No Diverting Measure M Funds: OCTA

SANTA ANA — Orange County cannot divert Measure M sales tax revenue earmarked for transportation projects to help solve its bankruptcy woes, the executive board of the Orange County Transportation Authority said Monday.

The roughly $130 million raised each year under Measure M--a voter-approved half-cent sales tax--is designated for freeways, roads and public transportation projects. Tinkering with those funds would be illegal, and could cause OCTA to default on its bonds, OCTA Chief Executive Officer Stan Oftelie said.

“The Measure M money is already pledged to projects; we just can’t stop it,” said Oftelie. “I think Will Rogers said, ‘Every man has a good idea that will not work.’ This is a good idea that will not work.”

The agency met Monday morning to debate the issue and, in a preliminary decision, recommended against such a proposal, which has been floated by opponents of Measure R, which seeks to raise the sales tax for 10 years.

The supervisors last week set a special election on June 27 to let voters decide Measure R, which would increase the tax from 7.75% to 8.25%. The revenue would help ease the county’s fiscal crisis.

Vocal anti-tax advocates responded with anger to the OCTA vote, accusing county officials of putting transportation first.

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“They just don’t want to touch transportation, they’d rather raise taxes,” fumed Tom Rogers, head of Citizens Against Unfair Taxation. “The county is favoring paving roads over people.”

Going after Measure M money has been a goal for tax opponents who have urged the Board of Supervisors to use existing revenue to bail out the bankrupt county before turning to a sales tax hike.

Tax opponents have an ally in Supervisor Roger R. Stanton, who has vowed to pursue the likelihood of using Measure M and any other revenue sources as an alternative to a tax hike.

Stanton did not return phone calls Monday seeking comment.

The county has been searching for funds since it declared the largest municipal bankruptcy in U.S. history on Dec. 6. The county investment pool had lost $1.7 billion due to risky investments.

Supervisor William G. Steiner, who is on OCTA’s executive board, said he and other board members had little choice Monday and had to reject any proposal to tamper with Measure M funds.

“It’s just not doable,” Steiner said. “It doesn’t look like it’s going to be a savior.”

OCTA officials expect to issue a final report on their debate later this week. It is expected to underscore the futility of looking to Measure M funds for financial help. A final OCTA vote is expected next Monday.

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A report by Moody’s Investors Service has also criticized any attempts to redirect Measure M revenue. The revenue is pledged as security to repay bonds, some already sold, by the transportation authority and any changes would have a negative impact on the OCTA’s AA bond rating.

A drop in OCTA’s bond rating would mean higher interest rates when it borrows for future projects.

There have also been suggestions that OCTA lend money to the county or reduce the Measure M tax to offset any new tax. But those proposals, too, could lead to a default, Steiner said.

“It would basically violate the agreements made with the voters at the time (Measure M was passed) and it’s clear that is absolutely not to be,” Steiner said.

Oftelie said the tightly written ballot measure, approved in 1990, only allows moving the funding around to other transportation projects--not other purposes.

“We couldn’t, for instance, use the money for welfare or give it to the Sheriff’s” Department, Oftelie said.

However, Bruce Whitaker, a spokesman for the anti-tax group Committees of Correspondence, said voters--not county officials--should have the final say about how tax proceeds are used.

“It just defies logic. And it just isn’t fair,” Whitaker said. “The door to these measures should swing both ways. In an extreme situation like this we should be able to use the proceeds where we have to.”

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One of the reasons Measure M passed in Orange County--where conservative voters typically reject taxes--is that voters knew the money would be used only for transportation projects and would not be appropriated for other county expenses.

The only way to raid the Measure M bank, said officials, would be to hold a special election in which two-thirds of the voters endorsed repealing the current measure and replacing it with another measure directing the money elsewhere.

And that scenario doesn’t take into consideration the legal wrangling that opponents would pursue to block it, said Oftelie, who noted that 14 months of legal challenges followed the voters’ approval of Measure M.

“It would be tied up in court a long time,” Oftelie said.

But critics remain unconvinced.

“They’re just totally incorrect,” said Rogers, who insists that at the very least OCTA can set aside some money to lend the county. He blasted a rail project that will cost nearly $350 million, calling it a “boondoggle” and insisting the money could be better used elsewhere.

“I think the voters would rather see that money go for its children,” he said, in a reference to using the funds to support school districts that invested in the failed pool.

Some county officials believe Measure M has become a target both because many vocal tax critics opposed it in 1990 and because OCTA had $700 million available to invest in the county’s investment pool. The agency was its largest investor.

“People see that kind of money and all of a sudden that’s a potential way to solve the county’s problem,” Oftelie said. “It’s a logical question and I think it should have been explored, but after looking at the facts it has become very clear that it is not an alternative.”