Privatizing, Sale of Assets Won’t Do It, Execs Say
Two representatives of a powerful business group tossed cold water Tuesday on assertions that asset sales and privatization alone can earn enough to pull Orange County out of its financial morass.
Although the two executives said such steps must be part of a solution to the county crisis, they questioned whether recent estimates of how much can be collected are realistic--and warned that the public might not be able to stomach some of the proposals now being considered.
“There’s an implication on the part of a number of people that there’s easy money around,” said Thomas C. Sutton, chairman of Newport Beach-based Pacific Mutual Life Insurance Co. and a leader in the Orange County Business Council.
The business group has become an increasingly forceful player in the intense debate over how to restore the county’s financial health and stirred furious controversy several weeks ago when it argued that taxes may be needed.
Sutton called for a “realistic analysis” of proposed asset sales that run the gamut from John Wayne Airport, landfills, county parks and the county’s as-yet unestablished claim to a slice of El Toro Marine Corps Air Station.
Moreover, Sutton doubted whether the public would stand for some of the proposed asset sales, describing the possible divestiture of public parks as “ridiculous.”
Some asset sales “involve things that from a broad-based point of view might not really be good for the county,” Sutton said. “There are certain things that might not be appropriate perhaps to sell . . . (such as) parks. What are you going to do? Turn them into apartment buildings or factories? That’s ridiculous. What we’re interested in doing is maintaining the quality of life that we all came here for.”
Irvine Co. Executive Vice President Gary Hunt, also a key figure in shaping the business council’s response to the county’s bankruptcy, cautioned that some figures being discussed are “theoretical . . . that are going to be very hard to achieve.”
“My sense is everything should be on the table,” Hunt said, “But I think they need to be realistic, though, in how much money those options are really going to create for us.”
“I think you do a disservice by putting up a higher level of expectation than what can realistically be achieved,” Hunt said. “There needs to be a realistic analysis done and real numbers put to it and not some hypothetical that causes everybody to believe this problem is fixable by jumping at those things right away.”
The executives’ comments, made in an interview with The Times, were the business group’s first full-scale response to claims from proponents of privatization and asset sales that the county and other government agencies can recoup the $1.69 billion lost in Orange County’s collapsed investment fund without a tax increase.
The libertarian Reason Foundation has estimated that the county can reap $1.4 billion or more from the sale of county-owned assets. Its estimates, along with those offered by interim Treasurer Thomas E. Daxon, have offered inspiration and support to anti-tax groups that see drastically smaller government as the solution.
Three weeks ago, the two executives--along with developer George Argyros, also a business council member--argued that a tax increase could not be excluded as one means of resolving the county’s fiscal woes. Their statements came as part of a Business Council plan--promptly adopted by the Board of Supervisors--for allocating money in the frozen investment fund to pool participants.
Supervisors, however, have forsworn any tax increase.
Hunt said it would have been “intellectually dishonest” for the business council not to have included taxes as one element of a possible solution. “It is inconsistent and perhaps irresponsible to say we’re going to pay 100% (back to pool investors) and, no, taxes are not on the table,” Sutton said.
The business leaders have now embarked on a campaign to alert the public to the depth of the county’s problems and the policy choices that must be made--”presenting the facts as we know them,” according to Hunt.
Hunt warned residents that the pain of Orange County’s bankruptcy will become more apparent day by day--”like Chinese water torture”--with services disappearing and the area’s vaunted quality of life diminished. Hunt said the impact on the quality of schools would be most immediate.
Sutton, Argyros and Hunt have met with school, city and water district officials, hoping to win support for the plan and avoid what they described as costly and pointless litigation.
Hunt acknowledged that the business leaders have a tough task. “A lot of people, to a very large extent, are in a state of denial as to the magnitude of this problem,” he said. “. . . It is awesome.”
Some privatization efforts, the executives argued, would bring higher costs of their own and distasteful side effects.
For example, Hunt agreed with Daxon’s estimate that the county could generate as much as $800 million by selling its landfills but maintained that the dramatic cash infusion would be possible only if the county nearly doubled user fees and dramatically increased the amount of garbage trucked into Orange County from other counties.
Hunt openly wondered how residents would react to having “6,000 (additional) tons of garbage moving through each day.”
Hunt and Sutton questioned whether Orange County could generate as much as $500 million by selling John Wayne Airport and a part of the El Toro base--a Reason Foundation estimate--because the county can’t yet guarantee potential buyers of approval to build a commercial airport on the Marine base property.
Describing asset sales as “good ideas that ought to be explored,” Sutton added that some proposed sales are prohibited by state and federal laws and that others are long-term projects.
The business leaders urged government agencies with funds tied up in the ill-fated county investment pool to accept their group’s bankruptcy plan that’s designed to rush cash to schools, cities and special districts that are in danger of defaulting on debt and being forced into bankruptcy.
