THE BOTTOM LINE ON MEASURE R : Every Taxpayer Will Pay a Price if Measure Fails

In any bankruptcy, a day of reckoning comes. For Orange County, it will be the day we go before Judge John E. Ryan with our balance sheet listing the debts the county owes and the money we have to pay them.

The judge will then approve a plan to distribute the money according to the law. The amount we owe stands at close to $2 billion.

If Measure R fails, the total available to pay creditors over the next 15 years is approximately $335 million.

This includes a onetime windfall of $70 million we hope to obtain from Tuesday’s sale of county property, plus additional revenue from accepting out-of-county trash and a restructuring of short-term county debt.

A complicated legal formula will be applied to distribute the money. Here’s the bottom line: After paying lawyers, accountants and obligations mandated by state or federal law, county creditors--including local small businesses that performed work for the county--will receive about 20 cents on the dollar. And we will default on our bond obligations.

Our schools will lose $100 million. Cities, water districts, sewer districts and other public agencies will lose $450 million.

This amount may be supplemented by a settlement or court victory over Merrill Lynch and others. Based on the history of these types of cases, I doubt that the county’s creditors will ever see more than half their money if Measure R is defeated.

That’s Plan B. Twenty cents on the dollar to printers, construction companies and other local small businesses that performed work for the county in good faith, and default to people who invested in good faith in county bonds.

A bond default of this magnitude will result in higher interest rates for years, costing Orange County taxpayers far more than the cost of a half-cent sales tax.

The $1.7 billion in new borrowing every year by the county and government agencies within the county comes at such a price: A 2% interest rate penalty on those borrowings would cost taxpayers $1.4 billion over the next 10 years--which is more than the entire cost of the sales tax. The cost could continue for a much longer period. New York City, for example, is still paying an interest rate penalty 20 years after its financial problems.

Based on our most recent experience in financing the recovery notes for the schools, I believe this 2% interest rate penalty is realistic if we default on the bonds.

Plan B is bad--for everyone but the lawyers.

Orange County will be in court for years fighting with angry vendors, bondholders and others who feel cheated, and we, the taxpayers, will pay hundreds of millions of dollars to lawyers.

None of the sources of revenue suggested by Measure R opponents are real. John Wayne Airport will not be sold any time soon. Even if voters approved the use of mass-transit revenue from Measure M, it would not begin to become available until 2004, and even then would barely put a dent in the county deficit.

There is no bailout coming from Sacramento, and I’m afraid Santa Claus is busy this year.

Many people are voting No on Measure R because they are mad at county supervisors. I would remind these people that a No vote will not remove even one supervisor from office.

A No vote will not punish the supervisors. It will punish honest local business people who won’t be paid, schoolchildren who will have the quality of their educations reduced, and tens of thousands of local citizens who hold county bonds in their mutual funds and retirement investments.

Every taxpayer will be stuck with the added cost of this bankruptcy for years.

Some people will say: “That’s OK. If all these things happen, it’s not my problem.”

To them I say: “I didn’t cause this problem either. Neither did Dist. Atty. Michael R. Capizzi, or William J. Popejoy, or the dozens of top business executives who have been working with him as volunteers to put this bankruptcy behind us.”

It is a question of civic responsibility. Each one of us has to make our own decision. It is simple and easy to vote No and ignore the consequences.

Personally, I am not satisfied with Plan B. That’s why I’m voting Yes on Measure R.

Brad Gates is sheriff of Orange County and leader of Citizens for Fiscal Responsibility, the main Yes on R campaign committee.