The Ghost of Christmas Past

Thirteen years ago the County of Orange government faced a really bad Christmas. On December 6, 1994 the Orange County Board of Supervisors declared the largest municipal bankruptcy in history, more than $1 billion, in the wake of a risky investment strategy employed by then Treasurer-Tax Collector Robert Citron. 

On Tuesday, December 4, 2007 Treasurer-Tax Collector Chriss Street abruptly announced to the Board of Supervisors that Moody’s Investors Service had announced that it may downgrade structured investment vehicles, in which Orange County has invested $460 million. Such a move would reduce the sale value of those securities. The Orange County Register reported on Sunday that Orange County is the only major government agency in California to put public money into this controversial type of security. In fact Dick Larsen, treasurer of San Bernardino County said;

“Our job is to preserve capital, not to reach for yield. For Orange County to do this is unconscionable.”

In 1994 Robert Citron had been praised by County Supervisors for his strong performance in generating large returns on county investments. At the time they were not concerned over the extreme risks that Citron was taking. As long as the money kept rolling in, they were more than willing to look the other way.

In August Street announced that the $1.5 billion Orange County Investment Pool was ranked as the nation’s #3 government investment pool in 2006 according TRACS Financial Research. The top rated funds have increased their return by over twenty five basis points over the last six months and now yield 5.31%.

“Our focus is to provide safety of principal and liquidity to our investors,” said Treasurer Chriss Street. “I am pleased we are able to provide our constituents with competitive returns while maintaining our Moody’s AAA rating and conservative investment style. The real winners are the taxpayers and school districts which benefit from the higher revenue.”

The Orange County Register reported on Sunday:

The county’s largest, and most politically active public employee union, the Orange County Employees Association, is already calling for an immediate public hearing.

“There have been thorough public discussions and hearings on our pensions, which is considered good business,” said OCEA general manager Nick Berardino.

Berardino, who was the union head during the bankruptcy and had to address myriad issues like layoffs in the wake, said any problems with the pool need full disclosure immediately.

“Silence is deadly,” Berardino said. “Right now, the level of debate is minor and it appears to being managed in a way to control public opinion instead of soliciting it. So far, the board has refused to shine a major light on the issue and provide the amount of time necessary to have a thorough public hearing and secure experts on each side of the issue.”

“In 1994 they told us not to worry and it was only a paper problem. I’m more worried in 2007 than I was in 1994,” Berardino said. “When they say not to worry, it’s time to start worrying because the last time they said that, the entire pool collapsed.”

Berardino is right. The Board of Supervisors cannot simply ignore the warning signs again. They need to hold a public hearing regarding Chriss Street’s competence to manage the County investment pool. They need to remove Street’s investment authority. It is clear that Street is distracted by the scandals surrounding him and his short time in office. He has not even been able to sit through an entire meeting of the Orange County Employees Retirement Board for months.

Board Chairman Chris Norby said recently that the people of Orange County deserved the benefit of a full-time Sheriff when commenting on the leave of absence that Sheriff Carona has taken to address federal indictments against him.

Given Street’s clear lack of attention to detail in waiting three days to notify the Board of the latest crisis; one that is the result of his decision to invest in bonds that no other municipality in California would touch; don’t we deserve the benefit of a Treasurer with his attention on his job full time?

We have an extensive archive of stories on Chriss Street.  In reviewing them for this post I found my commentary on Street’s September 2nd appearance on InsideOC with Rick Reiff.

Street pointed out the high rate of return on Orange County investments as an example of his performance.  You know, the last time we heard that line was when former Treasurer/Tax Collector Robert “Bob” Citron was running for re-election in 1994.

Click Here for all of our Chriss Street stories.

  1 comment for “The Ghost of Christmas Past

  1. Aunt Millie
    December 10, 2007 at 5:48 am

    Thanks for staying on this story.

    It’s time to start calling not only for Street’s to go, but also for Moorlach’s resignation. Where is Moorlach now as the county once again reaches for higher yields with engineered products that don’t have any market?

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