Recovery Efforts Get Much-Needed Hand : Others Chip In; Now It’s Up to County to Pass Tax

Orange County received help last week from Wall Street and Sacramento in its efforts to recover from bankruptcy. The assistance underlined the need for the county to do its part by passing the half-cent sales tax increase on the ballot June 27.

Last week Supervisor Gaddi H. Vasquez joined his colleagues William G. Steiner and Marian Bergeson in announcing he would vote for the increase, known as Measure R. That is a reflection of the lack of an alternative. No one wants to pay more taxes, but county officials and financial experts have concluded that there is no other way to come up with the money needed to pay $1 billion coming due this summer.

An insurer of municipal bonds also agreed to back $275 million in recovery bonds needed to repay the 200 school districts, cities and special districts that invested in the pool. That will make bonds the county issues later easier to sell. The action was welcome, although the insurance will cost the county more than it would have had to pay if it possessed a good credit rating.

The county declared bankruptcy Dec. 6 after its investment pool suffered a $1.69-billion loss, due to risky investments. It was the largest municipal bankruptcy in U.S. history and stunned schools and cities that invested in the pool, and individuals and institutions who bought the county’s bonds.

To help raise money, the county needed assistance from Sacramento, where legislators for a time seemed more interested in partisan wrangling than in offering a safety net. But in the end the Legislature passed a number of bills to help, and Gov. Pete Wilson signed them.

Wilson also vetoed one bill to appoint a state trustee to oversee Orange County’s financial matters. But he said a trustee could be installed if the Board of Supervisors “fails to show the necessary leadership” to get the county out of its morass. State Treasurer Matt Fong, too, has warned that if the county defaults on its debts, the state could step in. He correctly said that the county is running out of time before the bills come due. Those warnings should be heeded.

Since state Sen. William A. Craven (R-Oceanside) complained last month that county officials were not keeping members of their delegation informed of what was needed and were not listening to blunt assessments from Sacramento of what was politically possible, the county seems to have improved communications. County Chief Executive Officer William J. Popejoy and supervisors courted legislators and briefed them on actions already taken.

Craven and Sen. John R. Lewis (R-Orange) carried bills to help the county raise money by selling assets more quickly and borrow against delinquent property taxes, among other measures.

In the Assembly, Speaker Willie Brown (D-San Francisco) did not hold up action as had been feared. That earned some praise from an unlikely source, Assemblyman Mickey Conroy (R-Orange), who said Brown understood “what needs to be done and he did it.”

The county’s legislative package followed Sacramento hearings on the bankruptcy that were frequently marked by attacks on the county for not doing enough to repair the damage. The county is better positioned for recovery now, but those criticisms can justifiably recur if voters reject the sales tax increase. Elected officials need to explain to the public why the increase is necessary and how Orange County’s vaunted quality of life will suffer if the vote is “no.” It is important to remember also that no acceptable alternative scenario for the county’s recovery has yet been proposed.