Panel to Bolster Bill on Naming an O.C. Trustee

SACRAMENTO — Tightening the noose on Orange County leaders, a state Senate committee took steps Wednesday toward approving a proposal that would strip the Board of Supervisors of financial authority and install an all-powerful trustee to guide the county’s recovery efforts.

The Senate Local Government Committee agreed unanimously to toughen a bill authored by Sen. Lucy Killea (I-San Diego), but put off a final decision on the measure’s fate until at least next week.

Killea’s original bill would have allowed the Board of Supervisors or county voters to approve the formation of an Orange County Assistance Authority composed of representatives of the county, cities, schools and local agencies, as well as the state.

The proposal--similar to state-sponsored efforts used to bail out New York, Philadelphia and other cash-strapped cities--angered county officials, who felt it would usurp the authority placed with them by the voters.

But the Local Government Committee went even further than Killea.

The committee amended the measure so that county leaders would have no voice in the recovery efforts, putting that power in a single trustee appointed by Gov. Pete Wilson and reporting to state Treasurer Matt Fong.

In addition, the committee moved to strip out provisions that would have given the Board of Supervisors until April 22 to approve formation of the County Assistance Authority. It also welcomed a Killea amendment that would allow the trustee to put a sales-tax increase on the ballot.

That move puts considerable pressure on the Board of Supervisors to embrace a proposal Wednesday by county Chief Administrative Officer William J. Popejoy to hike the sales tax by one-half cent. If the supervisors don’t go along with the sales tax, the state could install a trustee who would.

Every member of the Local Government Committee voiced ire over the performance of the Orange County supervisors, suggesting that they need to be yanked out of the decision-making loop on finances as the county struggles to recover from nearly $1.7 billion in investment losses last year.

“I think it’s time for a (trustee) for Orange County, whether it’s Mr. Popejoy--who I think is a solid, sound man--or somebody else,” Sen. Quentin L. Kopp (I-San Francisco) said during the hearing, which took place before news of Popejoy’s tax proposal was announced.

“We need a trustee who is insulated from the political influences in that county,” added Sen. Newton R. Russell (R-Glendale). “If the Board of Supervisors is the problem and we’re putting a member of the board on (the assistance authority), that causes me some problems.”

Noting that the bill includes a provision for the state to lend upward of $200 million annually to help Orange County’s recovery effort, Sen. Patrick Johnston (D-Stockton) said he would feel uncomfortable knowing that four Orange County officials continued to hold the purse strings under Killea’s original measure.

“I don’t see this as a fix,” Sen. Charles M. Calderon (D-Whittier) told Killea. Calderon added that he wouldn’t support any plan for Orange County “unless they stand up to the plate” and raise taxes.

Killea went along with the committee recommendations, which will be drafted in the coming days and then be reconsidered for a final vote when the panel meets again.

After the hearing, Killea said she continued to prefer a committee overseeing Orange County’s recovery, but admitted the proposal probably would have been redrafted anyway in the Assembly, where Democratic Speaker Willie Brown has voiced strong support for a single trustee and called for the resignation of the three supervisors who were in office when the county declared bankruptcy Dec. 6.

Killea also remained convinced, after learning of Popejoy’s tax proposal, that there still was a need for state oversight, saying that the county won’t be able to get loans from Wall Street without it.

That sentiment was echoed by Thomas Kenny, municipal bond manager for the Franklin-Templeton Group of Funds. He told the committee that the market “clearly lacks confidence” in Orange County’s current elected leaders, but stressed that the sort of committee proposed by Killea was preferable to a single trustee because it has a good track record of success in New York and elsewhere.

“It’s been tested, the market has accepted it and it seems to work,” Kenny said after the hearing. “But if they’re going to appoint one person, at least having the state treasurer’s office involved goes a long way toward resolving some of those problems.”

Kopp, however, expressed confidence that Wall Street would quickly accept a single trustee, if one were appointed. “They can get used to it,” he said.

Killea and others expressed confidence that a trustee would get the blessing of the Legislature, but approval by Gov. Pete Wilson remains a thorny question. “We’d have to take a long, hard look at it,” said Sean Walsh, Wilson’s spokesman.