County’s Debt to Option B Agencies is Long Overdue

Nearly 16 months after the Orange County bankruptcy bombshell was dropped, county voters remain angry at their elected officials and county residents continue to be concerned about the bankruptcy’s impact on their quality of life.

Millions of public dollars were lost when the county’s investment pool collapsed, but the bankruptcy concerns more than money. It also is about people losing their basic trust in government.

Fourteen cities, redevelopment agencies and water districts recognized the county’s breach of trust and its implications when the bankruptcy occurred. It meant that cities such as Buena Park no longer could entrust our money and our financial futures to a county agency that misled us and lost millions of our dollars. That realization determined the course these 14 cities and agencies have traveled collectively for the past year.

All agencies with money in the investment pool chose between two options to settle their claims.

Most agencies--known as the Option A’s--accepted the county’s primary offer: 77% of their money in cash, with the remainder in IOUs, valued largely by the outcome of a county lawsuit pending against Merrill Lynch, the broker which sold Orange County risky securities. Only if the county secures a near billion-dollar settlement or jury award will the A’s be fully paid. They also sacrificed any right to sue on their own behalf.

We, along with 13 others, chose Option B: 77% of our money in cash, no IOUs, but we retained the right to litigate and recover our money from the county and Merrill Lynch, and protect our own interests and those of the taxpayers we represent.

The B group includes: Atascadero, Buena Park, Claremont, Milpitas, Montebello, Mountain View, Santa Barbara and Yorba Linda; redevelopment agencies in Buena Park, Montebello, Santa Barbara and Yorba Linda; the Santiago County Water District and the Yorba Linda Water District.

Option A meant trusting the county to act in our best interests. We chose Option B because we could not do that in good conscience.

This is the same county government that violated its own investment policies and procedures, lied about the pool’s value, skimmed interest earnings that did not belong to it, and then sought bankruptcy protection when the bankruptcy filing may not have been required.

Our deposits in the Orange County investment pool were supposed to be held in trust for us. We were assured they were as safe as deposits in any federally insured bank. Instead, they were gambled away to cover an undisclosed county budget deficit.

With millions of dollars in taxpayer money at stake, the Option B group wasn’t about to make the same mistake twice by handing control back to county officials as part of a partial settlement. We believe our responsibility to our citizens is to make every effort to be fully reimbursed.

To this day, we still are owed nearly $50 million in principal, and millions more when you include all the lost interest, costs, and damages incurred since bankruptcy froze our deposits.

Buena Park has an annual budget of nearly $35 million and is owed more than $7 million in principal from the bankruptcy.

We are a local government that must provide police and fire protection, sweep the streets and repair potholes no matter the financial difficulties. And we have continued to do so.

Meanwhile, our group--struggling to protect taxpayer funds--is ranked in priority below every other group of bankruptcy creditors in how our claims are treated. That means others, including Merrill Lynch, may be repaid before the B group.

As matters stand today, county administrators are hiring back employees cut in the wake of bankruptcy and are considering retroactive pay raises. They are settling with county vendors. They are settling with county bondholders. But there is no talk about settling our claims--an outcome our taxpayers deserve and demand.

What then has bankruptcy changed?

Are county supervisors showing responsible leadership? Is county government lean and more efficient? Is the county paying a price for its own misdeeds? Is the county going to get more in bankruptcy settlements than its victims?

It is time for county officials to take responsibility for our losses, to pay our claims, to put an end to the substantial sums being spent on litigation and to put this part of the bankruptcy behind them.

Settlement with the Option B cities also could help the county resolve its financial problems so it can demonstrate to Wall Street that it pays its debts and is reshaping itself into a credible, trustworthy government institution once again.