FOUNTAIN VALLEY : City to Avoid Suit by Switching to Option A

The City Council has agreed to accept 80% of its money next Friday from the county’s collapsed investment pool and will be repaid the remainder through recovery notes.

The city has $30.8 million in the investment pool--$6 million in city money and $24.8 million in redevelopment agency money.

Under a settlement agreement, the city will receive a total of $23 million in cash, and the remainder in recovery notes and secured claims, officials said.

“We’re looking at a fairly decent amount of money back,” Mayor Guy Carrozzo said.

The council last month had elected the county’s Option B to receive about 77% of its money now and retain its right to sue for the remainder.

Carrozzo said the council switched to Option A because officials believe the recovery notes will be made good. He also said that it would be expensive for the city to hire outside counsel to sue the county to get the remaining portion of its money.

City officials said that by choosing Option A, it would help to prevent further losses, accelerate the recovery of frozen assets and speed up the resolution for the benefit of all the investors.

Officials also said it is the city’s position that the county has not only a legal responsibility but a moral obligation to make the notes redeemable at full value by June 5.