City Council OKs Settlement in County Investment Pool

Saying that it is the best and most realistic deal La Palma could get, the City Council has approved a proposed settlement from the county’s bankrupt investment pool.

The proposal was recommended by a subcommittee representing all Orange County cities. It gives school districts first claim to any money the county may get from suing investment companies, such as Merrill Lynch. Cities would be next in line.

Under an earlier partial settlement, cities--including La Palma--recouped about 80% of the money they had invested in the county pool, which collapsed in late 1994. The follow-up proposal outlines how cities might recover some of the remaining 20% of their money.

City Manager Daniel E. Keen told the council earlier this week that La Palma had $5.5 million in the pool when the county declared bankruptcy. He said the city has so far recovered about $4.3 million of its investment.

The new proposal, Keen said, might recover more of the money, and it definitely would release $351,000 that La Palma had on deposit with the county in an account separate from the investment pool.

He said about $345,000 of that money represents savings La Palma set aside over several years to pay its share for a new countywide emergency communications system.

The city’s alternative to accepting the settlement, Keen said, would be to sue the county, and “we’d have to get in line behind everybody else.”

Councilman Kenneth Blake added that if La Palma chose to sue the county, it would have to pay attorney fees, and there would still be no guarantee of recovering any of the invested money.