1994-95: REVIEW AND OUTLOOK : Bankruptcy Aside, Orange County’s Prospects for Growth Appear Solid

Despite a year-end government financial crisis, Orange County’s economy is destined to expand in 1995, analysts and business leaders say.

The general economic underpinnings are solid, experts say, although the coming months will bring misery to those who lose their jobs in the wake of the county government’s $2.02-billion loss in the bond market and its Dec. 6 bankruptcy filing.

“It will certainly be felt throughout the county in reduced services, especially in programs for the poor,” said Anil Puri, chairman of the economics department at Cal State Fullerton. “But it just isn’t enough to make the overall economy suffer a great deal.”

After nearly five years of recession, Orange County rides into 1995 on a wave of rising economic indicators. Taxable sales, housing construction and median family income are all increasing; the latest employment figures show that local employers added 16,000 jobs to their payrolls from August through November.

The county’s economy benefited this year from increased foreign trade, thanks in part to the North American Free Trade Agreement’s relaxing of rules on commerce with Mexico and Canada. Those gains are likely to increase, analysts say.

“Business in general will continue to thrive,” said Larry Friend, president of the Irvine investment banking firm L.H. Friend, Weinress & Frankson Inc. “There is a lot of money out there, and while we will be held back a while, I don’t see any long-term problems.”

Even after factoring in damage from the county’s financial crisis, economists at Cal State Fullerton, Chapman University, UCLA and First Interstate Bank stand by their earlier projections of slow, steady growth.

The losses blamed so far on county Treasurer-Tax Collector Robert L. Citron’s high-risk investment strategy, in fact, come to just 10% of the $22-billion loss attributable to falling housing prices in the past five years, noted economist James Doti, president of Chapman University.

Layoffs and budget cuts could subtract as much as $100 million from taxable spending in Orange County next year and more than $500 million from the gross county product--the value of all goods and services--but “it’s a dampening, not a death blow,” Doti said.

For 1995, Doti is forecasting that employers will add 17,000 jobs to their payrolls, that the gross county product will rise almost 6% to $81.9 billion, that median household income will increase about 2% to $55,500 and that work will begin on almost 13,500 new homes.

Still, there are some worries.

Builder Larry Webb, president of Greystone Homes’ South Coast division in Newport Beach, said his company will not move ahead with any new projects in Orange County until the long-term results of the bankruptcy filing become clearer.

One fear is that cities hurt by the investment losses will try to recoup money by raising the fees they charge developers for streets, sewers and other infrastructure improvements, he said. If that happens, the construction industry will pass the higher fees along to home buyers.

One local developer, Irvine Apartment Communities, has already decided to postpone a planned $327-million debt refinancing because of uncertainty about how Wall Street will view Orange County investments in the coming months.

“I would expect that, until this is explained, people are going to be apprehensive to invest in Orange County,” said Philip S. Inglee, president of Liberty National Bank in Huntington Beach. But Inglee said the bank still plans to open two new branches this year.

Robert B. McKnight Jr., chairman and chief executive of Quiksilver Inc., shares the concerns about the bankruptcy’s impact. “Once somebody figures out where the bottom of this thing is,” he predicted, politicians “will try to hit everyone with a special assessment.”

Still, McKnight’s worries are overshadowed by the strong performance of his Newport Beach firm, a maker of casual clothing and beachwear.

Profit for the year so far is up 61% to $7.1 million, he said, and sales are up 33.3% to $126.1 million. Even sweeter, he said, is that orders for the spring, which typically account for a third of annual sales, are up 30%.

Wayne Bodington, general manager of the 390-room Westin South Coast Plaza hotel in Costa Mesa, thinks economic growth for 1995 is much more than a wish.

“From our perspective, it is solidly underway . . . (1994) will represent the second-highest occupancy year ever,” he said. Bodington has been hiring room attendants recently, as well as restaurant, bar and banquet facility employees.

The reason: business travel. Companies spend money for travel, he said, only when they think the economy is on a roll.

The rising tide that is boosting Orange County is a global one.

Cecil Chee, who arranges deals with Chinese companies for American-Asian Trade Connection in Irvine, saw a definite increase this year in both the number of clients in China who want to sell their goods in the United States and in companies here that want to move into the Chinese market.

“It was a lot more positive year, and I believe 1995 is going to be better,” said Chee, who joined American-Asian as a trader a year ago from Citibank Corp. in Singapore. “The whole economy is picking up.”

Contributing to this report were Times staff writers Greg Johnson, Don Lee and Chris Woodyard and Times correspondent Hope Hamashige.