MOORLACH UPDATE — BOS Actions — September 14, 2011

The Voice of OC covers a closed session decision made by the four Supervisors present at yesterday’s Board meeting.  The piece was released later in the day.  The reporter, Norberto Santana, Jr., wrote an article on the bankruptcy debt refunding (refinancing) some six years ago for the OC Register stating that the Vehicle License Fee (VLF) escrow mechanism was no longer needed and should be corrected legislatively.  Therefore, Norberto has every right to make an issue out of this awkward oversight.  Why the County’s Public Finance Department, which reports to the County’s CEO, failed to resolve this issue leaves all of us scratching our heads. 

To boil it down to its simplest language, a portion of the County’s property tax revenues were characterized as VLF revenues for bondholder payment purposes.  Regardless, it is still property tax revenues that are due to the County. 

In general, counties no longer receive VLF revenues.  In 2004 with the passage of Proposition 57, the State implemented the property tax swap (also known as the triple-flip), whereby counties had their sales tax and VLF revenues swapped for property tax revenues.  Because Orange County’s bankruptcy-related bond obligations specifically designated the use of VLF revenues to secure the bond payments, Orange County was exempted from the swap at the time.  Consequently, our property tax revenues were characterized as VLF revenues.  Orange County refinanced its bankruptcy debt in 2005, at which point it could have implemented the property tax swap and had them characterized as property tax revenues. 

Because those funds were still called VLF, the State’s Legislature and Governor swept them away with the approval of Senate Bill 89 (SB 89), along with certain VLF revenues received by the State’s cities.  It was a clever money grab concocted in the middle of the night on a Monday.  The next day, the County’s Board of Supervisors approved its annual budget.  Some 2 ½ hours later the State Legislature approved SB 89 and pick-pocketed the $48 million of Orange County VLF revenues.  It was a cruel surprise and will result in additional cuts to the County’s General Fund.  The $48 million equals twelve months of lost revenues which will have to be recouped in cuts over a nine-month period.

We have sued the State before for unpaid mandates and succeeded.  The courts have ruled that we are owed the money.  Unfortunately, since the County is a subdivision of the State, the courts have ruled that the County has to wait until the State feels like making payments on the balances due.  Consequently, we have accumulated some $120 million in unpaid mandates that Sacramento still owes the OC.  I’m not big on going down this road, again.  I did not vote to approve the law firm that was selected, as I leaned toward staying consistent for firms that were retained by the city of Bell at the time of its implosion.  (If we go after the auditors—as was done at OCTA — then we should also go after the attorneys.)  The first story below provides the speculation as to how the County may respond to this money grab. 

The Pasadena Star-News and the San Gabriel Valley Tribune provided a football-related item from yesterday’s Board meeting.  I abstained, as I do not believe it should be our Board’s role to weigh in on issues in a neighboring county.  It is the second article below.

I’m also in today’s Calendar section of the Daily Pilot.  Sorry for the late notice, but if your evening is free, please accept the invitation.  It is the third item below.

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Supervisors Authorize Hiring Lawyers to Go After Lost $48 Million

The Orange County Board of Supervisors today authorized in closed session the hiring of outside attorneys to explore legal action to recoup $48 million in tax revenues that Gov. Jerry Brown took to help balance this fiscal year’s state budget.

The board’s action is the latest twist in the drama resulting from the 2005 bankruptcy refinancing that left the county without legislative authorization for $48 million in vehicle license revenue.

County officials were aware that they needed to obtain authorization or risk losing the money, but they did nothing for five legislative sessions.

Board Chairman Bill Campbell and Nick Berardino, general manager of the Orange County Employees Association, traveled to Sacramento on several occasions in recent months in an all-out attempt to persuade state legislators to restore the funding.

And several members of Orange County’s legislative delegation labored until early Saturday morning to pass a law that would have done just that.

But the bill died in the state Senate as numerous other counties and cities got wind of what Orange County was seeking and tried to amend the bill to also restore some of their lost vehicle license fees.

"During the entire process, there were a number of counties and cities who were trying to make amendments on equity issues," said Donna Grubaugh, deputy county CEO for legislative affairs. That dynamic prompted Senate President Pro Tem Darrell Steinberg (D-Sacramento) to hold back the bill, saying he wanted to work on a "global fix" in January.

Campbell, who criticized Democrats in the Assembly on Friday, took time Tuesday to praise the efforts of Assemblyman Jose Solorio (D-Santa Ana) and Assemblywoman Diane Harkey (R-San Juan Capistrano), saying they did an effective job of rounding up votes.

That last-day scramble was a situation Campbell, a former assemblyman, wanted to avoid. "I was frustrated we didn’t move the bill until last day," he said.

The biggest challenge, Campbell said Tuesday, was to explain to legislators why Orange County’s situation is different from other jurisdictions’. "It was apples and apple sauce," Campbell said of comparisons.

But by then it was too late. So now, Campbell said, he will spend the next few months lobbying Steinberg to see that his "global fix" works for Orange County.

But until then, supervisors aren’t going to sit on their hands.

"This board will need to face alternative action plans as a result of the loss of the money," Campbell said. "I don’t think we can wait given what’s happened."

Beyond legal action, it seems supervisors are also beginning to contemplate radical options, such as withholding funds from Sacramento.

On Tuesday the board was asked to act as a fee-for-service contractor and provide pest spraying for the state Agriculture Department. Supervisor John Moorlach wondered aloud whether supervisors should balk, given that Sacramento owes Orange County more than $120 million in revenues that have not been paid.

Moorlach said losing the $48 million means radical options should be on the table.

"I’m just wondering, if we were in the private sector, we wouldn’t condone doing business with this kind of deadbeat client," Moorlach said.

County staff is expected to present a series of recommendations on Oct. 4 to compensate for the lost $48 million through budget cuts, Campbell said. Among the alternatives are layoffs and fewer outside contractors.

Please contact Norberto Santana Jr. directly at nsantana@voiceofoc.org and follow him on Twitter: twitter.com/norbertosantana.

Pasadena Star-News

Industry NFL stadium plan endorsed by Orange County supervisors

The Orange County Board of Supervisors endorsed Tuesday a proposed NFL Stadium in Industry, citing its location as easily accessible to the area and Anaheim, according to a statement from the stadium’s developer, Majestic Realty.

Supervisors passed the resolution in a 3-0 vote, according to the statement. Supervisors Shawn Nelson, Bill Campbell and Janet Nguyen ­ voted in favor of it, while Supervisor John Moorlach ­abstained and Supervisor Pat Bates was absent, according to the statement.

"Majestic Realty’s Los Angeles Stadium will create tremendous economic benefit for Orange County. With a location just 15 minutes from the central Anaheim tourism center, the stadium offers a needed boost to Orange County’s hotel and restaurant community," Nelson said in the statement.

The Riverside County Board of Supervisors endorsed the project in May, and the San Bernardino County Board of Supervisors endorsed the project in June.

"We’ve always known that our stadium is the best for Los Angeles County," stadium developer John Semcken said. "But as you can tell from today’s endorsement, it’s clear we’ve created an entertainment destination for the NFL that will benefit the entire Southern California region."


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Speak Up Newport

Orange County Supervisor John Moorlach will headline the monthly Speak Up Newport meeting with a talk, "Orange County: A Model During a Period of Municipal Meltdown." The program, which is from 6 to 7 p.m., will follow a reception from 5:30 to 6 p.m, at the Newport Beach Yacht Club, 1099 Bayside Drive. There will be a cash bar and free appetizers. Admission is free and no reservations are needed. For more information, call (949) 224-2266 or go to http://www.speakupnewport.org.

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