MOORLACH UPDATE — Green — May 18, 2013

The Daily Pilot provides the news of an official candidate for “my seat” (see MOORLACH UPDATE — My Seat — May 16, 2013) in the first piece below. As for me, “I’m getting a lot of friends together next week and we’ll make a decision.”

In the second piece below, the OC Register provides its understanding of a recently issued “confidential” Internal Audit Department report. It addresses an annual event that was very successful, but had very weak internal controls and put too much demand on county staff time. This is a matter that the new CEO will inherit and address. The bad news is that the report found issues that need to be dealt with. The good news is that Orange County does take a critical look at its own activities and professionally addresses the areas of weakness that need to be strengthened. We have a robust Internal Audit Department, a highly recognized Performance Audit Department, and a diligent Office of Independent Review. All three provide excellent oversight of the various functions performed by the County. In most cases, the Internal Audit Department reports are public (see May 21 Board Agenda item number 52), but in this rare instance it is confidential.

BONUS: I’d like to invite you to participate in a capital campaign event that will leave a wonderful legacy at one of the Second District’s glorious regional parks. On June 1st at 5:30 p.m., the Bolsa Chica Conservancy will host the Orange County Dreamin’ Gala to benefit the construction of a new learning center planned to be completed in the next 5 years. This is the second major fundraising event for the project and proceeds will be directed towards pre-development costs. The Conservancy hopes this event will breathe life into the building and give attendees an up close and personal look into the future, bringing the dream to life. The new building, currently coined the Center for Coastal Ecology, is slated to be constructed in Harriet Wieder Regional Park in Huntington Beach. The Center for Coastal Ecology will be a sustainable learning center aimed at being the first regenerative, net-zero facility in Orange County. It will incorporate living walls, a water harvesting system, bioswales, solar power, a green roof and passive ventilation, in addition to other Leadership in Energy and Environmental Design (LEED) standard concepts. The Conservancy’s goal is for this space to become a regional hub where the community and people of all generations can learn and be inspired to engage and become more actively involved in maintaining healthy ecosystems and environments. J. Craig Venter, PhD, regarded as one of the leading scientists of the 21st century, will be a featured speaker, who will tie in how human action can create a positive environmental impact. Dr. Venter is best known for sequencing the human genome and developing genetic applications to convert ocean resources into food and energy sources. Quiksilver has kindly welcomed the Conservancy into their headquarters in Huntington Beach and will serve as host of the event. Seats are $175 and a table of 10 is $2,500. To reserve your attendance, please contact the Conservancy at 714-846-1114 or e-mail to michelle.

Michelle Steel launches bid for supervisor

Moorlach compliments her but would prefer that an Orange County person, rather than L.A. transplant, replace him.

By Bradley Zint


o Orange County’s representative on the state Board of Equalization officially began her campaign this week for a seat on the county’s Board of Supervisors.

Michelle Steel, a Surfside resident, is running for the District 2 seat during the June 2014 primary election that will be vacated by Supervisor John Moorlach, who is prevented from seeking another term after serving on the five-member board since 2006.

District 2 includes Costa Mesa, Newport Beach, Huntington Beach, Seal Beach and portions of Fountain Valley.

"In these tough economic times, and as governments on all levels are struggling to tighten their belts while preserving excellent service, I believe that my experience as one of California’s fiscal officers, and an advocate for taxpayers, will help keep Orange County on a strong path for economic freedom and sound public policy," Steel, a Republican, said in her campaign announcement Thursday.

Orange County District Attorney Tony Rackauckas, county Sheriff Sandra Hutchens and former Assemblyman Jim Silva (R-Huntington Beach) are serving as honorary co-chairs for her campaign, Steel said.

Assemblyman Allan Mansoor (R-Costa Mesa) of the 74th District has also expressed interest in running for the position. The former Costa Mesa mayor sent out an email May 8 that sought opinions about whether he should run for supervisor or reelection to the 74th.

"For over a year, a number of people have asked me if I was interested in running for county supervisor in 2014," Mansoor wrote. "I hadn’t given it much thought, but there are many people who believe that our next supervisor should come from the community. … I think that my experience representing the region locally and in Sacramento will make me a strong candidate and [I] have been discussing the idea with my family, friends and supporters."

On Friday, Mansoor sent an email statement to the Daily Pilot: "I’ve been overwhelmed by the amount of responses I’ve received from asking folks for their opinion on this. A lot of people took the time to send me well thought-out responses, and I’m going to take my time to go through them before I make a decision.

"I’m strongly considering it."

Huntington Beach City Councilman Joe Carchio has also said he may run for the supervisor seat. Like Mansoor, he too has sent out exploratory letters to his constituents asking for their input.

"I’m waiting for their responses," Carchio told the Huntington Beach Independent earlier this week. "If it comes back positive, I will make an announcement. If it doesn’t, then I will think of something else to do."

No ‘firm commitment’

Past media reports have said Moorlach, a Costa Mesa resident, wants to run for county auditor-controller or as a Republican against Democratic Gov. Jerry Brown next year.

The former county treasurer told the Pilot on Friday, however, that he has not made "any firm commitment" regarding his political future or whether he is eyeing something at the local or state level — including Steel’s seat on the Board of Equalization.

"One of the options is just to get out," Moorlach said. "I’ve given my public service. I’m getting a lot of friends together next week and we’ll make a decision."

While he has not made any formal endorsements in the race yet, he expressed some support for Mansoor and Carchio, but some reservation about Steel, who moved to Surfside in recent years from the Palos Verdes Peninsula in Los Angeles County.

"Michelle Steel is a fine individual," Moorlach said. "My disappointment is that she is someone from L.A. County, and it would seem to me that someone of her stature on the state Board of Equalization would either move up to a statewide position or at least try to run for Assembly or Senate there in the Rancho Palos Verdes area."

The Republican Party "needs someone at the state level," Moorlach added. "And we need to regain some districts here in the L.A. area."

Mansoor, however, is someone who "pretty much grew up in the district. That has a real appeal," Moorlach said. "There won’t be much of a learning curve for Allan. He could hit the ground running."

And Carchio?

"He’s a good, longtime resident with a good portfolio of public service here in the county," Moorlach said.

O.C.’s ‘green’ fair plagued by policy breaches

Environmental fairs sucked up huge amounts of staff time, with allegations that employees benefited personally, according to a county supervisor.


County-run environmental fairs unexpectedly soaked up hundreds of thousands of dollars worth of staff time and prompted allegations that employees dined on fair revenues and made off with donated gifts, according to Shawn Nelson, chairman of the county Board of Supervisors.

Supervisors unanimously and abruptly cancelled the annual fair in February because of the troubling reports, terminating plans for the May 17 event. Earlier this month, supervisors received a completed audit detailing lapses in the program.

County lawyers say the audit is exempt from public disclosure requirements because it deals with personnel issues. Supervisor Todd Spitzer said he’s requested a redacted version that the board could consider releasing to the public.

But based on earlier updates of the internal investigation, Nelson confirmed that sweeping violations of county policy took place.

"There were no checks and balances," Nelson said. Accounting was so lax that allegations of employee misuse of vendor funds and gifts cannot be disproven, he said.

The audit comes on the heels of a scathing grand jury report on ethics in county government asserting that "corruption has permeated all levels of the organization." Some supervisors have called the grand jury hyperbolic and Nelson said there is no conclusive evidence of criminal wrongdoing in the green fairs matter.

But the audit continues a string of reports of suspect activity by county employees and a lack of managerial oversight. Nelson readily acknowledged other managerial lapses and said it’s important to thoroughly address individual instances.

"There’s been a real nasty habit in this county that once something was in the past, we say let’s move forward," he said, referring to failures to take corrective action. "But this green fair got totally out of hand. Someone deserves to be disciplined. Someone needs to be held accountable."

A key concern is misused staff time in the county’s purchasing office. The fair was overseen by the office, but there was supposed to be no taxpayer expense – any staff time was to be volunteered in off hours or while vacation times was logged.

"It started consuming extraordinary amounts of time," Nelson said. "It was several hundreds of thousands of dollars of staff time."

The fair attracted dozens of vendors and busloads of school children to the county concourse each year since it began in 2010 and received positive reviews in terms of attendance, participation and publicizing environmental awareness. But administration has been a different story. Nelson is questioning why the purchasing office was even handling those duties.

"What the hell do they have to do with running fairs in the plaza?" Nelson said. If any county agency handled the effort, it should have been OC Waste & Recycling, he said.

Complaints from employees that prompted the audit included allegations that employees had usedvendors’ booth fees for county staff lunches, that they took donated amusement park tickets and art kits that should have gone to fair participants, and that they won a disproportionate amount of the raffle prizes. Those prizes included Angels tickets, gift cards, a bicycle, and Trader Joes gift baskets.

However, Nelson said there was no way ofdetermining exactly what happened.

"You can’t really audit people if there aren’t records," said Nelson, who helped launch the audit after an employee detailed allegations to him. "There may have been a staff lunch or two to talk about green fairs" paid for with vendor money.

"If you take cash – even $20 – you have to account for it," he said. "None of it was completely accounted for. But the magnitude of the money involved was not that great. It was the ineptitude. If there’s anybody who should know how to account for things, it’s the purchasing office."

The head of the office, Purchasing Officer Ron Vienna, and the county executive office declined comment on the audit.

Nelson said that ending the green fair didn’t mean core issues had been addressed.

"I’m not satisfied that we’ve solved the problem," he said. He didn’t know if any disciplinary action had been taken with those involved.

Nonetheless, county employee union spokeswoman Jennifer Muir applauded Nelson for speaking out about the alleged abuses.

"Employees need to know that there is follow up when there are employee complaints," said Muir. "I hope this indicates a reversal of years of ignoring employee complaints."

Supervisor Pat Bates said in an emailed statement that rules were not followed in running the green fair. But she was satisfied that the problem was addressed by providing tighter oversight of accounting and money-handling procedures.

"While no fraud was found in the audit, the board did the right thing to cancel this event, and our Internal Audit Department has done its job in finding out what went wrong and how to keep this from happening in the future,” she said.

County Supervisors Janet Nguyen and John Moorlach declined comment on the audit, citing county lawyers’ confidentiality determination. Spitzer said Friday he would not comment until he has received and read a redacted version that has been scrubbed of confidential information.

But Moorlach did dispute Muir’s claim that the county had long ignored employee complaints, noting that the fraud hotline used to level green fair complaints has been in place for years.

"We get updates on the fraud hotline regularly," he said. "We get an update on what they’ve found out about each call and what they’ve done about it."

Nelson, on the other hand, acknowledged that there had been a history of looking the other way, which may have culminated with the case of former public works manager Carlos Bustamante. Bustamante resigned last year amid sexual harassment allegations and now faces 12 counts of felony sexual harassment, most of which took place in government offices on county time, according to prosecutors.

District Attorney Tony Rackauckas alleges Bustamante preyed on female employees over a period of eight years, and has questioned how the alleged misdeeds continued for so long without any managerial intervention.

Within a week of charges being filed, Bustamante’s direct boss was fired. Within a month, county CEO Tom Mauk resigned. The executive under Mauk who oversaw Bustamante’s boss was eventually fired and the human resources director also resigned.

"I think in the past year, we’ve eviscerated that culture, we’ve gotten rid of a lot of people involved," Nelson said.

Contact the writer: 714-796-6753 or mwisckol


May 18


With the primary election approaching, there were a number of articles. Peter M. Warren of the LA Times (see MOORLACH UPDATE — Voice of OC — May 7, 2013) provided an angle with “68th Assembly District – Primary Outcome Will Test Pringle’s Influence – Results will show whether the assemblyman has clout to anoint his successor. Ethnic demographics could also play a hand in the working-class area.” Here is the beginning of the piece:

The June 2 primary for the 68th Assembly seat will test the political staying power of Assemblyman Curt Pringle, who is trying to pick his successor in the working-class central Orange County district.

Pringle, who went from political novice to Assembly speaker during eight years in office, has given his endorsement and campaign machine to Garden Grove Councilman Ken Maddox, 34, a Tustin police officer.

Several other GOP leaders in the area have other ideas, however, about who should fill the seat and are backing other candidates.

John Kellogg, a 39-year-old Westminster attorney, is endorsed by Sen. Rob Hurtt (R-Garden Grove) while Garden Grove Councilman Ho Chung has the backing of County Supervisors Jim Silva, William G. Steiner and Charles V. Smith.

Also seeking the Republican nomination are Paul D. Gonzales, 39, a businessman from Buena Park, and Westminster Councilwoman Joy L. Neugebauer, 70.

Democrat Mike Matsuda, 40, who teaches reading at Orangeview Junior High School in the Anaheim Union High School District, is running unopposed and will advance to the November election and face the GOP winner.

Pringle (R-Garden Grove) is running for state treasurer.

The race has been conducted largely through door-to-door campaigning. Chung has the lead in fund-raising, having used his ties with the Asian American community to hold events in San Diego, Los Angeles and Orange counties.

The largely working-class district includes almost all of Stanton, Garden Grove and Westminster, most of Anaheim and Buena Park, and small parts of four other cities. Its registration is 43.5% Republican, 39% Democratic and 12% independent.

Political observers believe that ethnic demographics could play a role in the primary, boosting the vote totals of Gonzales and Chung. Registration is 13% Latino and 12% Asian, with the balance mostly Anglo.

Two years ago, Rep. Loretta Sanchez (D-Garden Grove), then an unknown, squeaked by three white men in a four-way Democratic primary. Many believe her ethnicity and gender were a significant factor in the win.

That fact is not lost on Neugebauer, who believes being the lone woman in a race with four men will play to her advantage. "I love seeing all those . . . men at the forefront," said Neugebauer, who has been elected to various local offices 11 times in the past 30 years. "I want them to ignore me."

Chung, a Korean immigrant, touts his six years on the Garden Grove council and 26 years running his own insurance agency, saying that he is the "most experienced of the candidates." A proven vote-getter in the city, he ran first among eight candidates for council in 1996, besting Maddox, who was also elected, 12,809 to 11,297.

"I am the American dream," he said. "I came here 30 years ago and I am a success due to self-motivation and will bring that to pay back my community, my state and my country."

His campaign had nearly $43,000 in cash on hand in mid-March, the end of the recent reporting period. He also has been endorsed by Treasurer-Tax Collector John M.W. Moorlach.

Chung is against abortion, and supports both Proposition 226, which would limit union spending in political campaigns, and Proposition 227, which would dismantle bilingual education programs.

Chung, who as a teenager learned English in his native South Korea, believes immersion is the way for youngsters to be taught English. He supports school vouchers for parents who send their children to private schools. He said he is unsure of whether he would support an increase in the minimum wage to $6.50 an hour, a proposal before the Assembly. He opposes gun control.

Chung said he supports allowing employers the flexibility to pay overtime after 40 hours of work in a week rather than after eight hours of work in a day. Democrats in the Legislature are seeking to overturn a recent state commission ruling that ended the eight-hour overtime rule and created a flexible 40-hour workweek.

The top story in California Public Finance was “Opponents Trade Jabs on Car Tax Bill” by Liz Enochs. The topic is still contemporary today, but the term we now use is Vehicle License Fee (VLF). It will give you some historical perspective through the lens of this interesting legislative battle. This piece provides the back-filling discussion at its embryonic stage. But, the concern about playing games with this revenue source was raised here fifteen years ago, which has Norberto Santana beat by a long shot.

Legislation to abolish a controversial car tax picked up steam in the California Assembly two weeks ago when it won kudos from Gov. Pete Wilson and formal support from Attorney General Dan Lungren.

With the political spotlight shining on the bill, which would abolish the motor vehicle license fees imposed by the state, local governments went on the offensive, slamming the legislation as an attack on one of their most reliable sources of revenue. And they warned that eliminating the car tax could affect scores of municipal bond deals that take advantage of a state intercept program which allows governments to pledge the motor vehicle fees as a repayment source for their debt.

“Clearly the two traditionally most stable streams of revenue local governments have are property taxes and motor vehicle license fees,” said Steve Kyle, legislative director for the California State Association of Counties (CSAC), noting that CSAC is concerned not only about the abolition of the car tax but also about how the legislation might affect credit ratings of local governments’ bond issues if it passes.

“If the [state intercept program, also known as ‘Credit Plus’] were to be diminished or done away with,” said Steve Zimmerman, a managing director with Standard & Poor’s, “the ratings would revert to underlying ratings” on all the issues that are rated through the Credit Plus program.

One of the largest local governments to feel the impact of the bill could be Orange County. “Their whole debt restructuring [plan] is based on vehicle license fees,” Kyle said.

Even though bill author Tim McClintock has said he would replace the car tax revenues dollar-for-dollar with sales and use tax revenues, the legislation could still jeopardize the county’s recovery financing, said Treasurer John Moorlach.

“How do we make sure we’re not impacted negatively if that revenue source dries up or changes and we’re not in a boom time again or if the state changes its mind on revenue sharing?” he asked. “We don’t have real high sales and use taxes here.”

One of the main fears of local governments is that the state constitutional guarantee that funds from the car tax will go directly to cities and counties will be eliminated if McClintock’s bill passes, and that state lawmakers could then play political games with the sales and use tax, the replacement source of revenue.

But McClintock last week argued that opponents to the bill (including CSAC and the League of California Cities) are ignoring a key provision that addresses those worries. He noted that ACA 45, a constitutional amendment and companion measure to AB 1776, would give the replacement sales and use revenues the same protection now afforded to vehicle license fee revenues.

“Under ACA 45 [the replacement of car taxes with sales and use taxes] will occur automatically,” he said, “and cannot be interfered with by future legislators or future governors.”

A committee hearing on the bill was originally scheduled for early last week, but was postponed until this week at the earliest.


Stuart Pfeifer of the LA Times had fun with an annual topic of interest in “O.C. Giving Away Cash Until June 3 – The treasurer is trying to distribute $426,000 in unclaimed awards and deposits dating back decades. The county will keep what’s left.” Escheatment was the buzz word. Departments who could not locate the rightful owners to funds on deposit would forward those funds to the Treasurer, who would place one or more final notification advertisements, before keeping the funds for the County. Here are selected paragraphs:

A man whose car was damaged by a reckless driver can claim a long-forgotten $487 restitution payment. A home development company might get back a $100,000 deposit it posted years ago during a legal dispute. The 7-Eleven company is owed exactly $1,007.11.

They can claim the money, if they act quickly.

Orange County’s treasurer is trying to unload $426,000 from a collection of deposits, refunds and court awards dating back as far as 30 years. The funds are due consumers from a variety of agencies in the county — everything from child support collections and crime victim restitution to small-claims court judgments.

Treasurer-Tax Collector John M. W. Moorlach is holding the cash until June 3, when he has the right to shift it into the county’s general fund.

Even at a time of fiscal crisis, Moorlach is taking extra steps to distribute the money. He’s advertised in a local newspaper and added the names of the 1,398 people and businesses that are due refunds to his Web site.

"We want to give them the money," Moorlach said.

For Carma Developers, the windfall could be much larger. The Canadian builder was involved in major development projects in Orange County in the 1980s. It is now based in Calgary, Alberta.

Moorlach is holding on to more than $102,000 that Carma could claim. The builder posted the money as a deposit in a court case years ago and did not collect the refund when the case was dismissed, according to an opinion written by Orange County’s legal counsel.

Karen Leeds, the company’s senior vice president of finance, said she will investigate whether Carma can collect the money.


David Haldane of the LA Times set up the queue for the Orange County Local Agency Formation Commission’s potential approval to allow one of the County’s largest unincorporated areas in the Second District to seek incorporation, in “Rossmoor confronts cityhood – again – Officials could decide as early as this week whether to put the question on the ballot.” The topic of VLF pops up, again, in this proposal. Here is the entire piece:

This year’s Rossmoor Family Fun Day Picnic featured a Ferris wheel, hot dogs and bands. Parents and children tossed baseballs in Rush Park as vendors sold their wares. And a seemingly innocuous sign at a booth caused a bit of a stir: "City of Rossmoor," it said.

The annual picnic is the closest thing to a municipal event in this upscale community between Seal Beach and Los Alamitos, an unincorporated section of Orange County just over the border from Los Angeles County. If local officials and community leaders have their way, however, next year the sign could be true: Rossmoor’s 10,500 residents may be asked to vote in November on whether to turn their 51-year-old neighborhood into the county’s newest city.

"It’s a subject of intense debate at sporting events," said Steve Petersen, who shares the skepticism of some of his neighbors that cityhood could be supported by Rossmoor’s slim commercial base.

The Orange County Local Agency Formation Commission could decide as early as this week whether to put the matter on the ballot. In fact, it’s an issue that’s come up before.

Rossmoor was founded in 1957 by developer Ross Cortese, who also created Leisure World and coined Rossmoor’s moniker from his first name and a description of its marshy land. Three times the idea of becoming an independent city or part of another has been rejected.

In the late 1960s, Seal Beach annexed the area’s 59-acre business center, which is now called the Shops at Rossmoor, although it isn’t in Rossmoor at all.

And a 1979 effort by Los Alamitos to annex the community’s last remaining island of commercialism, at Katella Avenue and Los Alamitos Boulevard, was rejected by the county.

The future of Orange County’s unincorporated areas has again been on the table since 1994 when the county experienced the nation’s largest municipal bankruptcy. Strapped for cash, county officials decided to begin unburdening themselves of otherwise unspoken-for land.

"It’s simple economics," said John Moorlach, chairman of the Board of Supervisors, whose district includes Rossmoor. "The county should get out of the municipality business. We should be focused on regional issues as opposed to fixing potholes."

In recent years, a number of county areas have been annexed by neighboring cities or incorporated into municipalities, including Laguna Woods, Aliso Viejo and Rancho Santa Margarita. Some large unincorporated county areas remain, authorities say, and Rossmoor is among the most populous.

The community’s large population, in fact, may be one of the factors making annexation unlikely. Neither Seal Beach nor Los Alamitos has shown much interest in taking Rossmoor on, probably, experts say, because of the power shift that would come with 10,500 new voters.

The idea of incorporation, however, gained momentum a few years ago after surveys of area law enforcement services revealed that Rossmoor residents, who rely on the Orange County Sheriff’s Department, have to wait significantly longer for response than do their neighbors in the two closest towns.

"We share a sheriff’s car with Sunset Beach," said Shawn Wilson, president of the Rossmoor Community Services District, which supplies some local services and applied last July to the county’s agency formation commission for incorporation on behalf of the community. "They say it’s getting better, but I don’t think it’s where it should be."

Wilson sees lots of advantages to incorporating. "No. 1," he said, "is that we would get to dictate our own governance. It wouldn’t be dictated on the county level but on the local level."

Eric Christensen, a co-chairman of a planning committee the Rossmoor Homeowners Assn., which was set up to examine alternatives, agrees. "One thing people here really care about," he said, "is retaining and protecting their identity. The only way we can take control of our future is by becoming a city."

That prospect took on new urgency with the recent passage of a statewide vehicle license fee benefiting cities incorporated by June 30, 2009. For a future city of Rossmoor, that could translate into $8.2 million over the next 9 1/2 years. In light of the community’s thin commercial base, the revenue is seen as crucial.

"We frankly couldn’t make it if we didn’t get that money," Christensen said.

But even with the vehicle tax, according to a recent agency formation commission study, cityhood is financially feasible only with the imposition of additional fees amounting to at least $16 per household per month. The upshot, assuming the commission follows its staff’s recommendation to put the measure on the ballot, is that incorporation will be implemented only if Rossmoor voters simultaneously approve a utility tax of 7% to 9%.

Not everyone is happy with that prospect.

Jim Alexander, who has lived in Rossmoor for 25 years and has served on the boards of its services district and homeowner’s association, calls incorporating under those conditions stupid.

"There are already senior citizens living here on limited incomes," he said. "People are already having difficulty paying their bills. To add to that is silly. We’re well taken care of. We live in Niceville. If it’s not broken, don’t try to fix it."

With the area having no grocery store or post office, with homes worth $700,000 to $2.2 million and nothing but a small commercial corner containing not much more than a seafood restaurant, car wash, video store and flower shop, some are having difficulty envisioning how the city would pay for itself.

"People are putting up $2-million mansions here," said Petersen, who plans to vote against incorporation, "but the state takes the property tax. If we become a city we’ll be paying more."

Moorlach, speaking at a recent town meeting on the subject, had a simple reply. "You’re 50 years old and still living at home," he scolded the gathered residents. "Why don’t you move out and leave your parents alone?"

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