Sticking Points Keep Recovery Plan Hung Up : Bankruptcy: County hopes for court OK by Dec. 15 are imperiled by clashes with pool investors. They’ve been arguing since Oct. 10.

A welter of seemingly minor details remains unresolved and may dash Orange County’s hopes of obtaining speedy court approval of its bankruptcy recovery plan, say officials and consultants who represent investors in the county’s failed investment pool.

“The county expects us to just roll over and sign this agreement, but these are significant issues that have yet to be dealt with,” said Jon Schotz, financial adviser to the pool investors.

Even though the Legislature passed and Gov. Pete Wilson signed the bills that enable the county to put into effect the joint agreement hammered out in September and October, several issues that weren’t addressed threaten to snag the plan. If they can’t be resolved, Wilson might ultimately have to appoint a trustee, as the legislation provides.

The county had hoped to have final signatures from the all the pool participants by now. But when County Chief Executive Officer Jan Mittermeier distributed a letter Oct. 10, it touched off a firestorm between the pool participants and the county.

In her letter, Mittermeier asked the participants to sign and send her final “executed agreements” so that the county’s plan of adjustment could be filed with the bankruptcy court by Dec. 15.

But some of the participants contended they were being pressured to sign off on the agreement before significant pieces of unfinished business had been addressed.

On Oct. 12, Patrick C. Shea, the attorney representing the pool participants, distributed his own letter emphasizing that the pool participants’ committee “has not recommended approval of the joint agreement.”

What followed was an exchange of biting correspondence.

“I was surprised by the tone and content of your letter,” Mittermeier replied to Shea.

Shea shot back: “The reason for my correspondence . . . was the sense of concern and confusion expressed to me by them [pool participants] upon receiving a legal document directly from you with instructions to approve, sign and return it to the county.”

The unresolved details range from a disagreement involving the 15-year diversion of $38 million a year in county bus funds, to when and by how much county-administered accounts would be replenished, to a dispute over $5 million in road construction funds.

“We’ve moved billions of dollars around to get this far and now we’re standing on ceremony,” Schotz said.

For their part, county officials don’t believe any of the matters will overwhelm and delay the recovery plan.

“The real issue here is, is everyone in agreement that the county must pay its bondholders 100% next June, and are all the pool participants willing to make that happen,” Mittermeier said.

The thorniest matter involves the diversion of the funds used to operate the county’s buses. Under the joint agreement between the county and the pool investors to lift the county out of bankruptcy, the Orange County Transportation Authority agreed to the diversion of $38 million a year for 15 years.

The original agreement would have allowed OCTA to borrow and pass on to the county the same amount of money, Schotz said. Because of the transportation agency’s excellent credit rating, it was felt that over 15 years, the agency could have saved $15 million to $50 million by borrowing instead of simply diverting the state-appropriated bus funds.

“If they could convince the county that rather than having a certain amount of money going to pay interest with the county borrowing, then the OCTA could do it in a less expensive manner,” Schotz said. “You’d rather have the money going to transportation services rather than in interest.”

Mittermeier said she’s not opposed to that but she is not convinced OCTA has the legal authority.

“OCTA has been unable to provide us with any legal premise for them being able to do that,” Mittermeier said. “So we said the chances are very, very slim that we would even select that option.”

Besides, Mittermeier said, the option was deleted by legislators. “That change was made by our delegation. They took that option out because they wanted the monies to go direct from the state to the county specifically for the purpose of bankruptcy. They didn’t want any fooling around with it.”

Mittermeier said it didn’t matter anyway because the county would not have chosen that option.

“We told OCTA all along that the probability of the county selecting that option was probably a minus 10,” Mittermeier said, “because the [municipal] market was going to be interested in seeing a dedicated secure source of revenue and they weren’t going to want to depend on OCTA.”

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Another large unresolved issue involves the $360 million in so-called county administered accounts. These accounts represent streams of revenue that fund such activities as joint fire protection shared by several cities. At the time of the bankruptcy, the balances in these accounts were in the county’s failed investment pool.

“The county has all these accounts and the question is in which order of priority are they going to fill them,” Schotz said. “We have not been able to get the final list from the county, much less how they’re going to be treated.”

Said Mittermeier: “The cities have asked for some additional technical information related to the county administered accounts and those will be going out next week. And most of them have told me that once that happens, that’s all they’re waiting for [to sign the final agreement].”