O.C. to Make Dent in Bankruptcy Debt

Four years after Orange County’s financial collapse, the Board of Supervisors has decided to pay off a large chunk of bankruptcy-related debts next year and move forward with long-delayed plans for a new children’s emergency shelter.

The money will come from the roughly $260 million that the county has won in a series of legal settlements with Wall Street firms the county held responsible for causing the bankruptcy. The settlements must be approved by a federal judge, which officials hope will happen as early as February.

If and when that occurs, the supervisors plan to use most of the windfall--$230.9 million--to pay off bond debt ahead of schedule.

Even with the early payoff, the county still has one huge bankruptcy debt remaining: $750 million borrowed in 1996 to pay off county bondholders, a move that allowed the county to emerge from bankruptcy.

That debt is costing the county $62 million a year, paid through a variety of sources including park fees, redevelopment proceeds and landfill revenues.

“The people who think the county has recovered should look at the debt we still have and the needs that we have,” county Chief Financial Officer Gary Burton said. “This is not going to be over for many years to come.”

Board of Supervisors Chairman Jim Silva said the county is withstanding the temptation to use some bankruptcy litigation proceeds for new programs and services, deciding instead to make debt repayment a top priority.

“It’s important for our long-term financial health, and it’s important in restoring Wall Street’s confidence in our ability to make prudent economic decisions,” Silva said.

But others were saddened that the most vulnerable county residents--the poor, the sick and the elderly--won’t get more of the proceeds from the bankruptcy litigation.

“It’s really a shame because the needs are greater than they’ve ever been, especially for health care. And there’s a dearth of affordable housing,” said Jean Forbath, founder of Share Our Selves, a social-services organization based in Costa Mesa.

Forbath pointed out that the county is spending millions to repair aging buildings neglected during the bankruptcy but has refused to significantly increase spending on health and social services.

“They talk about deferred maintenance [on buildings], but what about deferred maintenance on human beings?” she said.

In May, the board approved a five-year strategic financial plan that predicts income and expenditures and establishes priorities for high-priced needs like constructing new buildings and earmarking money to operate them.

Supervisors last week agreed to expand the county’s system for sheltering abused and neglected children.

The board approved $45 million in spending over the next five years for construction of a second Orangewood Children’s Home at El Toro Marine Corps Air Station, renovating the Los Pinos Honor Farm, expanding Juvenile Hall and building a resource center run by the Probation Department for teenagers encountering their first brushes with the law.

An additional $32 million was earmarked for a new South County courthouse, and $38 million was set aside to start paying for deferred maintenance on county buildings and facilities.

Burton estimated that the county must find $98 million in the next seven years to replace decades-old roofs, air-conditioning and heating systems, and indoor fire-sprinkler systems that languished unattended during the county’s fiscal crisis.

Burton said he hopes to know within the next six moths the details of a state settlement with the tobacco industry that should yield the county $33 million a year.

Forbath said she’ll urge supervisors to use the tobacco money on health-care needs, including boosting funds for the county’s community clinics for low-income residents.