ORANGE COUNTY IN BANKRUPTCY : Wilson to O.C.: Help Yourselves Out of the Mess

In his first public appearance here since Orange County filed for bankruptcy, Gov. Pete Wilson said Thursday that county leaders must take responsibility for their own financial debacle and warned them about defaulting on outstanding debt.

In a speech to about 600 local business leaders at the Newport Beach Marriott, the governor made no mention of a sales tax increase such as the one proposed Wednesday by county Chief Executive Officer William J. Popejoy and made no promises of direct state aid. He said solutions to the county’s fiscal woes were “a local decision.”

“Make certain that you stabilize the situation and you do not default,” Wilson said. “Orange County must maintain its credit and its credibility,” even if it takes 10 years for the county to solve its problems, Wilson told members of the Orange County Business Council.

“If you make that type of plan and if you stick with it, this county will boom,” he said. “And it will probably not take 10 years, it will take less, because in fact there is the energy here, there is the talent, the entrepreneurial drive. There is the know-how on how to promote this county.”

Wilson, who is exploring a run for next year’s Republican presidential nomination, has previously said he opposes any type of state bailout for the county.

The governor, who took no questions from the media or his audience, also did not say whether he favors a plan to install a single trustee to oversee the county’s recovery effort. State Sen. Lucy Killea (I-San Diego) has proposed such a plan, and it may be toughened by a Senate committee that wants to give Wilson--not the Board of Supervisors or county voters--the power to appoint the trustee.

Calling the county’s crisis a “man-made disaster,” Wilson on Thursday likened the situation to the state of California’s own budget woes, noting that the state has been forced to make tough decisions to cut programs. He said Orange County, which on Dec. 6 filed the largest municipal bankruptcy in U.S. history, must also make tough budget cuts.

“You need to make it clear to those who live and work here, and to those who would be investors here, that you will continue to provide education and public safety, but that you are going to have to make the kind of cuts the state has made,” Wilson said.

Local business leaders said they were encouraged by Wilson’s remarks.

“It was a call to arms of the business community. There is a willingness to rally even if it means putting up our own money,” said Wayne D. Wedin, chairman of the Business Council. “We also need to make sure we don’t default. The damage would be severe to Orange County and even the state.”

Bond market specialists have said that any default by Orange County could raise borrowing costs for other local governments in California, and could cost the state more money in June when it sells the bonds it needs to operate for the year.

“What Wilson said is very positive,” added Robert Moore, attorney for the county’s creditors, which include bondholders. “I think it’s now the belief that it is in everyone’s interest for the county to pay back its debt.”

But Wilson’s stance was greeted with disappointment from some school officials, who hope the state will help local school districts get through the financial crisis.

“The lack of vision and concern for the students from the leadership in Sacramento is reprehensible,” said Margie Wakeham, a member of the Irvine Unified School District Board of Education. “I would like to see Pete Wilson, Willie Brown and other leaders become a part of the team and be responsive to this problem.”

Some school officials hope the state will help local districts secure loans or guarantee IOUs the county is proposing to give pool investors as part of its repayment proposal.

“I don’t think it’s a local problem,” Wakeham said of the bankruptcy. “It’s a state problem and a national problem.”

While saying that he was not insensitive to the county’s plight, Wilson made no promises and did not say whether the state might help Orange County by guaranteeing new loans. He said the best way the state could help is by removing state mandates and restrictions that impede job growth and economic development.

“The decision about what you must do is a local decision,” he said. “We are eager to be as cooperative as we can be. Our responsibility to you, and to all of you who know how to promote what Orange County has to sell, is to help you take away the burden” limiting business development, he added.

Wilson praised the efforts of local business leaders and the Orange County Business Council, an organization representing 2,100 businesses, which on Thursday unveiled an initiative to create 48,000 local jobs.

The group----created when the Orange County Chamber of Commerce & Industry merged with the Industrial League of Orange County earlier this year--has raised more than $5 million, which will be used to keep jobs in the county and to attract new companies.

Wilson said he was “bullish about Orange County,” which, he said, would one day again be “the pride of California.”

Wilson’s staff has been considering ways the state might provide some financial relief. Among other proposals, officials are reviewing a plan to sell “recovery notes” that could be bought by the state or used as collateral for a loan of about $150 million to the schools.

But state officials are grappling with a variety of legal problems and economic constraints. Given the state’s own fiscal problems, some financial analysts in the Capitol suggest the only bailout California can afford is a short-term loan of a few months’ duration.

Any longer-term debt could jeopardize the state’s precarious financial footing toward the end of the current fiscal year, making it more difficult for California to market bonds.

Killea, who co-chairs a Senate committee investigating the county’s investment crisis, suggested that Wilson might support a realistic plan the cash-starved state can deliver on.

“I think he feels they have to show something,” Killea said. “If he gives any indication he’s sympathetic and wants to help, every Republican down there would come up urging him to bail them out. Orange County first has to produce their own solutions and then ask for as little state help as possible.”

Times staff writer Eric Bailey in Sacramento and correspondent Shelby Grad contributed to this report.