Arizona Gov. Bruce Babbitt today vetoed a controversial bill that would have created an all-Indian county.

Babbitt, a Democrat, branded the measure "racial in nature." Republican leaders in the legislature predicted they have enough votes to override the governor's veto, but were undecided whether to do so. The legislature, which sent the bill to the governor last Monday, is scheduled to end its 1982 session Friday.

In his veto message, Babbitt said the bill was "unworthy of a state that has always prided itself on its fair play and commitment to human rights."

White residents in the northeast part of Arizona, charging taxation without representation, have been demanding some form of relief for the last 10 years. Navajos control the Apache County Board, 2 to 1, but reservation Indians are exempt from paying property taxes levied by the board.

Whites, who comprise about 25 percent of the county's population, contend that they have been forced to pick up the tab for county projects, many of which have benefited the 14,000-square-mile Navajo reservation.

Added to charges of racism and segregation today was one of religious bigotry. State Sen. Alfredo Gutierrez, a Phoenix Democrat, contended in a fiery floor speech that the purpose of the Indian-county bill "is to keep the Indians in their place--that is, in a place that is somewhere other than where Mormon, southern Apache County folk are. They are to be segregated by color of skin, language and religion."

Most of the white residents in the area are members of the Mormon church.

Gutierrez's remarks brought State Sen. Stan Turley of Mesa up from his chair. Turley, a Mormon and a Republican, said the speech was "unfair and uncalled for," adding that the Mormon church has done more for the Indians than any other organization.

That prompted Gutierrez to respond, "with friends like that, you sure don't need enemies." Later, Gutierrez offered an apology, saying he had not intended to offend the Mormon church.

At a meeting with Babbitt earlier this week, Ambrose Shepherd, a Navajo and chairman of the Apache County Board, offered not to float any more bonds or levy any new taxes for one year without unanimous approval of the board.

Peter MacDonald, Navajo tribal chairman, said Shepherd's proposal should remove the need for legislation creating the Indian county.

"If the fear is that the Indians will go hog wild on expenditures, then this moratorium on taxes should take care of that," MacDonald said. "If they still insist the bill is needed, then it must be interpreted as racist."

Senate president Leo Corbet, a Phoenix Republican, said a bill was being drafted to create a study commission and declare a moratorium on tax increases in Apache County. That measure would go into effect only if the governor's veto stands or if the Indian-county bill is struck down by the courts or the U.S. Justice Department.

"We can study this issue to death," Corbet said.