By New Times
By Connor Radnovich
By Robrt L. Pela and Amy Silverman
By Ray Stern
By Keegan Hamilton
By Matthew Hendley
By Monica Alonzo
By Monica Alonzo
"We did not know at the time that there was this crisis going on," Given says. "We couldn't divine by telepathy what was happening. If all that is known now was known then, there would have been something in the Official Statement."
Rawles, one of the supervisors who voted for the bond issue, acknowledges that an operating deficit would have been "material" if he and other board members had known what was really going on with the county's finances.
"If we had known that we had that deficit, then we would have had to disclose it," Rawles says. The ignorance defense has been a common refuge for board members ever since the full scale of the county's financial problems came to light. Bruner, the former board chairman, has repeatedly insisted that he did not know that the county's financial staff was cooking the books to hide deficits.
But if board members were in the dark about the exact size of their budget woes, then they missed or ignored plenty of warning signs that had cropped up before they approved the 1993 bond sale.
Jim Bruner, a financial and estate planner for the state's largest law firm, served for five years on the Board of Supervisors, including two one-year stints as chairman. In January 1993, he took the helm for the second time.
He lauded county administrators for their performance, particularly then-county manager Roy Pederson, whom Bruner had hand-picked in 1990 for the top appointive post.
"The county has instituted a strategic plan for the first time," Bruner said in his speech marking the beginning of his second stint as chairman. "As Mark Twain said, 'How do you know where you are going if you don't have a map?' We know where we are going as a government, and we now have a plan for getting there."
Six months later, the map would be in tatters, and the county was headed for the poorhouse.
Indeed, for the previous two years, the county seems to have been walking a financial tightrope that Bruner and others say they didn't notice.
Multimillion-dollar operating shortfalls would crop up and then be covered quickly by borrowing from funds meant for other purposes, like highways or the flood-control district. Budgets would suddenly have to be slashed at the end of fiscal years, because there wasn't enough revenue coming in.
The revenue projections by the county finance office, then led by Ray Smith, kept turning out to be too high, sparking frequent scrambles to get the budget back in balance.
In February 1993, one month after reascending to the chairmanship, Bruner himself was forced to rush to Governor Fife Symington to ask for money. The county was on the verge of bouncing checks, a crisis averted only when Symington agreed to an emergency release of $60 million in state funds.
The constant scrambles for cash were making some people nervous, especially newly elected County Treasurer Doug Todd, who took office in January 1993.
After looking at the books, Todd began a crusade to convince anyone who would listen that the county was, in fact, running up debts that it couldn't pay and that were being obscured in the county's financial books.
Todd told Pederson, Bayless and others that the county's books were cooked months before the board voted on the 1993 bond issue.
Clearly, board members were at least suspicious of problems. The week before the bond issue was approved, finance director Smith resigned under pressure after an audit showed problems in the finance department.
Taken together, here is what any interested supervisor could have known on July 26, 1993, the day the board sat down to approve the bond sale:
ù The county treasurer had discovered that the finance staff was cooking the books, and that tens of millions of dollars of debt had built up.
ù The county's finance chief had been run off because of problems with his office.
ù Repeatedly, the board had been asked to move funds around to cover operating shortfalls.
ù That very day, the board was being asked to approve a staggering $128.8 million in short-term debt, including $25.5 million in bond sales, so the cash could be used to loan money to the general fund.
What the supervisors claim eluded them--that the county was running a deficit at the time--did not long elude the bond-rating agencies that pass judgment on the county's financial strength.
Within weeks, analysts from Standard & Poor's and Moody's Investor Services were in town to look over the situation, and they did not like what they saw.
Both agencies subsequently downgraded the county's bonds because of the financial problems.
After the bond sale was approved, Todd says, he again tried to tell officials that the Official Statement was misleading, because it contained phony numbers on the county's financial health.
"At that time, we mentioned to a number of people that the deficit was considerably more than they were even talking about," Todd says. "We told them that some of the numbers in the [Official Statement] were phony, but that was not acceptable to them."
Todd says he was scheduled to meet with the visiting bond raters, and planned to tell them his concerns about the Official Statement. But the scheduled encounter never took place.