Bankruptcy Plan Gets 2 Key Endorsements : Recovery: Officials of OCTA and League of California Cities back proposal despite misgivings. Bus patrons appear at meeting to plead that services be spared.


In a needed boost for Orange County’s bankruptcy recovery plan, county transportation officials and the League of California Cities on Monday backed a proposal that relies largely on diverted transit tax revenue to solve the fiscal mess.

Despite the lukewarm reception it received from the county’s legislative delegation and the criticism heaped on the plan by representatives of some cities, the plan is slowly winning the support it needs before the county can return to court to win the approval of the bankruptcy judge overseeing the largest municipal bankruptcy in U.S. history.

The Board of Directors of the Orange County Transportation Authority voted unanimously Monday to support the proposal, which involves a complicated tax swap that ultimately deprives OCTA of $225 million over 15 years.

Because the plan takes away $38 million a year in OCTA revenue currently used to subsidize the county’s public bus system, it is expected to have a major impact on bus transportation. And while the county will be giving OCTA $23 million a year currently spent on capital road projects in unincorporated areas of the county, transportation agency officials say funding restrictions will prevent them from shifting other revenue to make up for the $38-million loss.


The result, officials said, would be an overall 21% reduction in bus services used primarily by the county’s poor, elderly and disabled.

Because of such dire predictions, several people who use wheelchairs turned out at Monday’s meeting to plead that the board spare from cuts the services they desperately need.

“There are those of us that have to rely on others for transportation,” said Linda McGowen of Anaheim, who uses a wheelchair and relies on a bus to get around. “You all have nice and fancy cars to get yourselves to work. We don’t.”

Orange County Supervisor Jim Silva, who also serves on the OCTA board, told McGowen and others that the board will look for ways to make the cuts without gutting transit services for the disabled.


In a related development, leaders of the Orange County Division of the League of California Cities have recommended that its members “conceptually” approve the county’s latest plan.

Elected city officials from across the county are scheduled to gather at Irvine City Hall today to discuss the recovery plan and consider the recommendation of the league’s Orange County steering committee.

“The general feeling [among city officials] is that this is a decent plan and that we should go with it in concept,” said Westminster Mayor Charles V. Smith, president of the league’s Orange County Division. “There are still problems with it. But the feeling is that they can be worked out.”

A special league committee made up of city managers and finance directors spent last week reviewing the settlement plan and discussing some of their concerns with county officials.

The county declared bankruptcy Dec. 6 after a risky investment strategy lost nearly $1.7 billion, much of it belonging to cities, schools and special districts. The recovery plan makes a 100% return on their investments contingent on the county winning its litigation against the Wall Street giants it blames for the losses.

The plan also diverts tax money from OCTA and other county special districts, but promises to repay those funds if the county has litigation proceeds left over after settling all its other bankruptcy debts.

The league committee still has four objections to the plan. One involves the official committee that will oversee the recovery effort. City officials want the oversight committee expanded from three to five members so that cities and special districts would be guaranteed representation.

Under the existing plan, the panel would consist of a state-approved trustee, a representative of the county and a representative of the more than 200 pool investors, including cities.


A second key objection concerns an $18-million tab that cities, schools and special districts would be forced to pay to reimburse the county for the costs of transferring its road construction program to OCTA. City leaders said municipalities and school districts suffer enough under the recovery plan and should not have to absorb the $18-million hit as well.

Smith said Monday that the league will continue pressing to resolve the four points, but added: “The sticking points are not deal-breakers. We think they can be worked out.”