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Guest Contributor
John Moorlach

John M.W. Moorlach is Orange County's treasurer-tax collector.

Drip, Drip, Drip and Soon You're In Over Your Head

Let's count the costs taxpayers are facing because of O.C. officials' bad decisions..
[John Moorlach] 1/28/04

Former Orange County Treasurer Robert L. Citron's investment pool imploded nine years ago, creating a stunning $1.7-billion benchmark for poor stewardship of public funds.

No single incident since has reached that stratospheric level, but it's still sobering to count the costs taxpayers are absorbing because of poor judgment by state and county legislators. If elected officials would only count the costs before casting their votes, future financial hurdles wouldn't be so steep.

Citron's loss hit us all at once. Other costs have risen gradually, and we've become like the proverbial frog that eventually boils to death in a kettle as the temperature slowly rises.

The refusal to use county counsel to appeal a Superior Court judgment that would set aside the "2% recapture" methodology used by all California county assessors has cost the county $1 million in outside legal bills.

A failure to monitor the Planning and Development Services Department cost taxpayers $20 million as the department burned through cash generated by its unusually high fees and emptied its reserve fund.

The county also is paying dearly for mistakes in the human resources area. It is paying about $400,000 annually to cover the costs of administering the sheriff's deputies union's medical plan — even though the county human resources department receives a separate fee for the same services from the Sheriff's Department. Extrapolate that fee over the last nine years and the cost is $3.6 million.

Human resources consolidated employee vacation and sick leave time, in the process creating a potential unfunded liability of $30 million.

In 1995, the county set aside $320 million in an investment account reserve that was supposed to help pay off pension obligations during the next 30 years. The cash-strapped county now wants to drain the remaining $170 million to help solve an immediate cash flow problem.

No need to guess what that does to the pension plan subsidy that was supposed to last for nearly two more decades.

A plan to increase retirement benefits for public safety employees by 50% — without bothering to first identify a funding source — will cost $390 million. The county also faces a minimum $15-million annual liability to fund new retirement benefits for the next generation of sheriff's deputies — which could total $600 million.

Ill-advised transportation decisions also are adding to the pain. The Orange County Transportation Authority bought the 91 Express Lanes — overpaying by $20 million — and still hasn't reduced tolls as promised. OCTA also paid a $30-million prepayment penalty on the Express Lanes' recent debt refinancing.

Last week, OCTA approved an antiquated light-rail technology, the CenterLine project. OCTA is trying to make the line fit into whatever cities will accept it and its $1-billion price tag.

The county also has failed to maximize sources of non-tax revenue that could have helped to manage the costs of these financial indiscretions.

The county could have retired its bankruptcy debt 10 years earlier and cut financing costs by nearly $500 million had it agreed to divide revenue from the national tobacco settlement with the Orange County Medical Assn.

The El Toro Marine base will be turned over to civilians. The U.S. Navy and Irvine — not the county — will sell the land and reap the considerable proceeds of $3.9 billion in potential market value, before toxic cleanup costs.

The state's massive budget problems are trickling down to local government, so the county faces its share of Gov. Arnold Schwarzenegger's just-announced $1.3-billion diversion proposal from counties and cities, decreases in funding for social services and other programs, as well as the elimination of state-mandated reimbursements.

Orange County must deal with the financial sins of the past. County budgets will be tightened, and layoffs will be required. Services to constituents will suffer. Major infrastructure improvements will be deferred.

There is no argument that Schwarzenegger and our Board of Supervisors have their work cut out for them. Sacramento needs a spending cap and must fix the workers' compensation program.

Orange County needs to more carefully weigh the impacts of fiscal decisions against its 10-year financial plan. Fiscal restraint must be exercised at every level. Departments need to be monitored more closely. Negotiated benefits must be carefully analyzed using a worst-case-scenario approach.

The governor just proposed rolling back retirement benefits for new hires. Orange County should at least consider doing the same.

We will have county supervisorial campaigns this year in the 1st and 3rd districts.

Those who win must wear their business suits to work every day and leave the gaudier political garb for another time.


John M.W. Moorlach is Orange County's treasurer-tax collector.

This opinion piece first appeared in the Los Angeles Times

copyright 2004 John M.W. Moorlach




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