MOORLACH UPDATE — OC Register — January 26, 2013

I’m back from my Point-In-Time Homeless Count.  Thank you to all of you that participated!  We had some 675 individuals take the training, which is a great affirmation of the community spirit here in the OC.  I’m wet and I’m glad I brought along an extra pair of (dry) shoes.  I enjoyed the experience with my small group, led by Edwin, our homeless guide.  We encountered four homeless men in our designated area during our walk and surveillance. 

The OC Register has a discussion of an agenda item for Monday’s Orange County Transportation Authority Board meeting.  It is the first piece below.  The widening of the I-405 freeway between the 55 and the 605 is a very critical project for the residents of Orange County.  The choice of alternatives will be the most important decision that OCTA will make for the rest of this decade.  The current status is a preference for Alternative 1, which only adds one lane on both sides of the freeway (while widening bridges to accommodate two lanes on both sides).  This gives the potential for adding managed toll lanes in the future.  Alternative 2 provided for two new lanes (for only an additional cost of less than 8 percent).  Alternative 3 added two lanes, one for a two-lane toll road and one for the free lanes.  The tolls would be a revenue source in perpetuity for OCTA (eventually replacing the current sales tax revenues from Measure M).  Alternative 3 follows the 91 Express Lane model, but this strategy has not been implemented anywhere else in the county.  Since 10 of the 17 members of the OCTA Board did not participate in the previous process, and are now responsible for overseeing the implementation and construction of the project, I believe it is important that they all have the opportunity to hear a presentation on these efforts and review the alternatives.

It was my impression that during the consideration of the alternatives, OCTA staff continually framed the debate as a limited choice of Alternative 3 versus Alternative 1, with little meaningful consideration of a modified Alternative 2.  When Alternative 3 was defeated, I believe many Board members were led to believe that there was no “real” option other than Alternative 1, despite the sentiment of many that “we could do better.”  We may now have the opportunity to ensure that we consider a modified Alternative 2 with the same level of attention, scrutiny, and analysis as we allowed for Alternative 3.  Hopefully, this proposed agenda item will give us that opportunity before allowing Alternative 1 to move too far down the processing path with Caltrans.

To be clear, I am not seeking to delay or kill this project.  (In fact, OCTA staff has only recently submitted their official proposal to Caltrans for formal consideration.)  If, as a result of further study by the new Board, the Board chooses to reaffirm its support of the previous decision by the prior Board, we can continue forward with Alternative 1 with minimal delay.  However, in the aftermath of the rejection of toll lanes for the I-405, it is good fiscal stewardship  to take a closer look at a modified Alternative 2, making sure that the opportunity cost of failing to consider the merits of doubling the yield of new traffic capacity for an extremely modest cost increase is fully understood.  I look forward to the staff presentation and the related discussion.

The second piece is the OC Register’s take on the Orange County Grand Jury report that was released yesterday morning.

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Plan to widen 405 back up for discussion

By DOUG IRVING

The question that idling motorists might ask themselves during any given rush hour does have an answer, at least for now: What would it take to fix the 405? About $1.3 billion in new lanes.

That’s the solution to the notorious congestion on I-405 that the Orange County Transportation Authority endorsed late last year: one new lane in each direction. Not everyone is convinced that’s enough.

Several cities along the freeway have mobilized to fight for more lanes. OCTA directors will hear a briefing Monday on the freeway widening plans, an item that county Supervisor John Moorlach placed on the agenda in part to test the waters for a re-vote.

Like the cities, he favors a proposal that would add two lanes in each direction, not just one, at a cost of around $1.4 billion. The OCTA board dismissed that option as too expensive last year, but most seats on the board have since changed hands – bringing in new members whose votes are much less certain.

"I would love to have the new board take a look at it," Moorlach said.

Motorists stuck in the rush-hour crawl won’t see any immediate relief, no matter how the board votes. Construction isn’t scheduled to begin until at least 2015, with the new lanes – from the Los Angeles County line to the 55 freeway — ready for traffic around 2019.

Orange County drivers and traffic planners have been trying to figure out how best to loosen the congestion on the 405 for nearly a decade. Voters in 2006 approved the idea of adding one lane in each direction as part of a package of transportation projects paid for with a half-cent sales tax, known as Measure M2.

Planners later raised two other possibilities. The first would add two lanes in each direction. The other would add one normal lane and create two pay-to-ride toll lanes in each direction, in part by using existing carpool lanes.

That last option, which Moorlach said was "crammed" through the planning process, drew immediate fire from cities along the 405. Six of them – Costa Mesa, Huntington Beach, Westminster, Fountain Valley, Seal Beach and Los Alamitos – launched a $25,000 lobbying effort to derail the toll lanes and push for two new lanes in each direction. They’re considering whether to pool another $25,000 to keep the fight going.

The $1.4 billion cost to add two lanes in each direction may seem like a short jump from the $1.3 billion estimate for single lanes, but that’s a difference of $100 million. Moorlach and others who support the double-lane solution say the money could be found in other projects. The OCTA board, though, voted 12-4 last fall to support the less expensive single-lane project.

Nine board members – including seven who voted for single lanes – have since left the board; a 10th seat that had been vacant has also been filled. That could change the voting math, because three of their replacements come from cities pushing for double lanes.

Two others said they support the single-lane solution. That leaves five new members as potential swing votes; they said they will wait for Monday’s briefing before deciding whether to take a side.

That briefing is on Monday’s agenda as an update on the project – and on the possibility of Los Angeles adding toll lanes on its side of the county line. Moorlach said he would see how the discussion goes before deciding whether to make a formal request to re-open the debate over how Orange County proceeds on its side.

Contact the writer: 714-704-3777 or dirving@ocregister.com

O.C. health plan for poor ‘appears to be imploding,’ grand jury says

CalOptima sees executives depart amid political turmoil.

By ANDREW GALVIN

CalOptima, the public health plan for the poor that serves one of three children in Orange County, "appears to be imploding," the grand jury wrote in a report released Friday that puts the blame on a majority of the Board of Supervisors.

CalOptima’s leadership "has been decimated by the departure of 16 senior executives" over the past 18 months, the report says.

The $1.5 billion entity that serves 427,000 young, disabled, low-income and senior county residents is threatened by political turmoil, "jeopardizing its membership’s access to quality healthcare and potentially putting the entire entity at risk," the grand jury said in the report.

The turmoil at CalOptima comes as the organization’s membership is expected to grow by as much as 27 percent when President Obama’s Affordable Care Act takes effect next year.

While not naming names, the report criticizes county Supervisor Janet Nguyen for her role in remaking CalOptima after she joined its board two years ago. Lobbyists from the Hospital Association of Southern California were allowed to rewrite the county’s ordinance that governs CalOptima to give more control to health-care providers "and less to members and organizations representing members," the report says, without naming the lobbying organization.

In a news release announcing the report, Raymond Garcia, the grand jury foreman, wrote that CalOptima’s status as "a national model for county healthcare" has been undermined by "a series of unfounded internal allegations against senior management and a controversial ordinance passed by the Board of Supervisors last year dramatically changing CalOptima’s board structure."

As part of the ordinance change, the number of county employees who sit alongside Nguyen on CalOptima’s 11-member board was increased from one to two. The grand jury report recommends that county employees be removed from the CalOptima board as "county employees are reluctant to vote against a supervisor."

It also recommends that the CalOptima board include more than one county supervisor.

Nguyen wrote to Garcia this week asking that the report’s release be delayed "until you have had the opportunity to interview me." Nguyen wrote that she had briefly reviewed the report and "it does not present a complete picture of the facts and the current state of CalOptima."

"Excluding me from the investigation is indicative of a flawed process considering that I was intimately involved in CalOptima and its ordinance change," Nguyen wrote.

Nguyen said the grand jury had scheduled an interview with her in August but canceled it. She called the report "plagued by inaccuracies, misinformation, and the omission of facts" and said, "CalOptima is not imploding, but rather excelling."

Nguyen’s revision to the ordinance governing CalOptima was adopted by the Board of Supervisors in a 3-2 vote in December 2011. Nguyen was supported by Supervisor Pat Bates and then-Supervisor Bill Campbell. Voting to oppose the change were supervisors John Moorlach and Shawn Nelson.

Supervisor Todd Spitzer, who replaced Campbell on the Board of Supervisors this month, said Friday that he believes all five supervisors should sit on CalOptima’s board

"I do anticipate a significant change in governance structure" for CalOptima, Spitzer said, adding that his vote "changes the dynamic" on the Board of Supervisors with respect to CalOptima issues by breaking up the majority that had supported Nguyen’s changes.

Also Friday, state Sen. Lou Correa, D-Santa Ana, called the grand jury report "deeply disturbing" and said he plans to introduce legislation at the state level to restructure CalOptima’s board.

The grand jury found "puzzling" CalOptima’s decision in September to request more than $90,000 from two former volunteer board chairmen for alleged misuse of staff time, writing it "had all the earmarks of retribution by the retooled board of directors for fervently opposing the ordinance change."

Moorlach on Friday said the two former chairmen, Ed Kacic and Michael Stephens, "are just outstanding community servants and leaders, and I’m sorry that they had to go through this awkward besmirching of their reputations."

In a statement, CalOptima’s newly hired chief executive, Michael Schrader, said: "As the new CEO for CalOptima, I appreciate the interest of the grand jury in the agency, and welcome public scrutiny and review of our operations. We look forward to the opportunity to respond to the report."

Julie Puentes of the Hospital Association of Southern California said her organization has a policy of not commenting on "investigative reports and studies performed by government watchdog agencies."

Contact the writer: agalvin@ocregister.com

FIVE-YEAR LOOK BACKS

January 26

2003

The Sunday OC Register Commentary section carried two of my editorial submissions.  It was a fun collaboration with then editorial writer Chris Reed.  The OC Register’s website had the first one printed in full, but the dead-tree version did not.  This generated the printing of a correction in the January 28 issue of the OC Register and the reprinting of the piece the following Sunday (something I have not seen before or since).  The first submission was titled “Structural weakness – The latest meltdown in county government follows a post-bankruptcy series of ‘sound bite’ solutions.”  It has a lot to say about the history of decentralization and affirms our current Board’s recent efforts to recentralize the human resources function.

The Orange County Planning Development and Services Department’s recent financial fiasco, which culminated in a $26 million loss, the layoff of key trained personnel and the ouster of County Executive Officer Michael Schumacher, should be upsetting to all county residents, both in and out of government. 

In an era of result-oriented government, where public administrators craft annual business plans and strategic financial plans, it is hard to believe that there could be such leaks in the system.  But there are, and I believe the vulnerabilities can be traced, in significant part, to changes in county government structure and reporting relationships over the past several years.

Prior to the decentralization in 1996 by the second post-bankruptcy county executive officer, Jan Mittermeier, the former Planning and Building division had an excellent record and reputation for predicting, managing and properly charging for its workload.   

Subsequent to the county’s bankruptcy protection filing, the division has pursued several “restructuring” ideas—some valid, some Dilbertesque—that need to be reviewed and reevaluated.

This is an opportunity for the  Board of Supervisors to review the broader picture, get to some of the core causes of the problem and deal with them head on.  Let’s hope they don’t rush toward more “sound bite” solutions.  A re-evaluation of the county’s organizational chart and a determination as to whether the reorganization and decentralization efforts were the wisest courses of action must be pursued.  

One of the first such moves that should be reviewed is a brainchild of our first post-bankruptcy CEO, Bill Popejoy.  He shifted basic auditing responsibilities – the crucial nuts-and-bolts review of an organization’s spending – from our bankruptcy era former auditor-controller to an Internal Audit Department run by an appointed official who reports to the five members of the Board of Supervisors.

This sound-bite solution made Orange County the first and only of California’s 58 counties to strip this significant component of basic governmental checks and balances away from the elected auditor-controller, who answers to voters. 

Especially given the extreme pressure the county faces to cut costs, a return of internal audit functions to the auditor-controller’s department would decrease duplicative overhead costs.  It may be time to put the auditing back with the auditor.

But changes in the auditor-controller’s authority didn’t end with Popejoy’s departure.  Mittermeier, a former auditor-controller employee, took things a step further.  She had a chief financial officer position created and took revenue control authority away from the auditor-controller, i.e., making sure fees are updated and monitored.  This further emasculated the elected auditor-controller’s function, relegating this position, which must be filled by a certified public accountant, to that of a check writer and full-charge bookkeeper. 

Given that these fees are a central element in the planning agency crisis, one wonders if the mess ever would have occurred if Auditor-Controller David Sundstrom the range of authority his position use to enjoy.  It may be time to put the “control” back with the controller.

Mittermeier also instituted a radical decentralized structure for the county.  This idea had been tried decades ago and failed.  But it was time for change – and an opportunity for Mittermeier to put her stamp on the county.

Her model was John Wayne Airport, a small department with independent sources of funding, which she ran before becoming CEO.

And so the Human Resources Department was eliminated and recreated as a division of the CEO’s office.  The General Services Agency, responsible for purchasing, suffered the same fate.  County departments were now on their own to fend for themselves in HR and purchasing, albeit in conjunction with the CEO’s office, which had veto power over final decisions.  (The sort of decentralization that Mittermeier pursued in some ways actually increased the power of the CEO’s office.)

And large departments, like the Environmental Management Agency, were dissected into smaller departments, among them the planning department that’s now in the news.  Administrative staff was a casualty of this reorganization.

As treasurer-tax collector, after having laid off 12 percent of my predecessor’s staff, I was then told to handle the newly assigned human resources and purchasing functions with my remaining employees.  This “reforming government” strategy only provided major headaches and additional liability exposure for department heads.  Can you imagine dumping these two highly technical administrative functions on an already thin and stretched staff?

I requested the addition of both a human resource and purchasing manager position to my department.  Mittermeier’s response?  No.  I then went to the Board of Supervisors for the positions.  Realizing how critical these functions were, all the more for a smaller department, they granted my request. 

I would then hear whispers from the other department heads like, “you’re lucky to be elected, we couldn’t do that with Mittermeier, she would fire us.”  How much more Dilbert does it get?

Now improperly staffed departments are starting to show their wear.  The Registrar of Voters did not have adequate staffing.  Rosalyn Lever would not dare to demand that the CEO assist, of course.  It took a crisis for the CEO and Board to resolve the situation.   Schumacher responded by showing Ms. Lever the door.  (She took early retirement after November’s elections.)

Stripping Planning away from the former Environmental Management Agency meant it was left with minimal administrative staffing.  Prior to decentralization, the former Building and Planning Services division never had a reserve over $1 million or $2 million, accurately forecasted its workload, and charged variable fees accordingly. 

The person chosen to head the planning department, Tom Matthews, was recognized as a planner of renown.  Unfortunately, he was a land planner. 

With few experienced managers, the department made no changes in the fees it charged developers from the time of the bankruptcy until several years later.  The fees that built up during boom times resulted in a boondoggle balance of $18 million in developer overpayments. 

Richard F. McCarthy, Jr., a crusader against excessively high fees in and out of Orange County, describes this practice as amounting to nonvoter-approved “special taxes.”  I believe that this is an accurate assessment.

Mathews’ solution was a rapid spending scheme to eliminate the $18 million surplus.  But he was unable to slow down the spending binge after it started, as a good manager would have done, and his department flew through the $18 million and an $8 million “fix it” loan. 

This is an expensive way to realize the downside of decentralization.

And it makes clear that it’s time for a blue-ribbon committee to analyze and review the virtues of the decentralization efforts.  There are too many cracks in our corporate structure.  

It would appear that Schumacher and his finance staff should have been more active in encouraging Matthews to consider rebating excessive fees rather than spending the surplus they created.  Regretfully, if the courts determine that the fees were set illegally high, then it will cost the county another $18 million out of its quickly depleting reserves to resolve this mess.  

We can no longer tolerate such hemorrhaging.  Schumacher has started to implement some additional oversight requirements.  But his successor and the Board of Supervisors have an opportunity to implement real change and correct the overreactions and “sound bite” strategies of the past.

The second piece in the OC Register Commentary section was titled “Choosing the right CEO.”  Another timely topic to reflect upon, as the current Board is in the process of pursuing the hiring of a new County Executive Officer, and this history may be helpful.

The Planning Development and Services Department’s recent financial losses provide an opportunity to reevaluate a number of neglected issues in Orange County’s government.  With the termination of CEO Michael Schumacher, it is critical that these issues be addressed in order for his successor to avoid meeting a similar, and now familiar, fate.  His termination will not solve the systemic problems that led to this leak in our organizational structure.

Nor will it change the fact that, in spite of our county government’s problems over the years, the supervisors have arguably hired the person who was the right fit at the right time.  And Schumacher was no exception.

The Register’s article on the topic covered the various players rather accurately (“Swift action vowed on CEO,” January 15).  Ernie Schneider fit right in with the pre-bankruptcy Board.  Unfortunately, he defended Bob Citron’s high-risk strategy to the very end.  Schneider asked for Citron’s resignation after his infamous December 1, 1994, news conference.  But the horse was out of the barn.  Schneider would then publicly claim that his position was not strong enough.  So the Board of Supervisors established a stronger CEO position. 

In steps a charismatic, experienced and determined CEO in Orange County resident Bill Popejoy, who immediately pursued an agenda that he felt was the most appropriate for the county’s recovery.  He did the dirty work of overseeing massive layoffs and instigating the pursuit of the parties that participated in Citron’s inappropriate investment strategies.  He was the right person at the right time.

Unfortunately for Popejoy, the majority of the Board of Supervisors, as well as the majority of the populace, disagreed with Popejoy’s advocacy of a sales-tax increase as a response to the county’s bankruptcy.  Working at cross-purposes with your bosses does not make for a healthy environment, and Popejoy stepped out.

With the county still in bankruptcy protection and need of restructuring long-time insider Jan Mittermeier was tapped for the position.  She was strong, knew where the skeletons were buried, and knew the players to get a restructuring and comprehensive bankruptcy settlement agreement accomplished.  She was the right person at the right time.

Unfortunately, Mittermeier was a “my way or the highway” type of manager.  After successfully exiting bankruptcy protection and “decentralizing” county government, she focused her cram-down style on the proposed El Toro International Airport.  That was the kiss of death for a new airport.

Although “Jan’s style was necessary, given the challenges we faced at the time,” according to Supervisor Wilson, he voted to terminate her in 2000 anyway – even though she was his best weapon in thwarting the airport.

But with Mittermeier gone, it created a vacuum.  So a control-oriented Supervisor, Todd Spitzer, stepped up to fill the vacuum.  This required a CEO who would kowtow to the paradigm shift.

Michael Schumacher – very amiable, congenial and knowledgeable – was recruited for the job.  The longtime probation department chief had the appearance of a strong persona, but is non-confrontational.

The result:  in two-plus years on the job, Schumacher proved unwilling to side with department heads in any disagreement with the Board of Supervisors.  He sided with any three votes on the board.

Schumacher was the complete opposite of his predecessor.  But, once again, he was the right person at the right time when he was hired, given what county supervisors wanted out of a CEO. 

Now, with the cracks in the county’s decentralized management model starting to show, the board needs to determine who is to do what and how.  With new members, the board’s complexion has changed again. 

If supervisors want to run the show, then Schumacher was a good match.  But if the CEO is to run the show, then bring Mittermeier back.

I say it may be time to find a balance between the two.  Like Goldilocks, we need someone who’s not too strong and not too weak. 

The selection of Jim Ruth as the interim CEO may just be the answer.  A seasoned city manager is a great idea during this time of transition.  We may even find after six months that Jim Ruth was the right person at the right time.

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