MOORLACH UPDATE — LOOK BACKS — April 28, 2010

My thanks to those who responded to the “Your thoughts?” Update.  Very much appreciated.

FIVE-YEAR LOOK BACKS

April 27

2000

In the Letters to the Editor section of the OC Register, “Orange teachers have a bad union guiding them.”  Watching events in south county of late makes this letter current again.

I am pretty tired of hearing about how the teachers care so much for our children.  The latest is Paul Pruss’ quote on Page 1 of the April 26 Register, “You want to be creative without doing anything that will harm the students.”  Who do you think is getting hurt the most in the Orange Unified School District unrest?  A friend’s teacher told the kids to grade each other’s homework because she did not get paid enough to grade papers.  Teachers have offered extra credit to kids for picketing.

Orange County Treasurer-Tax Collector John Moorlach authored an article for the Foothills Sentry newspaper on April 11 reporting that the school board is correct:  It would go bankrupt if the board met the union’s demands.  Now there is the strike that is not a strike to tweak the school board.  Teachers are supposed to model professional behavior.  There are good teachers, but many are acting unprofessionally, led by, in my opinion, a bad union.  If the teachers can’t behave better, I am putting my child in private school net year where the teachers make less – but care more.

Art Hiester

Villa Park

April 28

2005

Sometimes really good things happen to you.  Five years ago, today, it was this “Viewpoint” column by Michael Capaldi.

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viewpoint

Orange County Voodoo

When will county officials start listening to John Moorlach?

By Michael D. Capaldi

 

What is money in the mind of government, anyway? Weird, magic stuff. It just appears. The kind of thing that you scrape off the taxpayer, like manna off a rock.

Or, like the wind, we know not from where it comes or whither it goes.


Even in conservative Orange County, where 10 years ago county Treasurer Bob Citron drove us into bankruptcy by betting taxpayer money on exotic derivatives, hedges, and other investments which are so complicated only a quantum physicist or a voodoo priest can understand them. As the Orange County Register reported, former Supervisor Roger Stanton “invoked the image of Citron as a Wizard of Oz, crouching behind the curtain,” while local officials “waited in awe for him to work his magic.”

Not John Moorlach.

Moorlach is an enthusiastic tightwad. He’s the kind of guy who knows exactly how much change is in his car’s ashtray. Better than that, he has an instinctive grasp of money for what it really is: your time and your effort, distilled, and siphoned into an account. It’s the stuff you get in exchange for spending time at work, away from your family, your friends, and the things you’d rather do. Every dollar is nothing less than a piece from your life.

Local Republicans asked Moorlach to run for treasurer, but it was not taking on the god-like Citron that held him back. It was being typecast, he says. “When you’re a CPA, and you join a club, someone’s always trying to get you to be the club treasurer.”


With a full beard and more hair than a bear, Moorlach looks like a rather tidy mountain man. Ten years ago, he was, in fact, returning from a backpacking trip in the Sierras, moaning about the pressure being put on him to run. The drive was long. A campmate managed to persuade him to think seriously about it.

“Then we got ahold of Citron’s investment portfolio.” Moorlach said. “And, oh, my goodness! He had the county in the kinds of investments you wouldn’t put your bravest client in.”

Moorlach, assuming he would lose, challenged Citron. He knew that that if interest rates rose and stayed high, Citron’s funky investment portfolio could cost the county hundreds of millions ­ or billions. County government closed ranks around Citron. Why would you kill the goose that lays golden eggs?

OC’s newspapers printed Moorlach’s accusations. However, according to Moorlach, the press missed the point. They covered Moorlach’s claims as if they were garden-variety political rhetoric. The reporters never did the math to determine if Moorlach was right. “It was all out there. They assigned political reporters to the story. They should have put their business reporters on it,” said Moorlach.

Moorlach lost. But so did the county. $1.6 billion.

Shortly after Moorlach’s nightmare came true and Citron resigned, the supervisors appointed Moorlach county treasurer. Voters have returned John Moorlach to the job for the past decade.

Today, Moorlach is running for county supervisor, a race that is heating up fast. Watch this one. It will be fierce.

Moorlach now worries that we’re headed for a disaster in slow motion. Last fall, the Board of Supervisors approved a horrible deal under a new union contract: it agreed to some big-time, deluxe pensions. Moorlach says the contract creates an instant shortfall of $300 million in pension obligations.

The hole will get bigger. The pension deal assumes that the fund’s investments will achieve an average 7.5% return per year over 30 years. Warren Buffet, the Lord of all Investors, says you’re a fool if you expect more that 6.5%.

Put aside the fiscal worries, and ask whether the contract is fair. If you are working for a private business, you will probably retire at 67 years old. You won’t have a guaranteed income, only what’s sitting in any defined-contribution account, as it may have grown over the years.

But county employees are different. Public safety employees, like cops and firefighters, can retire with 100% of their last year’s salary after only 30 years on the job, say, at 55. Other employees can retire at 55 with 80% of their last year’s salary.

Don’t worry, though. The money will come from somewhere. Namely, you.

So, here’s what Moorlach is worried about: The pension deal socks Orange County with an unfunded liability of $1.5 billion over time. We owe, perhaps, $761 million in bankruptcy hangover debt. And we have a $1 billion gap in the county retiree medical care system.

Total it all, and it looks as if we have a $3.3 billion weight around our necks. When county government went bankrupt 10 years ago, its debt was half that ­ $1.6 billion. We didn’t listen to John Moorlach then. We should hear him now.

Michael D. Capaldi is a partner in the business law firm of Spach, Capaldi & Waggaman, LLP in Newport Beach and the chairman of The Lincoln Club of Orange County.

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