County Says OCTA Can Afford Tax Loss : Bankruptcy: New chief executive disputes the agency’s claim that it can’t give up $1 billion in revenue.

As transportation officials warned that the latest bankruptcy recovery efforts would cripple bus service, Orange County’s new chief executive and her advisers said the massive local transit agency is so flush with cash that it can easily handle a $1-billion loss in tax revenue engineered last weekend by the state Legislature.

Meanwhile, many of the bus system’s 55,000 passengers worried that they would be left stranded because legislators voted to allow the county to divert $70 million a year from bus service to the bankrupt county, which hopes to use the money over the next 15 years to pay its delinquent debts.

On her first day on the job, county Chief Executive Officer Jan Mittermeier took aim at the Orange County Transportation Authority, insisting that the county’s wealthiest agency can do its share to ease the county’s financial crisis by shifting funds away from transportation projects that don’t need immediate funding, setting new priorities on its spending, and tapping into millions the agency is holding in reserves.

County financial adviser Chris Varelas said a county analysis of OCTA finances turned up $700 million in reserves that can be borrowed or redirected, including an estimated $300 million in unpledged funds. An additional $500 million in future transportation revenue has yet to be earmarked, Varelas said.

The analysis, Varelas said, doesn’t take into consideration ways that OCTA can save money on its current operations and thus lessen the impact of any lost revenue.

The county’s stance was immediately and bitterly denounced by Charles V. Smith, the Westminster mayor who is the current chairman of the OCTA board of directors.

“The cash flow is just not there,” Smith said. “It’s just not true.”

Seeking to stave off the county’s raid on their revenues, OCTA officials warned that the loss of funds would come close to bringing bus service to a halt by forcing a 75% to 85% reduction in the system’s operating budget. Hundreds of transit workers would be laid off, Smith said.

Transit services for disabled riders would suffer similar cutbacks, transportation officials said.

“This will just about demolish our bus system,” Smith said.

Smith fired off a letter to Gov. Pete Wilson urging him to veto the legislation, labeling it a “bad idea” that “falls most heavily on the working poor who do not have alternatives.”

Smith also scheduled an emergency meeting of the OCTA board of directors for Wednesday morning to mobilize opposition, and will seek out the backing of the influential Irvine Co. and others to help lobby Wilson on behalf of the county’s bus riders.

“Bus service cuts are likely,” Varelas acknowledged. But he said the cuts would not be nearly as deep as some transportation officials claim. “There is no need for the OCTA to take any drastic steps at this time.”

Pronouncements such as Smith’s left thousands of bus riders, who do not own or cannot afford a car, wondering how they will manage.

One such rider is Oscar Solano, 20, of Anaheim, who takes the bus four times a week to get to his job at a Santa Ana fast food restaurant.

Without bus transportation to get him there, Solano would have to give up his job.

“This is bad for everyone” who rides a bus, said a glum Solano, as he waited at the Santa Ana Regional Transportation Center.

Local transit officials said the Legislature’s action threatens more than the county’s bus service, jeopardizing light rail and even freeway construction projects.

Smith said the bus service helps the county meet federal air quality regulations, and failing to meet those standards could make Orange County ineligible for millions in U. S. transportation funds.

According to OCTA Chief Executive Officer Stan Oftelie, the transit agency also runs the risk of losing about $30 million in federal highway funds--creating headaches for Orange County motorists--if transitway funds are diverted to pay for bus operations.

“If we delay or postpone the improvements on the 405 [San Diego Freeway], 55 [Costa Mesa Freeway], 91 [Riverside Freeway] and the 57 [Orange Freeway], we lose those federal funds. We don’t ever get them back,” Oftelie said.

“The Legislature didn’t consider any of these ramifications. They’re just shotgunning,” Smith said.

Proponents of the bill to divert the state transportation tax monies said the loss to the OCTA would total $1 billion over the 15-year life of the measure. However, Oftelie said the diversion would actually be closer to $1.95 billion, when the effects of economic growth and inflation are figured in. Varelas was dubious.

“That sounds like an attempt to manipulate figures,” Varelas said.

Mittermeier said she is firm in her belief that the legislation awaiting Gov. Pete Wilson’s signature holds the key to the county’s bankruptcy recovery effort. She said she would not be supporting the legislation if she believed the brunt of it would be borne by the poor, disabled and needy who rely on buses to get around.

“It appears this would be in the best interest of the county at this point, based on the information we have,” she said, adding that she believes OCTA officials are naturally trying to protect their agency’s resources.

“I don’t know that that’s a deliberate scare tactic,” said Mittermeier, who said OCTA officials may not have examined their finances in the same way the county has.

Others were more blunt.

“The real irony of all this is that OCTA maintains that there can’t possibly be enough money available to maintain bus service, and yet there’s money for all these other ventures,” said Scott Johnson, chief counsel to state Sen. William R. Craven (R-Oceanside).

Orange County filed for bankruptcy Dec. 6 after former Treasurer-Tax Collector Robert L. Citron lost nearly $1.7 billion on a risky investment strategy. Aside from the county itself, OCTA had the largest amount invested in the county-run investment pool. In all, about 200 government entities had money in the pool.

As the county struggles to get out of bankruptcy without raising taxes, it has increasingly looked at taking money from ready sources such as the OCTA and special districts. Those entities in the past have been quick to reject any suggestion that they surrender any of their revenues, but are slowly becoming more receptive to the idea, especially if they get something in return.

OCTA, for example, insisted for weeks that it would be virtually impossible for Measure M sales tax transportation funds to be used for bankruptcy recovery.

On Monday, the OCTA joined a coalition of elected officials and leaders of special districts to propose ending the bankruptcy by swapping John Wayne Airport and several county landfills in exchange for $415 million and an agreement that the county can repay vendors and bondholders ahead of local government entities.

Mittermeier said she is eager to review those proposals, and would like to see a bankruptcy recovery plan that relies, at least in part, on both concepts.

But some see OCTA’s protests against raiding bus money as falling on unsympathetic ears.

“There’s a lot of jealousy about the Orange County [Transportation] Authority and its substantial resources,” said County Supervisor William G. Steiner, who as one of the four supervisors on the OCTA board of directors finds himself walking a tightrope between seemingly conflicting interests.

“When I’m acting as a member of the governing board of the OCTA, I act with those interests in mind, not as a member of the Orange County Board of Supervisors, and vice versa,” said Steiner, who voted to support the OCTA letter to Wilson.

Meanwhile, Supervisor Marian Bergeson, who also sits on the OCTA Board of Directors, went to Sacramento Monday to lobbying for the controversial legislation.

“I think it may be the best thing that we have going for us at the time,” Bergeson said. “This can be a major component of the recovery, but it will be necessary to have other components.”

Mittermeier agreed.

“If we can get it passed, it’s looking like the light at the end of the tunnel,” she said.

* PLAN OF THEIR OWN: A coalition of city and agency officials offers a proposal. A13

* UNEASY RIDERS: People who rely on the bus worry over possible cuts. A13

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Buses Serve Minorities, Poor

Orange County bus riders are heavily minority and from poorer households: Ethnicity Latino: 50% White: 33% Black: 7% Asian: 5% Other: 5% Household Income Less than $20,000: 60% $20,000-$29,999: 14% $30,000-$39,999: 9% $40,000-$49,999: 7% $50,000 and more: 10% ****

Most Used Routes

The five most heavily used routes serve nearly 50,000 riders daily: Route: Riders Fullerton-Newport Beach: 14,200 Santa Ana-Newport Beach: 10,400 Tustin-Long Beach: 9,600 Santa Ana-Sunset Beach: 6,300 Orange-Balboa Island: 6,000 Source: Orange County Transportation Authority