Loss Leaves Big Question: What Next?

After months of insisting there were no true alternatives to Measure R, Orange County officials began talking late Tuesday about further harsh budget cuts and perhaps a push to revive a moribund proposal to tap future property tax increases as the financial fuel of a recovery.

With the keystone of the bankruptcy recovery plan rejected by voters, opposing camps in the fight over the proposed half-cent sales tax increase continued to differ sharply over what alternative strategy the county should now adopt to rebound from the nation’s worst municipal bankruptcy.

County Chief Executive Officer William J. Popejoy said any alternative is unsavory: “One of the things that’s been asked all along is, ‘Bill, what’s your Plan B?’ Plan B is prolonged bankruptcy. Plan B is Plan A less $1.3 billion. Plan B just doesn’t make it.”

But the measure’s foes, emboldened by a decisive victory, continued Tuesday evening to pound on familiar themes--that Orange County should streamline its government, market assets like John Wayne Airport and hijack funds from Measure M, the existing transportation sales tax.

“The argument that there is no Plan B is now out the window,” Supervisor Roger R. Stanton said. “We need to work together and find the solution.”

Meanwhile, jittery state officials, fearful that the Orange County debacle could ripple throughout California, considered taking another crack at installing a trustee to shepherd the county’s flagging recovery.

And on Wall Street, the talk was of anger, fear and retribution against a county that is on the verge of reneging on a billion-dollar IOU to the municipal bond market as well as about $500 million it still owes cities and school districts that invested in the fallen county investment portfolio.

Zane Mann, publisher of the California Municipal Bond Adviser, said that “Orange County is going to be a dirty word for years to come.”

Virtually every recovery alternative offered in the past six months could rise again from the dead because of the failure of Measure R. There are, however, a few that show more signs of life than others.

Most enduring of all is the push to tap Measure M.

Stanton, along with a group of state lawmakers from Orange County and other Measure R opponents, has promoted the idea, suggesting voters be given the option of diverting a quarter-cent for the next 10 years--about $750 million in total--to the bankruptcy recovery effort.

“The county supervisors and the head bureaucrats will now have to seriously consider some of the alternatives,” said Assemblyman Curt Pringle (R-Garden Grove). “Chief among them is Measure M. It should be put before the voters.”

Pringle and others also see the bankruptcy as a golden opportunity to restructure a county government they say grew bloated with bureaucracy.

Other proposals include selling John Wayne Airport to the Orange County Transportation Authority for upward of $350 million. Stanton and other Measure R foes have also pushed for sale of the county’s landfills, which they contend could yield another $360 million.

On the other side of the fence, Measure R backers were having a hard time buying the alternatives.

“I think it’s time for those who said our plan is no good to come to the table with ideas, not just ideas but real solutions,” said Sheriff Brad Gates, a Measure R booster.

Popejoy said he now expects further major cuts in the county budget and renewal of an effort to divert property taxes from cities and special districts to county coffers. The money would finance bonds to propel the county’s recovery.

But the property tax plan requires state legislation and could be a difficult sell because it would take money from the cities and special districts that many lawmakers believe were already victimized by the county’s investment debacle.

Since the Legislature approved a package of recovery measures in April, the bankruptcy has virtually disappeared from political radar screens in the Capitol. But the vote Tuesday will almost certainly fan interest anew in Sacramento about Orange County’s plight.

Among the possibilities is the revival of a push for a state-appointed trustee to shepherd Orange County’s recovery efforts. A measure by state Sen. Lucy Killea (I-San Diego) along those lines was vetoed last month by Gov. Pete Wilson, but he promised to reconsider the idea if events warranted it.

The defeat of Measure R just might be that event.

Popejoy said it was “probable” a state-appointed trustee would intervene. “That’s the trade-off when you can’t solve your own problems,” he said. “Someone comes in and solves them for you.”

If Orange County leaders thought Sacramento was a hall of mirrors when they made the rounds earlier this year, this time they’ll figure they’ve landed in the middle of a Franz Kafka novel.

The ascent of Assemblywoman Doris Allen (R-Cypress) to the speakership on the shoulders of a bloc of Democrats has left the Assembly even more deeply divided than before. Meanwhile, Wilson’s presidential aspirations could come into play as the county seeks assistance.

Allen is expected to seize on the bankruptcy as a way to blunt a recall drive championed by Republican opponents in Orange County. Indeed, she announced Tuesday that she will take up the Orange County bankruptcy today on the Assembly floor.

“Frankly, if I was Orange County, I’d want an Orange County Speaker very badly Wednesday morning,” said Assemblyman Richard Katz (D-Sylmar). “It’s going to take someone with the stature of a Speaker to help Orange County now.”

Wilson’s situation is even less certain.

The governor has been avoiding the Orange County debacle, fearful he could be shackled to it as he heads into the campaign season. But he also has many friends in the county, chief among them a primary campaign backer, Irvine Co. Chairman Donald L. Bren.

A disappointed Supervisor Marian Bergeson said Tuesday that she was preparing to meet today with Wilson Administration officials in Orange County.

In Washington, meanwhile, lawmakers are exploring a bill that would allow the county to sell John Wayne Airport. Another would bypass the Pentagon’s cumbersome base closing process so that the El Toro Marine Corps Air Station can be turned over quickly to the county and then be sold as an asset.

“There’s nobody in Orange County who thinks that the federal government is just going to pick up the price of the irresponsibility of an Orange County official,” said Rep. Dana Rohrabacher (R-Huntington Beach), a Measure R critic. “Otherwise, we will wind up picking up the price for irresponsible officials all across America.”

Times staff writers Debora Vrana, Gebe Martinez and Rene Lynch, and Times correspondent Martin Miller contributed to this report.