ORANGE COUNTY IN BANKRUPTCY : OCTA to Rely on Outside Experts for Investment Advice : Finance: Agency voices optimism in updating its 100-day plan to deal with fund debacle. Bus and rail services continue, and $46-million debt can be paid.
The Orange County Transportation Authority released a cautiously optimistic update Monday to the 100-day plan it announced last month to deal with the county bankruptcy, and agreed to rely on an outside committee of experts for advice on its investments in the future.
By pooling a variety of resources, the agency will be able to meet a $46-million debt service payment due next month and can move forward with some right-of-way purchases for Santa Ana Freeway construction, officials said.
OCTA, which had $1.1 billion invested in the now-bankrupt pool, has also been able to maintain bus and rail operations and continue major construction projects that were already underway.
Lisa Mills, the OCTA assistant executive officer who presented the plan update to the board of directors, said the present outlook was “very positive. We’re moving forward with some new projects.”
But the bankruptcy has been far from painless for the county transportation agency. Work has been suspended on 31 contracts, totaling $27.5 million in value, and 100 right-of-way purchases have been placed on hold indefinitely. All hiring has also been frozen, according to the update.
The report also outlined goals to be met over the next six months to stabilize the agency, and provided a skeletal overview of what to expect in the 1995-96 budget year.
Key to future planning is determining just how much money the agency has lost in the debacle. Those losses could range from $56 million in interest that the OCTA had expected to earn this year to $306 million in lost principal if OCTA must shoulder its full share of the pool’s total 27% loss, said James S. Kenan, the agency’s director of finance and administration.
At its Monday meeting, the board also approved recommendations to create an interim OCTA investment committee that will select a panel of outside experts to review all agency investments, make recommendations and ensure that proper checks and balances are in place.
The agency relied on the county as its banker and lead investor for decades and must now look elsewhere for advice in setting investment strategy, Kenan said.
“All the checks and balances that OCTA thought were in place broke down,” he aid. “What we have to do is bring that confidence back up.”
Kenan said he plans to recommend that representatives of Moody’s and Standard and Poor’s rating agencies sit on the committee, along with a financial expert from private industry.
“It might be a first for any government agency,” he said of the committee’s role. “We’ve got nothing to hide. I think disclosure is the name of the game right now. . . . I think that what was missing over the years at the (county) treasurer’s office is disclosure.”
Kenan said that access to the financial markets is key to the agency’s survival, and that inviting the bond-rating agencies to play a role in where and how the agency invests would “tremendously boost OCTA’s credibility.”
OCTA’s finance and administration committee should have recommendations to the board of directors regarding the outside committee by early February, and Kenan said he hopes the outside experts will begin performing their duties “within 60 to 90 days.”
Over the next 18 months, the agency must restructure its short- and long-term debt, complete current projects funded through Measure M and look for ways to slash its budget, the report said.
Monday’s board meeting was County Supervisor Gaddi H. Vasquez’s last as chairman of the OCTA board. After issuing final statements, he passed the gavel to Westminster Mayor Charles V. Smith, who was elected unanimously. Supervisor William G. Steiner was elected vice chairman.
Newly elected Supervisors Marian Bergeson and Jim Silva were sworn in as agency directors.
“In these troubled times, we have to remember that 1994 was a time of significant achievement for transportation,” Vasquez said before stepping down. “At OCTA, our problems are solvable. . . . Our future is sound.”
Vasquez said in his address that now is the time to move forward and “stop looking backward to affix blame” for the debacle.
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OCTA Game Plan
The Orange County Transportation Authority on Monday released an updated 100-day plan with operations strategies and goals for its 1995-96 fiscal year budget. Some highlights:
* Continue working with county and other agencies to resolve investment-pool issues
* Approve interim procedures for OCTA treasury functions
* Complete six-month stabilization plan
* Begin work on a constrained 1995-96 fiscal year budget
* Resume work on Measure M projects when prudent
* Reactivate some right-of-way purchases
1995-96 BUDGET GOALS
* Restructure long- and short-term debt obligations
* Complete current Measure M construction projects
* Make bus and rail services as efficient as possible
* Find better ways to deliver services and programs
* Continue to reinstate contracts
Source: Orange County Transportation Authority