ORANGE COUNTY IN BANKRUPTCY : Measure M Tax Can Be Repealed, Counsel Finds

Both sides in the fight over a proposed half-cent sales tax hike to help Orange County recover from bankruptcy claimed the upper hand Friday with the release of a legislative opinion suggesting that the 1990 Measure M sales tax could be repealed.

In a 12-page opinion, the state legislative counsel concluded that the half-cent tax for highways and mass transit could be rescinded either by the Orange County Transportation Authority or by the electorate.

But the opinion by the staff of legislative counsel Bion M. Gregory, who provides legal advice to state lawmakers, suggested that Measure M could be rescinded only if an “alternative revenue source” was available to pay off revenue bonds and contractual obligations for current projects authorized under the 1990 ballot measure.

Gregory’s opinion also argues that OCTA couldn’t simply redirect or loan Measure M funds to the county for bankruptcy recovery, because the money must be spent on transportation projects.

The notion of going after Measure M money has been a goal for tax opponents, who have urged the Board of Supervisors to use existing revenue to bail out the bankrupt county before seeking another half-cent increase in the sales tax.

Assemblyman Curt Pringle (R-Garden Grove), a vocal opponent of Measure R--the bankruptcy sales tax measure appearing on a special June 27 election ballot--said Gregory’s legal opinion undermines arguments by county transportation officials that it would take a two-thirds vote in Orange County to repeal Measure M.

Pringle would prefer to keep the county’s sales tax rate at the current 7.75% by letting voters reduce the transportation tax to a quarter-cent and reallocate the remaining quarter-cent to bankruptcy recovery for the next 10 years.

He contends that the county transportation authority could use its existing cash reserves or get new loans to pay off its Measure M debt. It would be akin, he said, to a property owner refinancing their home loan.

The transportation authority had $1.1 billion tied up in the county’s toppled investment fund. About $700 million is left, $400 million of it Measure M monies.

“The people at OCTA threw up a lot of roadblocks to the idea of redirecting Measure M money,” Pringle said. “This will help start the discussion on a way to let the voters reorder their priorities. It empowers the electorate. And I have full faith and trust in what the voters would decide.”

But officials at OCTA and the county suggested that much of the Measure M money has either been spent on projects such as the Santa Ana Freeway widening, or is already tied up by contracts for future work.

“We spent the money,” said Stan Oftelie, OCTA executive director. “That’s why the people of Orange County have seen so much highway construction in the last few years. We borrowed to finance those projects.”

Oftelie said the half-cent tax would have to remain in effect another five years even if the agency virtually stopped Measure M in its tracks, refinanced the existing bonds and began paying off highway and roadwork now under contract.

“The county has a short-term problem and needs the money right now, not in five or six years,” Oftelie said. “We haven’t seen anything that indicates there’s a way to make this work.”

Supervisor Marian Bergeson said that the legislative opinion is “consistent with prior opinions we have received.” But she also refused to characterize it as “good news,” arguing that the county would like to find other solutions to pay off its staggering debt in the aftermath of $1.7 billion investment loss.

The OCTA governing board voted twice last month against exploring ways for Orange County to tap into Measure M funds.

Those votes angered tax opponents who have been eager to find ways to divert some of the Measure M money so that a smaller tax increase would be needed for the county’s bankruptcy recovery plan.