BONUS: This is a public service announcement. If you own real estate in the state of California, your second property tax installment is due no later than midnight today. If you have not yet paid it and wish to hand deliver it, please park in the Ross Street parking lot, between Santa Ana Boulevard and Civic Center Drive and walk north to the adjacent Building 12. If you mail the payment today, please make sure it garners an April 10 postmark. There is a drop box here at the Civic Center, at the door leading to the Treasurer-Tax Collector’s office in Building 12, if you wish to come by after closing hours. (There is a homeless population that is here that will not harm you, but bringing a friend along may be a good idea.) For more information, check out http://ttc.ocgov.com/.
I was in an article nearly every day last week. This week has been quiet. But, I’d like to catch you up on the LOOK BACKS. They include property tax reminders, a book review, Sheriff recruitment updates, editorials, and an interesting Montague bankruptcy-related episode.
FIVE-YEAR LOOK BACKS
The California Municipal Finance Journal, in a front-page article, provided book reviews with “When Government Fails – Some Orange County Lessons.” Segments are provided below. Another article from that same front page, “Judge Drops Case Against Underwriter; Imputes Citron’s Knowledge to Agency,” provides an update for a recent LOOK BACK (see MOORLACH UPDATE — Mulling and Inching — March 25, 2013). I own both of the books mentioned and agree with the thoughts provided by the piece’s author. Now that fifteen years has passed, it is interesting to observe how little has really changed.
A new book on the Orange County management and investing debacle – When Government Fails: The Orange County Bankruptcy – is timely for spurring thought and reflection, and for that reason alone we believe public and private finance professionals should buy it and read it.
Author Mark Baldassare provides an added bonus because he recognizes that California’s public finance system needs reform. He recommends, for example, that local governments in “suburban” counties be encouraged by the state government to engage more actively in regional cooperation. Baldassare observes the problems with local political fragmentation, and provides insight into the way citizens seemingly connect better with cities than their county. He also recognizes that the state’s property tax shift caused fiscal stress at the local level, and raises concern about the state’s apparent indifference toward local crises.
Baldassare . . . makes us recoil a bit by the way he throws Proposition 13 into the mix. Citing a poll of Orange County voters, Baldassare says this in his book: “Fewer than one in five agreed with the argument that the financial crisis was caused in part by Proposition 13, which made it so hard to raise taxes that school and local governments were forced to make risky investments to get enough money to pay for their operations.” Yow! No one “forced” these agencies to make risky investments. That some people did so – rather than confronting voters with the reality of their decisions – sends the wrong message that governments can always find more resources to get by, and in turn fuels the public’s suspicion there is “waste” and “inefficiency.”
He still set our teeth on edge a few paragraphs earlier by saying the “genesis for the Orange County bankruptcy” dates back to Proposition 13. What he is getting at, however, is that Proposition 13 and other fiscal constraints – combined with spending mandates and pressures – encouraged local governments to pursue creative sources of revenues. This can “help to explain why the risky actions of Bob Citron were allowed and even encouraged,” he writes. So, from that standpoint, he cautions that “local officials should see the Orange County bankruptcy as a warning.” He adds that “other local governments also have structures that allow public officials to operate with great autonomy and little fiscal oversight.”
This is why another new book – Investing Public Funds, Second Edition – is so timely. In fact, it is a great nuts-and-bolts complement to Baldassare’s book.
“Risky investment strategies and other speculative investment practices are inappropriate under all circumstances.” Note that it does not say “some” circumstances, such as situations where elected leaders do not want to match spending with prudently-earned revenues. It says all circumstances, period. “Besides legality, a government’s foremost investment objective must be safety of principal,” writes Girard Miller, the author of Investing Public Funds (with M. Corrine Larson and W. Paul Zorn of the Government Finance Officers Association).
How best to drive that point home in practice? Both Miller and Baldassare stress the need for oversight and fiscal accountability.
Baldassare also describes the long history of poor relations among Orange County and city governments. Out of this, he concludes that “local governments in suburban regions need incentives from the state to cooperate more.” Baldassare also makes the important point that the financial crisis “was not the fines hour for state leaders.” The state shifted property tax dollars away from local governments just a few years earlier, he observes, and has not returned those revenues even though the recession is over. Yet lawmakers also have steered away from serious efforts to reform the system of local and state government finance, Baldassare writes, including the pursuit of more discussion on realignment and revenue-raising issues. “A major reason for reform is to bring logic and efficiency to state and county government relations,” he urges.
After the bankruptcy, county residents pursued a solution to political fragmentation that increased “the amount of power given to their city governments” at the expense of the county, Baldassare writes. Nevertheless, “they were not willing to give up the power to elected officials such as the county treasurer, even after their bad experience with Bob Citron.”
And, even though current Orange County treasurer John Moorlach raised questions about the pool in an election race months before the bankruptcy, Miller makes a general observation that voters don’t always tune in to such arguments.
“From an accountability standpoint, however, the key issue is whether poor investment and other performance affect the election of the public official,” Miller writes.
[Baldassare] also says the Orange County Board of Supervisors “failed the public on three accounts: proper oversight of county affairs, leadership during the crisis, and willingness to take responsibility for their collective mistakes.”
The Daily Pilot announced that the “Rotary Club plans county election forum.” There was plenty of movement in the first post-bankruptcy election cycle. Two of the assessor candidates from fifteen years ago would be finalists in last Tuesday’s interviews for the Clerk-Recorder position.
Five of seven candidates for Orange County assessor are expected Wednesday at the first in a series of election forums sponsored by the Rotary Club of Costa Mesa.
Expected to participate are assessor candidates Larry Bales, James Bone, Bruce Peotter, Jeff Scott Reid and Thomas Sacco.
John Moorlach and Art Reese, program co-chairmen, are planning a series of forums before the June 2 election on county races for 2nd District supervisor, sheriff, district attorney, auditor and public administrator.
The Orange County Business Journal’s “OC Insider” columnist, Rick Reiff, had this as the conclusion of his weekly column, titled “OCers Pass on Move to Motown; Cristi Tries Politics.” For those who inquire about the meaning of my license plate, here is the back story.
John Moorlach is an occasional contributor to the OC Register’s op-ed page, but the county treasurer and car buff has a moving rebuke to The Reg – license plate SKYFELL. The tag, on his souped-up black 1996 Impala SS, refers to a September 1994 Register headline, “O.C.’s Sky Didn’t Fall.” The story chastised Moorlach for criticizing then-Treasurer Bob Citron’s investments, but within weeks OC went bankrupt. The Insider notes that this paper, another repository for Moorlach’s writings, has never belittled him in a headline.
The Orange County Business Journal added Michael D. Capaldi to its editorial board (when the OCBJ provided editorials) and he provided this “Viewpoint,” titled “Moorlach’s Mad Motivation.” I have underlined one clairvoyant sentence, because its claim has been borne out in the cities of Stockton and San Bernardino.
If you’ve ever wondered why the government won’t deal with tough problems, this is the unified field theory.
It alone explains all of U.S. immigration policy, our eternal dependence on foreign oil and our numbness to wealth-bleeding trade deficits.
It is the very reason why, even after 30 years of warnings, California still can’t educate its kids.
It’s the blind-eye theory of government. Why bother solving a problem—especially if it will offend a threatening special interest—when you can turn a blind eye until you leave office?
Learn this, and you can rip 10 chapters out of your college political science textbook and still ace the test.
So, when you see an official stand up, take on an issue—early, rather than late—and willingly tick off the powerful, you wonder, What’s gotten into him?
When I asked Orange County Supervisor John Moorlach, he wasn’t much help. He said only, “Well, when I get mad, I get motivated.”
(Full disclosure: I have done some pro bono legal work for Moorlach.)
Moorlach got mad in late 2006 when, as supervisor-elect, he heard that inmates beat to death 41-year-old John Chamberlain in a county jail as guards watched baseball playoffs on TV.
But, by calling for civilian oversight of the Sheriff’s Department early, was Moorlach jumping the gun?
Even before local newspapers started questioning the story, Moorlach sat former sheriff Mike Corona down.
“It hit me personally,” Moorlach said. “I remember bringing up to the sheriff, I think it was, Hebrews 13:3, ‘Remember those in prison as if you were their fellow prisoners, and those who are mistreated as if you yourselves were suffering.’”
Then, he heard more: Had a deputy encouraged the attack by letting slip a rumor Chamberlain was a child molester? Why wasn’t the district attorney called to investigate? Moorlach sent his staff into the jail.
“Their report,” he said, “wasn’t pretty.”
Moorlach’s chief of staff, Mario Mainero, was exasperated. He argued for unbiased oversight—not only of the jail, but of abuses alleged anywhere.
Tempers throughout the department flared at the thought of a crew of outsiders poking around company secrets.
“It was an amazing battle behind the scenes,” Moorlach said. “Not only did the sheriff push back, so did others in the county who wanted a good relationship with him.”
But Moorlach’s grip only tightened. The county’s supervisors, each showing guts of their own, backed the plan.
Today they’ve established an independent office to review all violent exchanges between deputies and the public.
Then there is Moorlach running point on unfunded liabilities.
The term unfunded liabilities is a sleep-inducing euphemism for a nasty situation. An unfunded liability, in simple English, is money you owe without a way to pay it.
In a few years, these debts, especially pension and healthcare obligations for government employees and retirees, will force municipalities across the state to cut important services—fire, paramedics, police, roads, you name it—and will usher some into bankruptcy.
San Francisco bears $4.2 billion in unfunded debt. The city of Vallejo already has publicly discussed bankruptcy. California’s cities and counties together have $118 billion in unfunded liabilities, an average of $3,200 per Californian.
Most municipalities play dumb. Orange County, however, which two years ago carried a $3.2 billion load, has cut it to around $2.3 billion, or $700 per resident.
One of Moorlach’s radical solutions could reduce the unfunded debt still more—and have a sweeping impact across the state.
Ever since he first heard about it, Moorlach thought the county’s 2002 contract with the sheriff’s deputies was odd, not because it gave them generous pensions, but because it promised to pay them retroactively, giving deputies additional benefits without asking for additional work.
The county filed suit to rescind the pensions. Because no one knows how many state and local agencies have similar union contracts, Moorlach can’t say how big the shockwaves could be.
But Moorlach estimates OC will save, on the low side, $187 million.
If the county represents 10% of the state’s population, multiply that number by 10. You can assume this is a $1.87 billion matter statewide.
When Moorlach and Mainero introduced their concerns at a public session, the deputies union presented a slide show showing officers killed in the line of duty and the families they left behind.
These, they said, were the people under Moorlach’s numbers.
Moorlach and Mainero, quiet and somber, outlined their position.
The problem, Mainero said, remains: the retroactive benefits broke the law. They were gifts, gifts of public money, given without work.
In his single year on the job, Moorlach has angered powerful public employee unions—and has been vilified throughout. If it hasn’t been worth it, he isn’t letting on.
“I guess I didn’t run to be a supervisor.” Moorlach says. “I ran to do some supervising.”
Capaldi is a partner in the business law firm of Spach, Capaldi & Waggaman, LLP in Newport Beach and Chairman Emeritus of The Lincoln Club of Orange County.
Christian Berthelsen of the LA Times did a profile on one of the Orange County Employees Retirement System (OCERS) trustees in “O.C. pension dispute spotlights man wearing two hats – Reed Royalty backs the campaign to cut benefits for sheriff’s deputies, but he also heads the agency that manages those benefits.” Due to the ratification process for approving California Public Employee Retirement System (CalPERS) trustees, someone like Reed Royalty would never be appointed to its board. During this period of time, my biggest lament (as a Supervisor and an OCERS member) was how the OCERS outside legal counsel was allowed to play an obstructive role and how much he was permitted to generate in unnecessary legal fees to do it. But, in a battle over mammon, pressures come from multiple directions.
When Reed Royalty endorsed Orange County Supervisor Janet Nguyen’s reelection campaign last month, he praised her for seeking to reduce pension benefits for sheriff’s deputies "that may be unconstitutional."
It was a logical comment for Royalty, an advocate of low taxes and limited government who is president of the Orange County Taxpayers Assn.
But it was a disquieting remark, many thought, for a man who is also chairman of the agency that manages those pension benefits — an agency now being sued by the county in an effort to roll them back. The lawsuit was initiated by Nguyen and her colleagues, who contend that the higher pension benefits for deputies are unconstitutional.
Royalty’s dual roles, as an anti-tax champion on one hand and an administrator of pension benefits for retired government workers on the other, has put him in a seemingly incompatible position, pitting his private views that public employee pensions have run amok against his legal duty to look out for the financial interests of retirement system members.
It is a fine line that he said he had tried to tread carefully. He said he sought legal opinions from multiple lawyers who assured him he had a 1st Amendment right to continue criticizing public pensions as long as he clearly identifies that he is speaking as a private tax activist. He said he saw no conflict between his public and private roles, and declined to comment on any questions about the county’s pending litigation against the Orange County Employee Retirement System.
"I’m doing a good job for the taxpayers, and I’m not doing anything to the detriment of OCERS," he said. The distinction is lost on union leaders whose members are in the pension system. They resent the county’s efforts to reduce benefits and fear that, with Royalty leading the way, the retirement board will not defend the case vigorously.
"I was very disappointed to see that the chairman of OCERS, the man entrusted to protect our pensions, has decided to abandon his official fiduciary duty in pursuit of politics," said Wayne Quint, president of the Assn. of Orange County Deputy Sheriffs. "His public congratulation of Supervisor Nguyen for suing the very organization he chairs is both shocking and bizarre."
Added Nick Berardino, general manager of the Orange County Employees Assn., the largest union of county workers: "He is basically sitting at the head of a group that is supposed to defend the interests of the retirement system, and at the same time he is going around applauding and aiding another group that is suing that same system. He just makes a mockery out of legitimate county government interests."
At issue is a 2001 labor agreement between the deputies union and the county that increased pension payments by one-third and granted the benefit retroactively, bringing the average pension salary for retired deputies to $70,000 per year, by the estimate of county Supervisor John Moorlach.
Moorlach believed the county could not legally grant the benefit because he said it violated the state Constitution’s prohibition on deficit spending, committing the county to $187 million more in payments in the coming decades than it had money to pay. He led the board to a unanimous vote in January to file the lawsuit.
Royalty has long criticized public employee pensions, saying their growing cost is eating into government’s ability to provide services and build infrastructure. He is also a member of the advisory board of the California Foundation for Fiscal Responsibility, a group that has pushed to reduce the burden of public pensions on government.
In a March 6 statement, Nguyen announced that she had received the Orange County Taxpayers Assn.’s endorsement. The announcement quoted Royalty as saying, "Fiscal responsibility has always been Supervisor Janet Nguyen’s trademark. . . . In addition to saving taxpayers hundreds of millions of dollars in unfunded liability, Supervisor Nguyen has supported measures to reexamine retirement benefits they may be unconstitutional."
Royalty’s endorsement remark is also focusing renewed attention on the county’s last-minute decision to name the retirement system as the defendant rather than the deputies union — prompting speculation that some kind of fix is in because of the political dynamics involved.
When county officials first began talking of suing to rescind the pension spike, the deputies union had always been discussed as the defendant. But in the days before supervisors formally voted to move forward, the retirement board suddenly became the target.
County lawyers declined to explain how that change occurred, saying only it was the recommendation of the law firm hired to handle the case.
The change appeared to catch Royalty by surprise; he testified at the board hearing that the retirement board did not belong in the case.
But he, along with three other members of the retirement board, could well determine how the board handles the case. The board also has four union-backed members, but the deputies union nominee, Richard White, had to recuse himself because he has a direct financial stake in the outcome. The move also created a situation in which the county is paying for both sides in the case, since the legal fees to defend the suit come in part from the money the county puts into the retirement fund to pay for benefits.
The retirement board has sought to move the case out of Orange County to ensure a fair hearing. The deputies union is seeking to intervene in the case because it wants to be sure its members’ interests are represented aggressively.
"From the association’s point of view, you can’t help but be suspicious of this change," Quint, of the deputies union, said. "Put yourself in our shoes. What would you think?"
Julie Wyne, an assistant chief executive and lawyer for OCERS, said Royalty’s comments do not constitute a violation of his legal obligations.
"As long as he’s not identifying himself as speaking on behalf of OCERS, as long as he’s clearly identifying who he’s speaking for, he’s not breaching any fiduciary duty to our system," Wyne said. "It’s challenging to manage communication issues, but this specific instance does not appear to violate the policy."
Royalty defended his remarks in his endorsement message for Nguyen.
The taxpayers association "supports an effort to determine if those benefits are constitutional or legal," he said. "I’m glad that the Board of Supervisors is taking steps to determine the constitutionality of those benefits."
Jean O. Pasco and David Haldane of the LA Times had a small front-page article, titled “Bankruptcy Figure Up for Tollway Job,” that would provide another interesting chapter to the bankruptcy’s reverberations. I recall receiving a call the evening before from Jean Pasco, who informed me of what she discovered on the Orange County Transportation Corridor Agencies’ (TCA) upcoming agenda. She shared the TCA’s Chairman’s observations, whose city was severely impacted by the bankruptcy in a number of ways, and I responded. I was told later that my “hit and run” quote helped make the article go viral. Sometime later, at a Bond Buyer Conference at the Del Coronado, Mr. Montague would confront me about my quote. It was an emotionally charged encounter where I had to remind him that his former employer had not yet settled with the County for their sins and I could not show grace to any perpetrator of the County’s fiscal losses until the courts had resolved our claims of his and his firm’s malpractice. It is my understanding that Mr. Montague’s practice is doing quite well now, serving municipalities with their debt issuance needs.
A financial advisor fined $35,000 three months ago for his role in Orange County’s bankruptcy is on the verge of being hired for four times that amount by a county agency that lost millions in the collapse.
Douglas S. Montague, a former investment banker who was found by federal regulators to have "failed to disclose information important to investors" in the county’s ill-fated investment pool, is slated to be hired Thursday by the Transportation Corridor Agencies as a financial advisor for $150,000. Irvine Councilman Mike Ward, the agency’s board chairman and a member of the two-person committee that chose Montague, defended the hiring.
"I think you can compare this to a person who normally drives the freeway at about 84 mph, and after they get a ticket, they are probably a very safe driver for the foreseeable future," Ward said.
But County Treasurer-Tax Collector John M.W. Moorlach, who is credited with warning the county about financial problems before the bankruptcy, responded: "We don’t have a ticket. I think right now we’ve got a hit-and-run."
The unprecedented 1994 bankruptcy resulted in a $1.64-billion loss to county government and scores of cities, school districts and special districts that contributed to the county’s investment pool. The tollway agency lost $74 million.
At the time, Montague was the lead municipal investment banker for Credit Suisse First Boston Corp., which underwrote a $320-million pension-bond offering that had failed to alert investors to the county’s risky finances, according to the Securities and Exchange Commission.
On Jan. 29, the commission ruled that CS First Boston, Montague and colleague Jerry Nowlin willfully violated federal securities law. The bank, which is being sued by the county, was fined $800,000.
Montague signed a 15-page consent decree, a standard SEC procedure, in which he did not admit guilt but promised to obey securities laws in the future.
The new contract with Montague of La Canada and his firm calls for them to advise the transportation agency, which operates the county’s toll roads, on partial refinancing of bonds for the Foothill and Eastern corridors.
The contract is contained in a consent portion of the agency’s agenda, meaning it was to be voted on without comment.
Several agency board members said Tuesday that they were unaware of Montague’s background.
"This doesn’t strike a good chord with me," Supervisor Tom Wilson said. "This is the first I’ve heard of it. There are too many folks out there who don’t have a blemish on their record that we could be hiring."
Supervisors William G. Steiner and Todd Spitzer, also on the board, said they expect an explanation of why Montague is being recommended.
"I wouldn’t give a shred of business to any individual who was involved in the Orange County bankruptcy," Spitzer said.
Montague didn’t return calls for comment Tuesday. His firm’s office referred calls to him.
Ward defended the selection of Montague’s firm on the basis of its experience and creativity in the field of bond refinancing. He and board member Susan Withrow selected Montague from a field of six competitive bidders. Their choice was endorsed by two committees consisting of agency board members.
"They came up with some innovative ideas on refinancing and, quite frankly, what we are doing here is inventive financing," Ward said.
Ward said he discussed Montague’s association with the bankruptcy with Withrow but said the issue wasn’t raised at either of the two committee meetings. It also wasn’t mentioned in a staff report on the matter. Withrow, the mayor of Mission Viejo, could not be reached for comment.
"First Boston was an extremely small player in the Orange County bankruptcy," Ward said. "They were one of many companies that were on the periphery."
Moorlach, who replaced former county Treasurer-Tax Collector Robert L. Citron, disagreed with Ward’s description of CS First Boston. As the first financial institution to pull its collateral out of the county’s pool, the bank was the "first domino" in Orange County’s financial collapse, Moorlach said.
"I think it’s a big deal, and it does matter," he said. "I think we shouldn’t lose our sense of outrage over what occurred in Orange County. The paint isn’t dry yet, and I’m disappointed that other financial advisors didn’t rank higher than this firm in the selection process."
The contract is especially inappropriate, Moorlach said, because the county’s lawsuit against Montague’s former employer is still pending. He scoffed at an assertion by Ward that the hiring was appropriate because Montague’s firm was being recommended, not Montague personally.
"You develop professional relationships with individuals and if those individuals fail you in their professional capacity at one firm, what does having a new firm have to do with it?" Moorlach said. "I think better judgment could have been applied."
The agency meeting begins at 9:30 a.m. at the Santa Ana City Council Chambers, 20 Civic Center Plaza.
Larry Welborn of the OC Register provided the results of a special Grand Jury’s investigation in “D.A. says deputies’ actions were ‘shocking and unacceptable’ – But Rackauckas says 9-month grand jury probe of jail beating death did not find evidence of criminal wrongdoing by sheriff’s personnel.” The D.A.’s observations set the baseline for the improvements that the new Office of Independent Review and the next Sheriff could move up from.
“Shocking and unacceptable.”
That’s how Orange County District Attorney Tony Rackauckas on Monday described the conduct of several sheriff’s deputies in the Theo Lacy branch jail where an inmate was beaten and stomped to death 18 months ago.
"The main goal of the deputies … was to do the least amount of work possible while collecting their paychecks,” Rackauckas said during a news conference to discuss the results of a nine-month grand jury investigation into the Oct. 5, 2006, death of inmate John Derek Chamberlain.
Rackauckas said that instead of watching over dozens of inmates in a common dorm barracks, deputies instead were “watching television shows like "Cops," watching movies, playing video games, (writing) text messages, and sleeping – repeat sleeping.”
The culture inside the branch jail also showed evidence of “institutionalized laziness” in which deputies protected one another’s incompetence and warned one another in codes" when supervisors or VIPs came around, Rackauckas told about a dozen reporters.
But despite a vigorous effort, the district attorney said, the grand jury investigation – which led to the indictments of three inmates in Chamberlain’s stomping death – did not find evidence of criminal wrongdoing by any member of the Sheriff’s Department.
Six other inmates were previously charged with murder in the fatal beating of Chamberlain, 41, under the mistaken belief that he was a child molester.
"If we could have proven a case that any member of the Sheriff’s Department — from the lowest to the highest rank — was criminally responsible for the death of Mr. Chamberlain, there is no question that indictments would have been issued," Rackauckas said.
Investigators specifically looked at allegations that on-duty Deputy Kevin Taylor had told inmates in “F” barracks that Chamberlain was in custody on child molestation charges, which would have brought the wrath of other inmates down upon him.
Jared Louis Petrovich, one of the inmates charged with the attack on Chamberlain, told detectives later that Taylor leaked the erroneous information about Chamberlain. In fact, Chamberlain was in custody on the less serious charge of possession of child pornography.
But, Rackauckas said Petrovich, who faces apossible 25-years-to-life sentence if convicted of first-degree murder, has told several different stories about what led up to the attack. And, Rackauckas added, Taylor cannot be charged in the case on the uncorroborated testimony of an accomplice.
“At the end of the investigation, there was insufficient evidence to support any charges against sheriff’s officials,” Rackauckas said.
The news conference was held immediately after deputy district attorneys Michael Lubinski and Keith Bogardus presented a 93-page investigative report on the grand jury proceedings to supervisors John Moorlach and Bill Campbell and aides from the other three supervisors.
The district attorney said he was also disappointed with several high-ranking Sheriff’s Department officials who insisted on investigating "a murder that took place in their own facility, their own house."
He said that county policy dictated that the investigation of an in-custody death – especially one that could implicate sheriff’s personnel – be turned over to investigators from the District Attorney’s Office. But, he said, several top-level sheriff’s administrators decided to bypass that policy, perhaps to "prevent the Sheriff’s Department from getting a black eye."
Rackauckas also said he was appalled that some deputies lied about collateral issues connected to the investigation, and broke an admonishment given to all grand jury witnesses to not discuss their testimony with others.
But he said that in the opinion of prosecutors, the lying did not reach the level of perjury because it was not material to the charges being investigated by the grand jury.
Ellen Pak of the OC Register provided a story on a subject that had me fuming since becoming an Orange County Transportation Authority board member, which was occurring behind closed doors because it was litigation, titled “Measure M will fund $39.3 million freeway settlement – Transit agency settled with contractor on 22 widening costs.” To be honest, I am still fuming over this transaction. The winning bidder to improve the Garden Grove Freeway stated it could be done in 400 days for $400 million. The second highest bidder stated that it would take 500 days and cost $500 million. The low bidder was selected and took 500 days and asked for nearly the $100 million difference. The second highest bidder was honest and accurate. The low bidder was not and, in my opinion, close to criminal in providing a bid 20 percent below reality, to obtain the business, with change orders to get you to the actual cost. That explains why I voted against even approving the $39.3 million settlement for the difference.
The Orange County Transportation Authority will tap into Measure M funds for the $39.3 million it agreed to pay a contractor that claimed tens of millions for unexpected costs on the 22 freeway widening project.
Money for the settlement, announced Friday, will come from Measure M, a half-cent sales tax that was approved in 1990 to go toward transportation relief in the county.
The money will be deducted from a $130 million pot that included funds for close-out costs on the 22 and I-5 widening projects and reserves for economic uncertainties, said Joel Zlotnik, an OCTA spokesman.
Contractor Granite-Myers-Rados initially sought $93 million to cover the cost of additional work that included excavating bad soil under the freeway.
"There is a balance between doing what’s right and doing what’s expedient for everybody and getting this resolved," said OCTA board member John Moorlach, who voted against the settlement.
After mediation, the OCTA agreed to pay $39.3 million to avoid a court trial that could cost millions in attorney fees alone. The agreement also nixes the $400,000 in liquidated damages that the contractor faced because it missed a key deadline by eight days in late 2006.
"There’s no argument that we got a freeway, no argument that they finished the job, theoretically," Moorlach said. "I’m only sorry that GMR didn’t follow the terms of the contract. It would’ve been a better story."
The contractor did not return calls Monday. On Friday, a representative said that if the freeway had been correctly built in the 1960s, the bad soil would not have developed.
And as soon as the Montague brouhaha started, it ended. David Haldane and Jean O. Pasco of the LA Times provide the details in “Bankruptcy Figure Rules Himself Out of Tollway Job – Government: Agency was to vote today on $150,000 financial services contract. Candidate was fined $35,000 for his role in O.C. debacle.”
A financial advisor whose firm was set to receive a $150,000 contract with the county today withdrew from the job Wednesday amid controversy over his role in the Orange County bankruptcy.
"The events of the last two days indicate this is clearly going to be a political decision rather than one based strictly on merit," said Douglas S. Montague of La Canada. "We’ve made a decision not to be involved in that type of a process."
The Transportation Corridor Agencies, which oversees Orange County’s toll roads, had been scheduled to vote without discussion on the financial services contract with Montague DeRose & Associates.
However, several of the agency’s board members said they learned from published reports Wednesday that Montague, a former investment banker, had been fined $35,000 by federal regulators for what they called his failure "to disclose information important to investors" in the county’s ill-fated investment pool. The toll road agency lost $74 million in the county’s bankruptcy.
At the time, Montague was the lead municipal investment banker for Credit Suisse First Boston Corp., which underwrote a $320-million pension-bond offering that had failed to alert investors to the county’s risky finances, according to the Securities and Exchange Commission.
On Jan. 29, the commission ruled that CS First Boston, Montague and colleague Jerry Nowlin willfully violated federal securities law.
The bank, which is being sued by the county, was fined $800,000. And Montague signed a 15-page consent decree, a standard SEC procedure, in which he did not admit guilt but promised to obey securities laws in the future.
Irvine Councilman Mike Ward, the agency board’s chairman and a member of the two-person committee that chose Montague, said he was aware of the would-be advisor’s background when he and committee member Susan Withrow selected him from a field of six bidders to advise the Foothill/Eastern toll road agency on refinancing its bonds. But Ward said he didn’t consider it significant enough to disclose.
On Wednesday, Ward called most of his fellow board members to apologize. "I made a mistake," he said. "Because of the information in the paper, the members of my board got blindsided, and I don’t like to do that to anybody."
Before hearing of Montague’s withdrawal, Ward said he planned to open the issue up for a full discussion of the board but would still support the hiring of Montague. Afterward, he expressed regret that his first choice for the job had dropped out.
"I’m sorry, because I don’t think it was that big of an issue," he said. "I think it got blown out of proportion, and the sad part for the [agency] is that the most qualified firm won’t get the job."
Withrow agreed. "I’m surprised," she said Wednesday. "Based on what I understood of the SEC action, there was certainly no criminal admission. And, frankly, their team was picked on merit. It’s unfortunate, but I guess he’s trying to take the high road."
Among those on the other side was board member Todd Spitzer, a county supervisor, who said that he learned of Montague’s background from published reports Wednesday and found it disturbing.
"There are plenty of very credible financial advisors available to the toll road agency," he said. "It seems inappropriate to have to be involved with someone from the only firm to have entered into an SEC settlement agreement."
Those sentiments were shared by county Treasurer-Tax Collector John M.W. Moorlach, who is credited with warning the county about financial problems before the bankruptcy.
"I think better judgment should have been applied," he said.
Spitzer said he would use today’s meeting to call for the establishment of a financial advisory board to provide better oversight on financial contracts awarded by the toll road agency.
Dennis Foley of the OC Register provided a helpful hint in “Property taxes payable online.” Remember, property tax payments are due no later than Wednesday, April 10. Payments made after Wednesday are subject to a ten percent penalty. Here’s the opening sentence:
Property taxes are due Thursday and now can be paid online, Treasurer-Tax Collector John M. Moorlach announced Tuesday.
Peggy Lowe and Tony Saavedra of the OC Register provided the most recent update on the John Derek Chamberlain murder in “Five placed on leave in wake of report on jails – Acting sheriff calls in FBI to look at jails; supervisor says report shows ‘clear case of human failure.’” Here is a selected quote and a photo of me having an interaction with acting Sheriff Jack Anderson during that Tuesday’s Board meeting.
"This is not a good day for Orange County," said Supervisor John Moorlach. "We have another clear case of human failure. The complacency has got to stop. Good cops can’t protect bad cops. The code of silence has got to stop."
FOX News and the Riverside Press-Enterprise had the Associated Press article, “Orange County Sheriff Asks FBI to Probe Civil Rights Violations in Jails After Inmate Death,” and I’m the closer that stays on the topic of the arrogance of protecting bad cops:
Supervisor John Moorlach said Tuesday that he was sickened by the lapses described in the grand jury report, but said Carona’s departure offers a "glorious opportunity" for the county to fix corruption and poor management within the department. Interviews with candidates, which begin May 18, will be open to the public, he said.
"We have a brotherhood and the brotherhood protects their own and they act like they are the upper class," he said of jail deputies. "We can’t touch or tease or talk about cops because they’re perfect — but they’re not."
Christian Berthelsen, Christine Hanley and Stuart Pfeifer of the LA Times covered the story in “5 suspended in O.C. jail case – Acting Sheriff Jack Anderson orders a probe and calls for an FBI investigation.”
County supervisors said they shared Anderson’s outrage over the grand jury findings, and agreed the department needed to change.
"We have a clear case of human failure. It is a time for repentance, and maybe a little restitution," said board chairman John Moorlach. "We have to do something about restoring our reputation."
At the conclusion of the meeting, San Juan Capistrano City Councilmember Tom Hribar spoke during the Public Comments portion of the agenda. Jonathan Volzke of The Capistrano Dispatch recorded the exchange in “Hribar on New Sheriff.”
"I’d like to suggest we get out of the box with the next sheriff. We need a tough-minded MBA," Hribar told the supervisors during their public-comments period of the meeting. "The economics of law enforcement need to be at least as important as the law enforcement itself."
Hribar suggested several ways of reducing the costs — from cutting retirement benefits to getting smaller cars — and said he would happily serve on a comittee to come up with more ideas. He jokingly suggested fiscal conservative Supervisor John Moorlach take the job of top cop. Moorlach countered by asking Hribar if he’d apply for the spot. Hribar told the board chairman he was a retired Marine Captain who served in combat. "I’d love that job," Hribar said.
My editorial submission for the Daily Pilot for the month of May, but printed in April, was titled “What’s fair for swap meet? Officials at the Fairgrounds shouldn’t meddle in Bob Teller’s Marketplace.” (My April submission would be printed on the income tax due date, April 15th.)At that time, Norbert Bartosik was the general manager for the Orange County Fair. Norb would go on to be the general manager of the Sacramento State Fair. At that time, Rick Pickering was the assistant to the Costa Mesa city manager. Rick would go on to be the assistant to Becky Bailey-Findley, the next general manager of the Orange County Fair. Rick would then go on to be the general manager of the Alameda County Fair in the city of Pleasanton. News has it that Rick Pickering is now succeeding Norb Bartosik as general manager of the State fair. Congratulations to all. It’s fun to see how careers progress. Here is the entire piece for old time’s sake.
On May 1 the new Orange County Marketplace swap meet lease agreement between the Orange County Fair Board (the state) and Tel-Phil takes effect. I hope the fair’s general manager, Norbert J. Bartosik, is happy. It seems that no one else is.
The Daily Pilot has kept us informed on the ongoing “Tel-Phil versus Orange County Fair Board” deliberations over the swap meet lease.
Alan W. Bock, senior columnist for the Orange County Register, also stated in his March 14 commentary that the new lease threatened to put some of the vendors out of business. That column solicited a response from Bartosik himself.
When a politician or governmental representative starts describing what is fair in the free market, Bruce Herschensohn’s warning comes to mind: “Beware!”
After reading Bartosik’s defense, the old expression about throwing a rock into a pack of dogs came to mind. The one hit is the one who barks the loudest. I sense that Bartosik is providing us with an inkling about who really is to blame for this fascinating “business versus government” battle.
Bartosik senses that everyone is blaming the Fair Board, something that he believes should not occur if we know the facts. What facts did he enlighten us with? Here’s a synopsis:
1) “The State of California owns the fairgrounds.”
2) “(Its) Board members are appointed by the governor.”
3) “The . . . lease agreement . . . was set to terminate March 31, 1992.”
4) “Other operators . . . expressed their interest in competing for the new lease.”
5) “Consistent with state policy . . . the Fair Board put the lease out to competitive bid.”
6) “The state is to receive a fixed percentage of the gross revenue.”
7) “Tel-Phil’s proposal made it clear that all cost increases would be passed on to the sellers and the public.”
8) “The blame (rests with) the ever-changing forces of the free market economy, which delivers equal doses of good times and bad times.”
9) “(A) solution: Undo the lease, untie the hands of the Fair Board, and put the matter back out to bid in today’s marketplace. Let’s be fair and give everyone an equal opportunity, let today’s competition re-select the operator, reset the rent due the state, and set the rent of the sellers.”
This all sounds well and good, if you’ve gotten used to buying the government’s line. Never mind that the state is meddling with the free market. Let me share some omitted facts:
1) Although the state owns the fairgrounds, it does not receive its net income. The fairgrounds retains its net profits and invests them back into their facilities and grounds.
2) The Orange County Fairgrounds has about $6 million in surplus funds.
3) The fairgrounds projected net revenues for last year were $2.1 million.
The fairgrounds doesn’t need additional income! This is something even a new Fair Board member, John Crean observed. The additional hoped-for revenues won’t reduce our state’s budget deficit!
With such an attractive “incubator to maturity” entrepreneurial swap meet, why put the creator and manager of one of the most successful outdoor swap meets through the proverbial grinder? I would postulate that it was Bartosik’s personal political agenda and not his business sense that caused this indirect regressive tax increase on the swap meet’s vendors and its thousands of patrons.
Bartosik’s call for competition in this metropolitan area is weak. If other operators want to compete, let them find another large blacktop. Perhaps the El Toro Marine Base should be contacted. Bartosik made a good tenant twist in the wind, a brutal way to treat a friend or, perhaps in this case, a foe.
If you have a good tenant, do you tell him that you have others who want his space and request a competitive bid from him? Give me a break. Can’t the government do anything right?
Common business decency would be for the landlord to renegotiate the lease with the existing tenant. If resolution cannot be reached, solicit other offers, approve a new tenant, and evict the old one. But you had better be sure the devil you don’t know is better than the one you do.
Try turning the tables. What if the Fair Board said to Bartosik, “Your annual review comes up in four months, would you please give us a competitive proposal for keeping you on as our general manager? As you know, these are difficult financial times and we’ve had numerous qualified individuals express an interest in competing for your job. We’re going to let today’s competition re-select the (general manager.)”
The Fair Board would probably get someone with more business sense at a lower overall salary package. Then the Fair Board will save money, but at only one person’s expense. We have a good Fair Board, it should act like a business, not a government.
David Haldane of the LA Times provided another update on the Montague affair in “Two on Toll Panel Sorry for Contract Flap – Transportation: Financial advisor withdrew bid for agency job after news of his role in county bankruptcy.” Here are a few selected paragraphs:
One day after a financial advisor bowed out of the running for a $150,000 contract with the Foothill/Eastern toll road agency, the agency’s chairman apologized to his board for not disclosing the man’s role in the Orange County bankruptcy.
At the same time, board member Todd Spitzer, also a county supervisor, proposed creating a finance advisory committee to avoid similar mistakes.
Ward said that the information about Montague’s background, disclosed to him and Withrow minutes before a joint meeting of the two committees that were to endorse the contract with the financial advisor, did not raise any red flags because it didn’t seem important.
"The whole thing has been blown way out of proportion," he said. "He had no involvement at all in the Orange County bankruptcy. He just got caught up in it because he happened to be selling Orange County bonds."
County Treasurer-Tax Collector John M.W. Moorlach, who is credited with warning the county about financial problems before the bankruptcy, has disagreed, describing CS First Boston as the "first domino" in Orange County’s financial collapse.
The Douglas S. Montague story caught the attention of the OC Register’s editorial board and they provided “Paying the piper” as their lead editorial.
Time heals, but occasionally time needs help in finishing the process. Some episodes of hurt require more than the mere ticking of the clock for the full impact to recede.
Along with the passage of months and years, sometimes it takes a formal sorting out of fault, a serious gesture of restitution, before closure can set in.
This maxim isn’t confined to interpersonal relations. Often the arena of public affairs operates under the same dynamics, writ large, that guide the individual heart and mind.
For that reason, it shouldn’t have come as a surprise that eyebrows shot up when it came out that the Transportation Corridor Agencies were preparing to give a $150,000 contract to an investment banker who played a controversial role prior to the Orange County bankruptcy, and whose former bank is still being sued by the county over bankruptcy-related issues.
Douglas S. Montague withdrew himself from consideration for the contract on Wednesday. His decision followed a furor that developed when the news spread that federal regulators several months ago formally punished him in connection with the sale of bonds prior to the bankruptcy.
The feds fined him $35,000 for withholding from investors "important information" concerning risks associated with the county investment pool. CS First Boston, the bank with which Mr. Montague was affiliated at the time that it underwrote a $320 million pension-bond offering related to the investment pool, was fined $800,000 by federal officials.
And that bank is still one of the targets of the county’s bankruptcy litigation.
"If the bank would settle, government contracts for officers present or past would be one thing," county Treasurer John Moorlach told us Thursday. "But while the county is still fighting for vindication of its claims in court, one can’t say that the bankruptcy controversy is behind us and all the accounting of who’s to blame and who owes what has been accomplished.
"I’m not being vindictive. I actually want all this litigation over with – in no small part because I want a broader pool of bond brokers to choose from for the needs of my office and the county. I would like to be able to consider the firms we’re suing as bidders on contracts. But not now. Not while the issues haven’t been resolved. Actions should have consequences, and not all the actions that led to the county’s financial troubles have yet met with the appropriate consequences."
A school of psychology says that trying to move beyond a incident of pain or conflict without first working through the issues, understanding where responsibility lies and laying out boundaries for future behavior, is a recipe for repeating mistakes – and for subtly teaching the corrosive message that accountability doesn’t matter.
A philosophy of insisting on consequences seems to have asserted itself in the controversy surrounding Mr. Montague, and we can’t necessarily say that’s an unhealthy thing.
Jean O. Pasco of the LA Times had a brief piece, titled “Second Property Tax Installment Due,” as an important reminder. Here are the opening and closing paragraphs:
Today is the deadline for Orange County homeowners to pay the second installment on their annual property tax bills.
Treasurer-Tax Collector John M. W. Moorlach said the county’s tax compliance rate from the first installment in December was 98%.
S. J. Cahn, the Daily Pilot’s “Politics Aside” columnist, had fun with his opener in “Putting a rumor to rest.” There’s nothing like being ten years too early.
A flier is circulating in Costa Mesa urging one of Newport-Mesa’s favorite political sons to run for governor.
But before all you fiscal conservatives get too excited, County Treasurer John Moorlach says he does not plan to seek the state’s highest office.
Taking into account the recall effort under way against Gov. Gray Davis, Moorlach – who famously predicted the county’s 1994 bankruptcy and is still one of the county’s most popular officials, despite some backlash to his backing of Measure G in 2000 that would have put 40% of tobacco settlement dollars toward paying off the county’s bankruptcy debt early – listed several reasons why he wouldn’t go after the seat.
The first is that the Republican Party in California will need to close ranks behind one candidate to replace a recalled Davis. And, in his mind, that person could serve 10 years in office and end the term as a front-runner for the White House.
But that couldn’t be Moorlach, who was born in the Netherlands. (What does that line of thinking do to Arnold Schwarzenegger’s chances?)
Now, state treasurer? Moorlach said he would be interested in that spot. So stay tuned.
Dana Parsons provided a column on the Sheriff selection process with “Acting O.C. sheriff is putting on a good show — Jack Anderson is being praised for his handling the Lacy jail crisis, giving him a head start in the race to get the job permanently.”
Acting Orange County Sheriff Jack Anderson has expressed disgust at the mess he’s inherited at Theo Lacy Jail. "I can’t think of a lower standard they were acting at," he told a Times reporter Tuesday. "I will take it as far as I can take it," he said about possible further disciplinary actions, "and termination will not be enough for me."
I hope he’s not talking about knee-capping people, but I get the point:
And, might I suggest, he’s thrilled.
Thrilled at his good fortune that just when he needs to impress five Orange County supervisors, his department hands him a scandal to clean up. Best of all, a scandal that doesn’t have his fingerprints anywhere near it.
How lucky can a guy get?
By my unofficial count, Anderson already has collected seven scalps since taking over the top spot in mid-January. He dismissed an assistant sheriff six weeks ago and another one resigned at the same time, both caught in the blowback from the jail scandal.
This week, after a scathing report from Dist. Atty. Tony Rackauckas on the Lacy situation, Anderson suspended three jailers, an internal affairs investigator and a women’s jail guard.
Anderson also has invited the FBI to look into the Lacy situation and has proposed systemic changes for how the county jails are operated.
He’s been Action Anderson.
The D.A.’s investigation and the subsequent grand jury probe into the October 2006 beating death of an inmate at the hands of other prisoners have resulted in murder charges against nine of them. Rackauckas said the grand jury’s nine-month investigation yielded a disturbing picture of dereliction of duty by Lacy personnel and subsequent efforts by higher-ups to impede the grand jury’s work. He also chastised the department for assuming control of the investigation into the inmate’s death, instead of following the long-standing practice of stepping aside to let the district attorney’s office handle jailhouse homicides.
No sheriff’s personnel have been charged with a crime, although Rackauckas noted that some gave misleading or false testimony to the grand jury.
For various reasons, he said, their statements didn’t meet the legal requirements for perjury.
That has opened the door for Anderson, who wants his "acting" title removed.
A 21-year veteran of the department, he’s already impressed one important observer — Board of Supervisors Chairman John Moorlach.
"I am still neutral, but I’ll tell you that Jack is doing a good job of convincing me he’d be a good pick," Moorlach says. "But I would like to stay neutral, because Jack has the sad baggage of being someone in the prior administration. That’s a big hurdle."
I’d call it insurmountable. I don’t have a horse in the sheriff’s sweepstakes, but I have argued against giving Anderson the job. Nothing against him, but he was a Mike Carona insider and, in fact, was tabbed by the now-indicted former sheriff to succeed him.
Carona’s shortcomings in picking chief aides have become the stuff of local legend.
Moorlach, however, won’t use that as a disqualifier. Among some of the things that have pleased him about Anderson, he says, is that he has reversed some of Carona’s policies.
At the moment, the supervisors have 29 applicants for the sheriff’s job and will take no more after April 18. A recruiting firm then will winnow the field to no more than six, but each supervisor can add the name of a person who didn’t make the cut, Moorlach said.
The board will interview the finalists May 27 and probably will pick the new sheriff a week later, Moorlach said.
Is Anderson auditioning? "The answer is yes," Moorlach says, "and to date he has exceeded expectations."
Someday I may have to apologize to Anderson for opposing him, but doesn’t an administration so plagued in recent years at its highest ranks cry out for new blood?
And for someone who, unlike Anderson, isn’t aligned with the county GOP and its political machinery?
What’s wrong with new blood? Nothing, Moorlach says, but he’s quick to add: "With the extreme amount of dysfunction Jack has had to deal with, he’s been doing an admirable job."
I won’t read between the lines, but I’m wary.
Until the other candidates hit town in late May, the lucky Mr. Anderson has one big advantage over them: He has live auditions in front of the supervisors for the next six weeks.
Jennifer Muir of the OC Register provided an eye-opening piece with “Transit officials vow to close tollway license plate loophole – Secret plates have allowed almost 4,000 91 Express Toll Lanes users a free ride, the Register found.” Here are the opening paragraphs:
Tollway officials called for quick action Wednesday to close a loophole that has allowed government workers with shielded license plates to drive on the 91 Express Toll Lanes free 14,000 times in the last five years.
The Orange County Transportation Authority discussed the secret license plates at a committee meeting, three days after an Orange County Register investigation reported that 3,722 motorists with the protection have breezed along the tollway without paying. It was the second such call to action by agency officials since the story broke in Sunday’s newspaper.
"I was not amused Friday when I read about some of our employees pulling this stunt," said Orange County Supervisor John Moorlach, regarding an Orange County Social Services employee who The Register found had driven on the toll lanes 239 times for free.
The Register found that the program, designed to protect law enforcement from criminals trying to find their home addresses through the Department of Motor Vehicles, also amounts to a free pass to evade some traffic violations.
The problem: Companies that subcontract to process many traffic and parking citations don’t have access to home addresses of the nearly 1 million public employees whose personal cars are registered through the Confidential Records Program. And the agencies that do have access lack the time or will to hold violators accountable, the Register found.
As a result, for example, the OCTA’s automated citation system had been sending notices for protected plate holders to a collections agency in New York, which also doesn’t have access to the home addresses. Some scofflaws had racked up hundreds of violations before the Register discovered they had been driving for free with impunity.
"I didn’t know why you didn’t communicate with us regarding the social services employee?" Moorlach asked on Wednesday. "Why wasn’t that done sooner?"
OCTA officials said they have been working to close the loophole in their automated process by finding a way to mail citations to the agency that appears in place of home addresses on DMV records.
"As a result of this article, we’re taking a look at our procedure and how to change it," said Kirk Avila, general manager for the 91 Express Toll Lanes.
Brianna Bailey of the Daily Pilot provided the LAFCO update in “Annex bid is dealt setback – Orange County Local Agency Formation Commission votes down extension of country club into Newport Beach.”
County officials Tuesday rejected the pleas of residents of the unincorporated South of Mesa Drive neighborhood to extend an application that would allow the neighborhood and nearby Santa Ana Country Club to be annexed by Newport Beach.
“It’s just wrong in a democracy to see a citizen’s group be treated so disrespectfully,” said Cal McLaughlin, who has led Newport Beach annexation efforts in the unincorporated neighborhood. McLaughlin noted that he and his neighbors overwhelmingly wanted the area to become part of Newport Beach.
The Orange County Local Agency Formation Commission, which presides over annexations, voted down the extension 6-1.
The residents needed a tax-sharing agreement from the Orange County Board of Supervisors to move forward, and some blame County Board Chairman John Moorlach for blocking the board from voting on the agreement. Moorlach, a longtime Costa Mesa resident, has been outspoken in his belief that Costa Mesa has more of a right to the land than Newport Beach.
“This application is expiring for one reason — John Moorlach,” said South of Mesa Drive resident John Fay. “He made the decision not to let the Board of Supervisors vote on the tax-sharing agreement.”
McLaughlin said he felt the annexation issue has unfairly been framed as a struggle for the land between Newport Beach and Costa Mesa.
Moorlach said he would not stand in the way of the residents’ wishes for Newport Beach addresses if Costa Mesa officials would give their blessings to the plan — but that hasn’t happened.
Moorlach has worked for the past year on what he calls “a global solution” to resolve the annexation clashes between Newport Beach and Costa Mesa.
“If the city of Costa Mesa says let it be annexed to Newport Beach, then I’m there — but I’m not there,” Moorlach said. “We will continue to work on alternative solutions.”
Costa Mesa City Manager Allan Roeder asked the commission to deny the residents’ request for an extension at the meeting.
“We ask you to deny the request you have before you,” Roeder said. “We believe, quite frankly, it is contrary to all the standards and procedures of good land use planning…but we understand it is a very emotional issue.”
Costa Mesa officials have been working on a proposal to provide city services to the residents south of Mesa Drive. The residents want Newport Beach addresses because they will boost property values, and they claim the city could offer them better services than Costa Mesa.
Costa Mesa has a sphere of influence over both the country club and the South of Mesa Drive area and tried to annex them in 2002, but faced widespread opposition from property owners who petitioned against the annexation.
Newport Beach voted 6-1 to move forward with the annexation application in February, even though city staff recommended the city let the application expire rather than risk a land battle with Costa Mesa over who should get the property.
Santa Ana Country Club and the residential neighborhood gathered more than enough signatures last year to petition for annexation to the county agency that oversees the process.
McLaughlin said the residents will ask the Local Agency Formation Commission to waive thousands of dollars in fees to reapply for annexation.
The residents also will consider asking the commission to switch the area’s sphere of influence from Costa Mesa to Newport, a move that would not require a vote on taxes by the board of supervisors, he said.
Jeff Overley of the OC Register provided his take in “Annexation effort dealt another setback – Request for more time from unincorporated areas looking to join Newport Beach rejected.”
An application from two enclaves hoping to join Newport Beach will be allowed to expire, a local agency ruled today, further hobbling the aspirations of residents in the unincorporated areas.
The Orange County Local Agency Formation Commission voted 6-1 against allowing more time for the application from the Santa Ana Country Club and the so-called South of Mesa Drive neighborhood, which are sandwiched between Newport and Costa Mesa.
The areas could apply again, but the annexation prospects appeared bleak even before today’s development. Both parcels jut sharply into Costa Mesa, which is legally entitled to absorb the areas and which opposes letting them break away to Newport.
For that reason, Supervisor John Moorlach has refused to take a procedural step – allowing a vote on a property tax resolution – needed to move the effort forward.
Residents overwhelmingly defeated a previous annexation attempt by Costa Mesa, and so the areas will likely remain unincorporated for the foreseeable future.
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