ORANGE COUNTY IN BANKRUPTCY : Investors Panel Backs Measure R, Gets Criticism

The committee representing local governments that invested in Orange County’s sunken portfolio voted Wednesday to endorse Measure R, the half-cent sales tax increase aimed at helping the county out of bankruptcy on the June 27 ballot.

“It’s the shortest distance between where we are, and getting paid,” said Patrick C. Shea, the committee’s attorney. “There are other alternatives, but this certainly fills the hole faster and gets us paid quicker.”

The unanimous vote by the group of top-ranking local government administrators is the measure’s strongest show of support yet among local officials, whose agencies stand to get $550 million in tax proceeds to offset the debt the county owes them.

Irvine City Manager Paul O. Brady Jr., the person on the seven-member committee most hesitant about endorsing Measure R, was on vacation in Palm Springs and missed Wednesday’s meeting, leading to the 6-0 vote. Brady could not be reached for comment Wednesday.

Several city councils and school boards have voted in recent weeks to oppose the tax or to take no stand on Measure R. A Times Orange County survey published Sunday showed that 44% of elected officials in the county plan to vote no on the measure, while another 19% are undecided. Slightly more than a third of elected officials surveyed favor the tax.

In a letter to County Chief Executive Officer William J. Popejoy, Stan Oftelie, chief executive of the Orange County Transportation Authority, acknowledges that the measure “is very controversial among the constituents” of the committee, but says the members stand ready to help pass the tax.

“Notwithstanding the desire of our constituents generally to avoid the imposition of any new taxes,” the letter says, “the success of Measure R provides the county the earliest opportunity for successful resolution of the pending bankruptcy case and the fulfillment of its numerous financial obligations with the least delay.”

Measure R, also known as the Bankruptcy Recovery Tax, would boost the local sale tax from 7.75% to 8.25%. It is expected to raise about $130 million annually for 10 years, money the county could borrow against to pay off debts.

County officials pushing the tax welcomed the endorsement, and said the committee’s knowledge of financial crisis should lend credence to the message that Measure R is essential to recovery.

“I think that’s a crucial endorsement for us without any question,” said Sheriff Brad Gates, co-chairman of the Yes-on-R campaign. “That’s a group that knows the facts involved in the entire bankruptcy. They have looked at this from every angle there is. Obviously, when you have legitimate bodies . . . that agree that Measure R is required, it’s an important criteria for people voting yes.”

But anti-tax leaders and officials said the committee overstepped its bounds by speaking out.

“Frankly, when you have paid bureaucrats speaking instead of the elected officials who represent those districts or agencies, I think that’s wrong,” said Mark Thompson of Citizens Against the Tax Increase.

U.S. Trustee Marcy J.K. Tiffany appointed the committee in December to represent pool investors in the bankruptcy cases, and the committee negotiated a settlement agreement on behalf of the 200 entities with money in the pool.

Oftelie chairs the committee and Brady is the vice chairman. The other members are Blake Anderson, assistant general manager of the Orange County Sanitation Districts; Orange County Water District Treasurer Andrew Czorny; Wally Kreutzen, executive vice president for finance at the Orange County Transportation Corridor Agencies; John Nelson, assistant superintendent for business of the Orange County Department of Education; and Mountain View City Atty. Michael Martello.

“I think it’s totally wrong for them to be getting involved in it,” said Irvine Mayor Michael Ward, who has spoken out against a tax increase and sits on a council that has taken no position. “They did a great job for what their job was, and that was reaching a settlement with the county. . . . But this is outside their realm of responsibility.”

Members of the committee said, however, they see Measure R in financial, not political terms.

Under the settlement agreement, pool participants received 77% of their Dec. 6 deposits back in cash and another portion in “recovery warrants.” The rest will come in proceeds from litigation against investment banks, leaving 10% of each participant’s money outstanding unless the county finds new revenue sources.

Gates and Popejoy told the committee last week that if Measure R fails, pool investors may never get that last 10%, a total of about $550 million.

“I was put on the committee to try--the message was clear--to get 100 cents on the dollar. This was the best way, the only way, to get it back,” Czorny said Wednesday.