COMMENTARY ON GOVERNMENT STRUCTURE : O.C. Is a $3.6-Billion Business--It Ought to Be Run Like One : A switch from general law to charter would allow flexibility to expand the board and put a mayor in charge.

A little over one year ago, in testimony before the State Senate Committee on Local Government chaired by state Sen. Marian Bergeson (R-Newport Beach), I had the audacity to argue for the complete elimination of elected county government (the Board of Supervisors) in large urban counties.

For Orange County, my argument was based on recognition of the facts that, as of 1992-93, the board had discretion over less than 10% of the county budget, represented fewer than 200,000 people in unincorporated areas, was losing its clout in land regulation to the cities, and was ineffective in handling regional problems that transcend county and city boundaries.

While the county structure may have made sense in 1850 when the state Legislature created it, it doesn’t today. Appealing to the principles of business process re-engineering, I asked that absolutely everything be put on the table for critical examination as we consider restructuring our state-county-municipal government relationships and funding mechanisms.

What’s most ironic about the crisis that now faces our county, in light of what I said then, is that something the board still does have responsibility for was so badly botched. Apparently lulled into a false sense of security by former Treasurer-Tax Collector Robert L. Citron’s rosy annual reports and historical success, the supervisors had no clue that the Citron investment strategy carried with it excessive risk in a rising interest rate environment and what the implications of that might be.

The circumstances are sadly reminiscent of the early ‘80s when, with portfolios consisting mainly of long-term, fixed-rate mortgages at low yields and facing a prime rate that ultimately rose above 20%, the S&Ls; pursued very risky investment strategies in order to survive. They, too, were operating in an essentially unsupervised environment.

By the standards set in the fire sale of assets that ultimately resulted, with California and Texas leading the pack of states with failed thrifts, the Orange County bankruptcy is merely a burp in the grander experience of national indigestion. But it’s a big burp when we must bear the entire burden of such a debacle locally.

As we all know, every crisis presents opportunity. In response to the S&L; crisis, the federal government rushed to impose onerous regulations on the remaining thrifts that were aimed at controlling interest rate risk to such an extreme that sometimes one wonders if that simple goal were not more important than whether responsible, competently managed businesses should be allowed to make a profit for their shareholders.

Rushing to this same sort of solution in the current situation would surely result in overkill, just as it did then, although some of the mechanisms which have been applied--like marking a portfolio to market and regularly examining its vulnerability to interest rate shocks--would be useful controls in this case too. Instead, we should seize the opportunity to restructure county government--not only to prevent a similar event from happening in the future but also to address more fundamental issues.

The County of Orange is a $3.6 billion business. It ought to be run like one. Since it would take action by the state Legislature to demolish county governments--something unlikely in the foreseeable future (ever?)--let’s at least do what we can to restructure county government locally, by converting Orange County from a “general law” county to a “charter” county.

While there are restrictions even then on what’s permissible under state law, a charter county can “customize” its structure to a great extent. For example, we could create a more corporate structure by establishing the position of elected county mayor (a sort of CEO), with the Board of Supervisors expanded beyond its present five members into a more legislative-like body. Each supervisor would represent fewer people and, with new supervisory districts corresponding closely to existing city and community clusters, this will ensure that the board represents specific, community-based concerns more effectively than is the case today. Charter counties are required to elect only the assessor, sheriff and district attorney. The county treasurer could be an appointed office, and hence more beholden to the mayor and board.

We might even conceive of electing a county mayor with business experience who knew something, at least, of derivatives and interest rate risk, accounting, marketing, organizational development, management and the like, and who, most importantly, would instruct the county treasurer to manage our money as if the downside risk was worthy of at least some discussion.

The current situation in the City of Los Angeles bears watching in this regard, with Richard Riordan and his team in charge.

Bringing a business perspective to government operations isn’t easy even when it seems to be an obvious need, as our own Roger Johnson is discovering at the General Services Administration. The soon-to-be created Orange County Business Council has proposed bringing in a “red team” to provide guidance during the financial crisis, as was done in Cleveland and New York years ago. While this offers important temporary help, it really begs the main issue.

In business, you hire the most qualified person to do the job. In politics, people are often elected for reasons other than their job qualifications and, as we are discovering once again, that can produce disastrous results.