Rising Interest Rates May Sack Raiders Stadium

For the first time since the Los Angeles Raiders announced last August plans to build a new stadium in Irwindale, City Council members are openly discussing the possibility that the deal may collapse.

Unless the city can find affordable financing--a prospect that has grown dimmer with rising interest rates on bonds, the officials see little community support for a final deal now being negotiated between the city and the professional football team.

“We can’t commit the city of Irwindale unless it’s something we can afford,” Mayor Pat Miranda said in an interview this week. “If you can’t afford a bike, why go in debt for a Cadillac.”

“I’m very concerned,” said Councilman Joseph Breceda, a longtime supporter of the project. “I started to become concerned three months ago when the environmental impact report was delayed and the interest rates started to go up. . . . We may be stuck with something we can’t do.”

Interest Rates Rising

In the nine months since an initial agreement was reached between the tiny San Gabriel Valley city and football’s winningest franchise, interest rates on the bonds needed to finance the project have gone up between 2 and 3 percentage points, according to industry experts.

Irwindale negotiators now say they would need between $14 million and $18 million a year in revenues to repay the more than $115 million in bonds needed to build the stadium. But the most optimistic of city-financed studies has Irwindale receiving only $12 million of a projected $24 million in yearly stadium revenues. The other half, or $12 million, would go to the Raiders. That translates into a yearly loss for the city of between $2 million and $6 million.

The likelihood that the city’s five-member council would approve such a deal has lessened in recent weeks with the defeat of two council members who were strong supporters of a Raiders stadium. They have been replaced by newcomers thought to be less enthusiastic about the project.

Irwindale consultants negotiating the final agreement with the Raiders remain confident that a deal favorable to the city will be consummated. But they concede that they must first convince Raiders owner Al Davis to give the city a bigger share of the revenues, something he has been reluctant to do. “It’s going to happen,” said Fred Lyte, redevelopment consultant.

John Herrera, a senior Raiders executive, refused to comment on the negotiations or the prospects of the deal collapsing. “It’s just not the right time to talk about that,” he said.

Irwindale negotiators said the search for affordable financing has led them to consider such unlikely possibilities as a $150-million loan at a 3% to 4% interest rate from foreign sources. One source said the deal would involve “Vatican or Arab money.”

The loan idea was suggested by Richard Diaz, whose family is the most powerful of four families that have long controlled the city of 1,040 residents.

Officials are said to be taking the offer seriously because the Diaz family controls four votes on the council. Diaz did not return repeated telephone messages. In addition, sources said, a certain desperation has set in. If the deal falls through, the city stands to lose $10 million in front money given to Davis. And the city already has spent more than $1 million in legal and consulting fees in its effort to bring the Raiders to Irwindale.

“There is a proposal that was presented to the city outlining very cheap money,” said Kenneth Adams, a Washington attorney representing Irwindale. “Am I skeptical? Yes, I am. But am I prepared to tell them that the city is unwilling to listen? Of course not.

“If they can make it work and deliver, then we are willing to listen. The notion that this suggests something either improper or desperate is absurd.”

Irwindale--a maverick city that found a pot of gold in the rainbow of industrial redevelopment--has a history of turning doubters into believers. When the city pulled off its biggest coup by landing the Raiders, local residents were besieged by reporters from throughout the country asking to see the town’s 17 gravel pits, the deepest of which would one day support a 62,000-seat stadium. A skit was even performed on the Johnny Carson show.

But a slew of legal and legislative challenges followed, and although the city has succeeded in defeating or slowing several of them, financing has remained an imposing hurdle.

The original agreement between the city and the Raiders outlined an ambitious financing plan in which the city would loan the team $115 million to build a stadium, team headquarters, practice field and a Raiders Hall of Fame. Plans call for building the new stadium on a site located northeast of the intersection of the 605 and 210 freeways. The goal has been to complete it in time for the 1990-91 season.

But a court order last September prohibited the city from issuing bonds until an environmental impact report was completed. And because the city wanted to use 80 acres of land controlled by the U.S Corps of Engineers for stadium parking, the environmental report process has had to be coordinated with the federal government. The report, originally due in March, is not expected to be completed until late this summer.

Meanwhile, interest rates on the financing sought by Irwindale climbed from around 9% to more than 11%. City officials said the shortfall of $2 million to $6 million could grow even more if interest rates continue to rise before the completion of the environmental impact report.

“If the revenue stream is not enough to meet the obligation, I don’t think the people will support it,” said Miranda, whose hand has been strengthened by the arrival of Councilmen Richard Chico and Salvador Hernandez. “I don’t think our people will want to go broke for anybody.”

Irwindale’s negotiators said they have come up with several different plans to increase the revenue flow, such as innovations in club seating and keeping stadium restaurants open year-round. In addition, if Irwindale can land a major college football team to play in the stadium, revenue would increase sharply.

But for now, city negotiators are trying to get the Raiders to relinquish some of its projected profits, a difficult task given Davis’ reputation as a hard bargainer.

The Raiders are believed to be maintaining contacts with representatives of Hollywood Park in Inglewood and Sacramento, which have both tried in the past to lure the Raiders.

Said Herrera of the Raiders: “It wouldn’t be proper for me to get into the financial aspects of this deal. It would be like talking to the press about a player trade before you made the trade.”

Times staff writer Kenneth Reich contributed to this story.