What Bankruptcy Has Cost : Aftermath: A year later, the most dire predictions haven’t come to pass. But there’s been plenty of pain, and more is still to come.

Buses run, streets get paved, schools are open and crooks still go to jail. Some of its bondholders had to extend nearly a billion dollars of county debt, but county government hasn’t shut down, and taxes haven’t been raised.

One year after the nation’s worst municipal bankruptcy, the doomsayers’ most dire predictions of Orange County’s demise have not come to pass. It has taken a heavy hit, no doubt, but the country’s fifth-largest county hasn’t sunk.

“Chicken Little was wrong, the sky didn’t fall this time,” said Sherry Bebitch Jeffe, a senior associate at the Center for Politics and Economics at Claremont Graduate School, who has been following the bankruptcy fallout.

Most residents haven’t even been pinched by the county’s loss of nearly $1.7 billion, first disclosed a year ago this week. Unemployment is down, economic activity is up and life pretty much continues at the same pace it traveled before the Dec. 6 bankruptcy declaration a year ago.

But there has been pain, both large and small, throughout the county over the past year.

Because of the financial calamity, fees at the county’s parks, beaches and zoo have been raised. Trash collection costs for most residents have increased. Schools have had to cut back on classroom supplies, student field trips and teacher conferences.

Drug and crime prevention programs have been cut. Prenatal care services to the poor have been wiped out. And some misdemeanor offenses that previously warranted jail time are being absolved with simple fines.

Within the Sheriff’s Department, work on old murder cases has been halted, while other criminal investigations have been put on the shelf. And even death must wait, as coroners take longer now to determine how some people died.

And for those who work with and within the Hall of Administration--the heart of county government--the winds of turmoil have blown steadily over the past 12 months. Jobs have been lost, careers have been shattered and services, especially to the county’s poorest and sickest, have been slashed. The Hall has become a sad and gloomy place.

It’s been a year most would like to forget.

“This has been the hardest 12 months in my life, and that’s an understatement,” said Supervisor William G. Steiner, who announced two weeks ago that his first full term in office would also be his last.

Lingering Questions

As the county marks the first anniversary of the bankruptcy, much uncertainty still remains.

Will the bankruptcy court approve the county’s recovery plan? Will the governor be obliged to appoint a state trustee to carry out that plan? Will the grand jury and federal authorities charge the Board of Supervisors and other county officials with misconduct? How long will the county and cities have to postpone capital projects such as new streets, jails and courthouses because of a lack of funds? And, what price will the county have to pay in the future when it approaches Wall Street, hat in hand, for loans?

Also unclear is whether the bankruptcy will have any lasting effect on the way county government operates.

“A lot of things are still up in the air,” Steiner said.

Shortly after the county’s fiscal collapse, some residents, looking for a bright side, said the bankruptcy provided a perfect opportunity to overhaul and reshape an outdated and inefficient government. Orange County, they said, would become the nation’s laboratory for reinventing government, a model for others to follow.

Hopes were high as county officials talked boldly of selling off assets, privatizing services and deflating a bloated bureaucracy.

But on the eve on the bankruptcy’s anniversary, most people fear the opportunity has been squandered. John Wayne Airport and the county’s landfills--the most attractive assets--remain unsold, services and jails have not been privatized, and plans for a restructured county government have advanced little, if at all.

“We haven’t done enough with the opportunity that was given to us,” said Robert Poole, president of the Reason Foundation, a libertarian think tank. “We’re not even close to what we should be doing. I’m pretty disappointed that we’ve seen so very little change in the scope and function of government in this period of time.”

William J. Popejoy, the retired business executive who served for nearly six months as the county’s first chief executive officer, was even more pessimistic.

“I don’t think the lesson has been learned,” said Popejoy, who resigned Aug. 1, months before the end of his contract, complaining that the supervisors had re-involved themselves in the day-to-day administration of county government--the same everyone’s-in-charge management system that failed to head off the bankruptcy in the first place.

“It seems like the county is going back to business as usual,” Popejoy said then. “I’m saddened to see that. County government right now is dysfunctional at best, and at worst, dangerous.”

Even members of a highly-touted, county-formed committee grappling with issues of government restructuring concede that not many substantial changes have occurred during the first year of the bankruptcy.

“Dramatic, huge change isn’t going to happen overnight and it can’t,” said retired Superior Court Judge Bruce Sumner, who chairs the Charter Commission Committee. “All change has to be incremental unless we have a revolution.”

Todd Nicholson, president of the influential Orange County Business Council, said it was not surprising that the government hasn’t yet undergone an overhaul.

“The initial focus has been on the bankruptcy recovery, not the restructuring itself,” Nicholson said. “Now we move into another phase. There is still the opportunity to change the organization and make it far more efficient and responsive.”

In March, county voters will have an opportunity to take a shot at restructuring government when they go to the polls to decide a ballot measure that would change the county from a general law county, which is governed by statutes approved by the Legislature, to a charter county, which is governed by statutes backed by county voters.

A charter form of government, supporters say, would give the Board of Supervisors the authority to privatize jails and other county services and appoint professionals to offices such as treasurer and clerk-recorder instead of keeping them elected positions.

The voters will also have the opportunity to decide on term limits for supervisors and whether to expand the board from five members to nine members.

“These changes would have been unheard of before the bankruptcy,” Sumner said.

But to Tom Rogers, a county activist who also sits on the charter commission, the proposed changes in government are “pitiful,” so inadequate that he and others are pushing a rival ballot proposal. Their version includes such dramatic ideas as placing an eight-year term limit for county department heads and creating citizen oversight committees with subpoena power to monitor county bureaucracy.

“Not only has nothing changed, the status quo is stronger now than it ever has been,” Rogers said. He added that nothing has been done to improve competitive bidding of government contracts in the county, reduce the influence of lobbyists or consolidate some of the many special districts in the county that seem to deliver the same services.

“In the end, I think the bankruptcy is going to be a blip on the radar screen,” he said. “It’s somewhat like wars. No one ever learns a lesson from wars, they just continue to happen.”

Changes at the Top

While some say the charter commission’s effort falls short of reinventing government, others point to the changes that already have occurred within government.

The county’s work force of about 17,200 has been cut to 15,300. Nearly $190 million has been cut from the discretionary budget that is now $275 million--a level it had not seen in more than a decade. A chief administrator who lacked hiring and firing authority has been replaced by a CEO who wields far more power. And, for the first time ever, the board holds night meetings once a month. (County insiders, however, say that department heads deliberately avoid putting anything either interesting or controversial on the night meeting agendas because they don’t want to work into the evening. Night agendas do tend to have the fewest number of items on them.)

Irvine City Manager Paul O. Brady Jr. said the relationships among the county’s cities have also changed for the better.

“It’s caused all the 31 cities in the county to become closer knit and work closer together than they have at any point in history,” Brady said.

Also, he said, cities and other governmental agencies are going to be more cautious about how they invest public funds. “It’s caused us all to rethink our investment practices and procedures.”

Furthermore, Brady and others say the county has undergone a significant leadership change. People who once controlled the direction of county government have been ousted from power.

Consider:

Board of Supervisors Chairman Gaddi H. Vasquez has resigned. Supervisors Roger R. Stanton and Steiner have declared they won’t run for reelection. Former County Administrative Officer Ernie Schneider was fired. Former County Counsel Terry C. Andrus resigned, as did the directors of personnel, integrated waste management, the Social Services Agency and the General Services Agency.

And, former Treasurer-Tax Collector Robert L. Citron, whose risky investments lost nearly $1.7 billion and forced the county into bankruptcy, has pleaded guilty to six felony charges of fraud and misappropriation of public funds. His underling, former Assistant Treasurer Matthew Raabe, has been charged with the same offenses but has pleaded not guilty.

Meanwhile, local and federal investigations continue to probe the involvement of supervisors and other county officials in the bankruptcy.

“For most people nothing has really changed, but for those in county government and politics it’s a substantially different world,” said William Mitchell, a spokesman for the Orange County chapter of Common Cause, a governmental watchdog group.

One of the most significant differences in county government since the financial collapse has been in the amount and intensity of citizen involvement. Unlike the pre-bankruptcy days when only a few interested residents attended board meetings, the chambers were packed after the fiscal calamity with angry homeowners and business leaders demanding explanations from their elected representatives.

Outraged residents organized in opposition as never before when county officials said a half-cent sales tax increase was the only way to bail the county out of bankruptcy. To many activists, the so-called Measure R campaign was a defining moment in the county’s history.

“It was trench warfare,” said Bruce Whitaker, a member of the anti-tax group Committees of Correspondence. “The county’s solution was the same one they always have, go to the taxpayer. But we didn’t allow it.

“It was very heartening the way people banded together to defeat Measure R,” he said. “[County leaders] awoke a sleeping giant.”

Rogers, another grass-roots activist, said the campaign further discredited county officials who ominously predicted--wrongly, it turns out--that the county would default on its short-term debts and be financially ruined if a tax wasn’t passed.

“We had all these dire predictions, that unless we had the tax the county would go down into oblivion. Schools would be locked up. Kids would be on the streets,” Rogers said. “None of the predictions came true. The county’s credibility is completely shattered. Many of us don’t think anything they will say in the future can be relied upon.”

Recently, however, it appears that even the activists are themselves suffering from business as usual. Recall efforts aimed at ousting three holdover board members have all failed. Anti-government rallies haven’t occurred in months. And even stalwart gadflies are skipping board meetings lately.

A poll conducted by UC Irvine showed this week that 26% of county adults identified the financial crisis as the top public policy problem in Orange County--and roughly the same number said they have been personally affected by the bankruptcy.

Even Whitaker admits that the activists “are better at playing defense than offense. . . . We need to channel the energy we had to defeat the tax into changing and reinventing government.”

Some say the opposition is withering because most residents haven’t felt inconvenienced by the bankruptcy.

“The government lost $1.7 billion and hardly anybody feels it,” Rogers said. “That means the government is fat.”

“We’re a selfish lot and we don’t care what happens to others,” said government professor Jeffe.

The Pain to Come

Orange County Sheriff Brad Gates said that residents are in for a surprise if they think that the bankruptcy will not affect them.

Anyone who thinks the bankruptcy won’t touch them “is foolish,” Gates said.

He said it is further straining an overloaded criminal justice system that was about to burst at the seams even before the bankruptcy. Because of cutbacks, Gates said, his department has severe backlogs in nearly every law enforcement function. Deeper cuts could be devastating.

If he had to cut another $1 million out of his budget, “I would have to close a jail,” Gates said.

For those who tend to the sick, the poor and the homeless, the bankruptcy has been far from painless.

“There is almost a general denial that there are people in need in this county,” complained Tim Shaw, director of the Homeless Issues Task Force. “But that’s not the way it is. The bankruptcy has resulted in a decreased quality of life, especially for low-income people in this county.”

Shaw said the average Orange County resident might not come to realize the bankruptcy’s ramifications until the fallout of the massive cuts to social and health programs become evident in a couple of years.

“There are going to be more mentally ill on the streets, more alcoholics on the streets and more drug abusers on the street. Tuberculosis cases will go up. Sexually transmitted diseases will go up,” Shaw warned. “Then you’ll see the impacts of the bankruptcy. There will be pain.”

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So Far, Difficulty Changing

Given an opportunity to remake itself, Orange County government has had trouble implementing suggestions:

Proposal:

Dec. 27, 1994: Supervisor Roger R. Stanton suggests selling John Wayne Airport.

“It’s got to be considered. Anyone offering a billion dollars for the airport can have it right away.”

Outcome: Airport sale rejected because of legal and financial obstacles.

*

Proposal:

March 9, 1995: Interim County CEO William J. Popejoy unveils plan to privatize services and sell county assets.

“Asset sales and privatization of county services are important links in the process of financial recovery.”

Outcome: To date, no significant privatization and only about $11 million in assets sold.

A Year of High Drama

During the past year of bankruptcy, Orange County and its officials have been participants in a number of dramatic scenes as the county’s financial crisis played itself out. Here are some key moments:

Jan. 17, 1995: Robert L. Citron a State Senate Committee. Treasurer-Tax Collector Robert L. Citron, left with attorney David W. Wiechert, campaigned last year as an investment wizard but now is reduced to having Wiechert seek leniency for him by denigrating his intelligence and financial acumen.

May 16, 1995: Assistant Treasurer Matthew Raabe in custody. Citron deputy Matthew Raabe, appearing in court handcuffed after bizarre chase from a law enforcement stakeout of him at a South Coast Plaza movie theater, has pleaded not guilty to six felony counts. His former boss told authorities in April that Raabe helped improperly transfer more than $80 million.

June 27, 1995: William J. Popejoy during the Measure R balloting. Retired baking executive William J. Popejoy worked for free as county chief executive but resigned early in frustration after his voters rejected his sales tax increase and supervisors resumed what he called “business as usual.”

Sept. 27, 1995: Gaddi H. Vasquez on his last day in office. Onetime national Republican rising star Gaddi H. Vasquez lost his luster after the bankruptcy, lasting only a little over half the year as Board of Supervisors chairman before announcing his resignation 15 months before his term expired.