Financially, the Future Looks Bright for County : A variety of economic reforms are paying dividends

At their mountain cabin retreat this month at Santiago Oaks Regional Park, the Board of Supervisors appeared to benefit from the opportunity to do some clear thinking in pristine environs. Among the issues on their agenda, the long-term financial recovery from bankruptcy was given the high priority it deserved.

Actually, things have been looking up on the financial and economic fronts for a while. Late last month, UC Irvine economists painted the most positive view of the county’s economic picture in more than a decade. Some 80% of businesses said they expected to expand in the next five years; more than half expected to hire more workers this year; and a 4% increase in new jobs in the county was envisioned.

Respondents were looking for ways to communicate their optimism to people outside the county, which had been tarnished with the stigma of a bankruptcy declaration in late 1994. As for the locals, only 13% of executives said they believed that the municipal bankruptcy was now a serious problem for the county, after having been a key problem in the last two surveys.

The county passed a significant hurdle last June when it emerged from bankruptcy by selling $800 million in bonds, from which the proceeds went to pay creditors. The repayment of those bonds over the next 30 years is a challenge to fiscal management and itself a drag on the local recovery.

Nevertheless, John M.W. Moorlach, the county’s treasurer, is to be credited for his conservative investment strategies, which have bolstered the image and reliability of Orange County. Late last month, about the time that the UC Irvine survey was released, Fitch Investors Service gave the county its highest rating--AAA--for the $2.25-billion money market investment pools, along with a designation as among the least risky portfolios.

The restructuring of the county’s pool has put county and school funds into money market investments. The county’s 36 school districts are required to invest much of their money through the county. No cities or other government bodies have joined up in the pools, and they have not yet been opened up to other governments, but the rating offers a signal of a real turnaround from the dark days after the county went bust. It is is making progress step by step.

The county’s reforms of cutting spending, restructuring investments, and instituting checks and balances are paying dividends. Over the long haul, this can only assist in the process of restoring confidence in Orange County’s investment strategies.

The county, in the meantime, must pursue its conservative fiscal management strategy without also pulling the purse strings so tightly that government cannot perform needed functions. Already, business plans submitted by each of the county’s departments and agencies argue that county government will need more money and more employees to handle increasing demands on law enforcement health and social services.

The old problem of jail overcrowding hasn’t gone away, and departments that suffered substantial cuts during the bankruptcy are reporting difficulty completing some basic tasks.

At their retreat, the supervisors recognized what the business leaders did in their survey--that restoring and building confidence takes work. But the improving economy has to be considered a plus in this effort to begin the long road to a better future. A number of financial advisors already are catching on to the changes that Orange County has made, and are urging the purchasing of Orange County notes. While there is a lot of anger over what has gone before, there is hope for the future.

The bankruptcy remains an important lesson for local government officials, and its massive debts continue to summon creative management of resources. But the economic picture of the county, and perhaps more important, the developing sense of renewed confidence in the region, is a heartening sign of spring.