Cannot georeference a raster layer that is orthorectified using a digital elevation model

Description

A raster that has rational polynomial coefficients (RPC) can be orthorectified on-the-fly. For more accuracy, a digital elevation model (DEM) can be used in the orthorectification process. When the georeferencing tools are used on the orthorectified layer, the elevation choice reverts to 'constant elevation', instead of DEM.

Cause

The orthorectification type is reverted to constant elevation when any georeferencing tools are used on the DEM orthorectificed raster.

Workaround

1. Use the 'Create Ortho Corrected Raster Dataset' geoprocessing tool to persist the orthorectification to a new raster dataset.
2. Add this newly created raster dataset in ArcMap and georeference it.