3 Cities to Take Cash, IOUs to Settle Score With County : Crisis: Votes by La Palma, Laguna Beach and Fullerton preclude future legal action to recoup funds.

City Councils in La Palma, Laguna Beach and Fullerton agreed Tuesday night to accept settlements with the bankrupt Orange County investment pool.

The county last month offered cities and other investors three options for settlement of their invested money. Option A allows the investors about 76% in immediate cash settlement, about 4% in negotiable notes, 9% in “secured claims” and 10% in vague IOUs. Those taking option A agree not to sue the county for additional money.

Option B allows investors about 77% of their investment in cash immediately and the limited right to sue for recovery for other funds. Option C provides no immediate money, but preserves the right to file unlimited litigation.

La Palma’s City Council voted to take Option A after hearing City Manager Pamela Gibson explain the choices and recommending option A.

“As I’ve talked to mayors and other city council people throughout the county, I’ve sensed a consensus for Option A,” Mayor Wally D. Linn said.

Councilwoman Charlene Hatakeyama said, “I think we need to be realistic. Eighty to 84% is all there is available right now. We need to accept that information and not carry this on.”

City Atty. Joel D. Kuperberg told the council that La Palma could expect to get 80 cents on the dollar by June 1. He predicted another nine cents on the dollar within the next six to 12 months. The last 11 cents, he added, “is not at all solid, but may come over time.”

La Palma had about $5.5 million in the pool when the county declared bankruptcy Dec. 6. City officials have said lack of the frozen money has not hampered normal city operations.

The Fullerton City Council also approved the settlement, choosing Option A.

Fullerton had $22.8 million in the pool at the time of the bankruptcy filing. By the summer, the city will receive $17.4 million in cash and $848,000 in recovery notes, which city officials said can be converted to cash by June 5.

The Laguna Beach City Council also voted for Option A.

“I’m not excited about this, but sometimes a bird in the hand will get you ahead,” Councilman Wayne Peterson said.

Correspondents Mimi Ko and Leslie Earnest contributed to this report.