MOORLACH UPDATE — Happy 25th JWA — August 2, 2010

The pension reform movement lost a key player Friday evening.  Former Assemblyman Keith Richman passed away after an extended battle with brain cancer.  See http://www.californiapensionreform.com/?p=1050.

My condolences go out to his wife and family.  Keith was a joy to work with and I will miss his friendship and counsel.

Yesterday, the OC Register had a front-page piece on the 25th anniversary of the John Wayne Airport settlement agreement.  Renegotiating the agreement will be one of the top priorities of my second term.  This article provides a great historical perspective and is the first below.  (I’m also sending it to my JWA E-Mail Tree.)

The OC Register also published my editorial submission, “Time for the next step in pension reform,” (see MOORLACH UPDATE — Rollbacks — July 30, 2010).

I am mentioned in Rick Reiff’s “OC Insider” column of this week’s edition of the Orange County Business Journal regarding my recent interview with Leslie Dutton (see MOORLACH UPDATE — Full Disclosure Network — July 25, 2010).  Rick’s smiling face is the bonus article at the bottom of my Update, just before the LOOK BACKS.

Also, my wife is on Facebook, but I still haven’t found the time to do so.  Yesterday was her birthday.  Consequently, she was receiving messages all day wishing her a happy birthday.

Honey, here is my message.  It’s got to be number 8,001.  Happy Birthday!  And thanks for putting up with me for 30 years!

O.C.’s landmark airport deal turns 25

By JEFF OVERLEY

NEWPORT BEACH – Twenty-five years ago this month, Newport Beach residents became the envy of anyone who’s ever lived near an airport, inking one-of-a-kind noise protections and flight caps that remain the nation’s strongest.

"Nobody – no population, no community – has a more restrictive regimen than we have here," said Barbara Lichman, a key player when locals secured landmark limits on John Wayne Airport in August 1985.

The so-called settlement agreement was unprecedented, and it had remarkable timing, coming just before federal legislation largely eliminated the legality of such local control.

Residents were "very fortuitous," said Dave Kiff, Newport Beach city manager.

A quarter-century later, they are counting on more than luck to keep the deal in place. With the pact set to be renegotiated in coming months and years, the city spends no small amount of time and money to head off adversaries who say its rules went too far.

LONG LEGAL FIGHT

From the time a modern terminal was built in 1967, the then-Orange County Airport faced lawsuits from noise-weary residents. The conversation-stopping racket was so significant that the Santa Ana Heights neighborhood near Upper Newport Bay was declared "blighted."

To compensate, the county through the years has added acoustical insulation to more than 400 homes, and as part of a purchase-assurance program, it has bought more than 40 properties, some of which were converted to business uses that are less demanding of tranquility.

In 1985, after county supervisors approved an airport expansion, the legal battle came to a head, culminating with the federal court settlement.

"This is a positive effort that will be felt for generations," Newport Beach Mayor Phil Maurer said at the time.

The deal limited the noisiest flights, capped passenger volume and restricted the airport’s size. Jets would still fly over neighborhoods near Upper Newport Bay – and still do to this day – but only on a predictable schedule that now amounts to 150 or so departures per day.

"I don’t know what I’m going to do, if I don’t have the airport to kick around anymore," Newport Beach Councilwoman Jackie Heather said after the settlement agreement was announced.

LANDMARK DEAL

The pact was front-page news in 1985, and it looked even more impressive in 1990, when Congress passed the Airport Noise and Capacity Act, a controversial bill that largely stripped cities of the ability to "reduce or limit aircraft operations."

Former Newport Beach Mayor Thomas Cole Edwards, now the city’s airport liaison, says the settlement agreement was part of the motivation for federal action. "My personal opinion is it was probably a moving force (when) airlines lobbied to pass ANCA," Edwards said.

Since then, towns have tried and failed to achieve even modest concessions. Locally, the Federal Aviation Administration last year rejected a night curfew at Bob Hope Airport in Burbank, saying it would create an "undue burden on commerce."

Other airports have strong noise restrictions, but John Wayne has been contained with considerable success. Long Beach Airport, for example, has a cap on commercial flights, but when all aircraft operations are counted, it witnessed 35 percent more landings and departures in 2009 than John Wayne.

For Newport Beach, the challenge is preserving everything it won. That hurdle was underscored in 2003, when the city agreed to a settlement agreement extension that allowed a nearly 30 percent spike in annual passengers and cleared the way for construction of a third terminal wing.

"I still think that too much was given away" in 2003, said former Mayor Evelyn Hart, who helped hammer out the original pact.

PRESERVING THE PACT

John Wayne Airport’s agreement lasts through 2015. It ultimately will allow 10.8 million passengers annually, and some observers hope to maintain the status quo when the deal is renegotiated in coming months and years. "10.8 and Shut the Gate" is the motto of AirFair, a residents’ group.

John Wayne isn’t expected to host that many travelers until 2022, according to FAA projections, bolstering the case for a simple extension.

"That would be the goal," said Supervisor John Moorlach. But it would also be a best-case scenario with FAA officials. "They only go up. They don’t go down," Moorlach said, referring to allowable flights and passenger volume.

And some hope they do go up. Leonard Kranser, a longtime airport watcher, says the cap artificially reduces capacity, driving up ticket prices.

"Airplanes make noise; people really don’t as they fly over," Kranser said. "So, to tell an airline that they can’t fill a seat because of the (passenger) cap, but then have them fly an empty seat, doesn’t really make a lot of sense."

Elected leaders near Los Angeles International Airport have also criticized the settlement agreement, saying Orange County is not pulling its weight to satisfy air travel demand.

"The folks around LAX would like nothing better than to export their problem down here," said Lichman, executive director of the Airport Working Group, one of the settlement agreement’s signatories along with Newport Beach, Orange County and residents group Stop Polluting Our Newport.

And airlines, which tussle each year for coveted passenger allotments, also would prefer looser caps at John Wayne.

"The issues are not really the city vs. the county," said Alan Murphy, airport director. "The challenge is, there are other stakeholders involved."

But few can match the intensity of Newport Beach residents. "The folks in Newport Beach are very focused on this issue; they’re very good," Kranser said. "They’ve got a lot of good technical help, and I think that they can get the better of the county in negotiations."

AGREEMENT’S LEGACY

Looking back over the past 25 years, it is hard to gauge the settlement agreement’s impact precisely.

On the one hand, voter rejection of an airport at the El Toro Marine Corps base kept pressure on John Wayne, and keeps its limits center-stage.

Also, many locals cite a 2002 study that tried to imagine the pact did not exist. It projected almost 14 million passengers could go through the gates annually, a roughly 50 percent increase from today.

"They could have blown the lid off JWA," Edwards said.

Lichman echoed that, saying that without the settlement agreement, "The sky’s the limit."

On the other hand, the 9/11 attacks and a lengthy recession have been a one-two punch for the airline industry, keeping travel at John Wayne well below its limits.

Practical matters also might prevent dramatic growth. For one, there is only so much capacity during times people actually want to travel. "There’s really not much demand, if any, to be flying in the middle of the night," Murphy said.

John Wayne is also surrounded by expensive property, making expansion a costly prospect. And even if adding a new commercial runway were affordable, it would almost certainly be blocked by Newport Beach, which in 2006 won veto power over such an expansion.

"At some point, you get all out of the airport that you’re going to get out of it," Murphy said. "If we’re not there yet, we’re pretty close."

Newport Beach residents sure hope so, arguing that one day, officials must recognize that a suburban airport can do only so much without wreaking havoc on quality of life.

"Someone has got to just say no," Hart said. "And that enough is enough."

Contact the writer: 714-796-7952 or joverley@ocregister.com

Callahan Called by Grieving Widow; Receiver for State?

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Supe John Moorlach says Gov. Arnold should set up one more commission before he leaves office, this one to figure out how to put California into receivership. “Some adults have to run the checkbook of this state that are immune from special interests,” he told Leslie Dutton of Full Disclosure Network …

FIVE-YEAR LOOK BACKS

1995

August 1

Every year seems to be too busy, but 1995 certainly was an amazing year for me.  Consequently, I have not scrapbooked all of the clippings from that era.  It will be a project to accomplish during my retirement years.

One clipping that I do have that gives a flavor of how the rest of the nation viewed Orange County at that time is a column by the nationally syndicated, and highly noted libertarian, James K. Glassman of The Washington Post.  He also co-wrote the book “Dow 36,000:  The New Strategy for Profiting from the Coming Rise in the Stock Market” in 1999 (which may not be a good thing to have on your resume.)  His column was titled “Orange County Decadence.”  The theme:  Can such disasters like Orange County’s bankruptcy be prevented in the future?  His answer:  I doubt it.  Here are selected paragraphs.

                Last week . . .  a House subcommittee headed by Richard Baker (R – La.) held two days of post-mortem hearings on Orange County.  One big question:  Can such disasters be prevented in the future? 

I doubt it.  The theme of the Orange County story is the lack of character shown by nearly everyone involved.

Laws and contracts aren’t enough.  Markets—like all human transactions—depend on a faith that the parties involved will act honorably, and Orange County, in a manifestation of self-centered, end-of-the-century decadence, proved to be no Cesar Birotteau  (who, through no fault of his own, goes bankrupt in a real estate deal, but works hard and repays all his debts—to the amazement of Paris).

Also playing a part in the mess were stupidity, greed and a lack of diligence on the part of folks who were supposed to be paying attention—government officials, bond-rating agencies, the press and the voters.

Other warnings:  In April of last year, Grant’s Municipal Bond Observer, a respected trade newsletter, dissected Citron’s risky portfolio and concluded that, thanks to the rise in interest rates, it had “tanked.”  In May, John Moorlach, who was running against Citron for treasurer, told the press that the county was headed for a billion-dollar crash.

But the press, said Rep. Christopher Cox (R – Calif.), in his testimony last week, ignored this Cassandra.  An editor at the Orange County Register admitted, “Moorlach handed everybody the story on a silver platter . . . Maybe if he had said Citron hired an illegal immigrant for a babysitter, somebody would have paid attention.”

Robert Genader, who chairs the Association of Financial Guaranty Insurers, got to the crux of the matter when he told the committee, “The municipal bond market functions on the basis of trust and honor.”  Certainly, no investor is safe from a person, company or county with aggressive lawyers and no scruples.

Values like “trust” and “honor” may sound antique, but in the end, the answer to the Orange County conundrum has nothing to do with legislation or regulation.  Instead, like almost everything else that ails America today, it’s a matter of character.

2005

The weekly “The Buzz” column on Mondays by Martin Wisckol provided the following information under the heading “Firefighters lose ground.”  AOCDS members agreed to a 50 percent increase in their union dues for political purposes and voted to keep it in place.  They would spend a lot of it the following year, but you know the rest of that story.

                The battle to defeat county firefighters’ November ballot measure got boosts from two places last week; from county supervisors, who as widely reported approved three competing measures, and from the county deputy sheriffs’ union.

The deputies’ union raised dues last year from 1 percent of their paychecks to 1 ½ percent, with the increase set aside exclusively for political activity.  Some deputies were unhappy with the increase, so there was a vote on whether to roll it back.  Results tallied last week:  536 to keep the increase, 393 opposed.

                A key selling point, said two deputies who had opposed the increase but now back it, was the fight with the firefighters, who are seeking a share of sales-tax money going to the sheriff’s and district attorney’s operations.

                The money might also be used in next year’s county supervisors’ races.  Many union members would like to replace Chris Norby and defeat John Moorlach, both of whom have criticized deputies’ pension plans as too generous.  Political money could also be used for next year’s sheriff’s race.

2000

August 2

In spite of my pleas to the Board of Supervisors to adopt the idea of sharing the national tobacco settlement revenues with the medical community, it did not.  Even in the face of a successful signature gathering effort by the Orange County Medical Association (OCMA), the Board did not achieve a compromise with the OCMA before it submitted the signatures to the Registrar of Voters.

I wanted three things:  1. to use a portion of the funds to pay down our bankruptcy debt (see March 26, 2010 Update); 2. to negotiate such a component with the OCMA; and 3. to not securitize the revenue stream to create new debt and use the proceeds for other purposes.

With a measure on the ballot there were two choices.  The first was to run a campaign in opposition.  That didn’t seem realistic as using the revenues for medically related purposes (80 percent) and for the County’s jails (20 percent) was tantamount to opposing motherhood and apple pie.  The second option was to run a competing measure that was similar to the OCMA’s, with improvements, and allocate, over the lifetime of the revenue stream, one-sixth of the revenues for debt retirement and the remainder to health care.  The intent was to reduce the debt in an aggressive manner and free up some ten years of additional funding in the County’s budget for health care.  I supported the second option.  (When you get down to the core “me,” I have an aversion to the use of debt.)

This article sets up the situation.  It is by David Reyes of the LA Times and was titled “Rival Tobacco-Settlement Plan Proposed – Treasurer John M. W. Moorlach’s measure would allocate more money for paying down the county’s bankruptcy debt.”

The Board was kind enough, a week later, to let me give the second option a chance.  The campaign would be an interesting one.  You’ll be seeing the press coverage between now and November.  This “instant campaign” was not successful.  But, with hindsight, had this option passed, it would have provided helpful budget relief during our current budget crisis.  I mention this because, ironically, even after receiving the Measure H funding, our health care partners are still asking for more funding.

Orange County Treasurer John M.W. Moorlach proposed a new measure Tuesday that calls for a higher percentage of money from the national tobacco settlement to pay down the county’s bankruptcy debt than proposed in Measure H, a ballot initiative proposed by health care officials.

Under Moorlach’s plan, 40% of the county’s $30-million-a-year share of the settlement fund would be used to pay debt obligation. Of the remaining money, Moorlach proposed spending 42% on health care and giving 18% to the sheriff’s office for public safety programs, including jails.

Measure H, if approved by voters in November, would allocate 80% for health care and 20% for debt reduction, according to a spokeswoman for health care officials.

"Orange County’s voters deserve alternatives to the use of tobacco funds," Moorlach said. He introduced the plan at the end of the Orange County Board of Supervisors meeting, during public comments.

"It’s incumbent on us not to let this opportunity to reduce our debt slip away."

Moorlach said he will ask the board to place his measure on the November ballot at its next meeting, Tuesday.

Moorlach’s plan was criticized by health care officials who have negotiated for more than a year with members of the board on use of tobacco funds.

"What political grandstanding," said Michele Revelle, a spokeswoman for the health groups. "If he was this concerned about it, why didn’t he enter and help in the negotiations a long time ago?"

Negotiations broke off between county and health officials two months ago when supervisors voted 3 to 2 against a compromise to divide the windfall.

Under that plan, 60% would have been used for health care and anti-smoking programs and the remaining 40% for jail construction and debt reduction.

A day later, health care advocates filed 117,000 signatures for the measure to let voters decide how the county should spend an estimated $763 million in national tobacco settlement funds over the next 2 1/2 decades.

Measure H is backed by a coalition of doctor, hospital and community groups, community clinics and a majority of the county’s elected representatives in Sacramento and Washington.

The board filed suit last week, on a 3-2 vote, to block the health care initiative, contending that Measure H violates both state law and the state constitution by limiting how the board, the county’s elected body, spends county funds. The week before, supervisors placed the health care plan on the ballot, which it was legally required to do.

"The biggest issue here is that after voting to put our initiative on the ballot because they had to legally, the board turned around and sued us," Revelle said. "Now they’re going to put their own [ballot measure] on?"

On Tuesday, Supervisor Todd Spitzer, who voted against the lawsuit, said Moorlach’s proposal also would tie future boards to a spending formula they did not vote on, which could be construed as unconstitutional.

The Measure H suit will be heard Aug. 30 in Orange County Superior Court.

A third formula for use of tobacco funds, still in the planning stages, has been proposed by former Assembly Speaker Curt Pringle and the Orange County Deputy Sheriff’s Assn. It calls for spending 25% of the funds on health care, 25% on jail expansion and 50% to retire county bankruptcy debt.

Peter Larsen of the OC Register covered the story in “Tobacco measure could face competition.”  Here are some quotes that add to the above article:

                “I think the voters want to pay down this debt,” [Moorlach] said.  “They understand this nut has to be cracked.”

                Moorlach said he proposed the initiative because he thought voters deserved a choice on how to spend the tobacco funds.

                He argued that his proposal would provide plenty for health services while retiring the bankruptcy debt years ahead of schedule, saving the county millions of dollars in interest.

                “A lot of us are concerned about the (bankruptcy) debt, and the county has been doing a wonderful job,” he said.  “But we can do better.  And it’s free money.”

                County supervisors are challenging Measure H in court on grounds that it is unconstitutional to dictate how future county supervisors spend the money.

                “I don’t believe (the lawsuit) will be successful,” Moorlach replied.  If the challenge fails and only Measure H is on the ballot, the voters and the county will have only one choice on Nov. 7, he said.

                Deadline for the supervisors to put measures on the November ballot is Tuesday.

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