O.C. IN BANKRUPTCY : City Officials Try to Assess Damage, Plan Responses

Two Orange County cities, Garden Grove and San Juan Capistrano, had no money in the county’s investment pool, but all others did. Here are some city officials’ reactions Tuesday to news that the county had filed for bankruptcy and the possible effects on their cities:

Anaheim, $169 million:

“This is one of the most shattering experiences that any of us in local government will ever face.”--Mayor Tom Daly

After a Tuesday night City Council meeting, officials said the city doesn’t anticipate withdrawing money immediately, other than that required for normal cash flow, but plans to hire an independent financial adviser to analyze its investment portfolio.

City Manager James D. Ruth also suggested that the city’s plans for a new stadium for the Angels and revitalizing the area around Disneyland will be reviewed.

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Brea: $9 million:

“We’re encouraged by (the bankruptcy filing). We think that means the county is taking control and protecting its assets.”--Tim O’Donnell, assistant city manager.

Brea, which had $17 million invested in the fund in September, began withdrawing money when interest rates started going up.

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Buena Park, $18 million:

“We’ll wait and see as things unfold. At this point, we’re just receiving information.”--Councilman Donald L. Bone

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Costa Mesa, $2.6 million:

Two weeks ago, the city asked to withdraw its entire stake in the pool and was waiting Tuesday to see how the county would respond to the request in light of the bankruptcy filing.

City Manager Allan Roeder says he’s confident the county will “act in good faith and honor the request.”

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Cypress, $5.85 million:

“I can tell you that all of our eggs were not in one basket, and I’m glad about that. . . . If I understand the filing correctly it will stop the downward spiral. . . . If filing prevents that, then I believe it was the right move.”--Mayor Cecilia Age

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Dana Point, $16 million:

The bankruptcy was “probably a good idea, if the intent is to protect the fund. . . . When you run up against a tough situation, you have to do the most you can to be prudent and protect the resources you have.”--City Manager Stephen Julian

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Fountain Valley, $6 million:

“Until we know how (the bankruptcy) will play out in terms of the restructuring, it’s pretty hard to say if there will be any long-term effects. But there won’t be any short-term effects.” --Elizabeth Fox, Fountain Valley city treasurer/fiscal services manager

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Fullerton, $18 million:

“At this point, we are keeping the money (in the investment pool). Obviously, we are monitoring the situation like everybody else is.”--Fullerton City Manager James L. Armstrong

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Huntington Beach, $43.5 million:

City Treasurer Donald L. Watson said he was grateful his city had just completed several major projects, renovation of the pier and expansion of the library.

“We will be able, I think, to get on by, but we’ll have to be sure that we don’t spend any monies that we absolutely don’t have to and keep everything very tight to the vest.

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Irvine, $209 million:

“There’s no question it’s a gray day when this has to occur. One has to question why and how, and that’s a lot of the answers that we need to receive.”--Paul O. Brady Jr., city manager and president of the Orange County City Managers’ Assn.

The City Council will meet in a special session today to discuss the crisis.

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Laguna Beach, $7 million:

“We have been big winners (regarding money earned by investing in the county pool) . . . so we want to cooperate with the county.”--City Manager Kenneth C. Frank

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Laguna Hills, $900,000:

“I don’t necessarily think that this is some dire, the-world-is-coming-to-an-end situation. Obviously they want to catch their breath. And we’ll see what happens then.”--Laguna Hills Mayor R. Craig Scott

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Laguna Niguel, $18.7 million:

“Bankruptcy doesn’t mean close up shop, and the county can’t do that. So if it’s a maneuver to buy time and evaluate options for handling the portfolio, then it might not be bad.”--City Manager Tim Casey

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La Habra, $8.2 million:

The bankruptcy “would tell me that there is something there that they have not advised, at least this city about, far worse than what we read in the media. . . . To my knowledge, a county has never gone bankrupt. Therefore, we do not know what the rules would be. It could be absolute, positive disaster.”--City Manager Lee Risner

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Lake Forest, $9.6 million:

“A bankruptcy could bring some stability to the fund. If it’s a reorganization type of bankruptcy, it might be the appointed trustee would have powers to prevent two drastic things from happening: a run on the fund or a margin call.”--Financial Director Dave Bass.

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La Palma, $5 million:

Before Tuesday, the city had asked to withdraw $500,000 from the investment fund for projects. County officials said, “No problem,” according to City Manager Pamela Gibson. “I can’t imagine they would not honor routine requests,” Gibson said.

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Los Alamitos, $2 million:

“We’re keeping the money in the pool until we get additional information. They will be paying the interest to us. We’re not going to take the 20% hit at this time.”--Assistant City Manager Gerard Goedhart

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Mission Viejo, $18 million:

City Manager Fred Sorsabal said the city Tuesday considered pulling its $18.7-million investment from the pool but decided against it, worried about incurring the 20% threatened penalty. His reaction? “Shock. I thought they’d work it out,” Sorsabal said.

The City Council will meet Thursday to discuss ending involvement in the pool.

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Newport Beach, $2.7 million:

“There will be some changes in City Council policy as a result of this. . . . I want to propose limiting the percentage of city reserves to be invested. It will probably affect our yield, but it will secure the principal as well as it can be.”--Mayor John Hedges.

In a closed session Tuesday afternoon, the City Council decided to hire outside attorneys to advise the city.

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Orange, $28 million:

After a closed-door emergency session Tuesday night, the city called on the county to develop a plan immediately for the “orderly, prompt and full recovery” of the funds it has in the county pool.

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Placentia, $20.7 million:

“It does at least freeze the situation until we can get all the facts.”--City Finance Director Howard Longballa

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Santa Ana, $55 million:

“I am frustrated. . . . You try and do productive things for Santa Ana residents and all of a sudden one person messes things up for--what?--2.5 million people?”--Councilman Ted Moreno

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San Clemente, $34.6 million:

“San Clemente is waiting to see whether other cities will make a rush on the fund.”--City Treasurer Ken Carr

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Seal Beach: $2 million

“By going into chapter 9, it keeps creditors off their back and lets them sort things out in an orderly way. . . . I think (the filing) was a wise move on the county’s part. A lot of towns were ready to draw their money out.”--Mayor George Brown

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Stanton, $3 million,

“We think that the best course of action is to wait and see and watch the situation to see what develops. But right now we’re leaving the funds on deposit in hope that no actual loss is realized.”--Dean Porter, director of administrative services

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Tustin $180,000 in interest:

The city withdrew its $4 million in principal out of the county pool in April because of a “philosophical difference” between the city’s investment policy and the riskier one pursued by the county, Finance Director Ronald Nault said.

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Villa Park, $1,3 million:

“It’s probably the only thing (county officials) could do. . . . This, I think, will provide some time to filter things out and see what happens.”--Councilman Bob Bell

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Westminster, $100,000:

“The effect on us is minimal. . . . It would cost us (more) to hire attorneys and consultants.”--City Manager Bill Smith

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Yorba Linda, $13.5 million:

“We’re staying in” the bond pool--David Gruchow, assistant city manager.