O.C. Voters at Crossroads in Sales Tax Vote : Bankruptcy: Approval of sharply disputed measure Tuesday would accelerate recovery while defeat would send a strong message of distrust to elected officials, observers say.

Seven months after Orange County’s high-wire investment act hit the floor in a $1.7-billion free fall, voters will decide Tuesday on Measure R, the centerpiece of the county’s proposed resolution to the worst municipal bankruptcy in U.S. history.

The half-cent sales tax increase, known as the Countywide Bankruptcy Recovery Sales and Use Tax, is the key to the multi-pronged solution designed by county officials and advisers who were recruited from the West Coast’s financial and legal community. It goes on the ballot in an unusual, one-issue election that takes place during the summer.

If approved by a majority of the voters, Measure R would increase the sales tax in Orange County from 7.75% to 8.25%, raising about $130 million annually for the next 10 years. The tax would cost the county’s 2.6 million residents about $50 a year each, although proponents say 20% of that would be borne by tourists and other visitors.

The plan is touted as the one sure way out of the county’s continuing insolvency and cavernous debt. Opponents say better solutions will be embraced once Measure R is defeated.

The election “is a significant foundation for the county’s future, no matter which way the vote ends up,” political consultant Harvey Englander said. “It is a defining moment as to the methodology to get there. If it passes, recovery will happen faster, but Measure R’s failure will be proof the voters no longer trust their leadership and elected officials in the county and the state will have to become a lot more accountable and proactive.”

Opponents say the tax is headed for certain defeat.

“This will lose by 20 points,” said Buck Johns, an organizer of Citizens Against the Tax Increase, the business and Republican Party group battling Measure R. “People who are going to vote have made up their minds; that is reflected in the huge numbers of absentee ballots and the pre-election polling.”

The measure’s proponents, who have spent lavishly and flooded the county with 2.5 million pieces of mail, offer no definitive prediction.

“I think this is going to be a close election,” said Sheriff Brad Gates, who heads Citizens for Fiscal Responsibility, the main Yes on R committee. “The higher the turnout, obviously then chances of us being successful go up.”

For a special election, voter interest is very high, fueled by the incredible saga of the bankruptcy, the vigorous campaigns, an unprecedented number of community forums and debates, and extensive media coverage. Both sides were pressing hard in the final week of the campaign, using phone banks, rallies and mailers.

Absentee ballot applications totaled a stunning 175,729; by Friday, 125,090 had voted by mail. The number of applicants surpassed that in the 1992 presidential race. Absentee voters typically make up 20% to 50% of the vote in Orange County.

Turnout is the key to the election. Proponents believe that they will lose if fewer than 40% of the county’s 1.1 million registered voters take part. That is because consistent voters in the county--those who vote in election after election--tend to be older and more conservative, and they generally oppose taxes.

“We certainly can’t win in the 30% [turnout] range,” said Stu Mollrich, whose firm, Butcher, Forde & Mollrich, is coordinating the campaign for Gates’ group. “And the closer to 50%, the better I like it.”

That view was generally borne out in the battle over Measure M, the half-penny sales tax increase for transportation projects. In November, 1989, the measure was alone on the ballot and turnout was 22.6%. The measure lost 52.6% to 47.4%.

A year later, it was back, but in a general election that included the governor’s race, and turnout blossomed to 62.1%. Measure M redux won 54.8% to 45.2%.

Polls show Measure R backers facing a tough challenge. A Times Orange County poll taken in early June showed the tax trailing among likely voters by 50% to 37%, with 13% undecided. The poll found voters angry and distrustful. More than half believed that county leaders waste “a lot” of tax money and “pay very little or no attention” to what their constituents think.

Proponents acknowledge that residents’ scorn for a government that “gambled away” $1.7 billion of taxpayers’ money comes up again and again when voters talk about the proposed tax.

Part of that anger is focused on the Board of Supervisors, which voted unanimously March 28 to place the measure on the ballot. Three board members were in office when former Treasurer Robert L. Citron, who has pleaded guilty to six felony charges, mishandled the county investment pool.

Two weeks ago, Supervisor Gaddi H. Vasquez, who supports the tax, announced that he will not seek reelection. Although he denied that the bankruptcy played a role, many consider him a victim of the fiscal meltdown. Supervisors Roger R. Stanton and William G. Steiner, who were also in office when the county declared bankruptcy, have spurned Chief Executive Officer William J. Popejoy’s requests that, for the good of the county, they not run again.

Supervisors Jim Silva and Stanton have come out against the tax. Steiner and Supervisor Marian Bergeson are for the tax, which is part of a recovery plan that also includes a sale of county assets; $188 million in cuts that have been made to the county’s $463-million general fund; the opening of county landfills to out-of-county trash; the layoff of about 700 workers, and the elimination of 2,000 vacant positions from a work force of 18,000.

The county has also discussed repudiating some of the $600 million it owes bondholders.

The county owes about $2 billion, half of it to bondholders and vendors, and the rest to the schools, cities, special districts and county agencies that were participants in the failed investment pool. The county has come up with about $1 billion, but is still short about $1 billion, said Bruce Bennett, the county’s bankruptcy attorney.

That is where Measure R comes in.

Its $130 million in annual revenue would go into the general fund, freeing a similar amount so the county can borrow against it.

Measure R provides for an oversight committee whose duties would include calling for an end to the tax before 2005 if the revenue is no longer needed for recovery purposes. Repeal would require a majority vote of the supervisors and the people.

Opponents argue that turning to a tax is premature, saying the county has failed to do all it can to trim government, find new revenues, privatize agencies and sell assets.

Numerous tax opponents have offered alternatives, ranging from Stanton--who wants to sell John Wayne Airport and stretch out debt repayment--to the People’s Response, which calls for increasing taxes on corporations and wealthy residents.

Some in the loose-knit coalition of sales tax opponents favor returning only part of the money that cities and special districts had in the failed investment pool. Many are calling for another referendum, this one to tap the Measure M transportation sales tax fund. Others, who label the bondholders “gamblers,” advocate not repaying them in full.

Bruce Whitaker, chief spokesman for the Committees of Correspondence, which opposes the tax, says county leaders have not seriously explored alternatives. “We always felt that taxes should be the last resort, not the first,” he said. “We think you lose all the leverage for a solution if taxpayers throw money at a problem upfront.”

Opponents see Measure R as a tool of entrenched interests--developers and bureaucrats--and call proponents such as Gates and Irvine Co. Chairman Donald L. Bren “counterfeit Republicans.”

The coalition of foes includes some business leaders, senior citizens, city officials, anti-government activists, libertarians, remnants of Ross Perot’s United We Stand America organization and some Democrats. The Orange County Republican Party and the Lincoln Club also vigorously oppose the tax, as does every member of the county’s legislative delegation.

Proponents argue that the tax is the only credible and speedy way to repay the county’s debt. This quick cauterizing of the county’s wounds, they say, will be less expensive in the long run--in part by protecting the county’s bond rating--and will safeguard the Orange County “way of life.”

Popejoy and Gates have said the sale of the airport and the tapping of Measure M transportation funds to aid recovery would be illegal or impossible to achieve within a workable period.

Under Measure R, proponents say, Orange County can emerge from bankruptcy in about a year by choosing a planned, businesslike approach that controls the costs and the time frame.

Tax supporters, who unleashed about 700,000 pieces of mail in the last week of the campaign, have formed an unusual alliance. They have pulled together much of big business and labor, as well as parent and school groups, and some prominent Republicans--such as the Irvine Co.’s Bren and Lincoln Club Vice President Tom Malcolm.