California, Berkeley-(Boalt Hall) (J.D. 1971). ~Order of the Coif. Note and Comment Editor, California Law Review, 1969-70. Trustee, Urban Innovations Group. Director, Motion Picture and Television-Tax Insti- tute Chairman, Estate and Financial Planning for the Closely Held Corporation, Practising Law Institute, 1976-81. Member: Los Angeles County, Beverly. Hills, and American Bar Associations; State Bar of California. MANATT, PHELPS, ROTHENBERG & TUNNEY January 15'; '1982 Page 7 Martin M. Jelenko, born New York, NeW York, June 16, 1945; admitted to bar, 1972, New York; 1972, California. Preparatory education, Columbia University (A.B. 1967); legal education, New York University (J.D. 1971). Member: Los Angeles County and American Bar Associations; State Bar' of California. Joseph Horacek III, born Atlanta, Georgia, May 18, 1941; admitted to bar, 1967, California. Preparatory educa- tion, Occidental College and University· of California at Los Angeles (B.A. 1963); legal education, University of California at Los Angeles (J.D. -1966).. Member, Board of'Editors, UCLA Law Review,- 1964-65. Member: Los Angeles Copyright' Society, Beverly. Hills and Los Angeles County Bar Associations; State Bar of California. George R.. McCambridge; born Los Angeles, California, June 5, 1945; admitted to bar, 1973, California. Prepara- tory education, University of San Francisco (B.A. 1967); legal education, University of California, Los Angeles (J.D.~ 1973). Chief Articles Editor, UCLA Law Review, 1972-73. Director,. UCLA School of Law Alumni. Association. Vice Chairman, Brentwood Bank. Member: Los Angeles County and American Bar Associations; Skate Bar of. California.~ Richard D. Williams, born Los~ Angeles, California,. August 30, 1946; admitted to bar, 19.73, California. Prepar- atory education, WaShington State University (B.A.. 1969); legal education, University of Ca'lifornia at Los Angeles (J.U. 1973).. Comment Editor, UCLA Law Review, 1972-73. Member: Los Angeles County and American Bar Associations;-. State Bar of California. Arnold P. Schuster, born New York, New York, August 4, 1940; admitted to bar, 1965, New York; 1970, Maryland; 1978, California. Preparatory education, Cornell University (A.B. 1962); legal education, Columbia University (J.D. 1965). Member:- New York Stat'e Bar; State Bar of California. ' Ronald J. Silverman, born-New York, New York, August 29, 1946; admitted to bar, 1973, District of Columbia; 1978, California. Preparatory education, Pennsylvania State. University (B.A.. 1967); legal education, George Washington University (J.~D. 1972). Member, George Washington Law Review. Assistant Chief,'Special Litigation Section, Anti- MANA?T. PhElPS, F~OThENBERG & TUNNEY Jaauary 15, 1982 Page 8 trust DivisiOn, U.S. Department of Justice, 1977; Trial Attorney, Special Trial Section~ Antitrust Division, U.S. Department of Justice, 1972-77. Special AssiStant U.S. Attorney, Washington, D.C., 1975. Co-Editor, Merger Case Digest, 1980. Member: Los-Angeles County, Century City, and American Bar Associations; District of ColUmbia Bar; State Bar of California. George David Kieffer, born New York, New YOrk, November !7, 1947; admitted to bar,~ 1973, California; District of Columbia,~ 1980. Preparatory education, University of California, Santa Barbara (B.A. 1969); legal education, University of California, Los Angeles (J.D. 1973). Member, UCLA Law Review, 1971-72. Extern Clerk, Chief Judge David Bazelon, U.S. Court of Appeals, D.C. Circuit, 1972.. Vice Chairman, University of California, Santa Barbara Foundation. President, Alumni Association, University of Calif°rnia., Santa Barbara, 1976-77, 1978-80.. Regent-Designate and Regent, Board of Regents, University of California, 1.978-80. Vice President, Center for the Study of Democratic Institutions. Member: Los Angeles County and American Bar Associations; District of. Columbia Bar; State Bar of California. Gordon M. Bava, born Stockton, California, February 12, 1948; admitted to bar, 1974, California. Preparatory educa- tion, Georgetown University (B.S.F.S. 1970); legal educa- tion, University of Southern California (J.D. 1974). Phi Beta Kappa. Executive Note Editor, Southern California Law- Review, 1973-74.. Member: Japan American Society of Southern California; Los Angeles County and American Bar Associations; State Bar of California. (At Downtown- L.A. Office.) Marc Epstein, born Hollywood, California, March 1, 1949; admitted to bar, 1974, California. Preparatory educa- tion, University of California at Los Angeles (B'.S. 1971);. legal education, University of California, Los Angeles (J.D. 1974). Order of the Coif. Articles-Editor, UCLA Law Review, 1973-74. Member: Los Angeles County and Beverly Hills Bar Associations;' State Bar of California. Richard Lee Auqust,. born Chicago, Illinois, February 1; 1947; admitted to bar, 1974, California. Preparatory educa- tion, University of Illinois (B.S. 1969; B.A. 1969); legal education, University of Southern California (J.D. 1974). Phi Beta Kappa. Notes and Articles Editor, Southern Cali- fornia Law Review, 1973-74. Member: Los Angeles County and Beverly Hills Bar Associations; .State Bar of California. MANATT. PHELPS. ROTHENBERG & TUNNEY January 15, 198.2 . -. Page 9 Jack Fried, born Rome, ItalY, February 3,1949; admitted to bar, 1974, California. Preparatory education, University of California at Los Angeles (A.~B. 1971); legal education, University of California at Los Angeles. 1974). Phi Beta Kappa. Counsel, California State Banking Department, 1974-76. Member~: Los Angeles County and American Bar Associations;State Bar of California. Richard S. Shaffran, born Hollywood, California, November 15, 1949; admitted to bar, 1974, California. P~eparatory education,· University of California, Santa Cruz (A.B. 1971); iegal ~ducation, Yale Law School (J.D. 1974). Member: Beverly ~ and American Bar AssoCiations; State· Bar of California. Mark S. Greenfield, born Los Angeles, California, April 11, 1950; admitted to bari 1.974, California. Prepara- tory education, University of California, Los Angeles,~ (B.A. 1971); legal education, University of California, Berkeley (Boalt Hall) (J.D. 1974). Law Clerk to U.S. District Judge William T. Sweigert, Northern District of'California, 1973-74. Member, Board of Trustees, University of California, Los Angeles Foundation, 1977--. Member: Los Angeles County and American Bar Associations; State·Bar of California. Thomas E. McLain/ born Kansas City, Missouri, August 19, 1946; admitted to bar, 19·74, California. Prepara-· tory education, Duke University (A.B. 1968); l~egal education, Duke University (J.D. 1974). Articles Edit·orr, Duke Law Journal, 1973-74.. Graduate of the Inter-University center for Japanese Language Studies in Tokyo,. Japan; Japan Founda- tion Fellow, 1974-75. Foreign law counselor to the Tokyo firm of Nagashima & Ohno, 1975 and 1978-79. Founder, The Century of the Pacific Conferences in Los Angeles and Tokyo. Lecturer: University of Southern Califomnia Law Center; UCLA Extension; Practising Law Institute.; Federal Bar Association; U.S. Chamber of Commerce; Keidenren. Member: Japan American Society of Southern California; Japan-California Association; American Bar Association; Federal Bar Association; State Bar of California. (At Downtown L.A. Office.) John F. Stuart, born San Francisco, California,. April 7, 1947; admitted to bar, 1972, California. Preparatory- education, University of San Francisco (A.B. 1969); legal education, University. of San Francisco (J.D. 1972). Lead Articles Editor, University of San Francisco Law Review. MANaTT, PHELPS, F~OTHENBERg & TUNNEY January 15, 1982 Page 10 Counsel, California State Banking Department, 1973-77;. Assistant Chief Counsel 1977-78. Member, State Bar of California. Paul J. Hall, born San Diego, California, January 13, 1951; admitted to bar, 1975, California. Preparatory edu- cation, University of California at Santa Cruz (A.B. 1972); legal education, Yale Law School, 1972-1973, University of California at Berkeley (Boalt Hall)' (J:D.~ 1975). Member: Los Angeles County and American Bar Associations; State Bar of California. Maria D. Hummer~ born Los Angeles, California, June 12, 1944; admitted to bar, 1976, California; District of Columbia, 1979. Preparatory-education, Scripps College (B.A. 1968); legal education, University of California, Los Angeles (J.D. 1976). E~terly Scholar Board of Editors, UCLA Law Review, 1975-76. Member, California Regional Water Quality Control Board; Los Angeles Region, 1976--. Member: Los Angeles County, Century City, and American Bar Associ- ations; District of Columbia Bar; State Bar of California.. James C. Corman, born Galena, Kansas, October 20, 1920; admitted to bar, 1949, California. P. reparatory education,. University of California, Los Angeles (B.A. 1942); legal education, University of Southern California (J.D. 1948). Member: Los Angeles City Council, 1957-60; United States House of Representatives, 1961-81; President's Advisory Commission on Civil Disorders, 1967-68. Member: San Fernando Valley, Los Angeles County, and American Bar Associations; State Bar of California. (At D.C. Office.) Jane Frank-Harman, born New York, New York, June 28, 1945; admitted to bar, 1969, District of Columbia. Prepara- tory education, Smith College (B.A. 1966); legal education, Harvard. Law School (J.D. 1969). Phi Beta Kappa. First Chief Counsel and Staff Director, Subcommittee on Represen- tation of Citizen Interests, Committee on the Judiciary, U.S. Senate, 1973-75. Chief Counsel and Staff Director, Subcommittee on Constitutional Rights, Committee on the Judiciary, U.S. Senate, 1975-77. Deputy Secretary to the Cabinet, The White House, 1977-78. Member: American Bar Association; District of Columbia Bar; Federal Bar Association; Women's Bar Association;Women's Legal Defense Fund; Federal Judicial Center Committee on Experimentation in the Law; Council on the Role of the Courts. (At D.C. Office.) IV~ANATT. PHELPS. ROTHENBERG ~ TUNNEY January 15, 1982 Page tl David B. Jacobsohn, born-Springfield,· Massachusetts, December 18, 1943; admitted to bar, 1968, New York; 1980, District of Columbia. preparatOry education, Cornell Univer- sity (B.A.-1965);· legal education, Cornell University (J.D. 1968). Senior Staff Attorney, Securities and Exchange Commission, 1967-72. Director,' Securities Disclosure Division, Comptroller. of the Currency, 1972-78. Special Assistant to Director William Isaac, Federal Deposit Insurance Corporation, 1978-79. Chairman, Legal Problems of Bank Regulation; Chairman, 15th and 16th Banking Law Institute; Co-author, Federal Regulation of Banking. Member:- Federal and American' Bar Associations; New York Bar; District of Columbia Bar. (At D.C. Office.) Harold E. Rogers, Jr., born Chowchilla, California, November 12, 1930; admitted to bar, 1955, California; 1967, U.S. Supreme Court. Preparatory education·, Stanford University (A.B.· 1952); legal education, Stanford University (J.D. 1955). Phi Beta Kappa. Co-author, Water for California (2. Vols.) and of other publications on. Municipal Finance; Guest Lecturer on Municipal Finance; Chairman, Commission on the Review of the Federal Impact' Aid Program (Presidential Appointment). .Member: The Bar Association of San Francisco; .American Bar Association; State Bar of California. (At.S.F.. Office.) K. Barry Schochet, born Asheville,. North Carolina, May 18, 1947; admitted to bar, 1973, Georgia; 1974, Florida and District of Columbia. Preparatory education, University of North Carolina, Chapel Hill, (B.A. 1969); legal education, Emory University School of Law (J.D. 1972). Order of the Grail. Assistant Counsel, U.S. Senate Select Committee on Presidential Campaign Activities, Sam J. Ervin, Chairman (Senate Watergate Committee), 1973-74. Legislative Counsel to U.S. Senator Richard Stone (Florida) 1975-79. Counsel, U.S. Senate Committee on Foreign Relations ·1979-81. Member: American Bar Association; District of Columbia Bar, The Florida Bar; State Bar of' Georgia. (At D.C. Office.) Mary Jane Large, born New. York, New York, November 13, 1950; admitted to bar, 1975, California and District of- Columbia. Preparatory education, University of California. at Berkeley (A.B., 1971); legal education, University of California at' Berkeley (Boalt Hall)(J.D. 1974). Editor, Ecology Law Quarterly, 1972-74.' Member: Los Angeles County and American Bar Assocations; State Bar of California. MANATT, PHELPS, ROTHENBERg & TUNNEY -, 'January 15, 1982 Page 12 Peter T. Paterno, born Queens, New York, February 3, 1951; admitted to bar, 1976~ California. Preparatory educa- tion, Harvey Mudd College (B.S. 1972), University of Hawaii (M.A. 1973); legal education, University of California, Los Angeles (J.D 1976). Member, State Bar'of California. Neal L'. Petersen, born3San Francisco, California, February 4, 1937; admitted to bar, 1963, California. Pr.epara- tory education, University of California, Berkeley (A.B. 1958); 'legal education, Harvard Law School (J.D. 1962). Member: Federal and American Bar Associations; District of Columbia Bar. (At D.C. Office.~) Ross T. Schwartz, born Los Angeles, California, August 9, 1949; admitted to bar, 1976, California. Prepara~ tory education, University of. California, Berkeley (A.B. 1971); legal education, George Washington. University (J.D. 1975). Member: Los Angeles County Bar Association; State Bar of California. Lisa Specht, born Los Angeles, California, Decem- ber 5, 1,9%5; admitted to ba~, 19.76, California. Legal educa- tion, University of' San Fernando Valley, College of Law (J.D. 1976). Editor-in-Chief, USFV Law Review, 1974-.75. Legal commentator, KABC Television. Director, American Civil Liberties Union of Southern California, 1972-78. Board. of' Governors, Women Lawyers' Association of Los Angeles, 1977--; Chairperson, ACLU Women's Rights Project Southern California, 1971-78. Board of Governors, the Los Angeles Woman's Building,. 1979-- Director, Women's Political Committee 1977-- Member: Los Angeles County, Beverly Hills, Century City, and American Bar Associations; State Bar of California. Peter D. Kelly, born Pasadena, California, July 30, 1948; admitted to bar, 1977, California; 19.79, District of Columbia. Preparatory education, California State Univer-. sity, Fullerton (B.A. 1972); legal education, Southwestern University (J.D. 1976). Lead Articles Editor, Southwestern University Law Review, 1975-76. Member: Los Angeles CitL- zens Advisory Committee on Airports, 1973; Los Angeles County Probation Commission, 1976-77; California State University, Fullerton, Alumni Association Board of Directors, 1980. California Democratic Party: Southern California Chairman, 1981--; Counsel, 1977-81; Chairman, Compliance Review Commis- sion, 1978; Executive Director, State' of California, 1975-76, MANATT, PHELPS, ROTHENBERG & TUNNEY January 15, 1982 Page 13 Southern California, 1973-75; 'Finance Director, 1972. Campaign Manager, Yvonne Brathwaite Burke- for Statue Attorney General, 1978. California Finance Co-Chairperson,.Carter/ Mondale P=esidential Campaign, 1979-80. 1980 Democratic National Convention: Alternate-Delegate; RUles Committee Member. Member: Los Angeles County, Century City, and Ameri- can Bar Associations; District of Columbia Bar; State Bar'of California. Bert H. Deixler, born Bronx, New York, November 8, 1952; admitted to bar,. 1976, California. Preparatoryeduca- tion, George Washington UniversLty (B.A. 1973); legal educa- tion, Columbia University Law School (J.D. 1976). Phi Beta Kappa; Harlan Fiske Stone Scholar. Member, Columbia Univer- sity Journal of Environmental Law. Assistant U.S. Attorney; Criminal Division, Central District of California, 1978-81. Member: Los Angeles County and'Federal Bar Associations; State Bar of California. Irwin Jay Deutch, born Detroitl Michigan, August 5, 1941; admitted to ba=, 1965, Michigan; 1980, California. Preparatory education, University of Michigan (B.B.A. 19'62); legal education, University of. Michigan (J.D. 1965); George- town University (LL.M. in Taxation 1967). Order of the Coif. Member: Los Angeles County, Beverly-Hills, Michigan, Ameri- can, and Federal'Bar Associations; State Bar of California. Julian Gresser, born New York, New YOrk, jUne 7, 1943; admitted to bar, 1971, California. Preparatory edu- cation, Harvard University (A.B. 1965, M.A. 1967); legal education, University of California, Berkeley (Boalt Hall) (J.D. 1971). Member: California and Hawaii Bar Associa- tions; State Bar of California.. Lee F. Colton, born Los Angeles, California, February 12, 1936; admitted to bar, 1962, California. Prepa- ratory education, University.of 'California at Los Angeles (B.S. 1958); legal education, University of California School of Law at Los Angeles (LL.B. 1961).. Member: State Bar of California. I~IANATT. PHELPS. I~OTHENBERG & TUNNEY 'January 15, 1982 Page 14 Jerry J2 Gotdstein, born Los Angeles, California, November 3, 1943; admitted to bar, 1974, California. Prep- aratory education, University of California, Berkeley (B.S. 1966); legal education, University of San Francisco (J.D. 1974). Member, McAuliffe Law Honor Society..' Assistant Editor, .University of San Francisco Law Review, 1973-74. Extern to Justice Raymond L. Sullivan, Supreme Court of Cali- fornia, 1973. Member: Beverly Hills and American Bar Asso- ciations; State Bar of California. Barbara J. Zuckerman, born Los Angeles, Califor- nia, August 6, 1948; admitted to bar, 1975, California. Preparatory education, University of Southern California (B.A. 1971); legal education, Loyola University (J.D. 1974). Member: Los Angeles County, Beverly Hills, and American Bat' Associations; State Bar of California. Steven A. Nissen, born Los Angeles, California, March 25, 19'51; admitted to bar, 1976, California; 1980, District of Columbia. Preparatory education, Stanford University (B.A. 1972); legal education, University of Cali- fornia, Berkeley (Boalt Hall) (J2D. 1976). Commissioner, Los Angeles County Rent Adjustment Board. Member: Los Angeles, Century City, Beverly Hills (Board of Governors, Barristers), and American Bar Associations; District of Columbia Bar; State Bar of California. Lawrence J. Blake, born New York, New York, Novem- ber 28,. 1950; admitted to bar, 197'6, California. Prepara- tory education, Le Moyne College (B.A. 1972); legal educa- tion, Harvard Law School (J.D. 1976). Member: Los Angeles County and Beverly Hills (Secretary, Barristers; Co-Chairperson, Barristers' Committee for the Arts) Bar Associations; State Bar of' California. Frederica R. Obrzut, born Los Angeles, California, December 22, 1949; admitted to bar, 1977, California. Pre- paratory education, University of California, Santa Barbara (B.A. 1971), University of California, Los Angeles (M.A. 1974); .legal education, University of California, Los Angeles (J.D. 1977). Managing Editor, UCLA Law Review, 1976-77. Member, State Bar of California. IV~ANATT.. PHELPS, ROTHENBERg ~ TUNNEY January 1'5, 1982 Page 15 Howard E. King, born Berkeley/ 'California, October 3, 1952; admitted to bar, 1977', California. Preparatory educa~ tion, University of California at Los Angeles (B.A. 1974); legal education, ~niversity of California at Los Angeles (J.D. 1977). Chief Justice, Moot Court Honors Program. Member: American Bar Association; State Bar of California. Keith T. Holmes, born Chicag°, Illinois, June 17, 1952; admitted to bar, 1977, California. P=eparatory educa~ tion, Northwestern University (B.A. 1974); legal education, University of Pennsylvania (J.D. 1977). Order of the Coif. Editor, University of Pennsylvania Law Review. Member: Los Angeles County Bar Association; State Bar of California (At Downtown L.A. Office.) Timothy Pat=ick Furlong, born Dallas, Texas, November 24, 19%6;' admitted to bar, 1977, California; 1980, District of Columbia. Preparatory education, University of Texas (B.A. 1969); legal education,. University of Texas (J..D. 1977). Legislative Assistant to Senator Lloyd Bentsen, 1971-74; Special Assistant to Senator Lloyd Bentsen, 1975-76. Member.: American Bar Association; District of Columbia Bar; State Bar of California. (At D.C. office.) Stephen D.. Greenberg, born New York,. New York, September 8, 1948; admitted to bar, 1977, California. Prepa- ratory education, Yale University (B.A. 1970); legal educa- tion, University of California, Los Angeles (J.D. 1977). Member, UCLA Law Review, 1975-77. Member, State Bar of California. Louis A. Spoto, born Brooklyn, New York, May 12, 1950; admitted to bar, 1978, New York; 1978, California. Preparatory education, Colgate University (B.A. 1972); legal education, Harvard Law School (J.D. 1977). Clerk, Judge Robert J. Kelleher, U.S. District Court, 1977-78. Board of Editors, Journal on Legislation. Member: New York Bar; State Bar of California. Nancy R. Schauer, born Detroit, Michigan, Septem- ber 9, 1950; admitted to ba~, t976,. California. Preparatory education, University of Michigan (A.B. 1972); legal educa- tion, UniversitY of Michigan (J.D. 1976). Member, Univer- sity of Michigan Journal of Law Reform. Member:. Los Angeles~ COunty and American Bar Associations; State Bar of California. MANATT; PHELPS, F~OTHENBERG & TUNNEY January 15, 1982· Page 16 William S. Brunsten, born Los Angeles, California; April 6, 1947; admitted to bar, 1974, California.' Prepara~ tory education, University of California, Berkeley (B.A. 1970); legal education., University of California, Los Angeles (J.D. 1974). Member: Los Angeles County, Beverly Hills, and Century City Bar Associations; State Bar of California~ Lawrence J. Ulman, born Flushing, New York, January 25, 1950; admitted to bar 1975, California. Prepar- atory education, University of Southern California (A.B. 1972); University of California, Los Angeles (M.B.A. 1980); legal education, University of Southern California (J.D. 1975). Recipient, ASCAP Nathan Burkan Memorial Award in Copyright. Member: Los Angeles County and American Bar Associations; Copyright Society of the U.S.A.; State Bar of' California. Isabel Well_, born New York, New YOrk, April 5, 1949; admitted to bar, 1973, New Jersey; 1981, California. Preparatory education, Barnard College (B.A. 1970); legal education, University of Pennsylvania (J.D. 1973)~ Member: American Bar Association; New Jersey State Bar; State Bar of California. John B. Emerson, born Chicago, -Illinois, January 1!, 1954; admitted to bar, 1978, California. Preparatory educa- tion, Hamilton College (A.B. 1975); legal education, Univer- sity of Chicago (J.D. 1978). Phi Beta Kappa; Phi Delta Phi. Member: American Bar Association; State Bar of California. .William T. Quicksilver, born St. Louis, Missouri., July 26, 1952; ~dmitted to bar, 1978, California. Prepara-. tory education, Princeton University (A.B. 1974); legal educa-- tion, University of Chicago (J.D. 1978). Associate Editor, Chicago Law Review. Member, State Bar of California. Nikki Wolontis, born Morristown, New Jersey, April 27, 1953; admitted to bar, 1978, California. Prepara- tory education, New York University (B.A. 1974); legal educa- tion, Stanford University (J~D. 1978). Phi Beta Kappa. Extern'Clerk, Judge George W. Phillips, Jr., Superior Court, Alameda'County (1977-78). Founding Member, Stanford Public Interest Law Foundation. Member: Los Angeles County and American Bar Associations; State Bar of California. MANATT. PhElPS, ROTHENBerg& TUNNEY January 15, 1982 Page 17 Mary Elizabeth Doyle, bOrn Sacramento, California, May 1, 1952; admitted to bar, 1979, California. Preparatory education, University of California, Santa Cruz (A.B. 1974); legal education, University of California,. Berkeley (Boalt Hall) (J.D. 1978). Member: Berkeley Law Foundation; Ameri- can, Beverly Hills, and Century City Bar Associations; State Bar of California. ~ Edward C. Rybka, born Passaic, New-Jersey, Septem- ber 29, 1953; admitted to bar, 1978, California. Prepara- tory education, The Sorbonne, Paris, France, and Princeton University (A.B. 1975); legal education, Duke University (J.D. 1978). Member: Los Angeles County Bar Association;..~ State Bar of California. Steven M. Goldberg, born B'ronx, New York, February 19, 1954; admitted to bar, 1978, California; 1979, New York. Preparatory education, Harvard University (A.B. 1975); legal education, New York University School of Law (J.D. 1978). Member, New York University Law Review, 1976-77. Member: Los Angeles County and Beverly Hills Bar Associa- tions; State Bar of California. Matthew S. Steinberg, bo'rn Los Angeles, California, October 20, 1953; admitted to bar, 1978, California. Rrepa- ratory education, University of California, Berkeley (B.A. 1975); legal education, University of San Diego (J.D. 1978). Member:~ Los Angeles County and American Bar Associations; State Bar of California. Jeffrey M. Wernick, born Brooklyn, New York, June 20, 1953; admitted to bar, 1979, New York; 1981, Cali- fornia. Preparatory education, State University. of New York at Buffalo (B.A. 1974)'; legal education; New York University (J.D. 1978). Member: New York Bar; State Bar of California. Peter J. Ross, born New YOrk, New York, June I0, 1953; admitted to bar, 1979, New York. Preparatory educa- tion, Yale University (B.A. 1975); legal education, Emory University (J.D. 1978). Member: American Bar Association; State Bar of New .York. (At S.F. Office.) Andrew Stuart Pauly, born Los Angeles, California, January 18,~ 1955; admitted to bar, 1979/ California. Prep- aratory education, Lewis & Clark College (B.A.. 1976); legal MANATT. PhElPS. F~OTHE'NBERG & TUNNEY January 15, 1982 Page 18 education, -University of California, Los Angeles (J.D. 1979). Member: Los Angeles County, Century City, and American Bar Associations; California Trial Lawyers Association; State Bar of California. Joan Whitehead Evans, born Waukegan, Illinois, Uecember 31, 1949. Preparatory education, Illinois State University (B.S. 1970, M.S. 1972), University of 'California, Los Angeles (M.B.A. 1979); legal education, University of California, Los Angeles (J.D..1979). Moot Court Executive Board of Judges, 1978. Director, Legal Aid Foundation. Member: Sex Equity Commission, Los Angeles Unified. School District; National Bar. Association; State Bar of California. Barbaua J. Schlain, born Detroit, Michigan, May 15, 1954; admitted to bar, L979, California. Preparatory educa- tion, University of Michigan (B.A. 1975); legal education, University of Michigan (JiD. 1979)~ Editor, Michigan Year- book of International Legal Studies. Member:. State Bar of California. (At Downtown L.A. Office.) Susan Lerner, born Brooklyn, New York,~ March 17, 1951; admitted to bar, 1979, New York; 1981, California. Preparatory education, University of Chicago (B.A. 1973); legal education, New York University (J.D. 1978)-. Member: New York Bar; State Bar of California. Benet E. Long, born New York, New York, September 15, 1954; admitted to bar, 1979, Washington, D.C. Prepara- tory education, University of Virginia (B.A. 1976); legal education, Washington College of Law, The American Univer- sity (J.D. 1979).. Member, District of Columbia Bar. (At D.C. Office.) Arn H. Tellem, born Philadelphia, Pennsylvania, February 21, 1954; admitted to bar; 1980, California. Prepa- ratory education, Haverford College (B.A. 1976); legal educa- tion, University of Michigan (J.D. 1979). Member, State Bar of California. Terry D. Garcia, born jaCksonville,. Florida, March 27, 1953; admitted to bar 1980; District of Columbia. Preparatory education, American University (B.A. 1975); legal education, George Washington University (J.D.- 1980). Staff Member, Journal of International Law and Economics.. Member, IV~ANATT. PHELPS, F~OTHENBERG' & TUNNEY January 15,-1982 Page 19 District of Columbia Bar. Co-author, Federal Regulation of Banking. (At Downtown LoA. Office.) Steven Marcus Knisley, born Santa Monica, Cali- fornia, February 26, 1952; admitted to bar, 1980, California. Preparatory education, Yale University (A.B. 1974); legal education, Harvard Law School (J.D. 1980). Member, State Bar of California. Jane L. Ellison, born Mansfield, Ohio, January 16, 1956; admitted to bar, 1980, California. Preparatory educa- tion, Cornell University (A.B. 1977);- legal education, Univer- sity of Chicago (J.D. 1980. Phi Beta K~ppa; Phi Delta Phi. Member, State Bar of California. Rita Eidson DeBoer, born Princeton, Illinois, May 5, 1953; admitted to bar, 1980, California. Preparatory educa- t±on,~ Scripps College (B.A. 1975), Harvard University (M.T.S.. 1977); legal education, University of California, Los Angeles (J.D. 1980). Rockefeller Fellow, 1975-76. Chief Comment Editor, UCLA Law Review, 1979-80. Member: Women Lawyers Association of Los Angeles; State Bar of California Leslie.A. Swain, born Long Beach, California, April 26, 1953; admitted to bar, 1980, California. Prepara- tory education, California State Universtiy, 5ong Beach (B.A. 1977); legal education, University of California at Davis (J.D_ 1980). Member, UC Davis Law Review 1979-80. Member: King Hall Legal Foundation, Los Angeles County and Century City Bar Associations; State Bar of California. Alan Mintz, born. New YOrk, New York, May 18, 1954; admitted to bar, 1980, California. Preparatory education University of California, Berkeley (A.B. 1976); legal educa- tion: Los Angeles Bar Association; University of Califor- nia, Los Angeles (J.D. 1980). Member, State Bar- of California. Masahiro Shimojo, born Gifu, Japan,~ March 19, 1944; admitted to bar, 1973, Japan. Legal education, Tokyo Univer- sity (L.L.B. 1966); Legal Training and Research Institute (1973);.University of Michigan Law School (M.C.L. 1980). Member, The First Tokyo Bar Association. N1ANATT, PHELPS, ROTHENBERG & TUNNEY January 15, 1982 Page 20 John W. Cochrane, born Cleveland, Ohio, December 12, 1955; admitted to bar., 1980, California. Preparatory educa- tion, University of California, Davis (A.B.. 1977); legal education, University of California, Los Angeles (J.D. 1980).. Member, State Bar of California. Gary Hal Amsterdam, born Chicago, Illinois, March 21, 1957; admitted to bar, 1981, California. Prepara- tory education, University of Texas, Austin. (B.A. 1977); legal education, University of Texas, Austin (J.D. 1980). Phi Beta Kappa. Member, State Bar of California. Enda Thomas Brennan, born Galway, Ireland, October 31, 1955; admitted to.bar, 1980, California. Prep- aratory.education, University of California, Berkeley (A.B.- 1976); legal education, Harvard Law' School (J.D. 1980). Phi Beta Kappa. Member, State Bar of California. Ellen B. Behravesh, born Pottstown, Pennsylvania, August 31, 1951; admitted to bar, 1977, Pennsyluania; 1978, District of'Columbia. Preparatory education, University of Pennsylvania (A.B. 1973) legal education, University of Penn- sylvania School of Law (J.D. 1977), Georgetown University Law Center (LL.M. in Taxation 1981). Delta Theta Phi. Member: Pennsylvania and American Bar Associations; Ameri- can Society of International Law; Pennsylvania Bar; District of Columbia Bar. Richard A. Kale, born Brooklyn, New York, January 29, 1955; admitted to bar, 1980, California. PreparatorY educa- tion, University of California, Berkeley (A.B. 1976); legal education, Yale 5aw School (J.D. 1980). Phi Beta Kappa. Member, State Bar of California. Barbara Zipperman, born Los Angeles, California, September 3, 1953; admitted to bar, 1980, California. Prepa- ratory education, Princeton University (A.B. 1975); legal education, University of California, Davis (J.D. 1980). Member: Los Angeles County and Beverly Hills Bar Associa- tions; State Bar of California. Anne H. Krummenacher, born St. Louis, Missouri, November 22, 1951; admitted to bar, 1.981, California. Prepa- ratory education, Occidental College (A.B. 1973); legal educa- tion, Loyola Law School (J.D. 1980). Member, State Bar of California. MANATT, PHELPS, ROTHENBEI~G & TUNNEY January 15, 1982 Page 21 Shinaan S.~ Krakowsky, born Brooklyn, New York, January 8, 1954; admitted to bar, 1981, California. Preparatory education, State UniversitY of New York at Buffalo (B.A 1976); legal education, Southwestern University (J.D. 1981). Member: State Bar of California. David W. Crumpacker, born Woodland,. California, November 16, 1955; admitted to bar, 1981, California. Prepa- ratory education, University of Colorado (B.A. 1978); legal education, George Washington University (J.D. 1981). Phi Beta KaPpa. Member: State Bar of. California. K. Terrance Garcken, born Los Angeles, California, January 24, 1948; admitted to bar, 1981, California. Prepa- ratory education, University of California, Santa Barbara (B.A. 1970); legal education, University of California, Los Angeles (J.D. 1981). Member: State Bar of California. Ginna Ingram, born Los Angeles, California, January 18, 1956; admitted to bar, 1981, California. Prepa- ratory education, University of California, Berkeley (B.A. 1978); legal education, University of California, Davis (J.D. 1981). Member: State Bar of California. Carol J. Moore, born New Haven, Connecticut, September 8, 1956; admitted to bars 1981, California.. Prepa- ratory education, Radcliffe College (A.B. 1978); legal educa- tion, Harvard Law School (J.D. 1981). Member: State Bar of California. Jody E. Graham, born Detroit, Michigan, August 1955; admitted to bar, 1981, California. Preparatory educa- tion, University of California, Santa Barbara (B.A. 1977); legal education, University of California, Davis (J.D. 1981). Member: State Bar of California. Deborah A. Lee, born Oakland, California, March 8, 1956; admitted to bar, 1981, California. Preparatory educa- tion, University of California, Davis (A.B: 1978); legal education, University of California, Davis (J.D. 1981). Member-: State Bar of California. Carol L. Mayali, born Burbank, California, January 9 1955; admitted to bar, 1981, California. Preparatory educa- tion, University of California, Irvine (B.A. 1977); legal MANATT, PHELPS, F~OTHENBERG K, TUNNEY January 15, 1982 Page 22 education, University of California, Los Angeles (J.D. 1981). Member: State Bar of California. Marc H. Rapaport, born New York City, February 6~ 1957; admitted to bar, 1981, California. Preparatory educa- tion, Wharton School, University of Pennsylvania (B.S. 1978); legal education, Harvard Law School (J.D. 1981). Member: State Bar of California. Eugene Tanaka, born Chicago, Illinois, June 5, 1956; admitted to bar, 1981, California. Preparatory educa- tion, Columbia University (B.A. 1978); legal education, Columbia University (J..D. 1981). Member: State Bar of California. Helen Elmquist Cutler, born Iowa City, Iowa, August 31, 1938; admitted to bar., 1981, California. Prepara- tory education, University of Southern California (B.A. 1960); legal education, University of California, Los Angeles (J.D. 1981). Extern Clerk, Justice Rodney K. Potter-, California Court of Appeal, Second District (Los Angeles), Spring 1980. Member: State Bar of California.. Daniel L. Appelman, born Los Angeles, California, December 29, 1944; admitted to bar, 1981, California. Prepa- ratory education, San Francisco State University (B.A. 1968, M.A. 1973); Temple University (Ph.D 1982); legal education, University of California, Los Angeles (J.D. 1981). Member: State Bar of California. Diane J. Gideon, born Queens, New York, December 1,' 1955. Preparatory education, University of California, Los Angeles (B.A. 1977); legal education, University of Cali- fornia, Los Angeles (J..D. 1981). Laurie Karon, born Highland Park, Illinois, August 16, 1956. Preparatory education, Northwestern Univer- sity (B.S. 1977); legal education, University of Illinois (J.D. 1981). . The following will be-joining the firm in 1982. Philip Recht, born PittsbUrgh, pennsylvania, June 10,. 1953. Preparatory education, Yale University (B.A. 1975); legal education, University of Pennsylvania (J.D. 1981). MANATT, PHELPS, ROTHENBERG & TUNNEY January 15, 1982 Page 23' Elizabeth Watson, born Lakewood, Ohio, July 20, 1955. Preparatory.educatiOn, Northwestern University (B.S. 1977); legal education, University of Southern California (J.D. 1981). Roger Lane Carrick, born High Point, North Carolina, July 28, 1951;. admitted to bar; 1980, California. Prepara- tory education, Harvard College (A.B. '1973, Ph.D 1975); legal education, University of California,. Berkeley (Boalt Hall) (J.D. 1980). Member, State Bar of California. Daffy Sragow, born May 17, 1946. Preparatory education, Cornell University (B.S. 1966); University.of Pennsylvania (M.A. 1968); legal education (J.D. 1981). Tot Braham. Preparatory education, Columbia College (A.B.. 1979); legal education, New York' University. Helen L. Delaney. Preparatory education, Cornell University (B.A. 1979); legal education, University of Cali- fornia, Berkeley (Boalt Hall). Timothy J. Hoy, born May 13., 1956. Preparatory education, Oberlin College (B.A. 1978); legal education, University of Michigan. Brad R. Krevoy. Preparatory education, Stanford University (B.A. 1978); legal education, Hastings College. Kenneth Krug, born October 25, 1958. Preparatory education, Duke University (A..B. 1979); legal education, University of Chicago. Robert D. Lee. Preparatory education, Harvard College (B.A. 1978); Legal education, Georgetown Law Center. Dennis A. Miller.. Preparatory education, Univer- sity of California, San Diego (B.A. 1978); legal education, University of California, Berkeley (Boalt Hall). Brad A. Mortice. Preparatory education, Claremont Men's College (B.A. 1978); legal education, University of California, Berkeley (Boalt Hall). MANATT, PHELPS, ROTHENBERG & TUNNEY January 15, 1982 Page 24 Matthew P. Quilter. Preparatory education, Princeton University (B.A. 1974); legal education, Univer- sity of Pennsylvania. Ronald L. R°dgers, Jr., born Brawley~ California, February 2, 1956. Preparatory education, University of· Southern California (B.A. 1979); legal education, George Washington University. Charles M. Shumaker III Preparatory education, Tufts University (B.A~ 1976), Columbia University (M.A. 1979); legal education, University of Michigan. Steven M. Siemens Preparatory education, Stanford University (B.A. 1976); legal education, Hastings College. Cary H. Thompson, born Winchendon, Massachusetts, August 4, 1956. Preparatory education, University of Cali- fOrnia, Berkeley (B.A. 1978); legal education, University of Southern California. The following persons will be working with the firm as summer associates during the summer of 1982: John Michael Alongi. Preparatory education, University of California, Davis (B.A. 1979); legal educa- tion, Univer'§ity of California, Davis. Peg O. Casey. Preparatory education, Gannon College (B.A. 1974); legal education, University of Southern· California Law Center. Mona A. Clee. Preparatory education, Austin college ('B.A.); University of Texas at Austin (M.B.A.; legal educa- tion, University of Texas School of-Law. Mitchell H. Cohen. PreParatory education, Brown University (A.B. 1980); legal education, New York University· School of Law. Christina Desser.~ Preparatory education, UniVer-, sity of California, Berkeley (B.A. 197'8); legal education, McGeorge School of Law. MANATT. Ph£lP$, F~OThEnB'ERg & TUNNEY January 15, 1982 Page 25 Julie R. Fenster. Preparatory education-, Brown University (A.B. 1979); legal education, University of Penn- sylvania Law School. Michael Allen Firestein. Preparatory education, Brown University (A.B. 1980); legal education, Northwestern University School of Law. Brian K. Lipson. PreParatory-education, Univer- sity of Michigan (A.B. 1978); 1.egal education, University of Pennsylvania Law School. Marshall M. Howell. Preparatory education, Massa-. Chusetts Institute of Technology (S.B. 1980); legal educa- tion, Harvard Law School.. Clare Bronowski Koopersmith. Preparatory educa- tion, Harvard University (B.A. 1976); legal education, University of California, Los Angeles. Steven Alan Laub. Preparatory education, Univer- sity of California, Los Angeles (B.A. 1980); legal educa- tiOn, Harvard Law School.. John J. Little. Preparatory education, Cook College/Rutgers (B.S. 1980); legal education, Yale Law School. Michael T. Maurer: Preparatory education, Iowa State University (B.A. 1980); legal education, University of Michigan Law School. Scott William Pink. Preparatory education, Harvard University (B.A. 1980); legal education, Harvard Law School. Pat Renee SPengler. Preparatory education, Yale University (B.A. 1978); legal education,' Yale Law School. Daniel G. Swanson. preparatory education, Univer-~. sity of California, Berkeley (A.B. 1979); legal education, Harvard Law School. Should Mandatory Redemption Be "Mandatory"? Case Study: New York State Public Authorities' Bond Redemption Policy ...Frank Paukowits and Benjamin Lonner The "Stepped Coupon"--A New Method of Structuring Bond Issues ...Arch W. Roberts and J.,Allan Rudolph Loans-to-Lenders Revenue Bond Financing for Multifamily Rental Housing in California ...Peter J. Ross Tax-Exempt Commercial Paper: An Innovative Financing Technique ...Christian McCarthy Credit AnaLysis Overview: General Guidelines in the Analysis of Municipal Bonds ...Sylvan G. Feldstein Index to Volume 2 publication of PANEL.PUBLISHERS : be to the Stepped Coupon we i i /23 erwhelmingly advantageous to te market-place will be swift and ! I Loans-to-Lenders Revenue Bond FinanCing for Multifamily Rental Housing in California PETER J. ROSS I. O,erview . A. Introduction This article describes a plan of f'mancing whereby certain California governmental bodies can stimulate the development of multifarnily rental housing within their respective U:rrltorial boundaries through the issuance of tax-exempt revenue bonds. In essence, the plan seeks to pass the-lower borrowing costs of such issuers through to developers of multifamily rental property. As a result, loans could be made available to developers at a rate significantly below conventional market rates. The lower interest rates should reduce overall project development costs and may enable developers to charge rents which are low enough to. be competitive for the area, yet sufficient to be profitable. '-: B. Eligible Issuers Eligible issuers (the "issuers") for the loans-to-lenders program described herein divide into three categories: (I) charter cities; (2) PETER J. ROSS is an associate with the law firm of Manatt, Phelps, Rothenherg & Tunney, (San Francisco office). Formerly, he was with LeBoeuf. Lamb, Leiby & MacRam. He is a graduate of Yale University and attended law school at Emory, in Atlanta, Georgia. The author wishe~ to acknowledge the assistance of Harold E. Rosers, Jr., partner in Manatt, Phelps, Rothenherg & Tunney, in the preparation of this article. 24 / Municipal Finance Journal i. redevelopment agencies; and (3) the City of Los Angeles. General law cities and counties presently are not authorized to issue bonds for multifamily rental housing; however, both houses of the state have approved legislation which, if signed, into law by the Governor, would .permit the issuance of such bonds. C. 'Eligible Housing Developments The location, size and occupancy standards of the rental housing projects to be financed-with revenue bonds may be set by the Issuer, subject to ~ tax and state law requirements. Under federal tax law, 20 percent of aH rental units financed with bond proceeds must (1) be occupied by tenants having incomes not exceeding 80 percent of the median income for the area as determined..by HUD and (2) be available at an annual rental not exceeding 3Oo. ercen_.t of the maximum annual income level of such tenants. In'the case o_f_"_targeted area projects" (as defined in Section 103A(k) of the Internal Revenue Code of 1954, as amended), the 20 percent requirement may be reduced to 15 percent. These requirements must be maintained for a period of at least 20 years after the rental units are available for occupancy (not after the bonds are issued). State law and local ordinances may add further restrictions, aH of which could adversely affect the ability of de- velopers to generate sufficient rental income to justify development costs--even with reduced borrowing costs. D. General Structure Basically, the Issuer would issue its revenue bonds and loan a major portion of bond proceeds to one or more financial institutions (the "Lenders")' to fund construction and permanent loans to developers of multifamily rental housing projects (the "Developers"). Accordingly, two sets of loans are involved: (I) the loan of bond proceeds to the Lenders (the "Lender Loans") and (2) the Lender's loans to the Developers (the "Developer Loans"). Principal of and interest on the bonds are payable from payments of the Lender Loans; principal of and interest on the Lender Loans, in turn, are payable from payments of the Developer Loans. The bonds, the Lender Loans and the Developer Loans will have parallel payment provisions and each will have terms of 10- 12 years. A loan with a 10- 12 year term is considered a permanent financing, yet the interest costs of such loan are significantly less than those associated with longer term financings. The payment schedule of each loan will be based on a permanent amortization schedule of 30-40 years, with a balloon payment in the tenth or twelfth year. Accordingly, the large portion of each loan will not be due until the housing projects have been in operation for several years and have had an opportunity to develop a positive cash flow. I, Eligible Lenders include commercial banks, savings and loan associations, savings banks and insurance companies. '~' Loans-to-Lenders Revenue Bond Financing / 2S os Angeles. General law cities ~ The bonds will never constitute a debt or liability of the Issuer. They are ~ issue bonds for multifamily payable solely from the revenues and assets pledged therefor, principally rate have approved legislation from repayments of the Lender Loans. Although the Lender Loans would Permit the issuance of ~ constitute a general obligation of each Lender, that obligation alone usually ~ is not sufficient to secure an "AAA" rating on the bonds, necessary for ~ marketing purposes. Thatrating may be obtained by two principal means: ~ (I) a letter of credit or similar obhgation of a financial institution having an ~ "AAA" credit rating and/or (2) the coliateralization of the Lender Loans of the rental housing projects ~ with certain other mortgages or federal direct or guaranteed securities, each set by the Issuer, subject to having a value substan6nily in excess of the relevant Lender Loans. The "AAA" ' ; federal tax law, 20 percent of mst (1) be occupied by tenants rating will reduce the Issuer's borrowing costs, and this reduction will be passed through to the Developer. !he median income for the area tble at an annual rental not 1 income level of such tenants. H. State Bonding Authorization fined in Section 103A(k) of the for Eligible Issuers $), the 20 percent requirement bents must be maintained for a A. Charter Cities its are available for occupancy Charter cities are empowered to issue revenue bonds for multifamily md local ordinances may add rental housing if the city charter incorporates the home rule provision of .~rsely affect the ability of de- Article XI, Section $(a) of the California Constitution. That section autho- :ome to justify development rizes charter cities, in the a. bsence of any charter restrictions to the contrary, to make and enforce all laws respecting "municipal affairs": It shall be competent in any city charter to provide that the city governed hue bonds and loan a major . thereunder may make and enforce all ordinances and regulations in res- peet to municipal affairs, subject only to restrictions and limitations ~e financial institutions (the provided in their several charters and in'respect to other matters ~anent loans to developers of they shall be subject to general laws .... ~velopers."). Accordingly, two ' id proceeds to the Lenders (the The scope of a charter city's local autonomy, i.e., the definition of oans to the Developers (the "municipal affairs," is determined by the courts on a case-by-case basis. No rest on the bonds are payable court has decided whether issuance of revenue bonds for multifamily housing il of and interest on the Lender is a municipal affair. Under accepted analysis, the home rule grant should ' the Developer Loans. be considered sufficiently broad. :loper Loans will have parallel Courts seem to apply a two-step apprOach in determining whether a of 10- 12 years. A loan with a charter city's local ordinance is protected by Article XI, Section 5(a). First, they mancing, yet the interest costs examine the state and local laws to determine if any conflict exists between ;e associated with longer term them. Conflicts have been found in the following instances: where the two. n will be based on a permanent laws were inconsistent with each other, see, e.g., Sonoma County, etc. v. itha balloon payment in the County of Sonoma, 23 CaL 3d 296 (1979); where local law duplicated a portion of each loan will not be state provision, see, e.g., Pipoly v. Benson, 20 Cal. 2d 366 (1942); and where ~peration for several years and the state legislature has evidenced an intent to preempt the field, see, e.g., .~cash flow. Bishop v. City of San Jose, ICal. Rptr. 56, 63 (1969); Redevelopment Agency v. City of Berkeley, App. 143 Cal. Rptr. 633 (1978). In the absence rings and loan associations, savings of a conflict, both the local and state law should be upheld. 26 ? Municipal Finance Journal In the event of a conflict, courts will then inquire into the nature of the matter that the local law seeks to regulate. If the matter is a municipal affair; the local law will be upheld. See Sonoma County, supra. If the local law infringes on a matter of statewide concern, the local law will be invali- dated. See generally, David, California Cities and the Constitution of 1879: General Laws and Municipal Affairs, 7 H.C.L.Q. 643 (1980), Sato, "Munici- pal Affairs" in California, 60 Cai. L. Rev. 1055 (1972). Courts have upheld local laws with extraterritorial effect as long as their impact upon matters of statewidc concern was not "serious." See, e.g., Weekes v. 'City of Oakland, 21 Cal. 3d386 (1978) (involving a local occupation tax). Although the California legislature has enacted a number of laws providing for the issuance of revenue bonds for multifamily rental housing (see, e.g., Cal. Health & Safety Code §§33750, et seq. (Deering); id. §§52055-56), it has not evidenced an intent to preempt the multifamily rental housing field. In at least one instance the state expressly has recognized and preserved the fight of charter cities to issue revenue bonds for multifamily rental housing purposes. One such legislative pronouncement appears in Section 52053(b) of the Health & Safety Code concerning the power of local housing finance agencies to issue revenue bonds to provide long-term mortgage financing: [N]othing in this subdivision shall affect the authority conferred upon a charter city by its charter to issue revenue bonds to undertake a program of long-term mortgage financing for multifamily rental housing. Similarly, in A.B. 665, currently awaiting the Governor's approval, the legislature has stated: [T]he provisions of this chapter shall not be construed to limit or other- wise restrict the authority of chartered cities to issue bonds for the pur- pose of financing the construction or development of multifamily rental housing...* In light of the above legislative expressions, a court could not' reasonably find that the .state has evidenced an intent to preempt the field of multifamiy rental housing. Accordingly, state law cannot be said to restrict the issuance of multifamily rental housing revenue bonds by charter cities. In the unlikely event t-hat a conflict with state law is perceived, a court nonetheless may uphold a local ordinance on grounds that the issuance of revenue bonds for multifamily rental housing purposes is a "municipal affair" protected against inconsistent state laws by the home rule grant. Such a finding is supported by those cases which hold that the procedure for the issuance of revenue bonds is a municipal affair. See, e.g., Fritz v. City and County of San Francisco, 132 Cal. 373 (1901), City of Santa Monica v. Grubb, 245 Cal. App. 2d 718 (2d Dist. 1966). See generally, Sato, supra at 1080..As additional support, analogy can be made to the muni- cipal tax cases which have established a strong po~licy of home rule fiscal * If signed by the Governor, A.B. 665 would enable ali cities--general law and charter--to issue revenue bonds for multifaraily rental housing~ Loans-to-Lenders Revenue Bond Financing / 27 I inquire into the nature of the autonomy. See, e.g., Igc, ekes v. City ofOaicland, 21 Cai. 3d 386 (1978); Ex , :If the matter is a municipal ~ .~ flarte Braun, 141 Cal. 204 (1903). ma County, supra. If the local ~ The bonds of charter cities and the Projects to 'be financed therewith arc rn, the local law will be invali- :'~ subject only to federal tax law requirements, unless the charter itself or the rand the Constitution of 1879: ~' local ordinance enacted thereunder adds further restrictions, As a result of ,.Q. 643 (1980L Sato, "Munici- :~ )55 (1972). Courts have upheld "?~ this'flexibility, charter cities are the most desirable issuing entities of revenue bonds for multifamily rental homing. ~s their impact upon matters of ~., Weelces v. City of Oalcland, ..: B. Redevelopment Agencies ation tax). .: Redevelopment agencies are empowered 'to issue revenue bonds for ~ enacted a number of.laws multifarnily rental housing pursuant to the provisions of S.B. 99, codified at for multifamily rental housing Cal. Health & Safety Code §§33750 et seq. (Deering). The enabling i33750, et seq. (Deering); id. language is contained in Section 337611 which provides: "An agency may tt to preempt the multifamily issue revenue bonds for the purpose of irmancing residential construction tance the state expressly has authorized by this chapter .... "Although not expressly provided, it is tr cities to issue revenue bonds reasonable to presume that rental housing is contemplated within the '~ such legislative pronouncement def'mition of "residential construction." "Residential construction" refers & Safety COde concerning the only to "residences," the definition of which' includes mUltifamily issue revenue bonds to provide residential structures, but does not distinguish between rental and owner- occupied dwellings. Id. §337530). : authority conferred upon a ~nds to undertake a program The housing projects financed under S.B. 99 must satisfy the occupant- . ~.nilyrental housing, eligibility requirements .prescribed by Sections 33760 and 33760.5. The applicability of these requirements depends upon whether the project is ~ the Governor's approval, the located' within or outside a "project redevelopment area.''2 If the rental ~ construed to limit or other- project is located within a project redevelopment area, there are no ~ to issue bonds for the put- restrictions as to occupant eligibility. If the project is located outside a ~pment of multifamily rental project redevelopment area, all occupants must be "eligible for financial assistance specifically provided by a governmental agency for the benefit of occupants of the residence." Id. §33760. s, a court could not' reasonably Section 33760.5 attempts to ease some of the hardships created by Section ent to preempt the field of 33760 for redevelopment agencies operating in jurisdictions having a te law cannot be said to restrict population in excess of 600,000 persons. Such agencies may finance venue bonds by charter cities, multifamily rental housing developments outside a redevelopment project state law is perceived, a court area for persons of low or moderate income~ provided that (1) 20 percent of a grounds that the issuance of the rental units are committed to lower-income households· and (2) 10 ~ing purposes is a "municipal percent of such units are committed to very low-income households. Section laws by the home rule grant. 33760.5 further provides that the above .restrictions will not apply if federal which hold that the procedure rent subsidies become unavailable. At present, these special provisions have icipal affair. See, e.g., Fritz v. effect only until January 1, 1983, unless extended by statute. iai. 373 (1901), City of Santa !2d Dist. 1966). See generally, ' 2. A "redevelopment project area" means a project area as defined by Gal. Health & IaJogy can be made to the muni- Safety Code §33320.1 for which a redevelopment plan has been adopted by ordinance pursuant iong policy of home rule fiscal to Section 33365 of that Code. Project areas must be located in blighted areas and must be selected by a planning commission for the community. all citiesmgeneral law and charter--to I 3. "Low or moderate income" is defined as 120 percent of the area median income. Cal. Health & Safety Code §33760.5(b)(Deering). ' 28 / Municipal Finance Journal As a practical matter, it may be very difficult to finance multifamily rental housing developments with bonds of redevelopment agencies--whether or not such developments are' located within redevelopment project areas. The restrictions added by S.B. 99 may severely curtail the ability of a housing project to generate sufficient rental income to justify development costs. In the case of housing developments in redevelopment Project areas, the blighted conditions of such areas may force rents to be too low. On the other hand, rental income from housing developments outside project areas will be reduced by virtue of the more stringent occupant-eligibility requirements. C. City of Los Angeles SeCtion 52055 of the Health & Safety Code specifically authorizes cities with populations exceeding 2,000,000 persons to issue revenue bonds for multifamily rental housing. At present, only the City' of Los Angeles qualifies. Section 52055 sets forth only one.minor limitatiOn on the housing projects to be financed thereunder: the rental units must be occupied by persons of low and moderate income. Until December 31,1981, counties' with populations exceeding 4,000,000 persons were empowered to issue revenue bonds for multifamily rental housing pursuant to the' conditions of Section :52056 of the Health & Safety Code. The "sunset" 'provision of Section 52056, however, .was not extended. Accordingly, Section 52056 no ~l°nger ProVides bonding authorization for multifamiiy rental housing. D. A.B. 665' At present, general law cities and counties have no bonding autho _rizati.on for mulfifamily rental housing. A.B. 665, if signed into law by the Governor, would provide that authorization. In addition, charter cities would be per- mitted to avail themselves of the provisions of A.B. 665. Accordingly, A.B. 665 would moot any questions concerning the authority of charter cities to issue revenue bonds for multifamily rental housing. The requirements of A.B. 665 parrot those set forth in Section 103(b)(4)(A) of the Internal Revenue Code. By definition, then, under current laws, a tax-exempt revenue bond for muitifamily residential housing would qualify under A.B. 665,' subject to the restrictions of A.B. 665 on the aggregate amount of multifamily rental housing bonds which may be issued.~ 4. However, since the provisions of Section 103(bX4)(A) arc not incorporated by rcference, A.B. 665 would be unaffected by an easing of the restrictious for federal tax-exemption. 5. As an alternative means of financing multifamily rental housing, A.B. 665 permits cities and counties to contract with the California Housing Finance Agency ("CHFA") to sell the bonds of such city or county and to operate.a program to fund construction and mortgage loans for multifamily rentnl housing developments within such city or county. This alternative subjects thc management and construction of all developments financed thereunder to the supervision of the CHFA. Loans-to-Lenders Revenue Bond Financing / 29 ~fficult to finance multifamily A.B. 665 also allows cities and counties to apply not more than 10 percent bonds of redevelopment of bond proceeds to the development of commercial property for lease.6 ~pments are located, within Such commercialproperty must be located on the same parcel as, or the ~ added by S.B. 99 may severely parcel adjacent to, a multifamily rental housing development. Any rents :nerate sufficient rental income ' collected therefrom in .excess of payments necessarY for debt service, oper- ~ of housing developments in ating expenses and required reserves must be applied to reduce the rent conditions of such areas may charged on units reserved for lower-income and very low-income households. :d, rental income from housing . A.B. 665 limits the aggregate amount of bonds which may be issued for reduced by virtue of the more ~ multifamily rental housing purposes to $900,000,000. This ceiling applies whether or not such bonds were issued pursuant to A.B. 665 or any other provision of law, including a city charter. By its terms, A.B. 665 would remain in effect until January 1, 1984, ~de specifically authorizes cities unless extended by a later enacted statute. ~ns to issue'revenue bonds for ~nly the City of Los Angeles E; Local Housing Authorities minor limitation on the housing Local housing authorities of cities and counties created under the rental, units must be occupied Housing Authorities Law, Cal. Health & Safety Code §§34200 et seq. are opUlations exceeding 4,000,000 permitted to finance primarily slum clearance or low-rent housing for persons bonds for multifamily rental of low income. Absent subsidization, such housing projects would not be financially feasible; the rental income generated thereby could not pay ~n 52056 of the Health & Safety development costs. On 52056, however, was not In addition, voter approval may be required for all such bonds of a local ino longer provides bonding housing agency. Under Article XXXIV of the California Constitution, state g' public bodies are prohibited from developing, constructing or acquiring low-rent housing projects without voter approval. Although the state legislature has exempted from this restriction privately owned developments . have no bonding authorizatign in which not more than 49 percent of the rental units are available to igned into law by the Governor, persons of low income, the projects to be financed by local housing on, charter cities would be per- authorities may not fall within this exception. There is, however, greater of A.B. 665. Accordingly, A.B. probability that this exception would apply to the bonds of the other ~he authority of charter cities tO issuers. ousing. : those set forth in Section F. The RentalHonsingConstmctionProgram e. By definition, then, under The Rental Housing Construction Program, described in Sections 50735 multifamily residential housing :he restrictions of A.B. 665 on et seq. of the Health & Safety Code, provides additional authority'pursuant housing bonds which may be to which cities, counties and redevelopment agencies can issue bonds to finance multifamily rental housing projects. However, such issuers must first apply to and receive a commitment from the Department of Housing )(A) are not incorporated by reference, restrictions tbr federal tax-exemption. ~ rental housing, A.B. 665 permits cities Finance Agency C'CHFA") to sell the tm to fund construction and mortgage 6. This i0 percent limit reflects the Internal Revenue Code requirement that 90 percent ~in such city or county. This alternative ("substantially all") of the proceeds of any industrial development bond be used to provide the relopmcots financed thereunder to the exempt facility (i.e., me housing developments). ~ Treas. Reg. § 1.103-8(a}(1). 30 / Municipal Finance Journal and Community Development for an allocation of funds before such bonds can be issued'. Accordingly, the program neither provides certain bonding authorization for local issuers, .nor, in the case of charter cities, meaningfully expands the already existing authority to issue multifamily rental housing revenue bonds. m. Federal Tax Exemption The tax exemption of revenue bonds for multifamily rental housing is provided in Section 103(b)(4)(A) of the Internal Revenue Code of 1954. At a minimum, such bonds must comply with this Section and the regulations thereunder, regardless of any requirements imposed bY state bonding acts.' Section 103(b)(4)(A) of the Code, as amended by the Mortgage Subsidy Bond Tax Act of 1980, permits tax-exempt f'mancing for residential rental property if individuals of "low or moderate" income are to occupy at least: (1) 15 percent of the rental units in the case of. "targeted area projects" or (2) 20 percent of the rental units in the case of any other project. "Low or moderate-income" is defined by Section 167(k)(3)(B) of the Code, which incorporates the standards set for Section 8 of the United States Housing .Act of 1937, as income not exceeding 80 percent of the median income area as determined by HUD. "Targeted area residences" is defined in Section 103A(k) of the Code as a residence which is in (1) a qualified census tract (where 70 percent of the families in the tract have incomes which are 80 percent or less than the statewide median) or (2) an area of chronic ' economic distress' (as designated by the state and approved by the Secretary of HUD). Under Section 103(b)(4)(A) of the Code, this 20-percent/15-per- cent test must be satisfied for a period of at least 20 years following the completion of the housing project, whether or not the bonds are outstanding. The rental housing projects to be financed With tax-exempt revenue bonds also must qualify as "residential real property" under Treas. Reg. '§1.103- 8Co). Thus, the housing facilities must be available for public use and consist of complete living units, with living, sleeping, eating, cooking and sanitation facilities, which are not used on a transient basis. IV. Detailed Analysis of Financing A. Financing Documents As stated earlier, a loans-to lenders financing involves two sets of loans: (1) the loan of bond proceeds to the Lenders, and (2) the Lender's loans to 7. The bonds also must comply with the arbitrage provisions of Section 103(c) and those provisions which apply to industrial development bonds generally. Loans-to-Lenders Revenue Bond Financing / 31 Lion of funds before such bonds the Developers. These transactions necessitate three types of financing either provides certain bonding documents: two with respect to each loan and a third with respect to the the case of charter cities, bonds. In addition; if a letter.of credit or similar obligation is obtained as authority to issue multifamily added security for the payment of the bonds, a fourth set of financing documents would be required. The following is a description of the basic documents contemplated by a ~emption multifamily loans-to-lenders financing secured by a letter of credit. DOCUMENT DESCRIPTION r multifamily rental housing is BOND (1) Trust Indenture Agreement between the Issuer and 'nai Revenue Code of 1954. At a his Section and the regulations DOCUMENT trustee for the bondholders (the imposed by state bonding acts.' "Trustee"). Issuer agrees to repay bonds from available funds and ~nded by the Mortgage Subsidy l~dges program asse~ and revenues financing for residential rental to the Trustee as security. "income are to occupy at least: LETTER OF (2) Application for Application by Issuer to letter of :of "targeted area projects" or CREDIT Lettcr of Credit credit bank to issue letter of 'of any other project. "Low or DOCUMENTS credit. 57(k)(3)(B) of the Code, which ] of the United States Housing' (3) Letter of Credit Agreement by letter of credit bank. cent of the median income area unconditionally and irrevocably to ,sidences" is defined in Section pay principal of and interest on the bonds. Issued to the Trustee for the s in (1) a qualified census tract ~ct have incomes which are 80 benefit of the bondholders. ,n) or (2) an area of chronic LENDER (4) Lender Loan Agreement between Issuer and LOAN Commitment Lender. Lender commits to orig- : and approved by the Secretary DOCUMENTS Agreement inate, and Issuer agrees to allocate e Code, this 20-percent/l 5-per- ~ to such Lender, specified principal at least 20 years following the r amount of loans. Al~ement is .ether or not the bonds are entered into before the bonds are issued. ~ with tax-exempt revenue bonds ($) Lender Loan Agreement between Issuer and irty" under Treas. Reg. §1.103- Agreement Lender providing for the actual loan .' available for public use and of bond proceeds. Lender's obliga- i, sleeping, eating, cooking and tion to repay the loan is evi- .transient basis, denced by a note which will be en- dorsed by Issuer to the Trustee. of Financing (6) Reimbursement Agreement between Issuer and Agreement Lender obligating Lender to reim- burse letter of credit bank for any draws made by Trustee under the ~cing involves two sets of loans: letter of credit. :s, and (2) the Lender's loans to DEVELOPER (7) Deed of Trust Agreement by Developer to grant LOAN a ilen on and security interest in the provisions of Section 103(c) and those DOCUMENTS housing project to a Deed of Trust ~ generally, trustee on behalf of the Lender. 32 / Municipal Finance Journal. (8) Developer Note Mortgage Note by Developer to the Lender evidencing obligation to re- pay the Developer Loan. (9) Regulatory Agreement between the Developer, · : ' Agreement Trustee and Issuer relating to the " permitted use of the housing de- ve~~pment. Regulatory Agreement :"~" is necessary to ensure tax exemp- tion of the Bonds. (10) Special Warranty Agreement by Developer (i) to · Deed and Deed comply with occupant-eligibility Restrictions r, quiremems for a period of twenty years and (ii) to maintain property as residential real property during lifetime of bonds. Agreement runs with the land and is binding upon any subsequent owner of the .: housing project. B. The Bonds 1. General The bonds will be issued in an amount sufficient to fund all of the Lender Loans, to pay issuance costs, and to fund a debt service reserve fund for the bonds. The actual size of the bond issue thus will depend upon the principal amount of loans each Lender commits to make to Developers. The interest rate on the bonds will be based on current rates at the time of marketing. The obligations of the Issuer relating to the bonds will be contained in a Trust Indenture with a qualified bank or institution acting on behalf of the bondholders (the "Trustee"). In particular, the Trust Indenture will: (1) pledge and assign all available funds and assets to the Trustee as security for the bonds; (2) Create various funds through which project revenues will flow; (3) set forth payment and repayment provisions; and (4) define events of default under which the Trustee can draw upon the letter of credit or other security for the bonds. 2. Security for the Bonds The bonds are payable from and secured by three sources of revenues: (1) repayments of the Lender Loans; (2) moneys held by the Trustee in the various funds and accounts created under the Trust Indenture; and (3) moneys drawn by the Trustee under the letter of credit (or other security obligation) and/or other collateral pledged to the payment of the bonds. The primary source of payment for the bonds is the repayments of the Lender Loans pursuant to individual Lender Loan Agreements. The Loans-to-Lenders Revenue Bond Financing / 33 Mortgage Note by Developer to the maturity and payment provisions of the bonds and Lender Loans .will be Lender evidencing obligation to r~- virtually identical; prepayments of the Lender Loans will trigger pre- pay the Developer Loan. payments of the bonds. Agreement between the Developer, In the event that payments received from the Lenders are insufficient to Trustee and Issuer relating to the meet debt service on the bonds, the Trustee may withdraw moneys from the permitted use of the housing de- various funds and accounts established under the Trust Indenture. The velopment. Regulatory Agreement Trust Indenture will Set forth the order in which such funds and accounts is necessary to ensure tax exemi>- may be so used. A Debt Service Reserve Fund.usually will be established to tion of the Bonds. pay at least six months' to one year's interest on the bonds? Agreement- by Developer (i) to The ultimate security behind the bonds is the letter .of credit or.similar comply with occupant-eligibility obligation from a bank having an "AAA" rating and/or collateral pledged req~ents for a period of twenty by Lenders in the form of certain mortgage 'loans or/federal securities years and (ii)to maintain property having a market value substantially in excess-of the Lender Loan. The as residential real property during actual collateral requirements will be dictated by the rating agencies and/or lifetime of bonds. Agreement runs the bank. with the land and is binding upon A loans-to-lenders financing may be structured to permit the bondholder- any subsequent owner of the (or the trustee acting on his behalf) to claim against the letter of credit or housing project, the pledged collateral, or both, in the event of default. If the bondholders can claim' against the pledged collateral, the aggregate yield thereon is limited by the arbitrage rules to the yield On the bonds. ,~e Rev. Rul~ 78-348 (1978). This restriction necessitates the periodic revaluation of the collateral, since its yield continually changes. However, if the collateral is pledged ~fficient to fund all of the Lender solely for the benefit of the letter of credit bank and the bondholders a debt service reserve fund for the can proceed only against the letter of credit, then the problems associated bus will depend' upon the principal with collateral would be eliminated. This is the preferable alternative. make to Developers. The interest rates at the time of marketing. $. Funds ~ the bonds will be contained in a The tYPical loans-to-lenders financing requires the .establishment'and  titution acting on behalf of the maintenance of the following funds: , the Trust Indenture will: (I) tssets to the Trustee as security for FUND SOURCE AND PURPOSE OF FUND )ugh which project revenues will (1) Loan Fund Funded from bond proceeds and early prepayments it provisions; and (4) define events of Lender Loans. Applied to make Lender Loans and, draw upon the letter of credit or after 3 years from date of the bonds, to redeem the bonds. For convenience, Loan Fund may be divided into (1) separate "Lender Loan Accounts" and (2) a I Contingency Account. in the event a commitment to ~ originate a Developer Loan is not fulfilled. d by three sources of revenues: (I) (2) Cost of Issuance Funded from bond proceeds~ Applied to pay issuance oneys held by the Trustee in the Fund costs, including legal fees, printing expenses~ etc. ter the Trust Indenture; and (3) letter of credit (or other security ~ to the payment of the bonds. 8. If the Trustee is able to draw immediately under the letter of credit or other security for .~ bonds is the repayments of the the bonds, the need for a Debt Service Reserve Fund may be obviated. Indeed,such Fund may Lender Loan Agreements.. The no longer be "reasonably required" within the meaning of Seclion 103(c) of the Internal Revenue Code. In such instance, moneys in such Fund could not be invested at unrestricted yield, thereby causing the Fund to become superfluous. 34 / MuniCiPal Finance Journal (3) Revenue Fund FuMed from pa)menu and ~most prepayments of . Lender Loans, and investment income from other funds. Amounts representing prepayments of. Lender Loans are used to redeem bonds. Other amounts are used to pay program expenses, principal and interest on the bonds, and to fund any deficien- 'cies in the Debt Service Reserve Fund. (4) Debt Service Funded from bond--Proceeds in an amount sufficient Reserve Fund to pay six months' to one year's interest on the bonds in the event of default. (5) · Bond Fund FUnded from transfers from the Revenue Fund and Debt Service Reserve Fund. Applied to pay .debt service on the bonds. For convenience, Bond Fund may be divided into separate Interest, Principal and Redemption Accounts. C. The Letter of Credit The letter of credit would be issued to the Trustee on behalf of the bondholders in an amount sufficient to pay when due, total principal of, premium, if any, and interest on the bonds. The Trustee would be entitled to draw on the letter of credit to pay debt serVice on the bonds in the event of default in the payment of a Lender Loan. Upon each draw, the letter of credit bank would have recourse against: (1) the defaulting Lender; (2) the collateral pledged by such Lenders; and (3) program revenues and assets held by the Trustee. These rights would be specified in the Application for Letter of Credit by the Issuer and in the Reimbursement Agreement between the letter of credit bank and the Lender. The letter of credit bank generally will charge between 50 to 100 basis points each year for its credit. This premium is a program expense, payable from the "spread" between the interest rate on the bonds and the interest rate on the Lender Loans. An alternative to a letter of credit security arrangement is a Collateral Purchase Agreement among the. Issuer, the Trustee and a financial institu- tion having an "AAA" credit rating. Under this alternative, in the event of a default by a Lender in the repayment of the Lender Loan, the Trustee would have the right to sell, and the financial institution would be required to purchase, the collateral securing the defaulted Lender Loan. The purchase price would be an amount at least equal to the principal amount of the Lender Loan then outstanding, plus one year's interest thereon. The initial commitment and annual fee of such financial institution may be lower than the fee on a letter of credit. However, the Collateral Purchase Agreement will involve problems of valuing and revaluing collateral. Loans-to-Lenders Revenue Bond Financing/35 nnents and most prepayments of D. The Lender Loans Nd investment income from other The Lender Loans will be made to each Lender in an amount equal to its ~representing prepayments of commitment to origiuate Developer Loans. That commitment must be le used to redeem bonds. Other entered into prior to the issuance of the bonds since it largely will determine ~opay program expenses, principal ~ bonds, and to fund any deficien- the size of the bond issue. As security for its commitment, each Lender will iceReserve Fund. be required to pay a non-refundable commitment fee~ equal to approx- imately 2 percent of the principal amount of its commitment. The ~ proceeds in an amount sufficient commitment also will require that the Lender enter into a ~ubstan-tial to one year's interest on the bonds binding obligation to make a Developer Loan Within six months after tult. issuance of the bonds. This is a requirement for the tax exemption of the s fers from the Revenue Fund and bonds. See Treas. Reg. § 1.103-14(b)(3). :rye Fund. Applied to pay debt The Lender Loan will be made pursuant to a Lender Loan Agreement with ids. For convenience, Bond Fund the Issuer. That Agreement will require the proceeds of the Lender Loan to to separate Interest, Principal and be used for Developer Loans and will set forth the payment and prepayment mrs. terms'° of the Loan and other agreements of the Lender. The interest rate on the Lender Loan will be approximately five-eighths of 1 percent more than the interest rate on the bonds. The Lender's obligation to repay the Issuer will be evidenced by a note. the Trustee on behalf of the Assuming a letter of credit is used to secure the bonds, each Lender would y when due, total principal of, enter into a .Reimbursement Agreement with the letter of credit bank as a · The Trustee would be entitled condition of receiving a Lender Loan. Under that agreement, the Lender .~rvice on the bonds in the event would pledge to such bank collateral iff the form of certain federal securities Upon each draw, the letter of and/or mortgages in consideration of the bank's issuance of its letter of the'defaulting Lender; (2) the credit. As noted earlier, the requirements for the value of the pledged program revenues and assets collateral will be set by either the letter of credit bank, the rating agency ~ecified in the Application for for the bonds, or both, depending upon whether the bondholders can claim ae Reimbursement Agreement against that collateral. tder; :barge between 50 to I00 basis E. The Developer Loan is a program expense, payable on the bonds and the interest As the final step in the financing, the proceeds of the Lender Loans will be loaned to individual developers to construct multifamily rental housing ty arrangement is a Collateral projects. Each Developer Loan will be secured by a deed of trust on the Trustee and a financial institu- project and will be evidenced by a note to the Lender in the principal this alternative, in the event of amount of. the Loan. As noted earlier, the payment and prepayment the Lender Loan, the Trustee provisions of the Developer Loan will correspond to those of the Lender ti institution would be required Loan. defaulted Lender Loan. The .. The rate of interest on the Developer Loan will be approximately 1 :qual to the principal amount Of percent more than the rate of interest on Lender Loans. In addition, the ae year's interest thereon. The Developer may be charged a loan origination fee'of approximately 2 /~ financial institution may be wever, the Collateral Purchase tnd revaluing collateral. 9. The commitment fee will be refundable only if the bonds are not issued by a certain date or at less than a specified interest rate. 10. As noted earlier, these provisions will parallel the terms of the bonds. 36 / Municipal Finance Journal lxn'eent, an annual servicing fee of approximately one-eighth of 1 percent and customary recording and title fees. These fees and the security interest in the projects will inure solely to the benefit of the Lenders and not to the bondholders or the Issuer. As noted earlier, operation of the housing developments must comply with federal law and state law requirements throughout the lifetime of the bonds and, in the case of tenant eligibility requirements, for a period of twenty years following the completion of the project. These requirements are enforced by means of two documents: (1) the Regulatory Agreement and (2) the · Special Warranty Deed .and Deed Restrictions. The Regulatory Agreement is the agreement of the Developer with the Issuer and Trustee to conform the rental housing projects to federal tax and state law standards. Upon a default of that Agreement, the Issuer or the Trustee will be able to re- quire the Lender to accelerate payment of the deed of trust note and to :.. foreclose on the deed of trust. In addition, the Issuer may be able to lease ::,~.~ the rental units at a nominal rent. The Special Warranty Deed and Deed Restrictions enable the ":" enforcement of the 20-percent/15_percent tenant-occupancy requirement ::,:i'- for a period of twenty years after completion of construction, The Deed Restrictions "run" with, and are an encumbrance on, the land and will bind the Developer and any subsequent owner of the project. V.. Conclusion Although legal mechanisms presently exist under California and federal Statutes for the issuance of municipal bonds to finance multifamily rental housing, occupancy restrictions and unfavorable interest rates have thus far severely curtailed the use of such financing. Hopefully, with the enactment of more liberal legislation presently being considered, an upturn in the econ- omy and lowering of interest rates, such multifamily rental housing finan- cing will become more prevalent. ' MANATT, PHELPS, ROTHENBERG & TUNNEY THOMAS D. PHELPS* PETER ~ PAtErNO ARN h. TELLEM 1666 CENTURY PAR~/~' ~T II~VIN JAY DEUTCH, .......................................... LOS ANGELES, CA 90067 ~ R l~ WASHINGTON, D.C. OFFICE .............................. S .................................... ' n~ $ OFFIce April 7 ~982 Mr. W.D. Higginbotham Assistant City Manager - Finance 1501 Truxtun Avenue Bakersfield, California 93301 Dear W.D.: I very much appreciated the opportunity to appear before the Budget and Finance Committee to propose that this law firm be considered as bond counsel for your proposed multi-family revenue bond issue. As we discussed, the underwriter, Bache Halsey Stuart Shields Incorporated, would prefer that we be bond counsel since this firm has been working with Bache in the development of this program. Because of the time that we have spent and the research that we have already done in this area we are prepared to move this transaction forward immediately. For your information, I am enclosing an article entitled ~oaIns'-'~O-:~e'n'ders''Re've:nue' BOnd Fi:nanCing 'forr MUl~tifamily Re'ntal''HOUsingi~n~Ca~l~i~fornia by Peter J. Ross of this firm which has just been published in The Municipal 'Finance'Journal and .sets forth all of the requirements for structuring a multi-family revenue bond issue. Additionally, the article makes reference to all of the docUments that must be prepared on behalf of the City in order tO complete the transaction. This law firm has already prepared in draft form all of the documents referenced in the article which is the reason we are prePared~'to immediately proceed. I am also enclosing for your information a copy of this firm's resume. MANATT, PHELPS, ROTHENBERG ~ TUNNEY Mr. W.D. Higginbotham Page. Two April 7, 1982 .'Once again,~ let me thank~ for your time and I will look forWard to hearing fr .'o~li~.o~. Ji_l~ I Cor~ll~ yours, Roth~be~g~Tunney PDK:bas Enclosures cc: Thomas A. Reilly, Bache Halsey Stuart Shields Incorporated (w/enc.) 115 Sansome~l~tl~,ln Francisco, Cali~'o~nia 94104 '" ~'~q~J[ 1~'~',~,.. 415/433-0300 ~-" ~ OFFIO£ MEMORANDUM TO: Mr. Thomas A. P~illy First Vice President Bache Halsey Stuart Shields Inc. FROM: William L. Ramseyer Executive Vice President DATE: March 15, 1982 RE: BAKERSFIELD iVlULTIFAMTI,Y RENTAL HOUSING DEMAND STUDY Enclosed is our study of incremental rental housing demand for the City of Bakersfield, in accordance with our agreement. Your conmentS are welcome. Enclosure cc: b~r. Philip Kelmar Mr. W. D. Higginbotham Mr. Jim Hosenfeld Associates 115 Sansome Street, San Francisco, California 94104 415/433-0300 MEMORANDUM TO: Mr. Thomas A. Reilly First Vice President Bache'Halsey Stuart Shields, Inc. FROM: Questor Associates DATE: March 12, 1982 SUBJ: BAKERSFIELD MULTIFAMILY RENTAL HOUSING STUDY In order to determine the incremental demand for multifamily rental housing, Questor has analyzed the housing market for the City of Bakersfield. Questor projects that there will be an average annual increase in rental housing demand of ap- proximately 700 units in the City of Bakersfield and 1150 units in the metropolitan area through 1985. The following determinants were considered in ~ur analysis': Housing stock characteristics and vacancy trends; Housing production trends; Trends in homeownership; Rent levels; Consumer housing economics; Future rental housing production; and, Population growth. This report summarizes the analysis of each of these factors in turn. I. DEFINING THE MARKET An important aspect of this study has been to define the appropriate market for rental housing in Bakersfield. Within the Bakersfield metropolitan area, as shown in Exhibit I-1, there is a large amount of unincorporated land. This unin- corporated area had a population 16% greater than the incor- porated City in 1980, with approximately the same number of housing units. To exclude this area from any discussion of rental housing demand in metropolitan Bakersfield would be to ignore one-half the available housing and more than one-half the population. Furthermore, boundaries between the incorporated and unin- corporated areas are constantly changing due to annexation. A table of annexation by the City of Bakersfield since 1970 appears in Exhibit I-2. In some cases, the City, following a pro-growth attitude, annexed thousands of acres at a time. These areas were primarily uninhabited agricultural land. Since the State Legislature passed Proposition 13, however, the impetus for annexation has generally come from requests by residents of the inincorporated islands within the City who desire City services such as trash collection and in- creased police protection. According to the City of Bakers- field Planning .Department, there are currently 52 requests for annexation being considered, the majority of which in- volve small pockets of unincorporated land. It is likely that future annexations will involve more occupied housing units. In light of these considerations, Questor has analyzed the rental housing market for both the City proper, and for the total Bakersfield area (including incorporated and unin- corporated land). For purposes of discussion, the latter will be called Metropolitan Bakersfield. The boundaries of this area are defined in Exhibit I-3. -2- Exhibit I' CITY OF.BAKERSFIELD / \ INCORPORATED AREA SOUR( .~..WATS ON CO 19792' Exhibit 1-2 CITY OF BAKERSFIELD 32XlNEXATIONS 1970 - 1981 Number of Year Annexations Total Acreage 1970 4 170.1 1971 7 1,339.5 1972 5 528.0 1973 7 1,705.4 1974 6 140.9 1975 1 2.7 1976 7 1,488.2 1977 10 14,075.0 1978 · 10 11,332.0 1979 11 523.5 0 1980 4 444.9 1981 2 457.2 TOTAL 74 32,037.3 SOURCES: Kern County Planning Department, Population and Housing Report, 1975; City of Bakersfield Planning Department; Questor Associates. SEVENTH · BRUNDAGE LANE I PANAMA LA] ~~ ~, ,.~ Exhibit I-3 METROPOLITAN BAKERSFIELD PLANNING DEPARTMENT. PANAMA R AD Various soUrces of information used in this study have defined differing boundaries of the metrOpolitan area. Questor has specifically indicated where this is the case, and provided maps for comparison. II. HOUSING STOCK CHARACTERISTICS AND VACANCY TRENDS The housing stock of Metropolitan Bakersfield has increased from 61,905 units in 1970 to 85,428 in 1980 (see Ex- hibit II-l). This represents an increase of nearly 38~. This rate is a more accurate representation of growth than the separate figures for the City and the unincorporated area, since annexations may have shifted housing stock groWth toward the City. The number of housing units in Kern County increased by 41% during the same period. The growth of the City's housing stock is primarily due to a 187~ increase in the stock of multifamily housing between 1970 and 1979. The number of single-family housing units increased 19% over the same period, but declined as a percentage of total housing units. The fact that the multifamily housing stock has been increasing so rapidly does not indicate that the stock of rental housing'has increased to a corresponding degree. Multifamily housing has tradi- tiOnally been rented rather than purchased, but in recent years it has included owner-occupied units such as condo- miniums. In the Bakersfield area, according to the Board of Realtors, approximately seven percent of all residential sales in December 1981 and January 1982 were condominiums. A portion of the .187% increase in multifamily housing units since 1970 is attributable to owner-occupied units, though no figures on the distribution are available. Similarly, not all single-family homes are owner-occupied. -6- Exhibit II-! HOUSING STOCK TRENDS METROPOLITAN BAKERSFIELD AND KERN COUNTY 1970 - 1980 Single-Family Multifamily Units Housing Units Total Percent~ Percent Mobile Housing Number of Total Number of Total Homes Units City of Bakersfield 1970 19,713 80.4 4,718 19.2 81 24,512 1974 20,312 68.5 8,589 29.0 730 29,631 1977 21,480 63.7 11,493 34.1 770 33,743 1979 23,475 61.8 13,547 35.7 936 37,958 1980 NA NA NA 42,752 Unincorporated Bakersfield 1970 32,763 87.6 2,850 7.6 1,780 37,393 1977 34,190 85.8 4,688 11.8 2,823 39,845 1979 34,612 81.1 4,857 11.4 3,233 ~42,702 1980 NA NA NA 42,676 Metropolitan Bakersfield 1970 52,476 84.8 7~,'568 12.2 1,861 61,905 1977 55,670 73.8 16,1181 21.4 3,593 75,444 1979 58,087 72.0 18,404 22.8 4,169 80,660 1980 NA NA NA 85,428 Kern County 1970 89,800 81.5 13,642%< 12.4 6,698 110,140 1977 98,525 73.0 23,450 17.4 13,060 135,035 1979 102,478 71.7 25,879 18.1 14,557 142,914 1980 NA NA NA 155,702 NOTE: NA = not available. SOURCES: U.S. Census, 1970 and 1980; State Department of Finance, Special Census, 1974 and 1977; Metropolitan Bakersfield, General Plan, Housing Element, 1980; Questor A~sociates. The levels of multifamily housing in the City have been significantly higher than in the unincorporated area. In 1970, 19.2% of the City's housing stock was multifamily, compared with only 7.6% of the housing stock in unincor- porated Bakersfield. The number of multifamily units in the City has grown more rapidly since 1970, with multifamily units constituting an estimated 35.7% of the City's available housing, and 11.4% of the housing units in the unincorporated area. In all cases (the City, the metropolitan area, and the County as a whole), the proportion of multifamily housing has been increasing since 1970. Housing conditionS in the City of Bakersfield and .in the unincorporated area are comparable, with 74% of the City's housing stock considered standard, compared with 75.5% of the housing stock in the unincorporated area. The definition of buildings considered substandard in the City's General Plan includes a category of units "in need of minor rehabilita- tion.'' It should be noted that this term is defined in the General Plan to include those buildings in need of "painting or landscaping," and this might be considered too broad a definition of substandard when considering replacement needs. If only those buildings which, according to EXhibit II-2 are "in need of major rehabilitation" or "should be demolished" are labeled substandard, then 7.8% of the City's housing stock is substandard compared with 5.4% in the unincorporated area. A distribution of the Bakersfield housing stock by age appears in Exhibit II-3. Approximately 15~ of the City's housing stock and 13~ of the unincorporated area's housing stock was built before 1940. Between 1940 and 1969, 17,726 housing units were built in the City (48.5%) compared with 29,254 units (73.4%) in unincorporated Bakersfield. During the 1970's, however, 13,446 units were added to the City's housing stock, while only 5,309 units were added in -8- Exhibit II-2 HOUSING CO~DITIONS ~-~fROPOLITA~ ~%/fERSF TET,D January 1, 1979 Total City of Unincorporated Metropolitan Bakersfield Bakersfield Bakersfield 'Number Percent Number Percent Number Percent Standard 28,100 74.0 32,226 75.5 60,326 74.8 In need of minor rehabilitation 6,889 18.1 8,174 19.1 15,063 18.7 In need of major rehabilitation 2,216 5.8 1,793 4.2 4,009 5.0 Should be demolished 753 2.0 509 1.2 1,262 1.6 TOTAL 37,958 99.9 42,702 100.0 80,660 100.1 Overcrowded Households* 2,447 6.5 3,064 7.2 5,511 6.8 * Houseliolds with nDre than 1.01 persons per rock. NOTE: Totals may'not add to'100.0 due to rounding. SOURCES: Metropolitan Bakersfield, General Plan, Housing Eteme~nt, 1980: Questor Associates. Exhibit II-3 AGE OF HOUSING STOCK METROPOLITAN BAKERSFIELD, 1979 City of Bakersfield Unincorporated Single-family Multifamily Mobile Total Total Year Built Number Percent Number Percent Homes Number Percent Number Percent Before 1940 2,972 14.0 2,368 16.5 7 5,347 14.6 5,300 13.3 1940.- 1949 3,498 16.5 487 3.'4 0 3,985 10.9 6,184 15.5 1950 - 1959 6,377 30.1 703 4.9 18 7,098 19.4 13,334 33.4 1960 - 1969 4,606 21.7 ].,971 13.7 66 6,643 18.2 9,736 24.4 1970 - 1979 3,762 17.7 8,829 61.5 855 13,446 36.8 5,309 13.3 TOTALS 21,215 100.0 14,358 100.0 946 36,519 99.9' 39,863 99.9 NOTE: Totals may not add to 100.0% due to rounding. SOURCES: U.S. Census, 1970; Metropolitan Bakersfield, General Plan, Housing Element, 1980; Questor Associates. the unincorporated area. Thus, while the City has some of the oldest housing stock in the metropolitan area, it has also captured most of the recent development. One possible explanation for this unusual distribution is that the City, in an effort to exercise more control over new construction, has annexed vacant land and captured much of the recent development. During the 1950s and 1960s, de- velopers built in the County under less stringent building requirements. Later, residents of these areas requested that they be annexed by the City in order to receive City services. The City was reluctant to annex land containing developments that were not built-to its standards. To avoid this problem in the future, the City annexed desirable vacant land, forcing developers to build on City property and so adhere to City standards. Within the City, there is a great difference between the ages of single-family and multifamily housing. Construction of single-family housing peaked during the 1950s, with approx- imately 30% of the City's housing stock as of 1979 built during that decade. Single-family construction has been declining since. In contrast, more multifamily housing was built during the 1970s than existed at the time of the 1970 Census. Over 60 percent of the multifamily housing stock as of 1979 was built during the 1970s. Exhibit II-4 shows that both the City and the metropolitan area seem to be experiencing a decline in housing vacancy rates. While consistent and reliable data are difficult to obtain, the trend has been toward lower vacancy rates. The vacancy rate for single-family housing in Metropolitan Bakersfield has remained at approximately I% since 1978, but the rate for multifamily units has declined sharply from approximately 2.5% to less than one percent in 1981. Builders and real estate brokers in the area agreed that -11- Exhibit II-4 VACANCY BY TYPE OF STRUCTURE METROPOLITAN BAKERSFIELD 1974 - 1981 City of Bakersfield Metropolitan Bakersfield** Single- Multi- Mobile Single-. Multi- Mobile Family famil~ & Other Family family & Other 1974 Total Units 20,312 8,589 730 Vacant Units 891 846 55 NA % Vacant 4.39 9.85 7.53 1977' Total Units 21,480 11,493 770 Vacant Units 779 723 20 NA % Vacant 3.63 6.29 2.60 1978 Total Units 64,287 12,546 3,536 Vacant Units NA 639 312 12 % Vacant 0.99 2.49 0.34 1980 Total Units 66,19'4 18,486 4,252 Vacant Units NA 681 483 76 % Vacant 1.03 2.61 1.79 1981 Total Units 67,194 18,377 4,923 Vacant Units NA 771 124 29 % Vacant 1.15 0.67 0.59 * Figures for 1977 are estimates based on the 1977 Special Census. Bakersfield did not participate in the Census. ** Figures for Metropolitan Bakersfield are for the aggregation of Zip Code zones 93301 and 93304-93309. See map, Exhibit II-5. SOURCES: Metropolitan Bakersfield, General Plan, Housing Element, 1980; State Department of Finance, Special Census, 1974; Federal Home Loan Bank of San Francisco, Bakersfield SMSA Housing Vacancy Survey, June 1978, June 1980, and June 1981; Questor Associates. Exhibit 11-5 BAK ERSF. IEI Di~AREA- ZIp ~.' ,,~. TO SHAFTER CITY LINE : X '4.. '~, I COMPANY ~.. MAP OF WEST BAKERSFIELD ',. ,~ ir-J vacancy rates are low, with a general consensus of 1 to 1.5% for owner-occupied units and 2 to 2.5% for rental housing in February 1982. The California Housing and Community De- velopment Department considers a two percent vacancy rate for owner-occupied housing and six percent for rental units to be optimal. By these standards there is currently a 'housing shortage in Bakersfield. Between 1970 and 1980, the number of persons per household declined from 3.01 to 2.49 in the City, and from 3.12 to 2.70 in Metropolitan Bakersfield; therefore, the number of house- holds has increased faster than the population. In the City, the population increased 52%, while the number of households increased approximately 84%. Although there was a 74~ ex- pansion in the City's housing stock, it did not keep pace with the growth in the number of households. Similarly, in Metropolitan Bakersfield, there was a 24% growth in the population between 1970 and 1980, but combined with the decline in the number of persons per household, this resulted in a 75% increase in the number of households. The housing stock of the metropolitan area increased only 38% during the same decade. III. HOUSING PRODUCTION TRENDS Exhibit III-1 shows building permit activity for the City of Bakersfield since 1970. While not all authorized units are actually constructed, the permits indicate intentions to build, and may be a good measure of developers' perceptions regarding the demand for housing and the availability of construction financing. Building permit activity for the City of Bakersfield peaked in 1976 at a total of 2,928 units. There were significantly more units authorized from 1976 through 1979 than before or -14- Exhibit III-1 BUILDiNG PEPS_IT ACTIVITY BY HOUSING TYPE CITY OF BAKERSFIEIf) 1970 - JANU3~RY 1982 Units Authorized by Building Permits Single-Family Mu!tifamily Units Lost Year Number Percent Number Percent Total Through Demolition* 1970 301 27.4 798 72.6 1,099 NA 1971 267 30.5 609 69.5 876 NA 1972 347 19.5 1,430 80.5 1,777 NA 1973 280 33.2 564 66.8 844 NA 1974 434 43.2 571 56.8 1,005 21 1975 559 37.7 925 62.3 1,484 65 1976 1,079 36.9 1,849 63.1 2,928 62 1977 1,343 50.2 1,334 49.8 2,677 NA 1978 1,505 51.9 1,393 48.1 2,898 NA 1979 1,536 68.3 714 31.7 2,250 58 1980 849 66.5 428 33.5 ]_,277 38 1981 677 48.4 721 51.6 1,398 34 Jan. 1982 96 38.9 151 61.1 247 0 Average** 765 45 944.7 55.2 1,709.4 46.3 * Also includes units lost byconversion to con~rcial property andunits gained through annexation. **Average excludes figures for January 1982. NOTE: NA= not available SOURCES: City of Bakersfield BuildingDepartment, Monthly Reports; Kern County Planning Department, Population and Housing Report., 1978; Questor Associates. since then. The average for these four years was 2,688 compared with an average of 1,181 for the six previous years and 1,338 for the following two years. Both single-family and multifamily permits peaked at about the same time, with an average during the late 1970's ap- proximately double the average for all other years. The proporation of building permits for multifamily units in January 1982 was 61.1%. This proportion has nearly doubled since 1979. In 1970, permits for multifamily units accounted for 72.6% of all residential building permits, and declined to a low of 31.7% in 1979. IV. TRENDS IN HOMEOWNERSHIP The percentage of owner-occupied housing units in the City has remained relatively constant at approximately 60~ between 1970 and 1979, as shown in Exhibit IV-1. Although no data on homeowners' exemptions are collected at the City level, according to the Kern County Assessor's office, the ratio of homeowners' exemptions claimed to the number of single-family homes in Kern County has not changed since 1977. Given that the City represents more than one-fourth of the County's housing units, however, it is unlikely that any significant change in tenure could have occurred in the City without affecting the County homeownership rates. V. RENT LEVELS As an indication of current rent levels in Bakersfield, Questor has examined the HUD fair market rents and conducted a survey of recently advertised rental units. While both of these are valuable, neither should be considered an accurate -16- Exhibit IV-1 HOUSING UNITS BY TENURE · CITY OF BAKERSFIELD* 1970- 1979 Own Rent Total Year Number Percent Number Percent Number Percent 1970 14,238 61.71 8,835 38.29 23,073 100.0 1974 15,982 59.29 10,974 40.71 26,956 .100.0 1977 19,002 58.97 13,219 41.03 32,221 100.0 1979 21,614 59.51 14,704 40.49 36,318 100.0 * Incorporated area only. Figures unavailable for un- incorporated area. SOURCES: U.S. Census 1970; State Department of Finance Special Census, 1974; Metropolitan Bakersfield, General Plan, Housing Element, 1980; Questor Associates. measure of the actual rent levels throughout the market. The HUD fair market rents are used in the administration of government housing projects, and as such are subject to varying methodologies over time. Advertised rental units are a selective sample in that they provide information on rent levels for new tenants, which are often higher than the rates paid by those who have been renting the same apartments for a number of years. Additionally, advertised rentals do not include rental units that are so desirable, either because of better quality or lower rents, that the landlords need not advertise. According to the Department of Housing and Urban Development the fair market rents for Bakersfield as of March 18, 1981 are as follows: Studio $195 1 Bedroom 252 2 Bedroom 288 3 Bedroom 391 4 Bedroom 462 These rates have been adjusted to exclude utilities by sub- tracting the 1981 average monthly ?G&E bill in Bakersfield, of $23. The results of Questor's rental survey of advertised housing in the Bakersfield area appear in Exhibit V-1. Units cur- rently on the market may not be a random sampling, and therefore not an indication of the entire market. For units sampled, however, the actual median rent levels of smaller units (studios, one-bedroom and two-bedroom apartments) were well below the HUD fair market rents. For units of three or more bedrooms, the median rents determined by the survey were significantly above the HUD fair market rents. It appears there is a relatively higher demand for larger rental units. One possible explanation for this is that families who are eliminated from the home-buying market by high interest rates -18- ' Exhibit V-1 RENT SURVEY OF ADVERTISED HOUSING UNITS PERCENTS BY TYPE OF UNIT BAKERSFIELD, 1982 Multifamily Units Single-family Units 1 2 3 or More 1 2 3 4 or More Monthly Rent Studio Bedroom Bedrooms Bedrooms Bedroom Bedrooms Bedrooms Bedrooms Under $150 8 2 7 $151 - 200 70 17 1 32 3 201 - 250 19 51 14 43 14 251 - 300 3 26 39 4 17 24 3 2 301 - 350 3 30 21 1 24 6 351 - 400 10 18 17 12 6 401 - 450 2 7 6 14 3 451 - 500 2 16 5 23 14 501 - 550 2 11 2 17 23 551 - 600 1 5 2 10 2 601 - 650 3 5 20 651 - 700 1 2 6 701 - 750 2 11 Over $751 5 13 TOTAL 100 99 101 102 100 101 99 100 25th Percentile $162 $206 $258 $350 $172 $267 $420 $500 50th Percentile 180 230 294 450 237 319 483 600 75th Percentile 198 260 335 541 242 379 550 692 Number of Ads 37 179 237 56 75 155 281 64 in Survey NOTES: (1) Based on advertisements for rental housing in the Sunday edition of the Bakersfield Californian for the following dates: January 3, 10, 24, 31, February 7, 14, and 21, 1982; and the current listings (as of February 24, 1982) of the Cal State Bakersfield Housing Office. Units were assumed to be in Bakersfield unless clearly marked otherwise. (2) Percents may not add to 100.0 due to rounding. SOURCE: Questor Associates. are entering the rental market as a second-best alternative and bidding up the price of the larger rental units. This explanation is substantiated by interviews with major developers in the area who indicated that they are now building an increasing number of three-bedroom luxury apartments to satisfy this perceived demand. VI. HOUSING AFFORDABILITY ANALYSIS This section addresses the issue of housing affordability. The income levels of Bakersfield residents will influence their choice of rental units, and their options of owning versus renting. A distribution of households in metropolitan Bakersfield among income-groups appears in Exhibit VI-1. The median household income in 1980 was $22,210. Exhibit VI-3 is an analysis of rental housing affordability. According to this analysis, and using the income distribution in Exhibit VI-l, 82% of the households in the metropolitan area could afford the median one-bedroom apartment. Ap- proximately 77% could afford the median two-bedroom apart- ment, and only 65% could afford the median three-bedroom apartment. Since rent levels are stated in terms of 1982 dollars, while the income distribution is for 1981 house- holds, these percentages are slightly conservative. In order to determine the trade-offs facing the prospective consumer of residential housing, Questor has analyzed resi- dential sales in the Bakersfield area for 1980 and 1981. The results are presented in Exhibit VI-~. A map of the bound- aries used by the Board of Realtors appears in Exhibit VI-5. Sales in the Southwest section of Bakersfield represented 40% of the sales in the area. The Northeast section represented another 25%. The remaining 35% of the market was distributed fairly well among the other sections. -20- Exhibit VI-1 HOUSEHOLD INCOME DISTRIBUTION BAKERSFIELD* 1969 1980 Count % ~ Count % Less Than $ 7,500 25,003 46.7 11,536 15.1 $ 7,500 - $14,999 19,387 36.2 13,755 18.0 $15,000 - $24,999 7,544 14.1 17,181 22.4 $25,000 - $34,999 894 1.7 16,095 21.0 $35,000 - $49,999 483 0.9 11,981 15.6 $50,000 and Over 246 0.5 6,043 7.9 TOTAL 53,557 100.1 76,590 100.0 Average Household Income $9,117 $23,785 Median Household Income $8,567 .$22,210 * The aggregation of Census Tracts 1.02, 2-3, 6-9.07, 11.01-31.03. See map, Exhibit VI-2. NOTE: (1) Totals may not add to 100.0 due to rounding. (2) Distribution is for 1970 households, based on 1969 in- comes; similarly, 1981 household distribution, based on 1980 incomes. SOURCES: National Planning Data Corporation; Questor Associates. Exhibit: BAKERSFIELD AREA CENSUS TRACTS IT · ~ METROPOLITAN ........... ~~ ~~~ ~ ~,~'~=' q/ BAKERSFIELD I. -' -'~ ....... L ..... ~/ .... F , ~ ~ ~~ ~ '~ ~ ' ; .... : -- ... , . 1 ~ .... ~~] ..... ~ .... :, .. ~ ~.. I ~;~'~ ~ i~ .~' i '~ ....... '"' -~ - '-.~ .... ' ..... ~ ......... ,~' ~ .~, . '1~~ ~ J ' , ...... ',~.~ Ir- ~ ' , II ..... i,~ ~ ~! ,~~' ' ..... ~ /r' ~ I I . . ~ ~. _~,~ d · .~ =...~.,, . ....... , -,,, ....... Exhibit VI-3 HOUSING AFFORDABILITY ANALYSIS MULTIFAMILY RENTAL HOUSING BAKERSFIELD 1 BR 2 BR 3 BR Unit Unit Unit Monthly Rent* $230 $294 $450 Monthly Utilities** 30 35 35 Monthly Housing Expenses $260 $329 $485 Annual Housing Expenses $3,120 $3,948 $5,820 Required Annual Income*** $9,400 $11,800 $17,500 Percent of Total House- 82.4 77.2 64.9 holds Earning Required Income or Above * Based on 50th percentile rent level as determined by survey, see Exhibit V-1. ** Gas and electricity expenses, based on information supplied by Pacific Gas & Electric Company. *** Assuming annual housing costs not to exceed 33.3% of annual income, rounded to the nearest $100. NOTE: Rent levels are in 1982 dollars, while the available income distribution (see Exhibit VI-l) is for 1981 households. As a result, the percent of households earning required income is a conservative figure. SOURCE: Questor Associates. Exhibit VI-4 RESIDENTIAL SALES BAKERSFIELD AREA* 1980 ARiD 1981 March 1.- November 30, 1980 March .1 -iNo~ember 30, 1981 Number Percent Median Number Percent Median Area* of Sales of Market Sale Price of Sales of Market Sale Price 1 - Central 125 6.17 $53,950 106 6.51 $59,475 2 - North 158 7.80 52,346 94 5.77 54,750 3 - Northeast 521 25.72 57,950 427 26.23 64,500 4 - Southeast 128 6.32 43,000 89 5.47 45,475 5 - Southwest 814 40.18 65,050 675 41.46 73,950 6 - Northwest 127 6.27 75,950 140 8.60 89,625 99 - Outside 153 7.55 44,000 ~97 5.96 49,500 TOTAL 2,026 100.01 $59,000 1,628 99.99 $66,237 * For Area, see map, Exhibit NOTE: Totals may not add to 100.00. due' to rounding. SOURCES: Bakersfield Board of Realtors, Profile Sales Activity; Questor Associates. Exhibit VI-5 BAKERSFIELD AREA BOUNDARIES USED BY THE BOARD OF REALTORS .... North to AREA 2 NORTH 'i "' OILDALE ,?;%;.,._ COMPANY ~' BAKERSFIELD to , : !=:~.:~,: East -.,, Enos-L~ane ..... , '--. '. ':~;~.,~AREA_ 6 NORTHWEST' [e~tended ,r.~:~-~=~ ...... ~'""' .' 3 NORTHEAST ~... ~'~ ' AREA 4 SOUTHEAST~: "~ AREA 5 SOUTHWEST EnosLa,e L .... { · ~: I, ~ L : . EaS~ i ....... :.,.: .... ~ "~ ~ ' '~ .............. -~- . AREA 99 ' ~ ,, ;~r:.: SOURCE FIELD BOARD OF REALTOR I[ The geographical distribution of sales has remained fairly constant between 1980 and 1981. The large percentages in the Southwest and Northeast are due to new construction. There is little new construction in other areas. The median sales prices of homes in the various sections,, as defined by the Bakersfield Board of Realtors, ranged from $45,475 in the Southeast to $89,625 in the Northwest in 1981. The overall median sales price for the area was $66,237, an 11% increase over the median for 1980. Condominium sales constituted 6.67% of all residential sales in December 1981 and 6.57% in January 1982. The average list price for condominiums during this period was approximately $85,000. Affordability of owner-occuPied housing in Bakersfield is analyzed in Exhibit VI-6. In 1981, only 26.6% of households in the Bakersfield area could afford to purchase the median priced home at an interest rate of 18%. With an effective interest rate of 14%, 34.0% of the households could afford to purchase the median priced home. A comparison of Ex- hibits VI-3 and VI-6 shows that a higher percentage of Bakersfield residents can afford to rent a median priced unit than can afford to purchase the median priced home. VII. CONSUMER HOUSING ECONOMICS The 1981 costs of owning and renting a home in Bakersfield are compared in Exhibit VII-1. With interest rates of 18%, the median income household would be left with an after-tax income, minus housing costs, of $12,318. An interest rate of 14%, which might be the effective rate on an assumed mortgage in conjunction with a second loan, would leave the household with $14,137. Based on first year cash flows, the median -26- Exhibit VI-6 HOUSING AFFORDABILITY ANALYSIS OWNER-OCCUPIED HOUSING BAKERSFIELD, 1981 Purchase Price: $66,237 18% Mortgage 14% Mortgage Interest Rate Interest Rate Annual Housing Payments* $10,778 $ 8,477 Utilities** 285 285 Property Tax (1.00%) 662 662 Private Mortgage 298 298 Insurance (0.50%) Hazard Insurance 270 270 ($100 deductible) Annual Housing Expense $12,293 $ 9,992 Required Annual $36,879 $29,976 Income*** Percentage of Total 26.6% 34.0% Households Earning Required Income or Above+ * Principal and interest of 30 year amortization, assuming 90% loan to value ratio. ** Gas and electricity expenses based on average bills for Bakersfield area in 1981. Information supplied by Pacific Gas and Electric Company. *** Assuming annual housing costs not to exceed 33.3% of annual income, rounded to the nearest $100. + 1981 incomes adjusted 10% over 1980 incomes. Assumes same distribution as for 1980 income. See Exhibit VI-1. NOTE: Purchase price based on median sales price of residential units. SOURCE: Questor Associates. Exhibit VII-1 AFTER TAX HOUSING AFFORDABILITY 32qALYSIS OWNER OCCUPIED AND RENTAL HOUSING BAKERSFIELD, 1981 Owner-occupied Unit (Purchase price: $66,237) Mortgage Mortgage Interest Rate Interest Rate Rental Unit 18% 14% (Rent: $450/mo.) Line 1: Annual $24,431 $24,431 $24,431 Income Line 2: Annual 10,778 8,477 5,400 Housing Payment Line 3: Utilities 285 285 265 Line 4: Federal 983 1,396 3,360 Income Tax Line 5: State In- 67 136 369 come Tax After-Tax Income, $12,318 $14,137 $15,037 Minus housing costs Line 1: Estimated 1981 median income for Metropolitan Bakersfield, based on data from National Planning Data Corporation. Line'2: Owner-occupied: Principal and interest on 30 year amorti- zation., assuming 90% loan to value ratio. Purchase price based on median sales price of residential units, 1981. Rental unit: Based on 50th percentile rental rate for 3-bedroom multifamily unit. Line 3: Gas and electricity expenses, based on average utility bills for Bakersfield area in 1981. Information supplied by Pacific Gas and Electric Company. Line 4: Based on 1981 household with married wage earner claiming 4 exemptions. Homeowner deducts 1) mortgage interest ($10,726 @ 18%, $8,337 @ 14% for the first year), and 2) property tax from gross income. Line 5: Same deductions and assumptions as for Federal Income Tax. Includes renter tax rebate of $137. SOURCE: Questor Associates. income household would prefer renting a home, which results in an after -tax income, minus housing costs, of $15,037. Although there are other considerations in the choice of buying versus renting, such as equity build-up, appreciation of the investment, and intangibles such as privacy, there is at least some short-term economic motivation to rent. VIII. FUTURE RENTAL HOUSING PRODUCTION Comparatively few new housing units are being built in the Bakersfield area. According to the Federal Home Loan Bank of San Francisco, there were 172 multifamily units and 185 single-family units under construction in Metropolitan Bakersfield during June 1981 (see map, Exhibit II-5, for the FHLB's definition of the metropolitan area). This .compares with 116 multifamily units and 1,036 single-family units in June 1980. In June 1978, there were 852 multifamily units and 753 single-family units under construction. Interviews with developers revealed that this decline in residential construction has continued into 1982. The availability of reasonable financing seems to be the major constraint on future development at this time. Land is readily available; according to the Housing Element, 17,981 acres were zoned for residential use in September 1979, yet only 4,570 acres were developed. Tenneco Corpo- ration, an oil company with a real estate subsidiary, owns most of the available land in the Southwest section of the City. Tenneco installs site improvements before selling the land to developers. Developers in the area find this ar- rangement favorable for building because of Tenneco's pro- fessional and attractive site development and the rate at which Tenneco makes the land available for construction. The -29- only constraint which Questor identified is Tenneco's stip- ulation that no units constructed on this land be converted to condominiums for three years. This limitation was con- firmed by Tenneco Realty. For internal policy reasons, Tenneco sells land intended for rentals at a lower price than that intended for owner-occupied housing. Without the stipulation regarding condominium conversion, it would be possible for the developer to purchase the land at a lower price, later converting the apartments to condominiums and making a larger profit. City and County services are expected to have sufficient capacity through 1985, according to the Housing Element. The only possible exception is domestic water supply, which has had quality problems that might become more severe with the stress of an increased housing supply. IX. FUTURE RENTAL HOUSING DEMAND Population trends for the City of Bakersfield, the unin- corporated area, the metropolitan area, and Kern County appear in Exhibit IX-1. The Bakersfield Planning Department has projected the City's population using a growth rate of approximately three percent. The annual growth rate for the City has increased since the early 1970s, and the Kern County. Planning Department has revised its own estimates to recognize the higher growth rate for the City than for the whole County. The population for the City of Bakersfield, which was 105,611 fOr the 1980 Census, is expected to be 122,780 in 1985. The Bakersfield Planning Department estimates that the unincorporated area will grow much more slowly, at a rate of 1.05~, reaching 128,746 in 1985. During the early 1970s, the population of the unincorporated area is thought to have -30- Exhibit IX-1 POPULATION TRENDS BAKERSFIELD AND KERN COUNTY City of Unincorporated Metropolitan Bakersfield Bakersfield Bakersfield Kern County % Annual % Annual % Annual % Annual Year Number Increase Number, Increase Number* Increase Number* Increase 1970 69,515 -- 113,816 -- 183,331 -- 330,234 -- 1974 76,282 2.35 NA -- NA -- 340,000 0.73 1977 84,189 3.34 115,194 0.17 199,383 1.21 359,900 1.91 1980 105,611 7.85** 122,195 1.99,* 227,806 4.54** 403,089 3.85 1981 108,832 3.05 124,650 2.01 233,500 2.49 411,200 2.01 1982 112,152 3.05 127,150 2.01 .239~300 2.49 419,450 2.01 1983 115,572 3.05 129,700 2.01 245,300 2.49 427,900 2.01 1984 119,097 3.05 ~132,300 2.01 251,400 2.49 436,500 2.01 1985 122,780 3.05 135,000 2.01 257,800 2.49 445,250 2.01 1990 142,464 3.02 149,100 2.01 .291,~550 2.49 491,800 2.01 1995 165,304 3.02 164,700 2.01 330,000~. 2.51 543,250 2.01 2000 191,806 3.02 ~!,900 2.01 373,700 2.52 600,000 2.01 * Projections rounded to nearest 50. ** Bakersfield did not participate in th~ 1977 Special Census. These annual percentage increases may be high due to possible underestimation of the 1977 population figures. SOURCES: U.S. Census, 1970 and 1980; State Department of Finance Special Census, 1974; Metropolitan Bakersfield, General Plan, Housing Element, 1980; City of Bakersfield Planning Department; Kern County Planning Department; Questor Associates. actually declined due to annexation and had an average annual growth rate for the decade of only 0.17%. Population pro- jections for the incorporated are are based on the City limits as of the 1980 Census, and assume no annexation; therefore, the growth rate should not be estimated on the basis of a period when the population of the unincorporated area was declining due to annexation. For this reason, Questor has estimated a higher rate of growth for the unincorporated area than that used by the City Planning Department. Questor expects the unincorporated area to grow at the same rate as the County, 2.01%, reaching a population of 135,000 by 1985, a difference of about 6,000 people over the County estimates. Questor's higher estimated growth rate for the metropolitan area as a whole reflects the higher growth rate in the unincorporated area. Questor estimates that the metropolitan population will reach 257,800, an annual increase of 2.49%. This Compares with the County's estimates of 251,640, or 2.01% annual growth rate. County planners have assumed that the metropolitan area is growing at the same rate as the County when figuring population projections. In conversation with Questor, however, they acknowledged that the population in the western part of the County'is being limited by com- panies who are holding the land for oil exploration, and this will most likely shift population trends toward the Bakers- field area. Using these population projections, Questor has forecasted the demand for rental housing in Bakersfield to the year 1985 and calculations appear in Exhibit IX-2. The estimated average yearly housing demand is for 1,426 additional units in the City, and 2,313 additional units in the metropolitan area. Rental housing demand is assumed to be 40.49% of the yearly average. This means an average yearly demand for 577 rental units in the City, and 938 rental units for the -32- Exhibit IX-2 RENTAL HOUSING DEMAND PROJECTION BAKERSFIELD 1980-1985 City of Metropolitan Bakersfield Bakersfield Average Annual Household Growth 1,379 2,222 Replacement Housing Need 47 94 Average Incremental Housing Demand 1,426 2,316 Average Incremental Rental Housing Demand 577 938 Vacancy Allowance 116 220 Average Yearly Rental Housing Demand 693 1,158 NOTES: (1) Average Annual Household Growth based on population projections in Exhibit IX-l, and using population per household estimates, based on 1980 Census Data, of 2.49 for the City and 2.70 for the metropolitan area. (2) Replacement Housing Need based on a historical demo- lition rate in the City of 0.1].% for years when data was available, multiplied by the number of units in' the 1980 housing stock; the result is a slight underestimate of future demolitions. (3) Average Incremental Rental Housing Demand based on 40.49% rental rate for the City in 1979. (4) Vacancy allowance includes (a) a 5% vacancy rate in the incremental housing demand, and (b) a 2.5% increase in the present rental housing' stock, which would be needed to bring the current vacancy rate to 5% by 1985. combined metropolitan area. Additionally, 116 units in the City and 220 units in the metropolitan area will be needed to allow for a 5% vacancy rate among rental housing units. Questor's method for determining these projections is ex- plained briefly below: ° Average annual household growth is calculated using the population projections in Ex- hibit IX-l, and population per household estimates based on 1980 Census data of 2.49 for the City and 2.70 for the metropolitan area. Replacement housing need is determined by multiplying the number of units in the 1980 housing stock by the City's historical demolition rate of 0.11%. This results in a slight underestimate of future demolitions because the demolition rate should be applied to future rather than current housing units. The aVerage incremental housing demand (the total of above) is multiplied by 40.49%, the percentage of rental housing units in 1979 to determine ~the average incremental rental housing demand. This assumes that the dis- tribution between rental and owner-occupied units will not change significantly by 1985. Since the proportion of rental housing in- creased only 2% between 1970 and 1979, this is a reasonable assumption. A vacancy allowance is added to the above to allow for a 5% vacancy rate in the rental housing stock. This includes not only a 5% -34- addition to the incremental housing demand, but also additional units to alleviate the current vacancy shortage, as discussed in Section II above. To determine this number, the total number of housing units in 1980 is multiplied by the proportion of rental units (40.49%). This figure is multiplied by 2.5% which represents the difference between cur- rent and acceptable vacancy rates. The re- sulting number is then distributed among 5 years to arrive at the average number of units to be added per year in order to eli- minate the vacancy shortgage by 1985. X. CONCLUSIONS Questor has concluded that there is a substantial need for rental housing in Bakersfield. This need stems from two sources: (1) a currently low vacancy rate, and (2) expected population increases. Questor projects that there will be an incremental need for 693 rental units annually through 1985 in the incorporated City, and 1,158 units annually in the combined metropolitan area. In the Housing Element (1980), the Bakersfield Planning Department calculates its own housing demand projections to the year 1985. They project an incremental demand for 1,603 units annually for the City and 2,559 units in the metropolitan area. The two most significant ways in which these projections differ from Questor's are: (1) they are based on lower population projections, and (2) they include owner-occupied as well as rental units whereas Questor has been concerned solely with rental units. For the sake of comparison, Questor has projected the following annual in- cremental housing needs, which include owner-occupied units, but are based on Questor's higher population projections: -35- City of Bakersfield: 1,711 units Metropolitan Bakersfield: 2,859 units. Questor's distribution of additional housing demand is based on the City's maintaining its present proportion of .the housing stock. Since there appears to be one continuous housing market, ~owever, the City could capture all new development and supply the needs for the entire metropolitan area. The 693 units projected for the City's annual incremental housing needs (see Exhibit IX-2) can be considered a minimum which the City can capture, with a maximum of 1,157 additional units. This larger figure would shift new households toward the incorporated area. Policy decisions will infuence distribution of units between the City and the County. -36- PROFESSIONAL SERVICES FOR ;. CITY_0F BAKERSFIELD A PROPOSAL BY PROFESSIONAL SERVICES FOR CITY OF BAKERSFIELD A PROPOSAL BY BAILEY, RUPPEL & NUNNELEY Certified Public Accountants BAILEY, RUPPEL & NUNNELEY CERTIFIED PUBLIC ACCOUNTANTS CECIL J. BAILEY, CPA 1321 STINE ROAD CATHY W. RUPPEL, CPA BUILDING A BAKERSFIELD, CALIFORNIA 93309 LANA M. NUNNELEY. CPA (805) 834-4747 April 22, 1982 Budget Review and Finance Committee City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 Attention: W. D. Higginbotham, Jr. Gentlemen: We are pleased to submit our response to the request for proposal for appointment as independent auditors of the City of Bakersfield for the fiscal year ending June 30, 1982. .The attached proposal describes our ability to perform services for the City, our approach to the audit, and an estimate of the fee for these services. We hope the accompanying information will be valuable to you as an aid in making an evaluation of our services as they would relate to the City. If you have any questions, would like further information or would like us to appear before the City Council, please do not hesitate to contact us, We look forward to serving you. Very truly yours, 'BAILEY, RUPPEL & NUNNELEY Lan a 'Nunn el ey ~ CONTENTS I. Our Approach to the Audit II. Personnel Resources III. Estimated Fees I. OUR APPROACH TO THE AUDIT I. OUR APPROACH TO THE AUDIT Our.examination of the financial statements of the City of Bakersfield will be made in accordance with generally accepted auditing standards, and will include tests of accounting records and transactions as well as other auditing procedures we consider necessary. Our auditing procedures will conform to: Audits of State and Local Governmental Units prepared by the American Institute of Certified Public Accountants' Committee on Governmental Accounting and Auditing, 1974; and, Statement 1, Governmental Accounting and Financial Reporting Principles prepared by the National Council on Governmental Accounting, 1979; .and, Statement 2, Grant, .Entitlement, and Shared Revenue Accounting and Reporting by State and Local Governments prepared by the National Council on Governmental Accounting, 1979; and, .Governmental Accounting, Auditing, and Financial Reporting prepared by the Municipal Finance Officers Association, 1980. Our audit procedures focus upon testing internal controls and operating systems as well as examining account balances. Based on this premise, the conduct of the audit will include the following major tasks: Estimated Timing * TASK 1 - Pre-audit review and planning. May/June 1982 TASK 2 - Evaluate internal controls. June 1982 TASK 3 - Conduct tests of operating systems. June 1982 TASK 4 - Examine account balances as of 'June 30, 1982. August/Sept. 1982 TASK 5 - Prepare audit report. September 1982 * To be scheduled with City personnel. Each task is briefly described as follows: TASK 1 - Pre-Audit Review and Planning Due'to the change in computer systems, the accounting reports and subsidiary information are in a different format from the.prior year.' We also understand that under the PRIME system, special purpose reports for the audit can be generated. In order to assure that information required is available and can'be produced on a timely basis, we'propose to begin the planning phase'of the audit in May, 1982. At this time, we will meet with City staff to determine if any special reports are required and prepare a time schedule for these reports to be available to the auditors. At this time, we would also review the accounting records for the year to insure that the audit trail is intact. We are not expecting any problems in this area. However, due to the system conversion, we feel the prudent approach to this year's audit includes an early assessment of the audit trail as it has existed during the year. TASK 2 - Evaluate Internal Controls Our evaluation of internal controls will include administrative controls that primarily relate to operational efficiency and adherence to City policy. In many cases these controls will only indirectly bear on the reliability of the City's financial reports.. However, we consider these procedures to be important to enhance the credibility of the financial reports. Our procedures in this task include: Reviewing City policies and procedures. Preparing or revising flowcharts of each operating system to reflect recent changes in the flow of transactions. Performing tests to determine that each system is functioning as designed. Analyzing documentation related to electronic data processing (EDP) applications, with emphasis on controls over input and output. Reviewing the budgeting process so that we will draw the proper correlation between actual financial results and budgeted amounts. 'TASK 3 - Conduct Tests of Operating Systems During this phase of the audit we test selected transactions that have occurred ·throughout the fiscal year. Our objective is to determine if each operating system is functioning as designed, and if it is accumulating or producing reliable financial data. Included in this task are the following possible approaches: ~ ' Test data accumulation and computer internal controls for those accounting applications on the computer at June 30, 1982. Test transactions selected by reference to applicable supporting documents and budget guidelines. Regular cash disbursements. Recurring cash receipts'. Payroll disbursements. ' Standard and non-standard journal entries. Examine significant transactions including: Major expenditures such as those related to .capital improvements. Significant lease or purchase commitments.' Federal and State grant programs. TASK 4 - Examine Account Balances as of June 30, 1982 Once the City's books are closed for the fiscal year, we will begin the last phase of field work of the audit. The extent of audit procedures used during the verification of account balances is largely dependent upon the results obtained'during TASK 3. Assuming the system of internal controls is well ~esigned and is functioning properly, we will be using a. relatively limited number of procedures during this task. We will develop and apply detailed audit programs which include, for example, the following: Confirming cash balances. Confirming with third parties Significant amounts owed or due the City. Conducting other audit procedures as required to satisfy ourselves as to the amounts included in the financial statements, including analysis of account balances. TASK 5 - Prepare Audit Report Once the City staff have drafted the financial statements and required footnote disclosure, we will review the dr~aft to.insure the statements are presented in accordance with generally accepted accounting principles and issue our opinion. The major part of this task is the reconciliation of the financial statement balances to the general ledger balances. II. PERSONNEL RESOURCES II. PERSONNEL RESOURCES We believe the individuals that provide our services, and their qualifications, are the most important assets we can present. The team we will 'assign is illustrated in the following summary. The team has the multi-skill experience required for the engagement. An abstract of the qualifications of each team member is given below: Team Member · Qualifications Partner-in-Charge Lana Nunneley . . previous audit experience and training with Authur Young & Co. . audit experience with governmental agencies (a major California city, Kern County Council of Govern- ments), a transit district, not for profit organizations and manufacturing concerns experienced computer auditor BA in govern- ment and history from University of Texas . MBA from University of Santa Clara . . . Certified Public Accountant. Co-ordinating Auditor Cathy Ruppel nine years experience in public accounting familiar with governmental accounting and auditing procedures . previous audit experience with governmental agencies, not for profit organizations, banks, insurance and manufacturing concerns . BBA in accounting from University of Texas . . Certified Public Accountant. Senior Auditor Dale Piner four years experience in public accounting . previous audit experience with school districts, water districts, savings and loans and manufacturing concerns . BA in business administration from California State University, Fullerton .~. Certified Public Accountant. The three auditors described above were part of the audit.team assigned to the City of Bakersfield audit for the year ended June 30, 1981. Staff auditors with one to three years experience will also be assigned to this engagement. III. ESTIMATED FEES III. ESTIMATED FEES Our services are of the greatest value when the relationship between our client and ourselves is founded on the understanding that both parties must be satisfied, not only with the quality of our services, but also with our fees. Our fees are based on the compensation, experience, and qualifi- cations of the individuals assigned to the engagement. In preparing our estimate, we gave careful consideration to the various levels of experience and expertise required for this engagement. Our fees are based upon the time actually expended by our personnel on the engagement. If, during the course of our work, we find that the engagement can be completed in less time than the estimated hours, we will bill only the time actually spent on the job. Services for which we will bill you, will not exceed the fees in the fee summary, under the following circumstances: The scope of our work remains unchanged from that described in this proposal. The General Ledger is closed and ready for audit before we are required to begin Task 4. The following fee summary shows the hourly rates and estimated hours by classification of staff: MAXIMUM FEES BASED ON ESTIMATED HOURS Hourly Rates Hours Fee Partner $50 160 $ 8,000 Senior auditor $40 100 4,000 Staff auditors $21 - $30 480 10,000 740 $22,000 I RECEIVED -RECEIVED. ' N'~ANATT, PHELPS, ROTHENBERG & TUNNEY I' ' J A N g 1 1987_ ~ ' ATTORNEYS AT LAW I , ~.;;!, , . ,~ 'Mary K. ShetI, Mayo~ ~ ' ] ' - "' (~ TELEPHONE 12J3] 55~-15OO '~ WASHINGTON. D.C. ' 'CITY CLERK ".. January 19, 1982' .~:. ,. [o~ ..... ~,~o~.~, Mary of K' Bakersfield Shell, Mayor City 1501 Truxtun Avenue Bakersfield, California 93301 Dear Mayor Shell: As you know, your City recently selected Bache Halsey Stuart Shields Incorporated to .serve as underwriters for. the proposed $85 million multi-family revenue bond issue. .This firm has a very fine relationship with Bache and we would very much appreciate the opportunity to serve as bond .counsel for that project. Bache is also very interested in having us involved ~ith them. I would apprecSa~e ~ vory much 5f ~hSs could be referred to the appropriate 'co~nittee' of the Council so.that ~this firm may have the oppgrtunity to make a formal presentation~ in connection with th~ bond-issue. .... Sinc~~r~ly yours, ~ Pete elly / of N~a~a~t~ Phelps~ ~DK: bas ~ PHELPS, F~OThENBERG & TUNNEY ATTORNEYS AT I-AW (213) January 15 1982 DESCRIPTION OF MANATT, PHELPS, ROTHENBERG & TUNNEY I. INTRODUCTION Manatt, Phelps, Rothenberg & Tunney is a rapidly groWing firm of young lawyers. The firm has thirty-nine partners, three attorneys serving as of counsel, and fifty- seven associates, with seventeen additional, lawyers joining the firm in the spring and fall of 1982.. Sixteen clerks, fr~om different law schools, will be spending the summer with the firm this year. The firm has grown from seven attorneys .in mid-1973, and plans' to continue its growth. In the past year the firm opened a. San Francisco office, specializing in municipal bonds, and'an office in downtown Los Angeles speci- alizing primarily in international corporate and banking. The firm also has a strong tradition of individual participation in community activities. Over the years, law- yers in the firm have assumed significant responsibilities in a broad range of educational, political, civic, charitable,· professional, and social concerns. II. NATURE OF PRACTICE The major areas of the firm's practice are corpor- ate, banking, energy, securities, and tax law; corporate and commercial litigation; entertainment and sports law; admin- ~ istrative law; municipal bonds and real estate. ,- MANATT. PHELPS, ROtNENEIERG & TUNNEy January 15, 1982· Page 2 In the corporate area, the firm' commonly serves as general corporate counsel. In addition, it~ represents a number of clients on a. specialized basis for such matters as registration under and 'compliance with· federal and state securities laws, including registration of equity and debt offerings and limited partnership syndications, proxy con- tests, and tender offers, as well as other specialized corpo- rate representation in the areas of mergers and acquisitions, reorganizations and dissolutions..· Among the firm's clients in this area are approximately sixty financial institutions, ranging from small independent banks to large international bank holding companies and foreign bank_ agency offices. The firm also. represents corporations outside the banking area, including corporations engaged in the exploration for and development and production of oil and gas, as well as several large foreign companies, including Japanese trading companies. In the. entertainment area, the firm represents record companies, television and motion picture production companies, producers, directors, writers, artists and enter- tainers, and concert promoters. I'n addition, the firm repre- sents teams, leagues, and professional athletes in various sports. The/firm's litigation department .combines. an excep-- tionally diverse practice with a solid emphasis on the devel.-' opment of the competence of_i..ts litigators. The department's practice extends to virtually every substantive area of. com- mercial law, including contracts, business torts, securi- ties, antitrust,.' and real estate. The department's p=actice includes litigation in-several areas not always a part of a general corporate practice: white collar criminal defense, entertainment, and sports. New litigators are assigned a varied caseload, work cl.osely with senior lawyers on large cases, and take primary responsibility on smaller cases with a senior lawyer participating in an advisory capacity. This mix of cases promotes the department's dual. objectives of comprehensive training and rapid assumption of responsibility-. The firm represents clients before a variety of administrative and regulatory-agencies, encompassing both informal and formal agency actions. These agencies include the Securities and Exchange Commission, the-Federal Deposit. Insurance Corporation, the Comptroller of the-Currency, the Internal Revenue Service, the Department· of the Interior,· .. MANATT, PHELPS, ROThENBERg & TUNNEY January 15, 1982 Page 3 the Franchise TaX Board, the California State Banking Department, the California Department of Savings and L°an, the California Coastal Commission, the California Department 'of Corporations, the California Department of Real Estate, and the State Board .of.Equalization. The firm's municipal bond department engages in a broad spectrum of activities representing cities, counties,. and special districts in California. and theWest, princi- pally as bond counsel. Such activities include advising ..municipalities how best to finance projects.ranging from building to water and sewer facilities, and preparing legal documentation for the financing. The firm also engages in litigation to assist the municipalities in enforcing their rights under the bonds. In the.real estate area, the ~firm has had exten-. sire experience in financing; real estate investment trusts; saleS; private and publ'icly offered real estate syndications; residential and commercial developments, including nation- wide shopping center development; subdivisions, including condominium development and qualification; and landlord- tenant matters. Real estate clients include large construc-. tion and development companies, developer-owners of. commercial and residential properties, and major_lending institutions. III. NEW LAWYERS The firm seeks lawyers of the highest' caliber. Emphasis is placed on academic achievement, and other experi- ence such as government service, clinical experience, and relevant work experience. Since the firm encourages the production of legal services of the highest quality and early client contact, as well as participation in the management of the firm, individual maturity and the ability and desire to assume responsibility are also of. great' importance to .us.. The firm's ninety-nine attorneys attended, twenty- eight different law schools. I~cluding the attorneys join- ing the firm in 1982, twenty-three of the firm's attorneys were formerly summer clerks wi.th the firm. MANATT, PHELPS, ROThENB'ERG ~-.TUNNE¥ January 15, 1982 ' Page 4 IV. BIOGRAPHICAL INFORM3.TION Charles T. Manatt, born Chicago, Illinois, June 9, 1936; admitted to bar, 1962, California. Preparatory educa- tion, Iowa State University (B.S. 1958); legal education, George Washington University (J.D. 1962) Member, Board of Editors, G~orge Washington Law Review, 1960-62. Chairman, California Democratic Party, 1971-73, 1975-77; Southern Chairman, California Democratic Party, 1973~75; Chairman,. Western States Conference Democratic Party, 1972-76; Demo- cratic Party National. Committeeman, 1976--; Democratic Party. Executive Committeeman, 1976--; Chairman, National Finance Council of the Democratic National Committee~ June, 1978-80; Chairman, Democratic National Committee, 1980--; President, San Fernando Valley Bar Association, 1971; Member, Los ' ~ Angeles. County'Bar Association Board of Trustees, 1978; Chairman of the Board of DirectOrs of First' Los Angeles Bank, 1973---; Member, Board of Directors., Tiger International, 1980--; Member, Board of Directors, Gene.ral Telephone Com- pany, 1980--; President, California Bankers Association, 1979-80. Member: Los Angeles County and American Bar Associations;. State Bar of California. Thomas D. Phelps', born Sigou'rney, Iowa, October 10., 1936; admitted to bar, 1963, Iowa; 1964, California; 1979; U'.S. Supreme Court. Preparatory education,. Iowa State University (B.S. 1959); legal education, George. Washington University (J.D. 1963). Member, Board of Editors, George Washington Law Review, 196.1-62; President, American Law Student Association, 1961-62. Director: Tokai Bank of California; Deauville Restaurant, Inc. Foreign. law counselor to the Tokyo firm of Nagashima &- Ohno, 1978. Member: California Bankers Association and Western Independent Bankers Association; Los Angeles Area Chamber of Commerce; Town Hall; Japan American Society of Southern California; Advisory Board of Directors, California Museum of Science and Industry; Los Angeles County and American Bar Associa- tions; State Bar of California. (At. Downtown L.A. Office.) Alan I Rothenberg, born Detroit, Michigan, Apri: 10 1939; admitted to bar, 1964, California. Preparatory edu- cation, University of Michigan (B.A. 1960); legal education, University of Michigan (J.D. 1963). Assistant'Editor, Michigan Law Review, 1962-63. Order of the Coif.. Member: Board of Governors, National Basketball Association, 1975-'79; Board of Governors, North American Soccer League., 1977-80. Commissioner (Soccer), 1984' Olympics. Director: First Los Angeles Bank; Bank of Newport; Newport. Financia! Ltdz; First-- MANATT, PHELPS, ROTHENBERG ~, TUNNEY January 15, 11982 Page 5 Thrift of America; Wolf & Rissmiller Concerts. Member: Los Angeles County, Beverly Hills, Century City (Member, Board of Governors~ 1978--), and American Bar Associations (Chairman, Litigation Section Committee on Entertainment, Sports and Media Litigation; Member, Executive Committee, Sports Division, AEA Forum Committee on the Entertainment and Sports Industries); State Bar of California. John V. TUnney., born New York City, June 26, 1934; admitted te bar, 1959, Virginia; 1963, California; 1963, New York. Preparatory education, Yale Usiversity- (A.B. 1956); legal education, Academy of International Law, The~Hague, Netherlands (!957), University of Virginia (J.D. 1959). Member: The United States House of Representatives, 1965-71; The United States Senate, 1971-77; Board of Directors, Western Center on Law & Poverty, Inc.' Member: American and New York State Bar Associations; Virginia State Bar; State Bar of California'. L. Lee Phillips, born New York, New York, August 16, 1937; admitted to bar, 1959, District of Columbia; 1960, New. York; 1964, California. Preparatory education, Cornell ~University (A.B. 1957); legal education, CornelI University (J.D. 1959). Order of the Coif. Note Editor, Cornell..Law Quarterly, 1957-59. Trial Attorney, Department of Justice-, Tax Division, 1959-63. Member: Los Angeles Copyright Society; Los Angeles County, BeverlyHills, and American Bar' Associations; District of Columbia Bar; New York State Bar; State Bar of California. Barnet Reitner, born Brooklyn, New YOrk, March 29, 1945; admitted to bar, 1971, California. Preparatory educa- tion, University of California at Los Angeles (A.B. 1967); legal education, University of California at Los Angeles (J.D. 1970). Articles Editor, UCLA Law Review, 1969-70. Director, California Korea Bank. Member, Advisory Committee to California State Banking Department on Banking Law and General Corporation Law. Member: Los Angeles County, Century City, and American Bar Associations; State Bar of California. Willie R. Barnes, born Dallas, Texas, December 9, 1931; admitted to bar, 1960, California. Preparatory educa- tion, University of California, Los Angeles (B.A~. 1953);. legal education, University of California, Los Angeles (J.D. 1959). California Commissioner of Corporations, 1975-79. First Vice President, North American Securities Administrators 'Association, 1978-79. President, Midwest Securities Commis sioners Association, 1978-79. Alumnus of the Year,. UCLA Law MANaTT. PHELPS, RoTH'ENeErG & TUNNEY January 15, 1982 " .. Page 6 School, 1976. Member: Oil~ and Gas Industry Advisory Com-- mittee and Real Estate Investment' Advisory committee, North American Securities Administrators Association; State of California Securities Regulatory Reform Panel; Los Angeles County, BeVerly Hills, Century City, and American(Member, Committee on Commodity Regulation; Committee on Federal Regulation of Securities,. and State Regulation of Securities Committee) Bar Associations;' State Bar-of California.. Brian J.. O'Neill, born New York, New York, October 12, 1940; admitted to bar, 1966, California; 1968, District of Columbia. Preparatory education, University of Notre Dame (A.B. 1962); legal education, Fordham Law School. (J.D. 1965). Trial attorney, National Labor Relations Board, 1966-67. Assistant United States Attorney, Central Distri.c~ of California, 1970-74; Member, U S. District Court Indigent Defense Panel, 19.77-78,. 1980--. Member California Attor-- neys for Criminal Justice; Los Angeles County and American Bar Associations; Bar Association of. the District of Columbia;~ State Bar of California. (At Downtown. L.A. Office.) Michael Kantor, born Nashville, Tennessee, August 7, 1939; admitted to bar, 1968, Florida; 1972, District. of Columbia; 1975, California. Preparatory education, Vander- bilt University (B.A. 1961); legal education', Georgetown University (J.D. 1968). Member, Georgetown Law Review. State Chairman, Carter for President; 1980. Director, Legal ServiCes Corp., 1979--. Campaign Director, Brown for~ Presi- dent, 1976. Campaign Director, Senator Cranston. Reelection, 1974. Member: National Legal Aid and Defender Association; American Bar Association; Florida State Bar; District of Columbia Bar; State Bar of California. Leslie S. Klinger, born Chicago, Illinois, May 2, 1946; admitted to bar, 1971, California. Preparatory educa- tion, University of California, Berkeley (A.B. 1967); ~legal education, University of California, Berkeley (Boalt Hall) (J.D. 1971). Order of the Coif. Note and Comment Editor, California Law Review, 1969-70.' Trustee, Urban Innovations. ~ Group. Director, Motion Picture and Television Tax Insti- tute. Chairman, Estate and Financial Planning for the Closely Held Corporation, Practising Law Institute, 1976-81. Member: Los Angeles County, Beverly Hills, and American Bar Associations; State Bar of California. N1ANATT, PHELPS, F~OTHENBEIRG & TuNNEy I January 15, 1982 Page 7 i Martin M. Jelenko, born New York, New York, June 16, 1945; admitted'to bar', 1972~ New-York; 1972,.California. Preparatory education, Columbia University (A;B. 1967); legal. education, New'York University (J.D. 1971).. Member: Los Angeles County. and American Bar Associations; State Bar of California. Joseph Horacek I'II, born Atlanta, Georgia, May '18-, 1941; admitted to bar, 1967, California. Preparatory educa- tion, Occidental College and University of California at Los Angeles (B.A. 1963); legal education, Univemsity of California at Los Angeles (J.D. 1966). Member,' Board of Editors, UCLA Law Review, 1964-65. Member: Los Angeles CoPyright. Society, Beverly Hills and Los Angeles County Bar Ass0cia.tions; State Bar of California. George R. McCambridge, born Los Angeles, California, June 5, 1945; admitted to bar, 1973; California. Prepara- tory education, University of San Francisco (B.A. 1967); legal education, University of~California, Los Angeles (J.D. 1973). Chief Articles Editor, UCLA Law Review, 1972--73. Director, UCLA School of Law Alumni Association. Vice Chairman, Brentwood Bank. Member: Los Angeles County and American Bar Associations; State Bar of California. Richard D.'Wiltiams, born Los Angeles, California, August 30, 1946; admitted 'to bar, 19.73, California._ Prepar- atory education, Washington State University (B.A. 1969); legal education, University of: California at Los'Angeles (J.D. 1973). Comment Editor, UCLA Law Review~.19'72--7'3.. Member: Los Angeles County. and American Bar Associations; State Bar of California~ Arnold P. Schuster, born New York', New York, August 4, 1940; admitted to bar, 1965, New York; 1.970, Maryland; 1978, California. Preparatory education, Cornell University (A.B. 1962); legal education, Columbia University (J.D. 1965). Member: New York State Bar; State Bar of California. Ronald J. Silverman, born NeW York, New York, August 29, 1946; admitted to bar, 1973, District of Columbia; 1978, CalifOrnia. Preparatory education, Pennsylvania State University (B.A. 1967); legal education, George Washington University (J.D. 1972). Member, George Washington Law Review. Assistant Chief, Special Litigation Section,'Anti- M'ANATT', PHELPS. F~OTHENBERG ~ TUNNEY · January 15', 1982 " Page 8 trust Division; U.S. Department of: Justice, 1977; Trial Attorney, Special Trial Section, Antitrust Division, U.S. Department of Justice, 1972-77. Special Assistant U.S. Attorney, Washington, D.C., 1975. Co-Editor, Merger Case Digest, 1980. Member: Los.Angeles County, Century City, and'American Bar Associations; District of Columbia Bar; State Bar of California. George David Kieffer, born New York, NewYork, November 17, 1947; admitted to bar, 1973-, California; District of Columbia, 1980. Preparatory education, University of California, Santa Barbara (B.A. 1969); legal education, University of California, Los Angeles (J.D. 1973). Member, UCLA Law Review, 1971-72. Extern Clerk, Chief Judge David Bazelon, U.S. Court of Appeals, D.C. Circuit, 1972. Vice Chairman, University of California, Santa Barbara'Foundation. President, Alumni Association,- University of California, Santa Barbara, 1976-77, 1978-80. Regent-Designate and Regent, Board of Regents, University'of California, 1978-80. Vice President, Center for the Study of Democratic Institutions.. Member: Los Angeles County and American Bar Associations; District of Columbia Bar; St-ate Bar of California. Gordon M. Bava, born Stockton, California, February 12, 1948; admitted to-bar, 1974, California. Preparatory' educa- tion, Georgetown University (B.S.F.S. 1970); legal educa- tion, University of Southern California (J.D. 1974). Phi Beta Kappa. Executive Note Editor, Southern California Law Review, 1973-74. Member: Japan American Soci.ety of Southern California; Los Angeles County and American Bar Associations; State Bar of California.. (At Downtown L..A... Office.) Marc Epstein, born Hollywood, California, March 1, 1949; admitted to bar, I974, California. Preparatory educa- tion, University of California at Los Angeles (B.S. 1971); legal education, 'University of. California, Los Angeles (J.D. 1974). Order of the Coif.. Articles Editor, UCLA Law Review, 1973-74. Member: Los Angeles County.and Beverly Hills Bar Associations;State Bar of California. Richard Lee. August,' born Chicago, Illinois, February ii 1947'; admitted to bar, 1974, California. Preparatory educa- tion, University of Illinois (B.S. 1969; B.A. 1969); legal education, University of Southern California (J.D. 1974). Phi Beta Kappa. Notes and Articles Editor, Southern Cali- fornia Law Review, 1973-74. Member': Los Angeles County and Beverly. Hills Bar Associations; State' Ba~'of California. MANATT, PhElPS. R'OTHENBERg & TUNNEY January 15, 1982 Page 9 Jack Fried, born Rome, Italy, February 3, 1949; admitted to bar, 1974, California. Preparatory education, Uniuersity of California at Los Angeles (A.B. 1971);·legal education, University of California at Los Angeles (J.D. 1974). Phi Beta Kappa. Counsel, California State Banking Department, 1974-76. Member: Los Angeles County and American Bar Associations; State Bar of California. Richard S. shaffran, born Hollywood, California, November 15, 1949; admitted to bar, 1974, California. Preparatory education, University of California, Santa Cruz (A.B. 1971); legal education., Yale Law School (J.D. 1974). Member: Beverly Hills and American Bar Associations; State Bar of California. MarkS. Greenfield, born Los Angeles, California, April 11, 1950; admitted to bar, 1974, California. Prepara- tory education, University of California, Los Angeles, (B.A. 1971); legal education, University of California, Berkeley (Boalt Hall) (J.D. 1974). Law Clerk to U.S. District Judge William T. Sweigert, Northern District of California, 1973-74. Member, Board of Trustees, University of California, Los Angeles Foundation, 1977--. Member: Los Angeles County and American Bar Associations; State Bar· of California. Thomas E. McLain, born Kansas City, Missouri,· August 19, 1946; admitted, to bar, 1974, California. Prepara- tory education, Duke University (A.B. 1968); legal education, Duke 0niversity (J.D. 1974). Articles Editor, Duke· Law Journal, 1973-74. Graduate of the Inter-University Center for Japanese Language Studies in Tokyo, Japan; Japan Founda- tion Fellow, 1974-75. Foreign law counselor to the Tokyo firm of Nagashima & Ohno, 1975 and 1978-79.. Founder, The Century of the Pacific Conferences in. Los Angeles and Tokyo. Lecturer: University of Southern California Law Center; UCLA Extension; Practising Law Institute; FederaI'Bar Association; U.S. Chamber of Commerce; Keidenren. Member:. Japan.American Society of Southern California; Japan-California Association; American Bar Association; Federal Bar Association; State Bar - of California. (At Downtown L.'A. Office.) John F. Stuart, born San Francisco, California, April 7, 1947; admitted to bar, 1972, California. Preparatory education, University of San Francisco (A.B.. 1969); legal education, University of San Francisco (J.D. 1972).. Lead Articles Editor, University of San Francisco Law Review. MANaTT, phELPS, ROTHENBERG & TUNNEY January 15', 1982~ Page 10 ' Counsel, CalifOrnia State Banking Department, 1973-77; Assistant Chief Counsel 1977-78. Member, State Bar of California. Paul 'J. Hall~ born San Diego, California, January 13, 1951; admitted to bar, 1975, California. Preparatory edu- cation, University of.California at Santa Cruz (A.B. 1972); legal education, Yale Law School, 1972-1973, University of California at Berkeley'(Boalt Hall) (J.D. 1975). Member~:. Los Angeles County and American Bar Associations; State Bar of.California. Maria D. Hummer', born Los Angeles, California, 'June 12, 1944; admitted to bar, 1976, California; District of Columbia, 1979. Preparatory education,. Scripps College (B.A. 1968); legal education, Uniuersity of California, Los Angeles (J.D. 1976). Esterly Scholar. Board of Editors, UCLA Law Review, 1975-76. Member, California Regional Water Quality Control Board, Los Angeles Region, 1976--. Member: Los Angeles County, Century City, and American Bar Associ- · ations; District of. Columbia Bar; State Bar of California. James C. Corman, born Galena, Kansas, October 20, 1920; admitted to bar, 1949, California. Preparatory education, University of California, Los Angeles (B.A. 1942); .legal education, University~of Southern California (J.D. 1948). Member: Los Angeles City Council, 1957-60; United States House of Representatives, 1961-81; President's Advisory Commission on Civil Disorders, 1967-68.~ Member: San Fernando Valley, Los Angeles County, and American Bar' Associations; State Bar of California. (At D~C_. Office.) Jane Frank-Harman, born New York, New York, June 28, 1945; admitted to bar, 1969, District of Columbia. Prepara~ tory education, Smith College (B.A. 1966); legal education, Harvard Law School (J.D. 1969). Phi Beta Kappa.. First Chief Counsel and Staff Director, ~Subcommittee on Represen- tation of Citizen Interests, Committee on the Judiciary, U.S. Senate, 1973-75. Chief Counsel and Staff Director, Subcommittee.on Constitutional Rights, Committee on the Judiciary, U.S. Senate, 1975-77.~ Deputy Secretary to the Cabinet, The White HouSe, 1977-78. Member: American Bar Association; District of Columbia Bar; Federal Bar-Association; Women's Bar Association; Women's Legal Defense~Fund; Federal Judicial Center Committee on Experimentation.in the Law; Council on the Role of the Courts. (At D.C.·Office.)- MaNaTT, PHELPS, F~OTHENBErg & TUNNEY January 15, 1982 P-age 11 David B.' Jacobsohn, born Springfield, Massachusetts, December 18, 1943; admitted to bar, 1968, New York; 1980, District of Columbia. Preparatory education, Cornell. Univer- sity (B.A. 1965); legal education, Cornell University (J.D. 1968). Senior Staff Attorney, Securities and Exchange Commission, 1967-~72. Director, Securities Disclosure Division, Comptroller of the Currency, 1972'-78. Special Assistant to Director William Isaac, Federal Deposit Insurance Corporation, 1978-79. Chairman, .Legal Problems of Bank Regulation; Chairman, 15th and 16th Banking Law Institute; Co-author, Federal Regulation of Banking. Member: Federal and American Bar Associations; NeW-York Bar; District of' Columbia Bar. (At D.C. Office.) Harold E. Rogers, J~., born Chowchilla, California, November 12, 1930; admitted to bar, 1955, California; 1967, U.S. Supreme Court. Preparatory education, Stanford University -(A.B. 1952); legal education, Stanford University (J.D. 1955). Phi Beta Kappa. Co-author, Water for California (2 Vols.) and of-other publications on Municipal Finance; Guest Lecturer on Municipal Finance; Chairman, Commission on the Review of the Federal Impact Aid Program (Presidential Appointment). Member: The Bar Association of San Francisco; .American Bar' Association; State Bar of California. (At S.E-. Office.) K. Barry Schochet, born Asheville, North. Carolina, May 18, 1947; admitted to bar, 1973, Georgia; 1974, Florida and District of Columbia. Preparatory education, University of North Carolina, Chapel Hill, (B.A.. 1969); legal education, Emory University School of Law (J.D. 1972). Order of the 'Grail. Assistant Counsel, U.S. Senate Select Committee-on Presidential Campaign Activities, Sam J. Ervin, Chairman (Senate Watergate Committee), 1973-74. .Legislative Counsel to U.S. Senator Richard Stone (Elorida) 1975-79. Counsel, U.S. Senate. Committee on Foreign Relations 1979-81. Member:' American Bar Association; District of Columbia Bar, The Florida Bar; State Bar of Georgia. (At D.C. Office.) Mary Jane Large, born New York, New York, November 13, 1950; admitted to bar, 1975, California and. District of Columbia. Preparatory education, University of California at Berkeley (A.B., 1971); legal education, University of. California at Berkeley (Boalt Hall) (J.D. 1974). Editor, Ecology Law Quarterly, 1972-74. Member: Los Angeles County and American Bar Assocations; State Bar of California. MANATT, PHELPS, ROTHENBERG &'TUNNEY January 15, 1982 Page 12 Peter T. Paterno, born Queens, New York, February 3, 1951; admitted to bar, 1976, California. preparatory educa- tion, Harvey Mudd College (B.S. 1972), University of Hawaii (M.A. 1973); legal education, University of California, Los Angeles (J.D. 1976). Member, State Bar of California. Neal L. Petersen, born 'San Francisco, California, February 4, 1937; admitted to bar, 1963, California. Prepara- tory education, University of California, Berkeley'(A.B. 1958); legal education, Harvard Law School. (J.D. 1962). Member: Federal and American Bar' Associations; District of Columbia Bar. (At D.C. Office.) Ross T. Schwartz, born~ Los Angeles, California, August 9, 1949; admitted to bar, 1976, California. Prepara~ tory education, University of California, Berkeley (A.B. 1971); legal education, George Washington University (J.D. 1975). Member: Los Angeles County Bar Association; State Bar of California. Lisa Specht, born Los Angeles, California, Decem- ber 5, 1945; admitted to bar, 1976, California. Legal educa- tion, University of San Fernando Valley, College of Law: (J.D. 1976). Editor-in-Chief, USFV Law Review, 1974-75. Legal commentator, KABC Television. Director, American. Civil Liberties Union of Southern California, 1972-78. Board of Governors, Women Lawyers' Association of Los Angeles, 1977--; Chairperson, ACLU Women's Rights Project Southern California, 1971-78. Board of Governors, the Los Angeles Woman's. Building, 1979-- Director, Women's Political Committee 1977-- Member: Los Angeles County, Beverly Hills, Century City, and American Bar Associations; State Bar of California.. Peter D. Kelly, born Pasadena, California, July 30, 1948; admitted to bar, 1977, California; 1979, District of Columbia. Preparatory education, California State Univer- sity, Fullerton (B.A. 1972); legal education, Southwestern University (J.D. 1976). Lead Articles Editor, Southwestern University Law Review, 1975-76.' Member: Los Angeles Citi- zens Advisory Committee on Airports, 1973; Los Angeles County Probation Commission, 1976-77; California State University~ Fullerton, Alumni' Association Board of Directors, 1980. California Democratic Party: Southern California Chairman, 1981--; Counsel, 1977-81; Chairman, Compliance Review Commis- sion, 1978; Executive.Director, State of California, 1975-76., MANATT. PHELPS; ROthENBERG & TUNNEy January 15, 1982. Page 13 Southern. California, 1973-75; Finance DireCtor, 1972. Campaign Manager, Yvonne Brathwaite Burke for State Attorney General, 1978. California Finance Co-Chairperson, Carter/ Mondale Presidential Campaign, 1979-80. 19.80 Democratic NatiOnal Convention:. Alternate Delegate; RUles Committee Member. Member: Los Angeles County, Century City, and Ameri- can Bar Associations; District of Columbia Bar; State Bar of California. Bert H. Deixler, born Bronx, New York, November 8, 1952; admitted to bar, 1976, CalifOrnia. Preparatory educa- tion, George Washington University (B.A. 1973); legal, educa- tion, Columbia University Law School. (J.D. 1976). Phi Beta Kappa; Harlan Fiske Stone Scholar. Member, Columbia Univer- sity'Journal of Environmental Law. Assistant U.S. Attorney; Criminal Division, Central District of California, 1978-81. Member: Los Angeles County and Federal Bar Associations.; State Bar of California. Irwin Jay Deutch, born Detroit, Michigan, August 5', 1941; admitted to bar, 1965, Michigan; 1980, California: Preparatory education, University of Michigan (B.B.A. 1.962);~ legal education, University of Michigan (J.D. 1965); George- town University (LL.M. in Taxation 1967). Order of the Coif. Member: Los Angeles County, Beverly Hills, Michigan, Ameri- can, and Federal Bar Associations; State Bar of California. Julian Gresser, born New-York, New YOrk, Ju'ne 7, 1943; admitted to bar, 1971, California. Preparatory edu- cation, Harva'rd University (A.B. 1965, M.A. 1967).; legal education, University of California, Berkeley (Boalt Hall.) (J..D. 1971). Member: California and Hawaii Bar Associa- tions; State Bar of California. Lee F. Colton, born Los Angeles, California, February 12, 1936; admitted to bar, 1962, California. Prepa- ratory eddcation, University of California at Los Angeles (B.S. 1958); legal education, University of California School' of Law at Los Angeles (LL..B. 1961). Member: State Bar of California. MANATT, PHELPS. F~OTHENBERG & TUNNEY January 15, 1982 Page 14 Jerry J. Goldstein,. born Los Angeles,' California, 'November 3, 1943; admitted to bar,' 19-74, CalifOrnia. Prep- 'aratory education, University of California, Berkeley (B.S. 1966); legal education, University of San Francisco (J.D. 1974). Member, McAuliffe Law HonOr Society. Assistant Editor, University of San Francisco Law Review~ 1973-74. Extern to Justice-Raymond L. Sullivan, Supreme Court of Cali- fornia, 1973. Member: Beverly Hills and American Bar Asso- ciations; State Bar of California. Barbara J. Zuckerman, born Los Angeles, Califor- nia, August 6, 1948; admitted to bar, 1975, California. Preparatory education, University of Southern California (B.A. 1971); legal education, Loyola University (J.D. 1974). Member: Los Angeles County, Beverly Hills, and American Bas Associations; State Bar of California. Steven A. Nissen, born. Los Angeles, California, March 25, 1951; admitted to bar, 1976, California; 1980, District of Columbia. Preparatory'education, Stanford University (B.A. 1972); legal education, University of Cali- fornia, Berkeley (Boalt Hall) (J.D. 1976). Commissioner, Los Angeles County Rent~ Adjustment Board. Memberr Los Angeles, Century City, Beverly Hills (Board'of Governors, Barristers), and'American Bar Associations; District of Columbia Bar; State Bar of California. 'Lawrence J. Blake, born New York, New York, Novem- ber 28, 1950; admitted to bar, 19'76, California. Prepara- tory education, Le Moyne College (B.A. 1972); legal educa- tion, Harvard Law School (J.D. 1976). 'Member: Los Angeles County and Beverly Hills (Secretary, Barristers; Co-Chairperson, Bar.risters' Committee for the Arts) Bar Associations; State Bar of California. Frederica R. Obrzut, born Los Angeles, California, December 22, 1949; admitted to bar, 1977, California. Pre- paratory education, University of California, Santa Barbara (B.A. 1971), University of CalifOrnia, Los Angeles (M.A. 1974); legal education, University of'California, Los Angeles (J.D. 1977). Managing Editor, UCLA Law Review, 1976-77. Member, State Bar of California. MANATT PHELPS. ROTHENBERG & TUNNEY January 15-, 1982 Page 15 Howard E. King, born Berkeley, California, October 3, 1952; admitted t0~bar, 1977, California. Preparatory educa- tion, University of California at Los Angeles (B.A. 1974); legal education, University of California at Los Angeles (JiD. 1977). Chief Justice, Moot Court Honors Program. Member: American Ba= Association; State Bar of California. Keith T. Holmes, born Chicago, Illinois, June 17, 1952; admitted to bar, 1977, California. Preparatory educa- tion, Northwestern University (B.A. 1974); legal education, University of Pennsylvania (J.D. 1977). Order of the Coif:' Editor, University of Pennsylvania Law Review. Member: Los- Angeles County Bar Association; State Bar of California. (At. Downtown L.A. Office.) Timothy Patrick' Furtong,.born Dallas; Texas, November 24, 1946; admitted to bar, 1977, CalifOrnia; 1980, District of Columbia. Preparatory education, University of Texas (B.A. 1969); legal education, University of Texas (J.D. 1977). Legislative. Assistant to Senator Lloyd Bentsen,. 1971-74; Special Assistant to Senator Lloyd Bentsen; 1975-76. Member: American Bar Association; District of Columbia Bar; State Bar of California. (At D.C. Office.)' Stephen D. Greenberg, born New York, New York, September 8, 1948; admitted to bar, 1.977', California. Prepa- ratory education, Yale University (B..A. 1970); legal educa- tion, University of California, Los Angeles (J.D. 1977). Member, UCLA Law Review, 1975-77. Member, State Bar of California. Louis A. Spoto, born Brooklyn, New York, May 12, 1950; admitted to bar, 1978, New York; 1978, California. Preparatory education, Colgate University (B.A. 1972); legal education, Harvard Law School (J.D. 1977). Clerk, Judge Robert J. Kelleher, U%S. District Court,. 1977-78. Board of Editors, Journal on Legislation. Member: New York Bar; State Bar of California. Nancy R. Schauer, born Detroit, Michigan, Septem- ber 9, 1950; admitted to bar, .1976, C'alifornia. Preparatory education, University of Michigan (A.B. 1972); legal' educa- tion, University of Michigan (J.D.. 1976). Member, Univer- sity of Michigan Journal of Law Reform~ Member: Los Angeles County and American Bar Associations; State Bar" of California. MANATT, PhElps, ROThENBERG & TUNNEY January' 15, 1982 Page 16 William S. Brunsten, born Los Angeles, California, April 6, 1947; admitted to bar, 1974, California. Prepara- tory education, University of California, Berkeley (B.Ai 1970); legal education; University of California, Los Angeles (J.D. 1974). Member: .Los Angeles County, Beverly-Hills, and Century City Bar Associations; State Bar of California. Lawrence J. Ulman, born FluShing, New York, January 25, 1950; admitted to bar 1975, California. Prepar- atory education, University of Southern California (A.B. 1972); University of California, Los Angeles (M.B.A. 1980); legal education, University of Southern California (J.D. 1975). Recipient, ASCAP Nathan Burkan Memorial Award in 'Copyright. Member: Los Angeles County and American Bar Associations; Copyright Society of the U.S.A.; State Bar of'~ California. Isabel Weil, born New York, New York, April 5, 1949; admitted to bar, ~1973, New Jersey; 1981, California. Preparatory education, Barnard College (B..A. 1970); legal ; education, University of Pennsylvania (J.D. 1973). Member: American Bar Association; New Jersey State Bar; State Bar of California. John B. Emerson, born Chicago, Illinois, January ll, 1954; admitted to bar, 1978, California. Preparatory educa- tion, Hamilton College (A.B. 1975); legal education, Univer- sity of- Chicago (J.D. 1978). Phi Beta Kappa; Phi Delta Phi. Member: American Bar~ Association; State Bar of California. William T. Quicksilver, born St. Louis, Missouri, July 26, 1952; admitted to bar, 1978, California. Prepara- tory education, Princeton University (A.B. 1974); legal educa- tion, University oS Chicago (J.D.. 1978). Associate Editor, Chicago Law Review. Member, State Bar of California. Nikki Wolontis, born Morristown, New Jersey, April 27, !953;. admitted to bar, 1978, California. Prepara~ tOry education, New York University (B.A. 1974); legal educa- tion, Stanford University (J.D. 1978). Phi Beta Kappa. Extern Clerk, Judge George W. Phillips, Jr., Superior COurt, Alameda County (1977-78). Founding Member, Stanford Public Interest Law Foundation. Member: Los Angeles County and American Bar Associations; State Bar of California. MANATT. PhElPS'. ROThENbERG & TUNNEY Jaaeary 15, 1982 Page 17 Mary Elizabeth Doyle, born Sacramento, California, May 1, 1952; admitted to bar, 1979, California. Preparatory education, University of California,. Santa Cruz (A,B. 1974); legal education, University of California, Berkeley (Boalt Hall) (J.D. 1978). Member: Berkeley Law Foundation; Ameri- can, Beverly Hills, and Century City Bar Associations; State Bar of California. Edward C. Rybka, born Passaic, New Jersey, Septem- ber 29, 1953; admitted to bar, 1978, California. Prepara- tory education, The Sorbonnei Paris, France, and Princeton University (A.B. 1975); legal education, Duke University (J.D. 1978). Member: Los Angeles County Bar Association;- State Bar of California. Steven M. Goldberg, born Bronx, New York, February 19, 1954.; admitted to bar, 1978, California; 1979, New York. Preparatory education, Harvard University (A.B. 1975); legal education, New. York University School of Law (J.D. 1978). Member, New York University Law Review, 1976-77. Member: Los Angeles County and Beverly Hills Bar Associa- tions; State Bar of California. Matthew S. Steinberg~, born Los Angeles, California, October 20, 1953; admitted to bar, 1978, California. Prepa-~ ratory education, University of California, Berkeley (B.A. 1975); legal education, University of San' Diego (J.D. 1978).' Member: Los Angeles County and American Bar Associations; · State Bar of California. Jeffrey M. Wernick, born Brookl.yn, New York, June 20, 1953;.admitted to bar, 1979, New York; 1981, Cali- fornia. Preparatory education, State University of New York at Buffalo (B.A. 1974); legal education, New York University (j.D. 1978). Member: New York Bar; State Bar of California. Peter J. Ross~ bo·rn New York, New York, June 10, 1953; admitted'to bar, 1979, New York. Preparatory educa- tion, Yale University (B.A. 1975); legal education, Emory University (J.D. 1978). Member: American Bar Association; Sta~e Bar of-New York. (At S.F. Office.) -· Andrew Stuar. t Pauly, born Los Angeles, California, January 18, 1955; admitted to bar, 1979, California. Prep-· aratory education, Lewis & Clark College (B.A. 1976); legal~ MANATT, PHELPS. F~OThENBERg & TUNNEY' January 15,' 1982 Page 18 educationl University of California, Los Angeles (J.D. 1979). Member: Los Angeles County, Century City, and American Bar Associations; California Trial Lawyers Association; State Bar of California. Joan Whitehead Evans, born Waukegan, Illinois, December 31, 1949. Preparatory education, Illinois State University (B.S. 1970, M.S. 1972), University of California, Los Angeles (M.B.A. 1979); legal education, University of California, Los Angeles (J.D. 1979). Moot Court Executive Board of Judges, 1978. Director, Legal Aid Foundation. Member: Sex Equity Commission, Los Angeles Unified School District; National Bar Association; State Bar of California. Barbara J. Schlain, born_Detroit, Michigan, May 15,~ 1954; admitted to bar, 1979, California. Preparatory educa- tion, University of Michigan (B'.A. 1975); legal education, University of Michigan (J.D. 1979). Editor', Michigan Year- book of~ International Legal Studies. Member: State Bar of California. (At Downtown L.A. Office.) Susan 5erner, born Brooklyn, New York, March 17, 1951; admitted to bar, 1979, New York; 1981, California. Preparatory education, University of Chicago (B.A. 1973); legal education, New York University (J.U. 1978). Member: New York Bar; State Bar of. Cali£ornia.. Benet E. Long, born. New York, New York, September 15, 195~; admitted to bar, 1979, Washington, D.C.. Prepara- tory education, University of Virginia (B.A. 1976); legal education, Washington College of Law, The American Univer- sity (J.D. 1979). Member, District of Columbia Bar. (At D.C. Office.) Arn H. Tellem, born Philadelphia, Pennsylvania,. February 21, 1954; admitted to bar, 1980, California. Prepa- ratory education, Haverford College (B.A. 1976); legal educa-- tion, University of Michigan (J.D. 1979). Member, State-Bar of California. Terry D.- Garcia, born Jacksonville, Florida, March 27, 1953; admitted to bar 1980, District of Columbia. Preparatory education, American University(B.A. 1975); legal education, George Washington University (J.D. 1980). Staff Member, Journal of' International Law and Economics. Member, MANATt. PHELPS. ROtHENbeRG & TUNNEY January 15, 1982 Page 19 District of Columbia Bar. Co-aUthor., Federal Regulation of' Banking. (At Downtown L.A. Office.) Steven Marcus Knisley, born Santa Monica, Cali- fornia, February 26, 1952; admitted' to bar, 1980, California. Preparatory education, Yale University (A.B. 1974); legal education, Harvard Law School (J.D. 1980). Member, State Bar of California. Jane L. Ellison, born Mansfield, Ohio, January~ 16, 1956; admitted to bar, 1980, California. Preparatory educa- tion, Cornell University (A.B. 1977); legal education, Univer- sity of Chicago. (J.D. 1980. Phi Beta Kappa; Phi Delta Phi.. Member, State Bar of California.~ Rita Eidson DeBoer, born Princeton, Illinois, May 5, 1953; admitted to bar, 1980, California. Preparatory educa-~ tion, Scripps College (B.A. 1975), Harvard University (M.T.S. 1977); legal education, University of California, Los Angeles (J.D. 1980). Rockefeller Fellow; .1975-76. Chief Comment Editor, UCLA Law Review, 1979-80. Member: Women Lawyers Association of Los Angeles; State Bar of California. Leslie A. Swain, born Long Beach, California, April 26, 1953; admitted to bar, 1980, California. Prepara- tory education, California State Universtiy, Long Beach (B.A. 1977); legal education, University of California at Davis (J.D. 1980). Member, UC Davis Law Review 1979-80.. Member: King Hall Legal Foundation, Los Angeles County and Century City Bar Associations; State Bar of-California. Alan Mintz, born New York, New York, May 18, 1954; admitted to bar, 1980, California~ Preparatory education University of California, Berkeley (A.B. 1976); legal educa- tion: Los Angeles Bar Association; University of'Califor- nia, Los Angeles (J.D. 1980). Member, State Bar of California. Masahiro Shimojo, born Gifu, Japan, March 19, 1944; admitted to bar, 1973, Japan. Legal education, Tokyo Univer- sity (L.L.B. 1966).; Legal Training and Research Institut~e (1973); University of Michigan Law School (M.C.L. 1980). Member, The First Tokyo Bar Association. MaNatt, PHELPS. ROTHENBERG'& Tunney January 15, 1982 Page 20 John W. Cochrane, born Cleveland, Ohio, December 12, 1955; admitted to bar, 1980, California. Preparatory educa- tion, University of California, Davis (A.B. 1977); legal education, University of California, Los Angeles (J.D. 1980). Member, State Bar of California. Gary Hal Amsterdam, born Chicago, Illinois, March 21, 1957; admitted to bar, 1981, California. Prepara- tory education, University of Texas, Austin. (B.A. 1977); legal education, University of Texas, Austin (J.D. 1980). Phi Beta Kappa. Member, State Bar of California. Enda Thomas Brennan, born_ Galway, I~eland, October 31, 1955; admitted to bar, 1980, California. Prep- aratory education, University of California; Berkeley (A.B.. 1976); legal education, Harvard Law School (J:D. 1980). Phi Beta Kappa. Member, State Bar of California. Ellen B. Behravesh, born Pottstown~, Pennsylvania, August 31, 1951; admitted to bar, 1977, Pennsylvania; 1978, District of Columbia. Preparatory education,. University of Pennsylvania (A.B. 1973) legal education, University of Penn- sylvania School of Law (J.D. 1977), Georgetown University Law Center (LL.M. in Taxation 1981). Delta Theta Phi. MEmber: Pennsylvania and American Bar Associations; Ameri- can. SocietY of International Law; Pennsylvania Bar; District of Columbia Bar. Richard A. Kale, born Brooklyn, New York, January 29, 1955; admitted.to bar, 1980, California. Preparatory educa- tion, University of California, BerkeleY (A.B. 1976); legal education, Yale Law School (J.D. 1980). Phi. Beta Kappa. Member, State Bar of California. Barbara Zipperman, born Los Angeles, California, September 3, 1953; admitted to bar, 1980, California. Prepa- ratory education, Princeton University (A.B. 1975); legal education, University of California, Davis (J.D. 1980). Member: Los Angeles County and Beverly Hills Bar Associa- tions; State Bar of California.. Anne H. Krummenacher, born St. Louis, Missouri,~ November 22, 1951; admitted to bar, 1981, California. Prepa- ratory education, Occidental College (A.B. 1973); legal educa- tion, Loyola Law School (J.D. 1980). Member, State Bar of California. MANATT. PHELPS. ROTHENBER'g & TUNNEY January 15, 1982 Page 21 Shinaan S. Krakowsky, born Brooklyn, New York, January 8, 1954; admitted to bar, 1981, California. Preparatory education, State University of New York at Buffalo (B.A 1976); legal education, Southwestern University (J.D. 1981). Member: State Bar of California. David W. Crumpacker, born Woodland, California, NOvember 16, 1955; admitted to bar, 1981, California. Prepa- ratory education, University of Colorado (B.A. 1978); legal education, G~o. rg~ Washington University (J.D: 1981). Phi Beta Kappa. 'Member: State Bar of California. K~ Terrance Garckenl, born Los Angeles, California, January 24, 1948; admitted to bar, 1981, California. Prepa- ratory education, University of California, Santa Barbara (B.A. 1970); legal education, University of California, Los Angeles (J.D. 1981). Member: State Bar of' California. Ginna Ingram, born Los-Angeles, California, January 18, 1956; admitted to bar, 1981, California. Prepa- ratory education, University of California, Berkeley (B.A. 1978); legal education, University of California, Davis (J.D. 19.81). Member: State-Bar of California.. Carol J. Moore, born New Haven, Connecticut, September 8, 1956; admitted to bar, 1981,. California. Prepa- ratory education, Radcliffe College (A.B. 1978); legal educa- tion, Harvard Law School (J.D. 1981). Member: State Bar of California.. Jody E. Graham, born Detroit, Michigan, August 21, 1955; admitted to bar, 1981, California. Preparatory educa- tion, University of California, Santa Barbara (B.A. 1977); legal education, University of California, Davis (J.D. 1981). Member: S~ate Bar of California. Deborah A. Lee, born Oakland, California, March 8, 1956; admitted to bar, 1981, California. Preparatory educa~ tion, University of California, Davis (A.B. 1978); legal education, University of California, Davis (J.D. 1981). Member: State Bar of California. Carol~ L. Mayall, born Burbank, California, January 9 1955; admitted to bar, 1981, California. Preparatory educa- tion, University'of California, Irvine (B.A. 1977); legal MANAtT PHELPS. ROthENBERg & TUNNEY January 15, 1982 Page 22' education, University of California, LOs Angeles (J.D. 1981). Member: State Bar of California. Marc H. Rapaport, born New York City, February 6, 1957; admitted to bar, ~1981, California. -Preparatory educa- tion, Wharton School, University of Pennsylvania (B.S. 1978); legal education, Harvard Law School (J.D. 1981). Member: State Bar of California. Eugene Tanaka, born Chicago, Illinois, June 5, 1956; admitted to bar, 1981, California. Preparatory'educa- tion, Columbia University (B.A. 1978); legal education, Columbia University (J.D. 1981). Member: State'Bar of California. Helen Elmquist Cutler, born Iowa City, Iowa~ August 31, 1938;- admitted to bar, 1981, California. Prepara- tory education, University of Southern California (B.A. 1960); legal education, University of California, Los Angeles (J.D. 1981). Extern Clerk, Justice Rodney K. Potter, California Court of Appeal, Second District (Los Angeles), Spring 1980. Member: State Bar of California. Daniel L. Appelman, born Los Angeles, California, December 29, 1944; admitted to bar, 1981, California. Prepa- ratory education, San Francisco State University (B.A. 1968, M'.A. 1973); Temple University (Ph.D 1982); legal education, University of-California, Los Angeles (J.~D. 1981). Member: State Bar of California. Diane J. Gideon, born Queens, New YOrk, December 1, 1955. Preparatory education, University of California, Los Angeles (B.A. 1977); legal education, University of Cali- fornia, Los Angeles (J.D. 1981). Laurie Karon, born Highland Park, Illinois, August 16, 1956. Preparatory education, Northwestern Univer- sity (B.S. 1977); legal education, University of Illinois (J.D. 1981). The following will be joining the firm in 1982. Philip Recht, 'born Pittsburgh, Pennsylvania, June 10, 1953. Preparatory education, Yale University (B.A. 1975); legal education, University of Pennsylvania (JiD. 1981). HANATT PHELPS. ROTHENEIERG & TUNNEY January 15, 1982 Page 23 Elizabeth Watson, born Lakewood, Ohio, July 20, 1955. Preparatory education, NorthweStern University (B.S. 1977); ~legal education, University of Southern California (J.D. 1981). Roger Lane Carrick, born High Point, North Carolina, July. 28, 1951; admitted to bar, 1980, California. Prepara- tory education, Harvard College. (A.B. 1973, Ph.D 1975); legal education, University of California, Berkeley (Boalt Hall) (J.D. 1980). Member,~State Bar.of California. Darry Sragow, born May 17, 1946. Preparatory education, Cornell University (B.S. 1966); University of Pennsylvania (M.A. 1968); legal education (J.D. 1981). Tot Braham. Preparatory education, Columbia College (A.B. 1979); legal education, New York. University. Helen L. Delaney. Preparatory education, Cornell University (B.A. 1979); legal education, University of Cali- fornia, Berkeley (Boalt Hall). Timothy J.~ Hoy, born May 13, 1956. Preparatory education, Oberlin College (B.A. 1978); legal education, University of Michigan. Brad R. Krevoy. Preparatory education, Stanford University (B.A. 1978); legal education, Hastings College. Kenneth Krug, born October 25, 1958. Preparatory education, Duke University (A.B. 1979); legal education, University of Chicago. Robert D. Lee. Preparatory education, Harvard College (B.A. 1978); legal education, Georgetown. Law Center. Dennis A. Miller. Preparatory education, Univer- sity of California, San Diego (B.A. 1978); legal, education, University of California., Berkeley (Boalt Hall). Brad A. Morrice. Preparatory education, Claremont Men's College (B.A. 1978); legal education, University Of California, Berkeley (Boalt Hall). MANATT. PHELPS, ROTHENBeRG & TUN EY January 15~ 19'82 Page 2~- Matthew P. ~u'ilter. Preparatory education, Princeton University (iB.A.. 1.974); legal education, UniVer- sity of Pennsylvania. Ronald-L. Rddgers, Jr., born Brawley, 'California,. February 2, 1956. Preparatory education, University of Southern California (B.A. 1979); legal education, George Washington University.! Charles M. Shumaker III. Preparatory education, Tufts University (B.A.1 1976), Columbia University (M.A. 1979); legal education, University of Michigan. Steven M..Si~emens. Preparatory education, Stanford University (B.A. 1976)i; legal education, Hastings College. T Cary H. hompson, born Winchendon, Massachusetts, August 4, 1956. Preparatory education, University of Cali- fornia, Berkeley (B.A.. 1978); legal education, University Southern California. The following persons wil'l be working with the firm as summer associates during the summer of 1982: John Michaeli Alongi. Preparatory education~ University of California, Davis (B.A. 1979); legal educa- tion, University of Ca!lifornia, Davis. Peg O. Case~. Preparatory education, Gannon College (B.A. 1974); legal education~ University of Southern California Law Center. Mona A. Cleei. P'reparatory education, Austin college (B.A.); University of iTexas .at Austin (M.B.A.; legal educa- tion, University of Texas School of Law. I Mitchell H-!Cohen. Preparatory education, Brown University (A.B. 1980)i; legal education, New York UniversitY School of Law. Christina De,sser. Preparatory education, Univer- sity of California, Belrkele~ (B.A. 1978); legal education, McGeorge School of Law NIANATT PHELPS, F~OTHENBERg & TUNNEY January 15, 1982 Page 25 Julie R. Fenster. Preparatory educatiOn, Brown University (A.B. 1979); legal education, University of Penn-- sylvania Law School. Michael Allen' Firestein. Preparatory education, Brown University (A.B. 1980);. legal education, Northwestern University School of Law. Brian K. Lipson. Preparatory education, Univer- sity of Michigan (A.B. 1978); legal education, University of Pennsylvania Law School. Marshall M. Howell. Preparato=y education, Massa- Chusetts Institute of Technology (S.B. 1980); legal educa-- tion, Harvard Law School. Clare Bronowski Koopersmith. Preparatory educa- tion, Harvard University (B.A. 1976); legal education,. University of. California, Los Angeles. Steven Alan Laub. Preparatory education, Univer- sity of California, Los Angeles (B.A. 1980); legal educa- tion, Harvard Law School. John Jo Little. Preparatory education, Cook College/Rutgers (.B.S. 19.80); legal education, Yale Law School. Michael T. Maurer. Preparatory education, Iowa State University (B.A. 1980); legal education, University of Michigan Law School. Scott Wil.~am Pink. Preparatory education, Harvard University (B.A. 1980); legal education, Harvard. Law School. Pa~ Renee Spengler. Preparatory education, Yale University (B.A. 1978); legal education, Yale Law School.' Daniel G. Swanson. Preparatory education, Univer- sity of California, Berkeley (A.B. 1979); legal education, Harvard Law School. t c li orn a, · Bar Asso ~ ~.~ ~asa~ena, ~ n~ D.~.st~c'~ '~' I ----~l~, ~"-~" - ---4a; ~-~, ' ,, ' -;e ~-. =-~ 1'97% , ~ ~_~4fo-~-n~. ~' '~ ..... ~ern tO m'~ ~' 11' ~* - C ','~lk~ Columb~a,~_'~ton {B.-~- 19'/=j .... .!,Articles '- ~_= An:.iele~', c~u~ sitY, ~-~=]''D 197~)-__"'.7".;J Member: · ~_ Angeles UniverS%~Y %~' evieW, 19;":-~:].2.~rts.' 1973; ~ui_ ~niversi .~infversltY LaW~_mittee on ~?'.~.j~{fornia staL?__~ 1980. ' ~ns AdV~s°ry ?~'~'on, 1976-7/;_'j~',~.~ of DirectO~ ~hairm~n, { ' ~ation c°mmlS~=ociati.°n Du~.~n californ-~ - 5~-__~ Alumni ~o.~ _ ...... Sou~.;~'~om~liance .F. evieW commlS- california w .... ; of californl 1981--; Counsel, 1977-81 Chairman> ' a, 1~75-76 ~{ sion, 1978; Executive Director, state : ~ " -.. / ~". ,,~,. ~mp~g~ ~an~e~, Y<Von~e. ~Waite ~u~e fo~ State c~-~a~ ~ssac~t~a~s; ~i;st~i~t O~'Oo~umb~ ~sa~; State