City OKs 2nd Phase of Bankruptcy Plan

After blasting county government, the City Council this week reluctantly approved the proposed second phase of a bankruptcy settlement with cities.

The county has proposed a plan under which cities would get part of legal claims that county officials are pursuing against Merrill Lynch and other financial institutions.

The county’s proposal also would give first claim on legal-recovery money to school districts. Cities would be next in line.

Cypress City Council members Monday night expressed frustration with county government and how it has handled pay-backs since its December 1994 bankruptcy filing.

The first-phase settlement with cities, worked out last year, allowed them to recover about 80% of the money they had in the failed county investment pool if they agreed not to sue the county.

Cypress was among cities that ratified the first phase. City Manager Darrell Essex said Monday that Cypress had about $5 million in the county’s investment pool and so far has recovered about $4.7 million.

The proposed second step could allow cities to recover some or all of the remainder of their funds. Essex said the proposed settlement also would free up other city funds that the county was holding in trust. Cypress has about $600,000 held by the county but not invested in the pool, Essex said.