Supervisors Endorse Tax Vote : Recovery: All five say public should decide on half-cent sales tax hike. It will be on June special ballot if four still back it next week, but two tie support to pool settlement.

Despite previously opposing any tax increase to resolve Orange County’s unprecedented bankruptcy, county supervisors unanimously voted on Tuesday to put a half-cent sales tax on a special June ballot.

Although four of the five supervisors must give a final go-ahead next week, the action Tuesday represents a stunning reversal that infuriated anti-tax forces including one activist who immediately threatened “the mother of all recalls.” Others, including Sheriff Brad Gates, urged the board to take action.

All five supervisors said they still abhor the idea of raising taxes, but Board Chairman Gaddi H. Vasquez said he believes the county might not be able to dig out of its financial morass without one.

“I could take the easy political road and just dismiss the proposal as bad and uncomfortable,” said Vasquez. “But today I can’t because the facts are real and they are facing me as a citizen, as a parent and as someone who has spent most of his life in this county that I am so proud of.”

The county declared bankruptcy Dec. 6 after risky investments by then-Treasurer-Tax Collector Robert L. Citron lost nearly $1.7 billion belonging to the county and nearly 200 school districts, cities and other agencies.

Although the board unanimously expressed a willingness to put the tax issue on a special ballot, at least two board members said they would not approve the ballot measure next week unless participants in the county’s failed investment pool reached an agreement with the county on how to allocate the pool’s losses.

If four of the five supervisors approve the tax initiative, to be called Measure R, it would be placed on the June 27 ballot and would require majority approval. The tax would take effect in January, 1996.

Under the proposal, the county’s sales tax would increase from 7.75% to 8.25%--the same rate as Los Angeles County’s--for a 10-year period. The tax would generate about $130 million annually and would be used to back approximately $700 million in new loans.

County Chief Executive Officer William J. Popejoy told the board on Tuesday that the county’s losses and debt were so great they there was no other option except to raise taxes.

He said the actions taken so far, such as layoffs, asset sales, privatization and litigation will not raise enough money in time to pay off more than $1 billion in debt due this summer.

“What you have is a choice to vote for a sales tax or a choice to vote for bankruptcy, one or the other,” Popejoy said. “It is a necessary evil. None of us like the idea.”

If the sales tax isn’t increased by a half-cent, the county will default on its loans, schools may file bankruptcy and the county will become embroiled in years of costly litigation, Popejoy warned.

“The alternative of this tax is to remain in bankruptcy, to go into a financial meltdown and have the schools and maybe the cities taken over by government entities,” Popejoy told the board. “That’s not what we’re here to do.”

After considerable discussion, supervisors said they were ready to take the action that they publicly have vowed to avoid since the county filed for bankruptcy. But the supervisors told Popejoy that they wanted some amendments to the proposal, including a citizens oversight committee that would monitor how the tax revenue was spent.

Supervisor William G. Steiner said he supported putting the tax hike on the ballot only if a settlement is reached on how to allocate the $1.7-billion loss. He said he saw no reason for the county to raise taxes to help pay off the pool investors if they continue to reject the county’s settlement offer.

“The two go hat in hand,” he said.

“That’s quite a hammer,” replied Vasquez, but “I support it.”

Supervisor Roger R. Stanton said he would agree to put the tax on the ballot, but wanted Popejoy to devise a “plan B” in the event voters don’t approve the increase.

“This is difficult for each one of us,” Stanton said. “But we’re dealing with a situation of pragmatics.”

He said the price of defaulting on loans may end up costing county residents more than the proposed sale tax increase.

Stanton and Supervisor Jim Silva said that while they voted to put the tax increase before voters, they would not endorse or support the increase.

“If the board votes to allow the people to vote on this . . . that doesn’t mean that the board themselves are going to vote for it,” Stanton said. “But the perception is going to be laid on us that we’re raising taxes.”

Silva suggested that Popejoy consider diverting millions raised by the Measure M transportation initiative--the 1990 voter-approved half-cent sales tax--to county coffers.

But County Counsel Terry C. Andrus cautioned it would be “difficult if not impossible” to dip into funds set aside strictly for transportation services. He said his preliminary legal research indicates a separate election would be needed to repeal Measure M before that could be done.

Stanton asked Andrus to look into the matter further, a move that many onlookers greeted with enthusiasm.

Transportation officials could not be reached for comment late Tuesday.

Supervisors also said they wanted the ability to bring the tax back to the voters and have it rescinded if the county’s recovery comes quicker and than expected.

Vasquez said putting the tax increase on the ballot was the “responsible thing” to do.

“We are in the midst of a catastrophe,” Vasquez said, “but unlike natural disasters you can’t see it, you can’t smell it and you can’t touch it. But it is out there and it will find its way into each one of our lives and we will eventually be affected by it unless we respond with action.”

Supervisor Marian Bergeson said she also supported putting the tax increase on the ballot. “All of the options are ugly, but they have to be made,” she said.

In Sacramento, legislators have been reluctant to offer Orange County any assistance unless supervisors do everything in their powers to pull the county out of its financial mess, including raising taxes.

The tax issue has been a politically treacherous one for supervisors. Citizen groups have threatened to recall them if they consider a tax, while school supporters, bondholders, government workers and a major business group pressure them to take such action.

Most people who addressed the board on Tuesday demanded that the board scuttle any proposal to place a tax measure on the ballot this year. Several critics called it premature and unnecessary.

“If you vote for the tax today . . . you will generate what I’ll call the mother of all recalls,” said Tom Steele, a member of Ross Perot’s We the People group.

“The moment of truth is here,” Bill Ward, a member of the anti-tax Committees of Correspondence, told the board. “You have to decide between tax-taker campaign donations or taxpayer grass-roots support. . . . If you oppose this, we will consider you one of us and will support you against the developers, Sacramento, Wall Street, Washington or anyone else attempting to interfere in our county.”

Former Rep. William E. Dannemeyer told the board he believes county residents are being misled into believing a tax increase is the only choice.

“There are alternatives,” Dannemeyer said, adding that he believes much money is wasted on paying county employees more than they would earn in the private sector.

Dannemeyer drew laughs when he also expressed the concern of many tax critics who say a 10-year tax will never be put to rest: “There is nothing so permanent as a temporary tax,” he said.

Tustin schoolteacher Sandra Banis pleaded with the board to do something now before the situation becomes more dire.

“How do you tell a 4-year-old, a 7-year-old, a 13-year-old that it has to hurt and hurt bad before something is done?” Banis said.

John H. Sawyer Sr., executive director of the Orange County Employees Assn., said the tax hike was needed. “We think the math and the simple facts of the situation require the board to take action as soon as possible,” he said.

Cynthia Pickett, who represents union employees in Orange County, said she is not eager to tax herself and other county residents, but said putting the measure would at the very least allow residents to voice their opinions.

“Please put it on the ballot, please vote for it,” she said. In an unusual move, Sheriff Brad Gates requested to speak during the public comments period in support of the tax initiative.

“I’m amazed at some of the speakers who have come to the microphone and are fearful, fearful, of letting the people of this county have their day in court and have their voice on whether this should be part of they solution they would like see put in place for their future and their quality of life,” Gates said. “What are they are afraid of?”

According to two recent polls, there is growing support for a tax among county voters, especially if it is earmarked to bail out schools. A poll conducted last month by pollster Mervin Field found that voters opposed a tax increase by 60% to 40%. However, six in 10 voters said they would approve a half-cent tax hike dedicated to education for one year.

In a Times Orange County poll published Jan. 28, 53% of county residents said they favored a tax increase if it went to bail out schools.

County officials publicly have linked a tax increase to school and law enforcement issues. However, earmarking the money for specific purposes would require that the tax be approved by a two-thirds of county voters.

* NEGOTIATIONS COLLAPSE: Pool investors’ quibbling brings settlement talks to halt. A8

* THE 77% SOLUTION: Huntington Beach wants its 77% worth from pool, now. A11

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Tax Time?

County voters are likely to decide on a proposed half-cent sales tax increase some officials say is necessary to solve the financial crisis. If passed, the rate would jump from 7.75% to 8.25% for 10 years. Key dates in the process:

* March 21: All supervisors agree tentatively to place tax question on ballot

* March 28: Supervisors will take formal vote on tax election

* June 27: Special countywide election; majority needed for passage

* June 30: $600-million payment due on county borrowings

“I could take the easy political road and just dismiss the proposal as bad and uncomfortable. But today I can’t because the facts are real and they are facing me as a citizen, as a parent and as someone who has spent most of his life in this county that I am so proud of.”

--Board Chairman Gaddi H. Vasquez

Source: Times reports