ORANGE COUNTY IN BANKRUPTCY : Anaheim May Seek Review of Investments

City Manager James D. Ruth will recommend today that the City Council hire a Big 6 accounting firm to conduct a review of the city’s investment procedures over the past year.

The city has $169 million in Orange County’s investment pool, which lost $2.02 billion through risky investments. Anaheim could lose as much as $45 million, officials said.

Ruth will make his recommendation during a special afternoon workshop where council members will be updated on the impact of the county’s financial crisis on the city.

“We want to reassure the City Council and our citizens that we have proper procedures in place,” Ruth said Monday in a prepared statement. “We also want to identify any weaknesses and correct them as appropriate.”

The city borrowed $94 million in early 1994 solely to invest in the fund, which Ruth said had netted them about $12 million over the last three years. The loan comes due in April.

The borrowing of the money, which was viewed by officials as prudent and low-risk at the time, has been criticized by new councilmen Bob Zemel and Lou Lopez, who were sworn in to office in November.

“Maybe I went to an old simple school, but that school says you don’t borrow money to invest,” Zemel said Monday.

City spokesman Brett Colson said it was not known Monday how much it will cost to hire the accounting firm, because staff members were still in the process of identifying the scope of services needed.

Colson said the firm, which will be selected by the end of the month, probably would take only a few days to complete its report to the council.

Zemel said most council members favor getting help from someone who had no participation in the failed investment.

“It’s really important that we be able to report to our constituents that we are getting counsel from sources that are not in the position to have a conflict,” he said.

Shortly after the county declared bankruptcy Dec. 6, the city put a hold on new capital improvement projects, instituted a city hiring freeze and canceled an order for a new fleet of city vehicles.

Ruth and other city officials have maintained that the city’s daily operations are not threatened and that big projects such as a new baseball stadium for the California Angels and a major rehabilitation of the area around Disneyland will go forward.

Until now, city officials have not detailed how they will proceed with their projects or how they will be able to absorb a possible $45-million loss.

Today’s workshop will begin at 2 p.m. in City Council chambers. It is open to the public.