Precarious O.C. Recovery Plan Is OKd : Bankruptcy: But Doris Allen proposes rival approach that could derail agreement in Legislature.

After making some last-minute concessions to cities that had been holding up the agreement, Orange County officials on Thursday unveiled and quickly approved a delicately balanced bankruptcy recovery plan that now faces an uncertain future in Sacramento.

Although she has shown little interest in crafting a solution to the Orange County bankruptcy in the past, embattled Assembly Speaker Doris Allen (R-Cypress) introduced a rival recovery plan just hours after the Board of Supervisors approved the details of their so-called “consensus plan.”

Allen’s plan, if it moves forward, could throw Orange County’s proposal into total disarray.

The plan hammered out in Orange County relies on the diversion of more than $800 million in tax revenues from county agencies and the Orange County Transportation Authority to the bankrupt county government. Allen’s proposal insists that the recovery plan should not rely on such diversions, even though critics say her plan would leave the county millions of dollars short of what it needs to pay its debt.

Any changes to the county’s proposed plan would void the recovery plan formalized Thursday between the county and the cities, schools and special districts to which it owes almost $1 billion, according to terms of the agreement unanimously approved by the supervisors and signed by board Chairman Gaddi H. Vasquez.

“Speaker Allen’s plan is going to create a situation where the whole recovery is going to fracture,” interim county Chief Executive Jan Mittermeier said Thursday evening. “The county cannot get out of bankruptcy if Speaker Allen’s plan is approved.

“It would be just devastating . . . a real tragedy to have something that goes forward to destroy the plan that we have spent weeks and weeks working on, a plan that has consensus,” Mittermeier added.

Orange County declared bankruptcy Dec. 6 after discovering that the county-run investment pool had lost $1.7 billion on risky investments. In the nine months since, the county has been struggling to come up with a way to repay its bondholders and creditors and indemnify the cities, schools and special districts for the nearly $1 billion lost from their investment pool accounts.

Allen’s rival plan was contained in legislation she introduced just hours after the county put the final touches on its recovery agreement, which was completed two weeks after the deadline that Gov. Pete Wilson had placed on the county if it expected legislative action.

After wrangling over details, the county conceded to two major demands of the cities--that the county abandon its insistence that the pool participants share in an $18-million fund to help the costs of transferring some of the county’s road-building responsibilities to the Orange County Transportation Authority, and that the county guarantee the cities a seat on a five-member recovery oversight committee.

Now that Orange County apparently has its act together, it is the political jockeying in Sacramento that could jeopardize the fragile agreement. And time is running out.

The Legislature is due to recess Sept. 15, and failure to have a recovery plan in place by then could spell disaster for Orange County.

Critics say Allen has jumped into the recovery effort in an attempt to change the dynamics of a recall attempt against her in her Orange County district. Republican activists, angry that she got herself elected Speaker by Democrats, are trying to get her removed from office.

Her last-minute legislation has forced Orange County’s legislation, which was introduced in the Senate, into a conference committee, which will try to hammer out an acceptable compromise between Allen’s plan and the one preferred by Orange County.

Allen named herself chairman of the committee, and said two Los Angeles Democrats--Richard Katz and Richard Polanco--will also serve on it, along with Sens. Lucy Killea (I-San Diego) and William Craven (R-Oceanside). Assemblyman Brian Setencich (R-Fresno) is the sixth committee member.