PUBLIC OFFICIALS of the YEAR

Cleaning Up a Fiscal Mess: The link between bankruptcy and opportunity 1998 HONOREE

Janice M. Mittermeier, Chief Executive Officer, Orange County, California

Orange County's bankruptcy in December of 1994 was cataclysmic. One of the wealthiest counties in the country was undone by a $1.6 billion investment loss, sending shock waves through the municipal bond market and spreading panic in the Southern California county's cities, agencies and school districts that had operating funds tied up in the county's investment pool.

Janice M. MittermeierIn the first six months that followed that event, an interim chief executive officer, along with the county's board of supervisors, tried to settle things down with a plan to pay off the county's debt: The county would borrow money by floating a bond, then pay bondholders with the proceeds of a half-cent increase in local sales taxes. That's when the county's difficult situation turned worse: 61 percent of the voters turned down the proposal. As a result, there was no plan, billions of dollars of debt were left outstanding, and, due to a resignation in the wake of the proposal's defeat, there was no chief executive officer.

Enter Janice M. Mittermeier. Now 58, Mittermeier had worked for the county for most of her adult life, including a stint as chief of the county's audit division. At the time of the bankruptcy, she was happily ensconced as director of John Wayne Airport, a job she'd held for five years. When the board of supervisors asked her to take on the CEO job in 1995, she wasn't exactly thrilled. But "I didn't think it was right to refuse to help," she says. "If there was a way to get out of bankruptcy, I knew I could figure it out and make it happen."

After all, the former auditor was so steeped in county knowledge that she knew all the ins and outs of how the county agencies worked. She also, as one observer put it, "understood the subtleties of dealing with a board of supervisors that wanted tough steps taken without taking the heat for those aggressive measures."

Clearly, raising taxes was not an option. Instead, Mittermeier sat down with the county's financial advisers and attorneys, and devised what she calls a "Robin Hood" plan: With the board of supervisors' approval, agencies with surplus money agreed to turn those funds over to the county and, with state legislative approval, tax revenue slated for several county agencies was diverted to the general fund. The revenues raised backed an $880 million bond that was used to pay vendors and holders of county bonds whose premiums were overdue. Local governments that had suffered losses through the investment pool agreed to wait to be repaid by proceeds from lawsuits that were being filed against various financial advisers and investment banks. Those governments since have recouped between 90 and 95 percent of the amounts due them.

Mittermeier did more than steer the county successfully through its travails. She saw an opportunity to modernize the county government — to reorganize the management structure and put in performance measurement and better systems for making long-range decisions. "My goal," she says, "was not just to fix the immediate problem but to make long-term changes so the county would be stronger than it was before the bankruptcy."

Mittermeier is known to critics and admirers as the sort of determined person who can accomplish a lot with a minimum of public fuss. "She's done a superb job of putting Orange County's house in order," says Mark Baldassare, a California public policy analyst and author of a book on the Orange County debacle.

— Penelope Lemov
Photo by Frank D'Amato