ORANGE COUNTY PERSPECTIVE : Simply Bite the Bullet

Orange County bondholders understandably are nervous about their continued exposure in the bankruptcy crisis. At a meeting in Anaheim last week, on the day a settlement plan for agencies participating in the county’s investment pool was being unveiled, investors demanded a stronger say in the bankruptcy proceedings.

The problems of the bond owners need to be taken seriously. Orange County must recognize that this is not just a problem for those who made individual investments--and who now say they still have not received detailed information.

The county is going to have to be able to go back to the markets at some point, and it needs to make a credible accounting of obligations to bondholders.

The ability of various agencies in the county to build schools and other facilities is very much dependent on the restoration of confidence in Orange County finances. Another matter for concern is potential defaults by agencies invested in the fund.

At the meeting of bondholders, Richard Roberts, a commissioner with the U.S. Securities and Exchange Commission, which is investigating the Orange County crisis, said county officials needed to come up with a plan soon. He is right. If Orange County is allowed to take a cavalier attitude toward such commitments, there could be repercussions elsewhere as well.

By the way, a sense of fiscal obligation should not have to be drummed into the leaders of a county heretofore known for its fiscal conservatism. Paying up ought to be a first principle.

Residents too need to understand that there is a connection between their concerns about the future quality of life and their aversion to paying back bondholders in full with new tax revenue. (Both those concerns and the aversion to the idea of new taxes turned up in a recent Times Orange County Poll.) The county simply must bite the bullet.

When the Orange County Business Council offered a plan for the sale of $255 million in so-called “recovery bonds,” municipal bond bankers who would be expected to purchase any new debt expressed skepticism. No wonder. Where will new buyers be found if the county fails to come up with a plan to pay current bondholders?

Clearly, the county needs to get a grip on the importance of meeting its obligations. It must find the wherewithal to pay up, painful as it may be, with new short-term revenue.