ORANGE COUNTY PERSPECTIVE

When Orange County voters rejected a sales tax increase as a way out of the county’s bankruptcy 19 months ago, they sent a clear message that the preferred alternative was cutting government expenditures. That obviously includes the cost of financing, such as interest on bonds.

Today the Board of Supervisors is scheduled to consider stretching out payments on pension bonds from the year 2005 to 2020. That would reduce the cost of annual interest payments from at least $25 million a year now, and from a higher figure in future years, to about $6 million a year for the next eight years and a higher figure later. Tempting though the math sounds, this financial restructuring is a bad idea.

The problem is that the longer payments will boost the total cost to the county to more than $300 million from the current $155 million. The math is clear to almost any homeowner: Borrowing $200,000 on a 30-year mortgage can mean paying three times the amount borrowed when interest is added.

The bonds issued more than two years ago to pay pensions to county workers are separate from the 30-year bonds issued last year to finance the county’s recovery from bankruptcy. It may seem attractive to restructure shorter-term debt so as to ease the burden of the means of bankruptcy recovery that the county has chosen. But paying off the pension bonds on schedule in eight years will lighten the county’s overall debt load. That is desirable. Better to take the bitter medicine for a shorter term than try to sugarcoat the pill over the long term and burden a future generation in the process.