THE BOTTOM LINE ON MEASURE R : Considering Options to Tax Hike : Crisis: Financing alternatives include more cuts in county programs, a trash-for-cash plan, the diversion of Measure M funds and the sale of county assets.

In designing Orange County’s recovery plan, the finance team selected Measure R as the centerpiece because it is the simplest, most straightforward and most comprehensive way to fill the $1.7-billion crater left by former Treasurer-Tax Collector Robert L. Citron’s sour investments.

But during months of brainstorming, county leaders and consultants also considered a variety of other financing alternatives. Most of those remain on the back burner, set aside for now because they take too long to accomplish, raise too little, or involve sticky political, legal and financial roadblocks the county is not yet ready to confront.

The No-on-R campaign argues that these other revenue-raisers were tossed aside too quickly, and that they can raise more than the sales-tax without further burdening residents’ wallets.

“There are many, many pieces of this puzzle that have not been pursued,” said auto dealer Mike Shepherd, a campaign leader. “Not all of them are necessarily going to work,” concedes Mark Thompson of Citizens Against the Tax Increase. “Some of them will, some of them won’t.”

Here is an item-by-item look at the prospects for alternative financing:

* Cost-cutting

Unprecedented budget cuts have taken place since the county filed for bankruptcy protection Dec. 6.

Of the county’s $3.6-billion annual budget for fiscal year 1994-95, only $463 million comes from the county’s general fund, over which county supervisors had complete control. The remainder comes from a variety of state and federal sources, and making cuts in these areas doesn’t improve the county’s financial situation very much.

County Chief Executive Officer William J. Popejoy has cut general fund spending by 41%, from $463 million to $275 million, for fiscal year 1995-96. He laid off about 700 workers and eliminated some 2,000 vacant positions.

Regardless of Measure R’s fate, Popejoy has promised further cuts--perhaps as much as $75 million more--because of unanticipated bankruptcy costs and reductions in state and federal funding that must be replaced with county money.

More, undoubtedly, can be cut, but it would result in reduced county services. As Popejoy often jokes, even eliminating the entire $275 million--which would be impossible, because the county is required to run a criminal justice system--would not enable the county to repay its debts.

Tax opponents argue that the entire $3.6-billion budget should be on the chopping block. But slashing state or federal dollars would not return any money to county coffers to help repay investors.

* Other fees/taxes

Some new levies can be imposed without voter approval.

The Board of Supervisors controls only the county’s ever-shrinking unincorporated area. A $10 tax on business licenses there would raise less than $500,000 a year; a 5% utility tax could net $5.5 million. The board could also increase charges for filing court or tax documents.

Other taxes require special state legislation. A “tippler’s tax” of 20 cents a drink at restaurants and bars could raise $100 million a year. Increasing an alcohol consumption tax, which includes beer, wine and liquor sold in stores, could raise $23.5 million annually. And hiking the current tobacco tax from 35 cents to 50 cents a pack would net an additional $30 million.

* Diverting Measure M funds

Passed by two-thirds of the voters in 1990, Measure M is a half-cent sales tax devoted to transportation projects scheduled to be built over the 20-year life of the tax. As of May, the tax had raised $506,423,085; in 1994, it collected $131 million.

Measure M can only be used for transportation. But a simple-majority vote could repeal the tax and replace it with one that would go into the county general fund.

There is, however, another catch.

About $70 million of each year’s Measure M revenue is dedicated to repaying $760 million in bonds that mature in 2011. Before repealing Measure M, those bonds would have to be retired. Or, voters could divert just a portion of Measure M, so that $70 million continued to go toward repayment of the bonds, and the remainder--$50 million to $70 million a year--could be used by the county for other purposes.

In addition, there is about $340 million in Measure M revenue earmarked for rail transit projects whose futures are in doubt. It might take voter approval, but the Orange County Transportation Authority could use that money to purchase county assets related to transportation--if the county can find something that fits the bill and is worth that much.

* John Wayne Airport

Seemingly the county’s most valuable asset with annual revenues of $58 million, a sale of the airport appears to be ruled out by existing federal laws. The county finance team estimates that it would take four to 10 years to overcome all of the obstacles to an airport sale; even tax opponent Shepherd admits “the time-frame of selling the airport makes it unreasonable.”

Federal law prohibits using airport revenue for any purpose other than airport services.

Los Angeles, for example, has been frustrated in its attempts to use surplus revenue from LAX to make up shortfalls in the city’s budget, because the FAA will not allow it.

No public airport has ever been sold to a private entity in the United States, because private owners would insist on raising fees high enough to repay their initial investment and also to turn a profit.

But turning a commercial airport into a profit-making enterprise runs counter to current law, and also faces fierce opposition from the powerful airline industry, which would be hit with higher landing fees and costs for operations.

Further complicating the situation is the El Toro Marine Corps Air Station, which might be converted into a commercial airport. The prospect of such close competition might discourage any would-be buyers; most analysts said an option on El Toro would have to be included in any sale, and the county cannot sell an option on land it still doesn’t own.

Before John Wayne could be sold, the county would also have to repay $253 million in outstanding bonds. Still, experts project that if the necessary laws were changed, the airport could yield about $250 million in net profit to the county.

Perhaps the most realistic prospect would be having the Orange County Transportation Authority buy the airport with its excess Measure M monies. That would still require federal legislation and, probably, voter approval.

* Landfills

The county’s recovery plan includes a trash-for-cash program. The Board of Supervisors has already raised tipping fees at the county’s landfills and has invited neighboring counties to dump their garbage at three county landfills.

Sheriff Brad Gates, a leading tax-backer, said last week he believes only about $5 million can be earned from the landfills each year. But some financial experts estimate that the operation can generate as much as $50 million to $70 million annually.

If the revenue is in the $50-million range, the county plans to use that money to back the issuance of some $500 million in bonds, with the possibility of selling the landfills later on, when they are more profitable.

Some tax opponents have urged selling the landfills now, and experts have pegged the potential price at $500 million. A sale would require environmental approval, and could take several years.

“I think they would probably get more by selling it,” said Robert Poole Jr. of the Reason Foundation, a libertarian think tank. “It’s a perennial argument in privatization: Should the government spend time and money trying to fix things up internally and then try to sell them. Or should they more or less sell it as is and let the private sector figure out what to do? Generally, our thinking is the private sector knows how to maximize value.”

* Jails

A Reason Foundation study earlier this spring suggested that the county could earn $100 million by selling or privatizing the jail system. Two national firms that run jails in other states have expressed interest in Orange County, though neither has reviewed the situation closely enough to offer a price.

But state law prohibits jails from being sold to or run by private companies. Even if that law were changed, County Counsel Terry C. Andrus has said such a move would require voter approval.

The jails, however, remain a favorite target for the anti-R campaign because of Sheriff Brad Gates’ dual role in running the system and leading the sales-tax campaign. “The bureaucratic, political part of it is the most difficult, because Brad Gates will fight hell and high-water to protect his kingdom,” Thompson said.

* Sale of county assets

The county originally produced a list of properties it could sell with an estimated book value of $403 million.

Many of the buildings, however, are needed for government operations. The county could still sell these to raise cash quickly, and then spend money annually leasing them back from the new owners.

The sales start Tuesday with an auction expected to raise $70 million. Other properties might take more time to sell because they require repairs or are already being used as collateral for debt. Still more assets--particularly parks and beaches--cannot be sold because of deed restrictions.

Anti-tax activists do not quibble with the county’s estimate of how much could be generated through asset sales, but they believe some county debts could await repayment until more buildings can be sold.

* Privatization of services

There are no specific proposals for privatization that have been suggested that the county is not pursuing. In general, county officials believe that privatization, while an admirable idea, does not shave much money off the budget. State law also prohibits privatization of some county services.

* Dedicated Revenue/Property Tax Increment Financing

Several financial firms have suggested using the growth in property taxes, rather than an added sales tax, to fill the gap. Assuming a 2% increase in assessed value, the property taxes could be used to issue about $1.5 billion in long-term bonds.

The problem with this idea is that it does not generate new revenue--it simply shifts money around. Current property taxes are not controlled entirely by the county, but by a host of local agencies, including schools. State legislation would be required to transfer these monies.

Getting dozens of cities, schools and special districts to agree to give up the increased property tax base they count on for growth would be a steep political climb. But some anti-tax activists, as well as independent analysts, believe this would be a fair way to share the burden of the investment pool losses.