Building Needs May Put County in Over Its Head : Government: Borrowing to finance public works could push the annual debt service from $1 million to an unmanageable $126 million, a report states.

If Orange County is forced to borrow money over the next decade to pay for jails, court buildings and other public facilities, the county’s annual debt payment could skyrocket from $1 million to $126.2 million, according to a county report obtained Thursday.

That would place Orange County above the national average in per capita debt, the report states, “potentially raising questions as to the county’s ability to safely weather future budget difficulties and make debt payments.”

Written by the county’s management and budget division, the report estimates that the cost of the proposed new Santa Ana criminal courts building, a South County Municipal Court building, a data center, a forensic science center, an intermediate-size jail and the larger Gypsum Canyon jail would top $1 billion.

Many of those public works projects are considered high-priority needs of the county.

Both jail proposals, for example, are in response to a court order requiring the county to alleviate overcrowding at the Men’s Central Jail. As a result, other County Jail facilities often operate at more than 35% above their intended capacity, the report states.

If the county does not raise taxes to pay for the projects and instead finances them with 30-year bonds, annual payments will come to $126.2 million a year, states the report, entitled “Focus on the ‘90s.”

Even without the increased bond debt, Orange County is likely to face serious budget shortfalls in the 1990-91 fiscal year. The report estimates expenditures for the coming budget year at nearly $436 million, while revenue is estimated at $410.7 million, leaving a budget deficit of more than $25 million.

Several county supervisors, who have just received the report, said it points to serious financial problems, both in the immediate future and over the long term. Moreover, there are few ready solutions in a county historically reluctant to approve new taxes.

That has created a conundrum for county officials.

“This may be our most serious issue and we’re trying hard to grapple with it,” Supervisor Thomas F. Riley said Thursday. “We’re all sitting around worried about what we’re going to do.”

Funding sources for the county projects listed in the report have in many cases not been identified, but voters have so consistently rejected higher taxes that bonds may be the only recourse left. Bonds defer up-front expenses by stretching out the repayment period, but they increase the overall cost of projects and drain general fund money that would otherwise go to operate programs and services.

“The whole thing is bleak,” said Don R. Roth, chairman of the Board of Supervisors. “I’m not a pessimist but it’s a really tough road.”

Some of those same concerns were echoed in a morning hearing of the California Debt Advisory Commission, which held its first of four sessions on the bonded indebtedness of California’s local governments.

Eileen Walsh, one of the county’s three associate administrative officers, told members of the commission, including state Treasurer Thomas W. Hayes, that Orange County’s debt is currently manageable but could increase dramatically if the county is forced to pay for new facilities through bonds.

“My discomfort, quite frankly, comes from looking down the line and seeing projects that we have no way of financing other than debt financing,” Walsh said, adding later that the potential debt represents a “serious problem.”

Hayes, who is conducting four hearings on the issue of local government debt, warned area officials that the consequences can be far reaching.

“Once you get to the point that you’re in trouble, it’s too late,” he said. “It’s an issue that will become much more acute in the ‘90s.”

To complicate Orange County’s budget picture even further, recent and predicted municipal incorporations are taking a toll on the county tax rolls. Although incorporations save the county some money by letting it cut back on the responsibilities of the Sheriff’s Department and other agencies, the loss of tax revenue outweighs the savings.

The county report notes that the combination of Laguna Niguel’s recent incorporation with the predicted incorporations of Leisure World, El Toro and Aegean Hills are expected to cost the county between $8.5 million and $18.2 million a year over a five-year period.