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Supervisors Endorse Tax Vote : Recovery: All five say public should decide on half-cent sales tax hike. It will be on June special ballot if four still back it next week, but two tie support to pool settlement.

March 22, 1995|MATT LAIT and RENE LYNCH | TIMES STAFF WRITERS

SANTA ANA — Despite previously opposing any tax increase to resolve Orange County's unprecedented bankruptcy, county supervisors unanimously voted on Tuesday to put a half-cent sales tax on a special June ballot.

Although four of the five supervisors must give a final go-ahead next week, the action Tuesday represents a stunning reversal that infuriated anti-tax forces including one activist who immediately threatened "the mother of all recalls." Others, including Sheriff Brad Gates, urged the board to take action.

All five supervisors said they still abhor the idea of raising taxes, but Board Chairman Gaddi H. Vasquez said he believes the county might not be able to dig out of its financial morass without one.

"I could take the easy political road and just dismiss the proposal as bad and uncomfortable," said Vasquez. "But today I can't because the facts are real and they are facing me as a citizen, as a parent and as someone who has spent most of his life in this county that I am so proud of."

The county declared bankruptcy Dec. 6 after risky investments by then-Treasurer-Tax Collector Robert L. Citron lost nearly $1.7 billion belonging to the county and nearly 200 school districts, cities and other agencies.

Although the board unanimously expressed a willingness to put the tax issue on a special ballot, at least two board members said they would not approve the ballot measure next week unless participants in the county's failed investment pool reached an agreement with the county on how to allocate the pool's losses.

If four of the five supervisors approve the tax initiative, to be called Measure R, it would be placed on the June 27 ballot and would require majority approval. The tax would take effect in January, 1996.

Under the proposal, the county's sales tax would increase from 7.75% to 8.25%--the same rate as Los Angeles County's--for a 10-year period. The tax would generate about $130 million annually and would be used to back approximately $700 million in new loans.

County Chief Executive Officer William J. Popejoy told the board on Tuesday that the county's losses and debt were so great they there was no other option except to raise taxes.

He said the actions taken so far, such as layoffs, asset sales, privatization and litigation will not raise enough money in time to pay off more than $1 billion in debt due this summer.

"What you have is a choice to vote for a sales tax or a choice to vote for bankruptcy, one or the other," Popejoy said. "It is a necessary evil. None of us like the idea."

If the sales tax isn't increased by a half-cent, the county will default on its loans, schools may file bankruptcy and the county will become embroiled in years of costly litigation, Popejoy warned.

"The alternative of this tax is to remain in bankruptcy, to go into a financial meltdown and have the schools and maybe the cities taken over by government entities," Popejoy told the board. "That's not what we're here to do."

After considerable discussion, supervisors said they were ready to take the action that they publicly have vowed to avoid since the county filed for bankruptcy. But the supervisors told Popejoy that they wanted some amendments to the proposal, including a citizens oversight committee that would monitor how the tax revenue was spent.

Supervisor William G. Steiner said he supported putting the tax hike on the ballot only if a settlement is reached on how to allocate the $1.7-billion loss. He said he saw no reason for the county to raise taxes to help pay off the pool investors if they continue to reject the county's settlement offer.

"The two go hat in hand," he said.

"That's quite a hammer," replied Vasquez, but "I support it."

Supervisor Roger R. Stanton said he would agree to put the tax on the ballot, but wanted Popejoy to devise a "plan B" in the event voters don't approve the increase.

"This is difficult for each one of us," Stanton said. "But we're dealing with a situation of pragmatics."

He said the price of defaulting on loans may end up costing county residents more than the proposed sale tax increase.

Stanton and Supervisor Jim Silva said that while they voted to put the tax increase before voters, they would not endorse or support the increase.

"If the board votes to allow the people to vote on this . . . that doesn't mean that the board themselves are going to vote for it," Stanton said. "But the perception is going to be laid on us that we're raising taxes."

Silva suggested that Popejoy consider diverting millions raised by the Measure M transportation initiative--the 1990 voter-approved half-cent sales tax--to county coffers.

But County Counsel Terry C. Andrus cautioned it would be "difficult if not impossible" to dip into funds set aside strictly for transportation services. He said his preliminary legal research indicates a separate election would be needed to repeal Measure M before that could be done.

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