MOORLACH UPDATE — Daily Pilot — December 18, 2009

The Daily Pilot requested a copy of the Harbor Patrol Report and provided their take. 

Not to overemphasize a point, but you can see the visible impacts of the county’s going, retroactively, from “2% @ 50” to a “3% @ 50” public safety defined benefit pension formula in this report. 

The hemorrhaging from this one pension enhancement decision is dramatic, and the Harbor Patrol costs are a microcosm of what ails the whole here at the county.  (And elsewhere – more on this topic with the December 20 Update.)

Harbor Patrol expenses rising

Increasing costs in fuel, employee pensions and salaries are among the reasons costs are up, says Harbor Master Lt. Mark Long. County received the findings last week.

By Joseph Serna

There is virtually no fat to trim off the Orange County Sheriff’s Harbor Patrol budget or staff, and there’s no way to force cities with harbors to help pay for the increasingly costly service, according to a report released by a county group assigned to examining the issue.

“There are no easy solutions for the proper structure and funding of the Harbor Patrol,” found the report, which was distributed to county supervisors last week. “While cities and their residents reap some benefit from having harbors, and the harbor patrol, the county cannot compel cities to pay for harbor patrol.”

Because of a 1975 resolution by the county Board of Supervisors, harbor patrol responsibilities were handed over to the Sheriff’s Department and away from the county’s Environmental Management Agency. Part of the understanding was that the county would reimburse the sheriff for the costs of patrolling the harbor.

The report comes from the county Working Group, a small task force made up of people from Supervisor John Moorlach’s office, the Sheriff’s Department, the OC Parks department and Dana Point Harbor.

While harbor patrol expenses have increased nearly 22% in the last five years, from $9.3 million to $11.3 million, services remain the same. In the last 10 years, the budget has more than doubled, according to the report.

But all the while, as far back as 1975, staffing has remained the same at the Sheriff’s Department’s Dana Point, Newport Beach and Huntington Beach harbors, the report notes. Increasing costs in fuel, employee pensions and salaries are among the reasons costs are up, said Harbor Master Lt. Mark Long.

Given the budget crisis, the report floated out different ways for the harbor patrol to potentially save money.

The Sheriff’s Department could abandon harbor patrol altogether and stick with its only legally required duty — patrol the coasts and tidelands. That, according to Long and the report, is essentially pointless.

Given the size of the coast and required 24-hour patrols, the Sheriff’s Department would have the same level of staffing they do now, minus maybe two deputies, Long said.

“Rather than just having deputies patrol the coastline, the county wisely chose to have those deputies also patrol the county areas within the inner harbors, including Dana Point harbor, county tideland areas as well as perform rescue services, marine firefighting and value-added services,” Long said.

The report suggests changing the type of officer or deputy who patrols the harbor or coastline to someone less costly (and with less training). Long echoed Sheriff Sandra Hutchens’ input into the report that having different classes of officers would create more headaches than save money.

Long said that scheduling and staffing “nightmares” would arise because one type of officer could not cover another’s shift, and only certain deputies could respond to certain incidents.

And because Hutchens has authority over the staff, the report stated, she refused to consider it as an option for those reasons. With cities not even legally obligated to pay for the Sheriff’s Department to patrol their harbors, the report noted that there are few, if any options, for the county.

The only one that appears clear is that the harbor patrol is a regional function that should continue to be funded, it concluded.

FIVE-YEAR LOOK BACKS

December 18

1994

It was Sunday again.  So it was time for big features on the bankruptcy story.

Liz Pulliam, Ronald Campbell, Chris Knap, Jeff Kramer Susan Kelleher and Kim Christensen of the OC Register had a piece for the wire service, titled “Gambling It Away—As Orange County Treasurer, Robert Citron Took Too Many Risks,” that was printed in The Seattle Times.  It was the one that the OC Register printed the Sunday prior (see MOORLACH UPDATE – December 11, 2009).

New stuff in the OC Register included a batch of Letters to the Editor in the Commentary section under the heading “Bankruptcy Blues.”  One sub-heading was “Warnings:  The Register also ignored the midyear warnings of John Moorlach.”  If I could have written one letter at the time, this is the one I would have submitted.  Thank you, Mr. Krupp, very, very much.

                The Register, in an excellent editorial, discussed the freefall in Orange County’s investment portfolio.  The editorial’s list of culprits, fools, and scalawags omitted one name, the Register itself.

The Register’s reporters went out of their way to pooh-pooh the warnings given by John Moorlach during the election campaign, functioning as an adjunct of the Citron campaign.  Reporter Chris Knap was the unofficial chief of the Citron campaign.  After the election, the Register had the chutzpah to run an article taunting Moorlach for questioning Citron.  Knap gave us a reprise of his robot-like acceptance of Citron’s statements.  Ironically, the same edition had an article on the collapse of the derivative market.

The Register is beginning to resemble the Wall Street Journal – an excellent editorial staff and economic imbeciles as reporters.  I would like to see the Register share why its reporting was so misleading and what it has learned.

Terry H. Krupp

Huntington Beach

The same section had a cute Orange Grove submission by Ed Doyle of Laguna Beach, titled “Have yourself a Merrill little Christmas.”  Here’s a portion to give you the flavor of his creativity.  Humor is so necessary.

                Excerpts from “The Orange County Christmas Album”:

                DECK THE HALLS with reams of lawsuits

                Falalalala, la la la la!

                ‘Tis Bob Citron gets the big boot

                Falalalala, la la la la!

                Now we sue our market makers,

                Falalalala, la la la la!

                For county bonds there are no takers,

                Falalalala, la la la la!

                Months ago ne thought it numbing,

                Falalalala, la la la la!

                But Moorlach’s view was unbecoming,

                Fa la la la la . . . la la la la!

The lead editorial for the Commentary section was titled “Say, what? – After the Crash:  An Orange County Financial Glossary,” which also tried to bring some humor to the situation.  Definitions were given for the names of the players.

8.  MOORLACH (Mur-lak)  n. Classical Mythology:  Cassandra.  Biblical:  Jeremiad.  Lit. Fig.:  A person who finds “creepy crawly” things under rocks (cf. H. G. Wells) which other persons bergeson or discredit to attempt to schneiderize; e.g., one characterized as bad in talking to New York financial media.  v. trans.  Accounting terminology:  To moorlach, to find funds which are leveraged or that risk a MegaCitron bomb; seek extrication from fund on basis of the first loss being the best loss.  Antonym:  “To keat” as in take money from little old ladies and orphans.

The OC Register’s News section had some humor, too.  In “Better to Laugh Than to Cry,” reader David Shere of Garden Grove wrote these sendups of Christmas songs with an Orange County twist:

                LEVERAGING (to the tune of “Jingle Bells”)

                Dashing through the fray about six months ago,

                A Costa Mesa C.P.A. said Citron’s risking all our dough!

                But the O.C. Board was calm and settled all our fears,

                After all they’d never bombed ‘cause Bob’s been doing this for years!

                (Chorus)

                Oh, leveraging—leveraging investors do it all the time

                Oh, what fun investing is when you own dough ain’t on the line

                Oh, leveraging – leveraging can make our coffers grow

                So don’t you fret about a thing ‘cause what does Moorlach know?

Now to a more serious OC Register front-page story, titled “Deputy of Deception? – Investors:  Citron aide misled them – Matthew Raabe, now acting treasurer, repeatedly said the fund was stable, officials say,” finally saw Chris Knap, Jonathan Lansner and Jim Mulvaney taking a real co-conspirator to task.  Matthew Raabe inserted himself full-force in the campaign.  There were times I was wondering who I was running against?  Citron or Raabe?  And that he was selected as the interim Treasurer was unthinkable to me.

                “It certainly appears to me that Matt Raabe was involved almost lock step with Mr. Citron.  I have serious concerns about his role,” said John Collins, a Fountain Valley councilman and director of the county Sanitation Districts, both depositors in the now-bankrupt county fund.

                Supervisor Steiner said Register reports that Citron and Raabe misled some investors by telling them their money was deposited in a safer “bond pool” raise new concerns about Raabe.

                “I think that it might be wise to have (county financial consultant) Tom Daxon named the treasurer, at least on an interim basis, in light of this new information,” Steiner said Saturday.

                “Matt did a lot of the talking for Bob, because Bob didn’t talk very well in front of people,” said Peer Swan of the Irvine Ranch Water District, one of the fund’s largest investors.

In March, Raabe made a presentation to USAA Investment Management Co. of Texas and allegedly misled it about the precarious condition of the county fund.  John Bonnell, a USAA credit analyst, said he was concerned about the county’s borrowing to buy more bonds.  Bonnell said Raabe said he could borrow “up to 100 percent . . . but we are nowhere near that.”

“That was misleading,” Bonnell said.

One month later, as political challenger John Moorlach began to criticize Citron’s strategy, Citron and Raabe confirmed in interviews with the Register and other newspapers that the county had borrowed more than 200 percent to boost the yield on its portfolio.

The LA Daily News had an article on my campaign as their front-page, top-of-the-fold feature, with photo.  It was titled “Prophet of Orange County – Treasurer candidate’s warnings about risky investments ignored” and it was by Mike Comeaux.  It also appeared in the Arizona Republic, as dear friends who lived in Prescott at the time sent me a copy.  Here are the first few paragraphs and a few selected ones.  The county actually filed on Dec. 6th.  But, Mike Comeaux took the local media to task and addressed the basics of a countywide campaign effort.

                Seven months ago, certified public accountant John M. W. Moorlach warned that Orange County was headed for financial disaster because of the risky investment strategies of county treasurer Robert Citron.

                Few people listened.  Most turned a deaf ear, chalking it up as political rhetoric, since Moorlach was running in the June election to unseat the 69-year old Citron as county treasurer-tax collector.

                “There were nights I stared up at the ceiling, calling out to God:  ‘They don’t understand.  How can I make them understand?’” Moorlach, 38, said a few days ago.

                Less than six months after county voters went to the polls and re-elected Citron by a 3-to-2 margin, the challenger’s prediction came true.  The county filed for bankruptcy Dec. 2 (sic), a day after Citron resigned in disgrace.

                Moorlach saw it coming, and he was sounding the warning seven months ago.

                “He was Paul Revere shouting that the British were coming.  But the political establishment were snoring so loud they drowned out the alarm,” said Harvey Englander, a veteran Southern California political consultant.

                In hindsight, political campaign experts and others say Moorlach’s on-the-money warnings went unheeded for several reasons, including his limited campaign budget and lack of credibility as an outsider challenging the political establishment.

                They also point to inadequate scrutiny by public officials, citizens and the news media of Citron’s stewardship of the county’s money.

                According to finance reports filed by both candidates, Moorlach actually outspent the incumbent, spending more than $69,000 on his campaign while Citron’s expenditures topped $45,000.

                However, Englander said that is too little to buy commercial advertising to drive a message home to voters in Orange County, which has a population of 2 million.

                “I had no ads,” Moorlach lamented.  He had counted on news reporters to convey his warnings to the public.  But none of the local news organizations investigated deeply—although others did so outside the county.

                Although Moorlach for 10 years has been a partner in the accounting firm of Balser, Horowitz, Frank & Wakeling, some county voters said they were skeptical of his warning simply because of what political candidates say.

“I’m not sure I was listening (to Moorlach),” said Sharon Rorick, an Orange County GOP voter.  “I have no financial background.  He could have been telling us many wonderful things and given us serious warnings, but you expect people in positions of power to be doing their jobs correctly and to serve the public well.”

                Three months after [the] election, the Orange County Register ran a story headlined, “O.C.’s sky didn’t fall.”  The Sept. 9 story said Moorlach’s forecast of a bleak future was apparently not coming true.

                “Well, the campaign is over, interest rates are leveling out, and to tweak a line from Mark Twain, reports of Bob Citron’s death have been greatly exaggerated.”

                A few months later the county filed for bankruptcy – and Moorlach said he has been swamped by hundreds of requests for interviews with national and local news organizations ever since.

                “It’s been nuts,” he said in his Costa Mesa office.

                Moorlach, who stands more than 6 feet tall and has a neatly trimmed beard, winks at a visitor and cracks small jokes about the sudden attention.

                “I wish it would stop,” he said with a smile.  “I’ve got to get some work done around here.”

                The ex-candidate said he didn’t expect help from the county supervisors.

                “I knew they were in the boat with Citron.  I didn’t expect them to do anything to help me.”

                But, he is disappointed that his message wasn’t investigated by local reporters.  But, he conceded the issues are complex, and he knew that elections for county administrative positions seldom draw much attention.

                “When it comes to these county administrative positions, it never gets much attention in the press,” he said.  “We got into the Wall Street Journal – I thought that was great.  Then I got accused of manipulating Wall Street.”

1999

Jeanette Steele of The Press-Enterprise provided a rare headline with “Tollway firm apologizes for handling of sale effort – The deal is called off after Riverside County transportation commissioners vote to sue in the affair.”

                “(We) overlooked the very delicate and sensitive nature of our relationship with key local officials,” the company said in a public statement from [CPTC] General Manager Greg Hulsizer.

                But Orange County Treasurer John Moorlach called the statement a good first step in repairing the rift with local government.

                “They’re still here and need to restore credibility,” Moorlach said.  Hulsizer refrained from commenting on whether the company is considering a future sale:  “There are lots of options available to us.”

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