O.C. IN BANKRUPTCY : Crisis May Puncture Dreams for Future : Projects: Plans for improvements like a new baseball stadium depend on the ability to sell bonds.

By CHRIS WOODYARD and H.G. REZA

Dec. 7, 1994 12 AM PT

TIMES STAFF WRITERS

Within hours of the county’s decision to seek bankruptcy protection and freeze its assets, an icy breeze blew through other local governments Tuesday night. Suddenly, big-ticket projects seemed not so certain.

In Fullerton, officials postponed plans to rescind a hotly debated utility tax. In Anaheim, where officials like to boast of 21st-Century projects expanding Disneyland and adding a new baseball stadium, the word was caution.

“I think it will absolutely have an impact on everything,” said Anaheim City Manager James D. Ruth, referring to the Disney and stadium projects. “We will be looking at all major projects in the city, including all capital improvement projects, to see if we’re going to freeze them.”

Between lavish theme park resorts and new baseball stadiums, Orange County’s dreams for the next century hinge on bonds. With the county’s bond rating plummeting and the likelihood of cities having problems in the bond market as well, some of these dreams may have to wait.

“The timing is incredibly difficult. I think it would be extremely difficult for the city to make any long-term commitments,” Ruth said.

Orange County’s bond woes may also spell trouble for the Save the Rams organization, which has suggested bond financing as one way to build the NFL football team a new stadium and keep it in Anaheim.

Other county officials expressed worry as well. “There’s a number of projects in which the county could be looked to to provide financial backing. We may have to put some of those things off until we get the issue of long-term security addressed,” said Ken Moore, president of the Orange County Chamber of Commerce.

Orange County’s decision to file for bankruptcy protection Tuesday is almost sure to result in a lower bond rating. And a lower rating can mean the county will have to pay higher interest rates, which could add thousands if not millions of dollars to capital projects, experts say.

And in a worst-cast scenario, the bankruptcy could result in Wall Street rejecting all of the county’s new bond issuances altogether.

“It’s going to put Orange County in a very bad position,” said Lou Feldman, a Los Angeles lawyer who heads his firm’s capital markets group in Orange County. “The widows and orphans will probably steer clear of Orange County.”

One bright spot, he said, is that projects that are expected to produce revenue, like the Walt Disney Co.’s proposed $3-billion resort in Anaheim, do not depend entirely on county financing and could be better protected from the fallout. “I don’t think it’s a death knell for the Disneyland project,” he said.

While Anaheim was pondering its future, others were more optimistic.

David Ellis, spokesman for a group of local businessmen who want to build a commercial airport at the El Toro Marine Corps Air Station when it closes in 1999, said the county financial crisis will not affect plans to build the facility.

“Airports are financed primarily by revenue bonds. The revenues generated by the facility are used to pay bondholders,” Ellis said. “You notice that bonds sold to pay for John Wayne Airport were not affected. By federal law, JWA bonds are an enterprise fund, separate from the the county’s portfolio.”