Orange County Voices : COMMENTARY ON COUNTY BANKRUPTCY : 10-Point Plan--With No Tax Increase--Is a Bet on the Future : Strength of local tax base, economy will allow investors, creditors and pool participants to recover fully in time.

Orange County is a viable economic entity with an entrepreneurial spirit. With an $82-billion gross county product, a $2-billion property tax base and an unemployment rate of less that 5%, it can recover from the $1.7-billion investment pool collapse. This loss is a onetime event with a beginning and an end--far different from Proposition 13, which forever changed the property tax base.

The solution to this crisis must be approached with aggressive and constructive resolve. Solving the problem will require the assembly of numerous pieces of a larger complex puzzle. No single piece will result in a resolution; yet each will play an important role in bringing us out of bankruptcy. Each must be explored before considering a tax increase, which is the easy way out.

It is important at this crucial juncture in our county’s history that we unite toward a common goal to restructure government in a manner that solves the current financial crisis and exhibits a foundation for stability and confidence.

Consider then, a 10-point plan that will prevent default on our debt, honor our obligation to our creditors, downsize government to make it more cost-effective and allow the county to eventually pay back cities, schools and special districts without a tax increase.

The important elements include:

1) Recognition that in the current anti-tax environment it would be dishonest for the county to promise immediate return of all investments. We need to put an end to the squabbling by distributing $5.8 billion immediately. An additional $132 million will enable the schools to survive. There will be $370 million more for the cities and special districts, which would be secured by litigation proceeds, and another $123 million would be available in recovery notes. The final $554 million remains a county indebtedness that will be met as resources become available. It is simply not responsive to ask for more now when there is no more to give.

2) Create a new loan and new loan terms in order to avoid default of the short-term debt due bondholders this summer. The Teeter program would be restructured to repay the $179 million that is due, and revenue could be raised from future tax penalties and delinquencies to meet other obligations of the county.

3) There must also be a measure of equity that goes beyond meeting the needs of pool participants and bondholders and recognizes the $100 million due vendors.

4) The financing of these obligations would be possible by removing restrictions on special funds and by dedicating the growth in the property tax, sales tax and motor vehicle license fees to an “intercept” fund to pay the pool participants, bondholders and creditors. Further, we would need to identify assets that could be used as collateral by the state to guarantee loans that would be repaid by the county.

Over the past 10 years, the county had an average annual growth rate of nearly 9% in total revenue from the property tax, sales tax and motor vehicle license fees. Under normal economic growth conditions we could generate millions, which could be used for debt repayment rather than using these increases to expand the county bureaucracy.

5) If the growth in the economic base is to be used for debt repayment, then the county must live within its means. This will require a pledge to adopt a “no growth” budget for several years. The pressures on county government to provide increased services must be met with existing financial resources.

6) Efforts also need to be made to get our fair share of tax revenue from the state. Orange County is a “donor county,” paying out far more of our wealth than we receive in return. Currently, we receive only six cents out of each property tax dollar, in comparison to 23 cents for Los Angeles County, 18 cents for Alameda County and 14 cents for San Diego County.

We need equity, not a loan or bailout from the state, but only what we are rightly due.

7) The county must adopt a budget that calls for more than a $100-million dollar spending cut. This will require zero-based budgeting, where we establish priorities for what we do. An evaluation of the county “mission” is at the core of any restructuring effort. In addition to layoffs, the elimination of 1,707 vacant positions would save approximately $85 million annually.

8) Any reduction will be impossible unless the county is able to explore opportunities for privatization. Dozens of ideas have been proposed that need to be considered in a coordinated way through the forum of Supervisor Roger R. Stanton’s restructuring effort, Supervisor Marian Bergeson’s management audit and Supervisor Gaddi H. Vasquez’s privatization task force.

9) Efforts should be made to turn our county-owned land and property into cash. This will involve the sale of millions of dollars worth of vacant land, the sale and lease back of county buildings, and the lease of land that will produce revenue. The transfer of John Wayne Airport from county auspices to the Orange County Transportation Authority could also provide additional revenue.

10) Finally, this crisis is a lesson to all public agencies that they should live within their means, using this opportunity to re-examine how they do business. We must work together on a regional basis to reduce duplication and waste. Our unincorporated county islands that exist in most cities should be annexed. Consolidation of services and governmental entities must take place. It will mean giving up “turf,” but ultimately the public will be better served.

Our first 90 days since the filing of bankruptcy was characterized by denial, blame and disarray in the context of crisis management. This 10-point plan, however, charts a course for the second 90 days and represents a blueprint that can be used by CEO William J. Popejoy to move the county forward to recovery. It is a plan that bets on Orange County’s future.