I hope you are having a wonderful Christmas season. Please accept my best wishes for a Happy New Year!
I spent the windy morning on the winter solstice at my old stomping grounds of some twenty years, the Orange County Civic Center, for a Homeless Memorial Service (see MOORLACH UPDATE — 2017 OC Homeless Deaths — December 20, 2017). The OC Register provided some photos on their website and a couple are provided below.
This is followed by a tweet that was sent by Jonathan J. Cooper, of the Associated Press, this summer that made it to a treatise on this communication vehicle in a CalMatters piece titled “The year In California politics, as told through Twitter,” by Matt Levin (see https://calmatters.org/articles/year-california-politics-told-twitter/).
For a refresher on this fun little moment, including a link to a video clip, see MOORLACH UPDATE — Bureau of Cannibals Control — June 14, 2017.
For the holidays, I treated myself to a few more books, where I was mentioned, for my collection (also see MOORLACH UPDATE — Copyright 2017 — January 3, 2017). So, if you have a relative who is a student taking finance or journalism courses, here are a few references they can use in a term paper.
The books are Great Financial Disasters of our Time by Alan N. Peachey, Cases in Public Policy and Administration by Jay M. Shafritz and Christopher P. Borick, and Public Budgeting: Policy, Process, and Politics edited by Irene S. Rubin, respectively. My thanks to Jay Shafritz and Christopher Borick for providing a narrative that made my Christmas!
Wishing you a very Happy New Year!
On a chilly, wind-swept morning, about 50 people gather on the plaza outside the county Hall of Administration in the Santa Ana Civic Center to mark National Homeless Persons Memorial Day on Thursday, Dec. 21, 2017. (Photo by Paul Rodriguez, Orange County Register/SCNG)
State Sen. John Moorlach addresses those gathered in the Santa Ana Civic Center in honor of National Homeless Persons’ Memorial Day on Thursday, Dec. 21, 2017. Moorlach recalled looking out his office window as a county supervisor and seeing the homeless people being fed by volunteer and church groups. Moorlach, 2nd District county supervisor from December 2009 to January 2015, was an early proponent of turning a defunct bus depot at the Civic Center into what became The Courtyard homeless shelter last year. (Photo by Paul Rodriguez, Orange County Register/SCNG)
.@SenatorMoorlach catches this epic typo in Senate budget committee staff report
Great Financial Disasters of
Alan N. Peachey
2006 and 2011
Even a book out of Germany covers the Orange County bankruptcy. The table of contents does not include chapter numbers, but addresses topics in alphabetical order. Orange County falls under “Derivatives – General” for the Chapter 9 history. It also falls under “Subprime Crisis and the Credit Crunch” in the 2011 version for my immediate successor’s holdings of $837 million in structured investment vehicles (SIVs) (see MOORLACH UPDATE — Voice of OC — December 20, 2012).
Here is the opening paragraph on the portion covering the bankruptcy filing:
Orange County, California, stunned the markets by announcing that its investment pool had suffered a loss of USD 1.6 billion (GBP 1.03 billion), the largest loss ever recorded by a local government authority, leading to the bankruptcy of the county shortly afterwards. The loss was the result of unsupervised investment activity by Bob Citron, the County Treasurer, who managed a pooled portfolio of USD 7.5 billion belonging to county schools, cities, the county itself, etc. Citron had been able to increase returns on the pool by investing in derivatives and by leveraging the portfolio up to the hilt. Some local school districts and cities even issued short-term taxable notes to invest in the pool despite repeated public warnings, mainly by John Moorlach who ran unsuccessfully for the post of County Treasurer in 1994, that the pool was too risky. Unfortunately, he was ignored.
Cases in Public Policy and Administration
Jay M. Shafritz and
Christopher P. Borick
Routledge (First Published by Pearson Education, Inc.)
Chapter 10 is titled “The Red Ink of Orange County: When Is It Ethical for Public Treasurers to Gamble with Public Money? Only When You Win!” It’s only seven pages long.
The three subtitles are “Preview,” “The Orange County Default,” and “Guilty of Six Felony Counts.” The treatment of me by the authors is very kind and I’ll try to use this as a quote in future campaign mailers (smile). I am mentioned at the conclusion of the second section and the two paragraphs are a concise review of the chapter:
Ironically, in that year his last opponent in his last election for Orange County treasurer was John M. Moorlach, who made a campaign issue of the risks that Citron was taking with the public’s money. After the financial debacle, Citron was forced to resign in disgrace, and his foresightful opponent was appointed to fill the vacant office and clean up the fiscal mess. Moorlach, as the “boy who cried wolf,” finally came to the rescue when the wolf was at the door. He would later be twice elected as treasurer and serve a total of twelve years, leaving the county in far better fiscal shape than it had been in when he arrived in office. He also became one of the nation’s leading experts on municipal bankruptcy–not that he ever wanted to be.
Citron lost more than one-and-a-half billion dollars (yes, billion!) of public money. This was initially hard to believe by the citizens of a county that was so rich. The average household income in Orange County in 1994 was $57,302, compared to a national average of $38,453. The problem was that the swaggering, free-wheeling aggressive business culture of the county–aptly symbolized by the larger-than-life statue of John Wayne in full cowboy regalia that greets visitors to the county’s John Wayne Airport–had infected its public finances.
Public Budgeting: Policy, Process, and Politics
Edited by Irene S. Rubin
M. E. Sharpe
The 33rd of 35 essays in this American Society for Public Administration (ASPA) collection is titled “Accountability and Entrepreneurial Public Management: The Case of the Orange County Investment Fund” by Kevin P. Kearns. It was originally published in Public Budgeting and Finance, Vol. 15, No. 3, Autumn 1995, pages 3-21.
You can see glimpses at http://onlinelibrary.wiley.com/doi/10.1111/1540-5850.01043/abstract and https://books.google.com/books?id=6ya3DAAAQBAJ&pg=PT163&lpg=PT163&dq=Accountability+and+Entrepreneurial+Public+Management:++The+Case+of+the+Orange+County+Investment+Fund&source=bl&ots=_HC6gOcEBU&sig=bDO8d2yHzK0Hb2b6VpIewfbQr5o&hl=en&sa=X&ved=0ahUKEwitvsmOnfvXAhVDLSYKHajyA5sQ6AEIOTAC#v=onepage&q=Accountability%20and%20Entrepreneurial%20Public%20Management%3A%20%20The%20Case%20of%20the%20Orange%20County%20Investment%20Fund&f=false).
It covers four strategies for analyzing accountability:
1. Compliance Accountability
2. Negotiated Accountability
3. Discretionary (Entrepreneurial) Accountability
4. Anticipatory (Anticipated) Accountability
I am mentioned in the third category, which is edited down by me to highlight the major points of the author (who was not in Orange County at the time or following, and has a few facts out of skew or exaggerated to make his points).
In the absence of meaningful threats or sanctions from the external environment, public officials must take personal and professional responsibility for anticipating and interpreting emerging standards of acceptable professional behavior and organizational performance, weighing long-term risks as well as short-term benefits.
Robert Citron was reelected to the treasurer’s office in June 1994, only six months before the financial crisis. His opponent in the race was John Moorlach, a certified public accountant who based his campaign on Citron’s risky investments and the vulnerability of the Orange County investment fund to fluctuating interest rates. Moorlach captured barely one-third of the vote and failed to generate any meaningful or lasting public dialogue on the Orange County investment strategy. Evidently, the voters were either: 1) unconcerned about Citron’s management of the investment pool; 2) incapable of making informed judgements [sic] because of the complexity of the issues; or 3) distracted by another political issue, Proposition 187 (limiting the rights of illegal immigrants), which had more emotional appeal than did the intellectually challenging notions of reverse repurchase agreements, derivatives, and fluctuating interest rates. Even after the bankruptcy, citizen reactions seemed mixed. A local radio station sponsored “an hour of rage” after the financial crisis, allowing callers to vent their anger. The station received very few angry calls.
While most of us readily embrace the democratic notions of citizen participation and consultation, it is highly unlikely that “typical” citizens would be able to engage in informed and reasoned discourse on this issue. Still, this cell raises important strategic issues for public managers. What opportunities (if any) exist for citizen input on a given entrepreneurial venture? Can such opportunities be created or enhanced? In the absence of citizen input, is the organization prepared to defend its actions in terms of the public interest and in both long-term and short-term perspectives? To what extent are the organizational cultures and professional norms of public agencies compatible with this entrepreneurial paradigm? Are public administrators and elected officials professionally competent to play the entrepreneurial game?
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