Controls Tightened on Investment Policy

The city has adopted a new investment policy that council members say reflects a more cautious and informed approach to money management.

“It will keep what happened with the Orange County bankruptcy from ever happening again,” Mayor Michael Ward said.

The new policy requires diversification of the city’s investments and approval from the city manager for single investments greater than $3 million that carry a maturity date longer than three years.

Long-term investments with a maturity of more than five years must be approved by the Finance Commission and the City Council.

Ward and two other council members were the targets of an unsuccessful recall drive over their approval of a plan in July 1994 for the city to borrow $62 million to invest in the county pool. Through risky investments, the pool’s value plunged by $1.62 billion in December 1994 and left the county bankrupt.

A similar plan had earned the city about $2 million the previous year, but some council members say lax oversight procedures failed to provide a timely warning about the steadily declining revenue from the new plan.

“It’s very important that we take a very strong stance that these kinds of things don’t happen again,” Councilwoman Christina L. Shea said.

In response to Shea’s concerns, council members agreed earlier this week to take another look at the use of funds from city-issued tax-revenue anticipation notes and the city’s continued use of arbitrage.

City Manager Paul O. Brady Jr. said despite the $39.2 million the county still owes the city from bankruptcy, Irvine will not need to raise taxes, cut services or delay construction projects.