Bankruptcy One Year Later : Battered but Not Broken

The bankruptcy wrought substantial change in Orange County government. Forcing unprecedented cuts and reductions in staff and services provided to 2.5 million residents. Yet, the county’s overall economic health remained strong and shows definite signs of improving.

Dollars Disappear

The discretionary general fund budget, from which the Board of Supervisors funds various services and programs, was slashed 41%. The fund, rounded, in millions of dollars:

90-91: $482

95-96: $275

Reality Check: Where We Stand on Changes

Orange County’s bankruptcy sparked lots of ideas--some grand and some simple. They are a mixture of fundamental change, revenue enhancement and, at times, just dragging the county along the path of modernization. Following through on the ideas, though, has been only a mixed success:

Proposal:

March 30, 1995: Interim County CEO William J. Popejoy proposes “a salary reduction for all employees earning $75,000 or more per year.”

Outcome: Most salaries are frozen, but no salary reductions have occurred.

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Proposal:

April 25, 1995: Supervisors approve looking into benefits of changing from general law county governed by state laws to charter law county governed by statutes passed by local voters.

Outcome: Supervisors this week agreed to put a charter measure on the ballot in March to let voters decide the matter.

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Proposal:

Jan. 2, 1995: Supervisor William G. Steiner predicts creation of permanent CEO position to replace a less powerful county administrative officer. “I think you’ll see [the position of] chief executive officer come out of this whole debacle.”

Outcome: CEO job created Feb. 10.

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Proposal:

Jan. 18, 1995: Former state Treasurer Thomas W. Hayes says county treasurer’s office computers need updating. “I think the Orange County accounting system needs to brought into the 21st Century.”

Outcome: Upgrading accounting systems with state-of-the-art computer software expected to be implemented early next year.

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Proposal:

Feb. 15, 1995: Reason Foundation report suggests “Orange County’s landfills could be sold to one or more private firms. . . . Their value would be increased if the county were to rescind its ban on out-of-county waste and permit the tipping fee to rise to market levels.”

Outcome: Landfill sales still under study; county officials approved trash importation, raised tipping fees Sept. 12.

What Bankruptcy?

Despite the bankruptcy, Orange County’s economy has proved remarkably resilient. Some measures and expectations:

Building industry expects a 58% increase over this year’s housing unit starts.

Nearly 30,000 new jobs are expected to be created during the next year.

Film industry pumped $6.3 million into the Orange County economy.

Tourism is expected to rise 5% this year.

Venture capital in the first quarter of 1995 tripled compared to 1994.

Median household income expected to top $55,500 this year, a 2% increase.

Taxable sales are predicted to rise 5% to 6% through the end of the decade.

Feeling the Pinch

The departure of money and people had an impact throughout county government. Among the most significant:

Probation Department: Eliminated electronic confinement program.

District attorney’s office: Ended a drug enforcement program.

District attorney’s ofice: Stopped enforcing some ordinances and handles some misdemeanors as mere infractions.

Sheriff’s Department: Reduced deputies’ firearms training.

Sheriff’s Department: Discontinued gang prevention and other programs.

Sheriff’s Department: Halted work on many unsolved homicides.

Social Services Agency: Ended prenatal program serving poor women.

Social Services Agency: Eliminated 883 agency positions.

Bankruptcy Timeline

Key dates and developments in the crisis that led to the largest municipal bankruptcy in history:

1994:

Dec. 2: After stock market closes for the week, officials verify rumors that county investment portfolio has lost nearly $1.5 billion.

Dec. 4: County Treasurer-Tax Collector Robert L. Citron, the fund’s manager, resigns from post he held for 24 years. His top assistant, Matthew Raabe, is named acting treasurer.

Dec. 6: Orange County files largest municipal bankruptcy in U.S. history, freezing assets of remaining investment pool.

Dec. 31: Supervisors Harriett M. Wieder and Thomas F. Riley retire as previously planned.

1995:

Jan. 12: County files suit against Merrill Lynch & Co., alleging it concocted exotic investment scheme that broke state law and led to collapse--charges that Merrill denies.

Feb. 10: County supervisors appoint former savings and loan executive William J. Popejoy as the county’s first-ever chief executive officer.

Feb. 24: County Administrative Officer Ernie Schneider and Assistant Treasurer Matthew Raabe are fired.

March 7: Popejoy announces plans to lay off 1,040 county workers and eliminate 563 vacant positions.

March 15: As part of a bankruptcy recovery plan, Popejoy calls for a half-cent sales tax increase, later submitted to voters as Measure R.

March 21: John M.W. Moorlach, who ran unsuccessfully against Citron in 1994 and warned of risky investment strategies, appointed treasurer-tax collector.

April 27: Citron indicted, pleads guilty to six felony charges relating to bankruptcy.

May 16: Raabe arrested on six counts of securities fraud and misappropriation.

June 27: Voters reject Measure R.

July 12: Popejoy resigns effective July 31, four months short of contract end.

Aug. 7: Supervisor Gaddi H. Vasquez announces he will leave office in September, with 15 months left in his term.

Sept. 25: After being appointed interim CEO in July, former John Wayne Airport Director Jan Mittermeier unanimously appointed the county’s first permanent chief executive officer.

Sept. 30: Supervisor Roger R. Stanton announces he won’t seek reelection when term ends in December, 1996.

Nov. 18: Supervisor William G. Steiner announces he won’t seek reelection when his term ends in December, 1998.

Making Deep Cuts

Five departments suffered the bulk of the budget cuts. Among the steepest declines, in millions:

General Services Agency:

1994-1995: $37.0

1995-1996: $22.7

Cut: -38.8%

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County Administrative Office:

1994-1995: $6.5

1995-1996: $4.4

Cut: -33.2%

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Auditor-Controller:

1994-1995: $9.2

1995-1996: $7.2

Cut: -20.9%

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Social Services Agency:

1994-1995: $213.3

1995-1996: $171.6

Cut: -19.5%

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Environmental Management Agency:

1994-1995: $95.6

1995-1996: $82.4

Cut: -13.8%

The Price in People

The size of the work force declined by 8% through layoffs, resignations and voluntary departures:

How employees left:

Resigned/voluntarily left: 50%

Retired: 24%

Layoffs: 26%

Employee positions:

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December, 1994 November, 1995 Authorized positions 17,236 15,334 Filled positions 15,753 14,409 Vacancies 1,483 925 Total employees full-, part-time 16,062 14,771

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Sources: Orange County Business Council, county administrative office, Times reports; Researched by MATT LAIT and APRIL JACKSON / Los Angeles Times