Bankruptcy? What Bankruptcy?!

OCs financial meltdown, five years later

Last House at the End

Orange County has never been a cheap place to live, but lately the lack of affordable housing has become particularly painful. Last year, the average cost of buying a house in Orange County jumped by $10,000 in one month alone, reaching an all-time high of $236,000 in June. This year, Orange County ranked dead last among 45 major metropolitan areas surveyed for how well they provide affordable housing for low-income residents.

Part of that can be pinned on the December 1994 bankruptcy, which took place just one year before the scandal-plagued Department of Housing and Urban Development (HUD) decided to give cities in Orange County unprecedented flexibility in spending millions of dollars in federal housing and redevelopment money. To get a place at the public trough, HUD required the county and a team of city officials to create "Consolidated Plans"—five-year spending proposals designed by each city and rubber-stamped by HUD.

One year after a bankruptcy that displayed the bottomless ignorance and avarice of local officials, HUD granted those same officials tens of millions of Community Development Block Grant dollars. One might have hoped that funds from an agency with the word "Housing" on its letterhead would be used for something like homes. Instead, the cash was spilled out like water on the sand of debts and obligations arising from the bankruptcy. Anaheim and Garden Grove redirected their HUD money into tourist-related redevelopment projects, which include hotels and restaurants but no affordable housing. Santa Ana spent the bulk of its money on everything from police helicopters to the modern-looking Santa Ana Jail.

"From what I know, Santa Ana's approach was dictated entirely by the bankruptcy," said Ron Jauregui, a community-development fellow at HUD's Santa Ana regional office. "HUD allowed them to use their money to pay off construction of the jail."

The county and the various cities in the Consolidated Plan are now preparing their "funding priorities" for the next five years. With the bankruptcy supposedly behind them, said Jauregui, HUD is going to demand that the county's cities spend federal money on projects more directly tied to housing.

Few cities are prepared for those tougher standards. So far, only Santa Ana and Irvine have held the public forums mandated by HUD as part of the funding process. Thanks in large measure to the efforts of City Councilman Larry Agran, Irvine is making a bold effort to draw public support for creating as much affordable housing as possible over the next five years.

Ken Domer, a project manager with the Orange County Housing and Community Development Department, told the Weekly that his agency has earmarked $10 million for new affordable housing projects in Orange County.

"We provide money to a developer to help finance a project, and they have to provide affordable housing for 55 years," Domer said. The county is acting as a third party to give the developer a lower-interest loan. In exchange, the developer "has to give up 20 percent of the units at 80 percent of the rent."

That's where the county's formula begins to break down under the harsh pressure of reality, however. Because rents don't have to be truly affordable but rather only relatively affordable compared with the average rent in a given area, "affordable housing" in Orange County will always remain out of the reach of many low-income people. Eighty percent of "too high" is still pretty high.


On July 11, the Orange County Transportation Authority (OCTA) raised county bus fares for the first time in eight years, unilaterally ending its policy of providing each rider with a free transfer. OCTA officials attempted to put the best face on the news. They pointed out, for example, that raising bus fares for most riders would allow them to reduce prices for senior citizens.

But before your heart gets too warmed by thoughts of OCTA's fondness for the elderly, consider the real reason for the fare hike: OCTA is taxing tens of thousands of poor, hard-working people to help fatten its own budget, thanks in large measure to the Orange County bankruptcy.

Flash back to December 1995, exactly one year after the county went belly-up. That's when county officials decided to bleed OCTA by a whopping $38 million per year, cutting bus drivers' already meager salaries by as much as $6,000 per year, among other things. They earmarked the money to help pay off the county's massive debt.

Simultaneously, officials took $23 million per year away from the county's road-building Environmental Manage-ment Agency (EMA), announcing that the money would also go toward bankruptcy relief.

That never happened because new roads are essential to Orange County's rapidly developing landscape, and therefore of significant interest to the county's most powerful men and women. Instead of sending EMA's $23 million to the county's creditors, officials secretly shifted the money to OCTA, thus consolidating the vital task of road building in that one agency.

There were two problems. First, the money arrived in OCTA's ledgers with a footnote: by law, it could be used only for building new roads. Second, even if OCTA officials could deliver on their promise to work out a complex deal to transform the money into usable mass-transit funds, the bus agency would still find itself $15 million poorer.

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