O.C. Recovery Plan Gains Momentum in Sacramento

Prospects for Orange County’s plan for recovering from bankruptcy brightened Friday as Gov. Pete Wilson indicated he would sign a consensus plan crafted by county supervisors if it remains intact, and Assembly Speaker Doris Allen appeared to back away from a rival proposal.

The rest of the county’s legislative delegation abandoned an array of complaints and coalesced around the delicate accord between Orange County and the schools, cities and other agencies that suffered massive losses last December in the county-run investment fund.

Still, hopes for imminent resolution to Orange County’s unprecedented financial collapse were in danger of being dashed by persistent political wrangling.

The governor’s spokesman said Wilson is prepared to veto the recovery plan if Los Angeles County lawmakers seek to link it with methods of raising money for that financially strapped county that Wilson opposes.

“He is supportive of the consensus plan developed in Orange County,” said Wilson press secretary Paul Kranhold. “If it reaches his desk in that form, or something similar to that form with not a lot of other garbage connected to it, he would sign it into law.”

“Unfortunately, you have a lot of Los Angeles County Democrats trying to link their legislation to the Orange County plan, and he’s not going to go for that,” Kranhold said, But Assemblyman Richard Katz (D-Sylmar) said the bailout packages for Orange and Los Angeles counties should be linked because “in the end, our futures are tied to each other.”

When told of the comments and threatened veto by Wilson, who is seeking the GOP nomination for President, Katz fired back: “Then let him run for President and try explaining to the country how he allowed the two largest counties in the state to go down the tubes.’

Orange County Supervisor Marian Bergeson said late Friday she was encouraged by the day’s developments.

“It looks good,” said Bergeson, adding that county officials are expected to head to Sacramento on Monday to assist in moving the plan along. “If luck is with us, we will be in good shape and on our way.”

A majority of speakers at a conference committee called Friday afternoon by state Sen. Lucy Killea (I-San Diego) to discuss the bailout packages supported the county’s consensus plan. The committee took no action on the plans.

In other good news for the county, a report issued Friday by Moody’s Investor Service said the key elements of the recovery plan “bode well for county bondholders.” Moody’s earlier this year declared the county in default on its debt.

But Moody’s Vice President Barbara Flickinger said she still feared political maneuvering could complicate the plan’s success.

“The desire to avoid this scenario should provide an incentive for all parties to ensure approval of a workable and economically sufficient plan,” Flickinger said.

Allen said Friday she may eventually lend her support to the county’s plan, an abrupt departure from comments a day earlier, during which she criticized the county’s plan and offered an alternative of her own.

“I have never been married to any bill,” the Speaker said. “Consensus from all the parties is the most important thing for me.”

Bergeson said she was pleased to hear of Allen’s seeming change of heart, but noted that unless the Allen endorses the recovery plan, she still has the power to disrupt the fragile consensus on the bill.

“A lot of it depends on Doris,” Bergeson said.

The county declared bankruptcy Dec. 6 after a risky strategy caused the county’s investment pool to lose nearly $1.7 billion, much of it belonging to Orange County cities, schools and special districts that also had their money in the fund.

Those entities have agreed to endorse the county’s recovery plan that includes the repayment of nearly $1 billion owed them. But that agreement will be voided if the Legislature tampers significantly with the county’s proposal, making consensus among the Orange County delegation all the more crucial.

The county’s recovery plan centers on seizing more than $800 million in tax revenue from county agencies and the Orange County Transportation Authority. It links reimbursement of money lost in the investment pool to successful litigation against investment brokers, auditors, attorneys and others the county blames for the crisis.

Allen, who was critical of efforts to divert tax money, introduced her own bill calling for a loan from the OCTA and postponing any pay-back of county funds lost in the investment pool.

But critics said her plan fell far short of repaying the staggering debt the county would still owe, and accused Allen of crafting the proposal to take credit for the county’s recovery as she tries to shore up public support in the face of a recall effort against her.

On Friday, members of Orange County delegation in Sacramento said they have abandoned any efforts to refine the county’s consensus plan and said they were prepared to present the legislation the county needs to make it work.

Earlier in the day, state Sen. William A. Craven (R-Oceanside) had called an impromptu news conference to blast Allen for jeopardizing the county’s recovery effort.

“She doesn’t know what she’s talking about,” Craven said. “Orange County people should pray.”

But by day’s end the delegation appeared to be moving closer on the issue of the recovery plan.

Bergeson said she believes Allen realized the ramifications of her rival bill.

“I think she has a lot to gain by supporting [the county plan], and I think she recognizes that,” Bergeson said.

Late Friday, Scott Johnson, special counsel for the conference committee, said the county’s delegation would seek to have Allen’s name added to the consensus bill. Her critics said that is what Allen wanted all along.

Times staff writer Greg Johnson contributed to this report.