A recent, widely circulated Forbes magazine article on the Orange County Investment Pool is interesting and instructive. It seems that if the Board of Supervisors had not dumped the $21-billion portfolio in December 1994, at a loss of $1.7 billion, Orange County taxpayers would not have lost a dime. In fact, according to Forbes, today the portfolio would have recovered its full value and earned an additional $300 million in interest.
Hindsight is 20/20, and it's easy to second-guess a decision made at a tense and critical time. There's nothing to gain by pining about "what might have been," but we learn from our mistakes.
County Chief Executive Officer Jan Mittermeier has adopted procedures (including establishing a Public Finance Advisory Committee) that will preclude overly risky investments in the future. That's commendable, but the Orange County Taxpayers Assn. (OCTax) thinks it's more difficult, and more important, to ensure that citizens can make decisions, through their elected and appointed officials, that are based on adequate information, effective communication and clear assignment of responsibility.
The first requirement is the gathering of information that leads to a decision. It is clear now that the Board of Supervisors lacked important facts before deciding to liquidate the portfolio.
The second part of the process is communication. The public and its elected representatives appear to have been excluded from important steps in the decision-making sequence. According to the Times Orange County Edition, many of the decisions on handling the investment pool crisis were made three days before the declaration of bankruptcy in a secret dinner meeting attended by a handful of county staffers and only one elected official, Auditor-Controller Steve E. Lewis. (Even the resignation of Treasurer-Tax Collector Robert L. Citron was engineered by staff without direct participation by the supervisors. Mr. Citron's faults were legion, but he probably knew best what was in the investment pool and how liquidation might be avoided. He was "the one person who could fill in the blanks," according to an article in The Times.)
In any case, it would have been best for elected and appointed officials to air out the pool's problems publicly and early. Yes, reaction would have been noisy and emotional, but it might have shaken out solutions from the investment community, academic and business leaders, county employees and others whose advice was desperately needed.
The final ingredient is responsibility. We elect the supervisors to represent, serve and protect the taxpayers of Orange County. To do so, they must be fully informed, and they must share their information with the public.