Happy Bankruptcy Anniversary!
It was five years ago next Monday that Orange County filed the bankruptcy heard ’round the world. Treasurer Bob Citron’s gamble on interest rates had gone terribly awry, and after jittery brokerage houses dumped its collateral, the county’s investment pool was left with a $1.6 billion loss, dozens of clamoring government entities and a mountain of litigation. World financial markets trembled briefly, and the national media feasted on stories about rich, cozy OC sinking into the ocean.
Today, it’s a faded memory. Though less chronicled than the debacle, Orange County’s recovery was almost as quick, and equally breathtaking. In fact, one the most striking things about the bankruptcy ordeal was the way most of OC’s citizenry and private sector went on with their business, never missing a beat. Raise taxes to cover the shortfall? You’ve got to be kidding, voters said.
Just 18 months after filing for bankruptcy, the county was out of hock and riding a powerful economic recovery. While county government trimmed, companies thrived, housing prices soared and roads kept getting repaired.
Today, the county’s unemployment rate is among the lowest in the nation, the nouveau riche are bidding up coastal lots to stratospheric levels and the media is back,but now to write about the county’s hot entrepreneurs and technology enclaves. Local governments,after managing to get through the hard times without laying off a single teacher, fireman or cop,are seeing their tax coffers overflow. After settling with Merrill Lynch and others, the county has recovered almost $900 million of the billion-six it lost,almost within range of break-even, if you figure in the above-market-rate gains Citron had achieved before his scheme collapsed.
In hindsight, the whole ordeal looks more like a quirk than a grim fact. It’s become a parlor game to debate whether the county even really needed to file for bankruptcy. (If only somebody during that first week of December 1994 had persuaded the brokerages to hang on a few days until the semi-annual property tax revenue rolled in ).
On page 18, we ask close to two dozen prominent bankruptcy players and observers that very question,Should Orange County have declared bankruptcy? On page 67, we chart the recovery of county government. And on page 16 we reminisce, with the dramatic, and heretofore untold, story of the man behind Bob Citron, Ray Wells.
