MOORLACH UPDATE — Measuring Insincerity and Cities 97 to 144 — November 13, 2019

Electrifying Insincerity

For a brief time, former Governor Jerry Brown studied to become a Jesuit priest.  I’m sure he is familiar with the Book of Jonah, as most are. God not only appointed a large fish, but he also appointed a scorching east wind (Jonah 4:8).  Santa Ana, Diablo and Sirocco hurricane-force winds have been here for millennia.

I’m not sure if there is an increase in wind intensity due to climate change.  However, Jerry Brown believes human emissions are causing greater winds than the planet has ever experienced.  He just doesn’t practice it with conviction and sincerity.

I have pursued three simple wildfire goals. First, prevent the failure of power lines in wildland urban interface areas to protect the lives of the populations residing there.   Second, measure greenhouse gasses generated by wildfires because wildfires generate more greenhouse gases than all of California’s fossil fuel powered cars running for an entire year.  Last, prioritize more use of Cap and Trade tax revenues to harden electrical assets.

It’s a little insincere to mandate that more vehicles be powered by electricity, but not improve the antiquated infrastructure that delivers this energy source.  Thankfully, an editorial writer for the OC Register and San Gabriel Valley Tribune points this out.

In 2016, I authored legislation to harden electrical assets in high risk wildfire zones only to see Democrat Jerry Brown veto SB 1463.  Subsequently, we all watched more than 120 residents perish in wildfires, in places like Santa Rosa and Paradise, caused by sparking overhead electrical lines.  Sincerely, who really should be talking about having blood on their soul?

I then recommended using Cap and Trade tax revenues to harden overhead electrical lines only to have Democrats on the Senate Environmental Quality Committee kill SB 1463 (2018).  Ironically, SB 901 (Dodd), a bill addressing wildfires that passed at the conclusion of the 2018 legislative session, which would include my recommendation but at a lower amount of Cap and Trade funding, to address hardening of electrical infrastructure.

This year I introduced SB 535 because I wanted the California Air Resources Board to quantify the greenhouse gas generated by wildfires, in order to shame the utilities, only to have the Democrats kill the bill in Assembly Appropriations.  The insincerity abounds.

Cities 97 to 144

As Peter Drucker taught us, if you don’t measure it, you can’t manage it.  That’s why we provide the rankings of California’s 482 cities based on their per capita Unrestricted Net Positions.  Not to be mean, but to provide a temperature gauge so that areas where some are struggling can be addressed proactively now, instead of reactively later, which seems to be the management style of  the majority party in Sacramento.

The third group of 48 cities includes six from Orange County:  Aliso Viejo (#98), Villa Park (#107), La Palma (#110), San Clemente (#127), Rancho Santa Margarita (#128), and Stanton (#135).  Five of the six cities moved up in the rankings.

The city of Fowler is highlighted, as we’re still waiting for its audited financial statements (see MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019).

For the second group, see MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019.

Rank City Pop. UNP 2018 (Thou-sands) UNP/ Capita 2017 Rank Rank Change
97 Sierra Madre 10,986 $6,263 $570 180 83
98 Aliso Viejo 51,950 $29,312 $564 107 9
99 Fillmore 15,953 $9,001 $564 111 12
100 Commerce 13,067 $7,084 $542 15 -85
101 Orange Cove 9,469 $5,131 $542 97 -4
102 Hollister 36,703 $19,647 $535 118 16
103 Dunsmuir 1,680 $888 $529 116 13
104 San Marcos 95,768 $48,322 $505 94 -10
105 Loma Linda 23,946 $11,961 $499 132 27
106 Plymouth 1,002 $499 $498 137 31
107 Villa Park 5,951 $2,919 $491 130 23
108 Rancho Cucamonga 176,671 $86,031 $487 147 39
109 Eastvale 64,855 $31,424 $485 144 35
110 La Palma 15,948 $7,673 $481 104 -6
111 Calabasas 24,296 $11,271 $464 134 23
112 Oakley 41,742 $19,285 $462 117 5
113 Orinda 19,199 $8,724 $454 103 -10
114 Highland 54,761 $24,874 $454 109 -5
115 Grass Valley 13,041 $5,896 $452 77 -38
116 Saratoga 31,435 $13,693 $436 126 10
117 Palos Verdes Estates 13,519 $5,684 $420 91 -26
118 Clearlake 15,917 $6,605 $415 277 159
119 Ferndale 1,367 $558 $408 148 29
120 La Puente 40,686 $16,458 $405 131 11
121 Hesperia 94,829 $38,038 $401 128 7
122 Santa Clarita 216,589 $85,155 $393 119 -3
123 Vista 103,381 $38,299 $370 125 2
124 Diamond Bar 57,460 $21,271 $370 133 9
125 Lawndale 33,607 $12,280 $365 121 -4
126 Wheatland 3,497 $1,261 $361 135 9
127 San Clemente 65,543 $23,634 $361 142 15
128 Rancho Santa Margarita 49,329 $17,427 $353 156 28
129 Holtville 6,501 $2,293 $353 175 46
130 Canyon Lake 11,018 $3,802 $345 157 27
131 Clayton 11,431 $3,837 $336 81 -50
132 Brentwood 63,042 $21,024 $333 122 -10
133 La Canada Flintridge 20,683 $6,860 $332 87 -46
134 Maricopa 1,156 $383 $331 153 19
135 Stanton 39,470 $13,015 $330 150 15
136 Chino Hills 83,159 $26,547 $319 154 18
137 Shasta Lake 10,143 $3,094 $305 102 -35
138 Delano 53,276 $16,112 $302 159 21
139 Twentynine Palms 27,046 $8,104 $300 146 7
140 Gonzales 8,587 $2,546 $296 136 -4
141 Pico Rivera 64,260 $18,735 $292 139 -2
142 Fowler 6,241 $1,817 $291 185 43
143 St Helena 6,118 $1,740 $284 249 106
144 Menifee 91,902 $26,052 $283 193 49

25th Anniversary Look Back

The Moorlach Memo continues with Chapter 3. In this edition, I clearly predicted that the County of Orange would “be the major loser” due to Citron’s investment strategy.  For the first three segments, see:

Intro — Context — MOORLACH UPDATE — Constitutionally Flawed Legislation — November 5, 2019.

Chapter 1 — Introduction — MOORLACH UPDATE — Business, Electricity and Top 48 Cities — November 7, 2019

Chapter 2 — Hold to Maturity — MOORLACH UPDATE — 3P, Cities 49 to 96 and Holding to Maturity — November 12, 2019

WE DO NOT MARK TO MARKET

The “not marking to market” argument is valid if no one withdraws their money until the market values return to the exact levels when the participants deposited their funds.  This is theoretically improbable and statistically impossible. This argument is so shallow and dangerous, that to accept it is to commit financial suicide.

1.  Mutual funds that invest in stocks, bonds, and similar securities are required to mark to market at the net asset value of the investments.

Let me give another example.  You and I each invest $100 to purchase stocks worth $200.  After a month, you want your $100 back. Unfortunately, the market has gone down during these last thirty days and the stocks are now worth $150.  If we marked to market, you and I would both receive $75 each and close the account. If we don’t mark to market, then I would give you your $100 and I would be left with $50.  You get a premium at my expense. That’s not kosher.

2.  By marking to market a mutual fund does not go broke, but by not doing so it can.  If half of the invested funds were withdrawn from Citron’s portfolio, $3.7 billion, the remaining investors would have nothing left.  They will have lost everything at the expense of those who were at the front of the line. Publicly traded funds can not do this, somehow our County government can!  But the County will be the major loser! This is something that Cuyahoga County in Ohio is facing right now, as it is returning investments to its participants after its Treasurer followed the same strategy that Citron is using.

On October 13 the “Register” quoted Citron’s assurance that “nobody’s going to lose a penny of principal.”  But “The Wall Street Journal,” in its October 13 issue, reported that Cuyahoga County’s estimates of losses exceed $100 million.  How are Cleveland residents going to recoup that?

3. Under prudent circumstances, a County Treasurer should be managing a portfolio that operates like a money market mutual fund.  A money market mutual fund trades at a $1 net asset value. The values of the assets in the fund trade close to their purchase price because of the short-term nature.

Mr. Citron has created a long-term, highly leveraged bond mutual fund.  The only appropriate way to insure proper income allocations and principal distributions, from an equity standpoint and an accounting standpoint, is to mark to market.  Otherwise, someone gains at someone else’s expense. That’s why the Securities and Exchange Commission (SEC) requires marking to market by law.

4.  In the October 3rd issue of “The Bond Buyer,” 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.  “We’ll 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.

My contention, exactly.

Jerry Brown’s quixotic quest to save the world

By SUSAN SHELLEY

https://www.ocregister.com/2019/11/13/jerry-browns-quixotic-quest-to-save-the-world-susan-shelley/

https://www.sgvtribune.com/2019/11/13/jerry-browns-quixotic-quest-to-save-the-world-susan-shelley/

Former California Gov. Jerry Brown was in Washington a couple of weeks ago to testify to the House Oversight Committee that Republicans are “flat Earth” science deniers who don’t understand the “life-and-death” stakes of California’s effort to require automakers to increase the average mileage of the vehicles they sell from 37 miles per gallon in 2020 to about 50 miles per gallon in 2025.

“The blood is on your soul here,” he testified.

Brown blamed California’s worsening wildfires on climate change without mentioning that in 2016, he personally vetoed a bill that would have required the state to identify areas at high risk for wildfires, and would have required state utility regulators and forestry officials to develop enhanced plans to prevent fires caused by power lines and other utility equipment.

Senate Bill 1463 by state Sen. John Moorlach, R-Costa Mesa, had passed both the Senate and the Assembly unanimously.

Another thing Brown didn’t mention was a recent report by Consumer Watchdog titled, “Brown’s Dirty Hands,” which looks at the “close proximity” of his administration’s actions on behalf of energy companies to millions of dollars in political donations from those companies to the former governor’s campaigns and favored causes.

If Brown wants to chase down whose blood is on whose soul, he really should run for president. Or become an exorcist.

One is more likely than the other. When Brown left office in December 2018, the Sacramento Bee reported that he had $15 million in his campaign account that he might use to play in ballot measure campaigns.

But that’s a needlessly limited ambition for someone whose credits include preventing the Apocalypse by raising the price of gasoline.

Even if he doesn’t get the nomination, he can win the California primary and then use his leverage at the Democratic National Convention to force the party to embrace his goal of bringing California’s energy prices to the whole country.

Spreading the grief nationwide is one way to make California more competitive with all the states currently absorbing our growing tide of middle-income refugees, not to mention the high-income former Californians who refused to live up to their responsibility to pay all the state’s bills while being blamed for all the state’s problems.

Those ingrates.

Speaking to lawmakers on Capitol Hill, Brown prophesized, “The combustion car is going the way of the dodo bird, and you’ve got to either get with it or get out of the way.”

People who were in school in the 1970s might remember a similar prophecy, delivered with similar scowling certainty, that the United States was going to convert to the metric system, like it or not, because the rest of the world was already on it.

Here’s a brief history of how that worked out.

It didn’t.

Americans have a history of not caring at all what the rest of the world is doing. It’s in our nature to evaluate the facts in front of us and make individual decisions. When enough people individually conclude that something makes sense, it happens. And if they don’t, it doesn’t happen.

This much freedom is enormously frustrating to the kind of people who think government should do all the research, announce the findings from “the science,” and then enforce its decisions on the population.

Take electric cars, for instance. They mostly run on fossil fuels mixed with your tax dollars, with the additive of higher electricity rates to subsidize the installation of charging infrastructure.

One purpose of ratcheting up the mileage requirements, also known as the Corporate Average Fuel Economy (CAFE) standards, is to provide a market for electric vehicle “credits.” Companies that sell muscle cars and pick-up trucks can meet their mileage obligation by purchasing credits from companies that exceed the requirements for fuel economy because they build electric cars. Tesla may earn more from selling credits than cars.

No matter how much the government pushes and charges — which coincidentally is what you may have to do with an electric car to get where you’re going — the vast majority of car buyers continue to choose “combustion” as their preferred mode of vehicle power.

We’ll keep watch on that dodo bird prediction, though. If muscle cars are endangered, they might qualify for federal and state protection.

Susan Shelley is an editorial writer and columnist for the Southern California News Group. Susan@SusanShelley.com. Twitter: @Susan_Shelley

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