Funding for the Boys and Girls Club project with Measure WW money might put the underlying bond's tax-exempt status at risk. At last week's city council meeting, Dave Collins, East Bay Regional Park District's assistant general manager for finance, told the city council that the district might have a problem approving the expenditure of Measure WW funds on a project by a non-profit that holds title to property where the funds are used.

He called such a move "potentially very difficult for the park district."

"Although the district allows the cities a maximum amount of latitude to choose programs . . . There is serious doubt that this (the Boys and Girls Club) project would be ultimately eligible," Collins told the council. He urged all parties not "to make binding financial commitments on any assumptions or presumptions in this matter."

Collins used the 1988 Measure AA bond funds as a precedent and pointed out that EBRPD bonds have never funded a project by a nonprofit where the nonprofit held title to the underlying property.

"This is a matter of some gravity," he said.

He pointed out that the issue at hand has nothing to do with the Boys and Girls Club, but whether property where the bond funds are used can be in private hands. "We cannot violate tax laws or do anything that would violate the tax-exempt status of these bonds," he said.

The Internal Revenue Service strictly regulates tax-exempt bonds and how their issuers can use their proceeds. At the heart of the contest lies the answer to the question whether the Boys and Girls Club project meets the IRS rule for private activity bonds.

The Tax Reform Act of 1986 put strict limitations on the purposes for which tax-exempt private activity bonds could be issued. At the Dec. 1 meeting Councilwoman Lena Tam pointed out that the property where the Boys and Girls Club would be built belongs, not to the club, but to the school district.

Collins replied that EBRPD would address this issue once the district has the application in hand. He also pointed out that the Boys and Girls Club and any other nonprofit are precluded from applying for Measure WW money. The city would have to apply, he said.

Councilwoman Marie Gilmore said that this is an EBPD issue. She chided Collins for the district's appearance at an earlier city council meeting saying that the Boys and Girls Club project might be eligible.

Mayor Beverly Johnson agreed, saying that she clearly remembers EBRPD representatives telling the council that the project might be eligible.

Collins apologized for the park district's intemperance, but stressed that district would make no decisions until it has an application in hand.

Despite Collins' caveat, the council voted 3-2 to proceed with the application. Councilmen DeHaan and Matarrese voted "no."