Major Reform of O.C. Investment Policies Enacted

The Orange County Board of Supervisors on Tuesday unanimously approved a major overhaul of the way the county handles municipal bonds and investments and instructed the county staff to return with yet more reform proposals dealing with the influence of lobbyists.

The board’s action formalized some of the most sweeping reforms proposed as a result of the county’s bankruptcy--reforms that were designed to assure the public and Wall Street that the misdeeds that brought about the financial crisis won’t be repeated.

The reforms, crafted by County Chief Executive Officer Jan Mittermeier, prohibit the county from issuing any bonds or notes to speculate in financial markets, and disqualify financial professionals who contribute money to a supervisor’s campaign from receiving county business.

Mittermeier’s reforms have met with widespread praise, though some good-government activists faulted her plan for not explicitly banning contributions from lobbyists who work for financial services firms.

In response, some board members asked Mittermeier to consider new language that would clarify who is covered by the prohibition.

“It’s something we have to look at carefully,” said Supervisor Don Saltarelli. “We might need to make some word changes here and there to make sure it is exactly the way we want it.”

At Saltarelli’s request, officials will also examine whether the county can place restrictions on lobbyists who receive contingency commissions for helping secure contracts for financial services firms.

Mittermeier’s reforms mark a significant change from the way the county did business before the Dec. 6, 1994, bankruptcy filing prompted by a $1.64-billion loss to the county-run investment pool.

The losses were blamed on former Treasurer-Tax Collector Robert L. Citron’s risky investment strategies--many of which are banned under the new reforms.

The plan requires outside lawyers and financial advisors to provide written assurances that bond issues are legal, financially prudent and that proper disclosures have been made to potential bond buyers. The county has been criticized for failing to disclose the risky nature of some of its investments to buyers of its notes and bonds.

The reforms also establish a five-member panel, with veto power, to oversee all county debt issues. Mittermeier proposed that the board be made up of herself, the auditor-controller, the county counsel and two members of the public appointed by the supervisors.

But Supervisor William G. Steiner said Tuesday that he would like three public representatives on the panel, and that the county counsel serve as an advisor, not as a voting member.

Supervisors, activists and others have praised the reforms for attempting to stamp out any local vestiges of “pay to play,” the widely condemned practice of municipal finance professionals who are competing for lucrative bond business contributing to the reelection campaigns of the officials who award such contracts.

Shirley Grindle, a longtime campaign reform advocate, credits passage of the reforms in part on the recent release of Orange County Grand Jury testimony that highlighted how financial services firms doing business with the county donated large sums of money to some supervisors in the expectation that their contributions would win them business.

“It put the spotlight on what was going on behind closed doors,” Grindle said. “It showed people what was really going on.”

Grindle hailed the reforms as a “big, big step in the right direction” but said they could be improved by clearly banning lobbyists from lobbying supervisors about investment matters if their clients have made campaign contributions.

As for Mittermeier, Grindle added: “She’s done more in five months that we’ve been able to do” in several years.

Saltarelli also asked Mittermeier to return to the board with ideas for reforming the county’s procurement system, which has long been the target of criticism by Grindle and other activists.

Saltarelli questioned the county’s current practice of sometimes listing the estimated cost of certain projects when placing them out to bid. The practice, he said, puts the county at a disadvantage when officials sit down to negotiate contracts with the selected firms.

Saltarelli said he doesn’t believe the procurement system needs a complete overhaul, but said there might be room for improvement.

“I think there is a public perception out there that if you have the right lobbyist, you will get the business,” he said. “That doesn’t make it true. The system works, but the perception is that it’s not the best possible system out there.”

Grindle said activists and some architectural and engineering associations have long pushed for procurement reforms that would reduce the influence of lobbyists. “We want a level playing field,” she said.

* SEC SETTLEMENTS EXPECTED: Deals likely with O.C., Citron and Raabe on civil charges. A14

* COUNTY CAN SUE CAMPBELL: Board authorizes suit to recoup ballot reprinting expenses. B1