ORANGE COUNTY IN BANKRUPTCY : Huntington Beach Mulls Switch in Settlement Plans

HUNTINGTON BEACH — The City Council met in special session Friday to consider switching pool settlement plans and dropping its bankruptcy-related legal action, but officials postponed a final vote until Monday.

Switching settlement plans would be a significant turnabout for the city, which has already spent $250,000 in an effort to sue the county and would owe an additional $500,000 in legal fees for class-action litigation against Merrill Lynch if the suit is dropped.

The city has been a vocal critic of the settlement process and of the county’s handling of the financial crisis.

The city attorney’s office recommended Friday that the City Council stick with settlement Option B, arguing that litigation offers the city the best chance of recovering 100% of its investment.

Under Option B, the city would receive about 77% of its pool money in cash and retain the right to sue for the remainder.

But at the Friday closed-session meeting, council members also weighed the benefits of Option A, which provides 80% of pool money in cash and recovery notes with the remainder promised by the county at an unspecified later date. Under Option A, however, agencies give up their right to sue.

Huntington Beach had $43 million in the pool when the county filed for bankruptcy on Dec. 6.

Already this week, several pool investors, including Brea, Costa Mesa, Fountain Valley and Tustin, have switched from Option B to Option A, joining the majority of pool participants.

Fountain Valley officials said they switched to Option A because it offered more money upfront than Option B. The officials also said they didn’t want to embark on costly litigation.

Times correspondent Shelby Grad contributed to this report.