MOORLACH UPDATE — Detroit — March 15, 2013

Along with all of the other fun activities that I enjoyed last year as Chairman of the Board, I was also involved in regular closed door sessions with all of the John Wayne Airport settlement agreement parties to work on the next extension of this critical document. The Daily Pilot provides a few hints in the first piece below, but news for public consumption is still a few days away.

The Voice of OC provides a glimpse on one critical item on next Tuesday’s Board agenda in the second piece below.

The third piece finds me in a legal publication, Law 360, where my attorney cousin in Iowa usually is recognized, regarding the fiscal takeover of the city of Detroit by the state of Michigan.

Mayor: New JWA agreement could be days away

Negotiations drag on presumably toward settlement of new limits on airport.

By Jill Cowan

Newport Beach Mayor Keith Curry had two speeches ready for the Airport Working Group’s annual meeting Wednesday night.

One would have answered looming questions about the new terms of John Wayne Airport’s settlement agreement, which sets JWA’s passenger and operational caps. The current agreement is set to expire in 2015.

For years, area residents eager to keep the effect of living in the shadow of a major airport at a minimum have closely watched the proceedings.

This week, Curry said, he was close to having something to tell them.

But he couldn’t give that speech.

"We’re not quite there," he told the audience at the annual meeting at the Balboa Yacht Club.

Still, he assured the group, an announcement about "an agreement that will continue the protection of our community" could be days away.

"I think we’re very close, and I think you’re going to be very proud," Curry said.

As for what exactly that deal will entail — whether JWA will be allowed to add flights or if someday more passengers could pass through its gates — that’s been kept under wraps.

"Because it is litigation, it is very difficult to comment on the specifics," Orange County Supervisor John Moorlach said Thursday. "This has been one of these deals where we’ve been working, I think, as best as possible. But it’s a tough deal. That’s about all I can hint at until something’s available."

According to the initial settlement, starting in 1990, the airport could see no more than 8.4 million annual passengers through 2005.

The average number of daily departures of larger, noisier, "Class A" aircraft was limited to 73.

Then, in 2005, those caps were bumped up following a negotiation process similar to the one that has taken place over the past year or so. The upper limit for annual passengers was changed to 10.8 million (a figure airport officials have said they aren’t close to hitting) and average daily Class A aircraft departures was increased to 89.

The airport’s curfews, which resulted from a county ordinance that actually predates the settlement by almost 15 years, will remain in effect as they are at least until 2020, because the Board of Supervisors agreed to revisit the ordinance five years after the settlement was slated to expire.

Parties to the original 1985 federal court settlement have worked since early last year to negotiate a new deal that will be acceptable to local jurisdictions and residents, as well as the Federal Aviation Administration.

JWA was able to "grandfather" in its activity, flight and passenger limits, even though they conflicted with the stipulations of the federal 1990 Airport Noise and Capacity Act, Courtney Wiercioch, deputy airport director of public affairs, said Thursday.

That meant that any new settlement terms couldn’t decrease the airport’s traffic caps — they could only limit growth.

"It’s been tough to negotiate," Curry said Wednesday. "If you overreach, you run the risk of ending the whole agreement."

At a Newport Beach Chamber of Commerce event last week, Newport City Manager Dave Kiff also mentioned a potentially forthcoming announcement and warned that area residents will "have to allow a little growth."

He said the county and the city were waiting on word from the FAA before saying anything more.

While the parties to the settlement — which include the city of Newport Beach, Orange County, the AWG and the Stop Polluting Our Newport — have reached some consensus, they’ve asked the FAA to weigh in on whether they foresee any "regulatory hurdles" in the plan, Wiercioch said.

She said the groups are "hopeful we’ll hear back from the FAA in the next week or two."

Then, she said, the airport, county and city can start the long environmental review and public comment processes required under the California Environmental Quality Act before sending the agreement back to the FAA for final approval.

In other words, Wiercioch said, there’s still a long way to go before a new set of restrictions are locked in.

And once they are, how long can residents expect to rest easy before negotiations start again?

Wiercioch said she couldn’t say. "That’s one of the items being negotiated."


Supervisors May be Inching Closer to Deal With New CEO


After weeks of private talks, between the Orange County Board of Supervisors and Santa Barbara County CEO Chandra Wallar, a two-year deal seems to have surfaced with officials scheduling a public discussion of her salary for next Tuesday.

While an agenda item listing for Wallar’s contract was posted Wednesday, her proposed contract was being held back. Officials with the Clerk of the Board said they expected her employment contract to be available for public release sometime today.

A key stumbling block to negotiations has so far has been over Wallar’s employee cost for her retirement pension. County supervisors, who just recently imposed a labor deal on county attorneys over the issue on a 5-0 vote, have publicly stated that a central goal of their labor negotiations is to have all employees pay their employee share of annual pension payments.

Two county supervisors, Chairman Shawn Nelson and John Moorlach, have both said they do not want to pay more than the $253,000 salary they paid to ousted CEO Tom Mauk. Both have also said they expect a full pension pickup, just like they are requiring of all labor groups.

Last month, supervisors’ private talks went into overdrive after Voice of OC revealed that Wallar was being courted as CEO.

Supervisors Pat Bates and Janet Nguyen have been negotiating in private with Wallar for some time. Last month, Nelson forced a public discussion about the salary offer to Wallar citing state law that requires a public discussion.

As a negotiator, having that discussion in public clearly bothered Supervisor Bates.

However, at the supervisor’s Feb. 26 meeting, Bates forcefully argued that salary ranges in excess of $300,000 for a CEO were reasonable given what nearby counties are paying top executives.

That kind of a pay range would allow Wallar to take the job, pay for her pension and still get a raise in pay.

Ironically, Bates and Nelson were together on the issue back in 2011 when they collectively criticized “a salary arms race” in their subcommittee report investigating questionable raises in the executive ranks of the county and the human resources department.

Another key thing to keep in mind is that Supervisor Todd Spitzer has thus far maintained that wants to see a CEO appointed in a unanimous vote. That does not seem to be the current situation.

Supervisors have been searching for a CEO since last August when Tom Mauk resigned his post in the wake of a sex crime scandal involving a top public works executive.

District Attorney Tony Rackauckas is still investigating the county culture that allowed Carlos Bustamante – also then a Santa Ana City Councilman – to have inappropriate relationships with female workers he supervised.

Detroit Looks To Jones Day Atty To Rescue City

By Maria Chutchian

Michigan Gov. Rick Snyder announced the appointment Thursday of Jones Day bankruptcy partner Kevyn Orr as the emergency financial manager for Detroit, the latest effort to pull the flailing city out of its prolonged economic crisis.

Orr, based in Jones Day’s Washington office, is well known for his restructuring work for Chrysler LLC in 2009. Snyder said he expected Orr to serve for 18 months, at which time city officials will assess the progress made and figure out what to do next.

The state’s Emergency Financial Assistance Loan Board took on the governor’s recommendation that Orr be selected as the person to take the reins and determine how to solve Detroit’s financial hardships.

In a statement, Snyder said Orr had roots in Michigan and understood the need to work collaboratively with Mayor Dave Bing, the city council, the city’s key stakeholders in Detroit and the state.

“He’s also focused on the same thing that we are: doing what’s best for the people of Detroit,” Snyder said.

Orr’s practice is in business restructuring, financial institution regulation and commercial litigation, according to his Jones Day profile. He earned his law degree from the University of Michigan.

Jones Day Managing Partner Steve Brogan said that the firm was very proud that the governor asked Orr to take on the role.

“Kevyn is a special and talented leader who possesses the empathy and the competence that will be needed to make, and then execute, the decisions required for the city of Detroit to find a sustainable path forward,” he said.

Snyder declared Detroit to be in a fiscal emergency earlier this month after an independent financial review team reported that the city was in a dire situation. He blamed part of the city’s problems on poor projections of its revenues, its history of spending “well beyond its means” and the accumulation of massive debt.

The Detroit City Council and Bing have long opposed a state takeover, disputing Michigan’s assertion that Detroit does not have a plan in place to stabilize the city. Still, they both agreed to work with Orr, and Bing said he would be a valuable asset.

Municipal restructuring experts say Detroit has a long road ahead. Karol Denniston, a bankruptcy partner at Schiff Hardin LLP, said the first thing the city should do is establish clarity on its true financial position. Once it is able to confidently determine its assets and liabilities, it can begin to address its budget, she said.

“This is one of those situations where you employ an emergency manager because you need a paradigm to fix this, and I think that’s what these 18 months will look like,” Denniston said.

Detroit estimated it would bring in $1.56 billion in revenue from 2011 to 2012, but ultimately made only $1.1 billion, he said. Additionally, the city borrowed more than $600 million to cover its short-term bills between 2005 and 2011, he said.

Now, the city cannot catch up with its long-term liabilities, with long-term debt exceeding $8.6 billion, not including pension liabilities and other post-employment benefits, as of last June.

The city’s total long-term debt, including those pension liabilities, is nearly $15 billion, depending on whether certain pension system assets are added in, according to Snyder. The city is likely to have a cash deficit of more than $100 million by June 30.

John Moorlach, who represents the Second District on the Orange County, Calif., Board of Supervisors and predicted the county’s bankruptcy — the largest the country had ever seen at the time — in 1994, said that Detroit would have to take a hard look at its public employees’ salaries and pension benefits.

But that will only address the city’s expenses; getting revenue growth back to where it needs to be is a whole different animal, he said.

“There’s got to be a way to make Detroit an attractive location for businesses to start or restart,” he said.

To do that, Moorlach said the city needs to figure out how to improve its property values; encourage construction; renovate neighborhoods; and create demand for the housing market, currently in a very depressed state.

It’s not a fast solution, he said, but it’s critical.

Additionally, Denniston says Detroit will be challenged by its own infrastructure, which has become too large as the city’s population has diminished over the years. The city needs to address its social problems that persist beyond the city management if it wants to grow back into its infrastructure, she said.

But the city is on the right track with the appointment of Orr. Denniston says he will improve decision-making within the city, thanks to his restructuring experience and the backing of a top law firm.

“There really is a new sheriff in town,” she said.

–Editing by Eydie Cubarrubia.


March 15


PERS – Public Agency Coalition (PAC), a member-based organization established in 1989) has a publication that is titled The Alert. This issue devoted the first two-and-one-half pages to the topic “The Orange County Lawsuit – An Update.” Besides taking me to task, the writer at least had to share that I made “a few solid arguments.” Here are copies from a PDF for historical purposes as this publication called the plays at that moment in time.

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