Bills Due; Where’s The Money?
SANTA ANA, Calif. (AP) _ Orange County on Thursday appointed a former California state treasurer to restructure its troubled investment fund and help keep the municipality afloat.
Former state Auditor General and Treasurer Thomas W. Hayes was brought aboard by the county’s Board of Supervisors, which also announced it had retained the Wall Street firm Salomon Brothers Inc. for advice on how to get out of its financial mess.
The county became the biggest local government ever to file for Chapter 9 bankruptcy protection this week after supervisors learned their $20 billion investment pool had lost $1.5 billion in high-yield, high-risk investments.
″This is a problem for every citizen of Orange County who pays taxes and uses services,″ said Hayes, who took a 90-day leave from his job as president of Metropolitan West Securities Inc. of Los Angeles.
Hayes said ″protection of principal is our primary short-term goal,″ but it was too early to say if residents faced higher taxes or cuts in services. He said he couldn’t give specific numbers on the fund’s status now.
″It’s probably the most complex and difficult issue I’ve ever faced in government,″ said Hayes, who served as California treasurer from 1989 through 1991 and managed the state’s $20 billion investment portfolio. He said the county fund’s strategy had been ″on the risky end of the spectrum.″
County Treasurer Robert Citron, who supervised the pool, resigned last weekend.
The bankruptcy filing has left many questions about building projects, payrolls and schools across the county of 2.6 million people.
Supervisors announced that property taxes due Saturday would go into a low- risk, short-term investment pool, separate from the troubled investment fund. The county collects about $2 billion in property taxes a year, and half of that is due this month.
Meanwhile, Board of Supervisors Chairman Thomas F. Riley announced the county would sue brokers who tried to pull money out of the fund after the bankruptcy filing.
Michael Kolbenschlag, a recently hired consultant, said the supervisors felt the brokers, whom he did not name, ″contributed to the uncertainty and confusion and unsettledness that we have seen in our financial markets in the last couple of days.″
Officials assured investors, creditors and residents that the county would work through the crisis. Payrolls would be met and there were no immediate plans for cuts in services, said Riley.
Tensions apparently were running high.
″When can the public address the board?″ attorney Stephen D. Johnson called out as the supervisors left their hearing room to go into closed session Thursday morning. ″You want to hide behind your attorneys, but you can only hide so long.″
Johnson said he represented about a dozen of the county’s 19,000 vendors.
″I have nothing to hide,″ Riley said as he left the room.
Vendors who get regular payments from the county will get their money on time, said Bruce Bennett, the county’s bankruptcy attorney.
In other developments:
-One of the county’s most visible projects, a toll superhighway that has drawn fire from environmentalists and Laguna Beach residents, won’t be left unfinished, said Lisa Telles, spokeswoman for the Transportation Corridor Agencies.
The TCA has about $306 million for the San Joaquin Hills Transportation Corridor frozen in the pool. That is about one-third of the project’s cost.
-Sanitation districts, which handle 95 percent of the county’s sewage, failed to repay a $26 million short-term loan due Wednesday.
″We are still talking with them,″ said Jim Cain at Lehman Bros. Inc., a New York investment banking firm. ″We’re aware that they’re sort of caught up in this through no fault of their own, so we want to work with them.″
-The Orange County Transportation Authority, which runs bus service, said it was stopping its contributions to the fund. The authority said it would use its ongoing revenue for day-to-day operations and look for new credit lines of its own. Service wasn’t interrupted.
-School districts, which have about $1 billion tied up in the fund, held an emergency meeting Wednesday. Officials said afterward they would be able to issue payroll checks to 29,000 employees expecting them Friday.