Bankruptcy? What Bankruptcy?!

OCs financial meltdown, five years later

It's Good to be the Kings

Two summers ago, Rick Reiff, editor of the invariably optimistic Orange County Business Journal, was munching wieners with Robert D. Kaplan at Bistango, a fine-food eatery for expense-account industrialists in the Irvine Business Center. Kaplan was visiting for what would become an Atlantic Monthly article on, among other places, Orange County, California.

"I asked about Orange County's credit collapse in 1994, after officials had made bad investments with public money," Kaplan wrote.

"A blip on the screen—in historical terms, just a rainy day," Reiff told Kaplan. "Roads are still being paved. No police have been fired. What I'm saying is that the Orange County phenomenon is intact."

But he was saying more than that. Reiff loves to call himself—as the late, gay millionaire Malcolm Forbes once did of himself—"a capitalist tool." In talking with Kaplan, he was clearly a tool, acknowledging what has become the perspective of the rich: Orange County is a phenomenon driven by two things—land development (hence the reference to roads) and suburban quality of life (police). Indeed, the December 1994 bankruptcy cost Orange County almost $1.64 billion, but in the months afterward, county officials managed to pave the roads that make land development possible and made sure that Brad Gates' notoriously wealthy and secretive Sheriff's Department was insulated from any bothersome democratic intrusions.

For the county's poor and for everybody else who depends in any way upon county services, the bankruptcy's effects have been something more than a blip—a blimp, maybe, or a zeppelin, like the Hindenberg that went down in flames with almost all aboard. If the "Orange County phenomenon" still operates, health care, water quality, mass transit and housing for the poor do not. In some cases, there have been crises so severe—as in the one at the county's Children and Youth Services—they have invited outside investigation; in others—say, the unprecedented closure of county beaches last summer—outside investigation was called for but never came.

Cries of concern fall on deaf ears in the county's Hall of Administration. Sometimes the supervisors adamantly claim that their budgets have not hurt the poor. Other times—particularly when confronted in pubic forums—they reluctantly acknowledge the festering problem but, as shoulder-shrugging Supervisor Chuck Smith recently rationalized, the county "could never do enough" anyway to address health-care issues with limited financial resources. The sensitivity to the plight of Orange County's underclass can be summed up by Gary Burton, the county's chief financial officer, who contends that the public needs to accept a "wider definition" of health care. Burton said straight-faced, "It could mean the county's overall financial health." Assistant Sheriff John "Rocky" Hewitt went one cynical step further. He has said that increased county spending on building jails should be viewed as a health-care expense because a sizeable portion of the inmate population is medically needy.

But disingenuous word games cannot mask the ugly reality: the supervisors routinely find thousands—even millions—of dollars for projects that benefit the rich and middle class, including themselves. For example, Cynthia Coad—a first-term board member who, conventional wisdom says, is the supervisor most concerned about health-care issues—got $1.5 million to fund her "crusade" to increase code enforcement in unincorporated areas in her district near Anaheim. Citing residents for allowing chipped house paint was apparently so dire that Coad increased the number of county employees for the job from one to seven. "These people [who live in the unincorporated area] have been ignored for too long," said the supervisor who lives close to the targeted area. At a November board meeting, Coad claimed "health-care issues are very well-addressed" by the county.

The hypocrisy gets worse. As a ploy to sooth potential public outrage, each of the board members (Coad, Smith, Jim Silva, Tom Wilson and Todd Spitzer) has repeatedly framed a false public-policy choice: health care vs. bankruptcy-debt reduction; or, even more inflammatory, health care vs. law enforcement and more jails. In June, Spitzer said, "It would be reckless and foolish not to make the bankruptcy debt our first priority."

But while Spitzer and his fellow supervisors can't find one additional dollar for health care or to assist the county's poor, the board voted itself generous car allowances and two separate raises totaling $10,000 per year; increased controversial County Executive Officer Jan Mittermeier's annual salary by $20,000 to $160,000 per year; boosted the number of county employees paid more than $100,000 annually by 24 percent; allocated $250,000 to televise their meetings; this year spent $1.5 million on public relations touting the conversion of El Toro Marine Corps Air Station to a commercial airport; dedicated $52 million for routine building maintenance; handed Disneyland and other local tourist-related business as much as $750,000 per year in taxpayer funds for advertising; increased county travel costs by 83 percent to $27 million per year; and, in the past two budgets, doubled employee overtime costs to $20 million.

Most offensively, however, the supervisors found the courage in May to give their largest block of campaign contributors, real-estate developers, a massive 28 percent tax cut on their projects.

Sadly, the true legacy of the bankruptcy is that Orange County's poor likely face the most hostile local government in the nation. Evidence? Consider the federal government's much-talked-about settlement with the tobacco industry. In January, the supervisors will begin receiving $30 million to $38 million annually for the next 25 years as a result of the deal. In theory, the money was won to help communities defray the health-care costs of tobacco-related illnesses. Supervisors in San Diego and Los Angeles counties have already pledged their windfalls ($948 million and $3.3 billion, respectively) to improve public health. Despite the emotional and fact-filled pleadings of numerous speakers at recent board meetings, Orange County supervisors have so far rejected spending one additional dollar from the tobacco windfall on health care. Instead, the supervisors are considering spending the bulk of the money on building jails ($150 million) and further reducing bankruptcy debt ($107 million). Health-care advocates hope to convince the board to change its mind before January, but even political insiders don't like the odds.

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