Orange must approve having state inmates at Theo Lacy for an expansion to proceed.

Orange County has received preliminary approval from the state for a $100-million grant for the long-stalled expansion of theJames A. Musick jail, but the money comes with conditions that could doom the deal.

In its proposal to the state two months ago, Orange County said it would set aside nearly 300 of its 3,100 beds at Theo Lacy Jail as a "reentry facility" to house state prison inmates completing the final months of their sentences, as part of a plan to help prisoners prepare for their return to society.

In exchange, the $100 million would be used to start construction on Musick. County officials have been seeking to expand Musick for more than a decade, recently adopting a plan to more than triple the number of beds to 4,400 from 1,256. But the effort has been tied up in court challenges and funding setbacks.

Last week, the state Corrections Standards Authority voted to approve grants totaling $750 million for jail construction in 12 counties, including Orange County. But in announcing preliminary approval, the California Department of Corrections and Rehabilitation said counties would have to get approval from the cities in which the jails are located.

That could prove tough for Orange County. The city of Orange, where Theo Lacy is located, is vehemently opposed to the proposal and has passed a resolution threatening to sue if the jail plan goes forward without the city's input. The city says a 1995 legal settlement with the county gives it a say in any significant changes in the jail's operation.

Theo Lacy sits across the street from the Block at Orange, a popular outdoor mall with restaurants, shops and movie theaters, and Orange is particularly sensitive about inmates being released out the front door of the jail. Maximum-security prisoners are bused to Men's Central Jail in Santa Ana before they are released, but lower-security inmates are released directly from Theo Lacy.

"It's too early to say if there's any way it could be acceptable," said Orange City Councilman Denis Bilodeau. "They need our complete buy-off on the program. So now we have a seat at the table and we can find out if they can address our concerns."

Through a spokesman, acting Sheriff Jack Anderson said the department would "reach out to explore our options with the city of Orange."

Complicating matters further, the grants come with a condition that the state must own the reentry facilities so that the property could be pledged as collateral for the bonds that will finance the construction.

County Supervisor Bill Campbell, whose district includes Theo Lacy and Musick, said Monday that he would not support any plan that gave the state ownership interest in county jails. He said he planned to talk with Orange and state officials to see if a compromise could be reached.

"We are hopeful the state will change its mind and see the opportunity to have reentry as directed by our own law enforcement personnel and still be supportive of the $100-million grant," he said. If California owned the jail, the facility "would truly be bringing a state prison into Orange County, and we're not a county that can support that," he said.

State officials plan to further evaluate the counties' proposals before making a final decision Sept. 18. If the state decides to proceed with the proposal at Theo Lacy without taking ownership of it, approval from the state Public Works Board would be needed. If the state decides the site is unsuitable, Orange County would be able to offer another location as an alternative.

"They haven't made a final determination as to whether the site is a viable site," said Seth Unger, a spokesman for the state corrections department. "It's not clear whether or not they would approve of taking a site" without it being turned over to the state.

christian.berthelsen@latimes.com