(1) Pledging the full faith and credit of the authority or pledging all or any part of the revenues of any project or any revenue-producing contract or contracts made by the authority with any individual, partnership, corporation, or association or other body public or private, or other moneys of the authority, to secure the payment of the bonds or of any particular issue of bonds, subject to such agreements with bondholders as may then exist.

(2) The rentals, fees, purchase payments, and other charges to be charged, and the amounts to be raised in each year thereby, and the use and disposition of the

revenues.

(3) The setting aside of reserves or sinking funds, and the regulation and disposition thereof.

(4) Limitations on the right of the authority or its agent to restrict and regulate the use of the project or projects to be financed out of the proceeds of the bonds or any particular issue of bonds.

(5) Limitations on the purpose to which the proceeds of sale of any issue of bonds then or thereafter to be issued may be applied and pledging such proceeds to secure the payment of the bonds or an issue of the bonds.

(6) Limitations on the issuance of additional bonds, the terms upon which additional bonds may be issued and secured and the refunding of outstanding bonds.

(7) The procedure, if any, by which the terms of any contract with bondholders may be amended or abrogated, the amount of bonds the holders of which must consent thereto, and the manner in which such consent may be given. (8) Limitations on expenditures for operating, administrative or other expenses of the authority.

(9) Defining the acts or omissions to act which shall constitute a default in the duties of the authority to holders of its obligations and providing the rights and remedies of such holders in the event of a default.

(10) The mortgaging of any project and the site thereof for the purpose of securing the bondholders.

(11) The mortgaging of land, improvements, or other assets owned by a participating party for the purpose of securing the bondholders.

(e) Neither the members of the authority nor any person executing the bonds or notes shall be liable personally on the bonds or notes or be subject to any personal liability or accountability by reason of the issuance thereof.

(f) The authority shall have power out of any funds available therefor to purchase its bonds or notes. The authority may hold, pledge, cancel, or resell such bonds, subject to and in accordance with agreements with bondholders. 39622. In the discretion of the authority, any bonds issued under the provisions of this division may be secured by a trust agreement by and between the authority and a corporate trustee or trustees, which may be any trust company or bank having the powers of a trust company within or without the state. Such trust agreement or the resolution providing for the issuance of such bonds may pledge or assign the revenues to be received or proceeds of any contract or contracts pledged and may convey or mortgage the project or projects, or any portion thereof, to be financed out of the proceeds of such bonds. Such trust agreement or resolution providing for the issuance of such bonds may contain such provisions for protecting and enforcing the rights and remedies of the bondholders as may be reasonable and proper and not in violation of law, including particularly such provisions as have hereinabove been specifically authorized to be included in any resolution or resolutions of the authority authorizing bonds thereof. Any bank or trust company doing business under the laws of this state which may act as depositary of the proceeds of bonds or of revenues or other moneys may furnish such indemnifying bonds or pledge such securities as may be required by the authority. Any such trust agreement may set forth the rights and remedies of the bondholders and of the trustee or trustees, and may restrict the individual right of action by bondholders. In addition to the foregoing, any such trust agreement or resolution may contain such other provisions as the authority may deem reasonable and proper for the security of the bondholders. All expenses incurred in carrying out the provisions of such trust agreement or resolution may be treated as a part of the cost of the operation of a project.

39623. Bonds issued under the provisions of this division shall not be deemed to constitute a debt or liability of the state or of any political subdivision thereof, other than the authority, or a pledge of the faith and credit of the state

or of any such political subdivision other than the authority, but shall be payable solely from the funds herein provided therefor. All such bonds shall contain on the face thereof a statement to the following effect:

"Neither the faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of or interest on this bond."

The issuance of bonds under the provisions of this division shall not directly or indirectly or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment. Nothing in this section contained shall prevent nor be construed to prevent the authority from pledging its full faith and credit to the payment of bonds or issue of bonds authorized pursuant to this division.

39624. (a) The authority is hereby authorized to provide for the issuance of bonds of the authority for the purpose of refunding any bonds, notes, or other securities of the authority then outstanding, including the payment of any redemption premium thereon and any interest accrued or to accrue to the earliest or subsequent date of redemption, purchase, or maturity of such bonds, and, if deemed advisable by the authority, for the additional purpose of paying all or any part of the cost of constructing and acquiring additions, improve. ments, extensions, or enlargements of a project or any portion thereof.

(b) The proceeds of any such bonds issued for the purpose of refunding outstanding bonds, notes, or other securities may, in the discretion of the authority, be applied to the purchase or retirement at maturity or redemption of such outstanding bonds either on their earliest or any subsequent redemption date or upon the purchase or retirement at the maturity thereof and may, pending such application, by placed in escrow to be applied to such purchase or retirement at maturity or redemption on such date as may be determined by the authority.

(c) Pending such use, any such escrowed proceeds may be invested and reinvested by the State Treasurer in obligations of, or guaranteed by, the United States of America, or in certificates of deposit or time deposits secured by obligations of, or guaranteed by, the United States of America, maturing at such time or times as shall be appropriate to assure the prompt payment, as to principal, interest and redemption premium, if any, of the outstanding bonds to be so refunded. The interest, income, and profits, if any, earned or realized on any such investment may also be applied to the payment of the outstanding bonds to be so refunded, After the terms of the escrow have been fully satisfied and carried out, any balance of such proceeds and interest, income, and profits, if any, earned or realized on the investments thereof may be returned to the authority for use by it in any lawful manner.

(d) The portion of the proceeds of any such bonds issued for the additional purpose of paying all or any part of the cost of constructing and acquiring additions, improvements, extensions, or enlargements of a project may be invested and reinvested by the State Treasurer in obligations of, or guaranteed by, the United States of America, or in certificates of deposit or time deposits secured by obligations of, or guaranteed by, the United States of America, maturing not later than the time or times when such proceeds will be needed for the purpose of paying all or any part of such cost. The interest, income and profits, if any, earned or realized on such investment may be applied to the payment of all or any part of such cost or may be used by the authority in any lawful manner. (e) All such bonds shall be subject to the provisions of this division in the same manner and to the same extent as other bonds issued pursuant to this division.

39625, if, in the opinion of the State Treasurer, any bonds issued by the authority under the provisions of this division are adequately secured and the revenues and other funds applicable to the payments of the bonds are, or upon the acquisition, construction or improvement of the project for which such bonds were or are to be issued, will be sufficient to pay the principal of and interest on such bonds, then the State Treasurer shall certify that such bonds are legal investments for all trust funds, the funds of all insurance companies, banks, both commercial and savings, trust companies, savings and loan associations, and investment companies, for executors, administrators. trustees, and other fiduciaries, for state school funds, and for any funds which may be invested in county, municipal, or school district bonds, and that such bonds are securities which may properly and legally be deposited with, and received by, any state or municipal officer or any agency or political subdivision of the state for any -purpose for which the deposit of bonds or obligations of the state is now, or may hereafter be, authorized by law, including deposits to secure public funds.

39626. No liability shall be incurred by the authority beyond this extent to which moneys have been provided under this division, except that for the purposes of meeting the necessary expenses of initial organization and operation until such date as the authority derives revenues or proceeds from bonds or notes as provided under this division, the authority may borrow money as needed for such expenses from the State Water Quality Control Fund, the General Fund in the State Treasury, and the California Environmental Protection Program Fund, or from any of such funds. Such borrowed moneys shall be repaid with interest within a reasonable time after the authority receives revenues or proceeds from bonds or notes as provided under this division.

ARTICLE 4. CONSTRUCTION AND LEASES OF FACILITIES

39630. The authority may contract with any participating party for the construction of a project by such participating party. All such contracts for the construction of a project by a participating party shall provide that the participating party shall be responsible for the architectural and engineering design and for the construction and completion thereof subject to such standards for architectural and engineering design as may be established by the appropriate contract agency specified in Section 39615, and subject to such supervision as the authority deems necessary, The authority may agree to pay the cost of such project constructed by any participating party and to advance such costs from time to time in installments or otherwise as required by the contract for the construction thereof. Title to all such projects shall be vested in the authority subject to the terms of the lease thereof to the participating party or the rights of a participating party under any contract for the purchase of such project including the payment of the purchase price under installment sales contract.

39631. The authority may, as lessor or lessee, enter into leases or agreements with any participating party relating to acquisition, construction, and installation of any project, including real property, buildings, equipment, and pollution control facilities of any kind or character. The terms and conditions of such leases may be mutually agreed upon. Any such lease may provide the means or methods by which title shall vest in a participating party upon the termination of the lease and shall contain such other terms and conditions as the authority may determine. The authority is authorized to fix, revise, charge, and collect rates, rents, fees, and charges for each project. Such rates, rents, fees, and charges shall be fixed and adjusted in respect of the aggregate of rates, rents, fees, and charges from all projects so as to provide funds sufficient with all revenues and moneys available therefor, if any, to do all of the following:

(a) Pay the principal of and the interest on outstanding bonds, notes, or other evidences of indebtedness of the authority issued in respect of such project as the same shall become due and payable.

(b) Create and maintain reserves required or provided for in any resolution authorizing, or trust agreement securing, such bonds, notes, or other evidences of indebtedness. A sufficient amount of the revenues derived from a project may be set aside at such regular intervals as may be provided in such resolution or trust agreement in a sinking or other similar fund which is hereby pledged to, and charged with, the payment of the principal of and interest on such bonds, notes, or other evidences of indebtedness as the same shall become due, and the redemption price or the purchase price of bonds, notes, or other evidences of indebtedness retired by call or purchase as therein provided. Such pledge shall be valid and binding from the time when the pledge is made; the rates, rents, fees, and charges and other revenues or other moneys so pledged and thereafter received by the authority shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of any such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the authority, irrespective of whether such parties have notice thereof. Neither the resolution nor any trust agreement nor any other agreement nor any lease by which a pledge is created need be filled or recorded except in the records of the authority. The use and disposition of moneys to the credit of such sinking or other similar fund shall be subject to the provisions of the resolution authorizing the issuance of such bonds or of such trust agreement. Except as may otherwise be provided in such resolution or such trust agreement, such sinking or other similar fund may be a fund for all bonds, notes, or other evidences of indebtedness of the authority issued to finance projects of a particular participating party without distinction or priority of one over another; provided, that the authority in any such resolution or trust agreement may provide that such sinking or other similar fund shall be the fund for a

particular project or projects and for the bonds issued to finance a particular project or projects and may, additionally, permit and provide for the issuance of bonds having a subordinate lien in respect of the security herein authorized to other bonds, notes, or other evidences of indebtedness of the authority, and, in such case, the authority may create separate sinking or other similar funds in respect of such subordinate lien bonds, notes, or other evidences of indebted

ness.

(c) Pay operating and administrative costs of the authority.

39632. The Authority may enter into contracts of sale with any participating party covering any project financed by the authority. The purchase price pursuant to such contract of sale shall be sufficient to provide funds for all the purposes provided in Section 39361 and may be paid in installments, together with interest on the unpaid balance, or otherwise, as may be mutually agreed and set forth in such contract of sale. All payments received by the authority under any installment sales or conditional sales contract shall be applied by the authority substantially in the same manner as hereinabove provided in Section 39631 in the case of lease payments or rental charges received by the authority. 39633. All moneys received pursuant to the provisions of this division, whether as proceeds from the sale of bonds, notes, or other evidences of indebtedness or as revenues, shall be deemed to be trust funds to be held and applied solely as provided in this division. Any bank or trust company with which such moneys shall be deposited shall act as trustee of such moneys and shall hold and apply the same for the purposes hereof, subject to such regulations as the resolution authorizing the bonds of any issue or the trust agreement securing such bonds may provide.

39634. Any holder of bonds, notes, or other obligations issued under the provisions of this division or any of the coupons appertaining thereto, and the trustee or trustees under any trust agreement, except to the extent the rights herein given may be restricted by any resolution authorizing the issuance of, or any such trust agreement securing, such bonds, notes, or other obligations, may, either at law or in equity, by suit, action, mandamus, or other proceedings, protect and enforce any and all rights under the laws of the state or granted hereunder or under such regulation or trust agreement, and may enforce and compel the performance of all duties required by this division or by such resolution or trust agreement, to be performed by the authority or by any officer, employee, or agent thereof, including the fixing, charging, and collecting of the rates, rents, fees, and charges herein authorized and required by the provisions of such resolution or trust agreement to be fixed, established, and collected. 39635. The exercise of the powers granted by this division shall be in all respects for the benefit of the people of this state, for their health and welfare, and protection of the state's environment. Any bonds, notes, or other obligations issued under the provisions of this division, their transfer and the income therefrom, shall at all times be free from taxation of every kind by the state and by municipalities and other political subdivisions of the state, Provided, however, that the preceding sentence shall not apply with respect to any bonds, notes or other obligations, or the income therefrom, for any period during which such bonds, notes or other obligations are held by (a) any participating party, (b) persons, organizations, trades or businesses (whether or not incorporated, organized in this state, or affiliated with such participating party) owned or controlled, directly or indirectly, by such participating party, or (c) persons. organizations, trades or businesses (whether or not incorporated, organized in this state, or affiliated with such participating party) which own or control, directly or indirectly, such participating party.

39636. The authority shall not be required to pay any property taxes or assessments upon, or in respect to, a project or any property acquired by or for the authority under the provisions of this division or upon the income therefrom, so long as the authority holds title to such project or the property or facilities comprised in the project. The exemption of the authority from taxation of any project herein provided shall cease forthwith when title to such property is transferred from the authority to any participating party. The provisions of this section shall not exempt any participating party from taxation with respect to any project, or the property or facilities comprised in any project, which may otherwise be applicable to such participating party.

(Added by ch. 277/73, effective 8/15/73.)

39637. Upon dissolution of the authority, the title to all properties owned by it shall vest in and become the property of the State of California.

(Added by ch. 277/73, effective 8/15/73.)

CHAPTER 2. SUPPLEMENTAL PROVISIONS

39640. This division, being necessary for the welfare of the state and its inhabitants, shall be liberally construed to effect the purposes hereof.

39641. This division shall be deemed to provide a complete, additional and alternative method for the doing of the things authorized thereby, and shall be regarded as supplemental and additional to powers conferred by other laws; provided, that the issuance of bonds and refunding bonds under the provisions of this division need not comply with the requirements of any other law applicable to the issuance of bonds; and provided, that in the construction and acquisition of a project pursuant hereto the authority need not comply with the requirements of any other law applicable to the construction or acquisition of public works except as specifically provided in this division. Pollution control facilities and projects as defined in subdivision (e) of Section 39603 may be acquired, constructed, completed, repaired, altered, improved, or extended, and bonds may be issued for any such purposes under this division notwithstanding that any other law may provide for such acquisition, construction, completion, repair, alteration, improvement, or extension of like pollution control facilities or for the issuance of bonds for like purposes and without regard to the requirements, restrictions, limitations or other provisions contained in any other law.

39642. The State of California does hereby pledge to and agree with the holders of any obligations issued under this division, and with those parties who may enter into contracts with the authority pursuant to the provisions of this division, that the state will not limit or alter the rights hereby vested in the authority until such obligations, together with the in interest thereon, are fully met and discharged and such contracts are fully performed on the part of the authority, provided nothing herein contained shall preclude such limitation or alteration if and when adequate provision shall be made by law for the protection of the holders of such obligations of the authority or those entering into such contracts with the authority. The authority as agent for the state is authorized to include this pledge and undertaking for the state in such obligations or contracts.

39643. To the extent that the provisions of this division, with respect to the financing of pollution control facilities, are inconsistent with the provisions of any general statute or special act or parts thereof, with respect to the financing of pollution control facilities, the provisions of this division shall be deemed controlling.

REVENUE AND TAXATION CODE-SECTION 201.5 AS ADDED BY CHAPTER 277/73

201.5 (a) Possessory interests in property acquired by or for the California Pollution Control Financing Authority pursuant to Division 27 (commencing with Section 39600) of the Health and Safety Code, whether in real or personal property, shall be subject to taxation under this code.

(b) If the amount determined pursuant to subdivision (a) is less than the amount of tax which would have been imposed if the participating party owned the pollution control facility, the contract or lease between the California Pollution Control Financing Authority and such party shall provide that the difference between the amount of tax paid pursuant to subdivision (a) and the amount determined on the basis of the full cash value of the property shall be paid by such party to the tax collector for the taxing agency at the same time as the property tax is paid.

(Added by Ch. 277/73, effective 8/15/73.)

Mr. SMITH. The committee will come to order. The next witness is the Administrator of the Small Business Administration, Mr. Thomas S. Kleppe. Mr. Kleppe has been here many times before. I guess he needs no further introduction. We are glad to have you this morning, Mr. Administrator, and do you have a statement?