O.C. Board OKs Recovery Plan With 6 Options
Despite concerns voiced by Supervisor Marian Bergeson that Orange County wasn’t fulfilling a pledge to produce a comprehensive bankruptcy recovery plan, the Board of Supervisors on Tuesday endorsed a proposal with six different formulas and said it would let the state Legislature pick and choose.
But if the board’s action was intended to ease fears that Orange County is running out of time to get the legislative help it must have to resolve its bankruptcy case before year’s end, it had the opposite effect.
The supervisors’ votes were barely an hour old before two members of the county legislative delegation rejected a key component of the plan.
And officials in Sacramento, complaining about an apparent lack of consensus, called an emergency session next Tuesday of the Senate committee that has been investigating the bankruptcy and the effect it might have statewide.
With only three weeks of the current legislative session remaining, Gov. Pete Wilson recently chastised Orange County leaders for not coming up with a comprehensive recovery plan and told them it was “imperative” that they have one ready when legislators return to work Aug. 21.
Following a closed-door meeting Tuesday with county officials who outlined the plans, Assembly members Mickey Conroy (R-Orange) and Marilyn C. Brewer (R-Irvine) said they did not think Orange County’s 31 cities should be forced to surrender from 1% to 4% of their annual revenue for the next two decades to help county government recover.
“I don’t think there is any interest in our [legislative] contingent, as far as I could detect, in a shift from the cities,” Conroy said, adding that the county should focus its efforts on targeting the Orange County Transportation Agency and various water and sanitation agencies that have the resources to help bail the county out.
Scott Johnson, chief counsel of the state Senate Special Committee on Local Government Investments, which plans an emergency session Tuesday, complained that “there doesn’t appear to be any consensus yet, and frankly we’re concerned about that.”
“There’s a three-week, drop-dead date to have a plan on the governor’s desk,” Johnson said. “If there’s no plan by the time we recess, it will simply be too late to help and the county will just languish in bankruptcy.”
Supervisor Bergeson raised such concerns during the board hearing Tuesday morning, adding that she believed the Legislature required a more focused plan, instead of a laundry list of ideas and scenarios.
“We’re going to have to defend and promote it . . . in all its gore and all its glory,” Bergeson said before the board resolution was put to a vote. “I think we need to be much more definitive in the action the board is going to take.”
But Board Chairman Gaddi H. Vasquez said later that the board is giving the Legislature the outlines of a viable plan, recognizing that the county legislative delegation and others in Sacramento may find some parts of the proposal politically unpalatable and may have their own ideas on crafting a better plan.
“We needed to come up with the parameters, and then we have to narrow the scope and refine it,” said Vasquez, who added that he believes the proposal fulfills a written promise he and Bergeson made to have a plan in place this week.
“We’re confident we’ve achieved our goal of submitting a plan that is viable and going forward,” he said.
The half-dozen scenarios involve taking tax revenue from cities, special districts and the transportation authority in hope of infusing the county’s treasury with $74 million to $160 million a year for 15 to 20 years to make up for the $1.7 billion the county lost on risky investments.
The county promises to continue seeking other options, such as selling assets, privatizing services, downsizing government and cutting costs. The county’s plan also envisions the imposition of a state trustee with broad powers to implement a recovery plan if the county stumbles in its efforts, although most board members agree that the county can succeed on its own.
After the meeting with the Orange County delegation Tuesday afternoon, Bergeson said her concerns were partly allayed, although she said she would like to see a special board meeting later this week to review the final proposal that will be presented to state officials.
“It will be refined with the help of the county, it will be pared and ready to be submitted, hopefully by Monday,” said Bergeson. “I would prefer seeing a finished plan at a special session on Friday, so that we have something that we can call a recovery plan in hand.”
Officials said the county may have to go beyond its legislators, perhaps to those of San Diego or Los Angeles counties, to find sponsors for legislation that county representatives may find politically unfeasible.
Bergeson said that while the delegation was generally supportive of Tuesday’s proposal, there was opposition to two of the six “reallocation cases” that involve taking $20 million to $33 million a year from the county’s cities for 20 years.
“It appears the cities may be off the hook on this because I certainly am not in favor of taking money from cities and I don’t know if there is enough support to go forward on something like this,” she said.
“But the charge to our lobbyist is, ‘This is our package, go find someone who will carry it,’ ” she said.
Supervisor Roger R. Stanton said he was pleased with the plan that shunned raising taxes in the wake of Measure R’s defeat by voters in June. Under that unsuccessful ballot proposal, the county would have imposed a new half-cent sales tax in the county for 10 years.
“We lost five months” chasing that failed effort, said Stanton, who blamed supporters of Measure R for blocking efforts to craft the viable Plan B endorsed by the supervisors Tuesday.
“But look at all the progress we made in the last 15 days on exploring non-tax options,” said Stanton, who opposed the sales tax.
The board meeting, while long on complaints about the plan, raised the possibility of another previously overlooked revenue source when the subject of redevelopment agencies came up.
Stanton asked county staffers to investigate whether the county can tap into the tax monies that now go to city redevelopment agencies, some of which have been accused of abusing redevelopment funds.
“I don’t want to hazard a guess on how much money is there, but I’d say it’s big-time money,” Stanton said after the meeting. “I think the time is ripe to look at this.”
Cities and special districts that had money invested in the bankrupt county investment pool have been nearly unanimous in their demands for a 100% return on their deposits, while insisting at the same time that any taking of their tax funds would be devastating. The cities have been repaid much of the money they had in the failed pool, but are still owed more than $400 million.
Newport Beach Mayor John W. Hedges told the supervisors Tuesday that a diversion of one-eighth of a cent of Newport’s sales tax share to the county would cost the city $1.5 million a year.
“That’s enough to fund 20 police officers or 20 firefighters,” said Hedges, whose city is owed $1.8 million by the bankrupt county.
Only two of the more than 20 people who spoke at Tuesday’s meeting supported the plan. The majority, who represented cities or special districts, said it would result in higher user fees and costs being passed on to taxpayers.
Before the supervisors adopted the plan, there were harsh complaints that the county’s legal and financial consultants had botched their calculations or refused to meet with district officials to discuss their financial situations. But it later became clear that the county’s experts had made a major effort to consult with those whose revenue was being targeted.
Vasquez at one point reacted sharply to the criticism, quizzing the Orange County Water District about its $350-million reserve fund, after a district official said diverting up to $20 million a year in property taxes would force water rate increases.
The pointed exchange came about when a water district official said he did not believe the county had done all it could to cut costs, consolidate and downsize.
Vasquez noted that there are more than 20 water districts in the county, including one district with only two customers--although one is an agricultural enterprise. Vasquez asked why water districts hadn’t consolidated.
“Is that too progressive? Is that too creative an idea?” the supervisor asked pointedly.
But mostly, those addressing the supervisors had only pleas to be spared.
Gilbert L. Challet, manager of the Orange County Vector Control District, said a proposal to seize less than $1 million annually from his agency would undercut its ability to control pests.
“It’s not much money for what you’re looking for, but it’s a heck of a lot of money for us,” he said.
Times staff writer Michael G. Wagner and correspondent Shelby Grad contributed to this story.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Tax reallocation plans endorsed by the Board of Supervisors focus on diverting sales tax funds from Orange County Transportation Authority during the next 15 years. Here are the options and the anticipated amounts of total revenue:
Plan: Plan A
Details: One-quarter-cent sales tax from OCTA
Revenue: $1.05 billion
Plan: Plan B
Details: One-eighth-cent sales tax from OCTA
Revenue: $525 million
Plan: Plan C
Details: One-eighth-cent sales tax from OCTA; property taxes from special districts (amount based on 65% of basic property tax levy or 9% total revenue, whichever is lower, for 20 years)
Revenue: $1.225 billion
Plan: Plan D
Details: One-eighth-cent sales tax from OCTA; one-eighth-cent sales tax from cities for 20 years; property taxes from special districts (with same amount bases as Case C above)
Revenue: $1.853 billion
Plan: Plan E
Details: Three-sixteenths-cent sales tax from OCTA; property taxes from special districts (amount based on 80% of basic property tax levy or 14.5% total revenue, whichever is lower, for 20 years)
Revenue: $1.645 billion
Plan: Plan F
Details: One-quarter-cent sales tax from OCTA; one-fourteenth-cent sales tax from cities for 20 years; property taxes from special districts (amount based on 50% of basic property tax levy or 5% total revenue, whichever is lower, for 20 years)
Revenue: $2.005 billion
The county’s recovery plan would take funds from a variety of local resources. A look at what the county would hope to reap on an annual basis; amounts in millions:
Sanitation districts: $8-22
Water districts: $9-20
Flood control: $2-7
Harbors, beaches & parks: $2-5
Source: County of Orange Recovery Plan