Tustin Pulled Back Funds in Time, but Can Still Lose : Crisis: City manager reports that a commuter rail station’s funds and property tax revenue may get caught in county squeeze.

The City Council has outlined possible impacts from the county’s bankruptcy on city projects, including a planned commuter rail station.

Tustin, which pulled its $4 million in principal out of the county-run investment pool in April, is in better financial shape than many Orange County cities. But officials have cause for concern because the fate of some major city projects remains unclear in the turmoil of bankruptcy proceedings.

The Orange County Transportation Authority, for instance, appears to have $1.9 million in the investment pool that is earmarked for construction of a commuter rail station in Tustin, City Manager William A. Huston told the council on Tuesday.

Because these funds are state bond proceeds and were not intended as investments, Tustin should assume an aggressive stance and demand that the city receive the entire $1.9 million, Huston said. But there are no clear answers at this point, he cautioned.

Huston also is concerned that the county might attempt to give Tustin less than its full share of property tax that was collected before the county declared bankruptcy. The city manager estimates that between $200,000 and $300,000 owed to Tustin is now tied up in the bankruptcy proceedings.

Any loss of property tax funds would be unacceptable, he said.

“That would be just outrageous,” he said. “That is not the county’s money to play with.”

If property tax allocations are cut back or delayed, Huston said, it may be more difficult and costly for Tustin to finance its $6 million share for the Edinger Avenue/Jamboree Road overpass project.

Huston also recommended an aggressive approach regarding Tustin’s $700,000 deposit for its share of an $82-million emergency police communications system the county planned to purchase. County supervisors recently delayed the project for 30 days.

Tustin’s deposit was being held in trust by the county, Huston said, and was clearly not intended for the investment pool. The city should receive full credit for the $700,000, Huston said.

Other city worries in connection with the bankruptcy include a possible loss of interest income and higher water rates. In addition, there is uncertainty surrounding joint projects with the Orange County Water District, the Transportation Corridor Agency, the cities of Irvine and Santa Ana, and other governmental entities.