SAN FRANCISCO — Two conduit bond issuers run by private firms appear to be the only entities out of thousands of government agencies in California that do not have to disclose any employee salaries.

The difference between the California Statewide Communities Development Authority and the California Municipal Finance Authority and all other state agencies spotlights their unusual roles as private companies running a government agency.

Jacob Roper, a spokesman for state Controller John Chiang, said the controller’s office, which collects the salary information, is unaware of any other government entities it collects data from in California that do not have to provide any salary information.

“There is no legitimate reason to hide these figures and not show taxpayers what they pay for a service provided,” Roper said in a statement.

Chiang started an initiative to collect salary information from the state and local governments following public pay scandals in 2010. The process is still ongoing and many smaller governments and special districts still have not provided the requested salary information. State employees not paid by the controller do not have to provide salaries.

Conduit bond issuers help local governments, nonprofits, or other projects with a public benefit sell and manage bonds. The CSCDA and the CMFA are not the only conduit issuers in California but they are the only ones run by private companies.

This private management of a public agency has stirred criticism from Treasurer Bill Lockyer, whose office also runs competing conduits, in the form of new legislation tightening regulation of joint power authorities and by pushing for a state audit of the two companies that is due this summer. 

The CSCDA and the CMFA do not have to disclose any information because the joint-powers authorities — a government agency formed by two other government-related entities — contracted out all of the work to private firms, which are paid based on revenues.

Neither of the two authorities’ operations are directly funded by taxpayers. 

Representatives of both the CSCDA and the CMFA said they have not done anything wrong and are private companies that have been hired to do the work, and as such are not required to provide salary information.

“We don’t have salary information to provide because we don’t have public employees who are contract staff,” said James Hamill, a program manager at the CSCDA.

Ben Barker, a financial advisor to the CMFA, said the organization is similar to public-private partnerships that the state has entered into to try to improve efficiency and reduce costs.

Both conduits have boards overseeing operations and report annual financial statements. However, the management firms do not have to disclose specifics of their finances.

The CMFA, a joint-powers authority created in 2004 by municipalities and special districts, is managed by the private firm Sierra Management Group LLC.

The CSCDA is one of the largest conduit issuers in the country. It is operated by HB Capital Resources Ltd., a private firm that won the original contract to run the conduit issuer JPA in 1988 from the authority’s co-sponsors, the California State Association of Counties and the League of California Cities.

In fiscal 2011, the CSAC and the league split $3.4 million from the conduit’s $16 million of revenue that came mainly from fees paid by municipalities to issue debt, according to the financial report. HB Capital and its subsidiaries made $9.4 million.

The agency, which has around 500 municipalities as members, issued $2.2 billion of conduit revenue bonds in fiscal 2011, according to its audited financial reports, making it one of the top 50 issuers in the country for both years.

Last year, amid public pay scandals, HB Capital’s perceived high salaries came under fire from critics that focused on HB Capital founders Stephen Hamill and Gerald Burke.

HB Capital, based in Walnut Creek, Calif., also operates the Public Finance Authority, a conduit issuer founded last year in Wisconsin that handles bond issues nationwide.

Aside from the CSCDA, HB Capital also runs a nationwide government-purchasing cooperative called U.S. Communities. Some of the same staff working on the bond side also work on purchasing.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.