Gov. Pete Wilson on Monday gave Orange County the power to recover from its bankruptcy debacle, signing into law three bills that let local officials pay their debts by diverting more than $800 million in transportation revenue and other funds.
"Contrary to what you might have read or heard, Orange County is not on the brink of collapse," Wilson told about 150 state and local officials and others who attended the signing ceremony at the Santa Ana Civic Center.
"This county remains a job-creating, financially vibrant cornerstone of the economic miracle that many are calling the California comeback," the governor said.
The signing--which occurred within view of the office of former Treasurer-Tax Collector Robert L. Citron, whose risky investment strategies plunged the county into financial ruin--marked only the third public appearance by Wilson in Orange County since the Dec. 6 bankruptcy declaration.
Wilson's action has been expected ever since state lawmakers passed the bills on the last day of the legislative session last month. Nonetheless, his formal approval of the laws was hailed as a watershed moment in the county's effort to recover from bankruptcy.
"This is a giant step forward," County Chief Executive Officer Jan Mittermeier said. "We now have the tools we need to get out of bankruptcy."
Wilson, whose speech was interrupted periodically by student protesters demonstrating against the governor's opposition to affirmative action at University of California schools, said the new legislation will enable local officials to pay their debts and pull out of bankruptcy without a state bailout.
"This plan protects Orange County's essential public services," said Wilson, who was flanked by Sacramento and Orange County politicians. "It provides the county with the resources it needs to educate kids and keep criminals off the streets. It is an important step toward guaranteeing that future generations will enjoy the same quality of life that drew many here in the first place."
Wilson also took a swipe at the "handful of government officials who made unwise investment choices" and caused the county's bankruptcy.
"We must be honest, they subjected this county to needless trauma, to embarrassment, but not to permanent or crippling injury described by naysayers who really fail to understand this county and its people," he added.
While the legislative package gives Orange County the ability to emerge from bankruptcy, it also includes a provision for a state takeover next year if local officials stumble. If the county is not about to emerge from bankruptcy by next May, Wilson will be required to appoint a trustee to assume command of county government, which was forced into bankruptcy when Citron's investments lost nearly $1.7 billion.
"Most importantly," Wilson said, "this plan reinforces that people who invest in California, and in particular this county, won't be shortchanged. We'll honor our obligations and meet our financial commitments."
County officials say the package of new laws, which become effective Jan. 1, will be vital in their effort to pay off more than $700 million in bond debt over the next 20 years. If all goes well, the county should emerge from bankruptcy by mid-1996, they said.
But by then, it might be a significantly different county, some officials said Monday.
"This will move Orange County out of bankruptcy, but it will create infrastructure problems in the future," said Stan Oftelie, chief of the county's transportation agency, which will see some of its revenue redirected to pay the county's obligations. "There's definitely a price to pay. How great a price we'll have to wait and see."
The bankruptcy already has taken a tremendous toll within county government. The county's discretionary spending has been reduced by 41%, nearly 3,000 county employee positions have been eliminated and county services--especially for health care--have been seriously cut. Even now, supervisors are exploring other ways to downsize and reorganize county government.
Under the terms of the newly signed bills, the county will divert $38 million a year in sales tax money from the Orange County Transportation Authority to the county's general fund and use it for the bankruptcy recovery. In exchange, the county agreed to give OCTA $23 million a year in gas tax money that until now has been used for road construction. Another $12 million a year is being diverted from restricted funds that normally go to the county's Redevelopment Agency, Flood Control District, and Harbors, Beaches and Parks division.
Supervisor Marian Bergeson praised Wilson on Monday for giving county officials the "tough love" they need to focus on solving their problems.
"He said, 'Get your act together,' and we did," said Bergeson, adding that Wilson played a key, behind-the-scenes role in moving the legislation through Sacramento.
Others, however, were less impressed with his involvement. Some Capitol insiders said they toiled for months to produce the recovery legislation with little help from Wilson.
They say Wilson scrupulously distanced himself from the issue, content to let the local officials who caused the problem come up with their own solutions, while he busied himself with running for the presidency.
"In the context of his presidential campaign, there was only the possibility for negative ramifications, with very little positive benefit," said one legislative staffer who worked on the recovery measures. "He wanted the whole Orange County mess to go away."
The closest Wilson came to playing a role was when he had his assistants call the Orange County Business Council, which includes the governor's political benefactors at the Irvine Co., to push for a final resolution of the problem, said a Republican official involved in the negotiations.
"From the very beginning back in December, legislators pleaded with the governor and his staff to become involved in finding a solution," the official said. "They not only didn't get involved, they didn't give direction. They never expressed what would be acceptable to them in the way of a plan. They just weren't there. Had they been, I'm convinced the plan could have been completed long ago. He had the bully pulpit and could have gotten this done."
Despite the government holiday Monday, many county officials attended the ceremony. Among those in attendance were: Supervisors Bergeson, Jim Silva and Roger R. Stanton, Sheriff Brad Gates, Dist. Atty. Michael R. Capizzi, Treasurer-Tax Collector John M. W. Moorlach, former CEO William J. Popejoy, and many of Orange County's state legislators, including Assemblywoman Marilyn C. Brewer (R-Irvine), Sen. William A. Craven (R-Oceanside), Sen. John R. Lewis (R-Orange) and Assemblywoman Doris Allen (R-Cypress).
After the ceremony, Wilson met briefly with reporters and said that he was working on another Orange County issue: The appointment of a 3rd District supervisor to replace Gaddi H. Vasquez, who resigned last month.
He said he expects to make an appointment before the Board of Supervisors' next meeting Oct. 17. He declined to elaborate.
Times staff writer Eric Bailey contributed to this report.
* WILSON SNUBS ALLEN: Uninvited former Speaker angrily walks out of event. A19
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Gov. Pete Wilson signed three bills Monday that give Orange County officials the tools to recover from the nation's worst municipal bankruptcy, which was brought on last year by nearly $1.7 billion in losses on risky investments. The bills allow the county to reallocate money earmarked for other uses.
AB 1664: Taps $38 million a year currently going to transit services in the county. These funds will help pay off bonds financing the county's recovery.
Author: Assemblywoman Doris Allen (R-Cypress)
SB 863: Takes $12 million a year from revenue of Harbors, Beaches and Parks, the Flood Control District and the Redevelopment Agency to help pay off recovery bonds to be sold next year.
Author: Sen. William A. Craven (R-Oceanside)
SB 1276: Requires Wilson to appoint a trustee next May to oversee all county operations if resolution of the bankruptcy isn't imminent. Also shifts $23 million a year in county road money to the Orange County Transportation Authority to soften the impact of $38-million shift from transit services.
Author: Sen. Lucy Killea (I-San Diego)
Source: California Legislature