District Puts Funds, Faith in O.C. Pool

A small Villa Park water district said Tuesday that it will become the first government agency to voluntarily place money in Orange County’s once-notorious investment pool since the county went bankrupt nearly five years ago.

The Serrano Water District’s investment is expected to be modest, but county officials hailed it as a symbolic boost and another sign of the county’s emergence from the 1994 financial collapse.

Before the bankruptcy, hundreds of cities and special districts placed millions of dollars into the county pool, trusting the county treasurer to make sound investments. But when the pool collapsed because of risky investments, those agencies lost money. Most have vowed never to trust the county to manage their money again.

County Treasurer John M.W. Moorlach, who took office after the bankruptcy, has been talking to several government agencies about investing in the pool for about a year. But Serrano was the first to step forward. The county now has very conservative investment practices and earns yields slightly higher than several well-known money market funds, officials said.

Water district President C.L. Pharris Jr. said the agency started examining the county’s investment policy in March and liked what it saw.

“Now since all the publicity and fiasco that’s ensued, I’m sure that it’s one of the most conservative investment plans that there is to go into,” Pharris said.

Pharris said the district probably will invest a fraction of its portfolio--just a few hundred thousand dollars--into the pool. The district had not invested in the county pool before the bankruptcy because it deemed the returns “too good to be true,” he said.

“The past history is the past, and we have a fiduciary responsibility to invest funds not in highest rate of return but in the safest fund,” Pharris said. “We felt that after what the fund had been through in the past, it should be one of the safest out there.”

Dick Hilde, the county’s assistant treasurer, agreed, adding that the county now adheres to strict, low-risk investment practices. It holds a AAA rating from Finch Investment Service, and its average gross yield continually outperforms Treasury bills and private money market funds, Hilde said.

For May, the pool had a yield of 5.13%, compared with 4.61% for a 90-day Treasury bill, 4.61% for the Standard & Poors Local Government Investment Pool Index and 4.74% for a composite of several money market funds.

Right now, only county agencies and school districts place investment money in the $2.79-billion pool, because they are required by law to do so.

County officials said they hope other agencies will follow Serrano’s lead.

“There certainly still are hard feelings out there,” Hilde said of the bankruptcy. “We just have to regain confidence and credibility, and that’s going to take a long time.”