Reaction Mixed to Merrill Plan

SANTA ANA — While negotiators were still working on the details, a plan to carve up the $30 million Merrill Lynch & Co. paid to avoid prosecution related to Orange County’s 1994 bankruptcy received mixed reactions Friday from county leaders, educators and other parties.

Some school district officials were hesitant to accept a compromise that gave them less than they are demanding, while Supervisor Charles V. Smith said he is developing an alternative plan that would distribute the Merrill Lynch money differently.

But backers of the proposed settlement said they were optimistic that the deal would be finalized by Monday and that the Board of Supervisors would approve it--perhaps as early as next Tuesday.

“I’m very happy that the parties were able to come together and bring closure to this,” Supervisor Thomas W. Wilson said. “It looks promising that we will be able to bring this before the board next week.”

The proposal calls for cities, school districts and other government agencies that lost money in the bankruptcy to receive most of the $30 million. The agencies would also receive some additional proceeds from interest and cash from a variety of county and special district accounts, according to a source familiar with the deal.

If approved, the distribution plan would resolve a two-month standoff between the county and the committee representing more than 200 cities, school districts and special districts that lost money in the $1.64 billion collapse of the county-run investment pool. Both the county and the other pool investors said the $30 million belonged to them.

Officials in county Chief Executive Officer Jan Mittermeier’s office declined to comment on the deal Friday. But Wilson said Mittermeier told him she was wrapping up the details and hoped to unveil the plan by Monday. “It looks promising,” Wilson said.

Irvine City Manager Paul Brady, a representative of the pool investors, expressed a similar view: “We hope to get the numbers crunched and bring this agreement before the board on Tuesday.”

Not everyone was as eager to sign onto the proposal.

Smith said he intends to offer his own distribution plan to his fellow supervisors when they take up the issue. Smith’s idea is to give a third of the Merrill Lynch settlement to school districts and to set aside another $10 million to help build a new South County courthouse.

“The overcrowding at the courthouse has reached critical proportions, and we made a commitment to build a new one,” Smith said.

Smith proposed that the remaining $10 million be used to retire bankruptcy debts, expand the Local Agency Formation Commission and help build a new wing at the Theo Lacy Branch Jail in Orange.

“We have a clear need for more jail space. Guys are getting out of jail early and committing new crimes,” Smith said. Expanding LAFCO, he added, would allow the agency to move forward on the consolidation of dozens of water, sewer and other special districts in the county. “Consolidation would be a big savings to taxpayers,” he said.

Some educators said they worried about accepting a compromise that didn’t provide them the full $30 million, which they believe school districts are due under the terms of a bankruptcy recovery plan.

“As far as I’m concerned, we have an agreement and they need to honor that,” said Mike Fine, chief financial officer of the Newport-Mesa Unified School District. “To do anything less than that would be unacceptable.”

Sources familiar with the negotiations said that pool investors would receive about two-thirds of the Merrill Lynch settlement plus a smaller portion of the interest and cash from the disputed accounts.

Orange County’s 28 school districts, which are still due $110 million of the money they lost in the investment pool, would receive the most money under the deal. But special districts, cities, redevelopment agencies and other pool investors would also receive some money under the proposed settlement, according to the sources.

The county would retain a portion of the Merrill Lynch settlement. Wilson said Friday the county’s portion would probably be placed in the general fund that supervisors could allocate when it adopts a final budget in September.

“There are many opportunities in my district to use that money,” Wilson said, citing plans to dredge Upper Newport Bay, widen Laguna Canyon Road and build a new South County courthouse. “But I’m not sure what needs other supervisors have in their districts.”