ORANGE COUNTY IN BANKRUPTCY : Cities, Schools Soothed as Funds Begin to Flow From County : Finances: Tensions may be easing, but citizens at two council meetings berate officials for investment losses.

City and school district officials around Orange County appeared to breathe a collective sigh of relief Tuesday as property tax disbursements and other funds began to trickle out of the county’s coffers.

In Anaheim, where the City Council met Tuesday night to discuss the financial crisis, officials said the city is scheduled to receive a $3-million infusion of property taxes from the county on Friday.

And school officials throughout the area said their immediate worries were eased by the release Monday of some $115 million in funds for education from the county’s frozen investment pool--even though individual districts have not yet received a nickel.

But even as tensions eased for some officials, angry residents descended on two city council meetings, taking their local officials to task for their failure to protect the cities from the county’s worsening bonds crisis.

In Placentia, police removed the owner of a local tavern from the council meeting after he disrupted a clergyman’s invocation by repeatedly shouting, “Where’s our money? Where’s our money?”

At the Fullerton council meeting, residents circulated a flyer calling for the ouster of City Manager James L. Armstrong and the city’s top finance official.

In Villa Park, Mayor Bob Patchin blasted the Orange County treasurer’s office, accusing it of withholding information about the risky nature of the investment pool. Patchin also acknowledged that Villa Park could lose as much as 30% of the $1.3 million it has invested in the pool.

Patchin, speaking at the council meeting, said the treasurer’s office never told city officials that the risky derivatives were used in the investment pool.

Events were considerably calmer at Anaheim’s council meeting, but the magnitude of the potential losses may have hit home to some residents during an explanation of the crisis by City Manager James D. Ruth.

Several residents gasped as Ruth explained that, under the worst-case scenario, the city could lose as much as $45.8 million from the county investment pool. Anaheim has $169 million invested in the troubled bond fund.

“The bottom line is we think the situation is not going to get worse, and it can get better,” Ruth said quickly, his tone reassuring. “We are solvent, and the city is in relatively good shape, even with this disaster.”

Ruth said the loss will be contingent upon whether the county gives Anaheim its allotted share of property tax money, if the city is treated equally in the disbursement of funds from the pool once the assets are liquidated, and if Anaheim decides to pursue legal action to recover funds.

“We have not ruled out any course of action at the present time,” Ruth said. “As this situation continues to develop, we will be able to verify the magnitude of our losses and make a more informed decision on how we are going to proceed.”

In Fountain Valley, City Manager Raymond H. Kromer said the city has placed several street repair and widening projects on indefinite hold.

The projects, which include improving the intersections of Magnolia Street and Warner Avenue, and Edinger Avenue and Brookhurst Street, were expected to cost $150,000 to $200,000 apiece. They were to be funded through county Measure M money.

The City Council also approved hiring a bankruptcy attorney.

Meanwhile, school officials expressed relief that the immediate crisis had been alleviated, at least somewhat.

Ronald Wenkart, general counsel for the county’s Department of Education, said his office is in the process of analyzing each district’s 90-day cash flow predictions and will determine later this week how the first disbursement from the county will be divided.

“Literally, we started out doing everything day by day, what needs to be done today, what needs to be done tomorrow,” Wenkart said. “Now we’re up to a week. We’ve got a little breathing space now. We’re starting to expand our horizons.”

Supt. Peter A. Hartman of the Saddleback Valley Unified School District agreed, saying the release of funds buys the districts a little time to evaluate the situation and its effects on their future.

“We can at least see getting through the school year,” Hartman said. “How well is to be defined.” But he emphasized that his district is not interested in an austerity budget that would result in overcrowded classrooms and require cutbacks in fine arts and athletics.

“We don’t consider those things to be frills,” he said.

Several school district officials, including those in Santa Ana Unified, Garden Grove Unified and Newport-Mesa Unified, also stressed that they had no plans to cut sports programs, at least for now.