ORANGE COUNTY IN BANKRUPTCY : Measure M Proposal Spurned Again : Recovery: Rohrabacher joins Stanton in vain appeal to OCTA for conversion of transportation tax funds.

Orange County Supervisor Roger R. Stanton failed for a second time Monday to persuade transportation officials to use Measure M sales tax revenue to help the county bail out of bankruptcy.

However, the proposal will be debated again next month at the Orange County Transportation Authority directors’ meeting.

Rep. Dana Rohrabacher (R-Huntington Beach) made a similar appeal to the authority’s directors Monday, asking that Measure M funds, which are intended specifically for transportation projects, instead be deposited in the Orange County general fund.

Both Rohrabacher and Stanton rejected legal opinions from the state Assembly Legislative Counsel and the authority’s general counsel that transferring the funds to the county is illegal. Stanton had offered the same proposal in a directors’ meeting in April, and it too was defeated.

Rohrabacher’s comments generated a murmur of criticism from people in the hearing room, who questioned why a Washington official was attempting to tell a local government agency how to solve a local problem.

There were several groans in the audience when he admonished the transportation board that Chief Executive Officer Stan Oftelie and General Counsel Ken Smart “should not be making policy.”

Both Oftelie and Smart had previously advised the board that it was illegal to transfer the funds and forgive $235 million owed to the transportation authority by the county unless the agency got something in return.

“You should tell your lawyer [Smart] what you want to accomplish and have him look for a way to do this,” Rohrabacher said.

Stanton has been a vocal proponent of diverting Measure M money--a half-cent transportation sales tax approved by county voters in 1990--to the county treasury or reducing the Measure M tax rate to offset the impact of Measure R.

Measure R, calling for a half-cent increase in the sales tax, raising it to 8.25%, will go before Orange County voters June 27. Polls suggest that the measure, which is specifically intended to help the county emerge from bankruptcy, won’t pass.

About $132 million in Measure M revenue was collected in fiscal 1994, transportation officials said.

On Monday, Stanton argued that the $235 million owed by the county to the authority should be written off as “a bad debt.”

“It’s not like we’re giving money to Bank of America,” he said, and portrayed opponents of his proposal as supporters of higher taxes.

However, Smart refused to be swayed and responded that the loan could not be written off as a bad debt because the county has promised to pay the transportation agency. He also reminded Stanton repeatedly that the California Constitution prohibits the transfer of funds from one public agency to another.

Further, Smart said the state Constitution prohibits “the straight forgiveness of a debt without getting something in return from the county.”

Rohrabacher suggested that the county could give John Wayne Airport to the agency in exchange for forgiveness of the $235-million debt. Oftelie said the transit agency would consider such a swap, but Orange County officials have not proposed it.

OCTA Chairman Charles V. Smith warned that forgiving the debt or transferring Measure M funds to the county could in turn jeopardize the authority’s ability to pay off the bonds issued for transportation projects.

“We can’t help the county that way,” Smith said.

In the end, directors defeated a motion by Stanton to require the OCTA staff to do an economic analysis of the impact that Measure R could have on Measure M revenue and to study how to legally transfer Measure M money to the county.

However, the directors agreed to reconsider the motion at the next meeting.