MOORLACH UPDATE — Voice of OC — December 8, 2010

It was a quiet (vs. quite) Board meeting yesterday morning.  All the same, we did continue an item to approve a component of a ten-year-old IT contract.  Staff welcomed the one week continuance in order to provide more detailed responses to certain inquiries.  This agenda item coverage is provided by the Voice of OC below.

I’ll have to watch myself in the future.  I certainly don’t want to be visibly irritated.  But, adding a little emotion into the mix should at least liven up an otherwise serious meeting.

REMINDER:

Today’s Look Back is a polite reminder that the property tax due date is this Friday.

BONUS:

Our annual office Open House is on December 10th from 2 to 5 p.m.  My staff has selected a Hawaiian theme.  If you can make it to the Civic Center on Friday, please drop by and say hello or “Mele Kalikimaka.”

DOUBLE BONUS:

Thanks for the fun responses to yesterday’s Update.  At last evening’s Costa Mesa City Council meeting, Gary Monahan was elected Mayor and Jim Righeimer was elected Mayor Pro Tem.  Oh well.  Neither Bill Lobdell nor I were close.

Supervisors Again Balk at IT Bonus

County supervisors once again balked this week on approving a $250,000 bonus for a computer contractor, ACS State and Local Solutions, which has come under intense criticism in recent years.

Board of Supervisors Chairwoman Janet Nguyen delayed action on the bonus this week saying that an undisclosed agency had called Tuesday morning seeking more information on the ACS bonus.

Questions from this mystery agency means the issue will be pushed at least to the Dec. 14 meeting.

But that didn’t stop one supervisor from asking his own hard questions.

Despite visibly irritating Supervisor John Moorlach — who, along with Supervisor Bill Campbell and Pat Bates, supports bonus provisions in contracts — Supervisor Shawn Nelson asked pointedly about how the specific bonus for ACS was calculated.

County Chief Executive Tom Mauk took issue with all the questions, saying opposition to the contract was primarily coming from the Orange County Employees Association and "blogs."

This was a veiled reference directed toward Voice of OC, which was the first to report on the ACS bonus issue.

"I believe the county has to abide by its contract," Mauk said. He added: "This has to do with OCEA and the blogs." Mauk called the concerns "nonsense."

Mauk then launched into a defense of ACS, which he admitted had come under serious questioning in recent years. But, he said, the contractor’s operations have improved.

Nelson’s questions signaled concerns about how such bonuses are structured. In essence, he challenged county staffers to prove that they didn’t just give $250,000 of taxpayer funds to a company without holding their feet to the contract language and forcing them to earn it.

Nelson also pointed out that only 97 out of 19,000 county employees responded to surveys on ACS work. He wondered whether it was a valid sample.

"How would we gauge any of this information, absent knowing what the criteria is?" he said.

Meanwhile, Moorlach, Campbell and Bates defended the nature of the contract.

"I like incentive contracts," Campbell said. "I don’t think they’re exclusive in the private sector at all. It’s very good to motivate people to perform in certain areas," Campbell said.

"It gets better performance for us and the taxpayers," he said.

However, a county staffer said they are antiquated in the IT industry, especially in the public sector where there is much more competition than when the county first contracted with ACS in 2000.

Modern IT contracts, the staff said, are set up with penalties for failing to meet negotiated standards, as opposed to getting bonuses for doing what was promised.

— NORBERTO SANTANA, JR.

FIVE-YEAR LOOK BACKS

December 8

2000

The OC Register’s lead editorial provided the background and concerns of an issue that Dan Morain of the LA Times had been addressing in an investigative series.  Dan Morain’s work would find him receiving the “Moorlach Award for Journalism,” which was my very small way or acknowledging excellence in municipal fiscal journalism.  The writer of this editorial, Steven Greenhut, would receive the “Moorlach Award for Outstanding Editorial.”  And a local attorney, Eric Norby, would receive kudos as well.  (He would later become the Chief of Staff for his brother Chris, the previous Supervisor for the Fourth District).

The editorial was titled “Connell’s smog fee standoff.”  The story is a long one.  But, I’ll let the entire editorial give you the broad strokes.

State Controller Kathleen Connell, the keeper of California’s checkbook, isn’t signing off on a $88.5 million check without a fight.  She and Board of Equalization Chairman Dean Andal deserve widespread support for challenging a payoff – Ms. Connell calls it a “windfall” – to five law firms that successfully overturned the state’s impact fee.

The fee, assessed on newcomers to California who registered out-of-state vehicles here, was ruled unconstitutional in 1999 for violating the Constitution’s interstate commerce clause.  After some wrangling over who would sign the refund checks (Gov. Gray Davis wanted to sign them as a way to take credit for the refunds), the Legislature passed a measure returning the money and leaving the check-signing duties where they belong – with the state controller.

We’re pleased that this unfair tax, signed into law in 1990 by Gov. George Deukmejian, was repealed and the money is being returned to its rightful owners, with interest.  But we agree with Ms. Connell that a line inserted in the smog-impact-fee legislation requiring binding arbitration for attorneys’ fees resulted in a questionable award to the law firms.

Published reports indicate that a law firm that will receive part of the money is a major contributor to Gov. Davis, who had persuaded the Legislature to include the arbitration requirement.

                Following controversy this week over the enormous pay-out – one published report pegs the rate at nearly $10,000 per hour – Gov. Davis on Wednesday said that the award was far too high, and supported Ms. Connell’s move to hold up the unprecedented payment.

                The governor said in those reports that he supported binding arbitration because he had thought that a court award to the attorneys of $18 million was too high.

                Ms. Connell argues that the state routinely uses arbitration to determine fair attorney fees, but that binding arbitration without any cap is tantamount to writing a blank check.  She also is dismayed by the confidentiality agreement that leaves the public in the dark over the details of the deal.

                “Firms should be compensated but this judgment far exceeds any judgment in California history,” Ms. Connell told us.  “It’s an outrage . . . $88 million is a huge amount.”  She pledged to “make every concerted effort to freeze” the payment.

                For an idea of how much money is at stake, her office pointed out to us that the entire state budget for recreation grants is only $75 million and that the entire annual budget for the air and army National Guard in California is only $76.8 million.

Orange County Treasurer John Moorlach told us that the award is “easily 10 to 20 times too high.”  He terms Gov. Davis’ opposition to the award a backpedal.  “He screwed up.  He made a major blunder that cost the state $70 million.  The guy is an expensive micro-manager.”  The state should “give a laborer fair compensation for his efforts,” Mr. Moorlach said, “but $9,000 an hour is scandalous.”

State Sen. Tom McClintock, who spearheaded the legislative effort to return the illegal fees to those who paid them, told us the attorneys’ fees are “another example of a tort system that needs a complete overhaul.”  But “the blame rests with a Legislature that willfully and knowingly passed an illegal tax, a governor who signed an illegal tax and governors who for 10 years collected that illegal tax despite the warnings of their lawyers.”

True enough, but California officials ought to pursue every option to rethink this oversized payment of tax dollars.

What can be done?  The controller’s office hopes that the Board of Equalization will consent to rehear the case, and consider lowering the fees.  An Irvine attorney, Eric Norby, is preparing a constitutional challenge, arguing that the Legislature had no authority to delegate its power to an arbitrator.

We have no way of knowing the “right” fee for this case, and we certainly don’t want to discourage attorneys from suing the state when it passes unconstitutional taxes.  But $88.5 million to five law firms deserves to be looked at again.  Ms. Connell should withhold her signature and the Board of Equalization should rehear the matter.

And the Legislature needs to be sure that future attorneys’ fee disputes are resolved in a different manner.

2005

Sometimes I share more with reporters than I should.  But, once you touch a flame or hot stove, you never do it again.  That’s sort of the theme of this story.  All to say, don’t be late on your property taxes.  Mary Ann Milbourn of the OC Register covered these topics in “Payment deadline for property taxes moved to Monday—Orange County gives homeowners two extra days to pay and avoid the 10% late penalty.”  This article applies to 2000, not 2010.  You still must pay no later than December 10.  I’m also including the “Property Tax Tips” sidebar.  Some of the details may have changed over the past ten years, but the strategy is still the same:  Pay your taxes long before the due date of December 10th.

Orange County Treasurer-Tax Collector John Moorlach knows from personal experience the price of being late on paying your property taxes.

Once during his pre-treasurer-tax collector days he failed to send his payment on time and got socked with a penalty. The reason sounds all too familiar.

"I just forgot," said Moorlach, a double irony since he was a certified public accountant at the time, responsible for advising other people about taxes.

There’s really no excuse for being late this year, since taxpayers get two extra days to pay their taxes. The usual Dec. 10 deadline falls on Saturday, when government offices are closed, so the payment deadline was moved to Monday.

Cindy Wilcox was one of those property owners who weren’t taking any chances Wednesday. She showed up in person to pay the taxes on her Tustin home.

She had planned to pay by telephone using a credit card, but decided to make the drive to the Treasurer-Tax Collector’s office in Santa Ana after learning that if she paid the taxes over the phone, she would be charged a 2.5 percent fee.

If you charge your payment in person — the treasurer-tax collector accepts only the Discover card for in-person payment — you pay a graduated fee depending on the total amount owed.

"By driving in, the flat fee is only $25" to charge her tax bill, Wilcox said. "That was less than the 2.5 percent fee."

Audrey and Martin Shaw of Laguna Niguel found another way to save money — applying for the $7,000 homeowner exemption.

The exemption is available to anyone who owned a home as of Jan. 1 and doesn’t have an exemption on another property.

If you already have the exemption, it will appear on your property tax bill. To apply for one, you must file a form with the county assessor.

"It (saves) $70, so it’s worth it," said Audrey Martin.

Property tax tips

Don’t take a chance mailing your payment at the last minute and missing the deadline. Payments postmarked after Dec. 12 will be socked with a 10 percent penalty.

If you do mail at the last minute, you might want to go to the Post Office at 3101 W Sunflower Ave. in Santa Ana, which will be open until midnight Monday to accept tax payments.

You can also place your payment in the Treasurer-Tax Collector’s drop box next to the front door of the office at 12 Civic Center Plaza in Santa Ana. If it’s in the drop box when the office opens Dec. 13, it will be considered paid on time.

You can pay by credit card, by telephone or online with American Express, Discover, MasterCard and Visa. The credit card companies charge a 2.5 percent fee.

You can pay in person with a credit card and pay a lower fee. The Discover card is the only one accepted for in-person payment. You will be charged a graduated fee, ranging from $6 to $50 depending on the amount of taxes you owe.

Make sure you have the money in your bank account to cover a payment by check. The treasurer-tax collector cashes checks as soon as they are received.

Southern California tax delinquencies

Orange County had the lowest delinquency rate of any of the six major Southern California counties in 2004-05:

County Delinquency rate

Orange 1.2%

Ventura 1.3%

San Diego 1.6%

Los Angeles 2.2%

San Bernardino 3.0%

Riverside 3.3%

Source: Orange County Treasurer-Tax Collector

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