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BOND TICKER : ORANGE COUNTY IN BANKRUPTCY : High-Level Meeting With Wilson Aides Not Intended as Strategy Session

June 21, 1995

With their bankruptcy recovery plans flagging, a delegation of Orange County leaders met Tuesday with aides to Gov. Pete Wilson in anticipation of a vote on a proposed tax increase facing long odds at the polls next week.

Supervisor Marian Bergeson, Chief Executive Officer William J. Popejoy, Sheriff Brad Gates and a group of municipal finance experts spent 90 minutes with state Finance Director Russ Gould and Kevin Sloat, Wilson's deputy chief of staff.

Bergeson said the session was intended to keep lines of communication open with Wilson in anticipation of the vote Tuesday on Measure R, the half-cent sales tax hike to help the county recover from bankruptcy.

"It was not a strategy session," Bergeson said. "The strategy session will come later."

She said officials from the Wall Street firms of Salomon Bros., A.G. Edwards and Goldman Sachs, the three firms brought in by the county to underwrite its new debt, related their concerns about the effect a county default would have on the state's municipal bond market.

Bergeson said there was no talk about what action the state might take to help if Measure R goes down and the county is unable to collect the estimated $130 million that the sales tax hike would yield each year.

Among the contingency plans insiders say are being considered by county officials is the seizure of property taxes intended for special districts, an effort that would require approval by the Legislature and Wilson. That would produce about $23 million annually, but would slash the revenue to the county's sanitation and water districts by about 15%.

Another proposal being discussed is a tax on alcoholic beverages, which county officials estimated would produce up to $100 million a year.

County officials also are interested in trying to link any state help to Los Angeles County, which is suffering dramatic budget problems, with aid to Orange County. Dovetailing the financial future of the two neighboring counties could help Orange County's prospects in the Capitol because Democratic legislators from Los Angeles County might be more willing to go along with assistance of some sort.

Report Says Airport Sale Won't Fly

A county task force has concluded that federal law and other restrictions prohibit officials from using money from John Wayne Airport, including sale proceeds, to help the county out of bankruptcy.

In an 11-page report released Tuesday, the John Wayne Airport Revenue/Sale Task Force delivered a significant blow to various bankruptcy recovery plans calling for sale of the airport.

"Simply put, the sale of the airport will not help the county get out of bankruptcy," said Reed Royalty, executive vice president of the Orange County Taxpayers Assn. and a member of the task force.

The task force also questioned the wisdom of transferring airport money to other uses, saying it could be "tantamount to the imposition of a hidden and potentially burdensome tax on a single segment of the population, in this case the traveling public."

"Congress makes it very clear they want airport money to stay in the airport," Royalty said.

The findings come nearly four months after Popejoy directed a task force to target potential ways the airport could provide money to the county's general fund, including sale of the airport.

Among the task force findings:

* Federal law prohibits Orange County from using any revenue generated at John Wayne Airport for non-airport uses.

* Almost all public and private entities contacted by the task force said sale of John Wayne Airport could be achieved only if the transaction included development rights or ownership of any commercial airport planned at El Toro Marine Corps Air Station.

* Any transfer of ownership would require approval of a variety of federal, state and local agencies. It would also require a change in state law.

The task force pointed out that John Wayne Airport is already highly privatized, and only 100 of the airport's 2,200 employees are county employees.

Anti-Tax Group to Float Alternative

An anti-Measure R group is scheduled today to unveil an alternative to the half-cent sales tax increase that calls for the county to sell properties including John Wayne Airport, use tax revenue designated for transportation and further cut costs.

Citizens Against the Tax Increase said the suggestions could generate enough money to help the county dig out of bankruptcy without raising taxes. But county officials rejected the group's alternatives, saying they won't bring the needed revenue.

Compiled by Shelby Grad, Eric Bailey and Anna Cekola.

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