MOORLACH UPDATE — 25th Anniversary Commemoration — December 6, 2019

Happy Anniversary

The OC Register requested my observations on the 25th anniversary of the County of Orange’s filing for Chapter 9 bankruptcy protection. Read more about it in the first article. 

Investing in Greenhouse Gas Reduction

Gov. Newsom recently issued a confusing executive order that encourages the state’s three major defined benefit pension systems “to reconsider how they spend the public’s money with an eye toward investing in projects that could help Californians prepare for climate change.”   

Observing that backup power generators are selling like hotcakes in Northern California, thanks to PG&E’s Public Safety Power Shutoffs (PSPS), I recommended that the pension systems should have invested in the manufacturers of these alternative and temporary power providers.  For more on PSPS, see MOORLACH UPDATE — PSPS Opening Remarks — November 30

While being interviewed, I did a quick search for a publicly traded generator seller and found Generac Holdings Inc. (NYSE: GNRC).  At the beginning of 2016, this Wisconsin corporation’s stock was trading around $30 per share. A year later, it was around $40 per share, up one-third in twelve months!  A year later, it was up to $50 per share; another 25 percent increase! It didn’t move much during 2018. Since the beginning of 2019, its price is now around $100 per share!  It skyrocketed 100 percent in one year! Now that’s how to invest in climate change. It is no surprise so many hedge funds have acquired significant holdings of Generac.  

I’m not making any stock tips, as it’s probably a year too late, but pension fund investment managers should manage their portfolios and elected officials should be careful about giving investment directives.  The anniversary of Orange County’s bankruptcy filing should be proof enough of this advice.

The California Globe addresses this Executive Order in the second piece.

25th Anniversary Look Back

The media frenzy continued, keeping me very busy with calls and requests from around the country.  Especially into the evening, as the Board of Supervisors had approved the filing late in the day of December 6th.  For more, see MOORLACH UPDATE — LOOK BACKS — December 6, 2009.  

For the last two Look Backs, see  MOORLACH UPDATE — 25th Anniversary Reflections — December 5, 2019 and  MOORLACH UPDATE — Life Changing Press Release — December 2, 2019.

25TH ANNIVERSARY

When the sky fell down on Orange

County’s finances

By John M. W. Moorlach

Dec. 6 marks the 25th anniversary of one of Orange County’s darkest moments, when the economy hammered an inappropriate investment scheme and the county filed for bankruptcy protection. It was the lead story for weeks and months to follow. Before it, the last event to dominate the Orange County Register’s headlines for such an extended period was World War II.

The historic implosion was caused by a reckless investment strategy condoned by most elected leaders in Orange County. Even the credit-rating agencies, bond lawyers and independent auditors said there was no need for concern. Treasurer- Tax Collector Bob Citron assured the media, “The sky is not falling.”

In my campaign against Citron that year, I was the only political candidate who, along with my supporters, was ringing alarm bells — to no avail. There also were earlier warnings from other market-impacted municipalities.

In 1984, the city of San Jose had to address the use of leveraging, with reverse repurchase agreements, in its cash-management portfolio. This technique allows one to borrow against the face value of the bond for a brief period. Interest rates on the short end of the yield curve rose and this city lost $60 million when it had to pay off the loans by selling bonds at a lower market price.

Municipalities should safely invest short-term cash balances and keep them highly liquid. The old KISS admonishment applies: Keep It Simple, Stupid.

In 10 short years, San Jose was forgotten. There is always someone who believes they can outsmart the market. Citron would borrow money at the short end of the yield curve for 90 to 180 days using the failed San Jose financing method. He took $7 billion in fixed-income instruments and borrowed against them twice, building a $21 billion portfolio of four-year bonds.

Since interest rates were falling for years, the strategy worked. Borrowing at 3% and buying longer term investments at 5 percent is a fascinating way to enhance yield. The New York Times called him a “wizard” because governments that invested with him got extra money they could use to balance tight budgets.

By 1994, the marketplace had also developed a variety of derivatives, or structured notes, designed to provide formulaic outcomes based on other available indexes. For instance, an “inverse floater derivative” would pay a higher yield if interest rates went down.

Borrowing to invest is like drinking alcohol and derivatives are like taking sleeping pills. You can consume one or the other, but both at the same time could be lethal.

In the summer of 1994, Odessa Junior College in Texas lost half the value of its $22 million portfolio because, according to the state auditor, it invested in “high-risk derivative investments without implementing investment management controls.” But if the yield curve changes direction it can confirm that you’re a gambler, as short-term borrowing rates began to exceed 5%.

By October, Cuyahoga County, Ohio, where Cleveland is located, incurred a $115 million meltdown when the issuers of reverse repurchase agreements demanded Cuyahoga increase their collateral. That’s what happens when the bonds you borrow against decline in value below the amount you borrowed. Heading toward December 1994, the Federal Reserve Board raised interest rates. Lenders then made collateral calls on the County of Orange. The county tried to stop the necessity of selling assets to make the margin calls by using a unique strategy. It filed for Chapter 9 bankruptcy protection, a section of the federal bankruptcy code only available to municipalities.

The lenders were not amused and sold the collateral anyway to repay their loans, resulting in more than $1.6 billion in realized losses. The sky fell.

Orange County became international news with the largest municipal bond portfolio loss and the largest municipal bankruptcy protection filing in United States history to that point.

Some journalists who covered my campaign against Citron just a few months prior would claim the implosion came as a total surprise. Moody’s and Standard & Poor’s, the two dominant rating agencies that publicly protected Citron’s scheme, had egg on their faces, something that would reoccur with the subprime mortgage debacle less than 15 years later.

After the bankruptcy, the Board of Supervisors appointed me treasurer-tax collector, a position in which I served for 12 years.

John M.W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate.

Gov. Newsom’s Climate Change Executive Order Looting Road Funds Short on Details, Long on ‘Social Investing’

‘The Governor is creating more greenhouse gas emissions with idling cars stuck in traffic’

By Katy Grimes

https://californiaglobe.com/section-2/gov-newsoms-climate-change-order-looting-road-funds-short-on-details-long-on-social-investing/

‘There’s a growing understanding that climate change is a material risk to investors and companies
just like cyber-terrorism or inflation.’

Recently California Gov. Gavin Newsom signed an Executive Order authorizing the looting of voter-approved gas tax funding for road repairs and highway expansions to be used to fight “climate change” via the high speed rail he promised to shut down. Voters felt duped. Again.

The Executive Order by the Governor requires state government to “redouble its efforts to reduce greenhouse gas emissions and mitigate the impacts of climate change while building a sustainable inclusive economy.”

Through the Executive Order, California Governor Gavin Newsom has redirected gas tax money to fund railway systems and other projects. The gas tax revenue would have repaired and upgraded the state’s broken highways and roads, California Globe reported in October.

“Newsom’s order directs the state’s Transportation Agency, pension funds and the department that manages government contracts to reconsider how they spend the public’s money with an eye toward investing in projects that could help Californians prepare for climate change,” the Sacramento Bee wrote.

What exactly does this mean?

“Social investing is dicey,” Sen. John Moorlach (R-Costa Mesa) explained in a California Globe interview. “We are supposed to invest for value.”

Moorlach suggested that the governor may not be looking at the big picture. Sen. Moorlach explained that California is emitting far more greenhouse gas by using the old electricity infrastructure all over the state, which caused the wildfires, according to CalFire. The greenhouse gas emissions from the fires far exceeds any GHG reductions all year.

And on top of the high greenhouse gas emissions, millions of California residents were forced to purchase diesel or natural gas generators to keep their power on during the utility power outages. “He should tell CalPERS and CalSTRS to invest in backup generators!” Moorlach said laughing, noting that stock prices for generator manufacturers have doubled in two years.

The Executive Order effectively ignores money earmarked for road improvements, and pension obligations, redirecting it to “climate change” projects designed to “reduce fuel consumption.” The governor wants roads and lanes reduced, wants people out of their personal cars, and instead using public transportation or bicycles.

Specifically, “the governor issued an executive order that, among other things, directed the State Transportation Agency ‘to leverage the more than $5 billion in annual … spending for construction, operations and maintenance to help reverse the trend of increased fuel consumption and reduce greenhouse gas emissions,’” as the Los Angeles Times reported.

The governor ordered the agency to “reduce congestion through innovative strategies designed to encourage people to shift from cars to other modes of transportation.” He directed it to “fund transportation options that … reduce greenhouse gas emissions, such as transit, walking, biking and other active modes.”

“Instead of building capacity on our highways to move people and freight, Governor Newsom is funding his pet rail projects throughout the state,” Assemblyman Jim Patterson (R-Fresno) said in October. “This theft of funds meant to improve our roadways is a glimpse into the future of transportation in our state and Newsom continues to execute his September 2019 Climate Change Executive Order. The Central Valley is just the beginning. Other road projects will likely be next.”

“This is theft of our gas taxes by Executive Order,” Patterson continued. “Governor Newsom is intentionally starving us out of our roads. Voters approved SB 1 with the promise that our crumbling highways would get the attention they deserve. Instead of building capacity, our gas tax funds are being siphoned off to fund Newsom’s favored pet-projects,” Patterson said. “Governor Newsom’s promise not to forget about the Central Valley is full of hot air, just like his climate plan.”

However, Sen. Moorlach notes that transit usage is declining nationally, and in California, as well. Moorlach also discussed Gov. Newsom’s announcement that he would no longer buy cars from auto manufacturers who side with President Trump’s relaxation of emissions standards. The auto makers targeted by Newsom are General Motors, Fiat Chrysler, Toyota and several others that sided with the Trump administration in the ongoing battle over tailpipe pollution rules.

“Have you seen the Capitol parking basement lately?” asked Sen. Moorlach. “It’s full of Toyotas,” assigned to and driven by members of the Legislature.

Gov. Newsom posted a Tweet about his directive: “Carmakers that have chosen to be on the wrong side of history will be on the losing end of CA’s buying power. CA will stop purchasing vehicles from carmakers that have refused to protect our air & chosen to follow the regressive ways of @realDonaldTrump.

However, nowhere in Gov. Newsom’s Executive Order does he state what and how “climate change” will be reduced in California. What the order says is:

“Maximize reduction of greenhouse gas emissions.”

“Develop and implement sustainable purchasing policies.”

“Consider strengthening or adopting new regulations…”

“Align the state’s climate goals with transportation spending…”

“Leverage the state’s $700 billion investment portfolio to advance California’s climate leadership… the Department of Finance shall create a Climate Investment Framework.”

There is nothing concrete in the Executive Order to describe how, or explain specifically what needs to happen to “redouble efforts to reduce greenhouse gas emissions and mitigate the impacts of climate change while building a sustainable inclusive economy.”

“Did he even read the directive he signed?” Sen. Moorlach asked.

“How much greenhouse gas emissions is created by powering high speed rail?” Moorlach asked. And, Moorlach said by refusing to improve and expand Interstate 5 and Highway 99, the Governor is creating more greenhouse gas emissions with idling cars stuck in traffic. We discussed the cities and counties with local councils and boards of supervisors approving “lane diets” and “traffic calming,” which has served to create epic traffic back ups and more idling cars spewing greenhouse gas emissions.

More Newsom Administration ‘Climate Change’ Talk

“Climate is a material risk to companies, both in terms of physical liability, like PG&E and wildfires and also when you talk about the transition to a carbon neutral economy because some assets will no longer be as valuable,” said Kate Gordon, Gov. Newsom’s director of the governor’s Office of Planning and Research, the Sacramento Bee reported. For instance, “electric vehicles are a solution and a player in the market,” she said. “We should be thinking of investing in electric vehicles. You want to avoid stranded assets as an investor and you want to avoid physical risk. There’s a growing understanding that climate change is a material risk to investors and companies just like cyber-terrorism or inflation.”

Sen. Moorlach questioned where the power will come from for all of the electric cars if California’s utility companies continue with scheduled power outages on windy days. And with the state’s current renewable energy mandate of 33 percent, 50 percent by 2025 and 100 percent by 2045, the electricity grid will not be able to withstand 40 million electric cars with intermittent power and rolling blackouts.

California purchases one-third of its electricity out of state – a figure that is bound to go up with each renewable energy mandate increase.

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — 25th Anniversary Reflections — December 5, 2019

OC Bankruptcy Reflections and Lessons

The 25th anniversary of the filing of Chapter 9 bankruptcy protection by the County of Orange is tomorrow, December 6th.  First, it is amazing how quickly the time has flown by. Second, it’s been an interesting historical exercise to reflect on 1994 through look backs in my UPDATEs, providing sequential events leading up to this point.

It is a mixed bag when you try to warn people about an impending disaster if they do not change course.  Half of you wants to say, “I told you so.” The other half says, “Wait a minute, it’s my property and hard work, translated into the payment of taxes, that you just damaged.”

It is important to appreciate and understand what happened in Orange County, as financial decisions by elected officials continue to have long-term reverberations that could impact us, our children and grandchildren in the near future.  R Street and the OC Register provide their reflections in the two pieces below.

25th Anniversary Look Back

After the December 1st press conference by the County of Orange concerning the Orange County Investment Pool, my life converted to nonstop media inquiries (see MOORLACH UPDATE — Life Changing Press Release — December 2, 2019).

Here are clippings from December 3rd: MOORLACH UPDATES — OC Register — December 3, 2009, December 4th: MOORLACH UPDATE — Mainero — December 4, 2009, and December 5th: MOORLACH UPDATE — LOOK BACKS — December 5, 2009

On December 5th, I faxed the following letter to the County’s Executive Officer:  

Dear Mr. Schneider:

When I ran for Treasurer-Tax Collector this year I was confident that my business background and financial expertise, as a Certified Public Accountant and Certified Financial Planner, would enable me to be an effective leader and conservative manager of the taxpayers’ funds.  I fully understood the dynamics of the high risk investment strategy being employed in regard to the Orange County Investment Pool and I am on record for voicing my strong concerns in this matter. Unfortunately, my worst fears of a potential calamity may be materializing.

During my campaign, I developed and was prepared to rapidly implement a comprehensive rehabilitation plan for the Pool.  Therefore, I believe I would be very competent to sit on the proposed oversight committee of the Pool and would be the most prepared local citizen to serve as the Chairman.  I will provide a plan, and believe that its implementation will be a model for other municipalities in similar situations to follow.

I would like to be involved in the formation of the criteria for selection of members of the committee to insure that there is fair representation for all investors, regardless of investment size, including “voluntary” and “statutory” participants in the Pool.  The committee should have the right to independently retain professional legal and financial advisors, who preferably are from the local community. Concerns of potential conflicts of interest have already been raised regarding the retention by the County of the law firm of Le Boeuf, Lamb, Leiby & MacRae, since one or more of their professionals were political contributors to Mr. Citron’s campaign.

I am making myself available to assist in these urgent matters immediately.  You can reach me at 754-1040.

Very truly yours,

John M. W. Moorlach

Anatomy of a Government Bankruptcy

Steve-Greenhut-400x400.jpg

Steven Greenhut

Resident Senior Fellow and Western Region Director, State Affairs

https://www.rstreet.org/2019/12/05/anatomy-of-a-government-bankruptcy/

When Orange County went belly up in 1994, the stories seemed to write themselves. One of the nation’s richest counties couldn’t pay its bills. Quirky Treasurer Bob Citron was the only Democrat elected to countywide office, yet Republican officials hailed him as a financial wizard as his Vegas-style investments raked in incredible returns. The county political establishment circled the wagons around him and took potshots at the messengers giving them sober news.

Citron, who died at age 87 in 2013, was indeed a colorful figure. Shortly after the bankruptcy, the Orange County Register described him as a man who “lived up to the penny-pinching stereotype of a treasurer–tax-collector” — known for his “well-worn suits, the calculator wristwatch to divvy up restaurant bills, the publicized spat with the county years back when he claimed he had been shortchanged $12 in a paycheck.”

That tightwad image, however, contrasted with his wild investment portfolio, which eventually collapsed like a house of cards — leading him to plead guilty to six felony counts related to falsifying information. Citron was never accused of personally benefiting from these dealings, but he was fined $100,000 and sentenced to a year in prison. He served his time at the jail commissary in a work-release program and quietly lived out his days in his modest Santa Ana home.

Citron had no degree or investment experience. He didn’t invest in stocks himself. (His defense even filed psychological reports claiming that he only had seventh-grade math skills and might be borderline brain-damaged.) Yet after a stint in the county’s tax bureaucracy, he won election as tax collector. The county merged that office with the treasurer to save on administrative costs, leaving billions of dollars in the hands of someone who had scant experience and who reportedly consulted with a mail-order astrologer for interest-rate advice. That all looks rather crazy in hindsight.

“Citron had a view — totally accurate — that interest rates were going down and that bonds were therefore going up,” explained Carol Loomis in a 2012 Fortune article. He leveraged the investment pool to buy bonds, and doubled down even after the Federal Reserve started raising rates. “By early December, the Fed had turned the screws five more times,” she added. “Wall Street’s brokers, who had provided Citron with most of his loans, were demanding additional collateral that he couldn’t supply. So some brokers sold their collateral, others mobilized to do so, and Citron’s whole jerrybuilt contraption tumbled.” The county lost $1.6 billion.

Citron blamed Merrill Lynch for luring him into the investments. The investment firm blamed Citron — but ultimately paid $400 million to settle the county’s $2 billion lawsuit. Citron gambled and lost with public dollars because he believed that he had figured out a clever way to satiate governments’ quest for something he presumably would not offer in his personal life: a free lunch.

In 2017, the county paid the last of its bankruptcy-related bond debt — the end result of a deal that officials hammered out after frustrated voters soundly rejected a half-cent sales tax (Measure R, in 1995) to pay for their politicians’ idiocy. In 1994, this was the largest municipal bankruptcy in U.S. history, but others have surpassed it since. But as the 25th anniversary of the bankruptcy arrives on Friday, lessons remain unlearned.

Why did no one see this coming? Citron’s financial reports made reference to the strategy and, as the Los Angeles Times reported, warned investors of its risky nature. The answer is obvious. Government agencies wanted the extra cash and were willing to turn a blind eye as long as the money was flowing.

A handful of Orange County experts proved the exception. John Moorlach, now a Republican state senator from Costa Mesa, was a private accountant who ran against Citron for the treasurer’s office. He sounded the alarms but was dubbed “Chicken Little.” Moorlach was met with outright hostility from local elected officials, including fiscally conservative Republicans, who didn’t want him to endanger Citron’s unbelievable return rates.

After bankruptcy, Moorlach was appointed treasurer, won another term, and then won terms as a county supervisor before heading to Sacramento. He remains one of the few lawmakers with actual math skills. His 2013 recollection sums up the problem aptly: “Our bankruptcy was a colossal accumulation of unnecessary errors and irresponsible actions done independently by a significant number of individuals from various financial and public sector disciplines, both inside and outside of county government, all of whom should have known better.”

Since then, Moorlach has been waving red flags about another approaching financial calamity. It involves California’s unfunded pension liabilities, brought on by politicians and pension funds more interested in boosting public-employee compensation than protecting the public’s assets. Officials should know better, but have been reacting to Moorlach’s warnings the same way they did in 1994. Some critics even have reprised the Chicken Little epithet.

Despite record stock-market earnings, the behemoth California Public Employees’ Retirement System (CalPERS) is funded at a wobbly 70 percent. Depending on whose data one uses, the unfunded liabilities to pay for pension and medical care for current and retired California public employees ranges from a couple hundred billion dollars to more than $1 trillion. One need only look at Transparent California to grasp the size of the compensation packages — check out the number of police sergeants receiving more than $350,000 a year — that led to the problem.

We’ve seen two California cities — Stockton and Vallejo — go bankrupt in large part because of those compensation packages. Others have teetered on the brink, and still others have mentioned the b-word as CalPERS hikes contribution rates. As Ed Mendel reports in his invaluable Calpensions blog, “A new CalPERS report shows average local government police and firefighter pension costs have reached 50 percent of pay — a level former CalPERS chief actuary Ron Seeling warned a decade ago would be in his view ‘unsustainable.’”

Governments are slow learners. Only five years after OC’s bankruptcy, the state Legislature passed a law (SB 400) that granted 50-percent retroactive pension increases to the California Highway Patrol, thus starting a wave of similar giveaways across the state. Its backers said it wouldn’t cost taxpayers a dime thanks to continued stock-market income gains, but we know how that played out.

Likewise, Orange County supervisors this year approved large pay hikes for deputy sheriffs — something that will add $151 million to its budget. County officials didn’t bother to evaluate the impact of the deal on pension costs, which will soar as a result of the higher pay. Some California cities, even in Orange County, are floating pension-obligation bonds, which allow them to take out new debt to pay their pension debt. Essentially, localities are betting that their investment returns will continually outpace the bonds’ interest rates. Let’s hope they’re better at this than Citron was.

The bankruptcy anniversary is reminiscent of the quotation from Upton Sinclair when he was running for California governor in 1934: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” When it comes to pension debt and other liabilities, California lawmakers really don’t want to know. It will be interesting to see whom they blame when the stock market goes south and takes public pensions with them.

Editorial

Has OC learned key bankruptcy lessons?

When Orange County declared bankruptcy 25 years ago on Dec. 6, 1994, the move unnerved financial markets across the country. And for good reason.

This affluent bastion of conservatism was, at the time, the largest municipality in the United States to ever file Chapter 9.

It was embarrassing — and almost unfathomable that nobody had noticed the warning signs.

Maybe not nobody. Sen. John Moorlach, R-Costa Mesa, was a private accountant who was being prodded by some GOP leaders into running against Democratic treasurer Bob Citron. Moorlach initially resisted, but then looked at the county’s financial statements and was shocked by what he saw. He ran a campaign warning of potential fiscal calamity, but lost the race by a wide margin. He was proven correct about the county’s shaky finances and the rest, as they say, is history.

Citron, who was elected tax collector before the county merged the office with the treasurer, was personally frugal, but lacked investment experience and savvy. Grand jury testimony suggested he even consulted an astrologist on financial matters. Citron’s “exotic” investment scheme created incredible returns for a while, which convinced a lot of officials not to look too closely.

The investments were based on heavily leveraging the county’s investment pool to buy bonds — lots of them — and essentially wagering “on the difference between the short-term interest he paid on the cash loans, and the longterm interest he earned on the bonds,” as a 2013 Register obituary explained.

Like so many gambles, it eventually collapsed — in this case after the Fed started boosting interest rates. Citron pleaded guilty to charges related to falsifying the books and faded from view.

“He was like the sun god,” Moorlach told us. No one said anything — not the rating agencies, bond holders or elected officials. Moorlach tried, but was accused of being a partisan hack. What advice does he offer on the anniversary? “Be careful about underestimating the marketplace and overestimating how smart we are.”

We’d add this one: Government should live within its means rather than gambling with public money to cover up its overspending.

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — Life Changing Press Release — December 2, 2019

25th Anniversary Look Back

Interest rates enjoy cycles, just like the stock market.  Let me provide an overview of the last four decades, focusing up to the Thanksgiving season of 1994. 

In 1980, the Federal Funds Rate was as high as 20%.  By the end of 1991, it dropped to 4%. During 1992, with 3 easings, the rate dropped again to 3%.  The Federal Reserve Board did nothing during the entire year of 1993, but 1994 was different.  

In 1994, the Fed raised interest rates 25 basis points (bps) on February 4th, and another 25 bps on March 25th and April 18th.  On May 17th, two weeks before the June election, they raised rates by 50 bps, up to 4.25%. 

In the summer, the Fed raised interest rates by another 50 bps on August 16th.  On November 15th of 1994, the Federal Reserve Board continued to tighten interest rates and raised them by 75 basis points (three-quarters of 1 percent) to 5.5%.  Such a move is very rare, especially in today’s nearly flat interest rate environment. This activity can be seen on the front end of the generic chart below.

P1wnufSR_I0Qh5IlBqP6Q3GYbKsw-wPCl5w6I_Sv5aUC7_P99O7J1JgGHAjTIUMCa2auqdOP8TIZuIlP8dGleuvrdU11HIaGMj7VqzwnEEG8PAlIhToCYphDaUUK-XhranGzvsX4

The short end of the yield curve set Citron’s borrowing costs (5.5%).  But, he had invested the proceeds in 4-year bonds that were paying less than that.  The Orange County Investment Pool (OCIP) had become an alligator and was now paying out more than it was earning.  The longer-term bonds had also declined in value, along with the inverse floater derivatives. Being down 7% on a $21 billion portfolio meant a $1.5 billion decline in value. 

With the “trend being your friend,” rates were more likely to rise than to peak or level out, let alone decline, in the very near future.  On February 1st of 1995, rates did go up another 50 bps. 

Mr. Citron and Mr. Raabe started communicating with the participants.  The private meetings were the scuttlebutt of the municipal world. 

On December 1, 1994, the Orange County Treasurer-Tax Collector issued the press release provided below.  It would change my life. In fact, for the two-plus weeks following, I was constantly on the telephone responding to media calls.  Occasionally, a friend would call, “I’m in Jakarta, Indonesia, and you’re on CNN. What’s going on at home?” 

The press release shared information that, in retrospect, is an example of how greed does blind people.  Bragging about high yields? Why don’t you just telegraph that you’re operating outside of the customary boundaries.  Stating that you’ve acted “immediately”? You can’t be serious.

With the Orange County Transportation Authority already signalling they were focused on obtaining higher yields and not necessarily on loyalty to a fund manager, one can hear in between the lines that withdrawal requests were already occurring.  And they were. Irvine Ranch Water District was already withdrawing $50 million a week, obtaining $100 million before Bob Citron stopped the payments (see MOORLACH UPDATE — School District Debt — August 22, 2013, MOORLACH UPDATE — OC Register — August 22, 2010, MOORLACH UPDATE — LOOK BACKS — January 23, 2010, MOORLACH UPDATE — Pension Crisis — December 20, 2009, MOORLACH UPDATE — LOOK BACKS — December 19, 2009, and MOORLACH UPDATES — OC Register — December 3, 2009).  And, at my insistence, the city of Costa Mesa withdrew all of its funds that were on deposit.  The dike now had more than leaks. It was hemorrhaging. 

David Evans of Bloomberg News heard something was brewing in Orange County (see MOORLACH UPDATE — Memories — May 27, 2013).  He posted a piece just before the County released its announcement, “Orange County, Calif., Plans Release Amid Concern About Losses.”  Here are the opening paragraphs: 

Orange County, Calif., is expected to make an announcement today on the status of its investment portfolio amid concern that the county faces a cash crunch caused by losses on derivatives.

The county plans to release a statement on its investments by 6 p.m. EST, said a spokeswoman for Assistant Treasurer Matthew Raabe.  “We have plenty of money to pay our bills and employees,” said the spokeswoman.

Orange County Treasurer Robert L. Citron wasn’t immediately available for comment.  The county treasurer is known for his aggressive investments, including purchases of derivative securities, whose value is derived from an underlying index or asset, such as bonds, currencies or commodities.

By using leverage, or borrowing money to buy more securities that he otherwise could, Citron expanded $7.3 billion in investments into $21.7 billion as of March 31.

A leveraged investor is more vulnerable to losses than gains.  Many of the types of investments Orange County has, such as so-called structured notes and certain mortgage securities, lost money this year.  Rising interest rates made these securities more difficult to value and sell, traders said.

A few hours later, Orange County issued this press release:

SANTA ANA, CA (December 1, 1994) — Robert Citron, County of Orange Treasurer/Tax Collector, announced today that repeated hikes in interest rates have caused a decline in the market value of the county’s investment fund.  The fund manages the operating and reserve monies of approximately 180 public agencies, including the County of Orange, the County Transportation Authority, sanitation districts, school districts and cities.

According to Citron, “Across the country, bond funds have been significantly impacted by rapidly rising interest rates, especially the latest Federal Reserve Board action in November.  This development has caused a decline in the market value of all bond and other funds, including the Orange County investment fund.”

The preliminary estimate of the paper loss in the Orange County investment fund is seven percent.  By comparison, the largest private bond funds have experienced approximately 10 percent market value losses.

Ernie Schneider, Orange County Administrative Officer said, “The County has acted immediately to assemble a management team of county executives including Bob Citron, who, with the advice of a nationally-recognized business and securities consulting firm – Capital Market Risk Advisors, are developing a strategy for repositioning the fund’s investments.”  Recommendations are expected by December 15.

The Orange County investment fund, under the guidance of Treasurer-Tax Collector Robert Citron, has consistently returned to its investors some of the highest yields in the State of California, exceeding the state’s own returns by an average of more than 3 percent annually.

Over the past 15 years, returns on the fund have averaged 10.10 percent; in the past five years, the fund has experienced returns of 8.60 percent.  In January 1994, the fund had a total market value of $20 billion. The preliminary estimate of the current value today is $18.5 billion.

According to Citron, “In my 21 years of managing this fund, I have dealt with bear markets and bull markets, and am confident that we can deal with this situation.”  He said, “I have devoted my professional life to achieving investment returns to benefit the citizens of Orange County. Over the years, I have worked closely with the fund participants and look forward to their continued support.”

As of today, a number of voluntary investment fund members have said that they will remain in the fund.  They include OCTA, which is the largest participant in the fund.

Citron believes that, with the cooperation of all fund participants and others in the restructuring plan, the fund will not have to sell any securities prematurely at a loss.  The executive management team plans to meet regularly with participants to advise them of ongoing market developments on the fund.

Bloomberg News, a wire service, would then issue the following piece, titled, “Orange County, Calif., Investments Lose $1.4 Bln,” and David Evans would be following the story in the days, weeks and months to follow.

Orange County, Calif., said its investments tumbled about $1.4 billion this year, partly because of holdings of risky securities known as derivatives. 

The wealthy Southern California county’s setback would be the biggest disclosed by any municipality in the country this year.  Since 1992, more than 24 cities, counties and school districts have lost hundreds of millions of dollars from investments in derivatives, whose value is derived from an underlying index or asset, such as bonds, currencies or commodities.

Orange County said the value of its investment fund, which includes money from more than 100 other California municipalities, dropped to an estimated $18.6 billion from $20 billion since January.

The county said it assembled a team of county executives and business and securities consultants to “develop a strategy for repositioning the fund’s investments.”

“Management believes that, with the cooperation of all its participants and others in its restructuring plan, the fund will not have to sell any securities prematurely at a loss,” said County Administrative Office Ernie Schneider.

Merrill Lynch & Co. shares fell as much as 1 5/8 to 36 3/8 on concern about the brokerage’s exposure to potential Orange County losses.  In afternoon trading, Merrill shares were down 1 1/8 at 36 7/8.

A Merrill Lynch spokeswoman said the securities firm hasn’t lost any money because of Orange County’s investment losses.

Critics of Strategy

Orange County’s losses were predicted by John Moorlach, a certified public accountant in Costa Mesa, Calif., who lost a bid to unseat County Treasurer Robert Citron in June.

Moorlach estimated Orange County’s portfolio was down $1.2 billion in May.  “This will probably be the biggest financial fiasco in the nation. We’re not talking Cuyahoga County (Ohio), $114 million.  We’re talking billions.”

Citron wasn’t immediately available for comment.  The county treasurer is known for his aggressive investments, including purchases of derivatives.

By using leverage, or borrowing money to buy more securities than he otherwise could, Citron expanded $7.3 billion in investments into $21.7 billion as of March 31.  The county said most of its money was invested in government securities, which plunged in value as the Federal Reserve raised interest rates six times this year.

Leveraged investors reap larger losses when markets move against them and larger returns when markets move their way.  Many of the types of investments Orange County has, such as so-called structured notes and certain mortgage securities, lost money this year.  Rising interest rates made these securities more difficult to value and sell, traders said.

A person in the treasurer’s office who requested anonymity said the difficulties stem from investments in structured notes.  In the spring, some of the country’s largest securities firms subjected Orange County to margin calls on the securities, and since then some of  the securities have been returned, the person said. There haven’t been any recent martin calls.

Bonds for Sale

Analysts from Moody’s Investors Service Inc. and Standard & Poor’s Corp., Wall Street credit rating companies, plan to meet with county officials next week.  “When something is going on, it is important to sit down” and discuss the situation with county officials, said Karen Krop, Moody’s vice president.

It is “not an emergency meeting,” she said.  The county’s “AA1” bond rating isn’t currently under review, Krop said.  “The thing will be how much liquidity the county needs” to meet its obligations, Krop said.

Robert Rifkin, an analyst at Standard & Poor’s Corp., said the company would review Orange County’s portfolio.  The company decided to set the meeting after it “came away with a reason” to take a closer look at the financials after a periodic review last week, he said.

Investors are concerned about their holdings of Orange County municipal bonds, traders said.  Some county notes were offered for sale and “no one picked them up,” said Robert Gore, a partner at Crowell, Weedon & Co. in Los Angeles.

Concern About Bonds

Some investors had sold Orange County bonds over the last few days, and “now people are reluctant to bid,” Gore said.  Yesterday, Orange County 6% bonds due in 2009 traded at yields between 6.75% and 6.80%.

“There were about $9 million in Orange County Water District bonds out for the bid, but I heard they had a hard time getting a bid,” said Peter Barbera, a principal at Alex. Brown & Sons Inc.

Traders speculated that Orange County may lose money on structured notes.  The county hasn’t tried to sell its structured note investments today, said Ted Dumbauld, a managing director at Blackhawk L.P., a New York hedge fund.  Dumbauld said he hasn’t seen any large amounts of structured notes being offered today.

“I’ve not seen a single bond come into the bid,” Dumbauld said.  “Normally (the county has) got big block sizes.”

Orange County isn’t the first California municipality to gain attention for using public money to make bets on risky investments. 

Ten years ago a grand jury criticized officials in San Jose for “incompetence, negligence and stupidity” after the city lost $60 million in bond market bets gone bad.

The report didn’t charge the officials with criminal activity.  But one member of the San Jose City Council said three city financial officers were “shooting dice with public money” for the losses, incurred selling and hedging government securities. 

Of course, the newspapers would publish the news nationally in their December 2nd editions (see MOORLACH UPDATES — LOOK BACKS — December 2, 2009). 

For the previous Look Back, go to MOORLACH UPDATE — PSPS Opening Remarks — November 30

Annual Christmas Open House at Second Harvest

Please accept my invitation to come to my annual Holiday Open House on December 6th, 4 p.m. to 6 p.m., at Second Harvest Food Bank at the Great Park in Irvine.  We found that this annual event has outgrown the space available in my District Office and you’ll enjoy becoming acquainted with this worthy nonprofit organization.  It’s centrally located at The Great Park, 8014 Marine Way, in Irvine. The invitation is below.


This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — PSPS Opening Remarks — November 30, 2019

Public Safety Power Shutoffs

I serve on the Senate Select Committee on the Governor’s 2019 Report: Wildfires and Climate Change – California’s Energy Future, where I worked diligently on issues regarding utility caused wildfires and where my fellow Senators and I established protocols for reserve funds to address investor owned utility reimbursements for future wildfire victims.

I serve on the Senate Insurance Committee, where I worked on issues concerning Wildland Urban Interface (WUI) coverage.

In addition, I also serve as Vice Chair of the Senate Energy, Utilities and Communications Committee.  We met this month to address the new normal of Public Safety Power Shutoffs. My opening remarks are provided below with some minor clarifying edits (see MOORLACH UPDATE — PSPS and Cities 241 to 288 — November 19, 2019):

CALIFORNIA STATE SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE OVERSIGHT HEARING 11-18-19

Mr. Chairman, I’ve been here before. But, in 2001 we called them brown-outs.  Orange County paid lower rates, but had to incur temporary outages when demand exceeded supply. 

They were a result of state deregulation of the energy market, prohibiting natural gas acquisition in the futures market, watching utilities be manipulated in the spot market, and observing Gov. Davis, who turned a problem into a mess. 

Sacramento made massive energy loans. SCE was downgraded. PG&E filed for Ch. 11 bankruptcy. And within a few months, Gov. Davis found himself being the 2nd sitting Governor in U.S. history to be recalled. 

In the middle of the commotion, I found myself Chairing the creditors committee and could have forced SCE into Ch. 11, too. 

Nearly two decades later, I’m seeing similarities. 

Sacramento makes demands, this time the pursuit of renewable energy generation and subsidizing the electric car industry, and the additional load demands that recharging extracts. 

With new mandates, the IOUs defer maintenance and do not focus on hardening assets or improving transmission lines. 

But, scorching desert winds have been with us for millennia. With inverse condemnation, many focused on hardening high voltage lines. 

SDG&E became very proactive (communicated with me throughout) during the last Santa Ana condition a couple of weeks ago. 

Anaheim, a public utility, spent the last 20 years undergrounding lines in wildfire zones, covering more than 90% to date. 

Yes, it is expensive. 

Yes, it takes time. 

But, it is cheaper than lost lives and property. 

Mr. Chair, in 2016 I tried to get the CPUC and Cal Fire to complete fire maps in populated wildfire zones in order to prioritize areas in need of hardening or undergrounding. Governor Brown vetoed SB 1463, a bill that received zero opposition in both Chambers. 

The CPUC and CALFire were 8 years behind schedule when Santa Rosa, Sonoma and Napa lost 42 lives the next year (2017). 

I did another bill in 2018 to use Cap and Trade tax revenues to harden electric lines. It was killed by the Senate’s Environmental Quality Committee on a bipartisan vote. Only to be resurrected in a similar form in SB 901 (Dodd) later last year. 

This year I authored a bill to use Rule 20A funding for undergrounding. It died in this new purgatory called Senate Appropriations (SB 584). 

I also tried to quantify greenhouse gases generated by wildfires. It died unceremoniously in Assembly Appropriations. (SB 535) 

I see Sacramento floundering in reaction to its actions and lack thereof. 

Nothing seemed well thought out, holistic or integrated when it comes to addressing climate change, electricity and wildfires. And I am grateful to see industry represented early in the agenda. 

They have difficult questions to answer but Sacramento has not made their core mission any easier and may have been the root cause for their public safety power shutoff (PSPS) strategy. 

With that Mr. Chair, I hope we do serious reflection on the entire topic of providing electricity to Californians in the decades to come. And, I hope we find ways to provide it more cheaply.

Our residents pay high taxes- income, sales and property. 

They pay high utility bills. 

They pay high homeowners insurance premiums (If they can get Home Owners Insurance). 

And now they’re paying massive sums to refill their freezers with lost provisions. 

California has backed itself into an awkward corner due to a lack of foresight and planning. 

We’re learning expensive lessons. Sacramento needs to make serious modifications internally as it improves its oversight on these critical energy providers. 

Let’s be strategic.  Let’s avoid chasing the concern of the day.  Let’s provide intelligent leadership that empowers (no pun intended) the providers and the overseers.  Let’s be big picture and provide a balanced approach to electricity and climate change. 

Thank you Mr. Chair and Colleagues. 

25th Anniversary Look Back

One of the first reporters to call me about the potential implosion of the Orange County Investment Pool was Andrew Bary of Barron’s. Twenty-five years later, he’s still with Barron’s.  That’s pretty cool!

It was on November 30, 1994, and I can still hear his opening line:  “I’m 3,000 miles away and we’re hearing that your county’s local government investment pool is about to implode!”

He was early.  Barron’s is delivered on Saturdays, but his piece was dated Monday the 5th of December.  The title was a classic: “Peter Pan Portfolio: Orange County bet that interest rates would stay low forever.”  The punch line? “You’ve just got to believe.” For a sneak peak, go to MOORLACH UPDATE — LOOK BACKS — December 5, 2009.

I had prepared a potential press release in advance, just in case Robert Citron decided to blame me.  I don’t recall that I ever released it to the press. However, I did FAX the draft to Andrew Bary.

It is with great disappointment that our County’s Treasurer, Robert L. “Bob” Citron, has been taking the greatest risks of perhaps any municipal Treasurer in the nation.  Between his aggressive use of leverage, through the use of reverse repurchase agreements, and his extensive acquisition of derivative products, he has jeopardized our tax dollars to a loss in market value of perhaps more than $3 billion.

To make this financial fiasco even more frustrating, instead of marking his portfolio to market (which I advocated throughout my candidacy), he still operates a legalized “ponzi” scheme.  Even though private investors have taken a beating in this recent bond market, Citron’s investors can withdraw their funds intact. What this means is that remaining investors will pay for those who pulled out at a premium.

Eventually, due to Citron’s extremely aggressive investment strategies, our County can potentially lose as much as $4 billion if it is forced to liquidate.  And because current market rates are out-performing Citron’s returns, withdrawals and forced liquidations will occur naturally. In a competitive market, this is only inevitable.   If this doesn’t wreck enough havoc, the collateral calls from the lenders surely will.

For Citron to blame anyone other than himself is the mark of a weak man.  No one forced Citron to leverage to the extremes that he has. No one forced Citron to acquire “inverse floater” derivatives with over a quarter of his available portfolio.  No one forced our economy to heat up just to put Citron’s interest rate gamble in jeopardy.

There is no grand plan to inflict any harm to the County or to the Pool’s participants by me.  However, since Citron is operating a “ponzi” scheme, even when he has been advised not to, I will, as a private citizen, continue to encourage my own City to withdraw from the Pool with its principal intact.  That is what my conscience dictates that I must do. In this current market, that is my moral obligation.

It is not my fault that the elected leadership of Orange County did not take my warnings, of over six months ago, seriously.  I did my best as “a voice in the wilderness” to wake up this community from the impending disaster that Citron’s strategies could inflict.  Again, when leveraging you can win big, but you can also lose big.

I did my duty to my community to sound the alarm.  I was willing to leave a better paying occupation, from a business which I own to a governmental bureaucratic position, to take on the task of implementing a loss avoidance strategy on behalf of the County.  I stressed a conservative, low-risk approach to investing. I provided a stark contrast to Citron’s policies. Some forty percent of the voters understood and supported my candidacy. Unfortunately, our local liberal press did their best to protect their lone “Democrat.”  Fine. I tried.

The lesson is simple.  If you want to make a killing in the world of investments, you had better be prepared to be killed.  That’s basic investment fundamentals. It was lost on Citron. It was lost on the Board of Supervisors.  It was lost on those responsible for investing in the Pool. To blame anyone else is sheer nonsense, scape-goating, and cowardice.

Our County will suffer for decades because one individual was willing to borrow over $12 billion to invest.  Citron also encouraged numerous municipalities to incur debt as well. It is a fiasco of international proportions.  My only regret is that it took a severe bond market to prove out my worst fears. Trying to distract the citizens of our County by misplacing the blame is only an insult to their intelligence.

We must go onward and forward.  We need leadership. Now is the time for even more drastic measures.  Major changes must be made in the administration of the County’s affairs.  We must do damage control and prevention to avoid this type of activity from occurring again in the future.  I stand ready, willing, and able to be of any assistance to my fellow Orange Countians. We saw the danger coming, we have now encountered it, and we must face it and deal with it in a business-like manner.

The next day, December 1, 1994, Mr. Citron would actually issue his own press release.  It would change the rest of my life.

For the previous LOOK BACK, go to MOORLACH UPDATE — Concordia, Second Harvest and Bottom 50 Cities — November 27,2019.

Annual Christmas Open House at Second Harvest

Please accept my invitation to come to my annual Holiday Open House on December 6th, 4 p.m. to 6 p.m., at Second Harvest Food Bank at the Great Park in Irvine.  We found that this annual event has outgrown the space available in my District Office and you’ll enjoy becoming acquainted with this worthy nonprofit organization.  It’s centrally located at The Great Park, 8014 Marine Way, in Irvine. The invitation is below.

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — Concordia, Second Harvest and Bottom 50 Cities — November 27,2019

Annual Christmas Open House at Second Harvest

Let me wish you a wonderful Thanksgiving! I hope you enjoy the holiday this week and then please accept my invitation to come to my District Office’s annual Holiday Open House on December 6th at Second Harvest Food Bank at the Great Park in Irvine.  The invitation is below.

Second Harvest recently had photographer Robert X. Fogarty in town to assemble a portfolio of individuals with a saying or phrase written on their body.  I chose Proverbs 22:9. The OC Register provides my photo below.

Concordia University Irvine  

As a young accountant, working for Richard G. Boyer, C.P.A. in the late 70’s, I was part of a team that prepared monthly financial statements for the new Christ College Irvine.  I remember attending a groundbreaking ceremony back when their Turtle Rock location was basically a barren hill and Charles Manske was the college’s President.

Who would know that some 40 years later, I would have a son-in-law who would not only graduate from the campus, now named Concordia University Irvine, but would also marry my only daughter in its original church (with the blue roof).  My sister-in-law, Stephanie, a Pepperdine University grad, would earn her Masters at Concordia. This institution, located in my Senate District, is a very special place for my family. It was an amazing honor to participate in their recent dedication of new buildings.  It’s covered in their publication below.

Cities 433 to 482 — The Bottom 50

This tenth and final segment of California’s cities, ranked by their per capita unrestricted net positions, concludes this series.

Two Orange County cities are included, Brea (#434) and Costa Mesa (#448), where my District Office is located.

Several cities in this grouping still have not completed their Comprehensive Annual Financial Report (CAFR) for June 30, 2018:  Benecia (a former state Capital), Westmorland, Fort Jones, Amador, Compton, Coalinga and Isleton. I have estimated their unrestricted net deficits based on historical trends.

The State Auditor recently ranked the city of Compton as the number 1 fiscally challenged city.  Why?  Because it hasn’t prepared a CAFR since 2013.

Carmel by the Sea had not prepared their CAFR since 2014.  The 2018 CAFR reflected a significant unrestricted net deficit, which explains their 431 ranking drop in the standings.  The same is true for the city of Bishop, thus explaining their 348 point drop.

Other than that, most of the bottom 50 cities from last year’s listing are still in the bottom 50 standings.

Rank City Population UNP 2018 (Thousands) UNP/ Capita 2017 Rank Rank Change
433 Redondo Beach 68,677 ($118,477) ($1,725) 429 -4
434 Brea 44,890 ($78,107) ($1,740) 438 4
435 Lodi 67,121 ($117,535) ($1,751) 428 -7
436 Bishop 3,922 ($6,897) ($1,759) 88 -348
437 Gardena 61,246 ($107,848) ($1,761) 407 -30
438 Colton 53,724 ($94,872) ($1,766) 446 8
439 Pinole 19,236 ($34,045) ($1,770) 391 -48
440 Benicia 27,499 ($49,272) ($1,792) 442 2
441 El Monte 117,204 ($210,560) ($1,797) 411 -30
442 Westmorland 2,325 ($4,305) ($1,852) 220 -222
443 Fort Jones 739 ($1,373) ($1,858) 221 -222
444 Amador 186 ($346) ($1,860) 222 -222
445 West Covina 108,245 ($201,952) ($1,866) 441 -4
446 South San Francisco 67,082 ($129,834) ($1,935) 458 12
447 Compton 99,872 ($194,491) ($1,947) 412 -35
448 Costa Mesa 115,296 ($224,658) ($1,949) 444 -4
449 Los Angeles 4,054,400 ($8,022,270) ($1,979) 451 2
450 Coalinga 16,791 ($33,303) ($1,983) 443 -7
451 Santa Barbara 94,807 ($189,963) ($2,004) 456 5
452 San Rafael 60,651 ($122,577) ($2,021) 460 8
453 Hayward 162,030 ($327,598) ($2,022) 452 -1
454 El Cerrito 24,939 ($50,908) ($2,041) 461 7
455 San Gabriel 40,920 ($83,870) ($2,050) 449 -6
456 Redlands 71,196 ($148,371) ($2,084) 440 -16
457 Big Bear Lake 5,512 ($11,560) ($2,097) 395 -62
458 Hawthorne 88,772 ($199,077) ($2,243) 437 -21
459 Torrance 149,245 ($354,180) ($2,373) 462 3
460 Pacific Grove 15,660 ($37,783) ($2,413) 468 8
461 Mill Valley 14,963 ($37,004) ($2,473) 455 -6
462 Pasadena 144,388 ($362,358) ($2,510) 465 3
463 San Jose 1,051,316 ($2,667,125) ($2,537) 459 -4
464 Jackson 4,679 ($11,898) ($2,543) 369 -95
465 Isleton 837 ($2,210) ($2,640) 466 1
466 San Fernando 24,602 ($66,465) ($2,702) 450 -16
467 Alameda 78,863 ($218,481) ($2,770) 453 -14
468 Sausalito 7,226 ($20,916) ($2,895) 470 2
469 Monrovia 38,787 ($122,000) ($3,145) 469 0
470 Monterey 28,323 ($91,012) ($3,213) 472 2
471 Carmel by the Sea 3,750 ($12,141) ($3,238) 40 -431
472 San Francisco 883,963 ($2,950,772) ($3,338) 474 2
473 Inglewood 113,559 ($388,751) ($3,423) 471 -2
474 Cathedral City 54,791 ($209,365) ($3,821) 477 3
475 Culver City 39,860 ($162,306) ($4,072) 478 3
476 Berkeley 121,874 ($502,673) ($4,125) 476 0
477 Palm Springs 47,706 ($212,860) ($4,462) 467 -10
478 Santa Fe Springs 18,335 ($90,543) ($4,938) 473 -5
479 Richmond 110,967 ($625,067) ($5,633) 480 1
480 Oakland 428,827 ($2,444,868) ($5,701) 479 -1
481 El Segundo 16,784 ($129,410) ($7,710) 481 0
482 Vernon 209 ($118,217) ($565,632) 482 0

25th Anniversary Look Back

The Moorlach Memo concludes with Chapter 10.   You can tell that the 1994 campaign for Orange County Treasurer-Tax Collector was a rather all-consuming endeavor.  All the more so with the Federal Reserve Board continuing its continued raising of overnight interest rates. You can see my passion 25 years ago in this editorial submission.

For the “prudently aggressive” reference, see MOORLACH UPDATE — We’re Out! Sort Of — July 2, 2017.  Regretfully, my warnings were too precise.

For the introduction and first nine chapters, see:

Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.

Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019

Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019

Chapter 3 — We Do Not Mark To Market — MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019

Chapter 4 — Prognosis —  MOORLACH UPDATE — Officers, Audits, CIRM and Cities 145 to 192 — November 14, 2019

Chapter 5 — Current Media Revelations —  MOORLACH UPDATE — SB 640 and Cities 193 to 240 — November 18, 2019

Chapter 6 — Scaring Credit Markets — MOORLACH UPDATE — PSPS and Cities 241 to 288 — November 19, 2019

Chapter 7 — Borrowing to Invest — MOORLACH UPDATE — 2020-21 Budget and Cities 289 to 336 — November 21, 2019

Chapter 8 — Odessa — MOORLACH UPDATE — Audit Results and Cities 337 to 384 — November 25,2019

Chapter 9 — Appropriate Response — MOORLACH UPDATE — Appeal to D.C. and Cities 385 to 432 — November 26, 2019

CHANGE OUR INVESTMENT STRATEGY

If you want to make a killing, be prepared to be killed. Citron and Swan have flushed safety of principal and liquidity down the proverbial toilet for higher yields. A sophomoric investment error for someone who refers to it as “prudently aggressive” — this title wins the “oxymoron of the year award.”

Bear markets have a way of removing the Citrons and Swans of the world from the market place. Should the portfolio disintegrate–heads will roll. Get ready for recalls and key administrative and finance director dismissals. We will have a financial wasteland and the costs will be felt by those directly responsible and, unfortunately, those who voted them in. Should interest rates go back down and we do not change our investment strategy, then we will have dodged the bullet but set ourselves up for the real Armageddon in the next rate increase cycle.

These issues are of a very serious nature. There are other counties and municipalities around the country facing them, too. You need to be informed. It is your money. The lessons learned from my campaign are twofold: first, the public should not rely on patronizing and politically motivated quotes from sources like Citron or Swan, who have their rears in the sling; and, secondly, we desperately need to elect leaders who are more financially prudent with our tax dollars. In the meantime, keep your eye on interest rates, and pray that they go down.

Dear World photographs by photographer Robert X. Fogarty, lean against a wall just prior to being hung at the Second Harvest Food Bank in Irvine on Thursday, November 21, 2019. The portraits are of people who are clients, volunteers, donors, and staff, each with a written message, quote, phrase or word from the participants photographed. (Photo by Mark Rightmire, Orange County Register/SCNG)

https://www.ocregister.com/2019/11/25/photo-project-at-second-harvest-in-orange-county-helps-bodies-speak-out-about-hunger/

Concordia University Irvine Celebrates Grand Opening of Music, Worship, & Theology Building

Opening of the Borland-Manske Center is the university’s newest building

https://www.cui.edu/aboutcui/news/view-article/ArticleID/235

Nearly 800 people were in attendance to witness the final step to the completion of Concordia University Irvine’s (CUI) newest building, the Borland-Manske Center (BMC), home of the university’s Music Department and Christ College School of Theology and Church Vocations. On Sat., Oct. 5 students, faculty, and alumni gathered together to bless and dedicate the new building.

The dedication ceremony included reflections by Theology Christ College faculty and speeches by elected officials. “It’s been an honor seeing Concordia University Irvine grow from that little Lutheran college on a hill to what it is today,” said California State Sen. John Moorlach. A ribbon cutting followed the ceremony symbolizing the official completion of the building. Inside, self-guided tours and performances by various Concordia ensembles then ensued.

The naming distinction commemorates the vision of Concordia’s founding President, Rev. Dr. Charles Manske and the philanthropic generosity of Mike and Caryn ’85 Borland of Newport Beach, CA.

The 37,500 square foot space is composed of two wings—one home to the Music Department and one home to Christ College School of Theology and Church Vocations. The Borland-Manske Center serves as the intersection of musical tradition and theological foundation, values core to the Lutheran faith.

A new recording studio has also found home in the Borland-Manske building’s music hall. “Concordia’s new studio was designed by John Storyk of New York-Based Walters-Storyk Design Group (WSDG) who is quite possibly the world’s preeminent acoustician and studio designer,” said CUI Professor of Music and Director of Commercial Music Steve Young. In addition to designing educational recording complexes for NYU and Berklee College of Music, WSDG has played an integral role in the creation of acoustic designs for NYC’s Jazz at Lincoln Center, and studios used by high profile artists such as Adele, Alicia Keys and Jay Z. “While CUI is fortunate to partner with such a prestigious studio designer, the students are the real beneficiaries as they get to learn and grow in a world class facility!”

The 1,110 square foot recording studio will be used as a recording, teaching, and rehearsal space. Given Concordia’s proximity to the Los Angeles music industry, the space provides a venue for students and alumni to grow and gain professional for the workforce. Both choral and instrumental ensembles will use the professional recording studio, as will the Music Department’s newest major program–Commercial Music.

The main floor of the Music building is composed of an orchestra hall, choral rehearsal hall, percussion room, and piano instruction room. The top floor also accommodates practice rooms, and faculty studios for special practice and instructional tutorials. The lower floor houses a live recording room with three isolation booths, a control room, classrooms, an open office suite, faculty offices, student lounge, and conference and breakout rooms. The studio is tied into the orchestral and choral rehearsal rooms, allowing for multiple ensembles to record simultaneously.

The Christ College Wing of the building is home to Concordia’s school of theology, church vocations, and philosophy as well as the graphic design program. Updated classrooms, conference rooms, offices and a dedicated library for theological works help comprise this wing. The newly dedicated library for theological works includes a broad range of important and engaging sources on a wide range of theological topics.

“A great advantage of having the library located in the Christ College wing of BMC is that students using the library are close to the faculty who are teaching their courses, so they can ask questions or engage in discussions that they would not have if they had to consult these works in the general library,” stated CUI Associate Dean of Christ College Rev. Dr. David Loy.

New technology-enabled classrooms in the wing also expand the student’s capacity to learn and supplies professors with new possibilities to work. “A number of the rooms in Christ College are equipped for active video conferencing for distance education. Just this afternoon, I taught a class in which my students were in a BMC room while I am away at a conference out of state. That’s a true blessing,” said Professor of Theology and Dean of Christ College Rev. Dr. Steven Mueller. With Concordia being the only university that provides a bachelor’s and master’s degree for Directors of Christian Education online, this technology can help boost this program and connect professors with their students around the nation.

The Borland-Manske Center addresses the need for modernized classrooms, lecture halls, rehearsal halls, and office growth and expansion as original facilities have aged since 1976 when the campus was built. With the rise of enrollment in music degree programs is another reason for construction of the new building.

ABOUT CONCORDIA UNIVERSITY IRVINE

Concordia University Irvine (CUI) is a non-profit Lutheran Christian liberal arts four-year university that prepares students for their vocations—their callings in life. Concordia offers undergraduate and graduate programs in education, nursing, theology, business, and athletics administration. CUI’s undergraduate program is distinctive because of its nationally recognized core curriculum, Enduring Questions & Ideas, and its Lutheran heritage that provides a thoughtful and caring Christian community that lives out the theology of “Grace Alone. Faith Alone.” Concordia is a U.S. News Top Tier Regional University and has been named by The Chronicle of Higher Education as one of the fastest growing private nonprofit master’s institutions. The university is part of the Concordia University System, the second largest education ministry system in the United States just behind the Catholic Church. Concordia Irvine—the only NCAA DII university in Orange County—enrolls about 4,000 students annually and is a designated Hispanic-Serving Institution (HSI).

image18.png?w=660&h=165

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — Appeal to D.C. and Cities 385 to 432 — November 26, 2019

Recommendations To U.S. DOJ and HUD

State Senator Pat Bates has been doing great work addressing sober living homes and opioid addiction through legislative efforts.

She recently requested that I sign on to a correspondence to the U.S. Department of Justice and the U.S. Department of Housing and Urban Development to communicate frustrations at the state level concerning Federal regulations (see https://bates.cssrc.us/sites/default/files/191122_BatesMoorlachLetterToHUD-DOJ.pdf).

City News Service addressed our concerns in the piece below.  During the interview, I also mentioned I’ve been focused on providing assistance to the  severely mentally ill and it was encouraging that Medicaid has given an IMD (Institutions for Mental Diseases) exclusion to Washington, D.C. (see  https://www.modernhealthcare.com/government/cms-approves-dc-waiver-medicaid-imd-exclusion-rule).  This move by the Federal Government is a signal that providing requests for assistance is worthwhile in pursuing.

Cities 385 to 432

We’ve reached the bottom 20th percentile.  Today we have 48 cities and the last edition will have the bottom 50.  This second to last group includes a half-dozen Orange County cities: Fullerton (#394), Huntington Beach (#401), Fountain Valley (#405), Newport Beach (#410), Santa Ana (#414) and Anaheim (#419).

This group also contains the city of Mammoth Lakes (#432), which is one of four California cities that filed for Chapter 9 bankruptcy protection in the last dozen years.

The city of Palo Alto stands out, since it dropped 294 places.  It’s Unrestricted Net Position dropped by $124 million. Two liability increases explain this movement.  It added $109 million in other post-employment benefits to its balance sheet and its pension plan unfunded liability increased by nearly $29 million.

Rank City Pop. UNP 2018 (Thou-sands) UNP/ Capita 2017 Rank Rank Change
385 Montclair 39,326 ($43,902) ($1,116) 413 28
386 Riverside 325,860 ($364,500) ($1,119) 419 33
387 Santa Rosa 178,488 ($200,128) ($1,121) 383 -4
388 Claremont 36,446 ($41,036) ($1,126) 421 33
389 Eureka 26,362 ($29,840) ($1,132) 376 -13
390 Oxnard 206,499 ($234,226) ($1,134) 398 8
391 Healdsburg 12,061 ($13,840) ($1,148) 351 -40
392 Hemet 83,166 ($95,864) ($1,153) 355 -37
393 Calexico 41,199 ($48,003) ($1,165) 396 3
394 Fullerton 144,214 ($169,976) ($1,179) 386 -8
395 Carson 93,799 ($111,098) ($1,184) 374 -21
396 San Diego 1,419,845 ($1,716,136) ($1,209) 420 24
397 San Buenaventura 111,269 ($135,445) ($1,217) 416 19
398 Atwater 31,235 ($38,120) ($1,220) 385 -13
399 Palo Alto 69,721 ($87,040) ($1,248) 105 -294
400 Lompoc 43,599 ($54,573) ($1,252) 384 -16
401 Huntington Beach 202,648 ($254,528) ($1,256) 422 21
402 Albany 19,053 ($24,126) ($1,266) 366 -36
403 Larkspur 12,351 ($15,699) ($1,271) 281 -122
404 San Bernardino 221,130 ($281,170) ($1,272) 457 53
405 Fountain Valley 56,920 ($73,294) ($1,288) 362 -43
406 Ukiah 16,226 ($21,409) ($1,319) 432 26
407 Sacramento 501,344 ($667,254) ($1,331) 427 20
408 Alhambra 86,665 ($115,404) ($1,332) 417 9
409 Monterey Park 62,240 ($85,103) ($1,367) 410 1
410 Newport Beach 87,182 ($119,818) ($1,374) 434 24
411 Santa Clara 129,604 ($180,368) ($1,392) 418 7
412 Scotts Valley 12,195 ($17,334) ($1,421) 436 24
413 Azusa 49,954 ($71,784) ($1,437) 400 -13
414 Santa Ana 338,247 ($501,404) ($1,482) 423 9
415 Redding 91,357 ($135,453) ($1,483) 454 39
416 Barstow 24,411 ($36,244) ($1,485) 275 -141
417 Belvedere 2,135 ($3,231) ($1,513) 253 -164
418 Downey 114,146 ($173,873) ($1,523) 401 -17
419 Anaheim 357,084 ($551,607) ($1,545) 426 7
420 Huntington Park 59,473 ($92,534) ($1,556) 415 -5
421 Del Rey Oaks 1,692 ($2,638) ($1,559) 464 43
422 Vallejo 119,252 ($187,401) ($1,571) 447 25
423 Long Beach 478,561 ($761,817) ($1,592) 435 12
424 Sonora 4,890 ($7,793) ($1,594) 425 1
425 Redwood City 86,380 ($139,527) ($1,615) 408 -17
426 Santa Cruz 66,454 ($108,357) ($1,631) 430 4
427 Montebello 64,327 ($104,997) ($1,632) 448 21
428 Pomona 155,687 ($257,496) ($1,654) 445 17
429 Arcadia 57,704 ($95,841) ($1,661) 433 4
430 Vacaville 98,977 ($166,324) ($1,680) 439 9
431 Folsom 78,447 ($133,461) ($1,701) 333 -98
432 Mammoth Lakes 8,316 ($14,206) ($1,708) 431 -1

25th Anniversary Look Back

The Moorlach Memo continues with Chapter 9.  I provided the obvious solution to address the current conundrum facing the Orange County Investment Pool and its investors.  I also took a swipe at the media for not appreciating the magnitude of the situation.

A couple of years later, in 1997, the Government Accounting Standards Board (GASB) would issue Statement No. 31, requiring municipalities to mark to market (see MOORLACH UPDATE — Marking to Market — July 12, 2019).  I still refer to GASB 31 as “my statement.”

For the introduction and first eight chapters, see:

Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.

Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019

Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019

Chapter 3 — We Do Not Mark To Market — MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019

Chapter 4 — Prognosis —  MOORLACH UPDATE — Officers, Audits, CIRM and Cities 145 to 192 — November 14, 2019

Chapter 5 — Current Media Revelations —  MOORLACH UPDATE — SB 640 and Cities 193 to 240 — November 18, 2019

Chapter 6 — Scaring Credit Markets — MOORLACH UPDATE — PSPS and Cities 241 to 288 — November 19, 2019

Chapter 7 — Borrowing to Invest — MOORLACH UPDATE — 2020-21 Budget and Cities 289 to 336 — November 21, 2019

Chapter 8 — Odessa — MOORLACH UPDATE — Audit Results and Cities 337 to 384 — November 25,2019

APPROPRIATE RESPONSE

As a business-minded solution I strongly insisted, and still insist, that the County “mark to market.” That is, treat the Orange County Investment Pool like the bond mutual fund that it is. Marking to market would let the participants understand the nature of their predicament and allow them to decide their options. They could remain in, receive the still currently higher than market interest income and wait for interest rate to go down, in order to have their principal restored by the market. Or they could withdraw, recognize their losses, invest their funds elsewhere, and not impact the integrity of the investments made by the other participants. Staying with the County’s current policies would be the sanctioning of a government sponsored “ponzi” scheme.

Mr. Citron’s solution was more draconian, he does not want his Pool’s participants to pull out. That’s why he crucified Tustin City Councilmember Jeff Thomas in the press when his city did. The City of Tustin made a move in its best interest by withdrawing their investment in tact. They showed financially astute leadership by emphasizing safety of principal. They were beat up by Citron’s allies in the liberal press.

But sometimes vindication comes quickly. The City of Tustin was just recognized for having one of the top eight investment policy statements in the nation. Following their investment policy statement led to their decision to withdraw from Citron’s Pool, not politics. But you won’t convince Citron or the press of that.

OC Lawmakers Seek Federal Help with Rehab Homes

By Paul Anderson
City News Service

https://mynewsla.com/crime/2019/11/25/oc-lawmakers-seek-federal-help-with-rehab-homes-2/

https://www.msn.com/en-us/news/us/south-county-senators-seek-crackdown-on-sober-living-homes/ar-BBXkio5

State Sens. Patricia Bates, R-Laguna Niguel, and John Moorlach, R-Costa Mesa, have asked federal Housing and Urban Development Secretary Ben Carson for help cracking down on what they say are some unscrupulous sober-living facilities.

In a letter last week, Bates and Moorlach said federal laws regulating access to the disabled are hampering efforts to regulate sober-living facilities.

People recuperating from alcoholism or drug addiction are categorized as disabled under federal law. The two lawmakers say that has allowed some sober-living facility operators to “exploit” transients, using their insurance for profit.

State Sens. Patricia Bates, R-Laguna Niguel, and John Moorlach, R-Costa Mesa, have asked federal Housing and Urban Development Secretary Ben Carson for help cracking down on what they say are some unscrupulous sober-living facilities.

In a letter last week, Bates and Moorlach said federal laws regulating access to the disabled are hampering efforts to regulate sober-living facilities.

People recuperating from alcoholism or drug addiction are categorized as disabled under federal law. The two lawmakers say that has allowed some sober-living facility operators to “exploit” transients, using their insurance for profit.

“We’ve had sober living homes where when the insurance runs out (the clients) end up on the streets,” Moorlach told City News Service.

“Opioid addiction has soared and unscrupulous rehab operators have rushed in to take advantage of mandatory mental health treatment coverage required by the Affordable Care Act,” the two lawmakers wrote in the letter to Carson.

“The quality of care in these facilities is not consistent and does not always adhere to a specific set of standards,” they added. “As a result, patients and their families can be misled, misdirected and misdiagnosed by unqualified individuals. The California State Legislature has recognized that consumers with substance use disorders have disabling conditions and need to be protected. However, the policies that have come down from the federal level do not allow the legislature to act.”

Moorlach and Bates also appealed to the U.S. Department of Justice along with HUD to “issue a new Joint Statement on the Americans with Disabilities Act and the Fair Housing Act to allow local governments to uphold national standards and best practices in sober living environments for the protection of residents in recovery.”

The state senators said a previous statement in November 2016 “only involved zoning regulations and added to the confusion in our districts on this issue.”

Municipalities that try to regulate the addiction treatment homes run into “lengthy and expensive litigation, and the legal landscape remains murky,” the senators said.

Moorlach said he is also working on reforms in the treatment of the severely mentally ill, which has also contributed to the rise in homelessness.

“I’ve been working on trying to get funds available to help people with serious mental health issues like schizophrenia,” Moorlach said. “The federal rules are hampering us.”

Moorlach said two weeks ago the federal government “made an exception for (the District of Columbia) to provide some funding so we see kind of like the window opening a little, so it’s probably a pilot project.”

Moorlach added, “There’s all this money going to mental health, but not to serious mental health issues.”

State laws meant to halt “institutionalizing” patients have led to “migrating these people out of institutions into the streets and in jail, so the largest mental health institution in Orange County is at the main jail,” he said.

Moorlach is seeking more federal money for “appropriate outpatient treatment to help normalize them and get them back to a normal life, and not back onto the streets.”

HUD, for instance, doesn’t provide money for temporary housing, “so we need to modify the rules and regulations at the federal level, so I see this (letter) as an effort to communicate something must be done,” Moorlach said.

image18.png?w=660&h=165

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — Audit Results and Cities 337 to 384 — November 25,2019

Joint Legislative Audit Committee

Earlier this year I was appointed to the Joint Legislative Audit Committee.  It assigns audit projects to the State Auditor, Elaine Howle, and her staff and also holds hearings to receive their audit reports.

While serving as a County Supervisor, we retained a law firm to review the reserves established to address workers’ compensation settlements, as the County was self-insured.  A second look at these arrangements provided a substantial savings if renegotiation efforts were warranted and pursued.

Coming to the state, I started with reviewing similar arrangements at the California State University and University of California systems.  The UC risk management staff assured me that they had thoroughly scrubbed their reserves and were confident another review was not necessary.

I then requested an audit of other state departments and agencies to determine if there was a similar opportunity to obtain savings for taxpayers through appropriate resolutions with those who needed the medical services for their recoveries.

The audit found that, of the departments reviewed, none was self-insured like the UC system.  But, it did determine the state’s Human Resources Department had a master agreement with the State Compensation Insurance Fund that was less costly than purchasing policies directly.  Consequently, the State Auditor found that taxpayer money could be saved and the audit added value (see  http://www.auditor.ca.gov/pdfs/reports/2019-106.pdf.

The Orange County Breeze provides our press release in the piece below.

Cities 337 to 384

We’re at the bottom three segments and three Orange County cities are in this group:  Placentia (#368), Orange (#374) and Westminster (#377).

The city of Maywood has not released its June 30, 2018 Comprehensive Annual Financial Reports (CAFR), so its Unrestricted Net Position was determined on data trends.

The city of Chowchilla (#341) dropped 186 places for an odd reason.  Last year, we reported their 2016 Unrestricted Net Position of a positive $5.5 million because I had not yet seen their June 30, 2017 CAFR.  Their Unrestricted Net Position fell to $(13.9 million) in 2017, and has dropped even further as of June 30, 2018 to $(14.3 million). There was little change between the June 30, 2017 and 2018 balance sheets, as the city does not provide for lifetime medical benefits for its retired employees.  Consequently, its high ranking last year was overstated and the current position is reflective of its actual standing for both years.

Rank City Pop. UNP 2018 (Thou-sands) UNP/ Capita 2017 Rank Rank Change
337 Willows 6,064 ($4,471) ($737) 357 20
338 South Gate 98,133 ($72,433) ($738) 310 -28
339 Escondido 151,478 ($112,192) ($741) 356 17
340 Martinez 38,097 ($28,754) ($755) 279 -61
341 Chowchilla 18,835 ($14,269) ($758) 155 -186
342 Newark 47,467 ($35,997) ($758) 380 38
343 Chula Vista 267,503 ($206,083) ($770) 379 36
344 Brisbane 4,692 ($3,630) ($774) 368 24
345 Paradise 26,572 ($21,204) ($798) 320 -25
346 Salinas 161,784 ($133,797) ($827) 365 19
347 Bell Gardens 43,051 ($35,969) ($835) 208 -139
348 Chico 92,348 ($77,247) ($836) 378 30
349 Modesto 215,692 ($182,197) ($845) 390 41
350 Milpitas 74,865 ($63,406) ($847) 309 -41
351 Woodland 60,426 ($51,602) ($854) 406 55
352 Concord 129,159 ($110,302) ($854) 350 -2
353 Daly City 107,864 ($92,552) ($858) 348 -5
354 Bell 36,325 ($31,638) ($871) 372 18
355 Covina 49,006 ($43,430) ($886) 371 16
356 Los Alamitos 11,863 ($10,679) ($900) 328 -28
357 San Bruno 46,085 ($41,778) ($907) 394 37
358 Roseville 137,213 ($125,570) ($915) 297 -61
359 Marysville 11,883 ($10,888) ($916) 354 -5
360 El Cajon 105,557 ($97,584) ($924) 392 32
361 South Pasadena 26,047 ($24,210) ($929) 323 -38
362 Piedmont 11,318 ($10,521) ($930) 424 62
363 Glendale 205,536 ($195,007) ($949) 373 10
364 Seaside 34,270 ($32,746) ($956) 370 6
365 Baldwin Park 76,708 ($73,931) ($964) 288 -77
366 San Leandro 87,598 ($84,962) ($970) 388 22
367 Corte Madera 10,039 ($9,740) ($970) 414 47
368 Placentia 52,755 ($52,089) ($987) 349 -19
369 Fremont 235,439 ($236,792) ($1,006) 377 8
370 Nevada City 3,226 ($3,330) ($1,032) 375 5
371 Placerville 10,642 ($11,010) ($1,035) 397 26
372 Davis 68,704 ($71,631) ($1,043) 344 -28
373 South Lake Tahoe 21,892 ($22,863) ($1,044) 463 90
374 Orange 141,952 ($149,196) ($1,051) 367 -7
375 Petaluma 62,708 ($66,356) ($1,058) 393 18
376 Blythe 19,389 ($20,536) ($1,059) 363 -13
377 Westminster 94,476 ($100,942) ($1,068) 346 -31
378 Maywood 28,044 ($30,028) ($1,071) 399 21
379 San Luis Obispo 46,548 ($49,910) ($1,072) 389 10
380 Upland 77,017 ($83,165) ($1,080) 402 22
381 Millbrae 22,854 ($24,700) ($1,081) 382 1
382 Capitola 10,563 ($11,536) ($1,092) 405 23
383 Dinuba 24,873 ($27,286) ($1,097) 285 -98
384 Pacifica 38,418 ($42,616) ($1,109) 409 25

25th Anniversary Look Back

The Moorlach Memo continues with Chapter 8.  To make my point about what could be in the County of Orange’s near future, I used the very recent 1994 investment loss fiasco in Odessa, Texas as an example (also see  https://www.sao.texas.gov/SAOReports/ReportNumber?id=95-035).

I should mention that Peer Swan and I are now friends and both served on the Newport Bay Watershed Executive Committee, I as Chair and he as Vice Chair, during my eight years as Orange County Supervisor.

For the introduction and first seven chapters, see:

Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.

Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019

Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019

Chapter 3 — We Do Not Mark To Market — MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019

Chapter 4 — Prognosis —  MOORLACH UPDATE — Officers, Audits, CIRM and Cities 145 to 192 — November 14, 2019

Chapter 5 — Current Media Revelations —  MOORLACH UPDATE — SB 640 and Cities 193 to 240 — November 18, 2019

Chapter 6 — Scaring Credit Markets — MOORLACH UPDATE — PSPS and Cities 241 to 288 — November 19, 2019

Chapter 7 — Borrowing to Invest — MOORLACH UPDATE — 2020-21 Budget and Cities 289 to 336 — November 21, 2019

ODESSA  

How about another recent real life example?  The Finance Chief of Odessa Junior College in Odessa, Texas, also dabbled in “inverse floater” derivatives.  But he did it big time. The results? According to the “Wall Street Journal,” the college lost half of its $21.9 million in resources this year!  “The money included not only the college’s long-term investment funds but also the proceeds of bond sales, payments from the state, tax revenues, tuition payments, even funds belonging to the alumni booster club.”

What were the consequences?  “The college, unable to pay its bills, has been forced to borrow $10.5 million on an emergency basis, has increased tuition 20% and has raised real-estate taxes on local property owners 7.2%.  At the same time, it has slashed its operating budget to $16 million from $18 million. Twenty-two senior professors have been given early retirement to save $850,000 in salaries, and Odessa’s president for 20 years, is forgoing his $122,500 salary.  Faculty travel has been all but eliminated.”  Get ready Orange County.

If interest rates don’t go down soon, returning to their October 1993 lows, Citron and Swan will have serious explaining to do.  It is one thing to be an investor. To use a small amount of margin makes you a speculator. But to borrow three-fold makes you a gambler, a financial maniac, someone who has converted our tax dollars into poker chips.

Moorlach responds to audit finding State agencies overpaying for Workers’ Compensation Insurance

http://www.oc-breeze.com/2019/11/25/148539_moorlach-responds-to-audit-finding-state-agencies-overpaying-for-workers-compensation-insurance/

Senator John M. W. Moorlach (R-Costa Mesa) issued the following statement today after the California State Auditor, directed by the Joint Legislative Audit Committee, released an audit finding at least 10 state agencies purchasing Workers’ Compensation Insurance from State Compensation Insurance Fund (State Fund), a nonprofit enterprise established by the California Legislature in 1914, are paying millions of dollars more than necessary to provide benefits to their employees.

“Given today’s concerning news, I appreciate the analysis done and the report prepared, as well as agree with the recommendations by the office of California State Auditor Elaine M. Howle, CPA.

“First, the California Department of Human Resources (CalHR) should provide a benefit analysis comparing the cost of obtaining workers’ compensation insurance through the Master Agreement vs purchasing directly from State Fund. I commend CalHR for agreeing to implement the Auditor’s recommendation.

“Second, the California Legislature should grant CalHR the authority to obtain the necessary data to compare insurance versus master agreement costs.

“Third, State Fund needs to create a policy for ‘to provide settlement authorization requests to agencies at least 30 days before settlement conferences.’ State Fund failed to achieve this for eight of the 15 claims the auditor reviewed. I call on State Fund to reconsider this request and implement the policy.

“Lastly, a review of rates paid to qualified medical evaluators should be considered.”

California State Auditor Report 2019-106 was conducted at the request of Senator Moorlach. A sample of 10 of the 32 agencies that purchase insurance through State Fund was audited and found to have paid an average of $5.7 million per year in premiums. These 10 agencies could have used the recommended Master Agreement to save the state $20 million during the period reviewed from fiscal year 2013-14 through fiscal year 2017-18. It is possible the opportunity costs could be three times that if the 32 agencies following the same practice were also audited.

This article was released by the Office of Senator John Moorlach.

image18.png?w=660&h=165

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — 2020-21 Budget and Cities 289 to 336 — November 21, 2019

LAO Budget Outlook

I was not impressed by Governor Newsom’s press release yesterday on the Legislative Analyst’s Office’s (LAO) outlook on the state budget.  The Governor has to release the 2020-21 State Budget on January 10th.  In anticipation of this requirement, the LAO released a report forecasting a $7 billion surplus for the upcoming budget year. Newsom wrote:

“This budget assessment points to a broader truth. California is now the fifth-largest economy in the world. Our state is proving what big-hearted, progressive governance can look like – all without breaking the bank. President Trump talks a lot about America’s economic growth under his presidency, but when you look behind the numbers, you see that it’s California’s growth that has provided the economic rocket fuel for the nation. 

 “As Washington soaks Americans with a trillion dollars in debt to pay for tax cuts that benefit the wealthy and destroys the social safety net, our state is now doing more than ever before to provide opportunity for all California families, especially those who are not equally sharing in our nation’s prosperity. We are taking important steps so that growth is broadly shared, doing it all while saving record amounts for a rainy day.

 “As our state and nation face uncertain economic headwinds, the federal government would be wise to look to California as a model for how to get its fiscal house in order.”

Let me remind you that California has been the state with the highest Unrestricted Net Deficit in the nation for at least the last two decades.  It just gave up the title to the state of New Jersey, pushing California, appropriately, into 49th place (see MOORLACH UPDATE — California’s and Group 7’s Fiscal Health — September 30, 2019).  With an Unrestricted Net Deficit of $213 billion, or $5,393 per man, woman and child, California is not a model for having its fiscal house in order.  To say so is hubris at its finest.

On a per capita basis, California just moved up to 41st place and that is because other states are doing worse while the Golden State is standing still (also see MOORLACH UPDATE — California’s and Group 7’s Fiscal Health — September 30, 2019).

I like to say that the trend is your friend.  If 2019-20 was $21 billion to the positive, and 2020-21 will be $7 billion to the positive, then 2021-22 may be $7 billion to the negative.  This is not a time to be thumping one’s chest.

The nation is being blessed with continued economic growth, but California is not seeing it as strongly as the rest of the country, as it lags the national average.  So I responded with a series of tweets:

https://platform.twitter.com/widgets.js

https://platform.twitter.com/widgets.js

https://platform.twitter.com/widgets.js

https://platform.twitter.com/widgets.js

The Sacramento Bee included them in the piece below.

Cities 289 to 336

We’re down to the 60th percentile group and it includes three Orange County cities:  Garden Grove (#316), La Habra (#325) and Buena Park (#332). This means the OC has a dozen cities below the 70th percentile.

Mountain View (#301) was a participant in the Orange County Investment Pool back in 1994.  It dropped 139 positions; it’s unrestricted net position went from a positive $20.9 million to a negative $42.9 million in one year.  It’s pension liability grew by $21.2 million and adding other post-employment benefits to the balance sheet provided another $31.4 million in liabilities.  Combined, they may represent $52.6 million of the $63.8 million swing.

The city of Brawley (#309) still has not provided its Comprehensive Annual Financial Report for June 30,2018 on its website.

Rank City Pop. UNP 2018 (Thousands) UNP/ Capita 2017 Rank Rank Change
289 Selma 24,742 ($11,605) ($469) 292 3
290 Reedley 26,390 ($12,448) ($472) 269 -21
291 La Mesa 61,261 ($29,042) ($474) 271 -20
292 Willits 5,128 ($2,482) ($484) 347 55
293 Grover Beach 13,560 ($6,662) ($491) 387 94
294 Turlock 74,730 ($37,109) ($497) 301 7
295 Taft 9,482 ($4,749) ($501) 246 -49
296 Rolling Hills Estates 8,111 ($4,090) ($504) 359 63
297 Campbell 42,696 ($21,605) ($506) 293 -4
298 Pleasant Hill 35,068 ($17,751) ($506) 340 42
299 Ridgecrest 28,822 ($14,913) ($517) 313 14
300 Bakersfield 386,839 ($200,715) ($519) 289 -11
301 Mountain View 81,527 ($42,935) ($527) 162 -139
302 Indio 87,883 ($46,940) ($534) 339 37
303 National City 62,257 ($33,784) ($543) 327 24
304 Desert Hot Springs 29,742 ($16,185) ($544) 331 27
305 Sutter Creek 2,479 ($1,354) ($546) 336 31
306 Clovis 113,883 ($63,435) ($557) 332 26
307 Cloverdale 9,134 ($5,149) ($564) 364 57
308 Merced 86,750 ($49,026) ($565) 352 44
309 Brawley 27,417 ($15,649) ($571) 308 -1
310 Santa Paula 31,138 ($18,377) ($590) 343 33
311 Novato 54,551 ($32,241) ($591) 314 3
312 Susanville 14,954 ($8,921) ($597) 353 41
313 Red Bluff 13,858 ($8,505) ($614) 324 11
314 San Marino 13,272 ($8,208) ($618) 334 20
315 Pleasanton 79,201 ($49,676) ($627) 274 -41
316 Garden Grove 176,896 ($111,538) ($631) 330 14
317 Morro Bay 10,503 ($6,626) ($631) 341 24
318 Hermosa Beach 19,673 ($12,637) ($642) 360 42
319 Avalon 3,867 ($2,490) ($644) 192 -127
320 Gilroy 55,615 ($36,193) ($651) 316 -4
321 Lynwood 72,015 ($47,075) ($654) 335 14
322 Colusa 6,241 ($4,103) ($657) 295 -27
323 Rialto 107,041 ($70,806) ($661) 329 6
324 Antioch 113,061 ($75,016) ($664) 294 -30
325 La Habra 62,850 ($41,738) ($664) 315 -10
326 Manteca 81,345 ($54,265) ($667) 345 19
327 Fort Bragg 7,512 ($5,115) ($681) 273 -54
328 Auburn 14,611 ($9,968) ($682) 381 53
329 Simi Valley 128,760 ($88,047) ($684) 311 -18
330 Fairfax 7,534 ($5,157) ($684) 342 12
331 Lindsay 13,162 ($9,064) ($689) 206 -125
332 Buena Park 83,995 ($58,567) ($697) 302 -30
333 Union City 72,991 ($52,112) ($714) 307 -26
334 Napa 80,403 ($57,495) ($715) 337 3
335 Sunnyvale 153,389 ($109,823) ($716) 235 -100
336 La Verne 33,260 ($24,270) ($730) 338 2

25th Anniversary Look Back

The Moorlach Memo continues with Chapter 7.  In this segment I address borrowing to invest, which many municipalities and school districts were doing back in 1994.  This scheme would earn the moniker of “casino” bonds.

For more on Irvine Ranch Water District, see MOORLACH UPDATE — Lonely Republicans — July 24, 2019.  For more on the phrase “Democrat leverage artist,” see MOORLACH UPDATE — Housing and Banking — July 4, 2019.

For the introduction and first six chapters, see:

Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.

Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019

Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019

Chapter 3 — We Do Not Mark To Market — MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019

Chapter 4 — Prognosis — MOORLACH UPDATE — Officers, Audits, CIRM and Cities 145 to 192 — November 14, 2019

Chapter 5 — Current Media Revelations — MOORLACH UPDATE — SB 640 and Cities 193 to 240 — November 18, 2019

Chapter 6 — Scaring Credit Markets — MOORLACH UPDATE — PSPS and Cities 241 to 288 — November 19, 2019

BORROWING TO INVEST

Mr. Swan is a trustee for the Irvine Ranch Water District (IRWD), which is a $400 million participant in Citron’s portfolio.  Accordingly, in spite of his being a Republican activist, he had to defend our nationally known “Democrat leverage artist.”

Where did this small water district obtain $400 million?  It issued bonds to buy bonds! What a financial maniac! Borrowing to invest, or “arbitrage,” is considered risky by most and even immoral by some, especially when done with public dollars.  But, in the bond market as interest rates go up this strategy backfires! As I’ve diagrammed, you still owe the debt but the value of your investments have decreased.

The IRWD’s strategy is to take advantage of the higher returns that Citron has been achieving.  Most sophisticated investment advisors would tell you, if one bond fund is out-performing its competitors by even half of one percent, then be cautious about the risks that the higher performing fund is taking.  Swan took that caution to the wind and encumbered the residents of his district by over $4,600 per registered voter! Just to squeeze out a few interest points!

So now we have a small water district, juggling funds equivalent to a significant portion of our state’s budget short-fall, in a major bet that rates will stay level or go down.  They haven’t. And, if the value is down 17 percent, Irvine has lost 50 percent of its value!

California is on track for a $7 billion budget surplus. Where will the money go?

BY SOPHIA BOLLAG

https://www.sacbee.com/news/politics-government/capitol-alert/article237555229.html

California’s long economic expansionis projected to continue into next year, giving Gov. Gavin Newsom and lawmakers another surplus as theymap out a new state budget.

Legislative Analyst Gabriel Petek released a report Wednesday projecting the state will bring in a $7 billion surplus in the 2020-21 budget year.

That’s far less than the $21.5 billion surplus California is collecting this year, but it still reflects a positive outlook for the state’s economy.

“The budget picture is strong and favorable. Full stop,” Petek told reporters Wednesday.

As much $3 billion could be available for ongoing expenses, while the rest could dry up in an economic downturn, according to the report. But the analyst’s office recommends the Legislature allocate no more than $1 billion of the surplus to ongoing expenses to avoid having to cut programs during a recession.

Analysts also found the state has enough saved in reserves to weather a typical recession, but recommend the state use much of the projected surplus to pay debts and boost reserves.

Last year, lawmakers approved a $215 billion budget boosted by record surpluses that accommodated new spending on health care, early childhood programs and housing construction. Lawmakers also socked away billions of dollars in reserves, giving the state $19 billion in separate savings accounts.

Newsom has warned that next year’s budget likely won’t be so flush.

In October, Newsom told reporters he’s seeing a slowdown in state tax revenue, indicating a recession is on the horizon after a decade of economic growth.

The analyst’s office still painted a positive picture of the upcoming year in its report, projecting the economy will continue to grow in coming years, although at a slowing pace.

“Withmore than a decade of economic expansion, coupled with deliberate legislative action to put the budget on better footing, the California budget is in good condition,” analysts wrote, although they noted the prospect of a recession still looms.

The analyst’s office predicts California will continue adding jobs and that the housing market will improve somewhat after declining in 2019.

The report also outlines several areas of uncertainty, most notably surrounding a policy reauthorized by California lawmakers this year to offset some health care costs in the budget known as the managed care organization — or MCO — tax. That policy requires federal approval, which the analyst’s office projection assumes will happen. About $900 million is at stake.

Newsom boasted about the positive outlook Wednesday.

“Our state is now doing more than ever before to provide opportunity for all California families, especially those who are not equally sharing in our nation’s prosperity,”he said in a written statement. “We are taking important steps so that growth is broadly shared, doing it all while saving record amounts for a rainy day.”

Sen. John Moorlach, R-Costa Mesa, said the outlook showed “California continues to benefit from a booming national economy,” but cautioned that state and local governments are carrying hundreds of billions of dollars in debt that could become especially problematic in a financial downturn.

Newsom in this year’s budget nodded to those debts, providing $9 billion in optional payments to the state’s underfunded CalPERS and CalSTRS pension plans.

“Let’s hope the governor allocates the $7 billion to address increasing state unfunded liabilities. Not doing so is intergenerational theft leaving Californians saddled with these debts on their backs,” Moorlach, who sits on the Senate Budget Committee, wrote on Twitter.

Newsom must propose a plan for the 2020-21 budget in January, kicking off negotiations with the Legislature, which must approve a final plan by June 15 in time for the July 1 start of the state’s fiscal year.

image18.png?w=660&h=165

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — PSPS and Cities 241 to 288 — November 19, 2019

PG&E

I have the privilege of serving as the Vice Chair of the Senate Energy, Utilities and Communications Committee this year.  And what a year it has been. With the recent Public Safety Power Shutoff resulting from the Santa Ana and Diablo winds, a special hearing was called for November 18th and every State Senator was invited to attend this committee’s discussion on Public Safety Power Shutoffs. However, most of the Senators in Sacramento yesterday were members of the committee.

I presented opening remarks, which I will provide in a future UPDATE. For a sense of what I shared, see MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019.

The three major investor-owned utilities (IOUs) were represented by key executives, but only PG&E’s new CEO, William Johnson, was present and testified.  To see the agenda, go to https://seuc.senate.ca.gov/content/#November182019.

PG&E was pummeled during the day by Senators and various speakers.  Therefore, I appreciated Mr. Johnson attending the entire hearing. There is a need to reduce utility-caused wildfires, and it is apparent that PG&E was not proactive in its approach,  especially when compared to SDG&E and SCE. The state of California is also guilty of a late reaction. The hearing certainly emphasized that there is much more to do.

On the issue of a state takeover of  PG&E, I asked Mr. Johnson his concerns about being “nationalized.”  He was fully aware that it was an option.

I asked each of the utilities what they were doing to install newer and more advanced electric lines and power diverters or current limiters, a newer technology that is being implemented in Australia to react to the surge of current that is unleashed when a high voltage line strikes the ground or is struck by a falling tree or tree branch.

Mr. Johnson said that, over the last 10 years, PG&E had spent $30 billion, but he did not mention newer technology.  So, I asked him where PG&E spent this large amount of money.

Some highlights are provided below in Dan Morain’s daily email blast for CalMatters.

Cities 241 to 288

We’re now in the 50th percentile of cities. These cities have  below-average balance sheets. In this sixth group, there is only one Orange County city, Seal Beach (#245).  This means 15 Orange County Cities are in the 60th percentile or lower.

Riverbank, Arroyo Grande and California City have not completed their annual audits for June 30, 2018.  They are almost a year behind in what should be the anticipated completion date. This is a signal to Sacramento, cities are having difficulty meeting their reporting requirements.  Consequently, I have projected their Unrestricted Net Deficits based on conservative assumptions.

The city of Porterville (#262) dropped 96 places.  It did something highly unusual, it increased its restricted net assets by $25.5 million.  Its pension liability rose by $6 million and the other post-employment benefit liability rose by $4.4 million.  This would explain why its unrestricted net position went from a positive net assets of $13.7 million to a net deficit of $20.3 million, or a $34 million decrease in one year.

Rank City Pop. UNP 2018 (Thou-sands) UNP/ Capita 2017 Rank Rank Change
241 Angels Camp 4,121 ($686) ($166) 241 0
242 Dixon 19,896 ($3,373) ($170) 282 40
243 San Ramon 82,643 ($15,099) ($183) 261 18
244 Riverbank 25,244 ($4,675) ($185) 205 -39
245 Seal Beach 25,984 ($4,911) ($189) 201 -44
246 Livingston 14,328 ($2,738) ($191) 219 -27
247 Hanford 58,176 ($11,446) ($197) 247 0
248 Patterson 22,679 ($4,612) ($203) 475 227
249 Arroyo Grande 17,912 ($3,702) ($207) 264 15
250 Norwalk 107,546 ($22,929) ($213) 236 -14
251 Oceanside 177,362 ($37,821) ($213) 290 39
252 Lake Elsinore 63,365 ($13,554) ($214) 272 20
253 Lomita 20,715 ($4,507) ($218) 242 -11
254 Galt 26,018 ($5,834) ($224) 270 16
255 Los Banos 40,986 ($10,084) ($246) 229 -26
256 San Mateo 104,490 ($27,695) ($265) 266 10
257 Guadalupe 7,604 ($2,067) ($272) 306 49
258 Anderson 10,263 ($2,808) ($274) 276 18
259 Mount Shasta 3,385 ($981) ($290) 265 6
260 Oakdale 23,324 ($6,909) ($296) 299 39
261 Alturas 2,868 ($914) ($319) 312 51
262 Porterville 60,798 ($20,249) ($333) 166 -96
263 Oroville 18,144 ($6,108) ($337) 304 41
264 Livermore 91,411 ($31,159) ($341) 280 16
265 Yuba City 67,280 ($23,187) ($345) 259 -6
266 California City 14,875 ($5,181) ($348) 283 17
267 Gustine 5,874 ($2,063) ($351) 404 137
268 Glendora 52,703 ($18,775) ($356) 263 -5
269 Murrieta 113,541 ($41,046) ($362) 255 -14
270 Lakeport 5,134 ($1,877) ($366) 267 -3
271 Gridley 6,937 ($2,572) ($371) 254 -17
272 Rohnert Park 43,598 ($16,252) ($373) 358 86
273 Burbank 107,149 ($42,672) ($398) 251 -22
274 Winters 7,292 ($2,950) ($405) 250 -24
275 Elk Grove 172,116 ($69,767) ($405) 234 -41
276 Grand Terrace 12,524 ($5,099) ($407) 286 10
277 Crescent City 6,590 ($2,706) ($411) 291 14
278 Manhattan Beach 35,991 ($14,862) ($413) 319 41
279 Sebastopol 7,786 ($3,255) ($418) 321 42
280 Santee 56,994 ($24,077) ($422) 296 16
281 Victorville 123,701 ($53,036) ($429) 305 24
282 San Anselmo 13,000 ($5,664) ($436) 287 5
283 Suisun City 29,192 ($12,730) ($436) 303 20
284 King City 14,880 ($6,591) ($443) 361 77
285 Belmont 27,388 ($12,214) ($446) 225 -60
286 Whittier 87,369 ($40,042) ($458) 300 14
287 Fairfield 116,156 ($54,094) ($466) 322 35
288 Pittsburg 72,647 ($34,067) ($469) 325 37

25th Anniversary Look Back 

The Moorlach Memo continues with Chapter 6.  In this segment, I lay it all out: “We have a County Treasurer who has borrowed staggering amounts of money to invest in highly speculative strategies that are totally inappropriate for a trustee of public funds to engage in.”

if you really want to understand what im talking about, watch “The Big Short,” a 2015 movie with a plotline reminiscent to my personal experience,   A quick view of the trailer will show you what I mean: https://www.youtube.com/watch?v=vgqG3ITMv1Q.  I just couldn’t make money betting against Citron’s bets.  

For The Bond Buyer article referenced, see MOORLACH UPDATE — Mail Bag and Group 8 — October 2, 2019.

For the introduction and first five chapters, see:

Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.

Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019

Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019

Chapter 3 — We Do Not Mark To Market — MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019

Chapter 4 — Prognosis —  MOORLACH UPDATE — Officers, Audits, CIRM and Cities 145 to 192 — November 14, 2019

Chapter 5 Current Media Revelations  MOORLACH UPDATE — SB 640 and Cities 193 to 240 — November 18, 2019

 SCARING CREDIT MARKETS

 We have a County Treasurer who has borrowed staggering amounts of money to invest in highly speculative strategies that are totally inappropriate for a trustee of public funds to engage in.  That, in a nutshell, was the personal belief I communicated during my candidacy to unseat our six-term Democrat incumbent.

 Mr. Citron’s assistant, Matthew Raabe, said as much in the October 3rd issue of “The Bond Buyer,” “‘Over the years, we’ve developed a reputation for being aggressive investors.’  He said the aggressive reputation is accurate: ‘We like to take our base portfolio and leverage it.'”

 Leveraging is wonderful if the market goes with you.  It can be devastating when it goes against you. “I wish we had been right about where interest rates are going, because I would be breathing a lot easier these days,” Raabe observed.

 Citron and Raabe have assembled a “Jenga” block stack (a game where players pull out blocks and risk losing if the stack should fall).  Why was it built in the first place, especially with tax dollars? And why does a challenger questioning this scheme draw Citron’s claims of “scaring” the credit markets?  My goodness. If asking questions about a bond portfolio causes problems, then there are problems!

 Questioning Citron’s management of our tax dollars was a legitimate campaign strategy; it hit too close to home for one of my critics, Peer Swan.  Let me elaborate.

 

 

Lawmakers challenge PG&E, as utility warns of more mass power shutdowns

By Dan Morain and Judy Lin

https://calmatters.org/newsletter/lawmakers-challenge-pge-but-to-what-end/

Good morning, California.

“We don’t want Californians to think they’re living in Puerto Rico because they are not.”— Ana Matosantos testified at a Senate hearing Monday. She’s Gov. Gavin Newsom’s energy czar and also serves on a board overseeing the financial restructuring of Puerto Rico, including the island’s electric grid.

  • PG&E Chief Executive Officer William Johnson told the senators: “Repeatedly turning off power for millions of people in one of the most advanced economies in the world, even in the interest of safety, is not a sustainable solution to the wildfire threats we face.”
  • PG&E warned that 800,000 people could lose their power Wednesday and Thursday as wind-driven fire weather is expected to return.

PG&E faces tough questions

PG&E CEO William Johnson at a Senate Energy, Utilities and Communications Committee hearing Monday

California lawmakers heaped harsh criticism on PG&E for its massive power shutoffs, with some calling for a public takeover of the bankrupt utility.

Democratic Sen. Scott Wiener of San Francisco: “This company in my mind has forfeited its right to operate as an investor-owned utility.”

High hurdles and huge cost: The California Public Utilities Commission would have to revoke the utility’s franchise and the state would have to overcome the 5th Amendment, which prevents taking private property for public use without just compensation.

In a daylong Senate oversight hearing, PG&E Chief Executive Officer William Johnson said: “I do work for the shareholders, let’s not kid ourselves about that.”

He’d like to keep PG&E in private ownership but sought to strike a conciliatory tone, acknowledging that an Oct. 9 blackout affecting 2 million customers “wasn’t perfect.”

He said the utility is working to reduce the blackout footprint by one-third by next year’s wildfire season, even as the wildfire risk has dramatically increased.

  • Sen. Bill Dodd, a Napa Democrat: “I looked at what happened on Oct. 9 as a big ‘screw you’ to your customers, to the Legislature, to the governor.”
  • Sen. Mike McGuire, a Democrat who represents fire-ravaged Sonoma County: “You are behind in modernization, grid hardening and vegetation management.”

Johnson said the utility has invested $30 billion in its system over the past decade.

  • Sen. John Moorlach, a skeptical Republican from Costa Mesa: “Where did you spend that $30 billion?”

image18.png?w=660&h=165

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — SB 640 and Cities 193 to 240 — November 18, 2019

SB 640

The LB Report is back with a thorough review of SB 640, my effort to address our mentally ill homeless population by expanding the definition of “gravely disabled” (see MOORLACH UPDATE — Senate Bills 511, 584, 598, 496 and 640 — April 15, 2019).

The LB Report has covered this topic before and I appreciate that a news outlet is knowledgeable about what I am trying to accomplish (see MOORLACH UPDATE — Invitations and Group 9 — October 8, 2019).

If you would like to become an expert on the Lanterman-Petris-Short Act and its shortcomings, this will be a good read for you.  My office will be issuing a white paper on the LPS Act soon. And, we will have a good sprint in January to get SB 640 to the Senate Floor, also explained in the piece below.

Cities 193 to 240

The fifth group finds us halfway through California’s 482 cities and we see that the zero threshold has been crossed.  It includes two from Orange County, Yorba Linda (#193) and San Juan Capistrano (#239). Yorba Linda dropped 64 places. Its Other Post-Employment Benefits (OPEBs) went up $19.7 million, which explains two-thirds of the drop in its Unrestricted Net Assets of $27.9 million.

The cities of Sonoma, McFarland, Artesia and Adelanto have not completed and posted their June 30, 2018 Comprehensive Annual Financial Reports.  Their Unrestricted Net Positions were estimated based on the prior year’s trends.

Rank City Pop. UNP 2018 (Thou-sands) UNP/ Capita 2017 Rank Rank Change
193 Yorba Linda 69,121 $2,992 $43 129 -64
194 Atascadero 31,147 $1,015 $33 228 34
195 Encinitas 63,158 $1,964 $31 182 -13
196 Weed 2,769 $83 $30 108 -88
197 Kingsburg 12,392 $356 $29 262 65
198 Citrus Heights 87,731 $1,755 $20 177 -21
199 Jurupa Valley 106,054 $2,110 $20 200 1
200 Wildomar 36,287 $653 $18 216 16
201 Imperial 19,372 $301 $16 161 -40
202 Soledad 26,246 $319 $12 233 31
203 Watsonville 53,434 $475 $9 258 55
204 Moraga 16,991 $143 $8 186 -18
205 Los Gatos 30,601 $171 $6 120 -85
206 Firebaugh 8,112 $22 $3 238 32
207 American Canyon 20,990 ($267) ($13) 199 -8
208 El Centro 46,315 ($788) ($17) 240 32
209 Arvin 21,696 ($393) ($18) 203 -6
210 Coachella 45,635 ($1,024) ($22) 127 -83
211 Corcoran 21,450 ($699) ($33) 230 19
212 Cotati 7,716 ($258) ($33) 257 45
213 Lancaster 161,485 ($6,021) ($37) 226 13
214 Banning 31,282 ($1,240) ($40) 210 -4
215 Duarte 22,013 ($887) ($40) 145 -70
216 Carpinteria 13,704 ($624) ($46) 231 15
217 Ceres 48,326 ($2,283) ($47) 173 -44
218 Norco 26,761 ($1,297) ($48) 195 -23
219 Apple Valley 73,984 ($4,162) ($56) 217 -2
220 Lemon Grove 26,834 ($1,701) ($63) 227 7
221 Sonoma 11,390 ($810) ($71) 243 22
222 Newman 11,801 ($890) ($75) 218 -4
223 Cudahy 24,343 ($1,843) ($76) 214 -9
224 Greenfield 18,007 ($1,668) ($93) 256 32
225 Chino 86,757 ($8,062) ($93) 140 -85
226 Santa Maria 108,470 ($12,187) ($112) 252 26
227 McFarland 15,105 ($1,707) ($113) 176 -51
228 Tracy 92,553 ($10,576) ($114) 245 17
229 Paramount 56,000 ($6,436) ($115) 239 10
230 Fontana 212,000 ($26,156) ($123) 211 -19
231 Artesia 16,792 ($2,160) ($129) 213 -18
232 Sanger 26,648 ($4,031) ($151) 284 52
233 Madera 66,225 ($10,128) ($153) 268 35
234 Exeter 11,169 ($1,732) ($155) 278 44
235 Beaumont 48,237 ($7,563) ($157) 326 91
236 Adelanto 35,293 ($5,561) ($158) 143 -93
237 South El Monte 20,882 ($3,319) ($159) 215 -22
238 Ojai 7,679 ($1,255) ($163) 212 -26
239 San Juan Capistrano 36,759 ($6,050) ($165) 223 -16
240 Solana Beach 13,938 ($2,320) ($166) 190 -50

25th Anniversary Look Back

The Moorlach Memo continues with Chapter 5.  In this segment, I wrote something that was impossible to say after December 6, 1994, “I told you so.”

For more on the Piper Jaffray incident, see MOORLACH UPDATE — OC Register Coverage Look Back — September 16, 2019).  For Cuyahoga County, Ohio, see MOORLACH UPDATE — SB 359 and Cuyahoga County — October 11, 2019.

For the first five segments, see:

Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.

Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019

Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019

Chapter 3 — We Do Not Mark To Market — MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019

Chapter 4 — Prognosis — MOORLACH UPDATE — Officers, Audits, CIRM and Cities 145 to 192 — November 14, 2019

CURRENT MEDIA REVELATIONS

We’ve recently seen the articles detailing how the value of  the investments managed by one regional investment firm, Piper Jaffray, plunged.

Piper Jaffray’s investment manager, Worth Bruntjen, invested over half of the portfolio in inverse floater derivatives.  An investment our County is using!  A strategy that, I believe, the unsophisticated Finance Directors of most of our cities and municipalities don’t understand nor have a clue as to the risks that they are taking.

Piper Jaffray’s portfolio of about $3.5 billion has lost over $700 million in value for its investors.  Citron’s portfolio holds roughly $3.5 billion of inverse floaters, or one-sixth of the entire holdings, that are down in value by some $1.4 billion!

My campaign claim that Citron lost some $1.2 billion in value was a mild understatement.  Those in the financial industry agreed with my claims.  Those in the government bureaucracy system had conniption fits over my criticisms.  But, as Piper Jaffray investors are discovering, higher returns really do equal higher risks.

Others are finding out the true risks, too, as the casualty list grows longer each passing day.  The front page of  the Sunday September 25, issue of “The New York Times” had this headline:  “Local Governments Lose Millions In Complex and Risky Securities.”  And now we have “Cuyahoga County Reels From Blow to Fund That Made Big Bet on Falling Interest Rates,” in the October 13th issue of “The Wall Street Journal,” thanks to the use of reverse repurchase agreements.  To quote a fellow conservative:  “I told you so.”

Annual Open House — Moved to Second Harvest Food Bank

Special Report w/ Detailed Coverage
Audio / Video / Perspective

State Senator John Moorlach Says He’d Welcome Long Beach Support For SB 640 That Would Add Language To Current CA Law Allowing Intervention To Help Severely Mentally Hill Homeless Persons Too Ill To Help Themselves

https://www.lbreport.com/news/nov19/hmls1.htm

The fatal 2011 beating by Fullerton police officers of Kelly Thomas, a schizophrenic homeless man, awakened then-Orange County Supervisor John Moorlach to issues involving governmental interactions with severely mentally ill persons. Eight years later, despite major taxpayer expenditures and escalating governmental interactions, California cities including Long Beach continue to allow seriously mentally ill homeless persons to wander the streets, inhumanely depersonalized while creating serious health and safety issues for themselves and others.

The incompassionate and ineffective status quo has led now-state-Senator Moorlach to introduce SB 640, a bill that would add language to a current state law to enable intervention that could help severely mentally ill homeless individuals. These are persons with mental illness so severe (including schizophrenia) that the person doesn’t realize he/she is ill and needs help for their safety and sometimes for the safety of others.

SB 640 would amend the “Lanterman-Petris-Short Act” – a state law that currently permits the involuntarily treatment of individuals who are “gravely disabled” — to also include [legislative counsel’s digest] “a condition in which a person, as a result of a mental health disorder, is incapable of making informed decisions about, or providing for, the person’s own basic personal needs for food, clothing, shelter, or medical care or shelter without significant supervision and assistance from another person and, as a result of being incapable of making these informed decisions, the person is at risk of substantial bodily harm, dangerous worsening of a concomitant serious physical illness, significant psychiatric deterioration, or mismanagement of the person’s essential needs that could result in bodily harm.”

SB 640 gained early support from the CA District Attorneys Association, the CA Police Chiefs Association, the City of Santa Monica, and NAMI Sacramento but drew opposition from the American Civil Liberties Union, CA Hospital Association (unless amended), Disability Rights California, Mental Health America of Northern CA, SEIU California and the Western Center on Law and Poverty.

At an April 8, 2019 hearing in the state Senate Health Committee (video below), Sen. Moorlach explained his basis for reforming current state law. He brought witnesses who offered compelling testimony in support of SB 640 and pleaded with Committee members to move the bill forward. The Committee chair, state Senator Richard Pan (D, Sacramento) and others among the Committee’s Democrat majority politely thanked Sen. Moorlach and his witnesses but indicated they’d vote “no” on his bill, an action that would prevent SB 640 from advancing further.

Stymied for the moment, Sen. Moorlach offered to make SB 640 a “two year bill,” a way to amend the bill to address stated objections.

To see/hear what took place in the state Senate Health Committee hearing on SB 640, click the VIDEO below:

https://moorlach.cssrc.us/content/senate-bill-640-mental-health-services-gravely-disabled

The Committee ultimately withheld a vote on SB 640. The bill remains in the state Senate Health Committee.

In June 2019, former LB Councilwoman Lena Gonzalez was elected to the state Senate. She is now a member of the state Senate Health Committee. LBREPORT.com reported on SB 640 in August 2019..

SB 640 faces legislative deadlines in late January 2020. By Jan. 24, 2020, the state Senate Health Committee must hear and report the bill to the state Senate floor and by Jan. 31, SB 640 must pass the full state Senate. If that doesn’t happen, SB 640 will die.

In a November 15, 2019 telephone conversation invited by LBREPORT.com, we asked Senator Moorlach if Long Beach Mayor Robert Garcia (who doesn’t set city policy) or any LB Councilmember(s) (who do set policy) or LB city staff (engaged in homeless/vagrancy issues) had contacted him about SB 640. Sen. Moorlach politely indicated that he didn’t recall but also indicated he’d welcome support from the City of Long Beach (L.A. County’s second largest city.) That could include a Long Beach City Council resolution supporting SB 640. Any LB Councilmember(s) could agendize this for Council action “on any Tuesday.”

To hear LBREPORT.com’s Nov. 15 telephone conversation with Sen. Moorlach, click here (MP3 file, lightly edited)

Senator Moorlach has a robust webpage devoted to SB 640. It includes links to video and statewide coverage of the issue at this link.

LBREPORT.com invites our readers to share this article on social networks and with the offices of their Councilmembers and state lawmakers. We also invite readers who receive responses from their elected officials to share them with us for possible publication.

Additional legislative background

An April 2019 state Senate Health Committee Legislative Analysis provided details of SB 640 here:

…According to the author, California is failing its seriously mentally ill. Current law states that a person is gravely disabled if, as a result of a mental health disorder, he or she cannot provide for their basic needs for food, clothing, and shelter. This law was intended to serve as a protection to individual liberties but has created a system that, instead of helping the most seriously mentally ill, relegates them to the streets, jails, and emergency rooms. Better metrics are needed to help seriously mentally ill individuals that are simply powerless to provide for their own personal well-being. This is especially important when the absence of significant supervision and assistance leaves the individual at risk of substantial bodily harm. Clarifying the definition of “gravely disabled” will be a step towards repairing a system that is failing to serve those who need it most.…The LPS [Lanterman-Petris-Short] Act provides for involuntary commitment for varying lengths of time for the purpose of treatment and evaluation, provided certain requirements are met. Additionally, the LPS Act provides for LPS conservatorships, resulting in involuntary commitment for the purposes of treatment if an individual is found to meet the grave disability criteria. Typically one first interacts with the LPS Act through a 5150 hold, which allows a designated facility to involuntarily commit a person for 72 hours for evaluation and treatment if they are determined to be, as a result of a mental health disorder, a threat to self or others, or gravely disabled. The peace officer or other authorized person who detains the individual must determine and document that the individual meets this standard. When making the determination or determining that a person should be placed on a 5150 hold, the peace officer or other authorized person may consider information about an individual’s historical course of a mental disorder, which includes evidence presented by a person who has provided or is providing mental health or related support services to the person on the 5150 hold; evidence presented by one or more members of the family of the person on the 5150 hold; and, evidence presented by the person on the 5150 hold, or anyone designated by that person, if the historical course of the person’s mental disorder has a reasonable bearing on making a determination that the person requires a 5150 hold.

Following an initial 5150 hold, a person may be certified for intensive treatment, which initially permits a person to be held for an additional up to 14-days, without court review, if they are found to still be a danger to self or others, or gravely disabled. When determining whether the person is eligible for a 14-day detention, the professional staff of the agency or facility providing evaluation services must find that the person has been advised of the need for, but has not been willing or able to accept, treatment on a voluntary basis. A notice of certification is required for all persons certified for intensive treatment, and a copy of the notice for certification is required to be personally delivered to the person certified, the person’s attorney, or the attorney or advocate, as specified. If after the initial 14 days a person is still found to remain gravely disabled and unwilling or unable to accept voluntary treatment, the person may be certified for an additional period of not more than 30 days of intensive treatment. A person cannot be found at this point to be gravely disabled if he or she can survive safely without involuntary detention with the help of responsible family, friends, or others who indicate they are both willing and able to help.

The LPS Act provides for a conservator of the person, of the estate, or of both the person and the estate for a person who is gravely disabled as a result of a mental health disorder or impairment by chronic alcoholism or use of controlled substances. The person for whom such a conservatorship is sought has the right to demand a court or jury trial on the issue of whether they meet the gravely disabled requirement. The purpose of an LPS conservatorship is to provide individualized treatment, supervision, and placement for the gravely disabled person. Current law also deems a person as not being gravely disabled for purposes of a conservatorship if he or she can survive safely without involuntary detention with the help of responsible family, friends, or others who indicate they are both willing and able to help.

SB 1045 (Wiener and Stern, Chapter 845, Statutes of 2018) established, under a five-year pilot project in San Francisco, Los Angeles, and San Diego Counties, a conservatorship process for individuals who are incapable of caring for their own health and well-being due to a serious mental illness and substance use disorder as evidenced by “frequent detention” for evaluation and treatment under 72-hour involuntary holds. Frequent detention is defined as having eight or more 5150 holds in the preceding 12 months.

The Committee legislative analysis summarized positions on the bill pro and con as follows:

Support. The City of Santa Monica states that although the current definition of gravely disabled was intended to protect individuals from inappropriate, indefinite, and unnecessary involuntary commitments, it has created a system that often relegates those who are gravely disabled to the streets, jails, and emergency rooms, and has failed to deliver care that is desperately needed. The City of Santa Monica argues that this bill would clarify gravely disabled to more closely align with the original intent of the LPS Act and to provide care that the current system has failed to deliver.Support if amended. Tenet Healthcare recommends that this bill be amended to pilot modernization of conservatorship programs in counties that have also adopted specific, voluntary community mental health and sheltering programs. Tenet states that ultimately the state must have resources to expand the continuum of care for behavioral, medically fragile and homeless patients. Tenet notes, for example, that Orange County has availed itself of two very appropriate tools: Laura’s Law/Assisted Outpatient Treatment and whole person care pilot programs. Tenet argues that without county support, wrap-around services, and vested community partnerships, simply transporting the gravely disabled population to a hospital emergency department (ED) will likely only exacerbate present bottlenecks in that ED caused in part by patients that we are unable to discharge by the hospital.

Opposition. Disability Rights California, the American Civil Liberties Union, and the Western Center on Law and Poverty write as a coalition to argue that this bill needlessly expands LPS to permit an undefined standard by which to impose involuntary care for individuals in a restrictive and confined environment; proposes a solution that does not meet the stated goals of addressing homelessness; and, does nothing to ensure that those proposed to be conserved under the expansion will be provided with adequate food, clothing, shelter, or medical and behavioral health care. The coalition states that many terms in the expanded definition are undefined and expansively broad and that the bill does nothing to promote uniformity between the counties and, to the contrary, substitutes a vastly more confusing standard for every stakeholder in the LPS system to attempt to learn and attempt to consistently apply. The coalition further states that involuntary treatment means the county has the duty to treat and house conservatees, which includes making physical and mental health services actually available, and this bill puts the cart before the horse since the counties are already unable to provide services and supportive housing for this population. The coalition states that they do not believe this bill has specified a clear or factual underpinning to support moving away from the current gravely disabled standard that has served for decades to balance the needs of individuals with behavioral illnesses and the protection of their own and others safety. Mental Health America of Northern California (MHA NorCal) shares similar concerns as the coalition. MHA NorCal also argues that efforts to institutionalize people with mental health conditions is not only counterproductive to the recovery model embraced by California but may also be a violation of civil rights. MHA NorCal also notes that Laura’s Law has been implemented in various counties, which consists of court-ordered coercive treatment with appropriate conditional elements that promote opportunities to remain in community services. SEIU California shares similar concerns as the coalition and argues that this bill would not assist the state with a more uniform application of conservatorships. Instead, it would create a more confusing set of criteria which will be newly reinterpreted and tested throughout California’s various jurisdictions in myriad ways. SEIU California states that by opening the definition up to include individuals who need help with providing for their basic needs, it fears it would be even harder to provide help on a voluntary basis to our most in-need populations.

Oppose unless amended. CHA states that this bill will only make it more challenging for hospitals to meet the needs of an increasing volume of patients with behavioral health needs. Over a six-year period, data shows that ED utilization increased by a staggering 47% for people with behavioral health conditions, while overall ED use increased only 14%. CHA argues that this bill expands criteria for 5150s and causes an unintended ripple effect that will negatively impact patient care such that under the expanded definition many patients with mental health disorders could be involuntarily detained simply because they do not follow a doctor’s recommended treatment; patients on 5150s would linger in EDs; and hospitals could not forcibly treat patients but would need to keep them. CHA argues that broader policy changes and investment need to be made, such as: standardization of involuntary commitment laws; mandated assisted outpatient treatment in all counties; and adequately funding California’s overburdened court and public conservatorship system.

Additional Long Beach background

In L.A. County’s second largest city, Long Beach Mayor Garcia (who doesn’t set city policy) has acknowledged homelessness is complex with multiple aspects but has tried to steer discussion mainly toward building more housing units (including below market/subsidized “affordable” housing.) In 2018, Mayor Garcia chose an “Everyone Home Task Force” that included a number of affordable (subsidized) housing developers and homeless service providers. It produced a Dec. 2018 report contending LB (parts of which are already densely populated) needs thousands of new housing units. On a separate track, Councilman Rex Richardson has been soliciting contributions (as of June 30 over $200,000) from affordable housing developers and homeless service providers for a future revenue-raising (read: tax imposing) LB ballot measure (LBREPORT.com coverage here.)

The Garcia-chosen Task Force acknowledged that a 2017 Long Beach homeless count found roughly a third (31%) reported a mental illness and 21% report a substance use disorder but its recommendations focused on housing, offering mainly conventional bureaucratic responses regarding mental illness issues. Under the heading “Increase access to Behavioral Health and Physical Health Services” the Garcia Task Force wrote:

Improving access to services is an important step to accessing housing and helping people maintain their housing once housed. In addition, our hospitals are impacted by those experiencing homelessness who have physical and behavioral health conditions. With state legislation in place that precludes discharging a person into homelessness, there is a tremendous need to increase collaboration among hospitals and community partners to access shelter and housing, as well as to increase the number of, and access to, recuperative care beds and sobering center opportunities in the City.

The Garcia Task Force recommended an agreement with LA County’s Housing for Health program for “a coordinated referral program to serve the City’s most vulnerable and most frequent users of City resources”; “partnering” with LA County and the State “to implement a substance use detox center, sobering center, and increased recuperative care beds and work to implement a safe needle exchange program; substance use treatment opportunities.”

It also advised a “significantly increase [in] long-term mental healthcare capacity” and “to reform the conservatorship rules and processes to make it easier to get people the care they need and maintain it as long as the level is appropriate.” However that measure is already in place. SB 1045, enacted in 2018 and co-authored by state Senator Scott Wiener, established a five-year pilot project in San Francisco, Los Angeles, and San Diego Counties for “a conservatorship process for individuals incapable of caring for their own health and well-being due to a serious mental illness and substance use disorder as evidenced by ‘frequent detention’ for evaluation and treatment under 72-hour involuntary holds.”

SB 640 would go where some in Long Beach and Sacramento haven’t yet gone.

Developing.

image18.png?w=660&h=165

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach