Camarillo Race Focuses on Ways to Recover From Financial Losses

Times Staff Writer

Camarillo's recent loss of $25 million from the city treasury has prompted the nine candidates competing for two City Council seats in the Nov. 8 election to stress fiscal accountability in their campaigns.

The city lost the money--virtually all its savings--last year after former City Treasurer Donald Tarnow borrowed funds to finance highly speculative investments that backfired.

Tarnow traded heavily in government securities that he would agree to buy at a certain price 30 days before the bonds were issued and the payment was due. When the bond market rose, with eager buyers bidding up the price of government securities, Tarnow could sell the bonds at a profit when the payment was due without having to spend any city cash.

When the bond market fell in 1987, however, Tarnow was caught holding more than $270 million worth of bonds that he was forced to sell at a loss. He used cash remaining in the city's savings accounts to pay money he owed securities dealers. All told, he lost about $22 million in the bond market, and invested about $3 million in failing businesses.

Checks Bounced

The losses were first discovered in November when $16,000 in city checks bounced.

Tarnow, who single-handedly transacted the risky investments, was fired in February for failing to tell anyone the city was losing money. The city manager and finance director subsequently resigned after auditors said they should have known of the speculative activity.

The financial scandal sparked a recall drive against City Council members Charlotte Craven, Sandi Bush and Thomas S. Martin. Incumbent F. Burrows Esty, 78, whose term expires in November, has declined to run for a third term. However, incumbent Michael D. Morgan, a federal probation officer, is running for reelection in the November contest.

How Morgan fares against the eight challengers, all of whom hold the City Council responsible to some degree for the losses, may prove to be a political litmus test for the council members targeted by the recall.

Much of the campaign debate centers on how the City Council should fund its capital improvement projects, such as road widening and a new police station, now that the bulk of its reserves is depleted.

The city still has about $1.6 million in reserves, according to a report presented to the City Council last week. It has not been forced to cut back on services in its $15-million annual budget, but capital improvement projects have been postponed at least until the City Council conducts a financial review in January.

In the wake of the crisis last spring, the council established a fiscal review committee composed of council members Bush and Estes, acting City Manager Larry Davis and interim Finance Director C. Robert Green. At least once a week, the committee monitors the financial transactions and investments of the Ventura County city of 48,000.

New Guidelines

In addition, the City Council limited city investments to banks, savings and loans, U.S. Treasury securities maturing in less than one year and a state-operated fund that pools municipal funds for short-term investments.

In 1987, when Tarnow began losing money in the bond market, the city's investment policy, which he wrote, required only that "money is always safe and available, when needed."

No criminal charges will be filed against Tarnow because there is no evidence he earned any personal profit, Deputy Dist. Atty. Roger A. Inman said.

The city has filed a lawsuit in U.S. District Court against three of the securities firms that Tarnow used to transact the bond deals. The suit alleges that the firms, which profited from the city's losses, purposely recommended unsuitable investments. One of the firms, United Capital Corp. of Little Rock, Ark., last month was fined $250,000 by the Arkansas State Securities Department for involving Camarillo in excessive trading for the sole purpose of generating profits for itself.

All of the candidates support the city's 1980 growth-control ordinance, which limits new housing construction to 400 units per year. All said they oppose the use of the county-owned Camarillo Airport for scheduled commercial jet airline service. The county has no present plans to allow jet service there, but many Camarillo residents are concerned that jets eventually will be permitted to land there.

Here is a rundown of the candidates, beginning with the incumbent:

* Morgan, 41, is seeking his third term in office. He said the council is not to blame for the city's financial loss because Tarnow submitted inaccurate financial reports. Council members are doing all they can to improve the city's financial status, including giving up their expense accounts, he said.

The crisis will make the city become "more businesslike" by forcing it to leverage its funds by borrowing money, instead of paying cash for capital improvements, he said. Morgan takes credit for founding the Camarillo Arts Council and helping it raise $150,000 for an arts pavilion completed last year.

* Donald DeBring, 51, is an engineer. He said he will "fight tooth and nail" against putting bond issues on the ballot or borrowing money for capital improvements because "if you can't pay for it, don't do it." He said he opposes turning Camarillo Airport into a commercial airport, but supports building more hangars and a coffee shop there.

* Larry DeSha, 48, is a family law and business attorney. He said his legal expertise will benefit the city as it pursues the suits against the securities firms. He said the council ought to fire City Atty. Colin Lennard and hire a full-time lawyer who would be more accessible. The city has budgeted about $350,000 in legal expenses this year from Lennard's law firm, Burke, Williams & Sorensen of Los Angeles, which specializes in municipal law. Lennard, who attends the biweekly City Council meetings and works in Camarillo City Hall at least one day a week, said the city is best served by retaining a law firm, rather than an individual, during the current financial crisis.

* Harvey Eisenberg, 56, is an operations administrator for a computer company. He supports putting bond issues on the ballot to raise money for capital improvements. He said that if elected, he will set up monthly public forums and reassess local bus routes to get residents to "shop Camarillo."

* George Imrie, 52, is a financial manager who said his background would be an asset. He claims to be "the only candidate with grass roots in the community." Imrie was chairman of a citizens' group that successfully opposed the expansion of the Camarillo Airport in the early 1980s, when the county was considering commercial jet service at one of its airports. He also headed a committee that supported Prop. 13, which was passed in 1978. He ran unsuccessfully for City Council in 1980.

* Stanley Scesney, 60, is a retired electrical engineer. He said he would deal with the city's financial problems by hiring advisers because, "I'm not a financial expert and neither is anyone else on the council." He said he is running for office because the city's drinking water, which comes from wells and the Los Angeles Aqueduct, is "a biological time bomb."

Scesney's wife died seven years ago of uterine cancer, which he believes was caused by the water. Urso Garcia, the city's water systems superintendent, said the water meets all the requirements of state health and regulatory agencies. Scesney ran unsuccessfully for the council in 1986.

* David M. Smith, 43, is a financial planner. He said the city rapidly needs to build a reserve of $7.5 million, or half its annual budget of about $15 million. He said that if elected, he will apply his financial expertise to finding new sources of revenue.

However, he said he supports an ordinance limiting commercial development, even though sales taxes from additional development would enrich the city's coffers. "If increasing the income to the city will deteriorate the quality of life, I don't think it's worth it," he said.

* George R. Wachold, 63, is a retired aerospace engineer and ex-planning commissioner. He said the city needs new leadership because the council lacks the proper aggressiveness and is "too comfy, relaxed and trusting." Camarillo will have to borrow money to finance capital improvements, he said. Wachold said that if elected, he will establish citizens advisory committees in keeping with his motto, "The People Are the City."

* L. Frank Zelinski, 55, is a retired math teacher. He said his math skills will come in handy in dealing with the city's financial situation. He said that if elected, he will strive to represent the city's senior citizens on issues such as mobile-home rent. Adults over age 55 make up 23% of the city's population, according to city planner Randy Richardson.

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