MOORLACH UPDATE — JWA Fast Food — January 20

If you’re on my JWA e-mail Tree, then you already received my John Wayne Airport e-mail informing you of discussion items #33 and 34 on next Tuesday’s Board agenda.  Item 33 recommends a vote for Sbarro/Panda Express in Terminal C.  Item 34 recommends Carl’s Jr./Green Burrito for Terminals A and B and terminating the existing lease with McDonald’s.  There are three layers of food concessioners.  Two were voted on two weeks ago at our January 11 Board of Supervisors meeting.  We voted for HMS Host International to handle the food concessions inside all three terminals.  We also voted for The Hudson Group and Paradies-OC to handle news and gift concessions (which also offer limited food items before and after screening into the terminals).  The third layer is the fast food component.  This concession has been held exclusively by McDonald’s since the building of the current terminals A and B.  Ironically, McDonald’s beat out Carl’s Jr. some 21 years ago for the contract.

When Barbara Venezia of the OC Register called me, her specific question was something like:  “When you go out for fast food, where do you prefer to go?”  I live in an area that is loaded with fast food establishments.  I like the variety.  I informed Barbara that my lovely wife had just given me a stack of coupons for Carl’s Jr.   There are times when my wife will call and ask me to pick something up for dinner on the way home.  I confessed that the family has selected Carl’s for me to go to more often than the other offerings.  I don’t recall commenting on the JWA staff recommendation.  I can tell you that my office is still working on making a decision on these two items.

I’m lovin’ it: an old-fashioned food fight at JWA


Which do you prefer: Carl’s Jr./Green Burrito or McDonalds? That’s the question the O.C. Board of Supervisors will have to answer Tuesday when it decides which lands the contract at John Wayne Airport.

McDonalds has been serving passengers in terminals A & B for the past 21 years. Is it time for a change? Both companies are vying for terminals A & B.

This decision isn’t as simple as you might think. Unlike the previous food vendor decision based primarily on revenue, Carl’s and McDonalds bids are close. Carl’s estimates $3.55 per food purchase and McDonalds’ estimates $3.89 per person. Each franchisee is qualified, and no one questions whether each would do a good job. So how will the supervisors decide? Is this more of an emotional food decision?

In all honesty, I don’t eat fast food, so I decided to conduct my own unofficial survey last week asking everyone I came in contact with about their fast food habits.

Not surprisingly, the gals in my morning yoga class were appalled I even asked the question. But interestingly enough, they all had the same perception – Carl’s Jr. had better quality food and healthier choices. The men I asked during the week agreed with the gal’s perceptions. They at least were willing to admit eating fast food, choosing mostly based on which chain was closer when they were hungry.

A JWA survey shows breakfast is what most passengers purchase. The Carl’s Jr./Green Burrito combo offers more choices than McDonalds in this arena. So I asked someone who always has an opinion and frequents both chains – fellow columnist Frank Mickadeit. In true Frank form he answered, "Not sure I want to sit next to a guy on a plane who’s just eaten a burrito!"

So what are the Board of Supervisors fast-food habits?

Supervisor Pat Bates and I played phone tag and never did connect for this article. Supervisor Shawn Nelson just ignored me. Maybe he’s a closet foodie? Gee, he looks like he eats fast food. Oh well…

Supervisor Janet Nguyen says she doesn’t eat fast food. She also told me she doesn’t consider Carl’s Jr. home-grown now that its corporate offices aren’t located in Orange County any longer. She believes Carl’s should be in terminal C and leave McDonalds in A & B.

Is Janet too young to remember Carl Karcher? Not me, I knew Carl Karcher well and remember how proud he was telling his entrepreneurial story of how he started with one restaurant in Anaheim and grew the company. McDonalds didn’t start here. Over the years I had the privilege of working with Carl on many fund-raisers for Providence Speech and Hearing. Carl’s is most definitely home-grown.

Supervisor John Moorlach shared he eats at Carl’s more and feels the staff report got it right here saying Carl’s Jr. should be in terminals A&B.

Supervisor Campbell said he eats fast food at least five times a week and slightly more at McDonald’s than Carl’s Jr. But when he looks at the overall balance he agrees with Moorlach adding, "Carl’s, because of the Green Burrito element, doesn’t make sense in terminal C because that’s where Javier’s will be." He believes McDonalds should be moved to terminal C.

A John Wayne Airport commission voted 3-1 in December in favor of ousting McDonald’s and replacing it with a Carl’s Jr./Green Burrito restaurant to serve travelers in Terminals A and B.

What do you think? E-mail me at


January 20


Just as underfunded retirement benefits are impacting municipal investors, ten years ago the story was “California Energy Crisis Strikes Fear in Municipal Investors.”  That was the Bloomberg News headline for a story by Robert Whalen, assisted by Philip Boroff, Liz Goldenberg, and Ted Hampton.  The piece points out the downgrading of ratings for numerous local government investment pools (LGIP), including Orange County.  Standard & Poor’s and Moody’s did not make such a drastic move.  Consequently, Fitch’s reputation in the LGIP industry dropped like a rock.  Orange County no longer utilizes Fitch.  Here is a selected section:

                “We bought these when they were top-grade investments,” said Orange County treasurer John Moorlach.  “At the time we acquired our last pieces, all the fundamentals were in place.”

                Dan Daly, San Francisco’s chief investment officer, agreed.  “PG&E and Edison were the kinds of investments you’d make on behalf of widows and orphans because they’d always been safe choices, but that’s all changed.  It’s a big mess out here,” said Daly.

One thing you learn about being in the public eye is that you may be “in the barrel” on occasion.  This is when your actions and decisions are scrutinized by the media and the story has “legs,” which means it runs for a few days, versus one quick article.  Occasionally I will note to staff that “so-and-so” is “in the barrel.”  It is not pleasant, especially when the issue is fixable and causes no damage, like holding the parent company’s debt issuances, but, this is what comes with the job.  In my particular case, because the media had missed the bankruptcy, I had become a big, juicy target.  The LA Times editorial staff decided to weigh in on this particular Sunday morning, when it still had an OC Commentary section.  The lead editorial was titled Red Flag Investments—Stock Purchase Shows Need for Earlier Oversight.”  The humor in the title is that I was prohibited from investing in stocks and could only purchase fixed income (bonds) instruments.  Here is the editorial in total.

In an ironic twist of fate, John M.W. Moorlach, the current county treasurer who first blew the whistle on the risky investment practices of his predecessor, now finds himself in a situation with some similarities.

Two of Moorlach’s investments, for a total of $40 million in Edison International (not Southern California Edison), are being understandably questioned and criticized by some as being risky, speculative and not in keeping with the conservative investment approach that he assured the public would be followed in the wake of the 1994 bankruptcy.

Moorlach’s openness and operation of the treasurer’s office, and its investments, certainly are far different from the high-rolling and at times illegal operations of former Treasurer-Tax Collector Robert L. Citron. Moorlach has done much to restore confidence and integrity to the operations of the treasurer’s office in the aftermath of Citron’s wrong-way bets on interest rates and his duplicity in trying to cover them up.

The $40 million represents only a small portion of the county’s educational investment pool. But it raises a red flag. It also again puts school districts that lost not only interest but principal in the 1994 county bankruptcy at risk again. Schools need every cent they can get and whatever they may lose now shortchanges their critical classroom needs.

Moorlach, distraught at the outcome, has said he considered it a good investment and never expected Edison or the state to allow the utility to wind up in such a financial bind. He feels confident that the notes eventually will be paid in full. The experience of utility investments, even in the case of bankruptcies, would seem to support that optimism. Investors can only hope so.

But that doesn’t resolve some of the questions raised by the rationale of investing $20 million last September after Edison disclosed it was paying more for electricity than it could charge its customers.

Another $20 million came on Dec. 7 after the utility had acknowledged its serious financial problem and the possible need of bailouts to keep it solvent. Administrators of other public investment pools months before stopped putting money into utilities because of the uncertainties of deregulation.

The notes Moorlach bought have now been downgraded to junk-bond status and the county’s pool credit rating was downgraded a notch to AA status.

The most important question to be asked from this recent experience is what happened to the oversight procedures put in place after the 1994 bankruptcy to serve as a check and balance on the investment program?

Moorlach reviews his investment officers’ decisions and issues a monthly report that goes to the county’s investment oversight committee, county supervisors, pool investors and is even put on the Internet for the public. The state also has oversight reporting requirements.


That somehow still hasn’t insulated the investment pool from purchases such as the Edison notes, or prompted any inquiries of concern from those responsible for overseeing investment funds. Shouldn’t oversight come closer to investment time rather than long after?

The fallout over the Edison purchase also raises the question of how much confidence may be lost in the county’s management of the investment pool. Only a few special districts have rejoined the pool since the bankruptcy, but the treasurer’s office manages all school district investment funds.

All investments are subject to the vagaries of the market and Moorlach, who is an able and hard-working public official, now must not only rightfully account for his judgment, but bear the brunt of the hindsight being applied to it.

Supervisor Todd Spitzer said he will ask the county board to question Moorlach on the purchase. The board should also review its oversight procedures.

It’s obviously a sounder investment policy to try to avoid potential losses in the first place than to have to explain them later.



Norberto Santana, Jr. of the OC Register did an article on a fun project I was working on as County Treasurer in “County trying new twist on pension funding—Officials expect a proposed $120 million bond issuance to save up to $4 million by avoiding underwriting and other costs.”  Here’s the Readers Digest version:

                After two recent pension enhancements for sheriff’s deputies and county workers, Orange County’s unfunded pension liability has doubled to more than $2 billion, meaning that virtually every county department has higher annual pension costs to keep the plan funded.

                For the next fiscal year, that means an increase of more than $80 million.  County CEO Tom Mauk has said the rise can be absorbed without effects on public services.

                Yet those spikes have irked some, such as Treasurer/Tax Collector John Moorlach.  He argues that pension debt could severely cut into public services.  Union officials and several county supervisors say rising pension costs can be managed without a cut in services.

The plan will be unveiled to county supervisors Tuesday.  In essence, the county will float the short-term bonds.  Then Moorlach’s office will buy them.  Without underwriters or other normal bond costs, county officials say they will save $4 million and transform the pension debt into a lower-interest debt.

Josh Cooperman, a Northern California-based municipal financial adviser, said the plan is “ingenious.”

While some may flinch when they hear about an Orange County debt issuance that deals with varying types of interest rates, Moorlach says the 1994 bankruptcy experience should not prevent officials from being creative.

“We shouldn’t let the past hinder us from doing what is good fiscal management,” he said.  “I think the public knows if it isn’t the right thing to do, I’d be screaming.”

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