MOORLACH UPDATE — La Pata, Et Al — May 25, 2011

Yesterday was a busy day in the OC.  Tuesday’s Board of Supervisors meeting generated a few articles and a couple of matters came up by themselves.

The first piece is my editorial submission to the OC Register on the public employee unions’ activities in Costa Mesa (also see MOORLACH UPDATE — Voice of OC — May 22, 2011).  In spite of requests from the public employee union leadership that everyone should all get along, like meet and greets at Antonello’s Restaurant, they have not showed any inclination to do so.  Consequently, I’ve weighed in.

The second OC Register piece addresses a critical vote in the County’s efforts to provide better transportation opportunities in South County; the connection of La Pata Avenue between San Juan Capistrano and San Clemente.

The third OC Register piece provides an update on former OC Treasurer-Tax Collector Chriss Street and his recently concluded legal battles regarding Fruehauf Trailer Corp.

The next two pieces are also about the La Pata Avenue project and are from the San Clemente Times and the San Juan Capistrano Patch.

The final piece deals with the Performance Audit Department’s Human Resources Report, a matter that I was interviewed for a few minutes ago for the next edition of Rick Reiff’s “Inside OC” on KOCE.

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John Moorlach: Costa Mesans, back your council

With every passing day, it becomes more evident that California, its counties and cities are rapidly approaching the edge of a fiscal cliff. Costa Mesa, for example, has made national headlines with its fiscal crisis. Also, the mayor of San Jose on May 13 unofficially declared a fiscal state of emergency.

Costa Mesa, while burning through its reserves, also improved the retirement benefits for its public safety unions. This deadly combination caused the watchdog Little Hoover Commission to criticize the municipality in its February report, titled "Public Pensions for Retirement Security."

The ballooning pension obligations that I’ve been warning about for years are here. Costa Mesa has to make severe budget and staffing cuts, and it must be done now.

Costa Mesa can no longer allow public employee unions to determine how the city is managed. That strategy was one of the reasons the city got into such trouble. Although everyone appreciates the city’s employees, their union leaders failed to look at the big picture and the consequences of their bargaining agreement successes.

What should a government do when it downsizes because it cannot meet its budget? There are several options. One idea is to raise your income. However, for a governmental agency, raising taxes in a down economic cycle can be a mistake. It stymies growth.

Another idea is to cut spending. Costa Mesa has been doing this over the past few years, but not at the pace necessary to avoid the crisis in which it now finds itself. Cuts should have been made sooner and deeper, instead of relying on reserves.

Refinancing debt is another strategy, but this doesn’t seem to be a game changer for the city. Selling assets is another technique, but the city does not have land holdings available to sell.

That brings the city back to cuts and layoffs. The handling of staffing reductions is never a pretty procedure. One rarely sees personnel departments handle layoffs, or the notification of potential layoffs, in a tactful and gracious manner.

In Costa Mesa, the messages of potential staff changes has been heard loud and clear for months, by those paying attention, from the City Council and in news reports. It was no surprise that layoffs were inevitable. Bargaining unit contract requirements provided for a six-month intention notification that employees may be laid off. Try finding that courtesy in the private sector.

The good news? Costa Mesa now has a few city council members who have business-sector experience, and they are pursuing remedies that any other smart business owner would consider. Is it pretty? Probably not. Is it necessary? Absolutely.

Costa Mesa, it’s time to rally around the taxpayers who are paying the city’s freight. The residents have to look through the nonstop, anti-layoff ad campaign and let the taxpayers’ representatives implement a financial recovery plan.

Now this same union wants to pursue a recall campaign against the very city council members who have a clear perspective of the city’s finances.

Costa Mesa has to be stabilized before it can be removed from life support. To accomplish this, everyone must calm down and let the City Council do its job.

Costa Mesa, be thankful you have a new council majority that sees the situation as it is and is not only handling it within the constraints placed on them, but also under the veiled threat of union retribution. In a few years, the residents will be grateful for this council’s leadership and fortitude in having avoided the financial precipice, upon which the city is teetering. That’s why they need your support now.

San Clemente to San Juan road extension OKd

By FRED SWEGLES

THE ORANGE COUNTY REGISTER

A critical gap in the county’s road network is a step closer to being filled, Orange County supervisors said Tuesday as they approved a route to extend Avenida La Pata between San Clemente and San Juan Capistrano.

On a unanimous vote in Santa Ana, the Board of Supervisors picked an alignment and approved environmental documents.

"Is there any way that we as a board can figure out how to find funding faster, sooner, quicker?" Supervisor John Moorlach asked.

Building the road figures to cost $77 million, which jumps to $90 million when design, right-of-way acquisition, permits and other costs factor in. Of that, only $33 million has been identified – $8 million from a fee collected by developers of San Clemente’s Talega community and $25 million pledged by Rancho Mission Viejo through fees attached to future homes. The timing of those 14,000 homes is uncertain.

Moorlach said he sees the La Pata extension as crucial to public safety. The 4.5-mile link would offer an alternative to I-5 to evacuate San Clemente in the event of a radioactive release from the San Onofre Nuclear Generating Station.

"La Pata is one of the main stems for relieving traffic congestion in the south county," Supervisor Patricia Bates said. "Both the extension of the 241 and La Pata connection are vital to the mobility in south county for all the things that we do – going to work, recreation, getting our kids to school and certainly the evacuation issues that have come to the forefront with the result of the earthquake and tsunami in Japan."

Bates called for completion of La Pata as quickly as possible and resolution of alignment issues to extend the 241 Toll Road to I-5. "If we do not get those connections," she said, "we’re looking at something worse than what we see on the 91 right now."

Moorlach asked for progress updates on La Pata every six months.

Val Ignat, a Talega resident, told the board that he wished an alternative alignment farther from Talega homes had been given more analysis by project planners, especially an alignment that would go on the west side of a hill, closer to the Forster Ranch community. "I don’t think the neighbors in Talega have been given a fair shake," he said.

Harry Persaud, project manager, told the board that a thorough study of options was done in 2005, including routes on the east (Talega) side and west (Forster Ranch) side of a hill on which regional power lines run up the middle. Persaud said the county would have to condemn Forster Ranch homeowners’ land to put the road on their side, while the Talega developer already had granted right of way to put the road on the Talega side.

Persaud said county engineers worked with Talega neighbors for two years on design refinements to minimize effects on Talega. The original route – 100 feet from the nearest home – now is 359 feet away and is proposed to be recessed 50 feet into the hill so it can’t be seen.

Akram Hindiyeh, San Clemente’s traffic engineer, told county supervisors that the city supports the project, which also would connect the Forster Ranch community with La Pata via a quarter-mile extension of Camino del Rio. Both links are essential to the city, he said.

Contact the writer: fswegles@ocregister.com or 949-492-5127

Chriss Street loses appeal of $7 million judgment

By Ronald Campbell

A federal judge on Monday rejected Chriss Street’s appeal of a $7 million judgment for breach of  fiduciary duty.

U.S. District Judge Dean D. Pregerson affirmed U.S. Bankruptcy Judge Richard M. Neiter’s March 5, 2010, ruling, calling it “reasoned and supported.” In his 10-page decision, Pregerson also agreed with Neiter’s conclusion that Street had engaged in willful misconduct and gross negligence as a bankruptcy trustee.

James A. Hayes Jr., Street’s attorney, declined comment.

Street was trustee of the End of the Road Trust, which harbored the shards of the bankrupt Fruehauf truck-trailer manufacturing company, from 1998 until summer 2005, when creditors forced him out.

Months later, John Moorlach, then Orange County’s treasurer-tax collector and now a county supervisor, named Street his assistant and political heir. Street was elected treasurer in June 2006.

Street’s successor as the Fruehauf trustee, Los Angeles money manager Dan Harrow, sued him for fraud and breach of fiduciary duty in early 2007, weeks after Street took office. Neiter ultimately dropped the fraud allegation.

The Fruehauf controversy dogged Street throughout his term as treasurer. The $7 million judgment, coming days before the filing period for what would have been his second term, ended his political career.

Since leaving office, Street has written opinion pieces for Huffington Post and BigGovernment.com while building a money management business. Meanwhile he has been fighting a courtroom war on several fronts with Harrow — the appeal, an attempt to stop collections of the judgment in Neiter’s court and a countersuit in Delaware, where the original case was filed.

But with Pregerson’s decision, Harrow said, “I think it puts an end to Street. … Street’s pretty done.”

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Supervisors Approve La Pata Connection Between San Clemente and Capistrano

by Jonathan Volzke

The Orange County Board of Supervisors unanimously approved the $70 million connection Avenida La Pata connection between San Clemente and San Juan Capistrano.

Supervisor John Moorlach called the route, decades in the planning, a vital link for regional transportation as well as a necessary alternate route to the San Diego Freeway, particular in times of emergency.

The Final Environmental Impact Report approved Tuesday studied the proposed project that will extend and widen the existing 1.8-mile portion of La Pata Avenue south of Ortega Highway, outside San Juan Capistrano, roughly two miles to connect with La Pata Avenue in San Clemente at Calle Saluda. The project also includes the Camino del Rio quarter-mile extension to the future La Pata Avenue from where it ends, just east of Camino de Los Mares. Both highways are proposed as four-lane roadways.

Supervisors supported the so-called eastern alignment for the road, which was also endorsed by the city of San Clemente as well as the Talega and Forster Canyon homeowners associations, said Kirsten Thornton, deputy chief of staff for Supervisor Patricia Bates, whose district includes San Juan Capistrano and San Clemente.

“If this is not Supervisor Bates’ top priority, it’s right up there in the top five,” Thornton said.

Money will be an issue. Of the more than $70 million required to build the project, only about $30 million is identified, leaving a $40 million funding gap, Thornton said. She said the county is working on “federalizing” the road, meaning it will be eligible for federal funding. A consultant is expected to be brought on board next month to launch that process.

San Clemente’s traffic engineer, Akram Hindieyh, traveled to Santa Ana on Tuesday for the hearing and also spoke in favor the plan, which moves the roadway more than 350 feet from the closest home. Another route studied, the western alignment, had more utility and right-of-way issues, Thornton said.

To see the county report on the project: Orange County Public Works.

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A Step Closer to La Pata Extension

Environmental studies and route win county approval, but funding is still missing on the $90-million highway project.

Wanting to break ground as soon as possible to avert 91-freeway-style traffic snarls, county officials on Tuesday morning approved the environmental studies necessary to propel construction of the La Pata Avenue extension.

However, approving the studies did nothing to reconcile the hefty funding gap for the $90-million connector, which would link San Juan Capistrano and San Clemente. Officials need to secure $42 million before any soil will turn.

"Is there any way that we as a board can find funding faster, sooner, quicker?” 2nd District Orange County Supervisor John Moorlach asked Tuesday.

He and 5th District Supervisor Pat Bates said closing the transportation gap in La Pata–as well as extending the 241 tollway from Oso Parkway to Trestles—is vital not only to daily commutes, but to create a secondary evacuation route to the 5 freeway.

“Certainly the evacuation issues that have come to the forefront [since] the earthquake and tsunami in Japan” should be kept in mind, said Bates.

In approving the environmental reports, the Board of Supervisors also approved an alignment for the extension. La Pata Avenue would be widened from three to five lanes, starting about 2,700 feet south of Ortega Highway and running to the Prima Deshecha Landfill. The road would also be extended from the landfill south to Calle Saluda and Avenida La Pata in San Clemente.

The road’s path would come as close as 400 feet to homes in the Talega community. Although two Talega residents told the board this was an improvement from the 100-foot distance proposed two years ago, they said they couldn’t fully support the alignment.

An alternative path that called for the connector to run closer to the Forster community to the west didn’t get "equal billing," they said.

"I don’t think the neighbors in Talega have been given a fair shake in this [Environmental Impact Report]," said Talega resident Val Ignat. "We will never know what the benefit might have been on the western alignment."

But planners said the eastern alignment—the one supervisors approved Tuesday—is the one that’s always been most-seriously considered. The western alignment would have traversed protected open space areas and would have required the city of San Clemente to use eminent domain to acquire rights of way, said project manager Harry Persaud.

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Supervisors Delay Discussion of HR Audit

The Orange County Supervisors today delayed discussion of a scathing audit that criticized the county’s human resources department on how it had negotiated labor agreements and handed out raises to managers and executives.

The study, completed by the county’s performance auditor, was six months in the making and revealed a culture of excess within the department.

The delay is apparently due to Human Resources Director Carl Crown being on vacation. Crown had announced he was retiring earlier this year, but he was asked to remain following the release of the audit.

When this discussion does take place, it should be an interesting one. County Supervisor John Moorlach has already reacted to the report, saying today that he wants to consider outsourcing the entire human resources department.

— NORBERTO SANTANA JR.

FIVE-YEAR LOOK BACKS

2006

May 23

The OC Register had a Letter to the Editor reacting to Steven Greenhut’s Sunday column, titled “County pension funds belong to employees.”  County employees do contribute in some form or fashion toward their defined benefit pension plan, see MOORLACH UPDATE — Straight Talk Magazine — March 30, 2011.

Why doesn’t senior editorial writer Steven Greenhut’s version of the great John Moorlach truth mention the amount of money Orange County employees pay into their own pension fund?  It seems county Treasurer Moorlach never does, either.  Does Greenhut even know the average non-safety worker in O.C. pays $400 to $500 per month into the county pension plan?  Why does the Register always say that pension funds are taxpayers’ money?

                Maybe the salary Register employees earn should be called the investors’ money and your 401-k funds the Register’s money?  How do you think a single mother of two feels, working for the county as a clerk, paying $200 per paycheck into a pension fund that you call taxpayers’ money?

                Once again it is the great Register version of the truth, from a politically biased paper.  No one will hear an unbiased opinion from the Register where the county of Orange is concerned.

                Henry Olsen

                Fullerton

May 24

Five years ago, I was enjoying a two-man race for my current elected position.  Alicia Robinson of the Daily Pilot provided her take in Candidate vs. unions in O.C. poll.”  The battle between sound fiscal candidates and the public employee unions is not a new story.  (The majority of the Costa Mesa City Council members are enjoying it right now by dealing with a crisis that is definitely not “artificial.”)  Here is the article in full.

The two-candidate race for one Orange County supervisor’s seat is shaping up as a battle between Orange County Treasurer John Moorlach and public employee unions, leaving the other contender, Stanton teacher David Shawver, largely on the sidelines.

Moorlach is the county’s head finance officer, appointed after predicting the 1994 bankruptcy and elected to the treasurer’s office three times. Shawver is a physical education teacher and longtime Stanton city councilman.

Both are seeking the second district supervisor’s seat, which represents Costa Mesa, Newport Beach, Huntington Beach, and all or part of eight other cities and some unincorporated county areas.

So far Moorlach has run a successful campaign, with a war chest of about $375,000 and an endorsement list that includes a majority of Costa Mesa and Newport Beach City Council members. He’s planning to raise more money, and he says he’ll need it when faced with the unions’ deep pockets.

The county deputy sheriffs association and an umbrella county employees’ organization have paid for pro-Shawver mailers, and the Orange County Employees Assn. recently asked members for permission to spend some of their dues to oppose Moorlach.

"I feel like it’s me against the unions as opposed to me against a candidate," he said. "What they don’t like about me is that I’ve been very vocal about the benefits that they’ve been able to achieve. This last bargaining agreement was very detrimental to the county."

The last agreement helped push the county’s unfunded liability up by $1 billion, threatening the county with another financial crisis, Moorlach said. Because its increased retirement benefits were retroactive, it created a wave of retirements and then recruitments and promotions, he said, adding that one department head recently told him 68% of the department’s staff have changed positions.

While private sector companies are moving from defined benefit plans to defined contribution plans, Moorlach said, "we’re going the complete opposite direction of those that are paying the bills, so that means we need to look at how do we bring some parity or how do we make sure that county employees are compensated fairly without making it look like they have extravagant benefits."

Meanwhile, despite the union-funded mailers supporting Shawver, he insists he is running his own grass-roots campaign. Asked why unions are supporting him, Shawver said it’s probably because Moorlach has antagonized them.

"I wasn’t recruited by them. I was very insulted by that [suggestion]," Shawver said.

He’s been in politics for nearly 18 years, and that’s where he sees an advantage over his opponent. As a city councilman, Shawver has helped make policy, dealt with the public and run meetings.

As a supervisor, Shawver said, he would work to balance the county’s budget, seek renewable energy sources and make police and fire services a high priority.

Whether Shawver wants campaign help or not, union participation has clearly upped the ante in the race. Moorlach said he’ll have to keep trying to raise money to counter union mailers.

The Orange County Employees Assn., which represents 16,000 public employees, sent a May 12 letter asking to shift $10 of each member’s already paid dues to a fund to defeat Moorlach.

Nick Berardino, the association’s general manager, criticized Moorlach for his appointment of Chriss Street, who was named assistant treasurer in January and is now running to replace Moorlach. The appointment has come under scrutiny after accusations that Street mishandled a corporate bankruptcy in which he was a trustee, and the Orange County district attorney is now investigating.

"I think that clearly demonstrated that John does not have the kind of sound judgment necessary to be a member of the board of supervisors, and we think he’s exercised that opportunistic political approach to a variety of problems and a variety of issues," Berardino said.

He also accuses Moorlach of creating an artificial crisis in the pension system by assuming future revenues from investments will be smaller than they’ve been recently. That means the pension fund appears to be in danger and employees must pay more into it, Berardino said.

Three supervisor seats are on the June ballot and either candidate for the second district seat would be just one vote on the five-member board. "I think we have made a decision regarding which one of those seats would be the most detrimental to sound public policy, and clearly John Moorlach is the biggest problem for good public policy," Berardino said.

May 25

The Huntington Beach Independent had a half page feature by Purnima Mudnal titled “GOP hopefuls set for primary.”  It featured Dianne Harman, Jim Silva, and Mike McGill.  Although Mike McGill was running on the topic of pension reform, I ended up in Jim Silva’s column, provided below.  One clarification, Jim Silva voted for another county pension plan increase in August of 1994, not 1995.

Silva has raised about $550,000 in campaign donations in his bid to win the June 6 primary, about $200,000 more than Harman and McGill.

He has many supporters in Huntington Beach, where as mayor he oversaw the rebuilding of the Huntington Beach Pier in 1992. Council members Cathy Green, Gil Coerper and Don Hansen have endorsed his candidacy.

Silva went on to join the Orange County Board of Supervisors in 1994, where he’s now serving a third and final term. He’s well regarded for helping the county emerge from its 1995 bankruptcy without raising taxes.

"I’ve a very good understanding of finance," Silva said. "The most important job of local and county officials is to balance a budget."

The $1.7-billion financial disaster came about because of high-risk investments.

But Silva’s vote in favor of a county pension plan in August 2005 has drawn flak from several quarters, including County Treasurer John Moorlach.

Moorlach has said Orange County could face a second bankruptcy due to unfunded pension liabilities.

Silva points out that the county has one of the best debt ratings in the state.

He defended his decision to vote for the pension fund as a way to give county employees the raise they didn’t receive during the 1994 financial crisis.

"It [the plan] was with the understanding that employees would contribute 9% to 15% of their salary," he said.

Silva takes a tough stance on illegal immigration, starting with sealing the borders. He says he favors business over "radical environmental regulations" that drive jobs out of the state, and he also vows to protect property owners from eminent domain abuse.

He said the only disadvantage of working in Sacramento is "being a Republican and working in an Assembly controlled by Democrats."

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