OCTA May Lend a Hand in Return for Airport : Recovery: Draft proposal for John Wayne would total $460 million. Officials see many obstacles to overcome.

County transportation officials are crafting a plan to assume ownership and control of John Wayne Airport in exchange for more than $460 million in financial incentives aimed at helping the county recover from bankruptcy.

The plan, if successful, would substantially improve the county’s financial position, reduce its debt obligations and possibly shave three years off the needed life of a proposed half-cent sales tax hike.

“It’s an idea whose time may have arrived,” said Supervisor William G. Steiner, a strong supporter of selling or transferring the airport. “It has many fewer obstacles than selling (the airport) to a private entity.”

In a confidential document obtained by The Times, the Orange County Transportation Authority (OCTA) would agree to write off $132 million the county owes the agency as a result of losses suffered by the county-run investment pool, would purchase $84 million in county recovery notes aimed at repaying other pool participants, and assume $250 million in airport debt as part of the contemplated airport deal.

The document is in the form of a draft agreement between OCTA and the County of Orange as a “settlement of claims” resulting from the bankruptcy. Aside from the county itself, OCTA was the largest single investor in the ill-fated pool, which lost $1.7 billion and forced the county into bankruptcy Dec. 6.

For OCTA, the addition of the airport would expand the agency’s authority and bring one of the county’s most coveted assets under its control.

Stan Oftelie, the chief executive of the transportation authority, said the proposal was a “very sketchy internal document” that was not yet completed or ready for public debate. Nonetheless, he said the proposal is seriously being considered within his agency.

Oftelie said the county would have to achieve a settlement with the other investors in the county’s collapsed investment pool before he would make a formal bid for the airport.

“We will work with the county on this, but we have to get past a settlement agreement before we can do anything at all,” Oftelie said. “But we are definitely exploring the idea.”

Paul Nussbaum, an adviser to Orange County Chief Executive Officer William J. Popejoy, said the proposal “needs to be reviewed” by county staff to determine whether it is a viable option. If it is, he said, Popejoy would recommend pursuing a deal with OCTA.

Nussbaum, however, said he still believes there are many legal and financial obstacles that would have to be overcome before the airport could be transferred to another party.

“We won’t preclude any option,” Nussbaum said. “It’s just a question of the size of the obstacles in the way and when they can get resolved.”

He said the proposed deal would have to be resolved by June if it is going to assist the county in making good on the “recovery notes” that county officials have pledged to make “as good as gold.”

“We don’t have much time,” Nussbaum said.

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Among the obstacles to a sale or transfer of John Wayne Airport are federal laws prohibiting airport revenues being used for non-airport purposes, deed restrictions against property transfers, the refinancing of some $250 million in airport debt, and the implications of a voter-mandated commercial airport at the El Toro Marine Corp Air Station.

Transferring the airport to the transportation authority--an autonomous public agency--could sidestep many of the obstacles that stand in the way of trying to sell it to a private-sector bidder, several county officials have said.

OCTA is an independent agency, but its 12-member board of directors includes four county supervisors. The other members include six city council members, an at-large representative from the public, and the director of the local Caltrans office, who does not have a vote.

The proposal to shift John Wayne Airport to OCTA has been suggested and shot down in the past. But now it is being seriously considered because of the bankruptcy crisis.

“This could be what we need,” Steiner said.

As part of the deal being prepared by OCTA, the transportation agency would seek a role in the planning for the El Toro Marine base. The authority wants to make sure that development at El Toro does not undermine the value of John Wayne Airport.

Transferring the airport to the authority also would have significant benefits to the county and many of the nearly 200 schools, cities and other agencies that lost $1.7 billion when the county’s investment pool crashed.

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One high-level county source said the financial incentives being offered by OCTA could effectively cut the duration of the proposed 10-year sales tax hike by three years, thus making it more palatable to Orange County voters.

“This would not preclude the need for the sales tax, but it would blunt its impact,” said Steiner, who was familiar with OCTA’s proposal. “That’s a major selling point.”

Winning public support for the half-cent tax increase is crucial to the county’s current bankruptcy recovery plan.

Steiner said an OCTA offer to buy $84 million in recovery notes would help the county to fulfill its promise to “make them as good as gold. This could especially solve the financial problem for our schools.”

With the money remaining in the pool, the county is offering to settle up with the nearly 200 other pool participants for an average of 77 cents on the dollar in cash, from 3 to 13 cents in recovery notes that are supposed to be “good as gold,” and the balances in two types of claims the county pledges to make its best efforts to pay off. School districts would get the greatest payouts. John Wayne Airport Manager Jan Mittermeier said Friday that she needed to study OCTA’s plan before she could take a position on it.

At “first blush, it makes sense,” she said. “But you have to think what is the mission of the two (agencies), and how are customers best served. We need to look at it very carefully from a financial standpoint, a legal standpoint and a policy standpoint.”

Mittermeier said that she was concerned that airport revenues not be misused for ground transportation purposes.

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Although federal restrictions require that airport revenue can be used only for airport uses, some county officials say that OCTA probably would be able to tap some airport funds for certain types of transportation projects, such as a rail system that would be linked to the airport.

In the past, Mittermeier has said she thought it would make sense for the county to place all of its transportation functions, including the airport, under one central authority. OCTA controls not only the county’s public bus system, but with the proceeds of the half-cent sales tax imposed by Measure M also oversees construction of a host of highway improvements designed to ease traffic congestion for commuters.

Airport spokeswoman Courtney C. Wiercioch said airport officials plan to actively seek proposals from both the private and public sector, asking them to provide information how they would overcome the hurdles blocking a sale.

OCTA “will be encouraged to participate in the process,” Wiercioch said.

* PROPERTY TAX REFUNDS: O.C. wants to pay back 88% of money it over-collected. A27