County transportation officials reacted like the targets of a hostile takeover attempt when the Legislature voted to shift bus taxes to help the county bail itself out of bankruptcy.
They immediately counterattacked, contending bus service would be all but destroyed and future transportation projects endangered. They mounted an all-out battle to protect their treasury.
But even before a legislative deal crafted in the middle of the night stood poised to divert nearly $2 billion from the Orange County Transportation Authority over the next 15 years, the agency and the county had already calculated together that $500 million to $645 million in transportation money could be made available over that period by canceling some future projects.
And, both concluded, it could be done without shutting down the bus system.
While the bill was vetoed Wednesday, the Legislature comes back to session in three weeks and the issue is expected to come up again.
Supervisor Marian Bergeson, a veteran state legislator who joined the Board of Supervisors in January, said that if the bill to divert bus taxes is redrafted, she anticipates that it will be more carefully written.
Bergeson, who sits on the OCTA board, said the agency’s own figures indicated that a small revenue diversion “was certainly doable.”
“In my opinion, it would be possible to readjust some of the OCTA projects to a point where that money could be provided.”
It isn’t simply that OCTA has $645 million stashed away earning interest.
Far from it.
Voters approved Measure M in 1990 to raise $3.1 billion over 20 years by adding a half-cent to the county’s sales tax and giving it to the OCTA. Five specific sets of transportation projects were planned: $1.3 billion on freeways; $350 million on regional streets and roads; $650 million on local streets; and $775 million on transit projects.
The $645 million that the county covets would come from scrapping three of the transit projects, including light rail, and reallocating some Measure M money to replace the transit tax revenue being diverted.
Because the transportation tax measure had failed twice before finally getting the voters’ OK in 1990, strict assurances were written into the law specifying that the money would only be used for transportation.
To prevent diversions, a citizens’ oversight committee was formed. Any plan to drain money from one project to fund another requires the approval of the committee.
OCTA Chief Executive Stan Oftelie said Thursday the agency needed to dispel the widespread belief that it is awash in cash. To that end, he invited the Orange County Grand Jury this week to send in auditors to scour his accounts.
“We asked them to come and look at our books and to discuss this with the county and to do the necessary due diligence to see how much money is available,” Oftelie said. “That might go a long way toward dispelling any myths that the OCTA has a billion or two billion dollars laying around.”
It was county financial adviser Chris Varelas, a Salomon Bros. executive experienced in corporate takeovers, who came up with the idea two weeks ago to raid OCTA’s coffers for about $35 million annually over 15 years. Orange County’s legislative delegation, however, went far beyond that and proposed a full quarter-cent sales tax diversion, which would have raised more than double what was originally envisioned--$76 million a year.
Before the delegation made its proposal--and infuriated transportation officials with the higher sum to be diverted--Varelas had met with Oftelie to identify ways to use the OCTA reserves.
“It was quickly clear to our team with only two hours of analysis that there was over $500 million available,” Varelas said. “We felt comfortable in that meeting that we had achieved our target. We felt comfortable we could go more but we weren’t interested in over-burdening any particular agency.”
They suggested that the $500 million could be diverted to the county by eliminating the three projects, including the $340-million urban light rail. Since none of the money for the projects has been spent or allocated, bus tax funds could be tapped now by the county.
These bus tax funds are earmarked by the Legislature to operate mass transit programs. By getting the Legislature to shift this money to the county to pay off bankruptcy debts, the thinking went, the OCTA could then obtain approval of the oversight committee to “backfill” that money with Measure M funds dedicated to other transportation projects.
“Stan [Oftelie] told us this [projects money] was completely unaccounted for, had not been contracted for, had not been pledged, had not been borrowed against, was completely available,” Varelas said.
It was the same pile of money the OCTA suggested might be tapped in order to purchase John Wayne Airport and the rights to develop the El Toro Marine Corps Air Station into a modern commercial airport.
Oftelie said that while he and Varelas have reached an understanding about where funds might be obtained from within the OCTA budget, that is a far cry from having OCTA’s agreement to actually transfer them.
Knowing what the numbers are “establishes the playing field,” Oftelie said. “We want to make sure the county understands what the projects are. There will be great resistance to tampering with Measure M money in any fashion, great resistance.
“That we’re close in describing what the numbers are doesn’t predict the outcome of a policy discussion,” he said.
But trying to find a solution that helps the county without damaging the county’s ambitious transportation program has not been easy.
“Any time you have a transaction you have to have give and take,” Oftelie said. “All we see here is ‘take.’ Under those circumstances it’s not very attractive to have conversations. But we continue to be willing to meet with anybody to try to find solutions.”
The agency, meanwhile, is preparing for the next legislative attempt to assist the county at its expense.
In order to ensure better protection of the county’s transportation money in the future, the OCTA board Wednesday hired a new firm to deal specifically with this issue, while retaining the lobbying firm of Carpenter, Snodgrass and Associates to handle other matters.
Lobbyist Dennis Carpenter said his firm, which also represents Orange County, had found itself in a conflict on the issue, faced with one of its clients trying to make a run on the coffers of the other.
“I’m uncomfortable in the middle of a case like this,” he said. “It’s about as clear a conflict of interest as you could have,” he said.
Oftelie said communication was poor between the agency and Carpenter’s firm in the days leading up to the Legislature’s consideration of the bill. As the vote approached, Oftelie said, “we found ourselves under-represented.”
“There’s plenty of blame in why this bill went through,” the transit chief said. “Dennis shares some of it, I do and other people too.”
The county and the OCTA are now preparing for the next legislative battle, which will begin after the Legislature returns Aug. 21.
“It’s been an adventure,” Oftelie said.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
The portion of Measure M money that county officials were eyeing would have all come from funds designated for transit projects. The $485-million total is almost two-thirds of transit’s $775-million piece of the Measure M pie. All dollar amounts in millions:
Planned Measure M Spending
Regional streets/roads: $350
Local streets/roads: $650
Transit projects: $775
Transit Project Detail
Pacific Electric right-of-way: $50
Lossan intercity rail program: 20
Lossan commuter rail: 130
Riverside commuter rail: 90
High-technology advanced rail: 340
Elderly/handicapped fare stabilization: 20
Source: Orange County Transportation Authority