This article is from Cal-Tax Digest, published
by the California Taxpayers' Association.
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In the early 1990s, Mendocino County's chronic budget woes were so severe and its credit rating so shaky that the Board of Supervisors was forced to put up the County Courthouse as collateral to secure much-needed financing from a Japanese bank.

It was a low point that drew national attention to this northern California county, and to the plight of other small, rural California counties that were teetering on the edge of bankruptcy because of reduced state and federal funding.

By February 1993, outside auditors declared Mendocino County's finances the worst of 16 similarly situated counties examined. They publicly expressed doubts about whether the county could continue to operate.

But nearly six years later, thanks to a bipartisan effort unique in local political annals, the county has paid off more than $5 million in debts, balanced the books in the current $109 million budget and begun to replenish reserves wiped out nearly a decade ago.

Mendocino County's finances have improved so dramatically that Standard and Poor's, a New York-based national financial credit rating service, has sharply raised its rating of Mendocino. The county now has a credit rating of single A-minus - almost, but not quite, the top grade available.

"Give us a few more years under our belts and we'll walk away with the highest rating," said County Administrator Michael Scannell in Ukiah, the county seat.

Standard and Poor's credits Mr. Scannell and other county managers for turning the county's finances around by imposing stringent financial controls, reducing unnecessary services, expenditures and full-time positions, delaying capital expenditures and selling unused assets.

In sum, the county is back on stable financial ground, according to Standard and Poor's latest analysis. The current outlook "is based upon strong financial management and low overall debt," said Standard and Poor's.

The sharply improved rating has county administrators, and current and former board members practically dancing in the streets. Two key players were especially singled out for praise for the county's good fortunes: Mr. Scannell and Auditor Dennis Huey.

"Those two guys consistently made their point, sometimes in ways that elected officials don't want to hear. But they knew we had no choice, and they pushed the board into taking the right course of action," said former county Supervisor Frank McMichael.

When the county's budget crisis worsened in 1993, Mr. McMichael was the leading conservative on a board with deep political divisions.

"Board members were far apart politically, but thanks to Scannell and Huey, we became unanimous in the recognition that serious and drastic steps had to be taken to pull the county back from the brink," Mr. McMichael recalled.

Former Supervisor Seiji Sugawara, long a political adversary of Mr. McMichael, agreed. "We all became fiscal conservatives," said Mr. Sugawara.

Although the board clashed sharply and repeatedly over complex socioeconomic issues, especially corporate logging of the county's privately owned forests, supervisors sought a common ground over the county's finances.

"Ultimately, we found the confidence and the courage to stand together and make the tough decisions that had to be made. I'm proud of that and I hope it serves as a lesson for the future," Mr. Sugawara said.