County to Miss Deadline on Debt : Crisis: Target date to file legal papers on $1-billion rollover was today. Officials had sought to start court process and wrap up deal before June 27 sales tax vote.

A week after announcing they were “very close” to reaching agreement on a one-year extension of nearly $1 billion in short-term debt, attorneys for Orange County and its bondholders were still scrambling late Thursday to complete a deal and decided about 8 p.m. that they would be unable to meet their target deadline of filing legal papers on the deal today.

The two sides had hoped to set the legal process in motion by filing papers today so the rollover deal could be completed by June 27, when Orange County voters will decide whether to raise their sales tax a half-cent to help pull the county out of bankruptcy.

“We do want to get it done by tomorrow, but if it doesn’t get done, it doesn’t get done. We can’t rush with a bad agreement just because of a timetable,” County Chief Executive Officer William J. Popejoy said Thursday. “We thought we’d have it done by yesterday--but we didn’t.”

After five hours of meetings with bondholders’ lawyers at his Los Angeles office Thursday, county bankruptcy attorney Bruce Bennett said: “There was more progress made--not done yet.”

Creditors’ attorneys had wanted the extension agreement completed before today, so a bankruptcy court hearing on the matter could be set by June 16. Then, if the deal is approved by U.S. Bankruptcy Judge John E. Ryan, the period for filing appeals would have elapsed by June 27, the date of the special election. That is also three days before the county’s fiscal year ends and the first of the bond issues come due.

But Bennett said the creditors dropped that demand Thursday evening and said they wanted to continue working on the deal. More meetings are scheduled for today.

The county also plans to file papers today setting in motion the refinancing of $175 million in so-called Teeter notes, short-term debt that helps governments raise cash in anticipation of collecting delinquent property taxes. The state Legislature recently passed a bill enabling the county to issue 20-year bonds in order to buy out its current Teeter notes.

Patrick C. Shea, an attorney representing participants in the county’s sunken investment pool, said details of the deal were still changing day by day. Although Shea’s clients are not a party to the deal, he has become peripherally involved in the final stage of the negotiations because it could impact pool participants who have received 77% of their pre-bankruptcy deposits, but are still owed their balances.

“It’s undergone very substantive changes,” Shea said Thursday of the rollover documents he first saw last week. “As of yesterday, the draft that we had from the previous evening was completely obsolete. I was supposed to be in Los Angeles to work on this deal [Thursday] but there’s no deal for us to work on.”

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According to the draft of the rollover deal, the county would repay $975 million in notes and bonds due this summer on June 30, 1996. In exchange for the extension, bondholders would receive an extra 95 cents interest for every $100 invested.

The bond rollover is crucial to the county’s recovery plan because it buys badly needed time.

If the half-cent hike in the sales tax is approved in the June 27 special election, the county would then be able to collect that revenue and use it to back new bonds. If the tax hike is rejected, the rollover would give county officials a year to come up with a backup plan.

“Why the hell do you think [they’re] trying so hard to get it done?” asked one source close to the deal, speaking on the condition that he not be named.

Popejoy acknowledged that the year’s grace period embedded in the rollover deal would be a blessing if the sales tax increase he supports loses next month. But he repeated his insistence that there is no Plan B, no other logical way for the county to dig itself out of the $2-billion hole left by investment losses and deficit budgeting.

“It does give you another year for the bondholders, but it doesn’t give you any way to pay them back. That’s what we’re trying to do, pay them back,” Popejoy said. “It’s breathing room,” he said of the rollover. “But it’s sort of like holding your breath under water. There’s no point in coming up for air if there’s no oxygen.”