Treasurer Candidate Says County Portfolio Value Down : Politics: Moorlach blames Citron strategy for $1.2-billion decline. Official says figures wrong.

SANTA ANA —  Orange County treasurer-tax collector candidate John M.W. Moorlach claimed Tuesday that incumbent Robert L. Citron’s investment strategies have caused the county’s investment portfolio to decline in value by an estimated $1.2 billion in the last five months.

In a Tuesday letter to Board of Supervisors Chairman Thomas F. Riley, Moorlach said the decline has resulted from Citron’s reliance on a strategy that depends on interest rates remaining low. The loss brings the paper value of the county’s portfolio to $6.3 billion.

“Overall,” Moorlach said in the letter, “the portfolio is a major bull-market bet in the middle of bear market. The incumbent has structured the portfolio only on the premise that interest rates would continue to decline for the next four years.”

Riley, who has endorsed Citron’s reelection bid, said he had reviewed Moorlach’s analysis but retained his confidence in the incumbent.

“I’ve checked with a number of financial agencies, and none of them feel like any major dangers are involved,” he said.

Assistant Treasurer Matthew R. Raabe said Moorlach’s figures are in error. He described the challenger’s study as a “last-minute chance to get publicity for his campaign.”

In his letter, Moorlach questions Citron’s money-management style, which uses the county U.S. Treasury bills and bonds as collateral for short-term borrowing at low interest. The borrowed funds are in turn invested in corporate bonds and securities that pay a higher rate of return. This can yield large returns while interest rates remain low and stable, Moorlach said. But the plan can also fail when interest rates rise, as they have in recent months, he said.

In his analysis of the county portfolio, Moorlach estimated that the decline in value amounted to $1,000 per registered voter in Orange County.

Since January, the county has had to post an additional $300 million in collateral because the value of the securities used to borrow the money has declined as interest rates have increased.

“Mr. Citron believes he can accurately anticipate the market all the time, and also outperform everyone,” Moorlach said in the letter. “That’s impossible.”