Anaheim Faces a $9-Million Cost Overrun

Higher than expected construction bids on the proposed Anaheim indoor sports arena have created a potential $9-million cost overrun and may force Anaheim officials to help make up the difference or look for another company to build and operate the facility, city officials said Tuesday.

What is described as a “critical” meeting will be held Thursday at City Hall among representatives of the facility’s developer, Ogden Corp., city officials and consultants who claim the developer’s estimates are too high, Assistant City Manager James Ruth said Tuesday.

Although construction costs for the 20,000-seat arena originally were estimated at $85 million, bids came in at $94 million, Ruth said. Unless the increased costs can be cut or shared by the developer or the booking agent--the Nederlander Group--Anaheim may be forced to find another developer, Ruth said.

“I don’t think (the arena) is in danger,” Ruth said. “It’s a matter of if you don’t work it out with (the original developer), work it out with someone else. If we decide we can build it for less, then we probably will proceed” with Ogden.

Ogden and Nederlander officials could not be reached for comment Monday and Tuesday, and the company’s negotiating agent, Los Angeles attorney Neil Papiano, did not return calls from a reporter.

Ruth said the city has no alternative developer in mind, although “we have had people who have expressed strong interests in the project.”

City Manager Bob Simpson said Tuesday he believes the city will continue with Ogden.

“That’s just what the meeting is all about,” Simpson said. However, he said, he does not believe the City Council will be willing to pick up additional costs for the arena.

Anaheim already has issued $18.7 million in bonds and raised the local hotel-motel bed tax to pay them off in order to finance acquisition of land for the arena. A tentative financial agreement with Ogden also calls for the city to subsidize up to $1.5 million a year in operating costs, which would be repaid from arena profits the following year.

Ruth said Ogden’s original construction estimates were based on comparable arenas built out of state, where labor is cheaper. However, the city has been advised by two “outside consultants” that the arena can still be built for its original $85-million price tag, he said.

“We are still hopeful of getting the arena program together,” Ruth said. “But we don’t want to diminish the quality of the arena” by cutting back on amenities.