MOORLACH UPDATE — Balanced Budget — June 15, 2011

The Board of Supervisors approved the County’s proposed budget for fiscal year 2011-12, in concept, at yesterday’s weekly meeting.  The budget is balanced and even adds $19 million to the County’s reserves.  Since we completed the task in total on Tuesday, the meeting scheduled for this morning has been cancelled.  During the proceedings, there was an agenda item specifically for Board comments on the budget.  After reviewing the $5.6 billion dollar budget, the proposed cuts, and requested augmentations, my “Good News/Bad News” remarks were something like this:

                Good News:  The County has been gliding down its annual expenditures over several years and it started this process early.  Many neighboring counties did not and are facing severe budget cuts this year.

                Bad News:  Sacramento is still pursuing a budget solution.  (Today is June 15, the “drop dead” date for a state budget.)  Although Gov. Brown is pursuing a solution, it’s a shame that it’s not the best one for the long-term viability of the state of California.

                Good News:  Every department was able to make 5 percent net county cost reductions.  Requesting 5 percent across-the-board cuts is a little “Dilbert”-esque, but somehow every department was able to do it.

Bad News:  The resulting savings from the 5 percent cuts is $30 million, but two-thirds of the savings are recommended to be reallocated to the public safety departments.  I could see this strategy coming a decade ago when the 2001 Board of Supervisors approved the “3% @ 50” pension formula, retroactively.

                Good News:  The County has made some positive, incremental movement on the pension front.  We’ve addressed this issue earlier than our neighboring counties.

                Bad News:  When the pension enhancements were approved in 2001, we were fully funded in our pension system.  In ten short years, we now have a $3.8 billion unfunded actuarially accrued liability that must be fed.

                I am very appreciative of the County’s department heads and their ability to, once again, do more with less.  This budget strategy was an obvious one.  You could see it coming from a mile away.  I get it.  But, I dislike it.

                With the 5 percent net county cost reductions there are five alternatives:

1.       Give the reductions back to each department proportionately,

2.       Adopt the CEO’s augmentation recommendations as presented,

3.       Pay down outstanding debts, like our bankruptcy-related Certificates of Participation (a practice pursued by previous Boards when there were extra funds available),

4.       Pay higher contribution payments to the Orange County Employees’ Retirement System in order to decrease future annual contributions (paying a little more can convert a 30-year mortgage into a 15-year mortgage), or

5.       Retain the funds in our reserves, to guard against a slower economic recovery as a result of Sacramento’s desire to implement higher taxes for the next five years.

Colleagues, my votes on the proposed augmentations will reflect my priorities, and although some votes may appear symbolic, you will know where I stand.  (If certain departments wish to enhance their retirement benefits retroactively, other departments should not have to subsidize it.)

I am frustrated and angry with the Human Resources Department and the CEO over the recent Performance Audit Department report, but I am more angry with prior CEOs and Human Resources Department Directors who advocated for pension enhancements and gave us this lousy hand of cards to address.  It is this Board that has to deal with the mess created by prior Boards, the County’s managers at that time, and the County’s employee unions that demanded unsustainable pension benefits.  With rising pension contributions on the horizon, with years of deferring infrastructure improvements, and with a flat property tax revenue source, I don’t see how this Board can negotiate pay raises in the next five to ten years.

Consequently, we still need to do more on the pension front if we want to provide pay raises in the future.  I gave this speech at last year’s budget hearings.  We need to negotiate pension benefits back down to the prior levels with every bargaining unit at the County.  The Little Hoover Commission came to the same conclusion this past February.

Prior decisions have left the current Board in a difficult quandary and everyone, including the Board, the County’s managers, and the County’s employees, will have to step up to the plate to address this long-term budget trend.

I said I would address this subject in today’s Update.  Since I did not see an article on the budget topic, I decided to provide my perspectives instead.  There was, however, an article on the Rossmoor efforts in the Los Alamitos-Seal Beach Patch and it is provided below.  On the topic of wanting to try something new, today’s LOOK BACK has a fun war story.

Rossmoor Approves Power Grab

Rossmoor leaders voted to petition the county for power over animal control, law enforcement and trash services in the community.

After months of debate, Rossmoor leaders voted to press the county for power over animal control, police and trash services Tuesday.

The decision represents a major shift for the governance of Rossmoor, and it came after several residents spoke up to encourage the move and an equal number spoke vehemently against it. Seen as a means of staving off the threat of annexation by neighboring Los Alamitos, the decision to pursue “latent powers,” comes with caveats.

While Rossmoor Community Services District Henry Taboada now has the Board of Directors’ approval to petition the county for the additional powers, several things have to happen before he can do it.

According to a resolution by Board of Directors Vice President Alfred Coletta, Taboada must first:

  • Attain confirmation from the state attorney general that Rossmoor has the right to contract for law enforcement services despite the county’s legal stance that Rossmoor doesn’t have the right to do so.
  • Attain and verify – possibly through a forensic accounting audit – a report from the county demonstrating the costs for each service as well as the revenue that Rossmoor generates to pay for it.
  • Attain a proposal from Long Beach Animal Care Services to provide animal control services to Rossmoor.
  • Verify that Rossmoor could get better animal control services by contracting with Long Beach instead of Orange County and better law enforcement services by contracting directly with the Orange County Sheriff’s Department.
  • Verify that the services would not increase costs to Rossmoor taxpayers.

The stipulations are designed to address reservations in the community about the power grab, but many residents remain unconvinced that move is good for the community.

Former RCSD Board of Directors President Linda Goodrich said she opposes the move, describing it as a way to achieve cityhood even though residents recently voted against incorporation.

“If we had tried something like this when I was on the board, we would have been run out of town on a rail,” she said. “No question about it.”

Several residents expressed concerns that the additional services would lead to increased costs and would require more staffing for the Rossmoor Community Services district to oversee. Others said the district is pursuing the wrong strategy to fend off the threat of annexation by Los Alamitos. Without voter approval by the residents of Rossmoor, the annexation could not take place, they pointed out. Instead of worrying about the unlikely threat of annexation, the community should consider ways to combat the threat by County Supervisor John Moorlach to impose a 11 percent utility users tax on Rossmoor to offset some of the county’s costs to provide services to the community, said residents.

However, not all Rossmoor residents see pressure from the county to merge with Los Alamitos as an idle threat.

30-year resident Susan Johnson said she and her husband support the move to stave off attempts by the county to force Rossmoor and Los Alamitos to merge. “He and I are definitely for as much control (needed) to keep Los Alamitos at bay,” she said. “Their presentations have been more like a hostile takeover.”

Resident Jim Alexander said he supported the move because they (sic) days when Rossmoor had good communication and support from the county are over. Rossmoor needs to centralize control over those services because the county no longer works with the residents to address concerns when they arise, he said.

While opinions varied about the best course for the community to take, residents at Tuesday’s meeting generally agreed that Rossmoor could get better animal control services than residents are currently getting from Orange County. Residents also expressed an overall satisfaction with the services provided by the Orange County Sheriff’s Department.

Diane Rush praised the community’s current sheriff services. “I think they are great. I wouldn’t change a thing,” she said. “If it’s not broke, don’t fix it.”

“If we like a service, shouldn’t we have the right to say we want to be able to keep the service,” countered Jeffrey Rips, President of the RCSD Board of Directors.

Director Ron Casey said he’s heard from many residents who don’t want to see any changes in Rossmoor, repeating the mantra ‘If it ain’t broke don’t fix it.’

 “I mostly think that, except for animal control, it ain’t broke, but I do believe that John Moorlach is going to try to fix it anyway,” added Casey.

Local Agency Formation Commissioners, including Moorlach, have identified Rossmoor as a priority in the county’s drive to eliminate unincorporated islands. Moorlach has floated numerous suggestions for Rossmoor, although few of them are popular with residents.

He suggested merging Rossmoor with Seal Beach and Los Alamitos to form a supercity, or merging Rossmoor and Los Alamitos, since Seal Beach leaders have made it clear they want no part of a supercity. Moorlach has also proposed transferring police and animal control services for Rossmoor from the county to Los Alamitos, giving the city Rossmoor’s only commercial corner in exchange for the services. He has threatened to hold a countywide election, asking voters if residents in unincorporated islands should pay a utility users tax to cover the cost of their services. Last, he has offered to transfer police and animal control services over to the Rossmoor Community Services District if the residents volunteer to pay an 11 percent utility users tax.

It could be several months before Rossmoor would petition LAFCO for the latent powers, a move that would cost more than $8,000.

The commission will scrutinize the petition, asking for proof that the transfer of services would result in improved services for the residents without increased costs, said Carolyn Emery, LAFCO’s assistant executive officer. The commission would also want a demonstration of Rossmoor’s ability to pay for the services if the community was granted oversight.

FIVE-YEAR LOOK BACKS

2001

June 15

Every once in awhile a reporter will find a recent experience that you had at the office to be of general interest.  Jonathan Lansner of the OC Register did this with Bidders don’t show O.C. the money.”  Taking a stab at new technology always provides for learning opportunities.  Here is his piece in full:

E-commerce ain’t dead, but it’s got wrinkles to iron out.

Take Orange County Treasurer/Tax Collector John Moorlach‘s recent experience. Last week, he took 34 deadbeat properties to cyberspace for an online real estate auction. These were properties whose owners had failed to pay their county property-tax bills for years. Moorlach offered this real estate — mostly peculiar vacant parcels, but one Santa Ana condo was included — online for auction.

When the gavel hit Friday afternoon — or whatever happens when online auctions end — the county had 643 bids on 27 properties for a total of $527,000. Most bids came in a last-minute flurry before closing.

Compared with the last county auction, the Internet at first glance seemed like a winning formula. At the last auction two years ago, the county sold just four of 12 properties offered for a total of $371,300. That was an old-fashioned, face-to-face auction.

But the early glow of last Friday’s initial auction results dimmed as the reality of online commerce played out.

At previous traditional county auctions, payment basically was required on the spot. Online, that wasn’t the case.

Thus, the tax collector’s staff had to notify winners by e-mail and gave bidders 72 hours to pay. That’s where it got tricky. Only 13 of the 27 bidders have paid so far, for a total take of $155,550. Some bidders never responded to e-mails seeking their money. Others declined to pay. One even claimed a big bid was a typo.

“It proved a mixed result,” Moorlach says.

The county is now contacting other bidders to see if they still want the properties. If, of course, they were truly interested in the first place.

While the Internet’s power can bring a globe’s worth of people to what’s typically a local event, that same global network is fraught with risks, thanks to the relative anonymity of cyberspace.

At a typical county auction, Moorlach notes, bidders are normally loath to make too much trouble. Heck, a few county sheriff’s deputies provide decorum.

Unfortunately, the online world offers no such etiquette. Moorlach is learning, after checking with the sheriff and the district attorney, that there seems to be little regulation to enforce against bidders who bamboozle the system. The tax collector saw six bidders for 10 properties fail to make good on their promises.

“We’re seeing what we can do with these flakes,” Moorlach says.

After a final tally on this year’s experiment is done, Moorlach and staff will mull whether the Internet is the right venue for future county property auctions. One surmises that the county might require bidders to put up some earnest money that could be confiscated if they walk on a bid.

It’s obvious that it is darn early in this Internet evolution. Yes, the online auction is said to be the most successful part of the otherwise disappointing e-commerce transformation. Still, much work is left — from marketing to legal to technology.

The county’s tax collector certainly knows that now.

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