MOORLACH UPDATE — Fighting/Leading — July 1, 2013

The OC Register addresses the County’s concerns with Tata Consulting Services Ltd. (TCS) (see MOORLACH UPDATE — Grand Jury Season — June 26, 2013). The Treasurer-Tax Collector, Auditor-Controller, and Clerk of the Board have been updating the Property Tax Management System (PTMS) independently of the central Information Technology department, but with CEO IT’s involvement as a resource and observer. The Assessor independently updated the Assessment Tax System (ATS), which is an interface to the PTMS, in a similar manner. Many years of work went into designing the foundational PTMS structure, and the next major portion of the work was writing the code. This contract was won by TCS, who failed to meet the scheduled completion dates and the County did not renew its contract out of frustration. Now that we are in litigation, I’m limited on saying anything more. It’s the first story below.

The lead editorial in Sunday’s OC Register covers the startling news of Congressman John Campbell’s decision to not rerun. The editorial, which is the second piece below, addresses freedom fighters. I’ve been a fighter for financial freedom my entire life and I see this as the major issue of the day at the Federal and local levels. This weekend, my immediate family gave me the green light to consider this opportunity, so the month of July should be crazy and fun. The National Journal Hotline, Washington’s premier daily tip sheet on campaigns and elections, also mentioned my name as a potential candidate over the weekend.

The Voice of OC provides the third piece, which objectively reports that I will be voluntarily paying for my employee contribution to the pension plan. Until now, the County had picked up this cost as a component of remuneration for elected officials, executive management and other bargaining units, like the Orange County Managers Association (OCMA). With the OCMA voting to begin paying their employee portion, I am moving alongside them. This will be a significant financial sacrifice for my family, as it is for County employees and their families, but it is the appropriate course of action. Now, if I were a Congressman, I would be addressing Internal Revenue Service Revenue Ruling 2006-43, and supporting H.R. 205, to give government employees more financial flexibility in choosing a pension formula that they can afford.

County sues over IT upgrade

Company made false promises over property tax software, it says.


If it ain’t broke, it ain’t Orange County. At least that’s the way it seems these days.

In 2008 the county was looking for new software to track and collect the $4.5 billion in property taxes amassed yearly to pay for schools, county programs and services provided by 34 cities.

Enter Tata Consulting Services Ltd., part of mammoth, worldwide organization. Better known as TCS, the vendor promised it could provide the software in two years and keep costs below $8 million according to legal documents. As proof, TCS officials touted a company record of finishing 96 percent of projects on time and under budget, documents said.

Five years later, Orange County has spent $15.4 million on a system with faulty code. Of that money TCS got about $5 million the rest went to subcontractors, county support staff and other expenses.

“It was a big disappointment, and they have set us back years,” said county Supervisor John Moorlach. “All they had to do was write the code, just pick it up and key away.”

The county pulled the plug on the “property tax management services” project in December 2012 and filed a federal suit against TCS in April, alleging fraud, negligent misrepresentation and breach of contract.

The strongly worded lawsuit alleges TCS made a series of false promises and intentional misrepresentations to win the contract. Also, the suit says that TCS personnel did not have the talent needed to take over the computer project.

The county wants costs and general damages exceeding $10 million.

In a prepared statement, TCS responded: “It is our policy not to discuss pending legal matters. We stand by the quality of our work and commitment to customer success as demonstrated by the fact that over 98 percent of our business comes from repeat clients.”

But Orange County is not likely to return any time soon. The lawsuit says the firm’s property managers were incapable of doing the job.

The case has been moved into private mediation, with the first meeting in late July.

A grand jury report released this week singled out the antiquated technology in the county treasurer/tax collector’s office as a specific area of concern. The systems must track more than 1 million pieces of property (homes, boats, planes, etc.), value each one annually, calculate taxes on each one annually (when there are 4,500 different tax rate areas in the county), then issue property tax bills, collect money and handle appeals from taxpayers.

New computer systems often run behind schedule and over budget. Bugs are common.

But the county’s experience with information technology may be more troubled than most: An internal audit in 2009 found that the county’s IT department spent more than $45 million over four years on contracts that never went out for a public bid. Further audits found further problems – including one that described a department that was poorly organized, avoided accountability and failed to adequately disclose its spending internally and to county supervisors.

To address the problems, the county has shed several high-ranking IT officials and launched an Information Technology Strategic Initiatives program. Critics say problems remain, however, as the TCS suit, and the antiquated systems in the treasurer’s office, illustrate.


After Campbell, time for freedom fighter

Retiring congressman represents a vital area for the national Republican Party.

Congressional seats in the Republican-majority areas of Orange County are so valuable because of our area’s national importance. So a scramble now is afoot to replace Rep. John Campbell, RIrvine, who just announced his retirement. His district’s voter registration is 45 percent Republican and 28 percent Democratic.

Before going to Washington, Mr. Campbell was a California assemblyman and state senator, where he established himself as a fierce budget hawk, something he carried over to his job on Capitol Hill. However, he also has had to weather a financial scandal that diminished his clout.

Since January, he has represented California’s 45th Congressional District, which forms an area roughly including Irvine, Anaheim Hills and Mission Viejo. Previously, he represented the slightly different 48th District, which included Irvine, Tustin, Laguna Niguel and Newport Beach. His predecessor was longtime Rep. Chris Cox, later the head of the Securities and Exchange Commission and now a local lawyer in private practice. Mr. Cox was known for his Internet Tax Freedom Act, which deals with important issues and which expires next year.

While Rep. Campbell had his pluses, we believe the next representative from this vital area should be more ambitious in advancing the principles of freedom for which Orange County is known, especially in this district. Area residents include Republican financial and economic heavyweights that help form the bedrock of the national party’s finances. Even though Republican presidential candidates don’t campaign much in California because it’s nearly impossible to win our state, they still come to this area for fundraisers.

All that means the next representative should have the principles, talents and moxie to rise in Republican ranks, perhaps even one day becoming House speaker. The GOP certainly needs an improvement on the lackluster leadership of current Speaker John Boehner, R-Ohio; and the previous Republican speaker, Rep. Danny Hastert of Illinois.

We also believe that our representatives should do a lot more on the issue of personal liberties. For example, in April the House passed the Cyber Information Sharing Protection Act, which increased data sharing between the government and the private sector.

Rep. Dana Rohrabacher, R-Huntington Beach, was the only O.C. Republican representative to oppose it. Supporters included O.C. Republican Reps. Campbell, Ed Royce, Ken Calvert and Darrell Issa. Not voting was Republican Rep. Gary Miller. CISPA, fortunately, lost in the Senate. And since then have come the revelations of vast snooping on Americans by the National Security Agency, outraging almost everyone. All Orange County’s GOP congressmen, with their safe seats and liberty-loving constituents, should have joined with Rep. Rohrabacher in protecting our privacy.

Reported the Register, “State Sen. Mimi Walters, R-Laguna Niguel, said she is ‘definitely running’ and had begun calling donors shortly after she got word of Campbell’s plans. She is considered by the county GOP chairman and several other insiders to be an early frontrunner for the seat.”

Other possible candidates: Irvine Assemblyman Don Wagner, county Supervisors John Moorlach and Pat Bates, former state Sen. Dick Ackerman, Irvine Mayor Steven Choi, Dana Point Assemblywoman Diane Harkey and former Anaheim Councilman Harry Sidhu.

At least one Democratic candidate also will run. Because the 2014 election will be conducted under the recent Top Two reform, it’s possible that Republicans could win both slots in the November runoff.

The race has only begun. Next year we will be interviewing the candidates based on our principles of maximizing liberty, including, now especially, privacy from unconstitutional government snooping. In these trying times, standing pat is not an option. What’s needed is leadership for liberty.

Supervisors Set to Pay Into Their Pension Plans


At least two of the three Orange County supervisors who receive pensions are now set to voluntarily pay their employee shares of pension costs, according to a new policy quietly adopted this week.

The move came amid a years long battle over retirement benefits at the county, in which labor groups have strongly criticized supervisors for wanting county workers to pay their full employee shares while not doing so themselves.

While Supervisor John Moorlach has said that he plans to make the contribution, it wasn’t clear Friday whether Supervisors Janet Nguyen and Todd Spitzer will also.

The resolution states that "certain members" of the board have requested it. County spokesman Howard Sutter said Friday that he didn’t know who they are.

The new policy, first reported by The Orange County Register, was approved without discussion Monday as part of the county’s budget resolutions for the new fiscal year.

Sutter said that staff didn’t yet know how much supervisors will have deducted from their paychecks for their employee shares. He also didn’t have figures on what percent of total pension costs supervisors would be paying.

Meanwhile, county records indicate that the employee share last year was about $14,500 for Nguyen and $16,900 for Moorlach. Figures weren’t available for Spitzer, because he took office just this year.

While supervisors may opt for paying their employee shares, their new contributions aren’t etched in stone.

The policy allows individual supervisors to opt out of payments and thus have the county pay their employee shares.

The policy states that deductions from their paychecks are to “continue until the particular requesting Supervisor requests that such deductions terminate or their term expires.”

The three supervisors have been paying a “reverse pick-up” into their pensions, according to staff, which ranges from about 6.9 percent of salary to about 10 percent.

Moorlach said in his weekly update that his reverse pickup amounts to $14,260 annually.

Sutter also said staff interprets the resolution as still requiring a further request from individual supervisors in order for the deductions to take place.

The approved resolution, meanwhile, states that certain board members "have requested that the County deduct from wages" to pay their employee shares and that "the board hereby grants the request … with such deductions to commence as soon as administratively practicable."

Chairman Shawn Nelson and Vice Chairwoman Pat Bates don’t receive pensions.

You can reach Nick Gerda at ngerda, and follow him on Twitter: @nicholasgerda.


June 30


The OC Register, in its “County Briefly” column, announced the good news: “Investment pool gets highest credit rating.”

County Treasurer John M. W. Moorlach announced Monday that the county’s investment pools – totaling $2.6 billion in assets – have been given the highest credit rating available by Fitch IBCA.

The rating, AAA/V1 plus, reflects the quality and conservative nature of the investments managed by the Treasurer’s Office, Moorlach said.

This rating comes after the county restarted the investment pools for schools and other local government agencies after declaring bankruptcy in 1994. The county’s financial disaster was brought on by the collapse of the investment pool managed by former Treasurer Robert Citron.


Dan Morain of the LA Times, provided a split-roll discussion in “Firms’ Prop. 13 Savings Are Coveted – Businesses pay as little as a nickel a square foot in property tax. Some state lawmakers question the fairness and see a chance for new revenue.” I was called on for statistical information. Here are the opening paragraphs, the key paragraphs, and the one in which I am mentioned. Ten years later, and this topic is still being pursued, with a number of bills currently before the state legislature. What gets lost in the debate is how many small mom-and-pop businesses that would be impacted, and their employees, if this tax is raised. Sacramento should address the abuses, but not be punitive to honest businesses and their employees.

It’s no wonder Disneyland’s owners call their amusement park the "happiest place on Earth." For much of its land, Disney pays only a nickel per square foot in property taxes.

In Hollywood, Capitol Records pays a dime per square foot in taxes on the land beneath its famous tower, which resembles a stack of records on a hi-fi. In downtown Los Angeles, owners of the Wells Fargo Center pay about $1.77 a square foot.

Critics say the tax structure shelters older businesses; commercial properties change hands less often than homes, putting a larger burden on newer businesses.

In addition, the system gives publicly traded companies a break that other businesses and homeowners don’t get. The result of all this is that homeowners bear an increasing share of the overall tax burden, they say.

Many legislators are casting covetous eyes toward commercial property as a source of tax revenue as they struggle to fill California’s $38-billion budget hole.

Capitol Records, for example, pays roughly $11,000 for its land on Vine Street, but its overall property tax bill is about $147,000 a year. Shorenstein pays nearly $10 million a year on its California Street site. The Disneyland resort has a total annual property tax bill of $28 million, according to Orange County Treasurer-Tax Collector John M. W. Moorlach. Disney, the second-largest property taxpayer in Orange County, puts that figure at $34 million.

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