MOORLACH UPDATE — Mail Bag and Group 8 — October 2, 2019

CIRM 

Last week the San Diego Union-Tribune provided side-by-side commentaries on the California Institute for Regenerative Medicine (CIRM).  CIRM is working toward putting a $5.5 billion bond on the ballot next year to continue its taxpayer-supported funding.

Read the supportive narrative here: https://www.sandiegouniontribune.com/opinion/story/2019-09-25/commentary-why-californias-landmark-stem-cell-agency-deserves-more-funding

Read my opposition here:

MOORLACH UPDATE — CIRM and School District’s Group 5 — September 26, 2019

Thank you, Mr. Jester, for enthusiastically supporting my arguments.  His comments are in the first piece.

Spyglass Hill Picnic 

Mr. Merhfar sent a letter to the Daily Pilot and debriefed its readership on the recent annual Spyglass Hill Picnic in the second piece. My wife and I had a great time and enjoyed interacting with many of the area’s residents.

School Group 8, #659 – #752

It is down to the 30th percentile.  This means 70 percent of California’s school districts are in better financial shape than the districts in this group.

Orange County has four school districts in the eighth group of 94:

#700  Capistrano Unified, down 36

#706  Irvine Unified, up 38

#710  Westminster, down 30

#744  Newport-Mesa Unified, down 14

For Group 7 and links to the first 6 groups, go to MOORLACH UPDATE — California’s and Group 7’s Fiscal Health — September 30, 2019.

25th Anniversary Look Back

Every fall, The Bond Buyer holds a California conference.  In its October 3rd, 1994 edition, it shared a panel discussion in “California Democrat for Treasurer Says Taxes Are the Answer to the State’s Gap,” by Brad Altman (see MOORLACH UPDATE — Start to Finish — June 30, 2017).

Chris Ailman was quoted.  He is now the Chief Investment Officer of CalSTRS, so we get to interact on occasion when I’m in Sacramento.  He made a great observation on marking to market (see MOORLACH UPDATE — Reducing Debt Transparency? — September 25, 2019).

Here is the second half of this interesting piece, where Orange County gave a bold and worrisome account:

Investing public funds was the topic of a panel discussion held Thursday, and Orange County assistant treasurer Matt Raabe used the forum to explain how the county investment pool achieves above-average interest rate returns.

Raabe said the county uses a leveraging strategy to allow it to achieve high returns on its $8 billion fixed-income investment portfolio, which Raabe is responsible for managing on a daily basis.

Raabe did not specify the pool’s current interest rate return, which historically has averaged 8% — much better than the 4% to 5% achieved by the investment pool administered by the California treasurer’s office.

But Raabe indicated the county’s return has dropped, noting that “a significant impact” on the pool occurred earlier this year when federal funds rates were increased.  “I wish we had been right about where interest rates are going, because I would be breathing a lot easier these days,” he said.

“Over the years, we’ve developed a reputation for being aggressive investors,” Raabe said.  He said the aggressive reputation is accurate: “We like to take our base portfolio and leverage it.”

The leveraging strategy is based on an analysis of the cash flow needs of the 180 taxing districts that invest in the pool, Raabe said. Orange County asks the taxing districts, which include special districts, school districts, and cities, to provide cash flow projections.

“We tell them our current balance, and we ask them to define for us how much money they plan to leave with us for several years,” Raabe said.  The separate cash flows are combined, and the county derives “one cash flow for our investment purposes,” he added.

This single cash flow “allows us to stretch out further on the maturity range” investment expectations “than we could otherwise do,” Raabe said.  “We can extend further along the yield curve.”

Raabe said the pool contains “a large number” of long-term dollars pledged by the county’s airport, sanitation district, and other enterprise funds that give him “flexibility I might not otherwise have.”

Unexpected cash flow demands are covered by maintaining $1 billion “in overnight money” that can be tapped immediately “in case we’re wrong on some of our investment guesses, and our investors need their money sooner than they thought they did,” Raabe said.  The liquidity “brings our overall yield down, but it is important to have, particularly in this environment” of rising interest rates.

Orange County has not crossed the line between being “aggressive and an overly risky investor,” Raabe said. For example, “we don’t trade our portfolios” like some public agencies.  “We buy fixed-income government securities, and we intend to hold them until maturity.”

Another panelist, Christopher J. Ailman, chief investment officer and manager for Sacramento County’s $1.8 billion short-term fixed-income portfolio, said investment pools would be managed differently if they had to meet SEC requirements for daily valuation of their worth.

Municipal pools are run on an historical-cost basis required of mutual funds, which must maintain a $1 net asset value daily, Ailman said.  “We’d look horrible” if the pools were required to meet the mutual fund standard, he said, adding that “we would manage the portfolios differently” if that were the case.

A year later, I would be speaking on a panel about Orange County at the next annual Bond Buyer California Conference.  They wanted me so badly, they provided a limo from and back to the airport. It was an amazing experience.

For the last LOOK BACK, go to MOORLACH UPDATE — Reducing Debt Transparency? — September 25, 2019.

Readers React: CIRM has too little to show for so much investment

Maybe more/different/better data will change my mind

https://www.sandiegouniontribune.com/opinion/letters-to-the-editor/story/2019-10-01/cirm-has-too-little-to-show-for-so-much-investment-utak

Re “Stem cell funding debate” (Sept. 26): Based solely on the arguments posed in the op-ed section, the winner, hands down in my opinion, is John Moorlach, who reasoned that very little in the way of results speaks for itself.

The California Institute for Regenerative Medicine (CIRM) had a lot of money and 15 years to prove that billions afforded it “might/could” yield a decent scientific return. A few anecdotal successes don’t do it for me — not at this level. What the pro-CIRM group did not reason, that may have highly influenced me, is that “these things take a lot more time than we were given (with strong supporting data here).”

And what Moorlach did say, that influenced me to a large extent, is “91% of the CIRM funding went to institutions with representatives on the CIRM board.” That just smells.

Today, I would have to vote no to more funding. Sorry, but sometimes you just have to say no, cut the cord and move on. There are too many other pressing needs in our state. Maybe more/different/better data will change my mind.

Paul Jester

Poway

Spyglass picnic strengthens community

The Spyglass Hill community of Corona del Mar held its seventh annual meet and greet family picnic recently at Spyglass Hill Park. A good number of residents with their kids and grandchildren attended along with our elected officials, including Sen. John Moorlach (R-Costa Mesa), Mayor Diane Dixon, City Council members Will O’Neill, Brad Avery and Kevin Muldoon, City Manager Grace Leung and Newport Beach Police Area 4 Cmdr. Keith Krallman.

The fact that every year people can connect directly with each other and with their representatives at the city and state levels in a relaxed, open and family-oriented environment brings back the sense of community, belonging and oneness that has been gradually eroding at best and missing at worst from many communities across U.S.

Various activities for kids were planned and played with joy and excitement, including face paining, a watermelon contest and tug of war. Our caring and effective councilman for District 7, O’Neill, made a brief speech and awarded Therese Loutherback, chairwoman of the Spyglass Hill Picnic Committee, with an honorary title, “The Mayor of Spyglass Hill,” and gave her a specially designed sash.

Thanks to O’Neill and also our several vendor supporters. Just like in the previous years, complimentary burgers, drinks and ice cream were provided for the residents. Spyglass Hill community residents left with another joyful and memorable annual family picnic.

K.E. Mehrfar

Newport Beach

Rank School District Population Per Cap 2017 Chg
659 Lucia Mar Unified 78,750 ($1,180) 612 -47
660 Milpitas Unified 71,877 ($1,181) 640 -20
661 Kelseyville Unified 12,288 ($1,181) 703 42
662 Belridge Elementary 127 ($1,183) 13 -649
663 Morgan Hill Unified 65,169 ($1,183) 382 -281
664 Rim of the World Unified 30,615 ($1,187) 568 -96
665 Shoreline Unified 6,292 ($1,194) 623 -42
666 Burton Elementary 17,844 ($1,198) 740 74
667 Adelanto Elementary 60,160 ($1,199) 678 11
668 Ventura Unified 122,915 ($1,199) 698 30
669 Inglewood Unified 115,933 ($1,203) 708 39
670 Sierra Sands Unified 37,513 ($1,203) 169 -501
671 Riverside Unified 271,629 ($1,205) 728 57
672 Woodland Joint Unified 66,978 ($1,207) 526 -146
673 Lancaster Elementary 116,636 ($1,210) 713 40
674 Maxwell Unified 1,880 ($1,218) 669 -5
675 Val Verde Unified 89,981 ($1,220) 778 103
676 Waterford Unified 10,244 ($1,221) 706 30
677 Desert Sands Unified 196,219 ($1,222) 647 -30
678 Aromas/San Juan Unified 9,531 ($1,226) 919 241
679 Porterville Unified 102,053 ($1,227) 569 -110
680 Mountain View Elementary 59,024 ($1,230) 685 5
681 Lakeport Unified 10,664 ($1,231) 754 73
682 New Haven Unified 81,692 ($1,232) 789 107
683 Greenfield Union Elementary 18,436 ($1,237) 766 83
684 Holtville Unified 8,863 ($1,243) 699 15
685 Hesperia Unified 105,414 ($1,243) 661 -24
686 Shandon Joint Unified 1,944 ($1,245) 814 128
687 Victor Elementary 100,141 ($1,247) 608 -79
688 Twin Rivers Unified 195,713 ($1,248) 705 17
689 Redlands Unified 131,890 ($1,249) 734 45
690 Jamul-Dulzura Union Elementary 9,388 ($1,249) 881 191
691 Bonita Unified 63,450 ($1,251) 747 56
692 Ballico-Cressey Elementary 2,218 ($1,252) 921 229
693 Santa Paula Unified 33,169 ($1,253) 524 -169
694 Ojai Unified 22,491 ($1,255) 585 -109
695 Galt Joint Union Elementary 30,963 ($1,257) 724 29
696 West Park Elementary 1,933 ($1,257) 480 -216
697 Los Molinos Unified 3,550 ($1,258) 771 74
698 Lompoc Unified 60,586 ($1,259) 714 16
699 Guadalupe Union Elementary 7,563 ($1,261) 787 88
700 Capistrano Unified 362,235 ($1,268) 664 -36
701 Richland Union Elementary 20,301 ($1,269) 741 40
702 Garvey Elementary 54,980 ($1,277) 636 -66
703 Torrance Unified 149,919 ($1,278) 742 39
704 Laytonville Unified 2,929 ($1,281) 716 12
705 Rialto Unified 126,752 ($1,283) 752 47
706 Irvine Unified 197,643 ($1,283) 744 38
707 Klamath-Trinity Joint Unified 6,382 ($1,286) 791 84
708 Elk Grove Unified 337,557 ($1,288) 800 92
709 Gustine Unified 9,281 ($1,288) 711 2
710 Westminster 88,887 ($1,298) 680 -30
711 Needles Unified 7,513 ($1,309) 762 51
712 Anderson Valley Unified 2,975 ($1,310) 736 24
713 Pomona Unified 172,471 ($1,313) 748 35
714 Arcadia Unified 59,799 ($1,316) 660 -54
715 Konocti Unified 22,493 ($1,316) 651 -64
716 Hughson Unified 12,846 ($1,316) 835 119
717 Paramount Unified 80,221 ($1,317) 622 -95
718 Grant Elementary 2,835 ($1,319) 599 -119
719 Norris Elementary 25,448 ($1,323) 811 92
720 San Jacinto Unified 50,917 ($1,324) 759 39
721 Manhattan Beach Unified 36,366 ($1,326) 774 53
722 Freshwater Elementary 2,519 ($1,331) 536 -186
723 Rio Elementary 37,500 ($1,334) 670 -53
724 Lodi Unified 179,882 ($1,343) 780 56
725 Vallejo City Unified 128,235 ($1,347) 751 26
726 River Delta Joint Unified 16,424 ($1,349) 784 58
727 Orange Center 1,865 ($1,353) 464 -263
728 Middletown Unified 9,981 ($1,354) 767 39
729 Los Altos Elementary 44,223 ($1,357) 533 -196
730 Biggs Unified 3,634 ($1,359) 653 -77
731 Martinez Unified 31,817 ($1,359) 720 -11
732 Brentwood Union Elementary 59,685 ($1,367) 584 -148
733 San Francisco Unified 884,363 ($1,371) 604 -129
734 Eastside Union Elementary 25,073 ($1,373) 394 -340
735 Monrovia Unified 44,795 ($1,380) 798 63
736 Vacaville Unified 83,495 ($1,383) 492 -244
737 Poway Unified 202,986 ($1,387) 731 -6
738 Castro Valley Unified 54,327 ($1,388) 806 68
739 Hickman Community Charter 1,330 ($1,395) 376 -363
740 Hueneme Elementary 58,259 ($1,395) 725 -15
741 Menlo Park City Elementary 27,915 ($1,404) 845 104
742 Beaumont Unified 52,838 ($1,409) 410 -332
743 El Monte City 85,245 ($1,410) 621 -122
744 Newport-Mesa Unified 206,139 ($1,411) 730 -14
745 Portola Valley Elementary 6,958 ($1,411) 667 -78
746 Hacienda la Puente Unified 120,681 ($1,414) 834 88
747 Nuview Union 10,909 ($1,416) 793 46
748 Canyon Elementary 255 ($1,421) 646 -102
749 Oceanside Unified 145,268 ($1,426) 803 54
750 Del Norte County Unified 27,470 ($1,429) 837 87
751 Robla Elementary 20,995 ($1,429) 93 -658
752 San Carlos Elementary 28,373 ($1,429) 704 -48

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