Official Outlines 'Deep Cuts' in Orange County : Bankruptcy: New leader says rescue plan involves layoffs and reduced services. No tax increases are included.


In a grim but comprehensive overview of Orange County's finances, Chief Executive Officer William J. Popejoy warned the Board of Supervisors Tuesday that "deep cuts" in personnel and services still may not prevent the county from operating with a substantial budget deficit next fiscal year.

At his first supervisors meeting, Popejoy unveiled an ambitious 30-day timetable for implementing service cuts, layoffs, a 1995-96 budget proposal and a financing scheme to pay off more than $1 billion in debts due this summer.

"In all honesty," Popejoy said, "I have to tell you that the situation is much worse than I expected."

In a briefing with reporters before the meeting, Popejoy said he has identified at least one county asset that he wants to sell, but declined to disclose what it is. He also hinted that he may try to negotiate a settlement of the county's $2.4-billion lawsuit against financial giant Merrill Lynch to help the county meet its debt payments and avoid default this summer.

Popejoy told the supervisors and more than 300 people who attended the meeting that he has set three goals as he attempts to help the county recover from the largest municipal bankruptcy filing in U.S. history. First, he will propose a drastically scaled-back budget for next fiscal year, which starts July 1. Second, he will try to reach a settlement with participants in the county's investment pool on how to spread the $1.69-billion loss suffered by investors. And third, he will devise a plan to finance the $1.001 billion in bond debts due by Aug. 10.

"All three problems must be addressed," Popejoy said.

Though he offered no details, Popejoy said his recovery plan includes selling county assets, privatizing services, recovering money through lawsuits against Wall Street firms, slashing the county budget, short-term borrowing and obtaining exemptions from state and federal mandates.

"I will move forward aggressively on all of these fronts," he said.

Missing from Popejoy's plan is a tax increase. He said the option is not being considered because the Board of Supervisors adamantly opposes it.

"Everybody works for somebody," Popejoy told reporters during the briefing Tuesday afternoon.

Part of the reason for the presentation, Popejoy said, was to give the public a sense of how bleak the county's financial situation is.

"There will be pain," he said. "People will lose jobs, and many necessary county services will be cut."

Despite massive cuts, Popejoy said, it may be impossible for the county to balance the 1995-96 budget, whose general fund is expected to lose as much as $188 million in revenue, primarily from interest income, as a result of the financial disaster.

Although public safety and health will remain priorities, Popejoy said, county residents can expect a much leaner county government offering fewer services. County employees who do not lose their jobs can expect greater workloads and reduced benefits.

He added that he wants to implement the cuts over the next three months, before the next fiscal year begins. Some of the cuts may be made immediately, he said.

"We would like to do it as orderly and humanely as possible, but they won't be orderly and they won't be humane," Popejoy told reporters.

"If we simply can't get down (that far), then we'll proceed with a deficit and figure out some other way," Popejoy said at the press briefing.

A greater concern, Popejoy said, is covering more than $1 billion in bond debt payable by Aug. 10. He said the county is about $382 million short of being able to repay principal and interest due.

He told reporters that the consequences of defaulting would be immense because "the taint, the scar will last for a long time."

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