BREA : Default Might Leave City in Dire Shape, Officials Say

Although they stopped short of endorsing a “yes” vote on the Measure R sales tax increase, city administrators are warning about far-reaching financial repercussions if the bankrupt county defaults on its bond payments.

Orange County voters will decide the fate of the half-cent sales tax proposal June 27. The measure is designed to help the county, schools and other public agencies recover from $1.7 billion in investment pool losses.

In a recent report to the City Council, Brea City Manager Frank Benest cautioned that there might be “some terrible consequences” if Measure R fails and the cash-strapped county goes into default. These consequences could include a “barrage of litigation,” Benest said, reductions in home sales and an inability to attract and retain businesses.

Assistant City Manager Tim O’Donnell said it is difficult to predict how Brea, specifically, would be affected by a county default. But he expects a negative impact on the entire region if the county cannot meet its bond obligations.

“If the county defaults, then we all have problems in terms of our ability to obtain long-term financing,” O’Donnell said. “That is the most frightening aspect of the county not finding a way out of this mess.”

A default probably would be far more costly to residents, he said, than would the burden of paying an extra half-cent in sales tax over the next 10 years.

In his report to the council, Benest said he believes county officials are doing all they can to recover from the investment losses.