ORANGE COUNTY IN BANKRUPTCY : BOND TICKER : O.C. Debt Could Cost Elsewhere

Due to continuing uncertainty about whether Orange County can pay $1.3 billion in bond bills, California’s local governments may not be able to borrow money this summer as usual, analysts warned.

In a strongly worded memo on Tuesday, the National Federation of Municipal Analysts, a group of about 900 bond evaluators, said that “many California short-term debt issuers may not be able to finance their annual seasonal borrowing notes in an orderly fashion.”

The reason: recent bankruptcy court decisions that allowed Orange County to break its bond covenants with investors and stop setting aside money periodically to pay off its note borrowings. As a result of these court decisions, there is a concern that notes sold this summer by other government agencies “would no longer meet the minimal credit risk criteria required” under federal securities laws, the memo said.

Analysts recommended that in order for the bonds to be sold, state statutes be changed to give buyers of notes this summer more security. They also recommended that money set aside by a city or county to pay off those short-term loans be segregated from other municipal funds.

State Treasurer Matt Fong said in a statement that the memo from the municipal analysts highlights his concerns.

“I was the first public official to tell Orange County that bond defaults are not an option,” Fong said in the statement. “My position remains unchanged. . . . Defaults by Orange County will have a significant impact on the state of California.”

County Librarian, Communities Work to Keep All Branches Open

Six libraries slated for closure by the county might be spared after all.

County Librarian John M. Adams said that he is working with leaders from all six affected communities on plans to keep the branches open, probably with significantly reduced hours.

The closures were announced last month as part of an effort by the 28-branch Orange County Public Library system to trim its budget from $25 million to $20 million. The Board of Supervisors will take a final vote on the proposal in late May.

Since the cuts were proposed, community leaders have considered raising money and soliciting volunteers in efforts to keep the branches open.

In Villa Park, a commission appointed by the City Council hopes to raise as much as $50,000 to keep the city’s only library open two days a week.

Seal Beach officials have suggested that Leisure World purchase a branch located on the edge of the retirement community and convert it into a private library for residents. Neither the county nor Leisure World would discuss an asking price for the library building.

In La Palma, the City Council formed a special library commission, which will meet with Adams later this week. Adams also held discussions with Garden Grove officials, who stand to lose two of the city’s three libraries.

Residents in isolated Silverado Canyon also are organizing a campaign to save their branch. “It’s not just a library. It’s our community center,” said resident Mike Beck. “It’s the only public thing we have up here,” he added.

Adams said the only way the branches will stay open is if the communities can come up with money to pay for materials and staffing.

“It will be impossible for (the libraries) to continue operating without some cash,” he said.

Compiled by Shelby Grad with Debora Vrana.