MOORLACH UPDATE — Impose — March 6, 2013

The Board of Supervisors now interacts with the County’s bargaining units through its negotiating professionals.  Utilizing legal experts, instead of county managers, to negotiate labor agreements is something that I tried to implement as soon as I became a Supervisor.  The County started negotiating with the Orange County Attorney’s Association (OCAA) in May of 2011 to address a Memorandum of Understanding (MOU) that was to expire on June 16th of that year.  The main proposal from the County’s side of the table was to have this union’s membership pay for their full share of employee retirement costs (up to this point, the County had been paying this component of the compensation package).  Consequently, the longer OCAA could hold out, the longer their current compensation was not reduced.

On August 24, 2012, the Board of Supervisors presented OCAA with its Last, Best & Final Offer (LBFO).  On September 13th, OCAA informed the County that it did not agree to the LBFO, and as a consequence, the County declared an impasse in negotiations.  The parties participated in mediation on October 18th, which was unsuccessful.  On October 29th, OCAA requested Fact Finding.  Fact Finding was introduced to the Meyers-Milias-Brown Act the year before.  Governor Jerry Brown signed Assembly Bill 646 on October 9, 2011.  This bill introduced another step for elected officials in negotiating with public employee bargaining units.  A Fact Finding hearing was held on December 10th.  On January 2, 2013, the Fact Finding Chair submitted a draft Findings of Fact and Recommended Terms of Settlement to the parties.  This draft included benefits to OCAA that are over and above the County’s LBFO.  After consideration, the Board informally offered the Fact Finder’s recommendations to OCAA in an attempt to reach agreement.  OCAA membership, however, overwhelmingly rejected the Fact Finder’s recommendations on February 13th.  As a result, the Fact Finder finalized his report and recommendations on February 18th, which was publicly posted by the County on February 22nd.

Here are the significant components of the contract that I voted to approve:

·         Term – there is no contract term as there is no agreement

·         Retirement Contribution – Employees in the 2.7% @ 55 retirement plan will pay their full member contribution beginning on March 8, 2013. 

·         Merit Increases – consideration for the initial receipt of merit increases will change from six months to one year.  Merit increase amounts available will be reduced form a 4-step to  2-step system.  A standard performance rating will now warrant a 1-step increase (approximately 2.75%) rather than  the current 2-step (approximately 5.5%) increase.

·         Health Insurance – the cost saving changes recommended by the County’s health care consultant (i.e., Mercer) will be implemented at such a date as the County determines.

·         Discipline/Appeal Procedure – Binding arbitration will be replaced by advisory arbitration.

·         Premium Pays – All premium pays will be based on an hours-worked basis rather than an hours-paid basis, and will be paid on a flat dollar amount rather than a percentage of pay.

·         Layoffs – the determination of layoffs will be based on the needs of the organization rather than the existing system of seniority points

The financial impact of the imposition of the County’s LBFO results in an annual reduction of expenses to the County of $5,533,100 ($1,167,000 of which is Net County Cost) in the primary areas of retirement costs ($4.7 million), merit increases ($588K), premium pays ($20K), and future health plan costs ($229K).   

The Board of Supervisors has unanimously taken a position that total compensation cannot rise more than the level of growth in the County’s revenues.  We want to avoid driving over the fiscal cliff.  Allow me to provide you with an example of what is happening to total compensation in the city of Baltimore, Maryland (courtesy of a recently published report by Public Finance Management, also known as PFM).  It reflects the growth of components in total compensation that are happening in Orange County, as well as just about everywhere else.


I believe that the contract that was imposed is a fair one under the current fiscal conditions facing the County.  I will be the first to tell you that my interactions with members of this union (OCAA) have been excellent.  The County is blessed with a great group of attorneys.  I also know that frustrating them with no salary increases is an unpleasant thing to do and I am fully aware that it is a disincentive to nearly 500 fine employees.  I also know that members of the private sector have had to take pay cuts and that no one should be immune (as the article below in the Voice of OC tries to point out).  Hopefully, all of the bargaining units will understand and appreciate the necessity for employees to pick up their share of the defined benefit pension plan contribution.  If some of the members believe that wages are more important than a pension plan, then I would not blame them for finding a more lucrative position in the private sector.  Fortunately, when openings for legal positions are posted on the County’s website, there are hundreds of applicants.  This communicates to me that the County’s compensation package is considered desirable by those qualified to serve in this capacity.  In the meantime, let’s hope that the real estate market continues to improve (property taxes represent 92 percent of the County’s General Fund revenue) and that the retirement system continues to achieve double-digit investment returns (the pension system is only two-thirds funded, thus requiring ever increasing contribution amounts), and that in the future the County will have the resources to provide for salary increases.  Other than County employees migrating back to their previous pension formulas, patience and hope are the only viable alternatives.


OC Supervisors Impose Labor Contract on Public Attorneys


The Orange County Board of Supervisors voted unanimously Tuesday to impose a labor contract on the county’s nearly 500 public attorneys, a move that was immediately met with a lawsuit threat from the union that represents the lawyers.

“You know we’re going to sue you,” said Scott Van Camp, a leader of the Orange County Attorney’s Association, which includes attorneys from the district attorney, public defender and county counsel offices. The union has already filed an unfair labor practice action against the county.

Van Camp and other union attorneys argued that the board is violating a recently enacted California pension law by imposing higher pension contributions in a labor negotiation. County negotiators disagreed, saying supervisors can still impose terms.

At issue is the county’s demand that all employees join the rank and file in paying for the employee share of monthly contributions to the county retirement system. Since a new pension benefit tier was introduced in 2004, general employees have been paying their employee share of pension payments, along with the impacts from a retroactive boost granted that year to more senior workers.

Given the attention on ballooning, unfunded pension liabilities and Gov. Jerry Brown’s own revisions to the state’s pension system, known as the Public Employees Pension Reform Act, there has been heightened focus on making better-paid workers — attorneys, public safety officials, executives, managers and elected officials — do the same.

“At some point you have no choice but to impose, because you’ve got to get these savings or the system is going to implode,” said Supervisor Todd Spitzer.

Yet having those at the upper end of the pay spectrum to pay their full employee share has been challenging.

County supervisors have yet to agree to pay for their own employee share. Managers only accepted it after it was imposed by a fact-finding panel.

In general, upper-end workers like the managers have been attempting to secure salary increases to make up for the requirement they increase their pension contributions.

Board Chairman Shawn Nelson, who along with Supervisor Pat Bates doesn’t take a government pension, has joined Supervisor John Moorlach in taking a hard line against any salary increases while pension liabilities are out of balance.

Moorlach himself has yet to contribute to his own pension benefit. Two other supervisors, Janet Nguyen and Todd Spitzer, also don’t pay their employee share.

Attorneys’ association lawyers told supervisors on Tuesday that the pension reform act prohibits employers from using impasse proceedings to force employees to pay more for pensions.

Yet county negotiator Bruce Barsook told supervisors that the attorney’s association was misreading the law. “Nothing in [the act] changes the law regarding the county ability to change member contributions,” Barsook said.

Supervisors are still in negotiations with most of the county’s labor unions, including the Association of County Law Enforcement Management; American Federation of State, County and Municipal Employees; Association of Orange County Deputy Sheriffs; Alliance of Orange County Workers; In-Home Supportive Services Provider Unit represented by United Domestic Workers of America; International Union of Operating Engineers; and the Orange County Employees Association.


March 6


Jean O. Pasco and Seema Mehta of the LA Times provided an account of an interesting dilemma in “Management Exodus Likened to Challenge of O.C. Bankruptcy.”  It reminds us that the state of the municipal industry has been a discouraging one for quite some time.  But, it also shows that some things never seem to change.  Here is an abbreviated version of the piece:

Orange County’s budget chief this week outlined a bleak future filled with funding cuts and disappearing services — and then announced his retirement, becoming the seventh top county executive in two months to leave.

The departure of Chief Financial Officer Gary Burton highlights an exodus from government even as officials struggle with the worst financial crunch since the county declared bankruptcy in December 1994.

Since January, Orange County has lost its chief executive officer; directors of the Planning and Development Services Department, the Social Services Agency and Community Services Agency; the public defender; and the registrar of voters.

Most took advantage of a sweetened retirement package approved in December. Others left more abruptly, including former CEO Michael Schumacher, fired for his handling of a financial crisis at the planning department that led to the early retirement of former director Thomas B. Mathews.

At the same time, two new county supervisors took office, injecting more uncertainty into how government might be restructured in leaner times. The Board of Supervisors this week approved more than $100 million in cuts for the next fiscal year.

Burton, chief financial officer since 1996, was quick to say he wasn’t abandoning ship.

He said that at age 57 and with 33 years of service with various county agencies, he wanted to do other things.

The search for new managers comes as public opinion of county government — and its attractiveness as an employer — is diminishing, said Fred Smoller, head of the Henley Social Science Research Center at Chapman University.

"You’re competing with a small pool of talented managers, and usually the private sector wins because it can offer a lot more money and, in some ways, a lot less hassle," Smoller said. In government, "you’re subject to public exposure and ridicule. They don’t look like very attractive positions."

Board Chairman Tom Wilson said he’s betting there are enough people to tackle the challenge. The county will look statewide to fill most of the posts; the CEO search will expand nationwide.

"It’s not as bad as the bankruptcy, but it ranks right up there in terms of the challenges and [the] time it might take us to get back on our financial feet again," he said.

"I don’t put credence in the [notion] that under hard times it’s not fun anymore. New challenges invigorate me."

Reshuffling top management is an opportunity for fresh blood no matter what the circumstances, said Treasurer-Tax Collector John M. W. Moorlach, appointed in 1995 after then-treasurer Robert L. Citron resigned.


Daily Pilot “Recipe for Success” columnist Barbara Venezia provided her perspective of the Airport Working Group’s recent annual dinner and ongoing annexation discussions in “Newport-Mesa needs cooperation.”

I admire brave people who stand by their convictions. I was at the Airport Working Group (AWG) meeting when Supervisor John Moorlach spoke. In reading all the newspaper articles, no one mentioned how brave his speech was.

Supervisor Moorlach had the chutzpah to speak openly about his frustrations with his predecessor, Supervisor Jim Silva. As chairman of the Santa Ana Hts. Redevelopment Agency Project Advisory Committee (PAC), I witnessed first hand that Silva was more interested in his run for Assembly than actually doing his job. I was delighted when incoming Supervisor Moorlach convinced Silva to step aside early and let him take the lead on PAC projects. The result, projects moved forward at record speed with Silva out of the way.

When people say Moorlach’s making “back room” airport deals, I laugh. He’s the most transparent guy around. He’s all about accountability and fiscal responsibility.

Moorlach has no history of misleading the public, quite the contrary in fact. He continues to work on his own recipe for success encouraging neighboring cities to work together looking for broader solutions to county issues. So why the distrust?

My guess, he’s not the stereotypical politician and can’t be bullied. That makes people nervous. He’s not planning his next run for higher office; so asking him to support an annexation issue he’s not on board for, then threatening to back a candidate to run against him if he doesn’t, probably isn’t a good idea.

But rumor has it that tactic was applied at the Newport Beach City Council level when, all but Don Webb voted to support the annexation of the Santa Ana Country Club and area south of mesa to Newport. A vote clearly slapping both Moorlach and Costa Mesa.

Is Webb the only council member who actually grasps the fragile relationship between Costa Mesa and Newport? Or did he know that it wasn’t Costa Mesa’s idea to make a grab at partial annexation of Banning Ranch; it was actually LAFCO’s, so he harbored no resentment as some of his colleges apparently did. Or is it as simple as he understands, that Costa Mesa and the county will never let the country club be annexed by Newport, and any areas attached to that annexation won’t fly either.

I understood that a long time ago and fought successfully, convincing both cities and LAFCO to finally let the West Side Santa Ana Hts. annexation application stand alone. The country club attached itself to our annexation before I was PAC Chairman.

The Newport City Council had to weigh the risk of ostracizing potential voters versus Moorlach and Costa Mesa. This issue will likely die at the LAFCO level and that gets them off the hook. But will their continuing schizophrenic approach in dealing with Costa Mesa and the county cost us dearly in the future?

As Moorlach said in his speech, South County is still looking at growth at JWA as an answer to regional air transportation problems. Newport’s elected should start looking at the big picture before it’s too late. They should start focusing energy on building relationships with their neighbors and the county, not slapping them around.

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