BOND TICKER : ORANGE COUNTY IN BANKRUPTCY : Supervisors Dip a Toe in State Pool

At a time when Orange County is debating the future of its $3.4-billion financial portfolio, the Board of Supervisors on Tuesday voted 4 to 1 to study whether the county should place a portion of its funds in a state-run investment pool.

Supervisor Jim Silva said he “strongly opposed” the study that was suggested by colleague Marian Bergeson because he fears relinquishing control of the money could pave the way for a similar fiscal disaster that triggered the county’s bankruptcy. Board members also voiced concerns about the safety of the state-run fund.

But Bergeson stressed that the study would only consider investment possibilities for the county’s fund. It’s a touchy subject since the same investment pool that lost nearly $1.7 billion last year after then-Treasurer-Tax Collector Robert L. Citron gambled on a risky investment strategy.

“I’d like to have all the options available to look at,” Bergeson said.

The Wall Street firm of Salomon Bros. is now managing the county’s funds at a monthly cost of $140,000. Some have expressed concern about allowing the new treasurer-tax collector, John M.W. Moorlach, to invest up to $500 million of the county pool funds since his investment experience is limited.

Internal Auditing Overhaul Urged

The county’s financial advisers on Tuesday recommended that the Board of Supervisors overhaul the county’s internal audit practices to enhance oversight and accountability throughout county government.

In a special study session, consultants with the accounting firm of Arthur Andersen & Co. told the supervisors that the county’s audit department is poorly equipped and managed.

A 26-page report by the firm found that a backlog of audits exists, reports are not timely and the audit and business skills within the department “require diversification to support the changing needs of the county.”

Supervisors have said the county’s unprecedented bankruptcy has shown the need to revamp the auditor’s office. As part of that restructuring, the board has taken action to remove many of the audit functions performed by Auditor-Controller Steve E. Lewis and placed them into a new internal audit division.

Popejoy Takes Deficit Personally

County Chief Executive Officer William J. Popejoy said Tuesday he didn’t think twice about digging deep into his own pockets and writing a $40,000 personal check to pay off a creditor who stood in the way of the county’s plan to issue recovery notes.

The creditor was demanding payment for work performed at John Wayne Airport and was threatening to hold up the recovery-bond approval process by filing a challenge.

Pressed for time, the county was forced to consider an alternative method to get approval for the recovery bonds that could have cost the county millions more.

Hanging in the balance were the bonds, which are a cornerstone to the county’s efforts to help pay back schools and cities that lost money in the bankruptcy.

The bind prompted Popejoy, a millionaire, to write the check.

Popejoy, who works on a voluntary basis, said he’s unsure whether the bankrupt county will ever repay him.

“I’d like to get repaid someday, but I don’t see that happening in the near future,” Popejoy said.

Compiled by Rene Lynch, Matt Lait and Shelby Grad.