HomeMy WebLinkAboutOrange County Bankruptcy 1994/97 r
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Council/Agency Meeting Held: 7 f 7/q7
Deferred/Continued to:
al'Approved Conditio ally Ap roved ❑ Denied City rk's Signature
Council Meeting Date: July 7, 1997 Department ID Number: AS 97-028
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNC L MEMBERS
SUBMITTED BY: MICHAEL T. UBERUAGA, City Administrator
PREPARED BY: ROBERT J. FRANZ,. Deputy City Administrato
SUBJECT: EXPENSE REIMBURSEMENT -- LEAGUE OF CALIFORNIA S
Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments
Statement of Issue: The League of California Cities has requested reimbursement for
expenses related to the Orange County Bankruptcy.
Funding Source: Non-Departmental Budget, Miscellaneous Expenses.
Recommended Action: Approve the payment of $7,121 to the Orange County Division of
the League of California Cities for the City's share of League expenses related to the
Orange County Bankruptcy.
Alternative Action(s): Do not approve the reimbursement.
Analysis: Huntington Beach has joined other Orange County cities to pursue its interests
in the Orange County Bankruptcy. The cost for bankruptcy services is to be paid by the
participating cities. The Orange County Division of the League of California Cities has
incurred certain costs to assist Orange County cities to pursue their interests. These costs
include legislative monitoring and advocacy provided by Ken Emanuels, copying and
distribution of bankruptcy documents and expenses for the support of the Technical Team.
The Executive Steering Committee of the League and the Orange County City Managers
Association have approved these expenses and the request for reimbursement from cities.
The reimbursement amount requested of the City of Huntington Beach is $7,121. This
amount is calculated by the same formula as the membership dues to the Division: a flat rate
plus a population factor. 28 of 30 member agencies have reimbursed the Division for its
incurred costs.
It is anticipated that all members of the OCIP will be contacted as soon as next week
for their approval of the agreement. The final language is supposed to be finalized
tomorrow.
On the subject of Sacramento, a six member conference committee has been established by Senate
President Pro Tem Bill Lockyer at the request of Assembly Speaker Doris Allen. Lockyer has made it
clear that all bankruptcy must pass through the conference committee. We understand that the
members of the committee will be Senators William Craven,Lucy Killea,and Richard Polanco,and
Assembly Members I3rian Setencich and Richard Katz,and the Speaker. The conference committee
may meet as soon as this weekend to begin hearing legislation.
As of today,SB 863 bas been introduced by Senator graven and is supported by most of the Orange
County delegation. It contains trustee language with authority over the County and the authority to
vote on behalf of claimants in the investment pool,but it does not include the ability to divert city
revenues. The Speaker will be introducing her legislation tomorrow. The County legislation was
obtained late this afternoon and is being reviewed by members of the Division's technical team and
Division staff. The County,with support from the Orange County Business Council,will be
contacting members of the delegation to support the plan. It is not known who will be carrying this
legislation.
If you wish to discuss the agreement or proposed legislation in more detail,please contact Kevin
Murphy at 69-3000,Mike Uberauga at 536-5576,or the Division at 972-0077.
cc: Janet Huston,Executive Director
EXECUTION COPY
SEPTEMBER 6, 1995
JOINT AGREEMENT (the "Agreement") OF THE COUNTY OF ORANGE,
THE OFFICIAL INVESTMENT POOL PARTICIPANTS' COMMITTEE
AND EACH OPTION A POOL PARTICIPANT FOR RESOLUTION OF
ALL CLAIMS AGAINST THE COUNTY OF ORANGE
1. Definitions.. Capitalized terms not defined herein shall have the meanings
ascribed to such terms in the Comprehensive Settlement Agreement re:
Orange County Investment Pools (the "Comprehensive Settlement
Agreement"), in the form approved by the United States Bankruptcy Court
for the Central District of California ("Bankruptcy Court") in an order
entered on May 2, 1995.
2. Reallocation of Bradley-Burns Sales Tax: Alternatively, Deposit of Funds
by OCTA. The County of Orange (the "County"), the Orange County
Transportation Authority ("OCTA'), the Orange County Transit District
("OCTD"), and the Official Investment Pool Participants' Committee (the
"OCIP Committee") agree to support the passage by the California
legislature (the "Legislature") and the approval thereof by the Governor of
the State of California(the "Governor") of legislation providing for one of
the following alternatives, which alternatives shall be selected by the
County in the County's sole and absolute discretion: (a) the deposit by
OCTA with the County of Orange of$38 million per year for a term of 15
years commencing on July 1, 1996; or(b) the reallocation to and/or
retention by the County of a portion of the Bradley-Burns Sales Tax
currently allocated to the OCTA or to the OCTD in the sum of$38 million
per year for a term of fifteen (15) years commencing.on July 1, 1996. The
draft alternative legislation attached to this Agreement as Exhibit"A"
represents a form which is acceptable to the County, OCTD, the OCIP
Committee and OCTA for the legislation implementing the terms of this
paragraph 2. The undersigned holders of Settlement Secured Claims and/or
Repayment Claims (collectively, the "Option A Pool Participants") agree
that they do not and will not object to the passage and approval of
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legislation why generally`ir'ihe'foh" acMitd to this Agreeing ei'
Exhibit"A."
3. Transfer of Motor Vehicle Fuel Taxes. The County, the OCTA, the OCTD
agree to support the passage by the Legislature and the approval thereof by
the Governor of legislation that allocates to OCTA $23 million of the
County's yearly apportionment of Motor Vehicle Fuel Taxes for a period of
sixteen (16) years commencing on July 1, 1997. (The draft legislation
attached to this Agreement as Exhibit"A" represents a form which is
acceptable -o the County, OCTD, the OCIP Committee and OCTA for the
legislation implementing the terms of this paragraph 3. The undersigned
Option A Pool Participants agree that they do not and will not object to the
passage and approval of legislation which is generally in the form attached
to this Agreement as Exhibit "A.") The County agrees to pay, subject to all
bankruptcy defenses, limitations and objections, all eligible costs, as
determined by the County, for Arterial Highway Financing Program projects
originally programmed by OCTA or the County prior to and including June
30, 1995, and OCTA shall not be obligated'to pay any of such eligible costs.
4. Reallocation of Property Taxes (Harbors. Beaches & Parks). The County
and the OCIP Committee agree to support the passage by the Legislature
and the approval thereof by the Governor of legislation providing for the
reallocation to the County of property taxes currently allocated and paid to
the Orange County fund commonly known as Harbors, Beaches and Parks
in an amount equal to $4 million per year (plus any related allocation to
such fund of future years' tax increments) for a period of twenty (20) years
commencing on July 1, 1996. The draft legislation attached to this
Agreement as Exhibit "A" represents a form which is acceptable to the
County, OCTD, the OCIP Committee and OCTA for the legislation
implementing the terms of this paragraph 4. The undersigned Option A
Pool Participants agree that they do not and will.not object to the passage
and approval of legislation generally in the form attached to this Agreement
as Exhibit"A."
5. Reallocation of Property Taxes (Flood Control). The County and the OCIP
Committee agree to support the passage by the Legislature and the approval
thereof by the Governor of legislation providing for the reallocation to the
County of property taxes currently allocated and paid to the Orange County
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--rF WM t-ol District in an drdnt equal tol 'mill rr` I ar(plums ati}�
related allocation to that district of future years tax increments) for a period
of twenty (20) years commencing on July 1, 1996. The draft legislation
attached to this Agreement as Exhibit"A" represents a form which is
acceptable to the County, OCTD, the OCIP Committee and the OCTA for
the legislation implementing the terms of this paragraph 5. The undersigned
Option A Pool Participants agree that they do not and will not object to the
passage and approval of legislation generally in the form attached to this
Agreement as Exhibit"A."
6. Reallocation of Property Taxes (Development Authority). The County and
the OCIP Committee agree to support passage by the Legislature and the
approval thereof by the Governor of legislation providing for the transfer
from the Orange County Development Agency("OCDA") to the County's
general fund of an amount equal to $4 million per year for a period of
twenty (20) years commencing on July 1, 1996. The draft legislation
attached to this Agreement as Exhibit"A" represents a form which is
acceptable to the County, OCTD, the OCIP Committee and the OCTA for
the legislation implementing the terms of this paragraph 6. The undersigned
Option A Pool Participants agree that they do not and will not object to the
passage and approval of legislation generally in the form attached to this
Agreement as Exhibit"A."
7. Segregation of Redirected Revenues. All of the revenues to be directed to
or received by the County pursuant to legislation enacted in accordance with
paragraphs 2 through 6 hereof shall be accounted for and reserved for the
performance of the County's obligations pursuant to a confirmed plan of
adjustment, including payment of debt service on post-petition indebtedness
or Certificates of Participation approved by the Bankruptcy Court. Funds
may be released from the restrictions described in the preceding sentence to
the extent that funds from the County's general fund are applied to
obligations of the County under such plan.
8. Plan of Adjustment. The County shall, as promptly as practicable, and in
any event no later than January 1, 1996, prepare and file with the
Bankruptcy Court a plan of adjustment (the "Plan of Adjustment") and a
Disclosure Statement with respect to such Plan of Adjustment. The Plan of
Adjustment shall contain, in substance, the following terms and conditions:
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a) Thelan of` djuslriene'ia %pde pyment of the allb end
amount of all County vendor allowed claims as of the Petition Date.
b) The Plan of Adjustment may provide for the payment of the allowed
amount of all allowed claims asserted by County employees.
c) The Plan of Adjustment may provide for payment, in fuH, of all
allowed claims under the County's short-term note debt which
constitute "Senior Claims" as that term is defined in the
Comprehensive Settlement Agreement.
d) The Plan of Adjustment may provide for the replenishment of those
reserve accounts required to be maintained in accordance with the
documentation governing Certificates of Participation issued on
behalf of the County to the extent required by such documentation
through the payment of past due lease obligations for such
Certificates of Participation to cure any default resulting from non-
payment of such lease obligations, in an amount not to exceed $15
million.
e) The Plan of Adjustment shall provide for the appointment of a
Representative pursuant to Bankruptcy Code section I I23(b)(3)(B),
defined below, to enforce, prosecute and collect upon all Pool-
Related Claims, as such term is defined in the Comprehensive
Settlement Agreement, and such Representative's authority shall
include determining whether, and on what terms, to settle any or all of
such Claims.
f) The Plan of Adjustment shall provide for the establishment of a fund
in the amount of$50 million (the "Litigation Fund") to enable the
Representative to prosecute, enforce and collect upon Pool-Related
Claims, including without limitation to pay for the services of
lawyers, accountants, expert witnesses, consultants, and to the extent
the Professional Fee Reserve established pursuant to the
Comprehensive Settlement Agreement is insufficient, counsel for the
OCIP Committee and/or his designee and to pay other costs and fees
related to the prosecution, enforcement and collection of Pool-Related
Claims.
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PROLONGED
PLAN B -' BANKRUPTCY
NO SALES TAX
• $750 - $800 million short of filling hole
• Further reduce public service to substandard levels
• Compromise essential public service
— Public safety
- Health and Welfare
— Education
• Default on County debt
Eliminate access to public markets
All schools, roads, etc., built for cash only
Increased cost passed through to all citizens
Jeopardizes pool settlement
May result in state trusteeship
• Erosion of property values
OPTIONS CONSIDERED
• 'h ¢ Sales Tax
• Tax Increment Financing - Property Tax
• Diversion Of Measure " M" Funds
0 Alcohol and Tobacco Taxes
• Parcel Tax (Property Tax)
• Hotel Occupancy Tax
• Bar and Restaurant Tax
• Other County Funds and Non-County Agencies
• Sanitation Districts
Orange County Bankruptcy - Settlement Plan Options
Timetable - Authority to Ch ange Optio ns
y i zf.;p
("Yes" = Authorized to Change Option up to Date Indicated)
Select Court Settlement Cash Deliver x.
G 3 ,r
Event Settlement Approval Effective Distribution Recovery
s
Option Date Note
Date* April 17 April 28 May 15 May 22 June 5
• �^r;-af?"• '�:s?''r'�=r r -y.��3„:;is':�'-;,.x•••r^; x�r-rh?}:, era�.ro�:"a^-.ar.„!gs+ I 1 tyg
"; ek�U�� �
Option A f(�'r3 e`S a ry `rs {Sr�jF #est � r �4kY7 USA si No j No
E�$.�.,.ai.�..nr-a '�.:�:Y-::utt.�.i.��bt�i'�.::.::_rrc�..�'.,x�r�[i..'•+_-rli�i7.s:.f%-'Fn�zJ';���'�---'�:c�i!'�wrl.,
.`:. ,-�- :t£ '3-c,.yr3"f ..; ?�:`-`..'•r [::!a ?.:.,a,.,e";wn'._ .�j;„,�...r. .,,`3;Z;,`3?„ r,: .;?T": „+'� :,�"
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7
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Option B f x yes
:�3,V;y q-.R it � !�^` -q�' tt �" b "..Gr�-r,+>Fi 3� `33.F"a�ry a.t '�• _ ��" `y�.Ar r �i -�t� - �e,�
n ''�t..r fist � ..l ip d �""•�.-...,�f,..�,�k,.a.•±.y »'fi��- L. t 3,.,::.��'� d�+ d F f'(� <? .Sr �"3i.. 4` F' �%�
Option CL-a
5 No No No No
*Estimated Dates (could change after Bankruptcy Court action on current requests)
*If Recovery Notes are not Delivered, Authorized to Change to Option B until June 8
**County can Impose an Earlier Deadline for Changing to Option A
APRIL 1995
MAY 1995 JUNE 1995
Sunday Moralay Tuesday Wpdnestlay lTmsday Friday Saturday Sundry Monday Tuesday WednesdayfllunWry Friday Saturday Sundry Monday TuesdayWednesdayleunday Friday Saturday
1
9 10 11 12 13 14 15
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24
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24 25 26 27 23 29 .. Ain 25
CA 95-02
H
_ CITY .OF HUNTINGTON BEACH
���i�,c�FROM
COUNCIL ADMINISTRATOR COMMUN164
EA PARTOF THE HUNTINGTON BEACH rHE COUNCIL MEETING OF RECI ,�Rp
OFFICE OF THE CITY CLERK
CONNIE BRObKWAy,CITY CLERK
TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
FROM: MICHAEL T. UBERUAGA, City Administrat r
SUBJECT: STATUS OF ORANGE COUNTY INVESTMENT POOL '" ,
DATE: JANUARY 19, 1995
Attached are two documents, a news release regarding.the completion of the
restructuring of the Orange County Investment Portfolio, and a report by the
California State Auditor regarding their audit of the investment funds.
.The restructuring and sale of the Orange County Invest Pool is basically .
complete. As indicated in the news release, the portfolio's estimated loss of
$2.02 billion has been reduced to an estimated loss of $1.69 billion. This is a
$330 million improvement from the December 12, 1994 estimates. The
December estimate of a 27.2% loss in investment pool value has now been
revised to a 22.3% loss.
As the City Council is aware, the City .has .$43.6 million invested in the
Orange County Investment Pool. The City continues to pursue its objective of
receiving 100% return of the $43.6 million plus interest earnings. If the 22%
investment portfolio loss were distributed pro-rata to all 187 investors (the City
opposes this method of distributing losses), the City's loss would be $9.72
million.
With the completion of the restructuring of the portfolio, the focus will now shift to
the County's "Plan of Adjustment" and distribution of the portfolio assets. No
Plan.of Adjustment has been filed by the County, nor is one expected in the near
future. We will continue to keep you informed as developments occur in the
coming days and weeks.
MTU:RJF:skd .
0006876.01 01/19/95 3:18 PM
r
REPORT BY THE STATE AUDITOR
OF CALIFORNIA
STATUS REPORT ON THE ORANGE COUNTY
TREASURER'S OFFICE
94026.1 _ JANUARY 1995
t• �
CALIFORNIA STATE AUDITOR
BUREAU OF STATE AUDITS
MMT B.SJOBERG BUNI M P.EVASEaWK
State Auditor cal ter 910e Andbw
January 18, 1995 94026.1
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, Califomia 95814
Dear Governor and Legislative Leaders:
This letter represents the status of our audit of Orange County's (county) investment funds.
After meeting with county officials,we started our work on December 13, 1994.
Initially,we focused our effort on three areas:
1. Reconciling and verifying the assets held by the Orange County Treasurer on behalf of
various county agencies and outside investors;
2. Assessing short-term cash demands of the county's operational needs and the cash needed to
pay interest on the county's outstanding bonds; and
3. Reviewing the expenditure, income, and trading activity from the investment fund since
June 30, 1994.
Since that time, at the request of the Joint Legislative Audit Committee, we have expanded the
scope of our audit to include a review of the county's contracts with financial advisors and a
determination of the fees paid to Merrill Lynch by the county.
We have completed our work on Item 1. In the following section, we describe our work on this
item.
On December 6, 1994, county officials filed bankruptcy on behalf of the county and the other
participants in the county's investment pool. On December 12, 1994, Salomon Brothers, who
had been retained by the county_ to restructure the investment portfolio, estimated that the
portfolio had sustained a$2.02 billion loss. Since December 14 1994,a more accurate picture of
6"J Strew Soria 300,Sacrameate,CaUrOrata 9S814
Tekphonc(916)44S4)2S5 FaL(916)327-0019
Letter Report 94026
January 18, 1995
Page 2
the loss has evolved as the actual value of the investments was determined through sales and as
better information became available. In providing the better information,the county was assisted
by Arthur Andersen&Co., an accounting and consulting firm.
We worked with Salomon Brothers and Arthur Andersen & Co. staff to determine a current
revision to the loss that was estimated in December. In determining the revision, we reviewed
the assets of the investment portfolio as well as the amounts owed to the various participants.
We relied on the sales information as provided by Salomon Brothers. Based on the procedures
we performed, we believe that the revised loss as shown in the following schedule is materially
accurate.
Orange County Investment Portfolio
Original and Revised Estimates of Loss in'Value
(Dollars in Billions)
Original Rcvised
Estimate Estimate
as of as of
12/12/94' 1/17/95b
Amount contributed by fund investor S7.42 S7.57
Market value of securities held 543 5.16
Cash and equivalents 0.23 0.54
Value of excess collateral held by dealers 0.04 0.00
Value of excess collateral collected or due
from liquidations by dealers 0.10 0.18
Loss S2.02 S1.69
a Original estimate computed by Salomon Brother.
b The estitnaw dos not include SS3 million of specific imrestmcnts that arc not
held by Dank of Amaim Since the amount was also not included in the amount
contributed.d%m is no effect on the loss.
The schedule presents the value of securities based on sales of the portfolio through January 17,
1995. The county's investment portfolio loss, based on current information, is $1.69 billion, or
$330 million lower than originally estimated in December 1994. This decrease is primarily a
result of the better information that is now available regarding the assets of the portfolio and the
amount owed to participants.' Additionally, a portion of the decrease results from sales activity
Letter Report 94026
January 18, 1995
Page 3
that was better than anticipated. The loss could further change based on future sales activity
although such changes are not expected to be significant,as most of the portfolio has been sold.
We continue to work on the remaining items and plan to issue an interim report on Item 2 within
the next two weeks. Our final report,which we plan to issue in March, will cover the remaining
items.
We conducted this review under the authority vested in the state auditor by Section 8543 et seq.
of the California Government Code and according to generally accepted governmental auditing
standards. We limited our review to those areas discussed in this letter.
Sincerely,
KURT R. SJOBER
State Auditor
TOTPL P.05
County of Orange, California
Presentation to the Board of Supervisors
Portfolio Update
January 18, 1985
Salomon Brothers Inc
Salomon Brothers Inc
This report contains and is based on information provided by, or at the request of, the Board
of Supervisors of Orange County and Orange County, and publicly available information,
including information available from other publicly available information sources. Salomon
Brothers Inc ("Salomon") has not independently verified the accuracy of the information.
Salomon shall not be responsible for the accuracy or completeness of the information and
shall not be liable to Orange County or any third party with respect to this information.
The valuations provided are based on market information obtained from secondary sources
usually considered reliable. The valuations are based on assumptions as to such factors as
Salomon reasonably believes are relevant, such as interest rates, spreads, volatility, liquidity
and orderly disposition of assets. The valuations represent our judgment as of the time they.
are provided and are subject to change. The valuations do not necessarily reflect prices at
which the securities may actually be sold.
r
Salomon Brothers Inc
Valuation of County of Orange Investment Portfolio
(Dollars in Billions)
December 12, 1994 Adjustments January 17, 1995
Amount Contributed by Fund Investors $7.42 $0.15 (a) $7.57
Investment Portfolio
Market Value of Securities Held 5.03 0.13 N 5.16
Cash and Equivalents 0.23 0.31 (a) 0.54
Value of Excess Collateral Held by 0.04 (0.04)(c) 0.00
Dealers
Value of Excess Collateral Collected or
Due from Liquidations by Dealers 0.10 0.08 (d) 0.18
Total Value of Investment Portfolio $5.40 $5.88
Loss $2.02 $1.69
Percent Loss 27.2% 22.3%
(a)Represents accoui ft adjuebnerde based upon a reconciliation of the County records by Arthur Andersen and a review by the California State Auditor.
(b)Represents$36 million of Vadrg value received in excess of December 12.1994 valuation estimate and i94 million of previously unidentified secuitles net of
previously unidentified encumbrances.
(c)Represents adputment resulft from sale of collateral held by dealers as of December 12.1994.
(d)Estimate based on excess collected to date and data provided by dealens. Deductions have not been made for dealer deficit accounts.
2
Salomon Brothers Inc
Portfolio Status Report
Transaction Descriptions (Dollars in Millions)
Odginal Cash
Face Market Loan Proceeds to
Week of Type Amount Value Structured(a) Reducdons(b) County(c)
12J12/94 Agencies $1,048.7 $1,011.9 $0.0 $528.8 $483.1
CDs 440.0 401.3 440.0 401.3 0.0
12/19/94 Agencies 624.4 596.8 0.0 596.8 0.0
CDs 875.0 769.6 775.0 0.0 769.6
CMOs 196.3 181.0 0.0 0.0 181.0
Corporates 405.0 375.2 0.0 0.0 375.2
12/26/94 Agencies 941.6 863.7 746.6 378.9 484.8
1/2J95 Corporates 1.265.0 1,151.4 1,115.0 0.0 1,151.4
Agencies 50.0 44.3 50.0 0.0 44.3
1/9/95 Agencies 1,046.7 918.6 1,046.7 312.3 606.3
Corporates 275.0 252.4 75.0 0.0 252.4
Mutual Funds 161.7 147.0 0.0 0.0 147.0
1/16/95 Agencies 100.0 80.5 100.0 0.0 80.5
Mutual Funds 113.3 105.4 0.0 0.0 105.4
Total d $7 542.7 $6 899.1 $4 348.3 $2 218.1 $4 681.0
Original Portfolio Remaining (Dollars in Billions)
Conventional Securities $0.08
Structured Securities 0.45 Borrowings&Collateral Claims $0.0
Total $0.53 DVO1 -Sensitivity to Interest Rates(e) $22
(a)Original Few Amount
(b)Mental Value.
(c)Does not include the value of excess collateral collected or due to the County. Total figure indudes trades Met have been executed but have not sedled
(d)Total figures do not krckrde collateral liquidated at an unknown date.
(a)Dopar value in minions of a one percentage point change in Interest rates.
3
Salomon Brothers Inc
Portfolio Reinvestment Report: January 16, 1995
Salomon Brothers Asset Management- Current Investment Pool Portfolio Summary
• All investments are in U.S. Treasury or Government Agency securities
• Maturities range from January 17, 1995 through February 15, 1995
• 9.9 day average maturity
• 5.417% average investment yield
• $4.2 billion in new portfolio investments (a)
Maturity Schedule (in Millions) Issuer Breakdown (in Millions)
Date Amount Date Amount Issuer Amount
1/17 $678 1/30 $85 FHLB $1,462
1/18 212 1/31 150 FNMA 1,247
1/19 619 2/02 344 U.S.Treasury Bills 628
1/20 748 2/09 199 FHLMC 442
1/25 172 2/13 512 U.S. Treasury Collateralized O/N 285
1126 270 2/15 34 FFCB 170
1/27 212 Total $4,235 Bank of America Compensating Balances 15
Total $4,249
(a)Vedas hom Wtal cash p aceede to Carty reported on page two as total cash proceeds figue to Was blades that have been executed but have not wOW
4
News Release
SITRICK KRANTZ & COMPANY INC.
LOS ANGELES/NEW YORK
Contact: Sandra Sternberg
Michael Kolbenschlag
Sitrick and Company
818/834-4720
3101788-2850
For Immediate Release
Orange County Financial Advisors Reduce Estimate
of Loss to $1.7 Billion
Reduction In Loss Estimate Due To Accounting Adjustments
and Better than Anticipated Trading Results
Orderly Restructuring of Portfolio Essentially Complete
Santa Ana, Calif. —January 18, 1995—Orange County restructuring team leader
Thomas W. Hayes and the County's financial advisor Salomon Brothers Inc reported
today that the estimated loss of the Orange County investment portfolio has been
reduced to$1.69 billion from the original December 12, 1994 estimate of$2.02 billion.
The $330 million reduction from the original estimated loss is the result of accounting
adjustments and trading successes. The specific adjustments include:
■ Proceeds from securities sales that have exceeded the December 12 estimate by$36
million, attributable to well-received and successful auctions of structured securities,
as well as successful negotiations with various government agencies. -
■ $92 million In previously unidentified securities, net of encumbrances.
■ Recovery of$40 million in additional excess collateral due or collected from collateral
liquidations by dealers.
1875 Century Park East,Suite 950
Los Angeles, CA 90067
(310)788-2850 Fax:(310)788-2855
■ Accounting adjustments based on a reconciliation by Arthur Andersen &Co and a
review by the California State Auditor of County records:
—Initial pool investments were$150 million higher than originally reported.
—Additional cash of$310 million was identified.
In reporting to the Orange County Board of Supervisors today, Mr. Hayes said,
'We are very pleased with the results of Salomon Brothers' excellent trading and
execution. They have completed the auctions in an expeditious and prudent manner that
has significantly benefited the citizens of Orange County.
'The restructuring of the investment pool is essentially complete,well ahead of
the original 90-day estimate. We have successfully achieved our objective of significantly
reducing the interest rate exposure of the investment portfolio and have reinvested the
proceeds in a manner appropriate for a fund of this type.'
Mr. Hayes noted that°the accounting adjustments reflect a need to streamline and
improve the accounting system to effectively manage and report on the investment pool."
Now that the restructuring of the investment pool has been successfully
completed, Mr. Hayes said he will return to his position as President of Metropolitan West
Securities on February 3, 1995.
Orange County Bankruptcy
Orange County Bankruptcy
Impact on City of Huntington Beach
Status - January 23, 1995
Slide 1
........................................................................................................................ ................................
Status of County InvestmenTc
ol
Source: Salomon Brothers Inc.
12/12/94 1/17/95
Amount Contributed by Investors $7.42 $7.57
Portfolio Value 5.40 5.88
Loss in Value $2.02- _ $1.69
Estimated % Loss 27.2% 22.3
S in Billions
Slide 2 €
Summary - January 23, 1995
Orange County Bankruptcy
City Investment in County Pool
Amount Invested $43.6
22.3% of Investment 9.7
Balance $33.9
The Bankruptcy Court has Appointed an Investors
Committee which is Working on a Plan of
Adjustment to Return 100% of Investments to
ALL Investors in County Pool
Slide 3
Critical Issues to the City
• Receipt of 100% of 1994/95 Property Taxes on
normal distribution schedule
A Court Hearing Thursday 1/26/95
• Impact of Bankruptcy on 1994/95 Budget
A Interest Income Revenue
A Capital Projects
• Management of County Investment Pool
• Equitable Distribution of Pool Assets
• Withholding of $85-100 Million in Interest?
Slide 4
Summary - January 23, 1995
Orange County Bankruptcy
......................................................................................................................... ................................
Potential Financial Impact on ity
- Orange County Bankruptcy
• Invested Funds Currently not Available for:
A Capital Projects
A Cash Flow needs
• Lower 1994/95 Interest Earnings on
Investments
• Potential Loss on Investments
A City Intends to Recover 100%
A Timing of Bankruptcy Court decision Unknown
Slide 5
Summary
• Budget Controls Have Been Implemented
A Hiring Freeze Extended
A Expenditure Freeze
• Budget Revisions Will be Required
A City Council Meeting: February 6, 1995
A Project Delays
A Combination of One-Time/Ongoing Reductions
• City Will Closely Monitor Orange County
Bankruptcy Proceedings
Slide 6
Summary - January 23, 1995
0 , City of Huntington Beach
P.O.BOX 190 CALffORNIA 92648
From the desk of CONNIE BROCKWAY
CITY CLERK
January 24, 1995 (714)536-5227
Art De La Loza:
Please approve the following wording for the 1/23/95
minutes:
t� The City Administrator informed the City Clerk that
he was not in attendance in the Closed Session re:
status of Orange County Bankruptcy, as he requested
an opinion of the City Attorney regarding any potential
conflict of interest due to his son's employment
with the firm of Merrill Lynch. ��
Connie
OX—
Timing for Selection of Option
■ City to choose an Option by April 17
■ City can Change Option after April 17
— Can switch Options within 11 days after
approval of settlement by Bankruptcy Court
— Can switch from Option B to A by June 5
— If Recovery Note is not delivered by June 5,
can switch from Option A to B by June 8
Slide 9
Schedule of City Actions
■ City Council meeting April 10 to review
options in detail
■ Decision by April 17
Slide 10
April 3, 1995
M
Settlement Option A
(continued)
■ Repayment Claim - County is required to
use its "best efforts" to repay $4.7 million
■ Professional Fees - $135,448 for Services
Provided to the Investors Committee
■ Withheld Proceeds - $733,584 currently
Held by Investment Firms. Will be
Distributed When Released.
Slide 7
Waiver. of City Rights
■ Option A - All rights to further financial
recovery through City litigation waived
■ Option B - Right to recover from other
pool participants waived. Extent of
Waiver Unclear.
■ No Agreement - No rights waived
Slide 8
April 3, 1995
Summary - Huntington Beach
Return of Invested Funds
$in Millions Option A % Option B
Cash Distribution $33.561 77.0 $33.6
Recovery Note 1.632 3.7 0.0
Settlement Claim 4.300 9.9 0.0
Repayment Claim 4.716 10.8 0.0
Professional Fees 0.135 0.3 ???
Withheld Proceeds 0.734 1.7 ???
City Litigation 0.000 0_0 ???
$45.078 103.4 ????
Third Option: No Agreement-no guaranteed cash distribution
Slide 5
Settlement Option A
Return of Invested Funds
■Cash - $33.6 Million distributed to City
within 16 days of Bankruptcy Court
Approval
■Recovery Note - Additional $1.6 Million
provided to City by June 5 (failure to
deliver triggers right to switch to Option B)
■Settlement Claim.- $4.3 million of County
recovery from Merrill Lynch or others
Slide 6
April 3, 1995
3 Options
■ Option A
— 80% Return of Invested Funds by June 5
— Up to 9% from any settlement proceeds
— 11% Repayment claim
— Additional 3% for Earnings/Reallocation
— 103% Potential Total Return .
— Waive all legal rights
Slide 3
3 Options
(continued)
■ Option B
— 77% Return of Invested Funds
— Retain some legal rights
■ No Agreement
— No Guarantee of Return of Invested Funds
— Preserve all Legal Rights for Recovery of
Invested Funds
Slide 4
April 3, 1995
f • RE. .JED FROM G ��f►
AND MADE A PART OF THt RECORD AT
THE COUNCILYZETIHG OF l-31 c'.S
OFFICE OF THE CITY CLERK
CONNIE BROCKWAY,CITY CLERK
Orange County
Bankruptcy
Settlement Plan
Slide 1
Settlement Agreement
■ Investors Committee has reached
agreement with Orange County
■ Provides 3 Options for Investors
0 80% of Investors with 90% of Invested
Funds Must Approve
■ Bankruptcy Court must also Approve
Slide 2
April 3, 1995
--L;EIVED FROM_ (t�iri,n
,� + AND MADE A PART OF THE RECORD AT
Orange County B`ank up l Ciy'` r- COUNCIL MEETING OF_Lj -pis
OFFICE OF THE CITY CLERK
"-ONNIE BROOKWAY,CITY CLERK
County Orange C Bankruptcy
tY
Impact on City of Huntington Beach
Status - January 23, 1995
Slide 1
........................................................................................................................ .................................
Status of County Investment ool
Source: Salomon Brothers Inc.
12/12/94 1/17/95
Amount Contributed by Investors $7.42 $7.57.
Portfolio Value 5.40 5.88
Loss in Value $2.02 $1.69
Estimated % Loss 27.2% 22.3
$in Billions
Slide 2
Summary - January 23, 1995
r
Orange County Bankruptcy
City Investment in County Pool
Amount Invested $43.6
22.3% of Investment 9.7
Balance $33.9
The Bankruptcy Court has Appointed an Investors
Committee which is Working on a Plan of
Adjustment to Return 100% of Investments to
ALL Investors in County Pool
Slide 3
Critical Issues to the City
• Receipt of 100% of 1994/95 Property Taxes on
normal distribution schedule
A Court Hearing Thursday 1/26/95
• Impact of Bankruptcy on 1994/95 Budget
A Interest Income Revenue
A Capital Projects
• Management of County Investment Pool
• Equitable Distribution of Pool Assets
• Withholding of $85-100 Million in Interest?
Slide 4....................... ........*,.A.L...................................................................................................................
€
Summary - January 23, 1995
Orange County Bankruptcy
.......................................................................................................................MINIM................................
Potential Financial Impact on ity
- Orange County Bankruptcy
• Invested Funds Currently not Available for:
A Capital Projects
A Cash Flow needs
• Lower 1994/95 Interest Earnings on
Investments
• Potential Loss on Investments
A City Intends to Recover 100%
A Timing of Bankruptcy Court decision Unknown
Slide
Summary
• Budget Controls Have Been Implemented
A Hiring Freeze Extended
A Expenditure Freeze
• Budget Revisions Will be Required
A City Council Meeting: February 6, 1995
A Project Delays
A Combination of One-Time/Ongoing Reductions
• City Will Closely Monitor Orange County
Bankruptcy Proceedings
Slide 6
Summary - January 23, 1995
+ RECEIVED FROM
AND MADE A PAT THE RECORD AT
THE COUNCIL MEETING OF -/ - .S
OFFK)E OF THE CITY CLERK
Orange County Bankruptcy CONNIE BROCKWAY,CITY CLERK
WEEMEN-
.........................................
Potential Financial Impact on ity
- Orange County Bankruptcy
• Invested Funds Currently not Available for:
A Capital Projects
A Cash Flow needs
• Lower 1994/95 Interest Earnings on
Investments
• Potential Loss on Investments
A City Intends to Recover 100%
A Timing of Bankruptcy Court decision Unknown
AILA
................................... ................................................................................................Slide..}..
Investment of City Funds
as of 12/1/94
• $103.0 Million Total
• $43.6 Million in County $100
Pool
• $22.5 Million in other $75
Investments $50
A No Reverse Repos $25
A No Leveraging
A No Derivative Investments $0
• $36.9 Million Invested IN County Pool
by Banks/Trustees 0 Other Investments
®Trust Funds
................................... ................................................................................................Slide•2•
Summary - January 17, 1995
Orange County Bankruptcy
1w
Source of Funds
City Investments
General Fund 8.9
Redevelopment $10.6
Internal Svc $11.
Capital Projects 8.0
Water Fund $10.
Erterprise Funds $5.2
Debt Service $ •6
Trust Funds 9.5
$0 $5 $10 $15 $20 $25 $30 $35
$in Millions
.................................... ................................................................................................Slide 3
Summary
• Budget Controls Have Been Implemented
A Hiring Freeze Extended
A Expenditure Freeze
• Budget Revisions Will be Required
A City Council Meeting: February 6, 1995
A Project Delays
A Combination of One-Time/Ongoing Reductions
• City Will Closely Monitor Orange County
Bankruptcy Proceedings
................................... ........
........................................
.......................
.....................Slide••4••
Summary - January 17, 1995
V
Council/Agency Meeting Held:
Deferred/Continued to: LA"
❑ Approved veConditionally Approved ❑ Denied QCity Clerk's Signat re
Council Meeting Date: 03-06-95 Department ID Number: AD 95-10
and ao�c/ e-e sir ear o e c.dde,- W4 M
cv,•�/ addiio�o/ u/DIr/i/� by
�s fa IC. i i
REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION
SUBMITTED TO: HONORABLE MAYOR/CHAIRMAN AND CITY COUNCIL
MEMBERS/REDEVELOPMENT AGENCY MEMBERS
SUBMITTED BY: MICHAEL T. UBERUAGA, CITY ADMINISTRATOR/EXECU �,/
DIRECTOR
PREPARED BY: RICHARD BARNARD, DEPUTY CITY ADMINISTRATOR
SUBJECT: ORANGE COUNTY BANKRUPTCY - STATUS OF PLAN OF
ADJUSTMENT
Estatement ofissue,Funding Source,Recommended Action,Alternative Action,Analysis,Environmental Status,Attachment(s)
Statement of Issue:
The Orange County Division, League of California Cities has been working with all the
Orange County Cities, the Orange County Investment Pool (OCIP) Investors Committee, the
County of Orange, and the Orange County Business Council to negotiate an agreement that
will lead to the immediate release of OCIP participant's funds which are currently being held
by the County of Orange. A response to the County's Plan is being prepared by Orange
County Cities and a letter will be prepared outlining the Orange County Cities approach in
having 100% of Pool participant's funds returned. The letter will be available for Council
review on Monday, March 6, 1995. Staff is requesting that the City Council authorize the
Mayor, on behalf of the City Council, to be a signatory to the letter, which will be sent to the
Orange County Board of Supervisors setting forth an approach which will guarantee a 100%
Solution.
Funding Source:
No funds are required for the recommended action.
Recommended Action:
Approve the response letter to the County Plan and authorize the Mayor to sign the letter on
behalf of the City Council and transmit it to the Orange County Board of Supervisors.
Alternative Action(s):
Not approve the letter.
1
REQUEST FOR LOUNCIL/REDEVELOPMENT AGENCY ACTION
MEETING DATE: DEPARTMENT ID NUMBER: AD 95-10
Analysis:
The League of Cities, working with Mayors and City Council members of the Orange Cities,
and the Orange County City Managers Association, is drafting a response to the County's
proposed plan of adjustment. The Cities response will call for the immediate return of the
hard dollars currently being held by the County of Orange (approximately 77.7% of the total
amount in the Pool as of December 6, 1994) and a secured guarantee of the remaining
22.3% owed Pool participants. Under the Cities plan, the total returned to the Pool
participants would equal 100% of the funds invested into the Orange County Investment
Pool by the Pool participants.
The focus of the negotiations is on the 22.3% investment balance. The County currently
does not have cash on hand in the Pool to repay the Pool participants the 22.3%. The cities
believe the only viable solution is for the County of Orange to commit to a return of 100% of
the proceeds to the investors, with the recognition that complete recovery by Pool
participants will take place over time.
Environmental Status:
None
Attachment(s):
City Clerk's
Page Number
. .......... XXXXXXXX
......... ... ....... .................
......... .... ......... ...................
........ ........... ..
........ . ........... .....
....... ............ ..................
........ .............. ...............
......................
...... . .............. ................
..... . . ................ .............
...... ............... ...............
........ ................I. ...............
......... ..................... ...........
..... .. ........ . ....
..... ..............
0010758.02 -2- 03/02/95 12:58 PM
March 9, 1995
al) � ±,
The Honorable Chairman&Members C,;7-1
m
Board of Supervisors, County of Orange ry w m
10 Civic Center Plaza C m
Santa Ana, California 92701
Dear Chairman Vasquez and Members of the Board:
c.n
The cities in the investment pool are committed to developing solutions to the bankruptcy crisis that
will maintain our ability to serve our common constituencies. We sincerely believe that,with the
cooperation and assistance of the public agencies who are stakeholders in this crisis,the County
can return 100%of the investments,develop short and long-terns strategies to ensure our ability to
deliver critical public services and establish safeguards to prevent a reoccurrence of the events
which led to this circumstance. You must recognize cities are not seeking special consideration,
only the return of all of our funds to the full extent authorized by law. Anything less is not in the
best interests of our residents.
The formula to return 100% of investments is:
$ .77 immediate distribution of all cash available to all pool participants on a pro-rata
basis with no conditions attached;
$ .03 collateralized recovery note; and
$ .20 to be recovered over time through secured notes backed by existing revenues,
county assets and/or loans to the county from private institutions and/or federal and
state government and/or proceeds from county litigation. Cities cannot accept
subordinated status.
Investors are entitled to additional recovery as follows:
$ .02 (or more)reallocated interest;
$ .01 pre-petition interest(July 1, -December 6, 1994);
$ .03 post-petition interest(December 7, 1994- June 30, 1995); and
the transfer back to the County of losses improperly allocated to other investors.
This formula is based upon information available as of the date of this letter. Should new
information become available w reserve the right to revise our proposal.
The only obstacle to an agreement which will start us on the road to recovery is your unwillingness
to secure the balance not covered by cash or the recovery note. We share your concerns about
unsubstantiated claims about the value of County assets and the lack of objective analyses of the
appropriateness of asset sales. We are also aware the County's having run a deficit budget for the
last three years has greatly exacerbated problems arising from pool losses.- However,we believe
the only viable solution is to return 100% of funds to investors,recognizing complete recovery will
take place over time,
After the lawyers and consultants have departed, we will have to face each other across the table.
It is you and we who will have to ensure our children's education,maintain adequate public safety
services and access the bond market. If you are willing to work with us,we can all show the
leadership and courage necessary to fulfill our responsibilities to the public we serve.
Direct Mr.Bennett to immediately reach agreement with the Investment Pool Participants'
Committee based on the formula described in this letter. The consequences of not doing so now
will be disastrous to our residents and businesses.
Signature block for the mayors
i N8310"O'AWN00d8 3INNOO
N8310 A110 31-11 d0 30Id30
�- d0 ONI133104 11ON603 3H1
�f IV%0038 3Hl dO 18Vd V 30"ONV
City Administrator's Report v408:J 03AI3038
..4EIVED FROM tf/�r�Mr
AND MADE A PART OF THE RECORD AT
yE COUNCIL MEETING OF_ .10 �01 S
OFFICE OF THE CITY CLERK
`IWNIE SROOKWAY,CITY CLERK
Orange County
Bankruptcy
Impact on City of Huntington Beach
Status - February 21, 1995
L In suao i
Status of County Investment Pool
Source: Salomon Brothers Inc.
12/12/94 1/17/95
Amount Contributed by Investors $7.42 $7.57
Portfolio Value 5.40 5.88
Loss in Value $2.02 $1.69
Estimated % Loss 27.2% 22.3
$in Billions
slide 2
Febraury 21, 1995
4
City Administrator's Report
C.ity: Investment in County
Pool
Amount Invested $43.6
22.3% of Investment 9.7
Balance $33.9
* The County has proposed a Plan of
Adjustment.
* Investment Pool Committee is discussing
alternative Plans.
. ,. Slide 3
County Plan of Adjustment
Option
A B C
* Cash 77% 77% 0%
* Recovery Note 3 0 0
• Secured Claim 9 0 0
* Subordinated Claim 11 0 0
* Unsecured Claim 0 23 100
100% 100% 100%
;. Slide 4
Febraury 21, 1995
City Administrator's Report
Critical Issues to the City
* Receipt of 100% of 1994/95 Property Taxes
— Court Approved 1/26/95
* Impact of Bankruptcy on 1994/95 Budget
— Lower Interest Income Revenue
— Delay Capital Projects
— Budget Amendment Approved 2/6/95
* Equitable Return of Invested Funds
Slide S
Potential Financial Impact on City
Orange County Bankruptcy
* Invested Funds Currently not Available for:
— Capital Projects
— Cash Flow needs
Lower 1994/95 Interest Earnings on
Investments
* Potential Loss on Investments
— City Intends to Recover 100%
— Timing of Bankruptcy Court decision Unknown
Slide 6
Febraury 21, 1995
City Administrator's Report
Summary
• Budget Controls Have Been Implemented
• Hiring Freeze Extended
• Expenditure Freeze
• Budget Revisions
• Amendment Approved: February 6, 1995
• Capital Project Delays
• Combination of One-Time/Ongoing Reductions
• City Will Closely Monitor Orange County
Bankruptcy Proceedings
Slide 7
Febraury 21, 1995
n a� -:
. .
B For Cif Clerk's Use O
Council/Agency Meeting Held:
Deferred/Continued to:
XApproved ❑ Conditionally Approved ❑ Denied IV City Clerk's Signcfture
ne • 6 �
Council Meeting Date: 02/06/95 Department ID Number:
REQUEST FOR COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SUBMITTED BY: MICHAEL T. UBERUAGA, CITY ADMINISTRAT
PREPARED BY: RICHARD BARNARD, DEPUTY CITY ADMINISTRATOR
SUBJECT: RESOLUTION REQUESTING THAT THE COUNTY OF ORANGE
RETURN 100% OF THE CITY OF HUNTINGTON BEACH MONIES IN THE /
ORANGE COUNTY INVESTMENT POOL (OCIP) &.0 66 6r AdAIU d-
Statement of Issue, Funding Source, Recommended Action, Alternative Action, Analysis, Environmental Status, Attachment(s)
Statement of Issue:
It has become necessary for the City Council of Huntington Beach to adopt a resolution that makes
clear to the Orange County Board of Supervisors that nothing less than 100% return of the city's
OCIP funds will be acceptable to the Huntington Beach City Council and the residents of
Huntington Beach.
Funding Source:
Orange County is holding "in trust" $43.6 million of the city of Huntington Beach's funds in the
Orange County Investment Pool.
Recommended Action:
Adopt Resolution il�"e— requesting the County Board of Supervisors return 100% of city
funds to the city of Huntington Beach and its residents.
Analysis:
The cities of Anaheim, Laguna Hills, and Irvine have all passed similar resolutions requesting
100% of the pool funds be returned by the county. It is expected that many other cities will do
likewise.
-R COUNCIL ACTION • 6 95
QUEST FOR COU C ON Meeting Date. 02/0 /
RESOLUTION REQUESTING THAT THE COUNTY OF ORANGE RETURN 100% OF THE CITY
OF HUNTINGTON BEACH MONIES IN THE ORANGE.COUNTY INVESTMENT POOL (OCIP)
Since Orange County's filing for Chapter 9 Bankruptcy protection on December 6, 1994, pool
participants have been patiently waiting for the county of Orange to complete the restructuring of
the Orange County Investment Pool portfolio. The county announced on January 18, 1995, that
former State Treasurer Tom Hayes had completed the restructuring of the pool's portfolio. The
city has taken the position since the inception of the county bankruptcy that all participants in the
Orange County Investment Pool should be made whole by the county. The city and other pool
participants have indicated a willingness to work with the Orange County Board of Supervisors to
do what can be done to assist the county. To date, there has been little financial information
flowing from the county and no concrete proposal put forth by the county which will result in the
return of funds to the participants of the OCIF.
The city established a working committee comprised of Mayor Victor Leipzig, City Administrator
Michael Uberuaga, City Attorney Gail Hutton, City Treasurer Don Watson, Administrative
Services Director Robert Franz, and Deputy City Administrator Richard Barnard to monitor the
activities of the county's bankruptcy. This committee understands that there are on-going
discussions regarding development of a Plan of Adjustment which will outline how pool funds will
be distributed. The committee's position is that the Plan of Adjustment must include assurances
by the Orange County Board of Supervisors that the city of Huntington Beach, along with other
pool participants, must be guaranteed 100% return of their monies. It recognized that the Board
of Supervisors has a whole array of options available to assist them (e.g., bonds, loans, etc.)
which they can draw upon to address the financial crisis in which they find themselves.
Alternative Action(s):
Not adopt Resolution
Environmental Status:
N/A
Attachment(s):
Page Number
1. Resolution requesting 100% return of city funds.
0009068.01 -2- 02/03/95 9:32 AM
RESOLUTION NO. 6665
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
DEMANDING THAT THE COUNTY OF ORANGE RETURN 100 PERCENT
OF THE CITY OF HUNTINGTON BEACH TRUST MONIES FORTHWITH
WHEREAS, the County of Orange is authorized by Section 53684 of the California
Government Code to serve as a trustee for trust funds deposited by cities and other
governmental agencies; and
WHEREAS, the City of Huntington Beach has made substantial trust fund deposits with
Orange County; and
WHEREAS, the City of Huntington Beach has acted to maintain trust fund deposits with
Orange County in substantial reliance upon the State Government Code with regard to the
safety of trust funds invested by Orange County; and
WHEREAS, the City of Huntington Beach has acted to maintain trust fund deposits with
Orange County in substantial reliance upon the Orange County Investment Policy with regard
to the safety and liquidity of trust funds invested by Orange County; and
WHEREAS, the Orange County Treasurer/Tax Collector made assurances to the City
of Huntington Beach concerning the safety and liquidity of the City's deposits; and
WHEREAS, the Orange County Board of Supervisors is required by law to exercise
oversight of the activities of the Orange County Treasurer/Tax Collector with respect to such
trust funds; and
WHEREAS, on December 6, 1994, the County of Orange filed for bankruptcy under
Chapter 9 of the Federal Bankruptcy Code on behalf of the County and the Orange County
Investment Pools; and
WHEREAS, the County of Orange has admitted illegal activities which amounted to a
breach of its fiduciary duties as trustee in connection with the investment and safekeeping of
trust funds; and
WHEREAS, the Orange County Board of Supervisors has failed to acknowledge its
fiduciary responsibility to insure the safe return of all participants' trust fund deposits and
accrued interest earnings and has failed to return such trust funds; and
WHEREAS, it has recently been revealed that County officials have wrongfully and
illegally diverted and skimmed at least$85 million in interest earning from trust fund depositors
to a County "economic uncertainty fund" established by the Board of Supervisors and
controlled by County officials and have converted profitable investments to County accounts
while switching unprofitable ones to trust fund participants.
NOW THEREFORE, BE IT RESOLVED, that the City Council of Huntington Beach
demands that the Orange County Board of Supervisors immediately draft, adopt, and seek
approval of a motion in the Bankruptcy Court which will result in the return of 100% of the trust
funds the City of Huntington Beach and all other participants deposited with Orange County,
together with interest thereon, based on the following principles:
1. Orange County has a fiduciary responsibility to all participants who deposited
trust funds with Orange County for investment purposes, including the taxpayers of the City of
Huntington Beach.
2. Orange County has the financial responsibility for all losses of investment funds
and has an obligation to take all steps necessary to pay all trust fund participants in full and
immediately.
BE IT FURTHER RESOLVED that the City Clerk of the City of Huntington Beach shall
forward a copy of this resolution to each member of the Orange County Board of Supervisors
and to each of the other cities in Orange County and to the Attorney General of the State of
California for appropriate action by him in the event the Supervisors of Orange County fail to
perform their fiduciary duties as demanded herein.
THE FOREGOING RESOLUTION is approved and adopted by the City Council of the
City of Huntington Beach this 6th day of February, 1995.
4Z� 2
rl�� �
MAYOR
CITY OF HUNTINGTON BEACH
ATTEST:
��LG�i ooad�
CITY CLERK
CITY OF HUNTINGTON BEACH
APPROVED AS TO FORM:
CITY ATTOR EY
CITY OF HUNTINGTON BEACH
Res. No. 6665
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, CONNIE BROCKWAY, the duly elected, qualified City Clerk of
the City of Huntington Beach, and ex-officio Clerk of the City Council of said
City, do hereby certify that the whole number of members of the City Council of
the City of Huntington Beach is seven;that the foregoing resolution was passed
and adopted by the affirmative vote of at least a majority of all the members of said
City Council at a regular meeting thereof held on the 6th of February, 1995 the
following vote:
AYES: Councilmembers:
Harman, Sullivan, Leipzig, Dettloff, Green, Garofalo
NOES: Councilmembers:
None
ABSENT: Councilmembers:
Bauer
ce4ox�
City Clerk and ex-officio C erk
of the City Council of the City
of Huntington Beach, California
G/kw/resbkpg
CITY OF ANAHEIM CITY OF BREA CITY OF BUENA PARK
CI;(CLERK -1TY CLERK ^,ITY CLERK
200 S',AIJAHEIM BLVD. 4UMBER ONE CIVIC CENTER CIRCLE J650 BEACH BLVD.
ANAHEIM, CA 92803 BREA, CA 92621 BUENA PARK, CA 90620
CITY OF COSTA MESA CITY OF CYPRESS CITY OF DANA POINT
CITY CLERK CITY MANAGER - CITY CLERK
77 FAIR DRIVE 5275 ORANGE AVENUE 33282 GOLDEN LANTERN#203
COSTA MESA, CA 92628-1200 CYPRESS, CA 90630 DANA POINT, CA 92629
CITY OF FOUNTAIN VALLEY CITY OF FULLERTON CITY OF GARDEN GROVE
CITY CLERK CITY CLERK CITY CLERK
10200 SLATER AVENUE 303 W. COMMONWEALTH AVENUE 11391 ACACIA PARKWAY
FOUNTAIN VALLEY, CA 92708 FULLERTON, CA 92632 GARDEN GROVE, CA 92640
CITY OF IRVINE CITY OF LAGUNA BEACH CITY OF LAGUNA HILLS
CITY CLERK CITY CLERK CITY CLERK
ONE CIVIC CENTER PLAZA 505 FOREST AVENUE 25201 PASEO DRIVE, STE. 150
IRVINE, CA 92714 LAGUNA BEACH, CA 92651 LAGUNA HILLS, CA 92653
CITY OF LAGUNA NIGUEL CITY OF LA HABRA CITY OF LAKE FOREST
CITY CLERK CITY CLERK CITY CLERK
27801 LA PAZ ROAD 201 E. LA HABRA BLVD. 23778 MERCURY ROAD
LAGUNA NIGUEL, CA 92677 LA HABRA, CA 90631 LAKE FOREST, CA 92630
CITY OF LA PALMA CITY OF LOS ALAMITOS CITY OF MISSION VIEJO
CITY CLERK CITY MANAGER CITY CLERK
7822 WALKER STREET 3191 KATELLA AVENUE '" 26522 LA ALAMEDA,#190 '
LA PALMA, CA 90623 LOS ALAMITOS, CA 90720 MISSION VIEJO, CA 92691
CITY OF NEWPORT BEACH CITY OF ORANGE CITY OF PLACENTIA
CITY CLERK CITY CLERK CITY CLERK -
3300 NEWPORT BLVD. j 300 E. CHAPMAN AVENUE 401 E. CHAPMAN AVENUE
NEWPORT BEACH, CA 92663 ORANGE, CA 92666 PLACENTIA, CA 92670
CITY OF SAN CLEMENTE CITY OF SAN JUAN CAPISTRANO CITY OF SANTA ANA
CITY CLERK CITY CLERK CITY CLERK
100 AVENIDA PRESIDIO / 32400 PASEO ADELANTO 20 CIVIC CENTER PLAZA
SAN CLEMENTE, CA 92672 SAN JUAN CAPISTRANO, CA 92675 SANTA ANA, CA 92702
CITY OF SEAL BEACH CITY OF STANTON CITY OF TUSTIN
CITY CLERK CITY CLERK r CITY CLERK
211 8TH STREET 10660 WESTERN AVENUE 300 CENTENNIAL WAY
SEAL BEACH, CA 90740 STANTON, CA 90680 TUSTIN, CA 92680
CITY OF VILLA PARK CITY OF WESTMINSTER CITY OF YORBA LINDA
CITY CLERK CITY CLERK CITY CLERK
17855 SANTIAGO BLVD. 8200 WESTMINSTER BLVD. P. O. BOX 487
VILLA PARK, CA 92667 WESTMINSTER, CA 92683 YORBA LINDA, CA 92686
February 9, 1995
«Company»
<<Addressl»
<<Address2»
«City»,«State» <<PostalCode»
The City Council of the City of Huntington Beach at the meeting held February 6, 1995
adopted Resolution No. 6665 "A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF HUNTINGTON BEACH DEMANDING THAT THE COUNTY OF
ORANGE RETURN 100 PERCENT OF THE CITY OF HUNTINGTON BEACH
TRUST MONIES FORTHWITH."
The City Council requested a certified copy of the resolution be forwarded to each
member of the Orange County Board of Supervisors and to each of the other cities in
Orange County and to the Attorney General of the State of California.
Connie Brockway
City Clerk CMC
G/kw/ocresltr
Company Addressl Address2 City State PostalCode
CITY OF CITY 200 S. ANA CA 92803
ANAHEI CLERK ANAHEI HEI
M M BLVD. M
CITY OF CITY NUMBER BRE CA 92621
BREA CLERK ONE A
CIVIC
CENTER
CIRCLE
CITY OF CITY 6650 BUE CA 90620
BUENA CLERK BEACH NA
PARK BLVD PAR
K
CITY OF CITY 77 FAIR COS CA 92628-1200
COSTA CLERK DRIVE TA
MESA MES
A
CITY OF CITY 5275 CYP CA 90630
CYPRESS MANAGE ORANGE RES
R AVENUE S
CITY OF CITY 33282 DAN CA 92629
DANA CLERK GOLDEN A
POINT LANTER POIN
N #203 T
CITY OF CITY 10200 FOU CA 92708
FOUNTAI CLERK SLATER NTA
N AVENUE IN
VALLEY VAL
LEY
CITY OF CITY 303 W. FUL CA 92632
FULLERT CLERK CON MO LER
ON NWEALT TON
H AVE
CITY OF CITY 11391 GAR CA 92640
GARDEN CLERK ACACIA DEN
GROVE PARKWA GRO
Y VE
CITY OF CITY ONE IRVI CA 92714
IRVINE CLERK CITY NE
CENTER
PLAZA
CITY OF CITY 505 LAG CA 92651
LAGUNA CLERK FOREST UNA
BEACH AVENUE BEA
CH
CITY OF CITY 25201 LAG CA 92653
LAGUNA CLERK PASEO UNA
HILLS DRIVE, HILL
STE. 150 S
CITY OF CITY 27801 LA LAG CA 92677
LAGUNA CLERK PAZ UNA
NIGUEL ROAD NIG
UEL
CITY OF CITY 201 E. LA LA CA 90631
Company Addressl Address2 City State PostalCode
LA CLERK HABRA HAB
HABRA BLVD RA
CITY OF CITY 23778 LAK CA 92630
LAKE CLERK MERCUR E
FOREST Y ROAD FOR
EST
CITY OF CITY 7822 LA CA 90623
LA CLERK WALKER PAL
PALMA STREET MA
CITY OF CITY 3191 LOS CA 90720
LOS MANAGE KATELL ALA
ALAMITO R A MIT
S AVENUE OS
CITY OF CITY 26522 LA MISS CA 92691
MISSION CLERK ALAMED ION
VIEJO A #190 VIEJ
O
CITY OF CITY 3300 NEW CA 92663
NEWPOR CLERK NEWPOR POR
T BEACH T BLVD T
BEA
CH
CITY OF CITY 300 E. ORA CA 92666
ORANGE CLERK CHAPMA NGE
N
AVENUE
CITY OF CITY 401 E. PLA CA 92670
PLACENT CLERK CHAPMA CEN
IA N TIA
AVENUE
CITY OF CITY 100 SAN CA 92672
SAN CLERK AVENID CLE
CLEMEN A MEN
TE PRESIDIO TE
CITY OF CITY 32400 SAN CA 92675
SAN CLERK PASEO JUA
JUAN ADELAN N
CAPISTR TO CAPI
ANO STR
ANO
CITY OF CITY 20 CIVIC SAN CA 92702
SANTA CLERK CENTER TA
ANA PLAZA ANA
CITY OF CITY 211 8TH SEA CA 90740
SEAL CLERK STREET L
BEACH BEA
CH
CITY OF CITY 10660 STA CA 90680
STANTO CLERK WESTER NTO
N N N
AVENUE
CITY OF CITY 300 TUS CA 92680
TUSTIN CLERK CENTEN TIN
Company Addressl Address2 City State PostalCode
NIAL
WAY
CITY OF CITY 17855 VILL CA 92667
VILLA CLERK SANTIAG A
PARK O BLVD PAR
K
CITY OF CITY 8200 WES CA 92683
WESTINH CLERK WESTMI TMI
NSTER NSTER NST
BLVD ER
CITY OF CITY P.O. BOX YOR CA 92686
YORBA CLERK 487 BA
LINDA LIN
DA
ATTORN DAN 1515 K SAC CA 95814
EY LUNGRE STREET, RAM
GENERA N SUITE ENT
L 511 O,
ORANGE CLERK 10 CIVIC SAN CA 92701
COUNTY OF THE CENTER TA
BOARD BOARD PLAZA ANA
OF
SUPERVI
SORS
February 9, 1995
<<Company>>
«Addressl»
<<Address2»
«City»,«State» <(PostalCode))
The City Council of the City of Huntington Beach at the meeting held February 6, 1995
adopted Resolution No. 6665 "A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF HUNTINGTON BEACH DEMANDING THAT THE COUNTY OF
ORANGE RETURN 100 PERCENT OF THE CITY OF HUNTINGTON BEACH
TRUST MONIES FORTHWITH."
The City Council requested a certified copy of the resolution be forwarded to each
member of the Orange County Board of Supervisors and to each of the other cities in
Orange County and to the Attorney General of the State of California.
Connie Brockway
City Clerk CMC
G/kw/ocresltr
.y
i
RESOLUTION NO. 6665
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
DEMANDING THAT THE COUNTY OF ORANGE RETURN 100 PERCENT
OF THE CITY OF HUNTINGTON BEACH TRUST MONIES FORTHWITH
WHEREAS, the County of Orange is authorized by Section 53684 of the California
Government Code to serve as a trustee for trust funds deposited by cities and other
governmental agencies; and
WHEREAS, the City of Huntington Beach has made substantial trust fund deposits with
Orange County; and
WHEREAS, the City of Huntington Beach has acted to maintain trust fund deposits with
Orange County in substantial reliance upon the State Government Code with regard to the
safety of trust funds invested by Orange County; and
WHEREAS, the City of Huntington Beach has acted to maintain trust fund deposits with
Orange County in substantial reliance upon the Orange County Investment Policy with regard
to the safety and liquidity of trust funds invested by Orange County; and.
WHEREAS, the Orange County Treasurer/Tax Collector made assurances to the City
of Huntington Beach concerning the safety and liquidity of the City's deposits; and
WHEREAS, the Orange County Board of Supervisors is required by law to exercise
oversight of the activities of the Orange County Treasurer/Tax Collector with respect to such
trust funds; and
WHEREAS, on December 6, 1994, the County of Orange filed for bankruptcy under
Chapter 9 of the Federal Bankruptcy Code on behalf of the County and the Orange County
Investment Pools; and
WHEREAS, the County of Orange has admitted illegal activities which amounted to a
breach of its fiduciary duties as trustee in connection with the investment and safekeeping of
trust funds; and
WHEREAS, the Orange County Board of Supervisors has failed to acknowledge its
fiduciary responsibility to insure the safe return of all participants' trust fund deposits and
accrued interest earnings and has failed to return such trust funds; and
WHEREAS, it has recently been revealed that County officials have wrongfully and
illegally diverted and skimmed at least $85 million in interest earning from trust fund depositors
to a County "economic uncertainty fund" established by the Board of Supervisors and
controlled by County officials and have converted profitable investments to County accounts
while switching unprofitable ones to trust fund participants.
i
NOW THEREFORE, BE IT RESOLVED, that the City Council of Huntington Beach
demands that the Orange County Board of Supervisors immediately draft, adopt, and seek
approval of a motion in the Bankruptcy Court which will result in the return of 100% of the trust
funds the City of Huntington Beach and all other participants deposited with Orange County,
together with interest thereon, based on the following principles:
1. Orange County has a fiduciary responsibility to all participants who deposited
trust funds with Orange County for investment purposes, including the taxpayers of the City of
Huntington Beach.
2. Orange County has the financial responsibility for all losses of investment funds
and has an obligation to take all steps necessary to pay all trust fund participants in full and
immediately.
BE IT FURTHER RESOLVED that the City Clerk of the City of Huntington Beach shall
forward a copy of this resolution to each member of the Orange County Board of Supervisors
and to each of the other cities in Orange County and to the Attorney General of the State of
California for appropriate action by him in the event the Supervisors of Orange County fail to
perform their fiduciary duties as demanded herein.
THE FOREGOING RESOLUTION is approved and adopted by the City Council of the
City of Huntington Beach this 6th day of February, 1995.
MAYOR
CITY OF HUNTINGTON BEACH
ATTEST:
CITY CLERK
CITY OF HUNTINGTON BEACH
APPROVED AS TO FORM:
CITY ATTOR EY -7-a'
CITY OF HUNTINGTON BEACH
Res. No. 6665
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, CONNIE BROCKWAY, the duly elected, qualified City Clerk of
the City of Huntington Beach, and ex-officio Clerk of the City Council of said
City, do hereby certify that the whole number of members of the City Council of
the City of Huntington Beach is seven;that the foregoing resolution was passed
and adopted by the affirmative vote of at least a majority of all the members of said
City Council at a regular meeting thereof held on the 6th of February, 1995 the
following vote:
AYES: Councilmembers:
Harman, Sullivan, Leipzig, Dettloff, Green, Garofalo
NOES: Councilmembers:
None
ABSENT: Councilmembers:
Bauer
City Clerk and ex-officio C erk
of the City Council of the City
The foregoing instrument is a correct of Huntington Beach, California
copy of the original on file in this office.
Attest 19 9�
CONNIE BROC M
Clty °Clerk and Ex-officio Clerlc of the City
Council of the City of Huntington Beach,
,California,
By 010.1 nanUty
7"
G/kw/resbkpg
Attachment(s):
_. . .........................
._....._......_____...............
............_..__.................
................... .....
1 Invoice for reimbursement of League of California Cities,
Orange County Bankruptcy Division.
2 Benest/Brady memo to city managers discussing reimbursement
RCA Author: Robert J. Franz
ATTACHMENT # 1
brM WFST SANTA ANA BOCLE1,;,RD.j;:iTE IU.SANTa ANA.CALIFOPSIA 927111
TELEPHDSE:i7t 47.1007 PAX. l816
li
INVOICE
.kNAHEIH
BREA
HLENA PARK
COSTA HESA March 5, 1997
(APRESS
DANA POINT
FOUNTAIN VALLEY Invoice sent to: City of Huntington Beach
FULLERTON
GARDEN GROVE
HUNTINGTON BEACH
IRVINE
LA HABRA
IA PALMA , Amount Due: $7,121.00
LACUNA BEACH
LACUNA HILLS
LACUNA NIGUEL
L&KE FOREST
LOS ALAMITOS For: Reimbursement of League of California Cities
xISSION VIE1a Orange County Division for Bankruptcy Expenses as
NEWPORT BEACH Approved by the Executive Steering Committee and
ORANGE the Orange County City Managers' Association
PLACENTIA
SAN CLEMENTE
' SAN 1UAN CAPISTRANO
SANTA ANA
SEAL BEACH please Remit to: League of California Cities, Orange County Division
STANTON 600 West Santa Ana Boulevard, Suite 214
TUSTIN Santa Ana, CA 92701
VILLA PARK
WESTMINSTER
YORBA LINDA
PRESIDENT:Lauraan Coot.Mayor Pro Tem.City of Fountain Valley;FIRST VICE PRESIDENT:Be•Peery,Council Member,City of Brea:
SECOND VICE PRESIDENT;Steve Apodaca,Council Membot.City of San Clemente;PAST PRESIDENT:Ron Batca,Mayor Pro Tim,City of Los Alamitos:
STATE LEAGUE DIRECTOR:Pat McGuigan,COtsMil M<mber,City of Saatn Aeac RESOLUTION$COMMI'(•TEE CHAIRMAN:Act Browtt,Mayor.CLty of Buena Park:
OCTA REPRESENTATIVE: ;EXECUTIVE DIRECTOR:Jaen M.Hustoa
i
3i 0: ._Ci A M _
ATTACHMEN......................................................................
T # 2
109 P02 JUN 26 '97 12:53
soon
B w
C A L I P 0 NIA
City of Brea
Date: February 2 , 9997
To: City Managers
From: Frank Benest, Brea & Paul Brady, Irvine
on behalf of the OCCMA Executive Committee
Subject: Reimbursement of Division for Bankruptcy Expenses
As has been discussed at OCCMA meetings over the past two years, the Division has incurred
expenses on behalf of cities as a result of the County of Orange bankruptcy filing in December, 1994.
The expenses were not anticipated and therefore were not budgeted. They include the legislative
monitoring and advocacy provided by Ken Emanuels, copying and distribution of bankruptcy
documents as needed by the cities and the team of managers supporting the Cities sub-committee, and
expenses for support of the Technical Team. The amount of expenses for the two years since the
bankruptcy occurred totals $97,000, 90% of which are related to the legislative advocacy on the
property tax diversion bills and the legislation necessary to implement the bankruptcy recovery plan.
In an attempt to streamline the reimbursement process,Paul Glassman submitted a request to the
Bankruptcy Court over a year ago seeking reimbursement for expenses from the Professional Fee
Account. While reimbursement is anticipated at some point in the future, the process is-moving
forward very slowly and the Division is no longer able to subsidize those expenses which amount to
approximately one-third of the Division's annual budget.
After discussions with the Division's Executive Steering Committee and with Director Janet Huston
over the past months, the OCCMA Executive Steering Committee will be recommending at the March
OCCMA meeting that you support the reimbursement formula as outlined in the attached schedule.
The formula is based on the structure used to calculate annual dues—a flat rate combined with a
population factor. We asked that the schedule be calculated using the assumption that Garden Grove
elected officials would not authorize re-imbursement since the city is not a member of the State League
or Division. When the Division is reimbursed through the Court process,cities will either be given a
credit on their next dues assessment or be issued a refund.
Please keep in mind these expenses were "hard dollar" costs incurred as a direct result of the
bankruptcy. The Division absorbed other incidental and all staff costs. The Division's expenditures in
every other regard are at or below the budget approved by the membership. Additionally,the
Managers early on agreed that these extraordinary expenditures would not have to come from the
Division budget, The Division could have sought reimbursement over a year ago, however, as a
matter of convenience for member cities, they chose to try to work through the Court process._While
careful budget management has enabled the Division to hold out thus far, from a cash flow
perspective, it is no longer prudent for them to do so.
The work of the Division continues to be critical to the success of Orange County cities. We are
urging your support of this request.
cc: Executive Steering Committee
City Council Burnie Dunlap Glenn G.Parker Lynn Daucher Bev Perry Kathy Wiser
Mayor Mayor Pro Tem Councilmember Councilmember Councilmember
Civic&Cultural Center • Number One Civic Center Circle • Brea,California 92821-5732 . 714/990-7600 . FAX 714/990-2258
'311 P01/02 HUG 29 ° 35 16:13
j ,FA(:aU . ( l" ORANGE COUNTY 7VWON
CALIFORNIA
600 WEST SANTA ANA BOULEVARD,SUITE 214,SANTA ANA,CALIFORNIA 9 01 7
c.Inns TELEPHONE:(714)972.0077 FAX:(714)972.1916 /%!C
CONTACT: Charles V. Smith,President
ANAHEIM l auranti Cook, I st Vice President
BREA Janet Huston,Executive Director
BUENA PARK (714)972-0077
COSTA MESA
CYPRESS FOR DEViEDIATE RELEASE
DANA POINT August 29, 1995
FOUNTAIN VAI,LEY
FULLERTON
GARDEN GROVE
HUNTINGTON BEACH ORANGE COUNTY DIVISION, LEAGUE OF CALIFORNIA CITIES
IRVINE
LA HABRA OFFERS CONCEPTUAL APPROVAL OF COUNTY "CONSENSUS"
LA PAI.MA
IAGUNA BEACH RECOVERY PLAN
LACUNA HIUS
LAGUNA NIGUEL
LAKE!FOREST Irvine, CA...At a special meeting on August 29,the Orange County Division,
Los ALAMITOS League of California Cities offered conceptual approval of the County of Orange
MISSION VIEJO
NEWPORT BEACH "Consensus"recovery plan in anticipation of successful resolution of outstanding
ORANGE issues.
PLACENTIA
SAN CLEMENTE
SAN JUAN CAPIS ANO The recommendation was crafted by a technical team of city managers,finance
SAN rA ANA Mors and professional advisors and was endorsed by the Division's Executive
SEAL BEACH
STANTON Steering Committee. The recommendation acknowledges that the Consensus Plan is in
TUh-r1N large part based on a recovery plan endorsed by 30 of the 31 Orange County cities on
VILI A PARK
WES'rMINSTER August 10, 1995.
YORRA IANDA
The approval language had three components:
1.) Adopt the County's Consensus Plan in concept pending written bill
and/or agreement language,providing our outstanding issues,as listed`
are satisfactorily resolved.
a. the Consensus Plan will not include diversion of city sales,
property or other revenues,including reserves;
b. the$18 million of General Fund revenue costs will be shared
pro rata among all OCIP participants from future proceeds due
Iparticipants;
-more-
PRESIDENT:Charlox Smith.Mayor.City of WuxtNinialer:FIRST VICE PRESIDBIV111 IAPraan CInk.Gluncil Memhur,City of Fountain Valley:
SECOND VICE PRESIDENT:RUMMI Hnw;:m.Mayof Pro Tom,City of Laguna Hills:PAST PRESIDENT:Scull Diehl.Cuuncil Membee.MY Of San C1emcntet
I b-I
Orange County Division,LOCC
August 29, 1995
Page Two
C. the advisory committee will include a city representative;
d. any trustee would have only the authority of the Board of Supervisors
and would not have the ability to divert the revenues or reserves of other
agencies.
e. any litigation proceeds received by the County of Orange will be applied
to non-County dM party claims until those claims are paid.
2.) Authorize the Executive Steering Committee and Technical Team to continue
negotiations with the appropriate parties to resolve any current and future
differences.
3.) Continue to endorse the goals adopted by the Orange County Division on
August 10 including no new taxes and no forgiveness of debt.
The Division's Executive Steering Committee and Technical Team will use this
direction from member cities to continue working toward resolution of all issues prior to the
September 15 adjournment of the State legislature.
The Orange County Division,League of California Cities,is a non-partisan
organization comprised of the mayors and council members of the 31 Orange County cities.
296 P01/02 SEP 07 '95 18:33
}
LEAGUE OF
Memo CALIFORNIA
DATE: September 7, 1995 CITIES
TO: Mayors,City Council Members d City Managers
FROM: Laurann Cook,First Vice-President
ORANGE COUNTY DIVISION
SUBJECT. STATUS OF CQUNTY BANKRUPTCY 600 W. Santa Ana Blvd., Suite 214
RECOVERY PEAN Santa Ana, California 92701
TEL: 714/972-0077 FAX: 714/972-1816
This afternoon,the Board of Supervisors unanimously approved(Supervisor Steiner was absent)a
Joint Agreement for resolution of all claims against the County of Orange. The"agreement"which is
between the County of Orange,the Official Investment Pool Participants'Committee and each Option
A pool participant,was approved by the OCIP committee earlier in the day(the vote was 6 to 1 in
favor,with non-Orange County cities voting no)and appears to address the critical issues identified
and approved by the Division on August 29, 1995.
Our critical issues are as follows:
1) no diversion of city sales tax,property tax,or other revenues including reserves.
2) the$18 million of County General Fund revenue costs will be shared pro rats among all
OCIP participants from future proceeds due participants.
3) the advisory committee will include a city representative
4) any trustee will have only the authority of the Board of Supervisors and would not have
the ability to divert the revenues or reserves of other agencies.
5) any litigation proceeds received by the County of Orange will be applied to non-County
third party claims(i.e,Fire Authority and 800 NM funds)until those claims are paid.
The Joint Agreement agreed by the County and the OCIP Committee appears to address all of our key
issues. These include: 1) No further revenue diversions by the County,2)the County will absorb the
$18 million in cash contribution requested from the OCIP as part of the transfer of County road funds,
3)the County will distribute the available cash in County-administered accounts to Option A Pool
Participants and,it is believed,to Option B participants. The non-available funds will be paid through
litigation proceeds. These provisions address issues#l,2, and 5.
The terms of the agreement includes the establishment of a five member Orange County Recovery
Committee consisting of Tom Hayes,two members appointed by the County,and two members
appointed by the OCIP. The members of the OCIP have agreed that one of its two appointees will be
selected by Orange County cities. This addresses our strong desire to have a seat on the advisory
committee.
The last issue that is still in flux is the establishment of a trustee. The County's plan does not provide
for a trustee,bui the legislation currently supported by the Orange County State delegation includes
language for a trustee which generally falls within the parameters we've adopted. This issue will likely
be debated in Sacramento over the next few days.
Orange County Cities Working Together
Adjustment shall:-provide that all tti�miSe�uired�
Claims allowed pursuant to the Comprehensive Settlement
Agreement shall be subordinated to Senior Claims for purposes of
determining distributional entitlements under the Plan of Adjustment
and, upon the Effective Date of the such Plan, have recourse-only to
net proceeds of Pool-Related Claims and the Litigation Fund in
accordance with the terms and conditions described in Paragraph 9.
The security interest which collateralizes the Settlement Secured
Claims pursuant to the Comprehensive Settlement Agreement shall be
modified and released only to the extent necessary to permit all Pool-
Related Claims to become fully subject to the control of the
Representative and to permit the distributions of net proceeds of
Pool-Related Claims and of the Litigation Fund in accordance with
Paragraph 9, below.
h) The Plan of Adjustment shall provide that all Repayment Claims
allowed pursuant to the Comprehensive Settlement Agreement shall,
upon the Effective Date of such Plan,.have recourse only to net
proceeds of Pool-Related Claims and the Litigation Fund in
accordance with the terms and conditions described in Paragraph 9.
The security interest which collateralizes the Repayment Claims
pursuant to the Comprehensive Settlement Agreement shall be
modified and released only to the extent necessary to permit all Pool-
Related Claims to become fully subject to the control of the
Representative and to permit the distributions of net proceeds of
Pool-Related Claims and of the Litigation Fund in accordance with
Paragraph 9, below.
i) Except as otherwise provided in this Agreement, the Plan of
Adjustment shall provide that all claims based upon or arising out of
deficiencies in County-Administered Accounts resulting from
investment losses in the Orange County Investment Pools ("County-
Administered Account Claims") held by.the County will receive the
same treatment as County-Administered Account Claims held by
Option A Pool Participants.
j) The Plan of Adjustment may provide for payment, without interest in
accordance with Paragraph 10(e) below, of County-Administered
-5-
HM&B--9/7/95
TER30-1 12:12 PM
5
t .
Account Claims-held-by:Option-A:Pc�l 1 its over a period OF
up to twenty years beginning on the Effective Date of such Plan, as
shown on the cash flow projections attached hereto as Exhibit B.
9. The Representative. Matters relating to the Pool-Related Claims and the
Representative:
a) The Pool-Related Claims of the County and of the Option A Pool
Participants shall be enforced, prosecuted and collected upon by the
Representative. The net proceeds, if any, of such enforcement,
prosecution and collection efforts shall be distributed st such times
and in such amounts as may be determined by the Representative in
his sole and absolute discretion. Distributions shall be applied as
among the holders of Pool-Related Claims as follows:
i) The first $53,000,000 shall be distributed, to the holders of
Repayment Claims who are School Pool Participants,pro rata,
in accordance with the allowed amounts of such claims and
shall be applied to reduce the allowed amounts of such claims.
ii) After the distribution of$53,000,000 in accordance with
paragraph (i), the next $324,000,000 shall be distributed, to the
holders of Settlement Secured Claims,pro rota, in accordance
with the allowed amounts of such Claims and shall be applied
to reduce the allowed amounts of such Claims.
iii) After the distribution of$377,000,000 in accordance with
paragraphs (i) and (ii), the next $176,000,000 shall be
distributed to the County of Orange.
iv) After the distribution of$553,000,000 in accordance with
paragraphs(i), (ii) and (iii), the next $687,000,000 until
aggregate distributions equal $1,240,000,000 shall be
distributed as follows:
a) The Secured Claim Percentage of such amounts shall be
distributed to Option A Pool Participants and shall be
-6-
HM&B-9/7/95
TER30-1 12:12 PM
applied to the aff&- ed amount of the f ndi
Repayment Claims,pro rota, in accordance with the
allowed amounts of such Claims.
b) 100% minus the Secured Claim Percentage of such
amounts shall be distributed to the County of Orange.
v) After the distribution of$1,240,000,000 in accordance with
paragraphs (i), (ii), (iii) and (iv), the next $400,000,000 until
aggregate distributions equal $1,640,000,000 shall-be
distributed as follows:
a) 25% of such amounts shall be distributed to OCTA.
b) 75% of such amounts shall be distributed to the County
of Orange.
vi) After the distribution of$1,640,000,000 in accordance with
paragraphs (i), (ii), (iii), (iv) and (v), the next $125,000,000,
until aggregate distributions equal $1,765,000,000 shall be
distributed to OCTA.
vii) Amounts in excess of$1,765,000,000 shall be distributed as
-follows:
a) The Secured Claim Percentage of such.amounts shall be
distributed to Option A Pool Participants and shall be
applied based upon each Option A Pool Participants'
Investment Balance on December 6, 1994, as shown on
Exhibit 2, as revised, to the Comprehensive Settlement
Agreement.
b) 100% minus the Secured Claim Percentage of such
amounts shall be distributed to the County of Orange.
b) Subject to the waiver of certain interest set forth in Paragraph 10(e),
the County shall apply first net litigation proceeds received by the
-7-
HM&B-9/7/95
TER30-1 12:12 PM
v,t': County-oui`suanctnhis°paragraph t&tl* i �f allowed
County-Administered Account Claims held by Option A Pool
Participants arising out of County-Administered Accounts numbered
106, 109, 118, 139, 156, 180, 213, 264, 265, 300, 459, 477, and 506,
and such other County-Administered Accounts as are subsequently
identified by agreement of the OCIP Committee and the County, to
the extent that such Option A Pool Participant County-Administered
Account Claims are not previously paid.
c) The Representative shall be Thomas W. Hayes. In the event Mr.
Hayes is unable or unwilling to continue to serve as the
Representative, an individual or entity selected by the County and
approved by the-OCIP Committee shall be the Representative. The
Representative may contract with Metropolitan West Securities, Inc.;
or another person or entity, on such terms and conditions as the
Representative shall deem appropriate, for the provision of analytical
support and asset management services to the Representative. The
Representative shall receive reasonable compensation for his services
from the Litigation Fund and/or the proceeds of the prosecution,
enforcement and collection of Pool-Related Claims. The agreement
containing the terms of the Representative's compensation shall be
filed under seal with the Bankruptcy Court.
d) Both the Representative and Metropolitan West Securities, Inc. shall
be indemnified by the Litigation Fund and the litigation proceeds
from and against any and all claims which may be asserted against
them by reason of any action taken by either of them as
Representative or the Representative's agent, respectively. The
indemnification described in the preceding sentence shall include
payment of attorneys' fees and any other costs incurred in defense of
any claims asserted against the Representative or the Representative's
agent.
e) The Representative shall keep counsel for the OCIP Committee
informed concerning the progress of the Representative's efforts to
prosecute, collect and/or settle Pool-Related Claims. In particular,
Exhibit 6 to the Comprehensive Settlement Agreement shall be
amended to substitute "counsel for the OCIP Committee" for the
-8-
HM&B-9/7/95
TER30-1 12:12 PM
`iDesignated Counsel"-wherever such words-appear-in sueh..
Exhibit. Notwithstanding the foregoing, the Representative shall
retain the sole and absolute discretion in all matters concerning the
prosecution, collection, settlement and compromise of Pool-Related
Claims subject only to such jurisdiction as may be retained by the
Bankruptcy Court pursuant to the Plan of Adjustment.
10. Certain Agreements of the Option A Pool Participants. Each Option A Pool
Participant:
a) In its capacity as a holder of Settlement Secured Claims, Repayment
Claims, and/or County-Administered Account Claims, agrees not to
reject any Plan of Adjustment containing substantially the terms
described in this Agreement;
b) In its capacity as a holder of Settlement Secured Claims, Repayment
Claims, and/or County-Administered Account Claims, agrees that it
intends to accept any Plan of Adjustment containing substantially the
terms described in this Agreement;
c) In its capacity as a holder of Settlement Secured Claims, Repayment
Claims, and/or County-Administered Account Claims, agrees not to
oppose confirmation by the Bankruptcy Court of any Plan of
Adjustment containing substantially the terms described in this
Agreement whether or not such Option A Pool Participant accepts
such Plan of Adjustment. Notwithstanding the foregoing, if
Bankruptcy Code section 943 is deemed not to be satisfied, such
provision is waived by each Option A Pool Participant to the fullest
extent permitted by law;
d) In its capacity as a holder of Settlement Secured Claims, Repayment
Claims, and/or County-Administered Account Claims, agrees that the
treatment of Settlement Secured.Claims, Repayment Claims, and
County-Administered Account Claims described in this Agreement
complies in all respects with all applicable requirements of
Bankruptcy Code section 943 whether or not any class comprised of
holders of Settlement Secured Claims, any class comprised of holders
of Repayment Claims, or any class comprised of holders of County-
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Administered-Acc6ant Claims-accepth ftfIdAdjustment in
accordance with Bankruptcy Code section 1124. Notwithstanding the
foregoing, if Bankruptcy Code section 943 is deemed not to be
satisfied, such provision is waived by each Option A Pool Participant
to the fullest extent permitted by law;
e) Waives any right to post-petition, post-confirmation or post-effective
date interest on any County-Administered Account Claim.
Notwithstanding any provision hereof, each Option A Pool
Participant does not waive nor intend to waive any claim-for any
interest that it may have against any third party;
f) If not a School Pool Participant, agrees to subordinate its County-
Administered Account Claims to any County-Administered Account
Claim of School Pool Participants based upon losses in County-
Administered Accounts numbered 664, 666, 668, 669, 670, 673, 675,
676, 677, 678, 680, 684, 685, 686, and 687;
g) Agrees to suspend, pursuant to a stipulation acceptable to the County,
all appeals relating to the Bankruptcy Court's June 27, 1995, Order
Approving Compromise Of Controversy Respecting Validity Of Note
Debt or its June 27, 1995, Order Approving Second Amended Note
Modification And Extension Agreement, or any order or findings
related thereto; and
h) Agrees to dismiss with prejudice, upon entry of an order approving a
Plan of Adjustment, all appeals relating to the Bankruptcy Court's
June 27, 1995, Order Approving Compromise Of Controversy
Respecting Validity Of Note Debt or its June 27, 1995, Order
Approving Second Amended Note Modification And Extension
Agreement, or any order or findings related thereto.
11. Certain Agreements of the Pool Committee. The Pool Committee:
a) In its capacity as.a representative of holders of Settlement Secured
Claims, Repayment Claims,and/or County-Administered Account
Claims, agrees that it shall support the acceptance by all Option A
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- -• - - -Pool P1tiipants of any Plan of Adjustment containing substantially
the terms described in this Agreement;
b) Agrees that it shall urge acceptance by all holders of Settlement
Secured Claims, Repayment Claims, and/or County-Administered
Account Claims, of any Plan of Adjustment containing substantially
the terms contained in this Agreement; _
c) In its capacity as a representative of holders of Settlement Secured
Claims, Repayment Claims, and/or County-Administered Account
Claims who execute this Agreement or who accept the Plan of
Adjustment, agrees not to oppose confirmation by the Bankruptcy
Court of any Plan of Adjustment which contains substantially the
terms described in this Agreement whether or not such Plan of
Adjustment is accepted by any or all Option A Pool Participants;
d) In its capacity as a representative of holders of Settlement Secured
Claims, Repayment Claims, and/or County-Administered Account
Claims, agrees that any Plan of Adjustment containing substantially
the terms described in this Agreement complies in all respects with all
applicable requirements of Bankruptcy Code section 943 whether or
not any class comprised of holders of Settlement Secured Claims, any
class comprised of holders of Repayment Claims, or any class
comprised of holders of County-Administered Account Claims
accepts the Plan of Adjustment in accordance with Bankruptcy Code
section 1124;
e) Agrees to suspend, pursuant to stipulation acceptable by the County,
all appeals relating to the Bankruptcy Court's June 27, 1995, Order
Approving Compromise Of Controversy Respecting Validity Of Note
Debt or its June 27, 1995, Order Approving Second Amended Note
Modification And Extension Agreement, or any order or findings
related thereto; and
f) Agrees to dismiss with prejudice, upon entry of an order approving a
Plan of Adjustment, all appeals relating to the Bankruptcy Court's
June 27, 1995, Order Approving Compromise Of Controversy
Respecting Validity Of Note Debt or its June 27, 1995, Order
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Approving Second Amended Note Modff 6'a end Extension '
Agreement, or any order or findings related thereto.
12. Other Revenue Diversions. Except as specifically set forth herein, the
County agrees not to request of the Legislature, nor otherwise support if
requested or approved by any entity other than the County, the diversion of
revenue allocated to the undersigned Option A Pool Participant-for the
purpose of financing the repayment of claims in the County's debt
adjustment case or the payment of claims under the County's Plan of
Adjustment. _-
13. Effectiveness of this Agreement. This Agreement shall not become
effective unless:
a) This Agreement has been executed by authorized representatives of.
i) The County of Orange;
ii) The Official Investment Pool Participants' Committee of the
Orange County Investment Pools Bankruptcy Case;
iii) . The Orange County Transportation Authority; and
iv) Each Option A Pool Participant.
The County may waive the requirement contained in section 13(a)(iv)
of this Agreement by written notice sent to counsel to the OCIP
Committee.
b) The Legislature passes and the Governor approves legislation which
effectuates and is consistent with the reallocations of revenue
described in Paragraphs 2 through 6, above, and Exhibit A.
c) The Bankruptcy Court approves this Agreement. For the purposes of
implementing the provisions of this paragraph 13(c), all of the parties
to this agreement consent to any request that the Bankruptcy Court
shorten time or otherwise accelerate a hearing on any motion to
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i
approve this Agreement, provided tht=each party to this agreement is
given at least three (3) days notice of the date and time of any hearing
on any motion to approve this Agreement.
14.- Cooperation and Best Efforts in Seeking Bankruptcy Court Orders. Each
party to this Agreement agrees to cooperate with the County in seeking, and
not to hinder or interfere with any proceedings to obtain, the order or orders
described in Section 13(c) of this Agreement.
15. Distribution of Amounts in County-Administered Accounts. As promptly
as practicable following the effectiveness of this Agreement, the County
shall distribute to Option A Pool Participants, to the extent they are lawfully
entitled to such amounts under applicable non-bankruptcy law, cash
accounted for as available for distribution (i.e. cash balances net of pro-rata
allocations of investment losses and Withheld Proceeds based on December
6, 1994, revised balances) on account of funds placed with the County on
behalf of Option A Pool Participants and accounted for in County-
Administered Accounts numbered 106, 109, 118, 139, 156, 180, 213, 264,
265, 300, 459, 477, and 506, and such other County-Administered Accounts
as are subsequently identified by agreement of the OCIP Committee and the
County. Each Option A Pool Participant agrees not to object to any future
distribution proposed by the County to any other entity, to the extent such
entity is lawfully entitled to such amounts.under applicable non-bankruptcy
law, of cash accounted for as available for distribution(i.e. cash balances
net of pro-rata allocations of investment losses and Withheld Proceeds
based on December 6, 1994, revised balances) on account of funds placed
with the County on behalf of such entity and accounted for in County-
Administered Accounts numbered 106, 109, 118, 139, 156, 180, 213, 264,
265, 300, 459, 477, and 506, and such other County-Administered Accounts
as are subsequently identified by agreement of the OCIP Committee and the
County.
16. Effective Date of Legislation. The legislation proposed in Paragraphs 2
through 6 shall not take effect unless and until the Plan of Adjustment in
accordance with this Agreement is confirmed.
17. Limited Waiver of Certain Interest, Subordination. To the extent the
County has the authority and ability to do so, the County waives any right
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to, post-petition, post-confirmation, orpost-effective date interest on any
County-Administered Account Claim, but solely to the extent such interest
would be paid by or from another County-Administered Account or the
County General Fund. Notwithstanding any provision hereof, the County
does not waive nor intend to waive any claim for any interest that it may
have against any third party. To the extent the County has the authority and
ability to do so, the County agrees to subordinate its County-Administered
Account Claims to County-Administered Account Claims of School Pool
Participants based upon County-Administered Accounts numbered 664,
666, 668, 669, 670,.673, 675, 676, 677, 678, 680, 684, 685, 686; and 687.
18. Orange County Recovery Committee. There shall be established a
committee ("OCR Committee") consisting of five (5) members: the
Representative, two members to be appointed by the County, and two
members to be appointed by the OCIP Committee, provided, however, one
of.the members appointed by the OCIP Committee shall be a city
representative. OCR Committee shall review and evaluate any Plan of
Adjustment (the "Plan") and Disclosure Statement filed with the Bankruptcy
Court to determine if the Plan is inconsistent with any term of this
Agreement or the Comprehensive Settlement Agreement to the extent not
modified by this Agreement.
19. Effect of Comprehensive Settlement Agreement. Each Option A Pool
Participant hereby fully and finally waives and relinquishes any and all
obligations, duties and restrictions imposed upon the County by the
Comprehensive Settlement Agreement to the extent inconsistent with this
Agreement.
20. No Third-Party Beneficiaries. Nothing contained in this Agreement is
intended to confer any rights or remedies under or by reason of this
Agreement on, or waive any claims against, any person or entity other than
the Parties hereto.
21. No Representations or Warranties. Except as expressly set forth in this
Agreement, none of the Parties hereto makes any representation or warranty,
written or oral, express or implied.
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22. Applicable''Law. T s Agreement shall be goy rned in all respects, including
the validity, interpretation and effect, by title 11 of the United States Code
and the laws of the State of California, without giving effect to.the principles
of conflicts of law thereof.
23. Consent to Entry of Orders and Judgments by BankruptcYCourt. Each Party
hereto hereby consents to the determination by the Bankruptcy-Court, as a
"core proceeding" within the meaning of 28 U.S.C. § 157 or any successor
provision, and to have the Bankruptcy Court hear and determine and enter
_, .. appropriate orders and judgments, in any action brought to.enforce, interpret,
reform or rescind this Agreement or any of the provisions hereof and over any
action to determine or declare the rights of any of the Parties under this
Agreement.
24. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
25. No Admissions. Neither this Agreement, nor any of the terms hereof, nor any
negotiations or proceedings in connection herewith, shall constitute or be
construed as or be deemed to be evidence of an admission on the part of any
Parry of any liability or wrongdoing whatsoever, or the truth or untruth, or
merit or lack of merit, of any claim or defense of any Party or directly or
indirectly impair or adversely affect any rights or claims not released,
modified, waived or otherwise affected under this Agreement; nor shall this
Agreement, or any of the terms hereof, or any negotiations or proceedings in
connection herewith, or any performance or forbearance hereunder, be offered
or received in evidence or used in any proceeding against any Party, or used
in any proceeding, or otherwise, for any purpose whatsoever except with
respect to(a) effectuation and enforcement of this Agreement and(b) any
proceedings in the Bankruptcy Court to approve this Agreement and the
execution and delivery hereof.
26. Due Authorization. Each Party to this Agreement hereby represents and
warrants that such Party is duly-authorized to enter into this Agreement.
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THE COUNTY OFtORANGE
BY:
ITS:
THE OFFICIAL INVESTMENT POOL PARTICIPANTS' COMMITTEE
BY:
ITS:
NAME OF OPTION A POOL PARTICIPANT
BY:
ITS:
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An act to add and repeal Section 29530.5 of the Government Code, to add Section 97.5 of
the Revenue and Taxation Code, to add Section 130241.5 of the Public Utilities Code, to
amend Section 25350.6 of the Government Code, to add Section 25350.7 of the
Government Code, to add Section 25350.8 of the Government Code, to add Section
25350.9 of the Government Code, to add Section 25350.10 of the Government Code, to
add Section 25350.11 of the Government Code,
-6ewa�aiwit.coil" to amend Section 25350.55 of the Government Code, and to add and
repeal Section 2128 to the Streets and Highways Code, relating to local government
finance.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature in enacting this act that the Orange
County Transportation Authority continue to carry out the purposes of the Mills-Alquist
Deddeh Act as set forth in Section 99220 of the Public Utilities Code. In particular, the
Legislature intends that senior citizens and disabled persons should continue to receive
substantially the same level of bus transportation service. It is the further intent of the
legislature that, prior to January 1, 1996, the County of Orange and the Orange County
Transportation Authority shall report to the Legislature the steps taken to maintain
adequate public transportation in the County of Orange.
In enacting this act the Legislature recognizes that, because of the amounts
required to be transferred to the Orange County Transportation Authority from the
amounts received by the County from the Highway Users Tax Account in the
Transportation Tax Fund, the construction of certain vital County road projects, Newport
Coast Drive and Laguna Canyon Road, will be adversely affected unless funding therefor
can be otherwise obtained. In enacting this act the Legislature understands that all of the
other local government agencies in the County of Orange have officially expressed their
intent to use their best efforts to obtain funding to complete these vital road projects.
In enacting this act the Legislature further recognizes that the County of Orange
has developed a Consensus County Recovery Plan that includes as.its key elements:
(a)the diversion of S38 million annually for 15 years of Bradley Burns Sales Tax
revenues from the Orange County Transportation Authority, beginning in July 1996;
(b)the transfer to the Orange County Transportation Authority of S23 million
annually for 16 years of Orange County Proposition 111 revenues, beginning July 1997;
(c) the agreement by Orange County Investment Pool Participants to cover County
expenses totaling S 18 million in diverted Proposition I I I money over a five year period;
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(d)the agreement by Orange County Investment Pool participants to subordinate
their claims to a non-recourse status;
(e) the diversion of County funds from the County's Flood Control; Harbors,
Beaches and Parks; and Development Agency,
(f)the agreement by the County of Orange to contribute S105 million in one-time
money from the sale of assets and through the refinancing of existing county leases and
$25 million a year for 20 years through the importation of trash and the refinancing of
delinquent taxes; and support for any County underwriting to facilitate the payment of
allowed claims.
It is further understood by the Legislature that the proceeds from all of the above
agreements will permit the payment of all allowed vendor and labor claims in full, but not
to exceed S 100 million, and the repayment of indebtedness owed by the County of Orange
due in the Summer of 1996.
SEC. 2. The Legislature hereby fords and declares all of the following:
(a)The County of Orange lacks sufficient resources to finance an acceptable plan
of adjustment in its pending bankruptcy case.
(b)On June 27, 1995, the voters of the County of Orange defeated a proposed
sales tax increase, indicating the public's unwillingnesss to raise new taxes to finance a
plan of adjustment.
(c) It is in the interest of the State and all public debt issuers within the State to
enable the County of Orange to finance an acceptable plan of adjustment in order to
improve the credit standing of California public debt issuers and to preserve and protect
the health, safety, and welfare of the citizens of the county and the state.
(d)In the absence of some alternative source of revenue not now available to the
County of Orange, funds from other governmental units within the County must be
transferred to the County to enable it to prepare, and obtain confirmation o4 an acceptable
plan of adjustment.
(e)The transfer of funds to the County should be designed to minimize the impact
on affected entities.
(f)The emergence from bankruptcy of the County of Orange through the
confirmation of an adequate plan of adjustment will assist in the effectuation of the
primary purposes of the Community Redevelopment Law, including job creation,
attracting new private commercial investments, the physical and social improvement of
residential neighborhoods, and the provision and maintenance of low-and moderate-
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income housing. The attraction of new businesses to redevelopment project areas depends
on the existence of an effective county government that is not burdened by litigation and
other requirements of a bankruptcy proceeding. The payments to the county pursuant to
section 97.5 (c)of the Revenue and Taxation Code benefit redevelopment project areas
and are deemed a debt of the Orange County Development Agency to repay the county for
such general and specific benefits to the redevelopment project area previously provided
by the county.
SEC. 3. Section 29530.5 is added to the Government Code, to read:
29530.5 (a)Notwithstanding any other provision of this article, the board of
supervisors for the County of Orange may, upon the adoption of a resolution approved by
a majority of all of its members, unilaterally modify its contract, as described in Section
29530 of the Government Code, with the State Board of Equalization to require that,
effective on or after July 1, 1996, except to the extent that the provisions of paragraph(b)
shall apply during any period, county sales and use tax revenues described in Section
29530 of the Government Code be deposited into the County of Orange general fund in an
amount equal to three million one hundred sixty-six thousand six hundred sixty-seven
dollars($3,166,667) per month plus any amount by which amounts deposited in the
general fund in prior months were less than three million one hundred sixty-six thousand
six hundred sixty-seven dollars($3,166,667)times the number of prior months*eM nni w&
(b)(1)If the County of Orange has elected to guaranty payment of its obligations
under an agreement to finance the lease or lease-purchase of property through the issuance
of certificates of participation or lease revenue bonds pursuant to Section 25350.7(a)of
the Government Code, the amounts required to be deposited in the general fund of the
County of Orange, in any month, pursuant to paragraph(a),shall be reduced by the
amounts, if any, transferred by the Controller to the trustee for the certificates of
participation or lease revenue bonds, pursuant to Section 25350.7(a)of the Government
Code.
(2) If the County of Orange has elected to satisfy its obligations under an
agreement to finance the lease or lease-purchase of property through the issuance of
certificates of participation or lease revenue bonds pursuant to Section 25350.7(b)of the
Government Code, the amounts required to be deposited in the general fund of the County
of Orange, in any month, pursuant to paragraph(a)shall be reduced by the amounts
transferred by the Controller to the trustee for the certificates of participation or lease
revenue bonds, pursuant to Section 25350.7(b)of the Government Code.
(c)This section shall not take effect unless and until a plan of adjustment is
confirmed in Case No. SA-94-22272-JR in the United States Bankruptcy Court for the
Central District of California.
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(d)This section shall remain in effect only until June 30, 2011 and as of that date is
rcpcalcd, unlcss a latcr cnactcd statutc, that is cnactcd on or bcforc Junc 30, 2011, dcictcs
or extends that date.
SEC. 4. Section 97.5 is added to the Revenue and Taxation Code, to read:
Section 97.5. (a)Notwithstanding any other provision of this chapter, the
computations and allocations made by the County of Orange pursuant to Section 96.1 shall
be modified for the 1995-96 fiscal yea4As follows:
(1)The amount of property tax deemed allocated in the prior fiscal year to each of
the following specified County of Orange special district and fund shall be reduced by the
dollar amounts indicated below, and the amount equal to the proportionate incremental
increase, if any, in property taxes resulting from an increase in the assessed valuation of
real property:
Property Tau Reduction
Flood Control District S4 million
Harbors, Beaches & Parks Fund S4 million
(2)The amount of property tax revenues not allocated to the specified district and
fund as a result of the reductions calculated pursuant to paragraph(a)shall be allocated to
the County of Orange.
(b)Notwithstanding any other provision of this chapter, the computations and
allocations made by the County of Orange pursuant to Section 96.1 shall be modified for
the*+6-14 fiscal year as follows:
to1jr-to
(1)The amount of property tax deemed allocated in the prior fiscal year to each of
the specified County of Orange special district and fund listed in subdivision(a)(1)shall
be increased by the dollar amounts set forth in subdivision(a)(1).
(2)The amount of property tax deemed allocated to the County of Orange shall be
reduced by the aggregate of the dollar amounts set forth in subdivision(a)(1).
(c) For a period of twenty years commencing on July 1, 1996, the.Orange County
Development Agency shall transfer to the general fund of the County of Orange an amount
equal to $4 million a year in two equal installments on June 15 and February 15 of each
year. The Orange County Development Agency shall not incur any obligation with
respect to loans, advances of money, or indebtedness(whether funded,refunded, assumed
or otherwise)that would impair its ability to make the foregoing transfers or that would
cause the foregoing transfers to violate Article 16, Section 16 of the Constitution or
Section 33670(b)of the Health and Safety Code.
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SEC. 5. Section 130241.5 is added to the Public Utilities Code, to read:
130241.5. (a)Unless the board of supervisors of the County of Orange shall have
adopted the resolution described in Section 29530.5 of the Government Code, the Orange
County Transportation Authority shall cause to be deposited the sum of three million one
hundred sixty-six thousand six hundred sixty-seven dollars($3,166,667)in the general
fund of the County of Orange on or before the first day of July, 1996 and on or.before the
first day of each month thereafter to and including June 1, 2011.
(b)Notwithstanding any other provision of law, the board of directors of the
Orange County Transportation Authority shall have the authority to use any funds of the
Orange County Transportation Authority and/or any funds of any public entity governed
by the members of the Orange County Transportation Authority, comprised as specified in
Section 13005Z in order to satisfy the deposit of funds required by this section.
(c) In the event the Orange County Transportation Authority fails at any time to
cause to be deposited the sum of money as provided in subsection(al notwithstanding any
other provision of law, the board of supervisors for the County of Orange may, upon the
adoption of a resolution approved by a majority of all of its members, modify its contract,
as described in Section 29530 of the Goverment Code, with the Stage Board of
Equalization to require that; effective the month that the Orange County Transportation
Authority fails to deposit the sum required by subsection(a), the sum of three million one
hundred sixty-six thousand one hundred sixty-seven dollars($3,166,667)of those County
sales and use tax revenues described in Section 29530 of the Goverment Code be
deposited into the county general fund. In such event the Orange County Transportation
Authority shall have no further obligation to make the deposit required by subsection(a),
other than as provided in subsection(d).
(d)The Orange County Transportation Authority shall establish a reserve or line of
credit in an amount of not less than ten million dollars($10,000,000)to guarantee the
monthly deposits as provided in subsection(a)to the County of Orange for a period of
three months in the event the Orange County Transportation Authority fails at any time to
cause to be deposited the sum of money as provided in subsection(a). The purpose of the
reserve or credit line is to assure the continued deposits to the County of Orange for three -
months in order to provide time for the County of Orange to act pursuant to Section
.29530.5 of the Government Code to secure the continued funding and with no lapse.
(e)�14 If the County of Orange has elected to guaranty payment of af to satisfy,
its obligations under an agreement to finance the lease,or lease-purchase of property
through the execution and delivery of certificates of participation or lease revenue bonds
pursuant to subdivisions(a)or(b).of section 25350.7 of the Government Code, the
amounts required to be deposited in the general fund of the County of Orange, in any
month, pursuant to subdivision(a) shall be reduced by the amounts, if any, transferred by
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the;x��to the trustee for the certificates of participation or lease revenue bonds
pursuant to subdivision(a)or(b)of Section 25350.7 of the Government Code.
(f)This section shall not take effect unless and until a plan of adjustment is
confirmed in Case No. SA-94-22272-JR in the United States Bankruptcy Court for the
Central District of California.
SEC. 6. Section 25350.6 of the Government Code is amended to read: _
25350.6. (a) Moneys credited to the Motor Vehicle License Fee Account in the
Transportation Fund to which the County of Orange may at any time be entitled shall be
pledged, without any necessity for specific authorization of the pledge by the board of
supervisors, to all certificates of participation or lease revenue bonds executed and
delivered during 1995 or 1996, including obligations executed and delivered before 2001
to refund those certificates of participation or lease revenue bonds, to finance or refinance
the lease or lease purchase of property to the county and having a stated maturity of 20
years or more,
system-reveenes. However, the amount so pledged with respect to any fiscal year of the
county shall not exceed the amounts to be paid in that fiscal year on those certificates or'
lease revenue bonds.
(b)The state hereby covenants with the holders of any certificates of participation
or lease revenue bonds, including refunding obligations, entitled to the pledge granted by
this section that, as long as any of the certificates of participation or lease revenue bonds
entitled to the pledge granted by this section shall remain outstanding, the state shall not
alter or amend the deposit of moneys into, or the allocation of moneys credited to, the
:Motor Vehicle License Fee Account in the Transportation Tax Fund under Chapter 5
(commencing with Section 11001)of Part 5 of Division 2 of the Revenue and Taxation
Code in any manner that would adversely affect the security o& or the ability of the county
to pay the principal of and interest on, the certificates of participation or lease revenue
bonds entitled to the pledge granted by this section. However, nothing precludes any
alteration or amendment if and when adequate provision has been made by law for the
protection from impairment of the contract represented by the certificates of participation
or lease revenue bonds, and the right to so alter or amend is hereby reserved. The Court
of Orange may include this covenant of the state in the agreements or other documents
underlying the certificates of participation or lease revenue bonds.
SEC. 7. Section 25350.7 is added to the Government Code, to read:
25350.7. (a)Prior to entering into an agreement to finance the lease or lease-
purchase of property through the execution and delivery of certificates of participation or
lease revenue bonds, the board of supervisors of County of Orange may elect, by
resolution, to guarantee payment under that financing agreeement with all or part of Ithe
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funds to be deposited with the County of Orange pursuant-to Section 29530.5 of the
Goverment Code or Section 130241.5 of the Public Utilities Code, as applicaable, in
accordance with the following:
(1) If the County of Orange elects to participate under this section it shall provide
notice to the Controller and to the State Board of Equalization of that election, which shall
include a schedule for the payments to be made by the county under that financing
agreement, and identify a trustee appointed by the county for the purpose of this section.
(2) In the event that, for any reason; the funds available to the County of Orange
will not be sufficient to make any payment under the financing agreement at the time that
payment is required, the County of Orange shall so notify the trustee, and shall deliver to
the Controller and the State Board of Equalization a duly certified copy of the resolution
of its board of supervisors adopted pursuant to Section 29530.5 of the Government Code.
The trustee shall immediately communicate that information to the affected holders of
certificates of participation or bondholders, to the Controller and to the State Board of
Equalization.
(3)When the Controller receives notice from the trustee, and a copy of the
resolution from the County, as described in paragraph(2� or, after having adopted the
resolution described in paragraph(21 the county fails to make any payment under the
financing agreement at the time that payment is required, the Controller shall make an
apportionment to the trustee in the amount of that required payment for the purpose of
making that payment. The Controller shall make that payment only from moneys to be
transmitted to the County of Orange by the State Board of Equalization under Section
7204 of the Revenue and Taxation Code, which are derived from that portion of the sales
and use taxes imposed by the County of Orange in excess of 1 percent, pursuant to Part
1.5 (commencing with Section 7200)of Division 2 of the Revenue and Taxation Code,
and which are permitted to be deposited to the general fund of the County of Orange
pursuant to Section 29530.5 of the Government Code, and the State Board of Equalization
shall thereupon reduce, by the amount of the payment, the subsequent amounts to which
the County would be entitled under that Section.
(b)As an alternative to the procedure set forth in subparagraphs(2)and(3)of
paragraph(al the board of supervisors of the County of Orange may,on or after the date
of adoption by the board of supervisors of the resolution described in Section 29530.5 of
the Government Code provide a transfer schedule in a notice to the Controller and the
State Board of Equalization of its election to participate under this section. The transfer
schedule shall set forth the amounts to be transferred to the trustee and the date or dates for
the transfers and the Controller shall, subject to the limitation in the second sentence of
paragraph(3), make apportionments to the trustee in those amounts on the specified date
or dates for the purpose of making those transfers.
-- CONSENSUS PLAN (+}
9/7/95 2:56 AM
Page 8
(c),In the event that, for any reason, the County of Orange is no longer obligated,
for any period, to make all or a portion of the payments with respect to the lease or lease-
purchase financed through the issuance of certificates of participation or lease revenue
bonds, the trustee shall so notify the affected holders of certificates of participation or
bondholders, the Controller and the State Board of Equalization. Upon receipfof the
notification, the Controller shall cease making the transfers. If, after the giving of the
notice, the obligation of the County of Orange to make payments with respect to the lease
or lease-purchase financed through the issuance of certificates of participation or lease
revenue bonds is restored, the trustee shall so notify the affected holders of certificates of
participation or bondholders, the Controller and the State Board of Equalization. Upon
receipt of the notification, the Controller shall resume making the transfers.
(d) In the event that the Orange County Transportation Authority is to deposit
funds as provided in Section 130241.5 of the Public Utilities Code, then the provisions of
this section, which apply to the Controller and the State Board of Equalization, shall apply
with equal force and effect to the Orange County Transportation Authority.
(e)Any election made by the County of Orange pursuant to this section shall be in
addition to any other election made by the County of Orange pursuant to any other
applicable provision of law, to guarantee the obligation of the County of Orange to make
payments with respect to the lease or lease-purchase of property financed through the
certificates of participation or lease revenue bonds.
SEC. 8. Section 25350.8 is added to the Government Code, to read:
25350.9. (a)Taxes collected by the State Board of Equalization pursuant to
Section 7204 of the Revenue and Taxation Code, which are derived from that portion of
the taxes imposed by the County of Orange in excess of 1 percent pursuant to Part 1.5
(commencing with Section 7200)of Division 2 of the Revenue and Taxation Code, and
which are permitted to be deposited to general fund of the County of Orange pursuant to
Section 29530.5 (a)(1)of the Government Code, or fluids to be deposited by the Orange
County Transportation Authority pursuant to Section 130241.5 of the Public Utilities
Code, shall be pledged, without the necessity for specific authorization of the pledge by
the board of supervisors, to all certificates of participation or lease revenue bonds executed
and delivered during the years 1996 and 1997, including obligations executed and
delivered before January 1, 2001 to refund those certificates of participation or lease
revenue bonds, to finance or refinance the lease or lease-purchase of property of the
County of Orange and having a stated maturity of 20 years or more. However, the
amount so pledged with respect to any fiscal year of the County of Orange shall not
exceed the amounts to be paid in that fiscal year on those certificates or lease revenue
bonds.
(b)The pledge of taxes or funds pursuant to this section shall constitute a contract
between the County of Orange and the owners of any of the certificates of participation or
�. t 1
WF&G
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9/7/95 2:56 AM
Page 9
lease revenue bonds and shall be protected from impairment by the United States and
California Constitutions. The state hereby covenants with the owners of any certificates of
participation or lease revenue bonds entitled to the pledge granted by this section that, as
long as any of the certificates of participation or lease revenue bonds entitled to the pledge
granted by this section shall remain outstanding, (i)the provisions of Section 7202 which
authorize the imposition of the taxes shall not be repealed and(ii) the provisions of Section
29530.5 (a)Wof the Government Code or Section 130241.5 of the Public Utilities Code,
as applicable, may not be repealed prior to July 1, 2010 nor altered or amended.prior to
that date in any manner that would adversely affect the security of� or the ability of the
county to pay, the principal of and interest on the certificates of participation or lease
revenue bonds entitled to the pledge granted by this section. However, nothing precludes
any alteration or amendment if and when adequate provision has been made by law for the
protection from impairment of the contract represented by the certificates of participation
or lease revenue bonds, and the right to so alter or amend is hereby reserved. The County
of Orange may include this covenant of the state in the agreements or other documents
underlying the certificates of participation or lease revenue bonds.
SEC.9. Section 25350.9 is added to the Government Code, to read:
25350.9. (a)Prior to entering into an agreement to finance the lease or lease-
purchase of property through the execution and delivery of certificates of participation or
lease revenue bonds, the board of supervisors of County of Orange may elect, by
resolution, to guarantee payment under that financing agreement in accordance with the
following:
(1) If the County of Orange elects to participate under this section it shall provide
notice to the Controller and to the State Board of Equalization of that election, which shall
include a schedule for the payments to be made by the county under that financing
agreement, and identify a trustee appointed by the county for the purpose of this section.
(2)In the event that, for any reason, the funds available to the County of Orange
will not be sufficient to make any payment under the financing agreement at the time that
payment is required, the county shall so notify the trustee. The trustee shall immediately
communicate that information to the affected holders of certificates of participation or
bondholders, to the Controller and to the State Board of Equalization.
(3)When the Controller receives notice from the trustee as described in paragraph
(2), or the county fails to make any payment under the financing agreement at the time that
payment is required, the Controller shall make an apportionment to the trustee in the
amount of that required payment for the purpose of making that payment. The Controller
shall make that payment only from moneys to be transmitted to the County of Orange by .
the State Board of Equalization under Section 7204 of the Revenue and Taxation Code,
which are derived from that poition of the sales and use taxes imposed by the County of
Orange pursuant to Part 1.5 (commencing with Section 7200)of Division 2 of the
WF&G
=CONSENSUS PLAN(+)
9/7/95 2:56 AM
Page 10
Revenue and Taxation Code, other than that portion of such taxes described in Section
29530.5 of the Government Code, and the State Board of Equalization,shall thereupon
reduce, by the amount of the payment, the subsequent amounts to which the County would
be entitled under that Section.
(b)As an alternative to the procedure set forth in subparagraphs(2)and(3)of
paragraph(a), the board of supervisors of the County of Orange may provide a transfer
schedule in a notice to the Controller and the State Board of Equalization of its election to
participate under this section. The transfer schedule shall set forth amounts to be
transferred to the trustee and the date or dates for the transfers and the Controller shall,
subject to the limitation in the second sentence of paragraph(3� make apportionments to
the trustee in those amounts on the specified date or dates for the purpose of making those
transfers.
(c) In the event that, for any reason, the County of Orange is no longer obligated,
for any period, to make all or a portion of the payments with respect to the lease or lease-
purchase financed through the issuance of certificates of participation or lease revenue
bonds, the trustee shall so notify the affected holders of certificates of participation or
bondholders, the Controller and the State Board of Equalization. Upon receipt of the
notification, the Controller shall cease making the transfers. If; after the giving of the
notice, the obligation of the County of Orange to wake payments with respect to the lease
or lease-purchase financed through the issuance of certificates of participation or lease
revenue bonds is restored, the trustee shall so notify the affected holders of certificates of
participation or bondholders, the Controller and the State Board of Equalization. Upon
receipt of the notification, the Controller shall resume making the transfers,.
(d)Any election made by the County of Orange pursuant to this section shall be in
addition to any other election made by the County of Orange pursuant to any other
applicable provision of law, to guarantee the obligation of the County of Orange to make
payments with respect to the lease or lease-purchase of property financed through
certificates of participation or lease revenue bonds.
SEC. 10. Section 25350.10 is added to the Government Code, to read:
25350.10. (a)Taxes collected by the State Board of Equalization pursuant to
Section 7204 of the Revenue and Taxation Code, which are derived from the taxes
imposed by the County of Orange pursuant to Part 1.5 (commencing with Section 7200)
of Division 2 of the Revenue and Taxation Code, other than that portion of those taxes
described in Section 25350.7 of the Government Code, shall be pledged, without the
necessity for specific authorization of the pledge by the board of supervisors, to all
certificates of participation or lease revenue bonds executed and delivered during the years
1996 and 1997, including obligations executed and delivered before January 1, 2001 to
refund those certificates of participation or lease revenue bonds, to finance or refinance the
lease or lease-purchase of property of the County of Orange and having a stated maturity
WF&G
• '_- CONSENSUS-PLAN (+)
9/7/95 2:56 AM
Page 11
of 20 years or more. However, the amount so pledged with respect to any fiscal year of
the County of Orange shall not exceed the amounts to be paid in that fiscal year on those
certificates or lease revenue bonds.
(b)The pledge of taxes pursuant to this section shall constitute a contract between
the County of Orange and the owners of any of the certificates of participation or lease
revenue bonds and shall be protected from impairment by the United States and California
Constitutions. The state hereby covenants with the owners of any certificates of
participation or lease revenue bonds entitled to the pledge granted by this section that; as
long as any of the certificates of participation or lease revenue bonds entitled to the pledge
granted by this section shall remain outstanding, the provisions of Section 7202 which
authorize the imposition of the taxes shall not be repealed. However, nothing precludes
any alteration or amendment if and when adequate provision has been made by law for the
protection from impairment of the contract represented by the certificates of participation
or lease revenue bonds, and the right to so alter or amend is hereby reserved. The County
of Orange may include this covenant of the state in the agreements or other documents
underlying the certificates of participation or lease revenue bonds.
SEC. 11. Section 25350.11 is added to the Government Code, to read:
25350.11. Notwithstanding any other provisions of this chapter, the sum of the
amounts pledged with respect to any fiscal year pursuant to Sections 25350.6, 25350.8,
and 25350.10 of the Government bode shall not exceed the amounts to be paid in that
fiscal year on the certificates of participation or lease revenue bonds entitled to the pledge
described in those sections.
SEC. 12. Section 25350.55 of the Government Code is amended to read:
25350.55. (a)Prior to entering into an agreement to finance the lease or lease-
purchase of property through the issuance of certificates of participation or lease revenue
bonds, the board may elect, by resolution, to guarantee payment under that financing
agreement in accordance with the following:
(1)A county that elects to participate under this section shall provide notice to the
Controller of that election, which shall include a schedule for the payments to be made by
the county under that financing agreement, and identify a trustee appointed by the county
for the purposes of this section.
(2)In the event that, for any reason, the funds otherwise available to the county
will not be sufficient to make any payment under the financing agreement at the time that
payment is required, the county shall so notify the trustee. The trustee shall immediately
communicate that information to the affected holders of certificates of participation or
bondholders, and to the Controller.
f
WF&G
CONSENSUS PLAN(+)
9/7/95 2:56 AM
Page 12
(3)When the Controller receives notice from the trustee as described in paragraph
(2), or the county fails to make any payment under the financing agreement at the time that
payment is required, the Controller shall make an apportionment to the trustee in the
amount of that required payment for the purpose of making that payment. The Controller
shall make that payment only from moneys credited to the Motor Vehicle License Fee
Account in the Transportation Tax Fund to which that county is entitled at that time under
Chapter S (commencing with Section 11001)of Part S of Division 2 of the Revenue and
Taxation Code, and shall thereupon reduce, by the amount of the payment, the subsequent
allocation or allocations to which the county would otherwise be entitled under that
chapter.
(4)As an alternate to the procedure set forth in paragraphs(2)and(3), the board of
supervisors may provide a transfer schedule in a notice to the Controller of its election to
participate under this section. The transfer schedule shall set forth amounts to be
transferred to the trustee and the date or dates for the transfers and the Controller shall,
subject to the limitation in the second sentence.of paragraph(3), make apportionments to
the trustee in those amounts on the specified date or dates for the purpose of making those
transfers.
(5)In the event that; for any reason, the county is no longer obligated, for
period to make all or a portion of the payments with respect to the lease or lease-purchase
financed through the issuance of certificates of participation or lease revenue bonds, the
trustee shall notify the affected holders of certificates of participation or bondholders. The
trustee shall also notify the Controller. Upon receipt of the notification, the Controller
shall cease making the transfers. I£ after the giving of the notice_ the obligation of the
county to make navments with resnect to the lease or lease-ourcha_se financed through the
issuance of certificates of R8rt9cipation or lease revenue bonds is restored the trustee shall
so notify the affected holders of certificates of participation or bondholders and the
Controller. Unon receint of the notification. the Controller shall resume making the
transfers.
(b)This section shall not be construed to obligate the State of California to make
any payment to a county fi-om the Motor Vehicle License Fee Account in the
Transportation Tax Fund in any amount or pursuant to any particular allocation formula,
or to make any outer payment to a county, including, but not limited to, any payment in
satisfaction of any debt or liability incurred or guaranteed by a county in accordance with
this section.
SEC. 13. Section 2128 is added to the Streets and Highways Code, to read:
2128. (a)Notwithstanding any other provision of this Chapter, the apportionments
that would be made to the County of Orange under the provisions of this Chapter shall be
apportioned as follows:
1
WF&G
CONSENSUS PLAN (+) . .
9/7/95 2:56 AM
Page 13
(1)The Orange County Transportation Authority shall be paid $1,916,667 during
each calendar month commencing July, 1997 and ending June, 2013;
(2)All remaining apportionments shall be paid to the County of Orange at the time
each apportionment would have been made to the County of Orange;
(b)This Section shall take effect July 1, 1997 and remain in effect only until June
30, 2013, and as of that date is repealed, unless a later enacted statute; that is enacted
before July 1, 2013 deletes or extends that date.
(c)This section shall not take effect unless and until a plan of adjustment is
confirmed in Case No. SA-94-22272-JR in the United States Bankruptcy Court for the
Central District of California.
SEC. 14. The Legislature hereby finds and declares that a general statute, within
the meaning of Section 16 of Article IV of the California Constitution, cannot be made
applicable due to the uniquely severe fiscal crisis being experienced by the County of
Orange, and that; therefore, this special statute is necessary.
SEC. 15. Notwithstanding Section 17610 of the Government Code, if the
Commission on State Mandates determines that this act contains costa mandated by the
state, reimbursement to local agencies and school districts for those costs shall be made
pursuant to part 7(commencing with section 17500)of Division 4 of Title 2 of the
Government Code. If the statewide cost of the claim for reimbursement does not exceed
one million dollars(SI,000,000), reimbursement shall be made from the State Mandates
Claims Fund.
SEC. 16. If any section or provision of this act is held invalid, such invalidity shall
not affect the validity of the other provisions of this act.
SEC. 17. Notwithstanding Section 17580 of the Government Code, unless
otherwise specified, the provisions of this act shall become operative on the same date that
the act takes effect pursuant to the-California Constitution.
7'SEXIB.EwC-12:20 PM
Indicative Consensus Plan Cash Flow
Revenue Analysis AnnuM Reventic in Yems cross Present
(Ooilan in MOian) 0 1-5 6-10 11-15 16-20 21-25 26-30 Value Value(a)
Our—mritly Available Revenues
Note:Required Reductions to Balance General Fund(b) $0 ($15) ($25) ($25) ($25) ($15) ($15) . ($600) ($251)
Revenues Currently Av dable to Find Allowed Mims
Recovery Bonds(c) 0 0 (10) (10) (10) 0 (1 (150) (65)
Teeter Program(d) 40 10 10 10 10 0 0 240 146
Asset Sales/Privatization 20 0 0 0 0 0 0 20 20
Waste Management 0 15 15 15 15 0 0 300 159
Revenues Available to Fund Allowed Claims •$W $25 $15 $15 $15 $0 $0 $410 $260
Proposed Revenues
Sales Tar Reallocations
Bradley-Burns Sales Tax-OCPA $0 $38 $38 $38 $0 $0 $0 $570 $346
Bradley-Burns Sales Tax-Cities 0 0 0 0 0 0 0 0 0
>ti Total Sales Tax Reallocation $0 $38 $38 $38 $0 $0 $0 $570 $346
property Tar Raafiocations
�-- Harbors,Beaches and Parks 0 4 4 4 4 0 0 80 42
Flood Control 0 4 4 4 4 0 0 80 42
= County Redevelopment Agencies 0 4 4 4 4 0 0 80 42
Water and Sanitation Districts e 0 0 0 0 0 0 0 0 0
Total Property Tax Reallocation $0 $12 $12 $12 $12 $0 $0 $240 $127
Other Revenues/Costs
COPS Refinancing 95 0 0 0 0 0 0 95 95
Litisation Reserve Fund (50) ........... 0 0 U.._... .. 0 0.. 0 (50). .. .. (50)
Subtotal $45 $50 $50 $50 $12 $0 $0 $855 $518
__ _..... ... . ....
Total Revenues $105 $75 $65 $65 $27 $0 $0 $1,265 $778
(a) Assumes a discount rate of 7.00%.
(b) Reptesents nonrecurring revenues and incremental debt service on Recovery Bonds. Assumes budget cuts of$197 million m the general fund are achieved.
(c) Represents incremental debt service on the Recovery Banda.
(d)The available Teeter reserves of$50 million are modeled as$40 million in Year 0 and$10 million in Year I. The$10 million per annum does not flow into the
general fuM until fiscal 1997.
(e) The County will request that the Water Districts and Sanitation Districts serve as a backstop in the event funds and/or security is insufficient to complete a
public offering or satisfy remaining allowed claims.
♦ J
TSf MB.DEX-12:20 PM
i
r -
Indicative Consensus Plan Repayment .Schedule
Ainitial DebtService in Years
(Dollars in Millions) 1-s 6-10 11-1s 16-20 21-25 26-30
Total Public Debt Amortization(a) $55 $55 $55 $0 $0 $0
TotalCounty ._....._............_......._....__...___......
Total Annual Debt Service $58 $58 $58 $4 $0 $0
Cash from Currently Available Revenue Sources $25 $15 $15 $15 $0 $0
Cash from Proposed Revenue Sources 50 50 50 12 0 0
. _ .___...._........ .... ..
Remaining Cash Available $17 $7 $7 $23 $0 $0
Cash Required to Backfill General Fund Shortfall(c) 4 0 0 0 0 0
Remaining Cash Available to Fund Amortized Need $13 $7 $7 $23 $0 $0
Remaining Amortized Need(d) $250 $184 $151 $117 $0 $0 $0
(a) Assumes underwritten bonds are issued in sufficient amount to fund a 10%debt reserve and issuance costs.
(b) County bonds are assumed to bear interest at 5.50%.
(c) Represents the average amount required to offset the general fund overhead burden resulting from the transfer of motor vehicle fuel taxes to the OCTA,which
totals an estimated$18 million($e million in Year 1,$4 million in Year 2,$3 million in Year 3,$2 million in Year 4 and$1 million in Year 5).
(d)The Amortized Need does not accrue interest.
Membership Application
Huntington Beach Music Society
Name
Address
Home Phone Business Phone
Affiliation or Music Interest . '
Dues for the calendar year are $10. Please make checks payable to:
Huntington Beach Library Patron's Foundation -Music Society and mail to:
the Huntington Beach Central Library, 7111 Talbert Avenue,
Huntington Beach, CA 91648. For more information call (714) 375-5114.
Interests
I want to bring classical music to Huntington Beach. My committee preference
is:
PROGRAM (works with city, schools, and artists to plan musical
presentations)
EDUCATION (Coordinates with school districts and others to develop a
young peoples concert series
FUND-RAISING (raises funds to support programs)
— MEMBERSHIP (encourages people to join the society)
PUBLICITY(writes a newsletter, works with HBTV-3, and the
newspapers)
Signed Dated
Please make copiesof this application blank for others who might be interested.
When completed, please mail to the Huntington Beach Central Library at the
above address.
Membership Application
Huntington Beach Music Society
Name
Address
Home Phone Business Phone
Affiliation or Music Interest -
Dues for the calendar year are $10. Please make checks payable to:
Huntington Beach Library Patron's Foundation-Music Society and mail to:
the Huntington Beach Central Library, 7111 Talbert Avenue,
Huntington Beach, CA 91648. For more information call (714) 375-5114.
Interests
I want to bring classical music to Huntington Beach. My committee preference
is:
PROGRAM (works with city, schools, and artists to plan musical
presentations)
EDUCATION (Coordinates.with school districts and others to develop a
young peoples concert series
FUND-RAISING (raises funds to support programs)
MEMBERSHIP (encourages people to join the society)
PUBLICITY(writes a newsletter, works with HBTV-3, and the
newspapers)
Signed Dated
Please make copiesof this application blank for others who might be interested.
When completed, please mail to the Huntington Beach Central Library at the
above address.
Council/Agency Meeting Held: $/
Deferred/Continued to: V NZ q
❑ Approved Conditionally Approved ❑ Denied City Clerk's Signature
Council Meeting Date: 08-28-95 Department ID Number: AD 95-114
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCI MEMBERS
SUBMITTED BY: MICHAEL T. UBERUAGA, City Administrator �—
PREPARED BY:. RICHARD BARNARD. Deputy City Administrator'R
SUBJECT: Orange County Bankruptcy
Statement of Issue,Funding Source,Recommended Action,Alternative Action,Analysis,Environmental Status,Attachment(s)
f/3Q�j�s l� / '/nWe 6y ��-
Statement of Issue:
Recently, there has been a significant amount of effort to develop a recovery plan which
builds consensus among the participants in the County's Bankruptcy. Elements of the
recovery plan will require legislative action in Sacramento which is anticipated to happen
very soon. Cities are being requested by the County of Orange and the Orange County
Investment Pool Committee to be supportive of their recently released Consensus Plan.
Funding Source:
N/A
Recommended Action:
That the City Council reaffirms its desire to work cooperatively with all participants to reach a
Consensus Recovery Plan which is consistent with the following common goals:
- End the Bankruptcy
- No new taxes
- Solve the Bankruptcy within the County
- Utilize County resources to solve the County Bankruptcy
- Pay all bond and vendor debt
- Recognize schools as a priority
y/ljf - Maintain the integrity of the comprehensive settlement agreement
a o —- Re�sre investor confidence.in the bored market state
— Thu 1ei-�e be norntBrc�nr�or� c� y j-QvehNe �1y court to//y �er9�ve �ou��y
j1<ifAe19/dp as�ivrul/y a apte�l tVi subord,na/e hur nat
Alternative Action(s):
1. Modify the principles upon which the city would support a recovery plan.
._QUEST FOR COUNCIL ACTT jN
ME&ING DATE: 08-28-95 DEPARTMENT ID NUMBER: AD 95-114
Analysis:
On August 10, 1995, the Orange County Division, League of California Cities, adopted the
Composite Recovery Plan (30 cities in favor and 1 opposed) which lays out a proposal for
resolving Orange County's Bankruptcy. Included in the Composite Plan are eight common
goals which have served to guide both the League Executive Steering Committee and the
Technical Support Committee during discussions and negotiations with representatives of
the County of Orange, the Orange County Business Council, the Orange County
Transportation District, the Orange County Sanitation District, the Orange County Legislative
Delegation, and Governor Pete Wilson's Office. Discussions regarding the development of
the Consensus Plan were constructive and produced positive results. However, at the
eleventh hour the County took unilateral actions to adopt the Consensus Plan without
consulting with the cities' negotiating team. While the Consensus Plan meets most of the
common goals of the cities' adopted Composite Plan, there still remain some outstanding
issues that will require further discussion with members of the Orange County Legislative
Delegation, the Orange County Business Council, and the Governor's Office. Staff will
continue to participate in the discussions and negotiations to insure that our common goals
are reflected in the final Consensus Plan.
Environmental Status:
N/A
Attachment(s):
City Clerk's
Page Number
... ._..._ .. ..
_.... ...... .
.......... .... ........
.... ... ....
1. CITY COMPOSITE PLAN ADOPTED 8-10-95 BY THE ORANGE
....:......... .. .. .... ............... ...
COUNTY DIVISION,LEAGUE OF CALIFORNIA CITIES
_......... . ...... ..... .... ......
..... .... . ..... ... ... ....
_...... ....... ..._ _ . ._
.......... . -....... ... .... _.
. . .... ...... .. _ .
...._ . _ .. ...
........ _.. ... .
2 THE COUNTY OF ORANGE CONSENSUS RECOVERY PLAN AS
PRESENTED TO THE SENATE SPECIAL COMMITTEE ON LOCAL
GOVERNMENT INVESTMENTS, DATED 08-22-95
.......... 1.
................... ..................
3. COMMUNICATION BY OCTA STAFF TO OCTA BOARD OF
DIRECTORS REGARDING PROPOSED BANKRUPTCY RECOVERY
PLAN, DATED 08-28-95
#14128
a
0014128.01 -2- 08/25/95 2:42 PM
LEAGUE AfIOF
CALIFORA
CITIES
Common Goals
09MCB COUM MMION
End the Bankruptcy
Create No New Taxes
Solve the Bankruptcy Within the County
Utilize County Resources to Solve the County Bankruptcy
Pay all Bond and Vendor Debt
Recognize Schools as a Priority
Maintain the Integrity of the Comprehensive Settlement
Agreement
Restore Investor Confidence in the Bond Market
1
LEAGUE OF
CALIFORNIA
CITIES
The Problem
ORM(M COUM MISIOx
Short Term Problem
• County Bond Debt-Net Deficit
• Long Term Debt Net Shortfall $364
• Long Term Debt Reserve Deficit $ 15
$ 379
• Vendor/Other Claims $ 100
• Losses on Third Party Funds (1) $ 190
• School Repayment Claims - 100% $ 106
• Priority Bankruptcy Expenses $ 25
Short Term Problem - Resolved by June 30, 1996 $ 800
Longer Term Problem
• Non-Recourse Claims Secured
By Litigation—Cities, Special $ 763
(Includes Option B Claims)
Total Problem $1.563 billion
Note:
1. See Page 4 for detail. 2
LEAGUE OF
TA CALIFOMA
MES
League Composite Proposal
ORANGE COWIT DIVISION
$ 95 County debt restructuring(1)
350 Loan From OCTA-repaid with gas tax currently allocated
to County($15 million for 23 years) (2)
250 Sale of Landfills to Sanitation Districts(3)
105 Property tax shift from Harbors, Beaches&Parks,
and Flood Control District funds and/or other County-
controlled accounts(4)
$ 800 Immediate Solution
$ 763 Secured Claims(5)
$ 1.563 billion Solution
Notes: 1. The County has$1.0 billion in debt that could be restructured resulting in a$95 million one-time
cash inflow at no additional cost.
2. County currently receives$31 million in gas tax,$15 million of which would be passed through to OCTA upon
enactment of enabling legislation.
3. Requires negotiations between County Sanitation Districts and the County regarding landfill values
and closure liability.
4. County must determine distribution of property tax shift among County controlled Districts. Would
require County to issue$105 million in debt paid over 20 years.
5. Non-school Pool Participant settlement secured and repayment claims,including Option B claims,
become subordinate to all non-County claims,but receive 100%of litigation recoveries until paid in full
and control of litigation 3
This proposal provides for a trustee to administer the Plan only if the County does not implement the plan by January 1, 1996.
LEAGUE OF
qCMES
MA
Components of Third Party Losses
ORANOB COUNTY DIVLSION
Unapportioned Property Taxes $ 44
Employee Compensation and Benefits $ 30
Agency Trust Accounts $ 20
County Clerk Interpleader $ 12
Fire JPA $ 10
800 MHz $ 7
Housing Authority $ 7
Public Administration $ 3
Public Guardian $ 2
DA Child Support $ 1
Other $ 54
$ 190
4
SHORT-TERM PROBLEM
• THE COUNTY ROLLED OVER THEIR BONDED DEBT FOR A ONE YEAR
PERIOD. THE COUNTY HAS CALCULATED A$379 MILLION CASH
SHORTFALL IN MEETING THIS OBLIGATION FOR THE 1995-96 FISCAL
YEAR
• THE COUNTY HAS INCURRED$100 MILLION IN PRE-BANKRUPTCY
VENDOR AND EMPLOYEE CLAIMS
• THE COUNTY HELD$300 MILLION IN TRUST FOR THIRD PARTIES. OF
THIS AMOUNT$190 MILLION REPRESENTS THE AMOUNT DUE TO NON-
COUNTY THIRD PARTIES AND SHOULD RECEIVE PRIORITY OVER THE
$110 MILLION IN COUNTY CLAIMS.
• SCHOOLS ARE DUE$106 MILLION CURRENTLY HELD IN UNSECURED
REPAYMENT CLAIMS. THIS PROPOSAL PAYS SCHOOLS 100% OF THEIR
REPAYMENT CLAIMS AND REMOVES SCHOOLS FROM THE
BANKRUPTCY PROCESS.
• THE COUNTY HAS DETERMINED THAT$25 MILLION WILL BE
REQUIRED TO FUND BANKRUPTCY RELATED ADMINISTRATIVE
EXPENSES FOR THE 1995-96 FISCAL YEAR.
LONGER-TERM PROBLEM
• CURRENTLY,CITIES AND SPECIAL DISTRICTS HAVE TWO TYPES OF
CLAIMS TOTALING$.20 ON THE DOLLAR. THE FIRST$.09 IS A SENIOR
SECURED CLAIM AGAINST ANY LITIGATION SETTLEMENT RECEIVED
BY THE COUNTY. THE REMAINING $.11 IS A NON-SECURED
RECOURSE NOTE OF THE COUNTY.
• SCHOOLS HAVE CLAIMS TOTALING$.10 ON THE DOLLAR. THESE
CLAIMS ARE ALSO A NON-SECURED RECOURSE NOTE OF THE
COUNTY.
• THE LEAGUE'S COMPOSITE PROPOSAL WOULD ALLOCATE$106
MILLION TO THE SCHOOLS TO PAY THEM OFF COMPLETELY AND
REMOVE THEM FROM THE BANKRUPTCY PROCESS.
• THE CITY AND SPECIAL DISTRICT SECURED SETTLEMENT AND
REPAYMENT CLAIMS WOULD BE COLLAPSED INTO ONE NON-
RECOURSE CLAIM SECURED ONLY BY ANY LITIGATION SETTLEMENT.
THE CITIES AND SPECIAL DISTRICTS WOULD IN FACT SUBORDINATE
THEIR DEBT TO ALL NON-GOVERNMENT CLAIMS. THIS PLAN ALSO
PROPOSES THAT THE POOL PARTICIPANTS WHICH ELECTED OPTION B
IN THE COMPREHENSIVE SETTLEMENT AGREEMENT(CSA)BE
INCLUDED WITH OPTION A CITIES AND SPECIAL DISTRICTS WITH
TOTAL NON-RECOURSE CLAIMS OF$763 MILLION SECURED ONLY BY
A LITIGATION SETTLEMENT.
i
LEAGUE COMPOSITE PROPOSAL
• COUNTY DEBT RESTRUCTURING--$95 MILLION
• THE COUNTY HAS THE CAPACITY TO RESTRUCTURE$1.0 BILLION IN
EXISTING LONG-TERM DEBT TO RFALUE$95 MILLION IN ONE-TIlviE
AVAILABLE CASH PROCEEDS.
• ORANGE COUNTY TRANSPORTATION AUTHORITY(OCTA)--$350
MILLION
• THE LEAGUE'S PROPOSAL WOULD PROVIDE A LOAN OF$350 MILLION
IN CASH FROM OCTA TO THE COUNTY. THIS LOAN WOULD BE REPAID
OVER 23 YEARS FROM A REALLOCATION OF$15 MILLION OF THE
COUNTY'S $33 MILLION IN ANNUAL GAS TAX FUNDS . THIS
REPAYMENT WOULD BE WITHOUT INTEREST AND WOULD HAVE A
NET PRESENT VALUE OF$177 MILLION AT 6.5%. SEVERAL OTHER
OPTIONS TO THIS LOAN CONCEPT HAVE BEEN CONSIDERED BY THE
COUNTY. .
• SALE OF LANDFILLS--$250 MILLION
• THE LEAGUE'S PROPOSAL IS TO SELL THE THREE OPEN LANDFILLS
TO THE SANITATION DISTRICTS OF ORANGE COUNTY FOR$250
MILLION. THIS SALE WOULD REQUIRE NEGOTIATIONS BETWEEN
COUNTY SANITATION DISTRICTS AND THE COUNTY REGARDING
LANDFILL VALUES AND CLOSURE LIABILITY. SEVERAL OTHER
OPTIONS TO THIS SALE HAVE BEEN PROPOSED WHICH WOULD
PROVIDE EITHER AVAILABLE CASH OR A FINANCING REVENUE
STREAM EQUALING$250 MILLION.
• COUNTY SPECIAL DISTRICT REVENUE--$105 MILLION
• THE LEAGUE'S PROPOSAL WOULD REDIRECT APPROXIMATELY$10
MILLION ANNUALLY IN COUNTY CONTROLLED DISTRICT'S PROPERTY
TAX FOR 20 YEARS. THIS WOULD PROVIDE A FINANCING REVENUE
STREAM EQUALING$105 MILLION. THE COUNTY MUST DETERMINE
THE DISTRIBUTION OF THIS PROPERTY TAX SHIFT AMONG COUNTY
CONTROLLED DISTRICTS.
• THE ABOVE AVAILABLE CASH AND FINANCING OPPORTUNITIES
PROVIDES $800 MILLION TO THE COUNTY TO ADDRESS ALL SHORT-
TERM CLAIMANTS AND WILL EFFECTIVELY END THE COUNTY OF
ORANGE BANKRUPTCY. THE REMAINING NON-COUNTY CLAIMS ARE
SECURED ONLY BY LITIGATION AND ARE NON-RECOURSE TO ANY
OTHER REVENUES OF ORANGE COUNTY. THE LEAGUE'S PROPOSAL
PROVIDES THAT THE CITIES AND SPECIAL DISTRICT CLAIM OF$763
MILLION BE PAID PRIOR TO THE COUNTY'S REMAINING POOL
LOSSES. THE LEAGUE'S PROPOSAL PROVIDES THAT CITIES WOULD
CONTROL THE LITIGATION EFFORTS. SEVERAL OTHER OPTIONS
HAVE BEEN PROPOSED BY THE COUNTY REGARDING DIRECTION OF
THE LITIGATION EFFORTS IN THIS MATTER.
TRUSTEE
• THE LEAGUE'S PROPOSAL PROVIDES FOR A TRUSTEE TO ADMINISTER
THE PLAN ONLY IF THE COUNTY CANNOT IM PLElENT THE TERMS AS
AGREED BY JANUARY 1, 1996.
LEAGUE COMPOSITE PROPOSAL
• COUNTY DEBT RESTRUCTURING--$95 MILLION
• THE COUNTY HAS THE CAPACITY TO RESTRUCTURE$1.0 BILLION IN
EXISTING LONG-TERM DEBT TO REALIZE$95 MILLION IN ONE-TIME
AVAILABLE CASH PROCEEDS.
• ORANGE COUNTY TRANSPORTATION AUTHORITY(OCTA)--$350
MILLION
• THE LEAGUE'S PROPOSAL WOULD PROVIDE A LOAN OF$350 MMUON
IN CASH FROM OCTA TO THE COUNTY. THIS LOAN WOULD BE REPAID
OVER 23 YEARS FROM A REALLOCATION OF$15 MILLION OF THE
COUNTY'S $33 MILLION IN ANNUAL GAS TAX FUNDS . THIS
REPAYMENT WOULD BE WITHOUT INTEREST AND WOULD HAVE A
NET PRESENT VALUE OF$177 MILLION AT 6.5%. SEVERAL OTHER
OPTIONS TO THIS LOAN CONCEPT HAVE BEEN CONSIDERED BY THE
COUNTY.
• SALE OF LANDFILLS--$250 MILLION
• THE LEAGUE'S PROPOSAL IS TO SELL THE THREE OPEN LANDFILLS
TO THE SANITATION DISTRICTS OF ORANGE COUNTY FOR$250
MILLION. THIS SALE WOULD REQUIRE NEGOTIATIONS BETWEEN
COUNTY SANITATION DISTRICTS AND THE COUNTY REGARDING
LANDFILL VALUES AND CLOSURE LIABILITY. SEVERAL OTHER
OPTIONS TO THIS SALE HAVE BEEN PROPOSED WHICH WOULD
PROVIDE EITHER AVAILABLE CASH OR A FINANCING REVENUE
STREAM EQUALING$250 MILLION.
• COUNTY SPECIAL DISTRICT REVENUE--$105 MILLION
• THE LEAGUE'S PROPOSAL WOULD REDIRECT APPROXIMATELY$10
MILLION ANNUALLY IN COUNTY CONTROLLED DISTRICT'S PROPERTY
TAX FOR 20 YEARS. THIS WOULD PROVIDE A FINANCING REVENUE
STREAM EQUALING$105 MILLION. THE COUNTY MUST DETERMINE
THE DISTRIBUTION OF THIS PROPERTY TAX SHIFT AMONG COUNTY
CONTROLLED DISTRICTS.
• THE ABOVE AVAILABLE CASH AND FINANCING OPPORTUNITIES
PROVIDES $800 MILLION TO THE COUNTY TO ADDRESS ALL SHORT-
TERM CLAIMANTS AND WILL EFFECTIVELY END THE COUNTY OF
ORANGE BANKRUPTCY. THE REMAINING NON-COUNTY CLAIMS ARE
SECURED ONLY BY LITIGATION AND ARE NON-RECOURSE TO ANY
OTHER REVENUES OF ORANGE COUNTY. THE LEAGUE'S PROPOSAL
PROVIDES THAT THE CITIES AND SPECIAL DISTRICT CLAIM OF$763
MILLION BE PAID PRIOR TO THE COUNTY'S REMAINING POOL
LOSSES. THE LEAGUE'S PROPOSAL PROVIDES THAT CITIES WOULD
CONTROL THE LITIGATION EFFORTS. SEVERAL OTHER OPTIONS
HAVE BEEN PROPOSED BY THE COUNTY REGARDING DIRECTION OF
THE LITIGATION EFFORTS IN THIS MATTER.
TRUSTEE
• THE LEAGUE'S PROPOSAL PROVIDES FOR A TRUSTEE TO ADM MISTER
THE PLAN ONLY IF THE COUNTY CANNOT THE TERMS AS
AGREED BY JANUARY 1, 1996.
CONSEN.00C -8:52 1'M
1
The County of Orange
Consensus Recovery Plan
Presentation by the County of Orange
to the Senate Special Committee on
Local Government Investments
August 22, 1995
Salomon Brothers llennigan,Mercer & lteuuett Arthur Andersen MY
CONSEN.DOC-S:52 PM 1
THE COUNTY OF ORANGE CONSUNSUS KGCUVI'.NY PLAN / AUGUS 1. 21, I995
This report contains and is based upon information provided by,or at the request of the Chief
Executive Officer, the Board of Supervisors of Orange County and representatives of Orange
County, as well as publicly available information, including information available from other
publicly available information sources. Salomon Brothers Inc(the Financial Advisor to the
County), Hennigan, Mercer& Bennett (Senior Legal Counsel),Goldman, Sachs &Co. and A.G.
Edwards&Sons, Inc. (the Underwriters), Arthur Andersen LLP(the Financial Consultant) and
Willkie Farr and Gallagher (Bond Counsel);have not independently verified the accuracy of
the information. The Financial Advisor,Senior Legal Counsel, the Underwriters, the Financial
Consultant,and Bond Counsel shall not be responsible for the accuracy or completeness of the
information and shall not be liable to Orange County or any third party with respect to this
information.
Any valuations and projections provided are based on market information obtained from
secondary sources usually considered reliable. These valuations and projections are based on
assumptions as to such factors as the Financial Advisor and Underwriters reasonably believe
are relevant and represent our judgment as of the time they are provided and are subject to
change.
Salomon Brothers BBennigun,Mercer& Bennett Arthur Andersen 1.1.1'
CONSEN.DOC-8:52PM 1
THE COUNTY OF ORANGE CONSENSUS KhCOVERY PLAN / AUtiUST 21. 1995
The CountyOrangeof
Consensus Recovery Plan
Salomon Brothers liennigun,Mercer& Bennett Arthur Andersen LLII �
CUNSEN.UOC-8:51 PM
THE COUNTY OF ORANGE CONSENSUS RF.COVL'RY PLAN 1 AW;US'F 11. 1995
The County of Orange Consensus Recovery Plan
A Consensus Plan has been reached with high-level representatives of the
constituencies with a vested interest in the County bankruptcy
The following reallocations have been agreed upon to repay the allowed claims of the County
of Orange
Summary of Reallocations
tDoum in Millions)
Source Amount Years
OCTA-Sales Tax Revenue $38 15
Special Districts-Property Tax Revenue
Flood Control 4 20
Harbors,Beaches and Parks 4 20
Orange County Development Aencx.............................4 20.....................
Subtotal-Special Districts $12
Total $50 NA
In exchange for fully supporting a diversion of their sales tax revenues, the Orange County
Transit Authority (OCTA) will receive $23 million of road fund monies beginning in fiscal year
1998 for 17 years
Other OCIP participants will provide cash to cover certain general fund expenses of$8,$4,
$3, $2, and $1 million in fiscal years 1997-2001
The Antonio Parkway project will be completed by the County;other projects will be
completed only if sufficient funding is obtained from OCTA or other agencies
Salomon Brothers tiennigun,Mercer& Bennett Arthur Andersen 1.1.1' 2
CONSEN-UOC-d:52 PM t 1
THE COUNTY OF ORANGE CONSENSUS RECOVERY PLAN / AUGUST 21. I995
Consensus Plan
The holders of Secured Claims and Repayment Claims will convert their claims to non-
recourse,but have a greater stake in the litigation proceeds
Litigation proceeds, to the extent they materialize,will be distributed as follows:
Distribution of Potential Litigation Proceeds by Priority
Sequential
Amount Recipient
$53 Schools
324 Settlement Secured Claims
176 The County
710 Approximately 65%to holders of Repayment Claims,approximately 35%,to the County
400 75%to the County,25%to OCTA
Remaining Approximately 65%to holders of Repayment Claims,approximately 35%to the County
Litigation Trust of$50 million established to fund litigation with Thomas Hayes serving as
litigation trustee
Sanitation Districts and Water Districts will serve as a backstop in the event funds and/or
security is insufficient to complete a public offering or satisfy remaining allowed claims
Approval is required from the numerous Boards of Directors representing the various
constituencies with a vested interest in the County bankruptcy
Salomon Brothers Ilennigan,Mercer& Bennett Arthur Andersen l.l.l' 3
CONSEN.DOC•8:521'M
THE COUNTY OF ORANGE CONSENSUS RECOVERY I'1 AN / A0GUS1 21. 19Y.,
Summary of Obligations and Allowed Claims under
the Consensus Plan
In the proposal the Secured Claims and Repayment Claims would agree to be
non-recourse to the County; their repayment contingent upon a larger stake in
successful litigation
Summary of Financing Methodology for Allowed Claims
Original Revised :.
(Dollars in Millions) Estimate Estimate :• •
Recovery Bonds $236 $244 $0 $0 $0 $0
County Debt Shortfall 423 364 364 0 0 0
Settlement Secured Claims 342 324 0 0 0 324
County Non-debt Shortfall 360 300 50 0 250 0
Vendor Claims 100 100 100 0 0 0
Repayment Claims 513 493 0 0 0 493
- Option B Claims NA 44 0 ,,44 0 0
Administrative Claims NA 25 25 0 0 0
LTD Defeciency NA 15 15 0 0 0
Available Cash NA NA (105) 0 0 0
Total $1,974 $1,909 $449 $44 $250 $817
Salomon Brothers HenniRan,Mercer& Bennett Arthur Andersen 1.1,1' d
1
CONSCNDOC-8.51 PM
THE COUNTY OF ORANGE CONSENSUS KFCOVERY PLAN / AUGUST 21, 1•w5
Cash Currently Available
The County would use the cash balances currently available and cash generated
from asset sales and the lease refinancing to reduce the magnitude of the public
debt offering
Summary of Cash Currently Available
(Douars in Millions)
Source Amount
Teeter Program $40
Asset Sales 20
COPs Refinancing (b) 95
Litigation Fund (c) (50)
Total $105
(a) The Teeter reserves of$50 million are modeled as$40 million in Year 0 and$10 million in Year 1. The$10 million per annum does not flow into the general
fund until fiscal 1997.
(b) Net proceeds from the proposed Cops refinancing.
(c) Amount required to fund the litigation trust fund.
Salomon Brothers liennigaii,Mercer&Bennett Arthur Andersen LIT 5
CONSEN.DOC-8:52 PM t
THE COUNTY OF ORANGE CONSENSUS RECOVERY PLAN / AUGUST 21, IVYS
Consensus Plan Cash Flow
Revenue Analysis Gross Present
(Dollars in Millions) 0 1-5 6-10 1145 16-20 21-25 26-30 Value Value(a)
Currently Available Revenues
Note:Required Reductions to Balance General Fund(b) $0 ($15) ($25) ($25) ($25) ($15) ($15) ($600) ($251)
Revenues Currently Available to Fund Allowed Claims -
Recovery Bonds(c) 0 0 (10) (10) (10) 0 11 (150) (65)
Teeter Program(d) 40 10 10 10 10 0 0 240 146
Asset Sales/Privatization 20 0 0 0 0 0 0 20 20
Waste Management 0 15 15 15 15 0 0 300 159
Revenues Available to Fund Allowed Claims $60 $25 $15 $15 $15 $0 $0 $410 $260
Proposed Revenues
Sales Tax Reallocations
Bradley-Burns Sales Tax-OCTA $0 $38 $38 $38 $0 $0 $0 $570 $346
Bradley-Burns Sales Tax-Cities 0 0 0 0 0 0 0 0 0
Total Sales Tax Reallocation $0 $38 $38 $38 $0 $0 $0 $570 $346
Property Tax Reallocations
Harbors,Beaches and Parks 0 4 4 4 4 0 0 80 42
Flood Control 0 4 4 4 4 0 0 80 42
County Redevelopment Agencies 0 4 4 4 4 0 0 80 42
Water and Sanitation Districts(e) 0 0 0 0 0 0 0 0 0
Total Property Tax Reallocation $0 $12 $12 $12 $12 $0 $0 $240 $127
Other Reuenues/Costs
COPS Refinancing 95 0 Il 0 0 0 0 95 95
litigation Reserve Fund (50) 0 0 0 0 0 0 (50) (50)
Subtotal $45 $50 $50 $50 $12 $0 $0 $855 $518
Total Revenues $105 $75 $65 $65 $27 $0 $() $1,265 $778
(a) Assumes a discount rate of 7.00%.
(b) Represents non-recurring revenues and debt service on Recovery Bonds. Assumes budget cuts of$187 million in the general fund are achieved.
(c) Represents debt service on the Recovery Bonds.
(d)The available Teeter reserves of$50 million are modeled as$40 million in Year 0 and$10 million in Year 1. The$10 million per annum dues not Bow into the
general fund until fiscal 1997.
(e) The County will request that the Water Districts and Sanitation Districts serve as a backstop in the event funds and/or security is insufficient to complete d
public offering or satisfy remaining allowed claims.
Salomon Brothers tiennigan, Mercer& Bennett Arthur Andersen MY 6
C0NSLN.V(X-8:52 PM 1
THE COUNTY OF ORANGE CONSENSUS RECOVERY PLAN / AUGUST 21. 19V5
Consensus Plan Repayment Schedule
Annual Debt Service in Years
(DoUars in Millions) 1-5 6-10. 11-15 16-20 21-25 26-30
Total Public Debt Amortization(a) $55 $55 $55 $0 $0 $0
Total County Note Amortization(b) 4 4 4 4 0 0
Total Annual Debt Service $58 $58 $58 $4 $0 $0
Cash from Currently Available Revenue Sources. $25 $15 $15 $15 $0 $0
Cash from Proposed Revenue Sources 50 50 50 12 0 0
Cash Available to Fund Amortized Need $17 $7 $7 $23 $0 $0
Remaining Amortized Need(c) $250 $166 $133 $99 ($18) ($18) ($18)
(a) Assumes underwritten bonds are issued in sufficient amount to fund a 10%debt reserve and issuance costs.
(b)County bonds are assumed to bear interest at 5.50%.
(c) The Amortized Need does not accrue interest.
Salomon Brothers Flennigun,Mercer& Bennett Arthur Andersen LLI' 7
CONSCN-(AK•8:52 PM 1' 1
THE COUNTY OF OKANGE CONSLNSUS RECOVERY PLAN / A0G1JS1 21. Ivv5
Hypothetical Distribution Matrix
Without Incremental Revenues
In the absence of incremental revenue sources, the County will be compelled to
propose a Plan of Adjustment using only its available resources which will lead
to the following outcome
Hypothetical Distribution Matrix (a)
(Dollars in Millions)
Distribution on
Allowed Value of Unsecured Unencumbered PropCrtV Allocation Unsecured Total %
Claim Amount Collateral Claim Initial Pro Rata Redistributed Claim Distribution' Recovery
Series A TRANS $169 $29 g;a; 1 ;? $25 $11 $35 $64 38.0%
Series B TRANs 31 0 5 2 8 8 25.2
Taxable Notes(Non Repo) 510 341 30 13 43 383 75.2
Taxable Notes(Repo) 90 60 1 5 0 5 65 72.7
gas.
Settlement Secured Claims 324 0de3?tq 57 25 82 82 25.2
t Y
County Administered Accounts 360 0Q 63 27 91 91 25.2
Vendor Debt and Labor Claims 100 0 ( 18 8 25 25 25.2
Option B Pool Participants 44 0
8 0 8 8 17.6
r
Repayment Claims 493 0 93 87 (87) 0 0 0.0
Long-term Debt Reserve Deficiency 15 0 'k15 3 1 4 4 25.2
(a) Assumes Recovery Bonds are retired out of the general fund budget plus$10 million annual cash flow generated by the Teeter program. Assumes$300
million of value creation available to the County other than Teeter proceeds used to repay Recovery Bond principal.
Salomon Brothers liennigan,Mercer& Bennett Arthur Andersen 1.1.1r a
CONSEN.DOC-8:52 P&I 1
THE COUNTY OF OKANGE CONSENSUS RECOVERY PLAN / AUGUST 21, I945
Hypothetical Distribution Matrix - Consensus Plan
Assuming the Consensus Plan is implemented and the Settlement Secured
Claim holders agree to convert their claims to non-recourse, the public debt and
vendor debt can be repaid in full
Hypothetical Distribution Matrix (a)
(Dollars in Millions)
Distribution on
Allowed Value of Unsecured Unencumbered PropertyAllocation Unsecured Total %
Claim Amount Collateral Claim Initial Pro Rata Redistributed Claim Distribution Recovery
Series A TRANS $169 $29 1 $70 $70 $140 $169 100.00/0
Series B TRANs 31 0 g. „f sa,m 15 16 31 31 100.0
Taxable Notes(Non Repo) 510 341 i'b _°: 84 85 169 510 100.0
Taxable Notes(Repo) 90 60 30' '.. 15 0 15 75 83.4
Settlement Secured Claims 324 0 R.
162 (162) 0 0 0.0
County Administered Accounts 360 0 - 180 180 360 360 300.0
$GQ
Vendor Debt and Labor Claims 100 0 50 50 100 100 100.0
�i Option B Pool Participants 44 0 z 2222 0� 22 49.9
Repayment Claims 493 093;-;;;; 246 (246) 0 0 0.0
t
Long-term Debt Reserve Deficiency 15 0 i; :;15.`:.; - 7 8 15 15 100.0
(a) Assumes Recovery dunds are retired uut of the general fund budget plus$10 million annual cash flow generated by the Teeter program.
Salomon Brothers Ilennigun,Mercer&Ilennetl Arthur Andersen U.111 9
1 t
CONSEN.00C.8.52 PM
THE COUNTY Of ORANGE CONSENSUS RECOVERY PLAN / AUta/Sr 21. I995
Hypothetical Distribution Matrix
If the Settlement Secured Claim holders do not agree to convert their claims to
non-recourse, even if the other elements of the Recovery Plan are adopted,
neither public debt holders nor vendors would receive 100¢ on the dollar
Hypothetical Distribution Matrix (a)
(Dollars in Millions)
Distribution on
Allowed Value of Unsecured F UnencuniberedPropertN,Alloc.ition Unsecured Total %
Claim Amount Collateral Claim Initial Pro Rata Redistributed Claim Distribution Recovery
Series A TRANS $169 $29 0 F $70 $30 $100 $129 76.4%
Series B TRANs 31 0 lg F
�k' ��31 @ 15 7 22 22 71.6
Taxable Notes Repo)N o) 510 341( p 84 37 121 462 90.6
Taxable Notes(Repo) 90 60 � 730 15 0 15 75 83.4
Settlement Secured Claims 324 0 ` 162 70 232 232 71.6
County Administered Accounts 360 0a 180 78 258 258 .. 71.6
Vendor Debt and Labor Claims 100 0 50 22 72 72 71.6
Option B Pool Participants 44 0 :; 4 �,A 22 0 22 22 49.9
Repayment Claims 493 0 4 i 246 (246) 0 0. 0.0
Long-term Debt Reserve Deficiency 15 0 15<° 7 3 11 11 71.6
(a) Assumes Recovery Bonds are retired out of the general fund budget plus$10 million annual cash flow generated by the Teeter program.
Salomon Brothers liennigun,Mercer& Bennett Arthur Andersen 1.1.11' ,,.
CONSEN.IVC-8:52 PM I
THE COUNTY OF ORANGE CONSENSUS RECOVLRY PLAN / AUGUSF 21, 19V5
Assessment of Risk
The County of Orange Consensus Plan targets revenues to satisfy allowed claims with no
cushion or contingency for unforeseen events or variations from plan assumptions
Assumptions which are subject to variation include the following:
Waste Management importation revenues of$15 million annually
Legal implications and hurdles
Ability to obtain long-term contracts
Long-term supply and demand dynamic
Asset Sales of$20 million
Teeter program revenues of$10 million annually
Long-term delinquent property tax receivable trend
Allowed Claims
Vendor and Labor Claims of$100 million
County Non-Debt Shortfall obligations would be financed in two tranche amounts; the
second tranche will not bear interest
Prospective public offering
Interest rate movements
Ability to obtain bond insurance
General fund budget is balanced
An additional $18 million in budget cuts must be made in the next fiscal year to cover non-
recurring revenues and higher TRANs borrowings
Salomon Brothers llenniban,Mercer& Bennett Arthur Andersen Ll.l'
OCTA
August 28, 1995
To: Members of the Board of Directors
From: Orange County Transportation Authority Staff
Subject: Proposed Bankruptcy Recovery Plan
Overview
A consensus plan for County of Orange bankruptcy recovery has been
proposed for Board review. Each agency represented by the Orange County
Investment Pool (OCIP) Committee and the County of Orange will share the
burden of recovering from the bankruptcy under the proposed consensus plan.
Recommendations
A. Review and approve in concept the consensus plan as outlined in the
staff report.
B. Direct staff to call a special meeting of the Board of Directors to
consider the joint agreement, once it is in final form and approved by
the Board of Supervisors.
Background
Immediately after the defeat of Measure R, the one half cent sales tax for
bankruptcy relief, the County of Orange began work on a new recovery plan.
Three weeks later on July 18, the county's financial advisor presented various
options for the Board of Supervisors' review. The information contained in the
report was considered preliminary and did not require Board action that day.
One solution proposed in the working document was the diversion of
Transportation Development Act (TDA) funds from the Orange County
Transportation Authority (OCTA).
Transportation Development Act is the primary funding source for OCTA bus
operations, which includes the federally-mandated Americans with Disabilities
Act program for the frail elderly and persons with disabilities. TDA funding is
also allocated to the Laguna Beach Municipal Transit Lines, the Senate Bill
(SB) 821 bicycle program and the Southern California Association of
Orange County Transportation Authority
550 South Main Street/P.O.Box 14184/Orange/California 92613-1584/(714)560-OCTA(6282)
To: Members of the Board of Directors Page 2
From: Orange County Transportation Authority Staff
Subject: Proposed Bankruptcy Recovery Plan
Governments regional planning activities. The TDA program was initiated by
state statute in 1971 and dedicates 1/4-cent of state sales tax for local transit
services. OCTA anticipates receiving more than $76 million in TDA funds for
the 1995-96 fiscal year.
Shortly after the county's financial advisor unveiled the draft recovery plan
options, the State Legislature approved Senate Bill 75 known as the
Emergency Sales Tax Realignment Act of 1995. This bill was passed just after
midnight on July 30. SB 75 would have allocated all of the OCTA TDA funds
to the county general fund until the year 2011. Over this 15-year period, the
county would have received $1.9 billion, devastating public transit in Orange
County. Additionally, SB 75 proposed the diversion of $375 million in TDA
funds from the Los Angeles County Metropolitan Transportation Authority
(LACMTA) to the County of Los Angeles
The Governor vetoed SB 75 on August 3. In his veto message, Governor
Wilson expressed concern about the impact the diversion of LACMTA funds
would have on transportation projects and services in Los Angeles. In the
same message, the Governor stated his willingness to consider diverting TDA
funds and other pre-existing available revenue sources in Orange County if a
comprehensive bankruptcy plan was developed.
Meanwhile, a number of competing recovery proposals were developed.
Representatives of special districts prepared a recovery plan dubbed the
"Family of Governments" proposal and a League of Cities Technical
Committee fashioned an alternative composite plan reflecting municipal
recommendations. And, the Board of Supervisors directed its consultants and
staff to complete the county's comprehensive plan for consideration.
On August 15, a financial recovery plan was presented and approved by the
Board of Supervisors. The plan contained six alternative proposals with the
impact on OCTA ranging from a $35 million to a $76 million TDA diversion.
The Board of Supervisors elected to shape the final recovery plan through the
legislative process.
In response to the county's proposed recovery plan, the Governor requested
the Orange County Business Council's assistance in brokering a consensus
plan involving the county and the agencies in the Orange County Investment
To: Members of the Board of Directors Page 3
From: Orange County Transportation Authority Staff
Subject: Proposed Bankruptcy Recovery Plan
Pool. Building on the process which developed the Comprehensive
Settlement Agreement earlier this year, the Governor expressed his support
for one plan with agreement from all parties.
Discussion
The Orange County Business Council began work on a consensus plan early
this month. By August 17, the Business Council, county staff, OCIP
representatives, the League of Cities and local elected officials developed and
approved a draft consensus plan.
The county's bankruptcy attorney agreed to prepare a term sheet outlining the
draft consensus plan. The Business Council stated its willingness to meet
again to address two outstanding issues, a $4 million gap per year still existed
to meet the county's financial needs, and the county needed to determine the
general fund impact of transferring the gas tax revenues.
Representatives from the pool participants' committee, county staff and
consultants met over the weekend and on Monday, August 21 to address
impacts to the general fund and to iron out a final consensus plan. After
lengthy and tenuous discussions, and with the Business Council's assistance
on Monday, a consensus plan was developed. This draft plan was adopted in
concept by the Board of Supervisors (5-0), and the OCIP (5-2) on August 21.
The OCTA Executive Committee also met on August 21 and approved in
concept (5-0) the OCTA portion of the consensus plan.
Consensus Plan
The consensus recovery plan incorporates most of the elements contained in
the draft plan adopted by the Business Council group on August 17. The
major components of the plan include:
• Transfer of $38 million/year for 15 years from OCTA to the County of
Orange beginning July 1, 1996.
• Transfer of $23 million of the county's yearly $33 million gas tax
apportionment for 16 years beginning July 1, 1997. Road operations and
maintenance would be retained by the County of Orange.
t
To: Members of the Board of Directors Page 4
From: Orange County Transportation Authority Staff
Subject: Proposed Bankruptcy Recovery Plan
• A repayment claim of $225 million to the OCTA to reconcile the net loss of
$15 million annually for 15 years.
• Property tax reallocations of $4 million from Harbors, Beaches and Parks,
$4 million from the Flood Control District, and $4 million from the County
Redevelopment Authority. The property taxes would be allocated annually
for a 20-year period beginning July 1, 1996.
• A plan of adjustment to be filed with the Bankruptcy Court by January 1,
1996. This plan will outline how claims are handled.
• A litigation trust of$50 million will be established. Tom Hayes will serve as
the trustee, and chairman of a litigation committee to oversee efforts to
prosecute, collect and/or settle pool-related claims.
• All $817 million in senior secured and repayment claims for all pool
participants are moved to litigation trust (nonrecourse to the county and
contingent on litigation). The first $325 million of litigation proceeds must
be paid to the pool participants. On all remaining litigation proceeds, the
funds will be split 65 percent pool participants and 35 percent county.
OCTA's senior secured and repayment claims total $221 million.
• Funding of $18 million to meet the county's general fund obligations over a
five year period. The Orange County Investment Pool Committee would
determine the appropriate pro-rata share of each Option A pool participant.
The consensus plan must be approved by the County of Orange, the OCIP
Committee, OCTA, and each Option A pool participant to become effective.
Special legislation will also be required to activate the agreement. A joint
agreement is being prepared which provides the underpinnings of a
consensus plan. Once the agreement is completed, copies will be distributed
for the Board's review.
Impacts to Bus Operations
A preliminary analysis of two funding scenarios was completed. The analysis
recognizes that OCTA has already lost access to $221 million in funds that are
To: Members of the Board of Directors Page 5
From: Orange County Transportation Authority Staff
Subject: Proposed Bankruptcy Recovery Plan
now comprehensive settlement agreement claims. The first scenario assumes
the worst case proposed under the consensus plan of a $38 million TDA
funding loss each year with no backfill opportunities. Under this option, 49 of
73 bus routes would be eliminated representing a 57 percent reduction in
service. On the remaining 24 routes, service levels such as headways and
service hours would be cut by 15 percent.
All express bus, rail connectors, community routes, Headstart and group
service would be discontinued. Service to south Orange County would be
eliminated and weekend service would be drastically reduced from 43 to 15
routes on Saturday and 35 to 0 routes on Sunday. ACCESS service for
persons with disabilities would be limited to people living within 3/4 miles of
the remaining big bus system and no ACCESS service would be provided in
south Orange County.
OCTA's bus fleet would be reduced from 628 vehicles to 283. The workforce
would see a corresponding reduction of about 500 employees from
administration and bargaining units.
The second funding scenario assumes a $23 million backfill leaving a deficit of
$15 million each year (following a first year loss of the full $38 million). The
$23 million in gas tax apportionments transferred to OCTA from the county
would be used on other approved and funded OCTA or countywide
transportation projects, thereby freeing up unrestricted funds for the bus
system.
The loss of $15 million also significantly affects the bus system. Thirty-one
(31) of 73 bus routes would be eliminated representing a 21 percent service
cut. The remaining 42 routes would experience a service reduction of
10 percent. Weekend service would be reduced from 43 to 36 routes on
Saturday and 35 to 30 routes on Sunday.
Express bus, rail feeder, and community circulators would be discontinued and
ACCESS service limited to a 3/4 mile corridor of the big bus system. Service
to south Orange County would be reduced from 22 routes to eight routes. The
bus fleet would shrink from 628 vehicles to 507, and the workforce by more
than 200 employees.
To: Members of the Board of Directors Page 6
From: Orange County Transportation Authority Staff
Subject: Proposed Bankruptcy Recovery Plan
In completing the impact analysis on bus operations, three assumptions were
used: 1) the most productive routes (ridership and farebox recovery) were
maintained, 2) transit dependent services were given priority over
discretionary services such as express and rail feeder routes, and 3) federal
operating and property tax funding levels were held constant.
Once final legislation is signed by the Governor and the exact funding loss is
known, staff will begin work on a more detailed analysis of the bus operations
impacts and return with a report in 120 days. The Board will be faced with
several key policy decisions such as backfilling the $15 million deficit through
cutting other programs or where and how bus service cuts should be made.
Next Steps
The bankruptcy consensus plan requires the approval of several agencies
including the OCTA. Once the joint agreement outlining the terms of the
recovery plan is in final form and the Board of Supervisors have approved it, a
special meeting of the OCTA may be required.
OCTA staff will work with the county staff and advisors to develop mutually
agreeable legislation to implement the consensus plan. The State Legislature
has until September 15 to enact bankruptcy related legislation this session. If
legislation is approved, the Governor has 30 days to sign the bill.
Summary
A consensus plan has been developed to resolve the County of Orange
bankruptcy. OCTA under this plan plays a key role in meeting the county's
financial needs. County gas tax revenues totaling $23 million are pledged to
backfill $38 million in lost OCTA funds each year leaving an annual deficit of
$15 million.
*.. . . .d e
LAW OFFICES Or
PILLSBURY MADISON & SUTRO
SAN FRANCISCO- SUITE 1000 ORANGE COUNTY
JO SC E$
SAN DOSE 101 WEST BROADWAY SACRAMENTO
SA MENLO PARK
WA9I+INOTON. D.C. SAN OIEGO, CALIFORNIA 92101 TOKYO
WRITEA•$ DIRECT DIAL NUMBER TELEPHONC (610) 234.5000
TELECOPICR(619) 236.1995
(619) 544-3177
June 5, 1995
To all Orange County Investment Pool Participants :
Re: County of Orange - Orange County Investment Pools
Case No. SA94-22272-JR
Modification of Time for Election to Change from
Option A to Option B Relating to Liquidity Facility by
County of Orange on Recovery Notes
Dear Pool Participant:
Under the Comprehensive Settlement Agreement ( "CSA" ) the
County of Orange was required to provide not later than today a
liquidity facility, satisfactory to the Pool Committee, to
support the Recovery Notes . As late as last Friday there was
some question as to whether the County would be able to comply
with this requirement because of objections which had been filed
in the state court validation action respecting these Recovery
Notes . An alternative facility using certificates of
participation was proposed by the County. There were questions
regarding the availability, and cost, of this facility as well .
Over this past weekend the County announced that it had
resolved the objections relating to the validation action
pending in state court and as a result it would be able to
satisfy the liquidity facility requirement using the validation
procedure. The County further advised that it had a written
commitment of credit enhancement from MBIA which would ensure
the success of the financing available through the validation
action.
The Pool Committee takes the County at its word regarding
the success it has achieved over the weekend regarding the
liquidity facility required under the CSA. However, since the
County does not anticipate the funding of the Recovery Bonds
until the 13th of June, and in order to provide Option A Pool
Participants with the maximum protection of the rights obtained
under the CSA for Option A Participants, the Pool Committee has
obtained a stipulation from the County extending the date on
which the Pool Committee must make its determination of the
20760023
JUN- 5-95 MON 19:25 P, 12
'r
f �
To all Orange County Investment Pool Participants
June 5, 1995
Page 2
existence of the required liquidity facility from today June. 5th
to Tuesday June 13th, the date on which the County expects to
complete its sale of Recovery Bonds, the proceeds of which will
be paid to Option A Pool Participants on their Recovery Notes .
The three-day time period within which Option A Pool
Participants can switch to Option B assuming a negative finding
by the Pool Committee regarding the County' s liquidity facility
has likewise been extended for three days following June 13th to
June 16th.
Therefore, Option A Pool Participants expecting to make
election decisions in the next three days should revise their
calendars and await word from the Pool Committee on the County' s
compliance- with the liquidity facility obligations which will be
forthcoming on June 13, 1995 .
If you have any questions, contact the undersigned.
Sincerely yours,
r;_E!a
Patrick C. Shea
PCS:wpc
cc: Bruce Bennett, Esq.
OCIP Committee Members and Counsel
20760025
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ICI Y ADMINISTRATOR'S MEMO
To: Honorable Mayor&Members of the City Council
From: MichaeC9' Uberuaga, City Administra
Date: April 7, 1995
Subject: Orange County Bankruptcy
Attached is information on the Orange County Bankruptcy settlement agreement:
Provided by staff
• Timetable- Authority to Change Options
Provided by Orange County
• Orange County Restructuring Plan
• Citron's Crater
Provided by the Orange County Investment Pool
• Advantages and Disadvantages of the Options
MTU:PD
xc: Ray Silver, Assistant City Administrator
Don Watson, City Treasurer
Bob Franz, Deputy City Administrator/Administrative Services
Gail Hutton, City Attorney
Information - ;, by OCIP
provided
THE FOLLOWING SUMMARY IS NOT INTENDED TO CONSTITUTE A RECOMMENDATION BY THE SUBCOMMITTEE OR
COUNSEL FOR THE SUBCOMMITTEE. RATHER, THIS SUMMARY IS INTENDED TO BE AN OVERVIEW OF SOME OF THE
MAJOR POINTS THAT MEMBERS MAY WISH TO CONSIDER IN ELECTING OPTION A OR OPTION B. PURSUANT TO OUR
INSTRUCTIONS, WE HAVE NOT PROVIDED ANY ANALYSIS OF THE ADVANTAGES OR DISADVANTAGES IN CHOOSING
NOT TO PARTICIPATE IN THE SETTLEMENT. THIS SUMMARY IS NOT INTENDED TO BE EXHAUSTIVE AND EACH
MEMBER SHOULD CAREFULLY REVIEW THE ENTIRE "COMPREHENSIVE SETTLEMENT AGREEMENT' BEFORE MAKING
ITS DECISION.
OPTION A OPTION B
ADVANTAGES ADVANTAGES
1. RECOVERY NOTES CONVERTIBLE TO CASH; 1.. RESERVE BROAD CLAIMS AGAINST COUNTY
2. CLAIMS FIXED IN AMOUNT AND ALLOWED; AND 3RD PARTIES;
3. SHARE PRO-RATA IN LITIGATION RECOVERY 2. NO AGREEMENT TO SUBORDINATE CLAIMS
(SECURED); AGAINST COUNTY;
4. NO OUT-OF-POCKET LITIGATION COSTS; 3. MAINTAIN CONTROL OF LITIGATION;
5. NO LITIGATION RESPONSIBILITIES; 4. LIMITED RELEASES GIVEN;
6. COUNTY MAY HAVE BETTER LITIGATION CLAIMS; 5. CLAIMS CAN INCLUDE ALL DAMAGES;
DISADVANTAGES DISADVANTAGES
1. REPAYMENT CLAIM IS SUBORDINATE; 1. NO RECOVERY NOTES;
2. BROAD RELEASES MUST BE GIVEN; 2. CLAIMS MAY BE DISPUTED; PROOF MAY BE
3. CLAIMS MAY NOT INCLUDE ALL DAMAGES; COSTLY;
4. LOSS OF CONTROL OF LITIGATION; 3. MAY BE SIGNIFICANT DELAY IN REALIZING
5. LITIGATION RECOVERIES MAY BE SUBJECT TO ON CLAIMS;
REDUCTIONS; 4. COST AND INCONVENIENCE OF THIRD
PARTY LITIGATION;
5. RISK OF SUBORDINATION OR UNFAVORABLE
CLASSIFICATION;
6. MAY LOSE WITHHOLDS;
County of Orange, California
Financial Restructuring Plan
Presentation by the CEO, Financial Advisor and Underwriters
to the
Board of Supervisors
March 28, 1995
This report contains and is based upon information provided by, or at the request of the Chief
Executive Officer, the Board of Supervisors of Orange County and Orange County, as well as
publicly available information, including information available from other publicly available
information sources. Salomon Brothers Inc (the Financial Advisor to the County), Goldman,
Sachs & Co. and A.G. Edwards & Sons, Inc. (the Underwriters) have not independently
verified the accuracy of the information. The Financial Advisor and the Underwriters shall not
be responsible for the accuracy or completeness of the information and shall not be liable to
Orange County or any third party with respect to this information.
The valuations and projections provided are based on market information obtained from
secondary sources usually considered reliable. The valuations and projections are based on
assumptions as to such factors as the Financial Advisor and the Underwriters reasonably
believe are relevant and represent our judgment as of the time they are provided and are
subject to change.
Defining the Problem: Balance Sheet
(Dollars in Millions)
The County Deficit
Before Pool Proposed Pool Percentage of
Settlement Settlement Total
Non-County Pool Loss $1,091
Recovery Notes $236 12.0%
Current County Debt Shortfall 430 430 21.9
Secured Claims 342 17.4
County Non-Debt Pool Loss 345 345 17.5
Unpaid Vendor Claims 100 100 5.1
Repayment Claims 513 26.1
Total Deficit $1,966 $1,966 100.0%
Defining the Problem: Income Statement
(Dollars in Millions)
Even though substantial budget cuts have been implemented or are planned, any
proposed financing plan must be supported by new General Fund revenues _
Revenues 1995-96(a) 1994-95 Expenses 1995-96(a) 1994-95
Property Taxes $121.1 $117.6 Public Protection $83.3 $106.9
Motor Vehicle Fees 101.4 96.6 Trial Court Funding Agencies 36.8 53.5
Fund Balance Available 15.0 55.2 Health Services 25.7 40.3
One-Time Revenue 0.0 0.5 Community and Social Services 54.1 74.1
Interest Earnings 10.0 162.0 Environmental Resources 0.7 3.5
Sales & Other Tax 18.0 16.8 General Government and Services 61.4 80.9
Property Tax Administration 8.0 7.8 Capital Improvements 6.4 10.9
Jail Booking Fee 0.0 1.8 Capital Acquisition Financing 4.1 4.3
Fire Asset Reimbursement 4.1 4.1 Insurance, Reserves & Other 2.4 88.1
Total $277.6 $462.5 Total $275.0 $462.5
Projected Annual Reduction to Budget: $188 million
(a) Based upon Information provided in FY 1994-95 Mid-Year Budget report dated March 7,1995,which is pending approval by the Board of
Supervisors.
2
Criteria for Solution
In formulating the optimal Financial Restructuring Plan, the County's primary
objectives included:
• Repay $2 billion County deficit.
• Minimize the cost burden to Orange County residents.
• Avoid default on County debt.
• Continue to provide essential services (e.g. public safety, health and education).
• Provide proper management and oversight.
• Maintain Orange County's attractiveness to residents and businesses.
Given the urgency of the crisis, the solution must be implemented immediately
3
Financial Restructuring Plan
The solution to fill the County deficit is comprised of many parts
• Generate revenues through Asset Sales.
• Operate Waste Management as a business.
• Restructure to create efficiencies in the Teeter Program (a).
• Seek a half-cent sales tax increase for ten years.
• Issue long-term debt to repay certain current obligations.
• Utilize litigation proceeds to accelerate repayment of remaining claims.
(a) The Teeter program securltlzes delinquent tax proceeds for County and cities.
4
Financial Restructuring Plan
(Dollars in Millions)
Structure of the Proposed Solution
Additional Revenue Sources: Teeter Program Half-Cent Interest Income Waste Management
Sales Tax from Debt
Reserves
$10 T130 $5 $121$24 i•�
General Fund
r
Net Proceeds: Teeter Program Repay Claims Motor Vehicle Waste Management
Refinancing of Intercept Financing Financing
Existing Debt
$60 Net Proceeds $100 Annually $660 Net Proceeds $360 Net Proceeds
(a) $12 million to the General fund in year 1 is after debt service and assumes an Increase In the tipping fee to$35;the$24 In year 5 assumes a
decrease in the tipping lee to$30 and the importation of out-of-County waste.
(b) Release of reserves.
NB: For illustrative purposes.Motor Vehicle Intercept Financing would require sinking fund payments to adequately cover debt service after the
expiration of the sales tax. Net proceeds are after reserves,repayment of prior debt and capital costs.
- 5
Financial Restructuring Plan
(Dollars in Millions)
Overview of Bond Issues
Delinquent Tax Motor Vehicle License Integrated Waste
Recovery Notes Receivables Fees Management System
Recommendations Issue$236 of bonds Issue$150 of bonds • Issue$750 of bonds • Issue$500 of IWMD
secured by superpriority backed by bond secured by Motor bonds.
lien on County's Insurance or Letter of Vehicle License fees. . Increase tipping fees to
General Fund. Credit.
• To enhance security, market levels.
• Refund outstanding structure MVL fee
Teeter Notes with long- intercept to pay debt ' Import out-of-County
term bonds. service. waste.
• Sell both fixed and Any MVL revenues • Reduce fees as waste
variable rate Issues. intercepted would be volume grows.
• Structure as self- replaced with additional
sustaining program
revenue sources.
requiring no additional
County revenues.
Reasons for Action Provides immediate Retires$175 of Teeter Strongest security • $360 net proceeds used
funds for pool Notes due June 30, available to enhance to repay existing IWMD
participants. 1995. market access. bonds and County
• Enhances settlement • Provides at least$10 $660 net proceeds used Deficit.
agreement. annually to County's to repay County Deficit. • Provides additional
General Fund. cash flow for County.
• Provides approximately
$60 on a one-time
basis.
_ Provides source of
funds to purchase
delinquent tax receipts
annually.
6
New Revenue Analysis
Delinquent Tax ("Teeter") Refinancing
• The Current Situation
- On June 30, $175 million of Teeter principal and $8 million in interest
is due and payable.
- Teeter Financings have historically been sold as General Obligation
Bonds or one-year TRANs backed by County investment pools.
• The Proposal
- Refund the 1994 Notes with a long-term stand-alone financing
program that can be repaid from future delinquent tax payments,
penalties and interest earnings, and provide revenues to continue the
Teeter plan without requiring annual market access.
- The Financing will provide funds to replenish lost earnings in the Tax
Reserve Fund.
- Refunding the Teeter Notes with a Long-Term Financing will release
approximately $60 million in General Fund reserves back to the
County.
_ - Maintaining the Teeter Program will provide approximately $10 million
in revenues annually to the County's General Fund.
New Revenue Analysis
Waste Management
• The Current Situation
- Orange County charges County residents $22.75 per ton and prohibits the
acceptance of out-of-County waste.
- San Diego and Los Angeles County residents currently pay on average,
$40 per ton for solid waste disposal.
- The County landfills have the ability to take 16,000 tons per day - 6,000
tons per day greater than current utilization.
• The Proposal
- Operate Waste Management as a business to maximize value.
- Immediately raise the tipping fee to $35 per ton to support current cost
structure.
- As soon as practicable, import out-of-County waste and lower the tipping
fee to $30 per ton.
- The anticipated monthly cost per household (approximately $2.00) would
be increased regardless to operate at a break-even level. Cost per
household will be reduced to approximately $1.25 upon the acceptance of
out-of-County waste.
- The Proposal would provide additional cash flow which the County could
use to provide new debt capacity and support its budget.
_ - Requires Supervisor and environmental approval.
- Accepting out-of-County waste for 25 years will reduce projected landfill
capacity from approximately 53 years to 47 years.
8
New Revenue Analysis
Sales Tax Increase
• A half-cent increase in the sales tax for ten years would provide new revenues to
assist the County in addressing its anticipated budget deficit, Investment Pool
obligations and principal obligations.
• A half-cent sales tax would generate approximately $130 million per year in
revenue.
• With the proposed sales tax increase, Orange County would be at a level equal to
Los Angeles County.
• Approximately 15% - k% of the Countyyis sales taxes are paid by out-of-County
residents.
• Estimated time required for a sales tax increase to become effective is nine to
twelve months.
• An Oversight Committee will provide the means to review and consider the early
termination of the proposed tax increase.
9
Financial Restructuring Plan
Desired State Legislation and Assistance
• Teeter Program.
- Allow for transfer to a Joint Powers Authority to establish a stand-
alone financing program.
- Pledge the tax delinquency reserve as security for bonds.
- Provide for a twenty-five year maturity (currently seven years) to
enhance cash flow to County and improve marketability.
• Enhance the existing Pledges of Security Interests and Statutory Lien Provisions.
• Extension and expansion of Intercept Mechanism.
- Department of Motor Vehicle License fees.
- Sales Tax revenues.
• Waste Management.
- Simplify and shorten environmental approval process for the
acceptance of out-of-County trash.
• Recovery Notes.
- Monetization.
- Credit enhancement.
10
Other Selected Options Analyzed by Financing Team
• 1/2 Cent Sales Tax
- $130 million annually.
- Provides new revenues to address County budget deficit, Investment Pool obligations and debt
principal obligations.
- 15%-20%paid by out-of-County residents.
• Tax Increment Financing(Property Tax)
- Steals school/city property tax money.
- Complex legislative and voter approval process.
- Does not solve need for replenishing revenues.
- Requires 20 year ti¢ sales tax for 100%solution.
• Diversion of Measure M
- Voted for specific transportation projects and pledged to existing bonds until 2011.
- Requires repeal of current legislation and voter approval of tax use.
- Does not solve need for replenishing revenues.
• Alcohol and Tobacco Taxes
- State tax with revenue restricted for State use.
- Requires State legislation and 2/3 County-wide vote.
• Parcel Tax
- Must be used for capital projects.
- Requires state law change and 2/3 County-wide vote.
• Hotel Occupancy Tax
- Only collections from unincorporated available for County use.
- Low revenue generator.
• Bar and Restaurant Tax
- Already included in sales tax.
- Requires State legislation and 2/3 County-wide vote.
• Other County Funds & Non-County Agencies
- i.e.Waste Management, Road Fund, Sanitation District.
- County has no control over non-County Agency funds (Sanitation District, OCTA)
- Specific legal restrictions or designations preclude access(Road Fund,etc.)
11
Plan B Equals Continuation of Bankruptcy
• Further reduce public services to substandard levels.
• Compromise the health, safety, education and welfare of County residents.
• Cause the default of County debt.
- Eliminate access to public markets.
- Negatively impact all municipal issuers in the County.
- Increase financing costs which will be passed through to Orange
County residents and businesses if and when market access is
achieved.
- Jeopardizes and possibly invalidates Pool Settlement.
• Result in possible State trusteeship.
• Erosion of property values.
12
Financial Restructuring Plan
The financing team has structured a plan which best utilizes the limited options
available to the County to fill the $2 billion deficit at the lowest cost burden to County
residents to)
• Repays $2 billion County deficit, with major recipients being members of the County family.
- Over 75% of funds raised will go to schools, cities, vendors and other County
agencies.
• Minimizes the cost burden to Orange County residents: over half of the $2 billion burden will
not be borne by Orange County residents.
- Asset sales and privatizations.
- Out-of-County trash.
- Delinquent tax program restructuring.
- Portion of sales tax paid by out-of-County residents and businesses.
• Avoids default on County debt.
- Allows for continued access to public markets which will be crucial to support the
County's continued growth and economic success.
- Will minimize increased financing costs for all County entities if and when market
access is achieved.
- Will not harm holders of Orange County bonds which include many County and
California residents.
• Given a majority of proceeds will go to schools, cities and other County agencies, the financial
restructuring plan will support the quality of services offered and maintain the attractiveness of
Orange County to residents and businesses.
(a) Differential between$1.69 billion Investment pool loss and$1.97 billion County Investment comprised of$100 million of vendor claims and
approximately$172 million of debt not Included in County debt shortfall related to tax-exempt THAW.
13
Citron ' s Crater
$1 .7 BILLION DEEP
($ in millions)
1/20 SALES TAX
$130 Annually
WASTE DISPOSAL FACILITIES
$55 - $65 Annually
TEETER REFINANCING
$60 One Time
$10 Annually
ASSET SALES/PRIVATIZATION
$100 One Time
OPERATING BUDGET
$188 Reduction
Potential Additional Resources
• Litigation Recovery
. CA 95-02
CITY-..OF HUNTINGTON BEACH
COUNCIL ADMINISTRATOR COMMUNICr4FROM
E A PART OF Tfq
- r+uNTiNeTON eeacr+ THE COUNCIL MEETING OF REC' ,CORD
OFFICE OF THE CITY—CLERK
CONNIE 8RO6KWAY,CITY CLERK
TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
FROM: MICHAEL T. UBERUAGA, City Administrat r /
SUBJECT: STATUS OF ORANGE COUNTY INVESTMENT POOL
DATE: JANUARY 19, 1995
Attached are two documents, a news release regarding.the completion of the
restructuring of the Orange County Investment Portfolio, and a report by the
California State Auditor regarding their audit of the investment funds.
.The restructuring and sale of the Orange County -Investment Pool is basically
complete. As indicated in the news release, the portfolio's estimated loss of
$2.02 billion has been reduced to an estimated loss of $1.69 billion. This is a
$330 million improvement from the December 12, 1994 estimates. The
December estimate of a 27.2% loss in investment pool value has now been
revised to a 22.3% loss.
As the City Council is aware, the City .has $43.6 million invested in the
Orange County Investment Pool. The City continues to pursue its objective of
receiving 100% return of the $43.6 million plus interest earnings. If the 22%
investment portfolio loss were distributed pro-rats to all 187 investors (the City
opposes this method of distributing losses), the City's loss would be- $9.72.
million.
With the completion of the restructuring of the portfolio, the focus will now shift to
the County's "Plan of Adjustment" and distribution of the portfolio assets. No
Plan.of Adjustment has been filed by the County, nor is one expected in the near
future. We will continue to keep you informed as developments occur in the
coming days and weeks.
MTU-RJF:Skd
0006876.01 01/19/95 3:18 PM
News eelease
SITRICK KRANTZ & COMPANY INC.
LOS ANGELES/NEW YORK -
Contact: Sandra Sternberg
Michael Kolbenschlag
Sitrick and Company
818/834-4720
310/788-2850
For Immediate Release
Orange County Financial Advisors Reduce Estimate
of Loss to $1.7 Billion
Reduction in Loss Estimate Due To Accounting Adjustments
and Better than Anticipated Trading Results
Orderly Restructuring of Portfolio Essentially Complete
Santa Ana, Calif. —January 18, 1995— Orange County restructuring team leader
Thomas W. Hayes and the County's financial advisor Salomon Brothers Inc reported
today that the estimated loss of the Orange County investment portfolio has been
reduced to$1.69 billion from the original December 12, 1994 estimate of$2.02 billion.
The $330 million reduction from the original estimated loss is the result of accounting
adjustments and trading successes. The specific adjustments include:
■ Proceeds from securities sales that have exceeded the December 12 estimate by$36
million, attributable to well-received and successful auctions of structured securities,
as well as successful negotiations with various government agencies.
■ $92 million in previously unidentified securities, net of encumbrances.
■ Recovery of$40 million in additional excess collateral due or collected from collateral
liquidations by dealers.
1875 Century Park East,Suite 950
Los Angeles,CA 90067
(310)788-2850 Fax:(310)788-2855
■ Accounting adjustments based on a reconciliation by Arthur Andersen &Co and a
review by the California State Auditor of County records:
—Initial pool investments were$150 million higher than originally reported.
—Additional cash of$310 million was identified.
In reporting to the Orange County Board of Supervisors today, Mr. Hayes said,
'We are very pleased with the results of Salomon Brothers' excellent trading and
execution. They have completed the auctions in an expeditious and prudent manner that
has significantly benefited the citizens of Orange County.
'The restructuring of the investment pool is essentially complete,well ahead of
the original 90-day estimate. We have successfully achieved our objective of significantly
reducing the interest rate exposure of the investment portfolio and have reinvested the
proceeds in a manner appropriate for a fund of this type.'
Mr. Hayes noted that"the accounting adjustments reflect a need to streamline and
improve the accounting system to effectively manage and report on the investment pool."
Now that the restructuring of the investment pool has been successfully
completed, Mr. Hayes said he will return to his position as President of Metropolitan West
Securities on February 3, 1995.
County of Orange, California
Presentation to the Board of Supervisors
Portfolio Update
January 18, 1995
Salomon Brothers Inc
Salomon Brothers Inc
This report contains and is based on information provided by, or at the request of, the Board
of Supervisors of Orange County and Orange County, and publicly available information,
including information available from other publicly available information sources. Salomon
Brothers Inc ("Salomon") has not independently verified the accuracy of the information.
Salomon shall not be responsible for the accuracy or completeness of the information and
shall not be liable to Orange County or any third party with respect to this information.
The valuations provided are based on market information obtained from secondary sources
usually considered reliable. The valuations are based on assumptions as to such factors as
Salomon reasonably believes are relevant, such as interest rates, spreads, volatility, liquidity
and orderly disposition of assets. The valuations represent our judgment as of the time they
are provided and are subject to change. The valuations do not necessarily reflect prices at
which the securities may actually be sold.
y
,i
Salomon Brothers Inc
Valuation of County of Orange Investment Portfolio
(Dollars in Billions)
December 12, 1994 Adjustments January 17, 1995
Amount Contributed by Fund Investors $7.42 $0.15 (a) $7.57
Investment Portfolio
Market Value of Securities Held 5.03 0.13 (b) 5.16
Cash and Equivalents 0.23 0.31 (a) 0.54
Value of Excess Collateral Held by 0.04 (0.04)(c) 0.00
Dealers
Value of Excess Collateral Collected or
Due from Uquidations by Dealers 0.10 0.08 (d) 0.18
Total Value of Investment Portfolio $5.40 $5.88
Loss $2.02 $1.69
Percent Loss 27.2% 22.3%
(a)Represents accou drug a*x*nenta based upon a reconciliation of the County reoords by Arthur Andersen and a review by the Califomia State Auditor.
(b)Represents$39 mdion of baling value received in excess of December 12,1994 valuation estimate and$92 milion of previously unidentified somsitiss net of
previously unidentified encumbrances.
(c)Represents adjustment resulting from sale of collateral held by dealers as of Deoember 12,1994.
(d)Estimate based on exosse collected to date and data provided by dealers. Deductions have not been made for dealer deficit accounts.
2
Salomon Brothers Inc
Portfolio Status Report
Transaction Descriptions (Dollars in Millions)
Odginat Cash
Face Market Loan Proceeds to
Week of Type Amount Value Structured(a) Reducdons(b) -County(c)
12/12/94 Agencies $1,048.7 $1,011.9 $0.0 $528.8 $483.1
CDs 440.0 401.3 440.0 401.3 0.0
12/19/94 Agencies 624.4 596.8 0.0 596.8 0.0
CDs 875.0 769.6 775.0 0.0 769.6
CMOs 196.3 181.0 0.0 0.0 181.0
Corporates 405.0 375.2 0.0 0.0 375.2
12/26/94 Agencies 941.6 863.7 746.6 378.9 484.8
1/2/95 Corporates 1,265.0 1,151.4 1.115.0 0.0 1,151.4
Agencies 50.0 44.3 50.0 0.0 44.3
1/9/95 Agencies 1,046.7 918.6 1,046.7 312.3 606.3
Corporates 275.0 252.4 75.0 0.0 252.4
Mutual Funds 161.7 147.0 0.0 0.0 147.0
1/16/95 Agencies 100.0 80.5 100.0 0.0 80.5
Mutual Funds 113.3 105.4 0.0 0.0 105.4
Total d $7 542.7 $6 899.1 $4 348.3 $2 218.1 $4 681.0
Original Portfolio Remaining (Dollars in Billions)
Conventional Securities $0.08
Structured Securities 0.45 Borrowings&Collateral Claims $0.0
Total $0.63 DVO1 -Sensitivity to Interest Rates(e) $22
(a)Oronal Face Amount.
(b)Market Value.
(c)Does not include the value of excess collateral collected or due to the County. Total figure includes trades that have been executed but have not settled.
(d)Total figures do not u ct ude collateral liquidated at an unknown date.
(e) r value in mil8ons of a one percentage point charge in interest rates.
3
f
s
Salomon Brothers Inc
Portfolio Reinvestment Report: January 16, 1995
Salomon Brothers Asset Management- Current Investment Pool Portfolio Summary
• All investments are in U.S. Treasury or Government Agency securities
• Maturities range from January 17, 1995 through February 15, 1995
• 9.9 day average maturity
• 5.417% average investment yield
$4.2 billion in new portfolio investments (a)
Maturity Schedule (in Millions) Issuer Breakdown (in Millions)
Date Amount Date Amount Issuer Amount
1/17 $678 1/30 $85 FHLB $1,462
1/18 212 1/31 150 FNMA 1,247
1/19 619 2/02 344 U.S.Treasury Bills 628
1/20 748 2/09 199 FHLMC 442
1/25 172 2/13 512 U.S. Treasury Collateralized O/N 285
1/26 270 2/15 34 FFCB 170
1/27 212 Total $4,235 Bank of America Compensating Balances 15
Total $4,249
(a)Veriea horn total cash proceeds to Courdy reported on page two as total cash proceeds figure WkKies Wdes OW have been execLOW but have not settled
4
REPORT BY THE STATE AUDITOR
OF CALIFORNIA
STATUS REPORT ON THE ORANGE COUNTY
TREASURER'S OFFICE
94026.1 _ JANUARY 1995
A r_►
T
CALIFORNIA STATE AUDITOR
BUREAU OF STATE AUDITS
KMT R.SJOBERG MANOM P.EvASHIY
State Auditor CWdDepaty&Mn A"Wr
January 19, 1995 94026.1
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
This letter represents the status of our audit of Orange County's (county) investment funds.
After meeting with county officials, we started our work on December 13, 1994.
Initially,we focused our effort on three areas:
1. Reconciling and verifying the assets held by the Orange County Treasurer on behalf of
various county agencies and outside investors;
2. Assessing short-term cash demands of the county's operational needs and the cash needed to
pay interest on the county's outstanding bonds; and
3. Reviewing the expenditure, income, and trading activity from the investment fund since.
June 30, 1994.
Since that time, at the request of the Joint Legislative Audit Committee, we have expanded the
scope of our audit to include a review of the county's contracts with financial advisors and a
determination of the fees paid to Merrill Lynch by the county.
We have completed our work.on Item 1. In the following section, we describe our work on this
item.
On December 6, 1994, county officials filed bankruptcy on behalf of the county and the other
participants in the county's investment pool. On December 12, 1994, Salomon Brothers, who
had been retained by the county to restructure the investment portfolio, estimated that the
portfolio had sustained a$2.02 billion loss. Since December 12, 1994,a more accurate picture of
"0 J Street,Saito 30%Sacn=Anto,CaUfOrnia 9SB14
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Letter Report 94026 • ,� r-
January 18, 1995
Page 2
the loss has evolved as the actual value of the investments was determined through sales and as
better information became available. In providing the better information,the county was assisted
by Arthur Andersen&Co.,an accounting and consulting fum.
We worked with Salomon Brothers and Arthur Andersen & Co. staff to determine a current
revision to the loss that was estimated in December. In determining the revision, we reviewed
the assets of the investment portfolio as well as the amounts owed to the various participants.
We relied on the sales information as provided by Salomon Brothers. Based on the procedures
we performed, we believe that the revised loss as shown in the following schedule is materially
accurate.
Orange County Investment Portfolio
Original and Revised Estimates of Loss in Value
(Dollars in Billions)
Original Revised
Estimate Estimate
as of as of
12/12/94` 1/17/95b
Amount contributed by fund investors $7.42 $7.57
Market value of securities held 5*03 5.16
Cash and equivalents 0.23 0.54
Value of excess collateral hold by dealers 0.04 0.00
Value of excess collateral collected or due
from liquidations by dealers 0.10 0.18
Loss $2.02 $1.69
a Original estimew computed by Salomon Brothers.
b The csdmae does not include S53 million of specific investmerts that arc not
held by Hanle of America Shoe the a+noum was also not included in the amount
contributed.thete is no effect on the loss.
The schedule presents the value of securities based on sales of the portfolio through January 17,
1995. The county's investment portfolio loss, based on current information, is S1.69 billion, or
$330 million lower than originally estimated in December 1994. This decrease is primarily a
result of the better information that is now available regarding the assets of the portfolio and the
amount owed to participants.' Additionally, a portion of the decrease results from sales activity
Letter Report 94026
January 18, 1995
Page 3
that was better than anticipated. The loss could further change based on future sales activity
although such changes are not expected to be significant,as most of the portfolio has been sold.
We continue to work on the remaining items and plan to issue an interim report on Item 2 within
the next two weeks. Our final report,which we plan to issue in March, will cover the remaining
items.
We conducted this review under the authority vested in the state auditor by Section 8543 et seq.
of the California Government Code and according to generally accepted governmental auditing
standards. We limited our review to those areas discussed in this letter.
Sincerely,
KURT R. SJOBER
State Auditor
TOTAL P.05
C,4
44,
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