O.C. Weighing Sale of Airport, More Cuts to Deal With Losses : Bankruptcy: All should be up for review, including landfills and jails, Supervisor-elect Bergeson says. Move to trim budget by $120 million is only the beginning, officials add.

The collapse of Orange County’s investment pool is forcing supervisors to consider the sale of John Wayne Airport and other drastic steps--including the privatization of government departments--to cope with heavy financial losses, officials said Tuesday.

“All bets are off. There are no sacred cows,” Supervisor William G. Steiner said. “Even the airport. That is one of the scenarios that needs to be considered.”

The sale of the county’s only commercial airport has been discussed for years, but this time the temptation to follow through in light of the county’s 27% investment loss may prove overwhelming, officials said.

“Absolutely everything should be put on the table for review,” said former state Sen. Marian Bergeson (R-Newport Beach), who will succeed retiring Supervisor Thomas F. Riley on Monday. “I’m talking about landfills and jails and everything. This is the greatest opportunity a county could ever have to take control of its future. It happened during a crisis, but government often reacts to crisis.”

Although no formal discussions have begun over selling the airport, widespread talk among county supervisors and administrators about such a move is one more indication of the seriousness of the county’s financial problems. Last week, officials said they would immediately move to trim about $120 million from the county budget over the next 18 months, an action expected to result in hundreds of layoffs.

But that figure is only the beginning, officials said. Because the county’s contribution to the investment fund was $2.7 billion and the portfolio has lost 27% of its value, it is estimated that county government has lost nearly $730 million, reducing not only the county’s cash holdings but the nest egg it relies on to produce interest income.

As county department managers on Tuesday continued to weigh how the budget should be further slashed:

* Felix Rocha Jr., a Fountain Valley resident who sits on the county Department of Education’s Board of Trustees, personally served Supervisor Roger R. Stanton with recall papers and submitted to the county registrar of voters a notice of intent to recall Stanton.

“I’m going to reply to the recall as called out in the law and continue my efforts to make sure we maximize the value of this investment portfolio and make sure it doesn’t happen again,” said Stanton, a county supervisor for the past 13 years. “I invited Mr. Rocha to join me in that effort, but he felt this action was more appropriate.”

* A Fullerton city employee filed a class-action lawsuit against the county on behalf of all government workers with money frozen in one of three county retirement funds that were placed in the county’s now-bankrupt investment pool.

The suit states that Sgt. David Stanko, an 18-year veteran of the Fullerton police force, deposited $22,000 in deferred salary for his retirement with the county treasurer’s office. Stanko’s attorney said the officer is one of thousands of government employees in Orange County who have had money taken out of their paychecks and stashed in the county investment fund.

* In an effort to provide cities and school districts with cash, the county announced Tuesday that it will distribute property tax payments collected in mid-December about a week earlier than normal. Chuck Hulse, the chief deputy auditor-controller, said the move will allow agencies “to get their hands on more money.”

But city officials continued to simmer about the withholding of other property tax revenue, which were placed in the pool before the Dec. 6 bankruptcy and have since been frozen. Yorba Linda officials said they may sue the county to gain the $1.7 million in property taxes withheld last week. The Huntington Beach City Council will meet in closed session today to discuss possible litigation over the more than $2 million withheld from them.

* The county agreed to meet today with its largest labor union, the Orange County Employees Assn., which wants to block anticipated layoffs. Rival union leaders criticized the association for “jumping the gun” and creating friction with county leaders. The union also called on the Board of Supervisors to borrow money or issue new bonds to make up for the investment fund’s loss.

* Steiner said he will recommend today that $921,000 more be forwarded to 55 nonprofit agencies that provided services to the county before its Dec. 6 bankruptcy filing. Coming about a week after the county agreed to pay nearly $3 million to more than 100 nonprofit groups, the new request would cover services such as witness assistance and emergency housing. Most of it would eventually be reimbursed by the state or federal government, Steiner said.

As county officials continued to sort through their financial problems and what they mean to the future of county government, the idea of having private interests run the airport or other agencies took on new appeal Tuesday.

Stanton, who first raised the idea of selling the airport in June, 1992, during a budget crunch, said the prospects of that happening are more likely than ever.

“I thought it was an idea (that) would be more ripe a year or two down the road, never realizing that it would take a bombshell like this to ripen the fruit,” Stanton said. “It’s got to be considered. Anyone offering a billion dollars for the airport can have it right away.”

Airport officials say they have no idea how much the facility would be worth if it were sold, but the airport has become increasingly successful in recent years. It generated $58.1 million in revenue in fiscal 1994, and has seen an increase in flights and passenger loads this year, due largely to the start of service by low-fare carriers such as Southwest Airlines.

But a potential sale of the airport could be stymied by requirements that the federal government must be reimbursed for the millions of dollars it has invested. The deal also could be complicated by the millions of dollars more in bonds that have been sold to pay for massive improvements at the airport.

An airport spokeswoman, Courtney C. Wiercioch, said: “If the board requests our assistance, we will certainly provide it. However, we believe there are federal regulations which may make that option unfeasible.”

Various companies have expressed an interest in buying John Wayne Airport, including Lockheed Air Terminal, the Lockheed subsidiary that has managed Burbank Airport for 65 years.

“We have an interest in talking to the county (to see) if we can help them,” said Viggo Butler, president of Lockheed Air Terminal. “There are some impediments to outright sale, but whether there are intermediate steps” is yet to be seen.

Butler said he believes there may be methods to overcome the financing hurdles.

Other Potential Sales

At the same time county officials are looking at the airport for possible sale, the county’s three-member management council has asked the county’s General Services Agency to compile a list of properties that could be sold to make up for lost revenue and cash holdings.

“Definitely there are discussions going on internally about what assets could generate capital,” said Chuck West, the agency’s real estate director.

West said he expects to give the management council a list of county assets as early as today or Thursday. Two key parcels, he said, are a 7.7-acre parking lot near The Pond in Anaheim that the city of Anaheim leases from the county and an 11.7-acre parcel in Anaheim that houses the offices of the county’s agriculture commissioner.

The largest parcels with sale revenue potential cited in the county’s own annual property survey include the 329-acre Joplin Youth Center, a detention facility for juvenile offenders in Trabuco Canyon, and 100 acres of undeveloped land surrounding the James A. Musick Branch Jail in Irvine.

The list will be reviewed by the council, which in turn will make recommendations to the Board of Supervisors, which must approve any sale, West said.

The county is looking specifically for general-fund properties from which proceeds could be spent at the discretion of the Board of Supervisors. Much of the land owned by the county is dedicated to particular needs, such as flood control, waste management, harbors, beaches and parks. State law restricts the use of any money raised by the sale of such land.

“There are very few general fund assets that are big and very few available for sale that aren’t being currently used,” West said. The two parcels in Anaheim are among the largest general fund properties, he said.

West added that county officials will weigh the potential loss of lease revenue in choosing what, if anything, to sell. In 1994, he said, the county generated $70.6 million in lease revenue from various properties.

Labor Wants a Say

As they urged the county to look for new sources of revenue, labor leaders continued to press for a greater say in the imposition of $30 million in cutbacks announced last week--cuts that will fall on dozens of county departments.

“The Board of Supervisors should take positive command to remove the bankruptcy from the backs of Orange County citizens and immediately adopt revenue measures which will restore the principal lost in the investment pool setback,” read a letter to supervisors from county employees association General Manager John H. Sawyer.

The letter also called for the immediate reinstatement of collective bargaining agreements suspended in the wake of the bankruptcy filing. It said the county’s recent actions had been based on “alarmist speculation.”

Members of the Orange County Employees Assn.’s 16 bargaining units were called in for an evening meeting Tuesday with the organization’s board of directors to prepare for Wednesday’s “meet and confer” session with county management.

Many of the employees, who have sat across the bargaining table from county management to negotiate their contracts, said they welcome legal action if the county refuses to restore layoff provisions in their contracts.

“It’s the only alternative that we have,” said Bruce Moore, a deputy probation officer who has worked for the county for 23 years and negotiated numerous contracts.

In another letter delivered to department heads, the union also asked for a full accounting of each department’s financial situation and requested that a host of cost-cutting measures be considered before managers even think of reducing their work forces.

Those steps included reducing expenditures on outside vendors, suppliers and contractors, renegotiating leases and other real estate agreements and auctioning surplus equipment and property. If department heads still feel more cost-cutting measures are necessary, the letter said, they should work within the union’s negotiated contract and explore job sharing, part-time positions and leaves of absence.

Washington Response

In Washington, meanwhile, the role played by so-called derivative securities issued by government-sponsored agencies drew the attention of another federal regulator.

The Office of Federal Housing Enterprise Oversight, which regulates the Federal National Mortgage Assn. and the Federal Home Loan Mortgage Corp., asked those agencies--whose securities carry an implicit federal guarantee--for information about their disclosures to investors about the risks inherent in derivative securities.

Exotic notes issued by the agencies make up a large share of the derivatives bought and still held by the Orange County investment pool. Many of the securities were designed to pay higher interest as market interest rates fell. But when rates rose, those securities paid out progressively smaller dividends throughout 1994, triggering the county’s financial debacle.

* RECALL LAUNCHED: O.C. education official begins effort to oust Stanton. A11

* LAWSUIT AMENDED: Sergeant asks damages for any loss to his retirement fund. A11

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On the Block?

Some county-owned properties whose proceeds would go to the general fund if they are sold:

Acres Anaheim * Agricultural Department headquarters 11.7 * Former refuse transfer station No. 3 7.7 (now parking for The Pond) * Former refuse disposal station No. 4 7.86 Buena Park * Buena Park American Legion Post 354 .93 Dana Point * Del Obispo maintenance yard 1.1 Fullerton * North Orange County Regional Civic Center 20.7 Huntington Beach * Former refuse transfer station No. 2 11.7 Irvine * James A. Musick Branch Jail/honor farm facility 100 Laguna Niguel * Cabot Road vacant land 3.8 * South County Regional Civic Center 29.3 Orange * Fire Department headquarters complex 3.5 * Manchester office building N/A * Former refuse disposal station No. 22 16.6 Santa Ana * Probation Administration parking lot at 909 N. Main St. N/A * Chestnut Avenue Records/Surplus Center 3 * Deactivated fire station .28 * Phoenix House school 5.1 * Sheriff’s/Forensic Annex offices N/A * Fruit Street maintenance complex 17.2 * Civic Center engineering and finance building N/A and west-wing addition Westminster * Civic Center (vacant parcel) 3 Unincorporated area * Joplin Youth Center/Rancho Potrero 329

Building space (sq.ft.) Anaheim * Agricultural Department headquarters 31,772 * Former refuse transfer station No. 3 1,515 (now parking for The Pond) * Former refuse disposal station No. 4 N/A Buena Park * Buena Park American Legion Post 354 4,560 Dana Point * Del Obispo maintenance yard 2,940 Fullerton * North Orange County Regional Civic Center 127,640 Huntington Beach * Former refuse transfer station No. 2 1,110 Irvine * James A. Musick Branch Jail/honor farm facility 62,101 Laguna Niguel * Cabot Road vacant land N/A * South County Regional Civic Center 56,525 Orange * Fire Department headquarters complex 50,270 * Manchester office building 93,700 * Former refuse disposal station No. 22 N/A Santa Ana * Probation Administration parking lot at 909 N. Main St. * Chestnut Avenue Records/Surplus Center 14,879 * Deactivated fire station 1,976 * Phoenix House school 25,297 * Sheriff’s/Forensic Annex offices 36,239 * Fruit Street maintenance complex 111,048 * Civic Center engineering and finance building 273,236 and west-wing addition Westminster * Civic Center (vacant parcel) N/A Unincorporated area * Joplin Youth Center/Rancho Potrero 47,866

Source: Orange County General Services Agency