MOORLACH UPDATE — — December 23, 2009

The second editorial in today’s Register weighs in on the OC Fair.  And the December issue of The Log weighs in on a mandate for the county to address selenium. 

The OC Register seems to have this transaction pegged.  But is shy a boat load of key facts.  There is no mention of the fairgrounds being a public trust, tantamount to selling off park land.  There is no mention that the city of Costa Mesa will have a measure on next June’s ballot that will limit the zoning of the property to just a fair grounds and event center.  This will greatly impact its fair market value.

What we’re talking about here are three things.  First, California has threatened to sell this piece too many times in the past.  Either fish, or cut bait.  Second, there was a potential buyer that had appropriate intentions, but failed in creating and implementing its strategic plan (which can happen when you have a very short timeline).  Thirdly, the residents of Orange County actually do appreciate and use their fair.

Instead of the state having a boom of real estate profits from a per acre transaction, they will have a bust because of the restrictions placed on that very land.

The residents will be forced to redeem the land.  They have paid for it once and will now pay for it a second time.  Redemption is a costly exercise.

This transaction was not well thought out by the Department of General Services or by the “instant” foundation intending to convert the property from a state Agricultural District to a nonprofit (a la the excellent Los Angeles Fairplex model).

Wiser minds would pull the Request for Proposals (Bids) (RFP) from the table.  Desperate minds would not.  And, folks, the state of California is beyond desperate at this moment in history.  So desperate, in fact, that it is willing to disrupt the fifth most populated county in the nation to gain some one-time pocket change to apply towards a $21 billion looming deficit.

The Register editorial today is consistent with their philosophy. However, there are some things government not only does well, but is entrusted  to do, so that market economics are not really applicable or preferable in such cases. Those things are subjects of what is called the “public trust.” A good example is the parks system. We would not want the County, State, or Federal government to sell off the parks to the highest bidder (as the Register suggests should be done with the Fairgrounds), and then hope that some of the purchasers, or the market, would determine that the highest and best use of some of those lands is in fact as a park. Rather, we entrust government to act as a steward of some areas to preserve them for our children and grandchildren. It is on this basis that it makes the most sense that, if the Governor insists on selling the OC Fairgrounds, the most appropriate purchaser is another government entity—in this case the partnership between the County and the City of Costa Mesa. Together, we will operate the Fairgrounds as a public trust, and license or lease the property to an operator who will preserve its use as a fair and exposition center.

The Log addresses a function that is being addressed by the Newport Bay Watershed Executive Committee, which I Chair (versus having a representative or two from my office).  The reporter failed the “fact check” test.  But, the selenium issue is a fascinating one that has not been adequately explained in this piece or a recent Daily Pilot article.

Selenium is a natural element found in the soil, of which we need a little bit in our diets.  Some even believe it could by your most potent ally against cancer.  However, if we consume too much, it has a poisoning effect.

The source of selenium in the watershed occurs naturally by erosion from the foothills into the groundwater.  Prior to development, selenium was sequestered underground in the area known as Cienega de las Ranas, or the Swamp of the Frogs, the area of land where San Diego Creek used to terminate before it was channelized and connected to Newport Bay.  Changes to the drainage regime by human activities transport selenium from groundwater to surface water, where it creates risks for wildlife.  Other areas in California are also encountering problems with selenium.  The article provides the costs and the cooperation we are predicting in addressing this challenge.

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Editorial: Deep-fried turkey of an idea

The sale of the Orange County fairgrounds by the state to raise money has become something of a brawl and brouhaha. Government agencies are fighting amongst themselves; members of the fair board are accused of holding secret meetings about buying the fair; and the people profiting from using the fairgrounds have manufactured an activist movement to advocate on behalf of the status quo.

The original idea to auction off various high-value assets owned by the state of California, such as the Orange County Fair and Events Center in Costa Mesa, was a good one, and it still is. Unfortunately it looks like the sale of the fair will backfire, for many of the exact reasons it shouldn’t.

Of the several assets Gov. Arnold Schwarzenegger’s administration recommended for auction, the only one so far to move to an auction process is the OC fairgrounds. The process, though, is being thwarted by public opinion in some factions of the community and by council members in Costa Mesa and the county Board of Supervisors.

The newly formed Orange County Fairgrounds Preservation Society – funded in part by the owner of the swap meet conducted at the fairgrounds and the equestrian center housed there – voiced heavy opposition to the auction and staged protests to the sale.

Shortly thereafter, the city of Costa Mesa and the county Supervisors entered into a memorandum of understanding to attempt to purchase the fairgrounds using county and city funds. Supervisor John Moorlach told us the county will use a leveraged buyout strategy to purchase the 150-acre site, if it comes to that, and would use a bridge loan from county funds to initially finance the deal with the hope that Costa Mesa would pony up half the funds. The city is eyeing a number of strategies for how it would fund its portion of the deal, but nothing specific yet.

Both the city and county are hoping the governor cancels the sale before they would have to bid on the fairgrounds. And Assemblyman Jose Solorio, D-Santa Ana, who in July voted to authorize the auction of the fairgrounds, has introduced legislation to stop the sale. The governor has not made a final determination, but we think it is unlikely he will sign any such bill or cancel the sale outright.

Ownership and operation of a recreational facility like a fairgrounds is out of the purview of state and local government functions. It makes no sense that the state government would shed an asset and a local government, or in this case two cooperating local entities, would purchase it – a closed loop of taxpayer participation.

A better idea is to let private bidders compete and determine the fairgrounds’ highest and best use. If the owners of the swap meet, the equestrian center and others can develop a privately financed deal, so much the better. If not, there are other potential locations in Orange County for a fair-type events center.

We recognize the monies raised from a sale of the fairgrounds are only mild triage for the state’s enormous spending problems. But regardless, the state needs cash, and our local and state officials ought to focus on the proper role of government – and that does not involve being a landlord of a fairgrounds.

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Upper Newport Bay Cleanup Ordered

By: Ambrosia Sarabia

NEWPORT BEACH –The California Regional Water Quality Control Board ordered the city of Newport Beach, Orange County and cities contributing to the runoff of groundwater into the Upper Newport Bay watershed to produce alternatives to minimize the high levels of the chemical selenium that have been found in the bay.

The natural-occurring element has been leeching into the water, and traces of the chemical have been found in bird and fish eggs in the bay, according to the board.

Members of the Newport Bay Executive Watershed Committee have prepared alternatives to combat the high levels of the chemical, which has been blamed for causing developmental deformities in bird embryos and chicks.

A two-phase plan has been proposed to identify areas of high selenium concentration and conduct a series of “Best Management Practices” (BMPs) tests. The estimated cost is $42 to $137 million.

Nancy Gardner, who sits on the Newport Bay Executive Watershed Committee — a management team that includes city council members and representatives from Orange County Supervisor John Moorlach’s office — explained that each party involved in the watershed is responsible for a percentage of the preventative measures. Newport Beach would be responsible for 6 percent.

“There are some things we’d like to have considered by the board,” Gardner said. “One is to hold off on the second part of Phase 1 (testing the BMPs) to save money until we have the information the model will provide. Meanwhile, we will continue our efforts to reduce the cause of rising groundwater (runoff) with smart irrigation technology and education.”

The city of Newport Beach, Orange County, the Irvine Co., the Irvine Ranch Water District and various Orange County cities — including Tustin, Costa Mesa, Santa Ana and Irvine –will be responsible for funding the project.

There is no established treatment technology for the removal of selenium in the water, according to the committee.

FIVE-YEAR LOOK BACKS

December 23

1994

All of this “bankruptcy” action provided the Orange County Newschannel (OCN) to come into its own.  The provided an update “every hour on the half-hour.”  And they had a call-in program every evening at 8 p.m.  This all-day OC News channel is no longer in service, but this period of time allowed them to garner a larger market share, I’m sure.  They had an ad in the OC Register promoting their “OCN News Special.”

One of the news items was that the Board of Supervisors made cuts to the budget the previous day.  The LA Times had a section featuring key players and their “Reactions to Thursday’s Cuts.”  I’m not sure in what context my remarks were directed, but this is what they printed:

                “This is real life, and there’s no such thing as a promise.  I’m trusting on what I’ve been told.”

“Orange County:  How it happened—How golden touch turned into crisis” was the lead story on the USA TODAY Money section (B) and it was written by David J. Lynch, who flew into town to do interviews and write his story.  It included that terrible photo by the Register.  But, it gave an outsider’s view of what transpired the previous ten months.

Five weeks into 1994, John Moorlach, a tall, bearded accountant from Costa Mesa, announced he would oppose Citron for the treasurer’s job.  Just three days earlier, the Federal Reserve had raised short-term interest rates for the first time since 1989.  Moorlach warned that rising rates made Citron’s heavy borrowing and derivatives dangerous.

At first, Citron brushed aside the criticism, citing his impressive record and the endorsements from county supervisors.  Credit-rating agencies gave the county top marks.  The Los Angeles Times editorialized in his favor.

But as Moorlach sharpened his critique, Citron’s tone changed.  The incumbent had never been particularly tolerant of criticism.

For Citron, it was an unsettling spring.  After two decades as the county’s financial wizard, Citron now faced a three-front war:  Moorlach, nervous investors, and the financial markets.

In April, the city of Tustin withdrew $4 million from the county pool.  The withdrawal was a sliver of the $7.4 billion fund.  But Citron reacted as if he had been betrayed.  He labeled the withdrawal a political plot hatched by Moorlach, Jeff Thomas, a Tustin councilman and Moorlach supporter, and Chriss Street, an investment banker.

The license plates on Moorlach’s butterscotch-colored Bricklin sports car read “DULL CPA.”  The voluble accountant is anything but.  And after 20 years in which Citron was unchallenged, Moorlach’s aggressiveness prompted some to defend the treasurer.

Citron accused Moorlach and his supporters of undermining the county’s credit rating, which would cost taxpayers more in borrowing  costs.  Moorlach’s arguments were dismissed as political rhetoric.  And questions faded.

Still, the usually invisible treasurer’s race received substantial attention through the spring.  Allegations that Citron’s investments would be dissolved by rising interest rates were aired in both the Los Angeles Times and The Orange County Register.  On May 31, Moorlach released a public letter to the supervisors.

“The portfolio is a major bull market bet in the middle of a bear market,” he wrote.  “If interest rates continue to rise we may incur major financial losses in Orange County.”

In June, Citron was re-elected with 61% of the vote.

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