O.C. IN BANKRUPTCY : Business Leaders Fret Over Vote’s Impact on O.C. Climate, Image

Many local business executives expressed fears Wednesday that Orange County’s image and business climate will suffer gravely in the wake of voters’ rejection of the Measure R sales tax increase.

Though most businesses in the county say they aren’t likely to see an immediate, direct fallout, executives warned that the failure of the county bailout plan could push companies to flee the area and make it tougher to recruit firms as well as talented executives here.

“All businesses are going to have to continually re-evaluate whether this is the best location for them,” said Robert Haskell, a senior vice president at Pacific Mutual Life Insurance Co. in Newport Beach, which supported Measure R.

“Businesses like ours recruit people from around the country to work here,” Haskell said. “The first thing people ask us is: How are the schools and how stable are the property values. We don’t have a very good story to tell on both scores.

“If you can’t attract high-quality people to come here to work for your company, or if you can’t retain them, you’ve got to go somewhere else.”

Big corporations in particular had viewed the tax increase as a relatively quick, viable way to restore the county’s financial health, and they had put money and staff into the pro-Measure R campaign. But the failure of the tax increase proposal left them without an immediate backup strategy to help bail the county out of its financial mess.

“Not yet,” said B.J. May, director of community affairs for Rockwell International Corp., when asked about any alternative bailout plan in the works.

Seal Beach-based Rockwell, one of Orange County’s largest employers, had contributed $50,000 to the pro-Measure R campaign, and also sent letters to its 6,200 employees who live in Orange County in an effort to get their support of Measure R. “Certainly we are concerned about quality of life for our employees, and the ability to attract new employees,” May said.

Les McCraw, chairman of Fluor Corp. in Irvine, another major corporation in the county, had even threatened to leave Orange County if Measure R failed. Though McCraw declined to comment Wednesday, Fluor spokeswoman Kirsten Frosh said McCraw’s statement was meant to convey his strong concerns about the county’s weakening business climate.

But she noted: “There is no immediate threat of moving. We’re not packing our bags right now.”

Certainly not all businesses were disappointed with the poll results. Many Orange County car dealers, for example, were jubilant over the defeat of Measure R, which they saw as a potentially devastating threat to their business.

“Given the state of the auto business, we felt it would have made a lot of things worse,” said Steve Coleman, chief financial officer of Campbell Automotive Group, which owns six dealerships in Orange County and had encouraged its employees to vote against Measure R.

“It was just the sort of thing that could have driven a customer over the edge,” Coleman said of the sales tax increase, which would have cost every resident in the county an average of $50 more a year.

“I think we are plenty taxed already,” said A.J. D’Amato, general manager of Tustin Lexus. “They [the county] should manage their money better.”

Unlike big corporations, small businesses were more divided on Measure R.

Mary Ann Schulte, chief financial officer of Sukut Construction, a Santa Ana grading contractor, represents some 2,000 vendors who are owed about $200 million by the county.

“The vendors did not take a formal position [on Measure R] because it was a double-edge sword,” she said. “Any sales tax is not positive because it increases the cost of business. On the other hand, there was an opportunity for benefits” from a successful bailout of the county government.

Schulte, however, expressed confidence that county leaders will come up with an alternative plan to fix the county’s problems without raising sales taxes.

But other small-business executives weren’t so sure.

“I’m disappointed with the shortsightedness of the voters for not dealing with the problem head-on,” said William Ingram, president of Irvine-based Ivie Industries Inc., a 45-employee firm that makes security devices. “Now all the little nit-picky taxes and fees are going to go up, I’m sure.”

James Alexiou, chairman of Irvine Sensors Corp. in Costa Mesa, agreed that Measure R’s failure may ultimately result in more pain for some businesses and workers. But Alexiou, whose business hasn’t been hurt by the county’s bankruptcy, said he voted against Measure R, which he viewed as an easy way out.

“I’m more for get in there and fix it,” Alexiou said, adding that governments, like companies, need to restructure to survive. “You take your resources and you adjust; you cut back services, you slash salaries. . . . When you’re handed a lemon, you make lemonade.”

That apparently is the message from the voters, said Todd Nicholson, president of the Orange County Business Council, which led the pro-Measure R campaign.

“Our read of [the] vote is that voters are expressing frustration with the status quo in government as usual,” Nicholson said. “We’re really reading it as a demand for restructured government in Orange County.”

As such, Nicholson said the business council, perhaps the most influential business group in the county, has established a restructuring task force to look for ways to economize, downsize and privatize Orange County government.

But for the short term, many business executives worried about continued uncertainty and instability that have already shaken the corporate climate.

Gary Keller, owner of South Coast Lighting, said his 14 employees were visibly “shaky” in the wake of Tuesday’s vote. “They’re not sure if they’re going to have a job at the end of this year,” said Keller, noting that the bankruptcy has already cost him several hundred thousand dollars in business with Orange County government.

Keller said the passage of Measure R may not have helped his business much because his company is already shifting from government contracts toward private work. But a favorable vote would have helped lift the cloud of uncertainty hanging over businesses, he said.

“It’s that continued uncertainty that, over time, has the ability to impact the county’s economy,” said Larry Thomas, a senior vice president at the Irvine Co., Orange County’s largest developer, which gave $150,000 to the pro-tax campaign.

“It’s uncertain what the impact will be,” Thomas added. “If the bankruptcy goes on unresolved for years and the county can’t find financing without paying exorbitant fees, we as taxpayers are going to have to pay for it.”

Now, Thomas said, “there will be a huge burden on our elected leadership on all local levels and on our state legislative delegation to come together quickly and determine how best to deal with the bankruptcy, given the decisive vote that makes clear there will be fewer resources to deal with it.”

Whatever alternatives the county comes up with, he said, should be devised quickly “to dispel the cloud of uncertainty over county government.”

This story was reported by Don Lee, Greg Johnson, James S. Granelli, Ross Kerber and Dan Margolis. It was written by Lee.