ORANGE COUNTY IN BANKRUPTCY : TIMES ORANGE COUNTY POLL : Tax Hike Gaining Favor as Way to Address Crisis

Orange County residents, who have long held an antipathy toward new taxes, favor raising them to help public schools survive the county’s financial crisis and are evenly split on new taxes for police and fire protection, according to a Times Orange County Poll.

But while officials are scrambling to find ways to restore the financial markets’ faith in Orange County, the poll found that residents are unwilling to pay more in taxes to meet obligations to the county’s bondholders.

Half of those polled favored selling John Wayne Airport, long considered a sacred cow, to raise money during the crisis. There was also solid support for privatization of government services as a solution to the county’s shortfall.

Most residents said they believe a combination of tax hikes, increased user fees and spending cuts will be necessary to help restore the county’s financial health after staggering investment losses now put at $1.69 billion compelled Orange County to file for bankruptcy.

“This shows that even though Orange County residents historically are steadfastly opposed to taxes, when they can see that the money will be used for a good cause they’re willing to change their position,” said Cheryl Katz, co-director of the poll, which was conducted by Mark Baldassare and Associates.

A Times Orange County Poll conducted shortly after the county filed bankruptcy in December found that 80% of those surveyed opposed raising taxes to help recapture the lost funds, while only 17% were in favor. Over time, Katz said, it appears that residents are becoming more accepting of a tax hike as part of the county’s bailout, especially when it’s earmarked for specific programs that they support.

Still, poll respondents expressed a distrust that made them reluctant to give the County Board of Supervisors carte blanche to impose tax hikes.

“You just dread this,” said Grace Azvedo, 62, of Tustin. “Maybe we can agree on a new temporary tax. But what assurances do I have that it would be temporary? Or, for that matter, used correctly?”

At least three in four residents view the crisis as an opportunity to permanently trim government, with most wanting the county’s work force and budget to be cut 10% to 25%. Only 8% of the respondents want no permanent reductions, and only 3% said they would like to abolish county government altogether.

Generally, those interviewed said they have more compassion for schools because school districts were mandated by state law to invest funds into the county pool. About $220 million in losses were reported by 31 Orange County school districts that placed virtually all of their operating funds into the county treasury.

On school support, 53% of county residents said they favor a tax increase while 45% oppose it. More Democrats, 64%, than Republicans, 46%, favor an increase. Of residents with children, 59% favor a tax increase.

“You have to raise the taxes to make some sort of revenue somewhere,” said Tyler Nelson, 22, of Anaheim, a full-time college student who works part time as a mechanic. “You can’t pull money out of the air on this. In some ways, it’s not that I favor raising taxes, it’s the way it is. It’s like the (savings and loan) crisis. If someone screws up, you got to pay.”

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Opinions were strong among the 45% who oppose any new taxes for schools.

“What kind of taxes are we talking about here?” said Julie Wilson, 39, a former real estate businesswoman and now a full-time mother in Newport Beach. “I’m adamantly opposed to raising taxes. Are we talking about higher property assessments? Higher gasoline taxes? We need to talk about this openly.”

On fire and police services, half of the residents surveyed oppose raising taxes, while 48% favor tax hikes.

But when it comes to raising taxes so investors who bought Orange County’s bonds can be paid back in full, more than three-fourths oppose the idea.

Wilson, a mother with children both in public and private schools, said she does not believe a tax-supported pay-back plan is one she can support.

“I feel badly for the schools and the different organizations which were, by law, obligated to put money into the investment pool,” Wilson said. “But my husband and I make decisions that you have to be responsible for, and you live or die with them.”

The financial crisis has soured how people view owning a home here in what Money magazine in 1988 once rated the nation’s eighth-best place to live. Some of those interviewed said they once were cheerleaders for home ownership but are now becoming ambivalent, such as Azvedo, a retired school district accounting supervisor whose generation pushed home buying.

“It is changing attitudes,” Azvedo said. “My daughter who lives in the desert said she isn’t going to buy into the home ownership thing. They pitch it as buying into an idea, you know. But if they raise taxes on this, there’s going to be a trickle-down effect here and it’s going to hurt everyone.”

Poll results showed that the number of people feeling positive about purchasing a home in the county had dropped by eight percentage points since August, when UC Irvine’s Orange County Annual Survey was conducted.

Compared to homeowners, renters took an even dimmer view. The number of renters who said they felt that owning a home here was an excellent or good investment, fell by 12 percentage points since the August survey.

During interviews, many expressed a feeling of helplessness coping with a major financial crisis with which they had little or no involvement. They still enjoy living in Orange County, and emphasize the county’s picturesque beaches and nice weather. But anger and angst were common emotions on the crisis, and comfort zone seems to be eroding.

Some have mixed emotions, like Kathreen Jaramillo, 46, a San Clemente resident, whose life has been upended by the Capistrano Unified School District, which cut her job as a campus supervisor because of the financial crisis.

“I love California and I love Orange County,” she said. “If I could afford it, I would buy (a house). But people like me need to start looking at the way the government is run. What were the supervisors thinking of? This shouldn’t have happened in the first place.”

The positive note many felt was that the local economy was recovering in spite of the county’s bankruptcy. One in three people think the economy is in excellent or good condition, while four in 10 say it is fair, and two in 10 say it is poor, the poll showed.

“I believe our economy is fair to good,” Wilson said. “It’s quite contrary isn’t it?”

Ron Beron, 40, a college instructor who lives in Anaheim, said he believes “it’s an excellent economy.”

But Mark Penderton, also 40, of Fullerton, who owns a tool-and-die company that relies heavily on aerospace and defense contracts, said the economy is very sluggish from his perspective.

“The economy?” Penderton said. “I know that I’m affected by the lack of (Department of Defense) work. I’ve seen work drop drastically. For me, I have to say the economy is poor, and for everybody else I would have to say fair.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Times Orange County Poll

* Friday: The political fallout

* Today: Taxes and the road to recovery

* Sunday: How the bankruptcy hits home

HOW THE POLL WAS CONDUCTED

The Times Orange County Poll was conducted by Mark Baldassare and Associates. The telephone survey of 600 Orange County adult residents was conducted from Jan. 20 to 23 on weekend days and weekday nights, using a computer-generated random sample of listed and unlisted telephone numbers. The margin of error is plus or minus 4%.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Taxes Not Out of the Question

Residents think a combination of steps are needed to help cover the county’s $170-million shortfall, including raising taxes to maintain public school funding. They’re divided over doing the same thing to maintain current police and fire protection spending and are set against a tax increase to fully restore bondholder losses:

* The county government has a budget shortfall of about $170 million over thenext six months as a result of the failed investment pool. Which of the following doyou think is the best solution to this loss?

Child In Total school Cut spending 31% 22% Raise user fees 15 14 Raise taxes 4 2 All of the above 40 49 Other 3 2 Don’t know 7 11

* Would you favor or oppose raising taxes to maintain the current level of funding for:

Public Law enforcement/ Pay back bond schools fire protection investors in full Favor 53% 48% 18% Oppose 45 50 78 Don’t know 2 2 4

Reduction and Privatization

Given a chance, most residents would cut the county work force and budget, with many calling for reductions in the 10%-25% range. Privatizing county services--contracting them to private companies--looks good to most, and half of adults would go so far as to sell John Wayne Airport:

* Some people say the county’s financial crisis should be seen as an opportunity toreduce the county government’s work force and budget. Do you think the county government should be permanently cut by: (in percentages) Not at all: 8% Less than 10%: 23 10-25%: 40 26-50%: 9 More than 50%: 5 Totally abolish: 3 Don’t know: 12

* Do you approve or disapprove of selling John Wayne Airport as a way of easing thecounty’s financial crisis? Approve: 50% Disapprove: 36 Don’t know: 14

* Some people think privatizing is a good way to save the county money because private companies can provide services more cheaply and efficiently than government. Others think privatizing could end up costing the county more and the county will have less control over the private companies. Which argument do you agree with?

Total Democrats Republicans Save county money 60% 54% 68% Could cost more 27 36 20 Don’t know 13 10 12

The Housing Market

The idea that buying a home in Orange County is a good investment is taking a hit as a result of the fiscal problems. Since August, both current owners and renters have cooled significantly on the concept:

* In general, do you think that buying a home in Orange County today is an excellent,good, only fair or a poor investment?

Total

January August, 1994 Excellent 7% 11% Good 38 42 Fair 34 29 Poor 18 16 Don’t know 3 2

Homeowners

January August, 1994 Excellent 8% 12% Good 42 45 Fair 33 28 Poor 15 14 Don’t know 2 1

Renters

January August, 1994 Excellent 4% 9% Good 31 38 Fair 37 30 Poor 25 20 Don’t know 3 3

Quality of Education

At the school district level is where residents think investment fund losses will have the most impact on local quality of life. Views of those with children in school do not differ substantially from others:

* Do you think the investment fund losses will hurt the quality:

Of life in: Of education in Orange Your city Your school County community district A lot 17% 12% 22% Somewhat 57 46 41 Very little 18 30 21 Not at all 6 11 12 Don’t know 2 1 4

Sources: Times Orange County Poll; Orange County Annual Survey, UCI