MOORLACH UPDATE — Piles On — August 27, 2013

At the Board of Supervisors meeting on August 20th, buried inside agenda item number 17, was a disturbing little disclosure. Since June 2012, the Health Care Agencys Medical Services Initiative (MSI) Program has experienced significant increased costs due to a 19% growth in enrollment and the unanticipated Health Resources and Services Administration (HRSA) requirement to enroll qualifying Ryan White clients into the MSI Program. HRSA, the primary Federal agency for improving access to health care services for people who are uninsured, isolated, or medically vulnerable, has deemed Ryan White Care Act, as the payer of last resort for Ryan White clients. Thus, eligible Ryan White clients (and their associated high cost medicines) were transitioned into the MSI Program, with a resulting additional cost to the County of $12 million. Consequently, I asked if this was a Federal form of realignment. Realignment is a euphemism for the state transferring tasks down to the county level with the remote possibility of commensurate funding to cover the costs of performing the services. In this case, the answer was in the affirmative. The Federal government is shifting the cost of HIV/AIDS prescriptions to local government. Accordingly, I inquired if there should be some form of push back, either through the California State Association of Counties (CSAC), the related statewide organization for Health Care Agencies, or through litigation.

There was a time in life when it seemed as if it was one thing after the other. Now it seems like it is one thing on top of the other; it just piles on. The County has been hammered by the recession, the continuing increase of defined benefit pension plan contributions, the influx of state prisoners transferred here due to AB 109, the loss of the two redevelopment agencies as a result of state legislation, and now the very expensive implementation of the Affordable Care Act. The OC Register picked up on this portion of the ongoing onslaughts on the Countys cash reserves in the piece below.

Unplanned HIV/AIDS drug costs hit county

The Health Care Agency is faced with a $12 million tab for patients with low incomes.

By MIKE REICHER

Compensating for an unexpected drop in federal funding, the county is spending at least $12 million this year on drugs for low-income HIV/AIDS patients.

Along with other costs, the change has forced local health officials to slash payments to physicians, clinics and hospitals caring for the countys poor.

The temporary shift in funding is a byproduct of the transition to the Affordable Care Act, experts say. Previously, HIV/AIDS medication was covered by the federal Ryan White program, named after a teenager who died of the disease in 1990. But many of these patients will be covered by expanded Medicaid starting Jan. 1, and during the transition the federal government told participating counties to pick up half the tab.

This was clearly a surprise, Health Care Agency Director Mark Refowitz told the board when it approved the additional funding last week.

County officials expect the federal government to eventually reimburse about $6 million.

Meanwhile, supervisors say its another example of realignment, where higher levels of government pass responsibility to the county and officials are forced to make tradeoffs.

Its happening very subtly not to us, but to the general public who still receives services, Supervisor Patricia Bates said at a recent board meeting. Less and less money is assigned or appropriated to us at the county level and the services decline as a result.

Most patients were unaffected by the funding shift, said Philip Yaeger, executive director of the AIDS Services Foundation Orange County. He heard of a couple instances when patients were turned down at the pharmacy, but the foundation was able to find alternative means to supply drugs.

We didnt want people falling through the cracks and no longer having access to their medications, Yaeger said. The real critical thing to the treatment and medications is consistency.

Medication lowers the chance someone will pass on the disease, so providing for low-income patients actually saves money in the long term, Yaeger says.

HIV and AIDS medications cost about $20,000 annually per patient, and the county absorbed the cost for 400 patients, over the 18 months ending this December.

The cost to care for somebody versus the cost to prevent another infection theres absolutely no comparison, he said.

About 7,000 people in Orange County are living with HIV or AIDS, according to the Health Care Agency. That number is steadily rising due to longer life expectancy from antiretroviral drugs, experts say.

A hit in federal subsidies, though, comes at a bad time. The Medical Services Initiative, the countys insurance program for poor adults, grew an unexpected 19 percent over the past year, requiring $3.5 million more funding. Also, the state may reclaim $2.9 million of HIV/AIDS medication funding it had already paid.

The largest threat of all is an unrelated potential $76 million shortfall in state revenue. Legislators are trying to reverse that drop in vehicle license fees and property taxes.

It just piles on, said Supervisor John Moorlach, who asked administrators to research the feasibility of suing to keep the health care funding.

Physicians and other providers are taking the brunt of the cuts. Under the Medical Services Initiative, some would typically be reimbursed at half the federal Medicare rate. After these latest cuts, they are now receiving just 20 percent.

Theres not a whole lot we can do, said Dr. Peter Anderson, the director of the emergency department at Fountain Valley Regional Hospital. We are forced to take care of every patient.

The strain is temporary, county officials say. In January, when more provisions of the Affordable Care Act will take effect, the low income HIV/AIDS patients drugs will be covered by other plans.

Some patients will be covered under the expanded Medicaid program, which is funded by the federal and state governments. Others will be eligible for subsidized health insurance though Covered California, the state insurance marketplace for Obamacare.

FIVE-YEAR LOOK BACKS

August 24

1998

Tom Cahill, Sandy Gonzalez, and Neil Roland of Bloomberg News provided the latest on Merrill Lynch in Merrill Faces Enmity, if Not Lawsuits, From Calif. Treasurers. The article provides a gauge of how the marketplace was reacting to what this broker/dealer and investment banker had perpetrated on Orange County. The OC Register would publish this article in their August 26th edition. Here are the opening and closing paragraphs:

While Merrill Lynch & Co. has weathered most of the litigation over its role in Orange County, Californias bankruptcy, it faces an uphill battle to win back business from California municipalities.

The nations largest retail brokerage today agreed to pay $2 million in fines to settle U.S. Securities and Exchange Commission charges that it failed to adequately disclose the risks of investing in Orange Countys 1994 bonds. The SEC fine boosts the amount Merrill has paid to resolve cases involving the nations largest ever municipal bankruptcy to $471 million.

That amount could pale in comparison to the loss of business Merrill has suffered from public finance officials angry over its role in selling risky investments to Orange County. Those investments, which the county borrowed heavily to buy, led to about $1.7 billion in losses from the countys investment pool, forcing it into bankruptcy.

Once burned, twice shy, said Bridget Healy, treasurer for Claremont, California, who vowed never to use Merrill Lynch again. The next generation of public officials will be the ones to reconsider doing business with the firm, she said.

Merrills fall from grace with Californias treasurers an public finance officials, among the busiest borrowers in the nation, has shown in its underwriting rankings. Merrill ranked first in municipal bond underwriting in 1994, before the Orange County bankruptcy in December of that year. Its steadily declined since then, slipping one notch annually to fify place, according to Securities Data Co.

I am depressed its only fifth place, said Robert Peirson, finance director for Santa Barbara, California. It will be a long time before I have any dealings with them. While I am here, I cant see it happening.

Merrill Lynch is tainted, said Glenn Steinbrink, financial services manager for Fullerton, California. Merrill Lynch wants to put this all behind them and a trial would have muddied the water even more. They never wanted to take responsibility for what they did.

Orange County, even though it was at the center of the debacle, is one of the most forgiving.

We fought a war with Germany and now we drive German cars, said John Moorlach, Orange Countys treasurer. At some point, you have to move on.

Moorlach said Merrill still needs to mend fences in Orange County before his constituents and the countys board of supervisors would accept doing business with the firm.

Id like to have the opportunity to get better bids, said Moorlach. I am [sic] businessman and I cant run this office based on emotionalism.

The SEC, in agreeing today to a relatively modest fine, is taking into account Merrills previous agreements to pay $469 million to settle various other investigations and lawsuits related to its role in Orange County.

I dont know if theyll ever be finished paying a penalty, said Michael Shamosh, market strategist at Tucker Anthony & R. L. Day Inc. Rightly or wrongly, there are people who wont do business with them. Thats bad for the whole market.

Neil Roland and Tom Cahill of Bloomberg News announced Merrill to Pay $2 Mln to Settle SEC Muni-Bond Charges. This covered in detail the topic of their piece above. Here are two selected and the two closing paragraphs, one of which was provided above:

In the first case of its kind, the SEC also alleged that Merrill unreasonably failed to make sure investment bankers reviewing the bond offering statements were told about possible risks known to Merrills sales and trading workers. The left hand and the right hand were not in synch, said SEC enforcement director Richard H. Walker, who described the $2 million penalty as one of the largest fines weve ever assessed for non-intentional fraud.

It reflects both the seriousness of the conduct and our desire not to pile on, considering the other payments Merrill has made in this matter, Walker said.

For his part, the treasurer who replaced Citron in Orange County wants some day to do business with Merrill again.

We fought a war with Germany and now we drive German cars, said John Moorlach, Orange Countys treasurer. At some point, you have to move on.

Husein Mashni of the Daily Pilot provided an election update in Franco faces challenge in bid for fifth termNewport-Mesa school board member has served for 18 years, which opponent cites as main reason for his bid to unseat her.

She has obtained endorsements from several local officials, including Orange County Treasurer John Moorlach, Newport Beach City Councilman John Hedges and Orange County school board member Elizabeth Parker.

2003

One of my favorite quotes during the recall campaign came from Arnold Schwarzenegger: I told Warren [Buffet] that if he mentions Prop. 13 one more time, hell have to do 500 sit-ups. Buffet put Prop. 13 under the microscope and James B. Kelleher and Diana McCabe of the OC Register did a lengthy piece on the subject in Rethinking Proposition 13 Proposals to exempt commercial property from its tax protection have supporters and detractors. Gov. Gray Davis missed an opportunity to reconfigure the states tax system when he had a $12 billion surplus. I had a chance to vent in the following segment of the piece:

At the local level, cities came to rely on retail sales a reliance that has grown in recent years as the state has earmarked more and more of the property-tax receipts for mandated education programs. The result has been a tilt in urban planning toward strip malls and big box stores and away from affordable housing.

Its a dysfunctional system, says Orange County Treasurer John Moorlach. Cities are dependent on sales taxes and forced to do bizarre things like bringing in Costco or Wal-Mart instead of houses.

2008

The lead editorial in the Sunday OC Register was titled Take DNA lab away from government Sheriff, D.A. accuse each other of impropriety regarding evidence; both agencies have a point. The editorial was sparked by a recent piece by Tony Saavedra (see MOORLACH UPDATE — OC Jam Session — August 17, 2013).

Orange County District Attorney Tony Rackauckas is pushing for control of a proposed new $5 million DNA lab in order to build a more efficient and broader database to catch crooks and release the wrongfully convicted. Currently, the Sheriff’s Department operates the crime lab. Given the advances in the use of DNA evidence in crime-fighting, this should be a relatively noncontroversial matter.

Unfortunately, the DNA lab issue has become the subject of a vicious turf war between the D.A. and the Sheriff’s Department. Both sides argue that the other side cannot be trusted with such sensitive information. One would like to think that district attorney and sheriff’s officials would understand that DNA evidence can be a life-or-death matter, yet both sides have raised troubling allegations questioning the competence and integrity of the other agency.

On the D.A.’s side, "a senior prosecutor is alleged to have pressured a sheriff’s analyst to change her conclusion in a carjacking case that kept an innocent man imprisoned for 16 months," according to a recent Register report. According to a deposition, the DNA analyst said, "They were asking us to come to a conclusion that is not a typical conclusion that we would come to." D.A. officials deny any wrongdoing, but this opens up some troubling possibilities: What if the D.A. controlled the lab, and prosecutors wanted a different conclusion?

Of course, the Sheriff’s Department can’t seem to be trusted, either. As the Register reported: "A sheriff’s deputy is alleged to have falsified documents in a nationally funded DNA project, resulting in his arrest." In another situation, the D.A. said it hired a private lab to run DNA samples to get around the Sheriff’s Department’s foot-dragging. But private labs don’t have access to the federal and state DNA databases. Mr. Rackauckas argues that the Sheriff’s Department tried to stop other government labs from helping the D.A. compare the privately obtained samples to the databases. In other words, the Sheriff’s Department arguably endangered the public because it didn’t like that the D.A. used a private lab.

Here we see how an internal battle between government agencies is hurting the public and undermining the credibility of the DNA evidence process. Supervisor John Moorlach is promoting a reasonable solution a departmental reorganization that puts the coroner, jail health care system and the DNA lab under an independent chief medical examiner. We’d also advocate for the privatization of the DNA lab process. Competitive private labs could analyze samples more quickly and inexpensively than these bureaucratically run government labs and private labs wouldn’t have as many conflict-of-interest issues as the government-run varieties.

The Sheriff’s Department is right: The D.A. cannot be trusted with the DNA lab. The D.A. is right: The Sheriff’s Department can’t be trusted with it, either. It’s time to put an independent examiner in charge of the DNA lab rather than endanger the public with more delays and infighting.

Steven Greenhut focused his weekly OC Register Commentary section column on a topic that now appears to be ubiquitous in These worms make taxpayers squirm Despite troubling results of excessive pension increases for government workers, local Orange County officials haven’t learned to put taxpayers above the unions. The piece is a good primer for those who reside in the city of Los Angeles. The LA City Council is looking at a $3 billion bond issuance to repair potholes, which means residents will be asked to approve a tax increase to fund the bond payments. On its face, borrowing to pursue normal repairs should be worrisome. When they realize why the normal funding for street repairs has disappeared, then they will gladly vote against the pothole tax.

An old friend of mine taught me this saying: "Even the worm learns." He cited some obscure scientific study showing that if one pokes a worm with a stick every time it moves in a certain direction, the wriggling creature eventually will choose a different direction. The point (made all the more enjoyable as he told it in his thick West Virginia drawl): Worms are among the dumbest creatures on Earth, yet even they will change their behavior in response to some painful outcome if one is patient enough. If worms can learn from their mistakes, there’s no reason that even the dimmest human beings can’t also eventually learn important lessons.

My friend is a kind soul with enduring faith in humanity, so I admire his optimism. But he never had the displeasure of writing about local and state government, so he never considered a possible exception to his rule: politicians. This organism has a similar spinal structure to a worm (no skeleton, so they can bend with little effort) but often seems impervious to learning any meaningful lessons.

For instance, the United States is facing massive financial problems caused by the granting of unsustainable pension and medical benefits to government workers and dependents. Most people are familiar with the problems of Social Security and Medicare. A 2004 USA Today article captured the problem succinctly: "The long-term economic health of the United States is threatened by $53 trillion in government debts and liabilities that start to come due in four years when baby boomers begin to retire." Those four years are up, by the way.

The Bay Area city of Vallejo has been in the news lately for declaring bankruptcy and perhaps facing a state takeover after city officials gave government unions especially police and fire unions CEO-level pay and benefit packages that have consumed more than three-quarters of the city’s $80 million general-fund budget and have led to massive shortfalls. As Governing magazine reported in July, "Other troubled municipalities particularly those in California are watching Vallejo to see if bankruptcy is a viable approach to freeing the city from what Vallejo officials see as burdensome employee contracts." In the private sector, excessive benefits paid to union employees are threatening the continued existence of such iconic corporations as General Motors and Ford.

So what are local city officials doing in the face of this daunting evidence that pension-spiking is unsustainable? Spiking pensions, of course, and putting their taxpayers at risk of a Vallejo-like scenario. They’ve learned nothing. The offenders in recent days include Santa Ana council members, who Monday gave final approval to a plan to increase city worker pensions to a "2.7 at 55" formula. That means that city workers can retire at age 55 with as much as 81 percent of their final year’s pay (2.7 percent times the final year’s salary times the number of years worked) after 30 years on the job. Those who are about to retire get the new enhancement, anyway, thanks to the retroactive portion. (This is the old law enforcement formula. Now, police and firefighters can retire with 90 percent or more of their pay at age 50.)

This new benefit increase, granted with little debate, will impose enormous new taxpayer-backed liabilities on residents of a city that’s already incapable of even meeting its most basic responsibilities.

Orange County Supervisor John Moorlach, one of the few nonwormlike politicians willing to stand up to union demands, had this to say in a recent e-mail about Santa Ana’s plan: "What is infuriating to me is that some cities can’t even afford to fix the potholes in their streets. How can they afford to take on additional pension liabilities? In the near future, when a city council votes to put a ‘pothole tax’ on their ballot, don’t you buy it; it will really be a ‘pension enhancement/wealth transfer tax.’"

Fullerton also is involved in a pension-spiking scheme for its employees. Officials there are angry that one councilmember, Shawn Nelson, blew the whistle on the behind-closed-doors plan to spike pensions retroactively by 25 percent. As these things usually go, everyone is in on the deal (council members, staff who "represent" the city and the union) and then a deal that is fully negotiated in closed session is quietly placed on the public meeting agenda. There’s rarely time for opposition to grow, given how stealthily this is typically done. Then, before you know it, the employees walk away with taxpayer loot.

Because officials are quietly trying to approve these pension enhancements, we’ve yet to hear any argument for why they are doing this. Beyond Nelson, none of the council members even admit this is being discussed! The union members I’ve heard from echo the same old argument: We deserve it because we work hard, and others are getting more than we get. This just shows the depth of the entitlement mentality within the isolated world of government.

Writing about the Fullerton deal, the Long Beach Press-Telegram captured the nature of these rigged negotiations: "’Negotiating’ is a ridiculous term for what’s going on, which is raw self-dealing. Everybody involved benefits, from the elected politicians who expect help at election time, to city ‘negotiators’ who, of course, will get the 25 percent increase, too."

By the way, the publicity surrounding the deal didn’t shame City Council members into backing away from their proposal, but moved them Tuesday night to lecture Nelson about proper protocols surrounding the discussion of closed-door sessions. Again, these folks learn nothing.

But there’s no excuse for not knowing about the huge problems that local governments are facing because of deluxe pension promises. Pension issues have remained in the news in Orange County, in particular, given that the county’s pension plans are woefully underfunded by a meager 73 percent, with a stunning $2.9 billion in pension debts over time.

In 2004, the Board of Supervisors voted 3-2 to retroactively spike pensions for most county employees granting them a guaranteed retirement of 81 percent of their final year’s pay at age 55 after 30 years of work. While most private-sector employees must rely on the performance of the stock market and their 401-k plans, county employees have a guarantee from taxpayers, regardless of how poorly the economy performs. In 2001, . . .Supervisors . . . led the charge for a retroactive pension spike for deputies something that has added about $400 million to the county’s unfunded liabilities. This is a bipartisan game, with even Republican politicians still defending unconscionable pension votes.

Last month, after board Chairman Moorlach introduced a measure to place on the November ballot an initiative requiring voter approval of any pension increases, another supervisor argued that it was about 10 years too late. Yes, the measure was late, considering what happened in ’01 and ’04, but the Fullerton and Santa Ana deals prove that it’s never too late to take control of the situation given how slow politicians can be to listen to taxpayers when they are under the sway of a powerful special-interest group.

Fullerton and Santa Ana council members are worse than worms, but at least the current Board of Supervisors has learned something in its 5-0 approval of that ballot measure. The county measure doesn’t apply to O.C. cities, but it’s a great blueprint for what’s needed in every municipality in this county. In liberal San Francisco, where such a measure has long been in place, the pension plan is well funded at 107 percent.

Here’s a lesson for all of us: Politicians will never put you above their union allies, so we need to take such decision-making out of the hands of these spineless and unteachable creatures.

August 25

1998

Andrea Figler and Amy B. Resnick of The Bond Buyer would cover the story of the day in Merrill Settles SEC Charges Over Orange County Deals. Here are a few selected paragraphs:

Credit Suisse First Boston and two of its brokers contributed far less to the countys investment portfolio but paid the SEC $870,000 to settle similar charges this year.

Although the SEC touted the $2 million settlement because it was the first time it has blamed an underwriter for misleading disclosure to its other half, Orange County Treasurer John Moorlach said it was just some more fallout from the countys bankruptcy.

The bankruptcy is almost four years old. A lot has happened in the industry to make sure that this kind of occurrence doesnt happen in the future so this settlement is not a pivotal issue, Moorlach said. This is still part of the clean-up process for those who failed with Orange County.

Its a light settlement, Moorlach said, especially in light of the Credit Suisse settlement. He expected at least $3 million. Merrill Lynch should be happy.

E. Scott Reckard of the LA Times provided the story in Merrill Settles SEC Charges for $2 Million.

Charges of fraud or recklessness could have tainted the firms reputation as it moves to regain its role as the biggest Wall Street player in Californias municipal bond market.

A lot of municipalities, to their credit, have discontinued using Merrill Lynch, said Orange County Treasurer John M. W. Moorlach.

In a failed campaign for treasurer in 1994, Moorlach revealed the risks Citron was running, and he has criticized Merrill for supplying too-risky investments.

But he now advocates that the county again do business with Merrill, Citrons chief investment house, saying the extra competition will save the treasury money on its investment deals.

I look at Merrill Lynch the way I do at Germany and Japan. I mean, were driving German and Japanese cars now. The past is the past, and you move on, Moorlach said.

2003

The Orange County Business Journal printed a Letter, County CEO, from a labor union representative that took umbrage with one of my recommendations for the Countys next CEO (see MOORLACH UPDATE — SB 2 — August 7, 2013). I am proud to say that one of the many successful initiatives that I pursued as a County Supervisor was the establishment of an ordinance that prohibits the imposition of a project labor agreement (PLA) at the County, unless it is a legal requirement due to state or federal law (see MOORLACH UPDATE — PLA — October 29, 2009). I know full well the detrimental ramifications of a PLA on infrastructure projects, thank you very much. Consequently, Im honored by the attack the letter writer lunged at me.

This letter is in response to the Aug. 4 Help Wanted Viewpoint by John Moorlach.

I would suggest to Mr. Moorlach that before he writes an article that he do some type of research on the validity of the subject matter. Among several expectations that the taxpayer, the board of supervisors, the countys department heads and the countys employees should have of our next CEO, Mr. Moorlach lists the strength to extricate the county from the ill-advised and costly project labor agreement.

If Mr. Moorlach is selected as the new CEO, I certainly hope his recommendations to the board of supervisors are based on factual information. I would like to have him explain who ill-advised the majority of the board that approved the project labor agreement. Additionally, where is the cost?

If the contractors (union or nonunion) bid the county projects with the intent of paying prevailing wages as required by state and county law, the cost of construction labor is basically the same, regardless of a project labor agreement. And in many cases, with the use of registered apprentices, the cost will be less.

Could it be that Mr. Moorlach doesnt want the workers to receive prevailing wages? Is this an attempt to save money by taking it from the workers paycheck? If that is what he means, he should say it.

Jim Adams

Council Representative

Los Angeles/Orange Counties Building and Construction Trades Council

August 26

2003

Jean O. Pasco and Seema Mehta of the LA Times provided an update in CEO Parrish Declines Top Post in O.C. Riverside Countys chief executive stays put, citing better retirement benefits. Supervisors vote to give him a $24,000 salary increase. Wooing a County Administrative Officer from a neighboring county failed to work over the total compensation package recently, and it did ten years ago as well. In the article, a status report on the eight month long process was provided, including this paragraph:

John M. W. Moorlach, appointed county treasurer by the board after the countys 1994 bankruptcy, also applied for the post at the request of Supervisor Chris Norby.

August 27

2008

The Long Beach Press Telegram had an editorial, titled Pension-spiking schemes, on the city of Santa Anas granting of retroactive benefit enhancements.

Beware of politicians’ largess on your dime.

As has been said famously, democracy can exist only until voters discover they can vote themselves largess from the public treasury. But in California, there’s a twist to that observation.

Voters are failing to discover it’s their employees who are emptying the treasury. The latest example is the city of Santa Ana, where there probably isn’t enough money to fill potholes, yet politicians last week approved a treasury-busting increase in city employees’ pensions.

The plan gives employees retroactive pension increases with payouts of as much as 81 percent of final year’s pay at age 55 – 10 years earlier than "normal" retirement age for most people. This is the formula Long Beach adopted several years ago, although Long Beach plans to modify its benefits slightly to encourage long-term employment. Police and firemen get better pensions, of up to 90 percent at age 50.

As the Orange County Register reported, Santa Ana was taking its cue from a great many other California cities, including Fullerton, whose city council has been planning in closed-door sessions to do the same thing, and the Northern California city of Vallejo, which has declared bankruptcy because the treasury looting there is done.

Orange County Supervisor John Moorlach, a rare example of a politician who speaks out against such pension-spiking, told the Register that voters should watch out if a city council puts a "pothole tax" on the ballot, because it really will be a "pension enhancement/wealth transfer tax." That’s the same thing as a treasury-looting tax.

Moorlach, much to his credit, is the supervisor who pushed successfully for an Orange County ballot initiative that would require voter approval of any further pension increases. That would be too late for Orange County’s pension spiking, which has created unfunded liabilities of $2.9 billion, but Santa Ana and Fullerton illustrate that the practice continues.

Taken to its logical conclusion, pension spiking won’t lead to the end of democracy in California. There’s always the alternative of bankruptcy.

But there’s a better way. Voters should figure out what’s happening to their treasury before it’s too late.

The Long Beach Press Telegram also provided an update on the incorporation front with A step for Rossmoor, by John Canalis.

Organizers of an effort to form Orange County’s newest city with help from a proposed utility tax said Tuesday that qualifying seniors and disabled residents would be exempted from the levy.

County supervisors agreed last week to set aside money to pay for the tax waivers if Rossmoor becomes a city of 10,000 in the Nov. 4 election.

Under provisions in the resolution, qualifying age, income levels and disabilities would be negotiated between the new city council and the county’s chief executive officer.

Wealthier or still-employed seniors – the subdivision’s median income is about $100,000 – would keep paying but those who could prove they are struggling would not.

Eric Christensen, co-chairman of the Committee for Rossmoor Incorporation Now!, said removing the tax for seniors and the disabled should alleviate one of the incorporation drive’s greatest roadblocks.

"Now those who may qualify for the exemption will be able to enjoy the benefits of incorporation without the stress of worrying whether they will be able to pay the only new tax," he said.

On the ballot are two competing tax proposals of 7 percent and 9 percent on gas, water and electricity. One of the two measures must pass for Rossmoor to incorporate.

Under the county resolution, the county would make up the difference in lost revenue for an amount not to exceed $400,000 over a five-year period – about $80,000 a year.

The figure was arrived at by an outside consultant who studied the viability of Rossmoor cityhood.

"It’s not a scientific number, but it’s a very good number," said Henry Taboada, executive director of the Rossmoor Community Services District, which handles some government functions for the community. "It’s one that could be refined by the city council once they sit down and have the finance staff validate it."

Incorporation opponents criticized the supervisors’ decision as non-binding.

"As far as that waiver for seniors and everything is concerned, that’s another smoke screen," said resident Jim Alexander. "If they were really going to do that prior to the measure going on the ballot it would have been written in there as a guarantee, but it wasn’t."

The 50-year-old subdivision bordered by Long Beach to the west, Los Alamitos to the north and Seal Beach to the south and east, is currently governed by the county seat in Santa Ana and the small district board to which Taboada reports.

Members of the board would not automatically become council members. Voters will be asked on the same ballot to elect a council.

Eight candidates are seeking five seats. The top three vote-getters would earn four-year posts; the fourth and fifth vote-getters would receive two-year positions.

Voters also would decide whether to create council districts by neighborhood, as neighboring Seal Beach and Long Beach do.

Rossmoor differs from those communities in that it was developed at roughly the same time in the 1950s and has little variation in demographics or neighborhood character.

"You divide Rossmoor by fifths and each fifth looks the same," Christensen said.

The first council would be elected at-large. District boundaries, if voters want them, would be drawn later.

Taboada, a retired Long Beach city manager, said he would stay on temporarily to help with the transition but would not apply to become Rossmoor city manager.

The 7 percent tax would mean about $16 a month per household; 9 percent would mean about $21 a month.

The difference between the two utility tax proposals would mean about $226,000 a year to the proposed city but both were found fiscally sound by an outside consultant and the county agency that oversees cityhood applications.

In ballot arguments against the measure, opponents argue that the county cannot legally refuse to provide services to Rossmoor and that the community’s relatively weak sales tax base could mean future taxes to keep the city afloat.

"A new city will be more bureaucracy and more expensive to operate," according to the ballot argument.

Supervisor John Moorlach, whose 2nd District includes Rossmoor, has long supported cityhood, arguing that the county should focus on providing regional services, such as health care and law enforcement, and get out of the business of governing unincorporated "islands."

The difference between what Rossmoor residents pay in annual taxes and what they receive in services is about $590,000, according to the county.

Utilizing available revenue, such as a portion of property and sales taxes, state vehicle license fees and a utility tax, would give Rossmoor projected revenues of $4.9 million its first year against expenses of nearly $4.5 million.

The district spends $1 million in an annual budget that covers street sweeping and lighting, parks and recreation and tree-trimming.

County services provided to Rossmoor include animal control, law and code enforcement and issuing building permits.

The new council would decide on contracting for city services, including law enforcement, which is currently handled by the Sheriff’s Department, and animal control.

The Orange County Fire Department would continue providing protection.

If the ballot measures pass, Rossmoor would become a city on Jan. 1.

"The new City Council would actually meet on New Year’s Day; that’s the date of incorporation," Taboada said.

The county would provide services through June 1, which is when the utility tax would kick in, Christensen said.

MEASURE U AT A GLANCE

The Nov. 4 ballot measure asks Rossmoor’s roughly 7,000 voters to make decisions on the following issues:

– Incorporation

– Issuing a 7 percent utility tax

– Issuing a 9 percent utility tax

– Electing a five-member city council

– Creating council districts by neighborhood

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