O.C. Agencies in Fund Pool Halt Projects

Cities and school districts throughout Orange County slammed the brakes Tuesday on expenditures and projects, many of them in the works for years.

Off the planning boards for now is a $17.5-million extension of Newport Coast Drive that would have provided a toll-free bypass connecting Irvine to Newport Beach. In Foothill Ranch, school trustees delayed the ballyhooed opening next month of a new elementary school. Brea city officials postponed the groundbreaking for a $7-million community center, scheduled for later this week.

And that was not all.

The reverberations from the widening financial crisis continued to shake many of the 187 cities, school systems and special districts that have relied on Orange County to invest their savings. Officials said Tuesday that they were acting to protect their remaining assets, deferring all but the most necessary expenditures until the situation is clearer.

“We’re still in the shock mode, in the grieving mode,” Fullerton City Manager James L. Armstrong said after hearing the news Tuesday that the county investment pool had lost 27% of its value since January. “Obviously, I’m angry. You entrusted your money to somebody who you thought was managing it appropriately and they weren’t.”

Jeff Niven, Irvine’s manager of finance and fiscal services, said he was particularly irked Tuesday to learn that the county treasury continued to borrow money and tie investments to interest rates this spring. He and other local officials learned Tuesday that the money they had entrusted to Orange County’s investment pool may have dropped even more in value than previously feared.

“You invest some money and the next day, it’s gone. Ouch!” Niven said. “To deposit money in the county four months ago and incur a 27% loss is staggering.”

One week after the county declared bankruptcy and froze all funds in the ill-fated pool, officials of the agencies that had participated were struggling to come to terms with news that seemed to grow worse with each passing day.

Several said their latest actions--including hiring freezes and postponing numerous capital improvement projects--could be reversed or modified should the situation prove to be less serious than feared. But few of those interviewed Tuesday appeared to hold out much hope.

La Habra City Manager Lee Risner, who announced that the city was instituting a hiring freeze and deferring three flood-control projects, was openly hostile toward county officials.

“Until we see that the county is serious about paying out money, we’ll have to hold a lot of things,” Risner said, including park development, storm drain repairs and street projects.

Public offices throughout the county were tallying the losses Tuesday.

Among the most common actions were postponement of planned construction projects.

In Irvine, officials said they have been told by the county and its toll-road agency that there is no money right now for a $17.5-million extension of Newport Coast Drive that would have provided a toll-free bypass to a section of the San Joaquin Hills toll road. Assemblyman Gil Ferguson (R-Newport Beach), confirmed that the county financial crisis would probably scuttle it.

In Huntington Beach, officials announced that they had postponed indefinitely the construction, set to begin Jan. 2, of a new Ruby’s restaurant at the end of the pier. The project had been planned for three years.

“We’d be foolish to blindly spend our money on . . . capital outlays without finding out where we’re going and where we are down the road,” said Richard Barnard, Huntington Beach deputy city administrator.

Brea officials postponed breaking ground on a $7-million community center, scheduled for a construction start this week. Assistant City Manager Tim O’Donnell called the move a precautionary measure.

The city of Anaheim has put $86.5 million in capital improvement projects on hold, most involving the planned widening of the Santa Ana Freeway, city officials said at a council meeting Tuesday. Other planned but now postponed expenditures included sewer improvements along the freeway corridor and three separate high-occupancy-vehicle-lane projects.

The city, which has $167 million invested in the county pool, also has begun a detailed cash-flow analysis and has hired a portfolio and investment adviser and a law firm specializing in bankruptcies.

Anaheim City School District officials said Tuesday they are holding off on building a new Head Start facility at one elementary school and putting off repairing the drainage system at another. District Supt. Meliton Lopez remained optimistic that his district would recover all of its money in the fund, despite the sharp drop in the fund’s value, but the district has ceased all non-essential spending, he said.

“We’re not replacing textbooks that are lost, we have canceled all seminars, workshops, anything teachers were planning to attend that would require a substitute,” Lopez said.

In other cities and school districts, hiring was the No. 1 issue on managers’ minds.

The Orange Unified School District put negotiations with the teachers union on indefinite hold, Supt. Robert L. French said.

In Los Alamitos, the city suspended contract negotiations with the Los Alamitos Police Officers Assn. until early next year, City Manager Robert C. Dunek said.

At the Irvine Unified School District, selection of a new superintendent will be slowed by the bankruptcy, officials said; the district does not yet know whether it will have the money to hire a search firm. And plans for a new high school and elementary school will also be placed on hold, along with negotiations between teachers and administrators for a new three-year contract.

“Every element of this district will be ultimately impacted,” district Clerk Tom Burnham said, reacting to Tuesday’s news of the county’s investment loss. “The haircut of 27% is substantial. It’s certainly going to create a lot of pain.”

The Fullerton School District was suffering even more basic problems. Supt. Duncan Johnson told the school board Tuesday night that a vendor refused to fill a $5,000 purchase order for audio visual equipment such as televisions and videotape recorders for use in classrooms. After being turned down, the district was able to persuade another vendor to fill the order, Johnson said. He did not identify either vendor.

Last week, another unidentified vendor refused the district’s request for 8,000 gallons of gas to fuel school buses--instead giving the district only 1,000 gallons. District officials said Tuesday that they threatened to stop doing business with the vendor, who then filled the rest of the order.

The Newport Beach City Council voted to put off the purchase of a new firetruck, even though the city could have delayed paying for the unit for at least a year and saved $36,000 by making a commitment this week.

“I’m a little queasy about making this kind of a commitment this early on in this kind of an environment,” Mayor John W. Hedges said.

Two school districts are holding off on projects that already have cost them considerable sums.

The Saddleback Valley Unified School District has put off the opening of its new elementary school in Foothill Ranch. The school was expected to open next month. The county pool contained $22 million the district had set aside for construction projects and needed to tap into in order to complete the school. Officials said the district also has asked its vendors to hold all shipments of supplies until further notice.

In the Capistrano Unified School District, spokeswoman Jacqueline Price said the county’s financial crisis cut short a final scheduled $2.5-million payment from the pool for an elementary school site in Aliso Viejo at Sanborn and Wood Canyon Road. District officials had hoped to open a school there in September, 1996, but that schedule is now in limbo.

Nonetheless, Capistrano Supt. James A. Fleming sounded a note of certainty Tuesday that even if the county does not free funds in the pool relatively soon, the state will act to protect the schools.

“We feel that the state will not permit schools to go under or suffer,” Fleming said.

Others also tried to remain optimistic, hoping that the latest dose of bad news from the county might somehow spell little in the way of problems for them.

Laguna Niguel City Manager Tim Casey, for example, said the 27% loss was actually less than many had expected. And no current projects are endangered in his city, he said.

“We are only deferring the commencement of some capital improvement projects,” Casey said. Those include a $1.5-million street resurfacing project and another $3.3 million in improvements to street medians and local parks.

City officials in Cypress too said they saw few impacts for their city. City Manager Darrell Essex, in his job for 32 years, said he saw no immediate changes or hardships for the city.

“Everything’s fairly normal,” he said Tuesday.

But frustrated members of the public were not always seeing things the same way. Many were telling off city or school district officials who had chosen to invest taxpayer money in the ill-fated pool.

At a meeting of the Placentia-Yorba Linda Unified School District on Tuesday night, Yorba Linda resident Thomas Turk called for the resignation of the top administrators who had borrowed an extra $50 million to invest in the county pool.

Addressing school board members, Turk said, “Each of you brings special talents to the board. None of you are elected for your financial expertise so it’s understandable that you rely on the expertise of the management team. That the management team remains in a position of trust is not understandable.”

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Fund Drop Hits Home

Orange County school districts, cities and water districts have begun to hold the line on spending with news of a 27% drop in the value of the county-managed fund in which they invested. A sampling of steps being taken:

CITIES

* Anaheim: $169 million

Developments: All new capital improvement projects on hold. No new hiring until full impact of county financial problems known. Initiated detailed cash flow analysis, retained a portfolio and investment adviser, and is considering taking legal action

* Brea: $9 million

Developments: Postponed construction for 30 days on $7-million Brea Community Center. Construction was to have begun Monday.

* Costa Mesa: $2.6 million

Developments: Postponed plans to create left- and right-hand turn lanes at Adams Avenue-Harbor Boulevard and bus turnouts to pick up passengers. Street repairs and maintenance projects also on hold.

* Dana Point: $16 million

Developments: Has not postponed or canceled any capital improvement projects. Reopening of Pacific Coast Highway after the La Ventana landslide is on track for completion.

* Fountain Valley: $6 million, $24.8 million (redevelopment agency)

Developments: Won’t enter new contracts dependent on reserves. Will meet all financial obligations, including debt payment due Jan. 1 on bonds sold in 1985 for redevelopment projects.

* Fullerton: $12.3 million

Developments: $8-million Highland Avenue widening on indefinite hold. Also some capital improvement projects such as street repairs shelved.

* Huntington Beach: $43.5 million

Developments: Temporary halt to capital projects including Ruby’s restaurant on the municipal pier, a bluff-top beach park, the Pier Plaza project aimed at sprucing up the pier area, and low-income apartment housing project. Formed Emergency Management Team to address developments in county fiscal crisis.

* Irvine: $198.1 million

Developments: All projects, including planned $17.5 million extension of Newport Coast Drive.

* Laguna Beach: $7 million

Developments: Expects to operate as usual because money in county fund was “surplus” and should not affect operations.

* Laguna Niguel: $18 million

Developments: Postponed start of $4,859,000 in previously budgeted capital improvement projects, including $1.5 million street resurfacing program, plans for new playground equipment at local parks, restrooms for Rancho Niguel and Juaneno parks, and street median improvements.

* La Habra: $8.2 million

Developments: Hiring freeze on all jobs. A $1.2-million project to drill two water wells is on hold, as is $2.5 million in storm drain repairs. City Manager Lee Risner demands county provide city money to fund a sophisticated law enforcement communication system and $800,000 for services rendered to county.

* Lake Forest: $9.6 million

Developments: No projects reported canceled or delayed and no specific belt-tightening measures taken while council members wait for finance director to complete a fiscal analysis of city finances.

* Los Alamitos: $2.2 million

Developments: Will suspend contract negotiations with Police Officers Assn. until early next year. Also on hold are street improvements, park upgrades and other projects partially funded by Measure M money. Hiring frozen except for critical positions.

* Mission Viejo: $21.9 million

Developments: At least one official favors moving forward with a $6 million library to have been mainly funded from the $18.7 million in county pool.

* Newport Beach: $16.5 million

Developments: Postponed purchase of new fire pumper ($311,396). Canceled proposal to offer residents special trash pickups for large items as well as bidding a $44,000 contract to improve the Newport Boulevard/Coast Highway intersection and MacArthur Boulevard widening.

* Orange: $28.1 million

Developments: Might consider delaying long-planned improvements to the La Veta Avenue-Main Street intersection and Santiago Canyon Road widening.

* Placentia: $20.6 million

Developments: Probably will postpone buying five new police cars and new police radios; $222,000 note due in January will be paid from other reserves.

* Santa Ana: $150 million

Developments: Funding for jail and police facility in jeopardy, construction may soon halt

* San Clemente: $35.8 million

Developments: Money in county fund not needed for day-to-day operations. Staff, which has been in the process of determining when the reserve would be needed for various programs, will now “factor in” the 27% anticipated loss.

* Stanton: $3 million

Developments: Postponed all county-funded projects and decided not to use two urban park grants it received.

* Tustin: $180,000

Developments: Removed $4 million in principal in April. Only accrued interest remains in fund (only about 0.7% of city’s total revenue for 1994-95).

* Westminster: $100,000

Developments: Money represents interest posted after city removed $2.5-million investment in May.

* Yorba Linda: $13.5 million

Developments: Will reconsider list of projects recently approved by City Council and redevelopment agency, including a $2.5-million gymnasium planned near City Hall and a $4-million sports park on the East Side.

SCHOOL DISTRICTS

* Anaheim City: $6 million

Developments: Canceled teachers attendance at all workshops, conferences and seminars. Eliminated substitutes for all positions except teacher, bus drivers, school site clerical workers and special education classroom workers. Halted construction of a new drainage system at Horace Mann Elementary School and replacing the Head Start building at Patrick Henry Elementary School. Postponed finishing work on a new administrative building. Canceled book fairs at all district schools. Not replacing lost or old textbooks.

* Brea Olinda Unified: $8 million

Developments: Will be able to make the debt payment of $610,000 on Feb. 1, 1995.

* Capistrano Unified: $74 million

Developments: Final $2.5-million payment from investment pool for a elementary school site in Aliso Viejo at Sanborn and Wood Canyon Road cut short. Opening date in limbo. Plans to build a $2.6-million bus yard in Aliso Viejo on hold.

* Irvine Unified: $102 million

Developments: Process of naming new superintendent will be slowed. Froze hiring and nonessential expenditures, including plans for a new high school and elementary school. Halts contract talks between teachers and the school district on hold.

* Laguna Beach Unified: $6.8 million

Developments: Supt. Paul M. Possemato said county does not have right to use school district money at all since districts had no choice but to deposit into county pool.

* Los Alamitos Unified: $12.5 million

Developments: Administrators will present options on how to deal with the financial crisis at board meeting Monday.

* Newport Mesa Unified: $82 million

Developments: Will slow planning and construction on new headquarters building. Board directed county to segregate any new deposits from the district. The district, recovering from a $3.8-million embezzlement by former finance director Stephen Wagner, received A bond rating from Moody’s. Rating is intact but the district was put on credit watch.

* Orange Unified: $18 million

Developments: Construction and deferred maintenance projects, such as repaving at Taft Elementary School, being considered for cuts or delays.

* Placentia-Yorba Linda Unified: $32 million

Developments: Reconsidering teachers attendance at workshops, conferences and seminars already approved and suspending travel. Evaluating all construction projects, including renovation of Bradford Stadium at Valencia High School.

* Saddleback Valley Unified: $66 million

Developments: Planned opening next month of elementary school in Foothill Ranch put on indefinite hold. Hiring freeze implemented.

* Santa Ana Unified: $51.8 million

Developments: Board expected to consider hiring freeze, canceling travel and conferences and canceling all but essential purchase orders.

* Tustin Unified: $12.8 million

Developments: Trustees developing crisis budget. Administrators will identify programs and projects for delay. Two legal firms hired to help school district officials understand the financial and legal implications of the county bankruptcy filing.

* Anaheim Union High School: $18 million

Developments: Hiring freeze for 27 classified and 5 certificated positions. Withheld all substitute pay except in event of illness. Encouraged employees to refrain from workers compensation filings and minimize health insurance claims. Canceled attendance at conferences and workshops.

* Fullerton Joint Union High School: $22 million

Developments: $700,000 project to repave school parking lots and an energy conservation program delayed.

* Buena Park Elementary: $3.9 million

Developments: Even if the district’s future revenue is kept out of the pool, it will run about $500,000 short on operating funds needed to pay salaries and vendors in March and April. Halted spending on new supplies and shelved plans to build amphitheater and library at junior high school.

* Centralia Elementary: $7.6 million

Developments: No hiring freeze but only making essential expenditures. Uncertain whether county will make $155,000 payment on general obligation bond due Jan. 1.

* Fountain Valley Elementary: $6 million

Developments: No new hiring, no pay raises and a halt to nonessential spending.

* La Habra Elementary: $12.5 million

Developments: Renovation of Las Lomas Elementary School delayed.

* Ocean View Elementary: $9 million

Developments: Postponed buying computer software and hardware.

* Westminster Elementary: $13.5 million

Developments: Officials have joined with other district leaders to hire attorneys to protect assets

* Saddleback Community College: $22 million

Developments: Chancellor Robert A. Lombardi said, “We are really only considering ways perhaps we can control extra expenses like consultants. We’re going to talk to Sacramento, and other things perhaps if we can borrow funds if we need to.”

* Rancho Santiago Community College: $16.1 million

Developments: Hiring freeze implemented. Shelved about $1 million in capital improvements, including air-conditioning maintenance and handicapped access projects.

WATER DISTRICTS

* Irvine Ranch: $300 million

Developments: Currently has $130 million in other accounts that will fund operations and projects for the next three years. Instead of using county fund income to build reservoirs, install pipelines and build water treatment plants, district will turn to property taxes and user fees.

* Yorba Linda: $2.65 million

Developments: Operations won’t be affected and it is too early to make any decisions about postponing or canceling projects.

Sources: Individual districts and cities