MOORLACH UPDATE — County Elected Officials — September 14, 2010

The first article, from the OC Register, is self-explanatory.  For comparative purposes, Supervisors earn approximately $143,000 per year.

For the second article, the Voice of OC provides another perspective on the Spitzer-Rackauckas story.

County elected officials refuse pay cut


Three of Orange County’s 12 elected officials have backed away from a voluntary 5 percent pay cut after the Board of Supervisors voted last year to slash their own salaries along with the salaries of all of the county’s elected officials and 100 county executives, The Watchdog has learned.

The three – Treasurer-Tax Collector Chriss Street, Auditor-Controller David Sundstrom and Assessor Webster Guillory – are not donating five percent of their $173,100 salaries back to the county, county spokesman Howard Sutter confirmed.

All other county elected officials and executive managers are participating, county spokeswoman Brooke DeBaca said.

The Board of Supervisors voted in June 2009 to reduce salaries of elected and county executives by five percent for a year in the midst of the county’s budget problems.

By state law, the pay of elected officials cannot be reduced in the midst of their term, but elected officials can choose to voluntarily reduce their pay, Sutter said.

Street, Sundstrom, and Guillory did originally agree to the voluntary pay cut after the supervisors’ June 2009 vote, Sutter said. The pay cut reduced the salaries of Street, Sundstrom and Guillory to $164,445 a year.

But even before the year was up, on April 30, 2010, Street opted out, Sutter said, bumping his pay back up to $173,100 a year.

Street’s term ends Jan. 3. Guillory and Sundstrom were both re-elected in June.

When the Board of Supervisors voted this June to extend the salary reduction for another six months, Street, Sundstrom and Guillory did not sign up.

“In a season where sacrifice is the theme, my household was willing to make the 5 voluntary five percent pay cut,” Moorlach said. “It’s not easy, but how could we make layoffs and request no pay raises and concessions from our bargaining units if we aren’t making some sacrifice ourselves?” Supervisor John Moorlach said.

For Sundstrom, his explanation was simple – it’s voluntary.

“It shouldn’t take a declaration from the Board of Supervisors to donate any amount of money to the county,” Sundstrom said. “I find the idea of this kind of odd. And if they wanted us to do this, they should have come around and asked us.”

Sundstrom also said he’s pulling his weight when it comes to helping the county weather tough economic times. “I’ve managed to my budget for the last 2 ½ years,” he said, adding that his staff is continuing to slash costs. “I’m doing everything I need to do by keeping everything going,” he said.

But, if the county’s economic situation continues to worsen, Sundstrom said he may reconsider the pay cut.

“I wouldn’t ask my staff to do something I’m not going to do,” he said.

Guillory and Street did not respond to two calls from The Watchdog.

Street’s decision not to participate in the pay cut came after the Board of Supervisors stripped Street’s authority over the county’s $5.8 billion investment pool in March. And after the End of the Road Trust, winner in a $7 million civil fraud suit against Street, began taking a chunk of his paycheck.

Trustee Dan Harrow confirmed the garnishment and said he also filed liens against several of Street’s personal bank accounts. None of the official county government accounts administered by Street is affected. The decision entitles Harrow to one-quarter of his pay for a year.

Street ran the End of the Road Trust, successor to the bankrupt Fruehauf Trailer Corp., from 1998 until he was ousted in August 2005. His successor, Harrow, sued him for fraud in February 2006.

A U.S. Bankruptcy judge ruled Street breached his fiduciary duty to the trust, and ordered him to pay more than $7 million in damages.

Guillory was investigated earlier this year by the District Attorney’s Office after Orange County Employees Association General Manager Nick Berardino publicly disclosed employee concerns about Guillory’s conduct.

Among accusations by assessor employees was that Guillory was allowing certain businesses to avoid paying taxes on government property they use, resulting in as much as $125 million in uncollected taxes. Employees also said Guillory misstated the progress of a $25 million computer project aimed at collecting taxes more effectively..

The DA probe found that Guillory did nothing criminal – and criticized Berardino for calling out Guillory.

Staff writer Ronald Campbell contributed to this report.

More Questions About Public Administrator/Guardian’s Approach

When District Attorney Tony Rackauckas fired Todd Spitzer last month, the stated reason was that the senior deputy district attorney overstepped his bounds by aggressively inquiring about a case being handled by Public Administrator/Public Guardian John Williams.

But ever since the firing, at least as many questions — if not more — have been raised about Williams’ overzealousness.

Bill Mitchell, a former chairman of OC Common Cause, stood outside Williams’ office a couple weeks ago and urged the board of supervisors as well as State Attorney General Jerry Brown to dig deeper into how Williams handles the estates of deceased people and those living who courts have determined cannot manage their estates on their own.

He points to Ruth Hull Richter and her 92-old mother, who are fighting Williams’ attempts to control the elder woman’s estate.

The crux of Mitchell’s allegation is that in trying to keep his agency afloat during hard budget times, Williams has become too aggressive in trying to step in to administer the estates of elderly people.

And, according to sources at the county administration, Richter’s case isn’t the only cause for concern.

Another is called TapouT, LLC.

With an estimated worth of more than $10 million, it’s a clothing company associated with mixed martial arts whose founder, Charles Lewis, was killed last year when he crashed his Ferrari in Orange County.

Lewis, had two children back in Illinois and after his death the children’s’ mother sought control of the estate. But Williams jumped in arguing to a local judge that Lewis’ estate was too complicated.

He won the argument and gained control of the estate. And, according to Fifth Floor sources, was boasting that the fees the case would bring in would essentially balance his 2010-2011 budget.

This raised more than a few eyebrows, especially given that county budget documents show that Williams had budgeted a large swing in his finances, soaring from $1.9 million to $2.5 million.

But then a state appellate court reversed his stewardship returning the estate back to the next of kin, Lewis’ children.

"Children are second in the order on the priority list, compared to the public adminstrator in 16th place," read the May 2010 appellate decision.

Williams argued to the court that despite the line of authority, California’s statute allowed him to leapfrog over the family.

There’s no indication that Williams told budget planners that an appellate court had reversed his big money case, especially since that decision came two months before final adoption of the 2010-2011 budget.

That leaves people like Mitchell openly wondering whether Williams got aggressive with cases like Hull-Ritchter in order to make up the difference.

That’s an agency that was called "the Guardian of Last Resort" by a 2009 Orange County grand jury that severely criticized Williams for doubling the staffing costs of his agency from a little over $500,000 to well over $1 million.

Those conclusions concerned County Supervisor John Moorlach, who initially lobbied for Williams to combine the appointed job of public guardian and the elected job of public administrator.

After the grand jury report, Moorlach apologized to County CEO Tom Mauk and tried to reverse his action but lost on a 3-2 vote. Today, he says Williams’ actions frustrate him.

"What’s so glorious about this country is anybody can get elected. And they do," said Moorlach after the experiences with former Sheriff Mike Carona (who was indicted) and Treasurer/Tax Collector Chriss Street (who was found guilty of breaching his fiduciary trust) and now Williams.




September 11


Michael Utley of The Bond Buyer addressed the work of eighteen months (due to a six-month extension) by nineteen OC residents in “Supervisors Bear Brunt of Blame for Losses, Grand Jury Says.”  The assessment of blame is a fun topic for debate.  Here are a few paragraphs from the article:

                The Orange County Board of Supervisors bears the lion’s share of the blame for the county’s bankruptcy crisis last year, according to a report released by the Orange County grand jury.

                “The foundations of this financial disaster were clearly built on ineffective management of, and oversight controls over, Treasury operations,” said the 48-page document submitted on Aug. 24 to the grand jury by Kroll Associates.

                The report, released by the grand jury Thursday afternoon, recommended changing the county treasurer’s job from an elected office to an appointed one, and transferring the treasurer’s primary responsibilities to a fiscal czar.

                County Treasurer John Moorlach, Citron’s appointed successor, said Friday that he disagrees with Kroll’s recommendation to make the treasurer’s job appointed rather than elected.

                “Just because we had one very sad situation here doesn’t mean we need to take an opportunity away from the voters,” said Moorlach.  “I would prefer it remain an elected position.”

Moorlach also said the county has already taken many of the steps recommended in the Kroll report, including the development of a new investment policy statement, the establishment of an independent oversight committee, and the separation of the auditor-controller’s office into two independent departments.

“About 80% to 90% of what’s recommended in that report we’ve already started doing,” said Moorlach.  “It’s a little dated.”


Steve Schmidt of the San Diego Union-Tribune did a piece, “San Francisco voters make pension decisions,” that would eventually be a building block on the way to Orange County’s Measure J (2008), which requires voter approval of negotiated retirement benefit increases.  Here is the bulk of the article:

                While fiscally conservative San Diego stews over its pension problems, some unlikely news has come from the north:  San Francisco, by many accounts, is operating one of the best municipal pension systems in the state.

                San Francisco’s retirement system is 104 percent funded, meaning it has slightly more than it needs to cover estimated future retirement benefits.

                San Diego is 65 percent funded, the lowest among eight of the state’s largest pension systems.  The Orange County pension system is 69 percent funded.

                Pension experts consider the yawning gap striking.

                “Rather painful to hear, isn’t it?” said John Moorlach, Orange County’s treasurer and tax collector.

                San Francisco’s success is largely attributed to an unusual law that goes back more than a century:  The city requires voter approval for any pension plan change, including benefit increases.

                In other major pension systems across California, including San Diego, elected officials make the final decisions on benefits.

                Clare Murphy, executive director of the San Francisco Employees’ Retirement System, believes the ballot hurdle has helped keep a lid on pension costs, while other systems have sweetened benefits in recent years.

                San Francisco voters have considered 131 pension proposals over the past century, approving 40 percent of them.

                In 1996, voters there rejected a proposal by then-Mayor Willie Brown that would have shifted the pension-decision burden to elected officials.

Steve Schmidt also did a major piece on pension plans in general for the San Diego Union-Tribune, titled “Pension mess isn’t unique to San Diego – Other cities, counties struggling to fill gaps.”  He addressed matters in Orange, Los Angeles, and Contra Costa counties.  Here is the segment on the OC:

                Orange County.  More than a decade after filing for municipal bankruptcy, another financial crisis is unfolding.

                County supervisors recently learned that their employee pension fund is $2.3 billion short of what officials say is needed to pay future retirement benefits.

                Some supervisors were stunned by the news, but critics say they shouldn’t have been.  They say the Board of Supervisors triggered the pension crunch by approving overly generous benefit increases twice in recent years.

                Orange County Treasurer-Tax Collector John Moorlach opposed the pension increases, largely because they applied to current employees as well as future workers.

                “Overnight, for example, the public safety workers here got a 50 percent increase in their pensions,” Moorlach said.  “It was very frustrating.”

                Moorlach knows something about financial train wrecks.  He tried to warn supervisors about the county’s financial troubles in the early 1990s, before the county landed in bankruptcy court in 1994.

                “Everyone was treating me like Chicken Little 11 years ago, and now I’m up screaming and yelling again,” he said.

                Orange County’s pension system is 69 percent funded, one of the lowest among the state’s largest public retirement programs.

                A pension program’s funded status is a measure of assets against liabilities.  The San Diego County Taxpayers Association considers anything below 85 percent worrisome.

                San Diego’s funded status has dropped to 65 percent, from 97 percent five years ago.               

September 12


The title of Frank Mickadeit’s column was a fun start to the week in the Monday morning edition of the OC Register“County treasurer backs college trustee’s recall.”  The topic commandeered the first half of his missives for the day.  Here are portions of that article (the second paragraph is pretty cool):

                There’s already a pretty impressive list of local public officials who are supporting the recall of Coast Community College Trustee Armando Ruiz for the shameless – but legal – padding of his retirement benefits.

                But recall organizers have now snagged the support of one official synonymous with trying to run fiscal manipulators out of government, county Treasurer John Moorlach.

In a prepared statement, Moorlach says:  “Public officials are supposed to represent the best interests of the public.  So, when an elected representative is caught gaming the public pension system, it’s time to remove them from office.  The cost of a recall election is a small price to pay to ensure responsible management of the public trust.  That’s why I fully support the recall of Armando Ruiz.”

The recallers have until Nov. 21 to gather enough signatures to put it on the ballot.  Coordinator David Kidd says he’s shooting for 45,000, or 20 percent more than the minimum required.  The activists have also launched a Web site,

September 14


The one-term former Treasurer-Tax Collector of San Diego County ran into some awkward difficulties.  He made some decisions that were inappropriate in his communications to a co-worker.  The San Diego Union-Tribune’s editorial board was in the mood to oust Bart Hartman.

I have been a long-time advocate of county treasurers being elected.  I’ve also been a strong supporter of their being delegated the authority to invest.  Consequently, it was gut-wrenching for me to vote to revoke that authority from our elected Treasurer-Tax Collector.

I have a history of jumping in to defend my fellow Treasurer-Tax Collector colleagues around the state on the topic of their election when warranted.  I decided to insert myself into the debate on the editorial pages of the San Diego Union-Tribune.  Here is my opinion page submittal, titled “The tax collector should be elected.”  The topic is still very contemporary.

There may be no disputing the disappointment that the San Diego County Board of Supervisors has in their elected treasurer-tax collector, Bart Hartman. The Board of Supervisors was appropriate in conducting a study. I don’t believe they necessarily showed good judgment in the manner in which it was broadcast, their recommendations, or their ulterior motives.

Now the Union-Tribune is asking an elected treasurer to resign over a matter not related to finances or investments. That may be the honorable thing for Hartman to do. But the Union-Tribune is also advocating that the position be appointed, rather than elected. In this regard, there is too much heat and not enough substance. The Treasurer-Tax Collector’s Department in San Diego County does not appear to be deficient in how it conducts its stated purposes.

Hartman has an outstanding staff and there is no disputing the fine tax-collection statistics that are achieved every year by his department. Unfortunately, Hartman showed poor judgment with an employee relationship within his department. Does it demand the response that the Union-Tribune is proposing? No.

I would strongly advocate that the treasurer-tax collector should continue to be an elected position. There are strong and numerous reasons for this being the case. This approach has stood the test of time. For 150 years, nearly all of our 58 counties have had an independently elected treasurer and tax collector. Currently, only four counties have appointed treasurer-tax collectors. The treasurer represents the public and keeps the auditor-controller and the county’s financial staff in check.

An appointed treasurer-tax collector would not publicly question another county official’s financial actions. It would end that individual’s career with the county. Even after losing more than $1.6 billion in investment losses, an act certainly more egregious than Hartman’s, the voters of Orange County did not want to relinquish an elected treasurer-tax collector position.

As a taxpayer who questioned my predecessor’s investment practices, and now as the elected treasurer-tax collector for the County of Orange, I have the right to publicly question the financial practices of other officials, elected or otherwise. That independence has allowed me to pursue inappropriate financial transactions and save my constituents considerable sums of money.

Let’s review some of the San Diego supervisors’ actions this week:

1. Have the treasurer share control with the county’s chief financial officer.

I did not see one mention in public accounts that the treasurer was not properly investing the taxpayer’s funds. There is already an oversight committee required by state law. The Board of Supervisors annually reviews and approves the treasurer’s investment policy statement. Why would the CFO take on this fiduciary responsibility? Why should the CFO be called at 5 a.m. for investment decisions? Power grabs are fun to watch, but this one is an overreach.

2. Limit salary adjustments.

Where was the county’s human resources director on this one? Where are the board’s policies preventing a doubling of salaries? The failure seems to lie elsewhere other than on Hartman’s doorstep.

3. Require travel approval.

Proper internal control systems should have been in place. Again, it looks like the county was remiss in this area.

The voters put Hartman into the position that he currently occupies and the voters are responsible for taking him out. They can wait until 2002 or they can mount a recall tomorrow. That is how you deal with elected officials. The Board of Supervisors should be very cognizant of this. They can conduct their study, issue their findings and then rely on their constituents to act appropriately. However, if they try a repeat of the 1996 attempt to switch to an appointed treasurer, they will lose again.

The treasurer-tax collector should be a protector of the public trust. The office holder should meet minimum experience requirements, as provided for in state law, and be expected to perform professionally. If the voters do not pursue a recall of Hartman, the Union-Tribune will do a satisfactory job of informing the voters of the qualifications and accomplishments of all the candidates running for this position in 2002. Should Hartman be one of those candidates, then the Union-Tribune will have a field day.

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