Smoking Funds Can Bail County Out, Board Is Told

Orange County could use the roughly $912 million it is receiving from the national tobacco-industry settlement to pay off bankruptcy debts as well as build sorely needed jail beds and other projects, according to plans unveiled Tuesday by the county’s chief financial officer.

The proposal won a generally favorable reception from the Board of Supervisors, which on Tuesday also added two law enforcement projects to its long-term priority list: a new 390-bed juvenile hall in the South County and a lock-down facility for inmates with drug and alcohol problems.

The county is scheduled to receive $30 million to $38 million per year from the tobacco settlement until 2025. Chief Financial Officer Gary Burton wants the county to create a nonprofit organization that would issue bonds based on the settlement revenue. The county would then use proceeds from the bonds sale, along with other savings, to pay off nearly $560 million in debts incurred when it emerged from bankruptcy in 1996.

By selling bonds, the county would have immediate access to a much larger pool of money than if it simply accepted the annual settlement payments. The creation of a nonprofit organization is necessary so that the county can keep the new bond debt off its balance sheets, Burton said.

Paying off bankruptcy debt ahead of schedule, officials added, allows the county to avoid hefty interest payments.

“We got out of bankruptcy essentially on a credit card, and that’s why one of [the] priorities is [eliminating] the debt,” said County Chief Executive Officer Jan Mittermeier.

Under the plan, the county would pay off the 1995 recovery bonds as well as other debts and still have and $100 million to $150 million left to focus on building jail facilities.

Burton said he was not sure how the jail money would be used, but it is likely that much of it would go for the proposed expansion of the Theo Lacy and James A. Musick branch jails.

“I was very impressed with the presentation,” said Supervisor Jim Silva. “I would like to see this money go to county debt reduction and funding of the Musick jail facility.”

California government agencies will receive about $1 billion annually through 2025 under the settlement with tobacco companies over health costs and other issues related to smoking.

Overall, when the supervisors were setting priorities, they put heavy emphasis on public safety issues.

No sites have been identified for either the juvenile hall addition or the detox lock down, and officials said they still don’t have all the money to build them.

But by making them a “top priority,” officials hope to eventually save the money needed for the projects.

The substance abuse lock down has been strongly advocated by Sheriff Mike Carona, who argues that many inmates in the county jail have drug and alcohol problems that the county should be trying to solve.