O.C. Fund-Raiser: Sell County Assets, Privatize Services : Recovery: Popejoy proposes unloading libraries, courts, drug and juvenile centers, but not big-money John Wayne Airport or landfills. Privatization likely to cost more jobs.

Struggling to raise cash, Orange County Chief Executive Officer William J. Popejoy announced plans Thursday to privatize a variety of county services and sell as much as $145 million in assets--including libraries, courts, a drug rehabilitation home and a juvenile detention center.

But Popejoy did not recommend the sale of John Wayne Airport or county landfills, the county’s big-ticket items, saying they posed legal and financial obstacles that would make them too difficult to sell.

“Asset sales and privatization of county services are important links in the process of financial recovery, but they are not a panacea and must not be looked upon as salvation from the county’s financial woes,” Popejoy warned in a report to the Board of Supervisors. “Like the severe budget cuts I announced this week, they are only a part of the recovery plan.”

Thursday’s proposal is another element of the CEO’s sweeping plan to help the county recover from its unprecedented Dec. 6 bankruptcy. In addition to selling assets and privatizing county services, Popejoy has announced plans to lay off 1,040 workers and eliminate another 563 positions to save the county $188 million. He has also asked the state for loan guarantees.

“We are leaving no stone unturned,” Board Chairman Gaddi H. Vasquez said Thursday. “We still need to take steps that are rather dramatic and rather painful.”

In presenting his plan to the Board of Supervisors on Thursday, Popejoy said it was the “first wave of sales of county assets and services that we suggest should be privatized.” Additional properties and services may be identified later, he said.

“It’s a good blueprint that is realistic,” said Supervisor William G. Steiner. “He shows what can be done quickly and what can be done over a longer period of time.”

According to Popejoy, the county could earn about $33 million by selling a dozen properties over an initial 12-month period. They include a fire station, a federal court facility and the Phoenix House drug rehabilitation center--all in Santa Ana--and several office buildings throughout the county.

He said the $33 million is the most the county can reasonably expect to raise to help out with its critical short-term cash flow needs, which include about $1 billion in bond payments due by Aug. 10. Other assets, he said, cannot be sold in time to help with the county’s immediate cash crunch.

“There’s been a perception that the county had all these hidden assets. The reality is different,” Popejoy said. “The other assets will help down the line.”

The county could earn as much as another $71 million by selling and leasing back three properties: the Santa Ana Civic Center, including the supervisors’ own Hall of Administration; office buildings used by the Sheriff’s Department, and the county’s Probation Department headquarters.

Other properties, which could take years to sell, might be worth another $40 million, the report noted. They include nine county libraries, an American Legion Post in Buena Park, the Joplin Youth Center for juvenile offenders in Trabuco Canyon, the historic Howe Waffle House in Santa Ana and the South Orange County Municipal Court complex in Laguna Niguel.

The sale of those properties would involve a number of complicated legal and logistic problems, not the least of which is relocating some operations of the sheriff’s, probation and public defender’s offices.

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Don Hansch, club manager of the American Legion Post, said the county would have to break a $1-a-year lease with the organization that doesn’t expire until 2033 if it wants to sell the property.

“We’d be upset, that’s for sure,” Hansch said. “If they break the lease, I think they would have to relocate us and that could cost them even more money. We’ve been here since 1934. . . . Hopefully they won’t touch us.”

It was unclear Thursday whether there might be buyers for many of the county properties that could be put on the block. Financially strapped cities such as Seal Beach expressed little interest in buying a county library.

But officials in Irvine, one of the cities hardest hit by the collapse of the county investment pool that caused the financial crisis, were more interested.

“Library service is considered a very high priority in Irvine,” said Councilwoman Paula Werner. “I certainly think the idea is not just something we should consider, it’s something we should actively pursue.”

Despite much speculation about the sale of John Wayne Airport and county landfills as a way to raise as much as $1 billion, Popejoy and a task force that researched asset sales concluded that trying to sell those properties is not reasonable because of legal and financial entanglements.

“In order to achieve a sales price of any substantial amount, it would be necessary to increase revenues significantly,” Popejoy informed the board. “Such measures would likely impact taxpayers through increased airline fares or trash disposal fees, which would be the likely result of selling these assets.”

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Instead, Popejoy suggested that the airport and landfills be used as collateral to secure loans.

Some residents and business leaders were critical of Popejoy’s reluctance to put the airport and landfills up for sale, especially if the alternative would be raising taxes.

“There is a real missed opportunity here to generate dramatic revenues to replenish a significant portion of what was lost,” said Robert W. Poole Jr., president of the Reason Foundation, who studied the county’s privatization options for the Lincoln Club of Orange County. Poole’s report estimated that the county could garner $977 million to $1.4 billion from asset sales and lease-backs.

John Wayne Airport should be packaged with the rights to the proposed commercial airport at El Toro Marine Corps Air Station, he said, and sold to a private bidder.

“If the supervisors don’t seize this opportunity to get the benefits from selling to private interests, they never will,” Poole said. “I hate to be too judgmental, but this is not as ambitious as it should be.”

Reed Royalty, executive director of the Orange County Taxpayers Assn., called Popejoy’s plan a good start, but pressed him to look for more assets to sell, including the airport.

“If Orange County is going to sell assets, then let’s sell the easy stuff,” he said. “But when it comes to the airport, the landfills and difficult things, the taxpayers association would ask that he not give up. We’d insist that the county continue to pursue legislation as needed to allow those sales.”

But Paul Nussbaum, a Wells Fargo Bank executive assisting Popejoy in the recovery effort, said county officials conducted “an all-encompassing search of every county asset” before releasing Thursday’s report.

In another money-saving proposal, Popejoy identified a number of county services that could be privatized, including payroll operations, vehicle maintenance, accounting services, electronic surveillance of jail inmates, maintenance of county records and management of the county’s investment portfolio.

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Hiring private firms to perform some county jobs--such as crossing guards, custodians, food preparers at jails, carpenters and other trades workers--would require special state legislation, the report noted. The county is actively lobbying legislators in Sacramento to change existing laws.

Popejoy said he would invite the private sector to submit bids on performing those services. County officials have identified at least $500,000 in savings but say they have not calculated the full benefit or the number of jobs that would be lost by privatizing. Labor groups estimate that such privatization would involve hundreds of county workers.

“Privatization is not a panacea, as it has been romanticized in the media,” Popejoy warned supervisors in his report.

The move to transfer county jobs to the private sector was the latest jolt of bad news for county workers already jittery over Popejoy’s recent layoff announcement.

“Seems like they’re privatizing all the (positions) that weren’t part of the layoff notices,”’ said Bill Fogarty, executive treasurer of the Orange County Central Labor Council. “They’re just jumping in and taking an action to cut, nothing more. There seems to be an attitude with the board and Mr. Popejoy to cut first and worry about it later, and let the public be damned.”

“I’m sure it would impact hundreds of county employees,” added Tobye Lovelace, a spokeswoman for the 11,000 member Orange County Employees Assn.

The county already privatizes nearly $1 billion in operations countywide, including laundry, printing, data processing and other services.

Labor leaders adamantly oppose contracting out county jobs, claiming that privatization usually leads to less efficient and more expensive services. They also said the supervisors lose oversight of operations when they privatize them.

Fogarty said privatizing may seem like “a quick cure right now, but you end up paying more down the road.”

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“There has to be oversight,” Lovelace said, “and we’ve already seen that the Board of Supervisors doesn’t have a very good track record with oversight.”

Nonetheless, Popejoy’s privatization efforts were well received by many in the business community, who sense opportunities or are concerned the county may consider raising taxes or defaulting on loans.

“It’s a step that needs to be taken,” said Orange County Business Council President Todd Nicholson. “Asset sales and the privatization of services needs to be looked at quickly, somewhat urgently.”

He said the Business Council is assembling a task force of top local executives to study privatization and asset sale options in an attempt to determine which options can be completed “on an urgent basis.”

Nicholson cautioned the county to give careful consideration to which assets are sold and which services are turned over to the private sector.

“What I don’t think anybody wants is a fire sale,” he said. “A lot of thought and care has to go into this. We need to make sure that we’re maximizing the assets that might be available.”

The Business Council’s task force, which could be created by late next week, will issue a report to the county. “But the final determination on sales obviously isn’t ours,” Nicholson said.

The privatization and asset sale task force will include executives drawn from an 18-member group that met Monday in Irvine to help chart the role that business leaders will play in the privatization and asset sale debate, Nicholson said. The task force hopes to help supervisors determine which moves make both economic and public safety sense.

Times staff writers Mark Platte and Greg Johnson and correspondent Shelby Grad contributed to this report.

* TOO GOOD TO BE TRUE?: County wary of Taiwan company’s $3-billion loan offer. A22

* TAX REFUNDS ON HOLD: Bankruptcy delaying tax assessment appeal refunds. A23

* MORE COVERAGE: A20-24

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Sellers and Savers

County Chief Executive Officer William J. Popejoy proposes selling 30 county-owned properties, including nine libraries and a courthouse. The CEO pegs the possible profit at as much as $145 million. Not for sale at this time, however, are John Wayne Airport, the James A. Musick Branch Jail facility and county landfills. Three of the properties would be sold and then leased back to the county.

SHORT-TERM SALES

Time frame: One month to one year

Possible proceeds: Up to $104.7 million

Anaheim:

Properties: Transfer station, Katella/Douglass

Acres: 7.7

Properties: Agricultural commissioner’s facility, 1000-1010 S. Harbor Blvd.

Acres: 11.84

Properties: Social Services Agency building, 1170 Anaheim Blvd. & 1133 Homer St.

Acres: 1.24

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Newport Beach:

Properties: Harbor Club Tower, 3333 Coast Hwy.

Acres: n/a

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Santa Ana:

Properties: Office building, 801C Broadway

Acres: n/a

Properties: Santa Ana Boulevard property, west of Grand Avenue

Acres: 0.8

Properties: Phoenix House site, 1207 E. Fruit St.

Acres: 5.1

Properties: General Services Agency/Environmental Management Agency facilities, 1140-1145 Fruit St.

Acres: 10

Properties: Old Newhope Fire Station, 521 N. Figueroa St.

Acres: n/a

Properties: General Services Agency storage facility, 1119 E. Chestnut Ave.

Acres: 3

Properties: Federal courts facility, Flower/6th Street

Acres: 1.88

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Westminster:

Properties: West Court lot, east of Beach Boulevard/13th Street

Acres: 3.07

LONG-TERM SALES

Time frame: One to two years

Possible proceeds: $40.7 million

Anaheim:

Properties: Newkirk parcel, Frontera Road

Acres: 8

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Santa Ana:

Properties: Central utility facility, Flower/6th streets

Acres: n/a

Properties: Howe Waffle House lot, Civic Center/Sycamore Street

Acres: 0.46

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Buena Park:

Properties: American Legion Post, 8071 Whitaker St.

Acres: 0.93

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Laguna Niguel:

Properties: South County Regional Center (includes Municipal Court)

Acres: 29

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Other:

Properties: Nine libraries: University Park branch in Irvine; Crown Valley branch in Laguna Niguel; Dana Niguel branch in Dana Point; El Toro branch in Lake Forest; Laguna Beach branch; Mission Viejo branch; Los Alamitos-Rossmoor branch in Seal Beach; Leisure World branch in Seal Beach and Rancho Santa Margarita branch.

Acres: n/a

Properties: Joplin Youth Center, Trabuco Canyon

Acres: 330

LEASE-BACKS

Properties (all in Santa Ana): East Civic Center facilities bordered by Ross Street, Civic Center Boulevard, Santa Ana Boulevard and Broadway

Square feet: 534,000

Properties (all in Santa Ana): Environmental Management Agency/Sheriff’s Department Twin Towers, 300-320 Flower St.

Square feet: 367,295

Properties (all in Santa Ana): Probation Office Building, 909 N. Main St.

Square feet: 104,046

Source: Orange County administrative office

Going Private

As part of efforts to cut the budgets of several county agencies, Chief Executive Officer William J. Popejoy recommends contracting with private firms for some services. The agencies and services that would be affected:

Current Agency Service annual cost GSA Civic Center heating/ $1.53 million cooling GSA County records services 116,206 GSA Vehicle body repair/ 408,657 paint GSA Quick copy printing 225,215 services Auditor/controller Some accounting services 9.95 million Auditor/controller Payroll services 420,000 Sheriff/coroner Autopsy record 65,000 transcriptions Marshal Service of legal papers + Treasurer Portfolio management **

Estimated Agency annual savings GSA $400,000 GSA 50,000 GSA 35,000 GSA * Auditor/controller * Auditor/controller * Sheriff/coroner 65,000 Marshal + Treasurer

* Private proposal would be needed to determine savings

** Private firms may be interested in bidding

+ Requires court approval

Source: Orange County administrative office