O.C. to Begin Paying Off Debts to Some Vendors : Bankruptcy: Federal court clears the way for county to pay companies for work on airport, roads and waste management.
Orange County will soon begin repaying some of the businesses that were owed millions of dollars when the county went into bankruptcy last December.
Dozens of businesses that worked for or provided supplies to Orange County before its bankruptcy will get a total of $10 million under an order signed recently by U.S. Bankruptcy Judge John E. Ryan.
As many as 2,000 businesses, most of them based in Southern California, are owed an estimated $100 million by the county for everything from copier cartridges and janitorial services to road paving and structural engineering work. Most of the vendors won’t be paid until the middle of 1996, however, after the county is expected to emerge from its bankruptcy.
The initial $10 million will come from special county accounts that can’t be used legally to pay other expenses. Vendors will receive funds for work done at the county airport, on county highways and in the county’s waste management program.
Although the funds, mostly from federal or state grant programs, could not be spent for any other purposes, bankruptcy law prohibited any payments without court approval.
The decision to start paying some of the vendors’ bills--most of them at least a year old--”is good for everyone because it is sending a message that the county is finally getting back on track,” said Richard Marshack, the Newport Beach attorney representing the vendors committee.
As much as $5 million more from the restricted funds is likely to be released in coming months as other vendors’ claims for payment from these accounts are identified, Marshack said.
Among the first payments will be $133,000 to LSA Associates Inc., an environmental planning firm in Irvine. The company, owed a total of $400,000, will get its initial payment from the highway fund for work on county road projects, said LSA President Les Card.
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Most of LSA’s 80 employee-owners gave up raises at the start of the year and all have seen company contributions to their retirement plans drop because the county’s inability to pay its debt has slashed LSA’s income for the year.
“So this is really welcome,” said Card. “We will put the money back into our retirement and benefit fund.”
Mary Ann Schulte, the vendor representative to the county creditors committee, said she is preparing claim forms to be sent to vendors eligible to be paid from the restricted funds. The county has agreed to issue checks within 20 days of receiving the vendors’ signed claims.
Schulte said vendors had been asking the county for months to seek a court order releasing funds in the restricted accounts but that other, more pressing business kept derailing the request.
Schulte is chief financial officer for Sukut Construction Inc., a Santa Ana heavy construction firm that is the largest creditor among the vendors. Sukut has $4.8 million in claims pending. She said Sukut is scheduled to receive $1.2 million in the first round of payments, all from the waste management fund for its work on the Coyote Canyon landfill.
Vendors suffering severe financial hardship because the county hasn’t paid them have gotten some payments through an emergency relief plan.
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There are no reports of any county vendors declaring bankruptcy because they cannot make a go of it without the funds the county owes them, Schulte said. But 21 businesses have staved off ruin by collecting a total of $300,000 through the emergency program, she said.
Most of the hardship cases are small businesses. She said one engineering consultant received $7,500 from the county, enabling him to make his rent payments. The consultant, who was owed a little more than $15,000, was facing eviction from his home and office last month when he applied for relief.
For vendors not facing imminent financial collapse and not eligible for payment from the restricted accounts, it is likely to be July before any relief arrives, said Schulte. That’s when the county expects to emerge from bankruptcy and begin repaying bills with the proceeds of a planned $500-million bond sale, scheduled for late March.
The bankruptcy court has set a Dec. 1 cutoff date for vendor claims to be filed. The county has mailed claim forms to business that supplied it goods or services before the bankruptcy and those with unpaid bills who don’t submit the claim forms by the end of the month could forfeit their claims, Schulte said.
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Pay Up Time
When Orange County filed for bankruptcy last December, as many as 2,000 businesses were left holding the bag for more than $100 million worth of work or services provided. A recent court order allows repayment of $10 million to those who worked on the county airport, highways and waste management program. Partial list of companies:
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Company Approximate payment amount Sukut Construction Inc. $1,252,800 GSF Energy Inc. 999,100 Greenfield Services Corp. 749,600 International Technology 337,500 Nobles/Fulton 263,100 Laguna Niguel Community Services Dist. 236,900 Windrow Earth Transport Inc. 232,400 Landfill Control Tech. 230,300 American Building Maintenance 222,400 Lumsdaine Construction Inc. 220,400 Fluor Daniel Inc. 205,600 Park Environmental Corp. 186,600 FCI Constructors 172,700 Greiner Inc. 167,200 RJW Construction 156,500 Rust Environmental & Infrastructure Inc. 145,600 Bryan A. Stirrat & Associates 118,600 Willdan Associates 108,900 Calscience 105,900
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Source: U.S. Bankruptcy Court
