BOND TICKER : Proposal by County Alarms Moody’s

A proposal by Orange County officials to roll over bond debt and increase the sales tax raises troubling questions about the county’s commitment to avoiding bond defaults, according to a report released Monday by Moody’s Investors Service, a major bond rating agency.

“Recent actions and announcements by Orange County have contributed to confusion about the county’s intention in honoring its debt commitments and otherwise resolving its current financial crisis,” the report said.

Specifically, the report criticized county officials’ proposal to defer repayments on short-term notes for one year, calling it “troubling” because it was not clear whether bondholders would be forced to accept the extension or be asked to voluntarily accept the plan and help determine the terms. Especially dangerous, Moody’s said, is Orange County’s intention to ask the court to invalidate $600 million in notes sold last July, so the county would not have to repay those bondholders.

Moody’s also warned that the County Board of Supervisors must strongly endorse any sales tax increase if the measure is to be put before voters on June 27, in order to “send a clear and positive sign that the county is ready to move forward to resolve its problems.”

In its six-page report, Moody’s said the county is running out of time to come up with a viable restructuring plan, noting that $1 billion in bond debt comes due this summer.

“If a vote on a sales tax is not successful, the probable scenario is that the county will default on its debt obligations,” Moody’s said.

Community College District Might Consider Selling Land

North Orange County Community College District officials hinted Monday at a strategy for dealing with the effects of the county financial crisis.

The district, which has $83 million frozen in the county investment pool, might consider selling surplus district property in Yorba Linda to cover any losses, said Trustee Barry J. Wishart.

“We will maintain the integrity of our educational programs,” said Wishart, adding that the district doesn’t anticipate the need to lay off employees or discontinue classes.

In addition to selling surplus property, Wishart said, the district may enter into a loan agreement with a bank to help ease any cash flow problems.

Under a settlement agreement being finalized, the county would pay all school districts 90 cents on every dollar invested in the pool, with the rest promised later.

Crisis’ Effect on North County Will Be Topic at Public Forum

The League of Women Voters will hold a public forum next week that looks at how the county bankruptcy will affect North County cities.

The city managers of Buena Park, Brea, Fullerton, La Habra and Yorba Linda and the finance director of Placentia are scheduled to speak at the March 31 forum at Buena Park City Hall, 6650 Beach Blvd. The event begins at 1:30 p.m.