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Ventura Port District Files for Bankruptcy : Government: The agency says it can't pay a $15.6-million lawsuit judgment. No disruption is expected in harbor operations.

August 21, 1993|PEGGY Y. LEE | TIMES STAFF WRITER

Ventura Port District officials filed for bankruptcy Friday, seeking protection from creditors demanding payment of a $15.6-million judgment that district officials say they're having trouble paying.

District officials said operations at the Ventura Harbor will not be disrupted as a result of the filing, and officials will continue to negotiate with their creditor, Ocean Services, to pay the judgment. Other vendors, creditors and bondholders will continue to be paid, officials said.

The judgment was awarded to Ocean Services, a bankrupt development company that successfully sued the port district for not acting in good faith during negotiations over development of the Ventura Harbor Village.

The port district lost the case in September, 1990, and the 2nd District Court of Appeal upheld the judgment in May. The state Supreme Court on Thursday refused to hear the case, making the judgment final. The same day, port commissioners voted unanimously to file for bankruptcy under Chapter 9 of the U.S. Bankruptcy Code.

According to bankruptcy attorneys, the port district is the first public agency to file for bankruptcy in Ventura County, and one of a handful in state history.

"It was a difficult decision, but it was the only viable option available, and I think we'll come out of this fine," Port Commissioner Gary Jacobs said. "I don't think it's going to hamper the long-term management of the port district."

By filing for bankruptcy, the port district is protecting itself from any legal action Ocean Services may take to force payment of the judgment, Jacobs said. However, port district officials will be required to submit a plan for approval by the bankruptcy court detailing how the district will pay off its creditors. Attorneys said the bankruptcy case may take months to resolve.

As a public agency, the port district enjoys more protection than a private company would have in the same situation, said Irving Sulmeyer, an attorney for the district.

A private company could be liquidated and its assets sold. But because it is in the public interest to continue operating the Ventura Harbor, creditors will not be able to put a lien on public property or force sale of public lands, Sulmeyer said. In the case of a private corporation, the court could appoint a trustee to oversee operations, but the port district is exempt from that and will continue operating under its current organization, Sulmeyer said.

District officials said they think they will be able to work out a long-term payment schedule. They said they hope to negotiate a settlement of less than $15.6 million. The judgment also calls for interest payments at an annual rate of 10%--from Jan. 31, 1991, until it is paid in full.

Attorneys for Ocean Services investors scoffed at the bankruptcy filing Friday and accused port district officials of trying to buy time. Before they heard about the filing, Ocean Services attorneys filed a lawsuit Friday morning in Ventura County Superior Court asking for the court to decide what funds the district has available to pay the judgment.

Because of the bankruptcy filing, that lawsuit will not be decided until the bankruptcy case is resolved. The lawsuit calls for paying the judgment in full by the end of the 1994-95 fiscal year.

"I find it difficult to believe that they can say they're broke with a straight face," said John Johnson, who represents about 20 investors. "I think they're just trying to evade their obligations."

District officials insist the bankruptcy status is necessary for protecting the harbor's operations, and they say they will continue to work on trying to find a way to pay the judgment.

"The court isn't going to let us walk away from this," said Richard Parsons, district general manager. "The reality is that we simply don't have 15 million."

According to Johnson, the district can raise the money by levying a tax or assessment, take it out of the harbor's operating budget or sell some of its vacant lots.

Johnson said he intends to file papers in bankruptcy court to get the case dismissed, arguing that the port district is not insolvent.

"We're not saying we're broke," said Tom Bunn, an attorney for the district. "You don't have to be broke to file a Chapter 9. You just have to be unable to pay your debts as they come due. If you take the Ocean Services case to mean that it was due (Thursday), then it's fairly clear that we couldn't pay that when it became due."

District officials said they have not had any trouble making payments on their loans and to their bondholders. But the multimillion-dollar judgment proved too much for their resources, officials said.

Most of the district's annual income of $1.8 million comes from leasing boat slips and properties around Ventura Harbor. The district owns 152 acres of land and 122 acres of water--most of which is leased. Officials estimate the district's assets total more than $50 million.

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