Veto of Safeguard for Olympic Center Loan Upsets Lawmakers

Returning after a short summer recess, lawmakers this week reacted with disbelief and anger over Gov. George Deukmejian’s decision to allow state money to be used for an unsecured $15-million loan to help build an Olympic Training Center in Chula Vista.

Legislators had inserted special language requiring collateral for the loan after The Times revealed that Deukmejian’s administration had agreed to make an unsecured loan to the San Diego National Sports Training Foundation toward construction of a state-of-the-art, $60 million training center along the western shore of Lower Otay Reservoir.

But Deukmejian wiped out the requirement for security when he vetoed the special provision July 31, the same day he also cut $753 million from social, mental health and education programs.

The companies and executives who have a stake in the center in aggregate have donated more than $272,000 to Deukmejian’s campaign coffers since 1985. The governor declined to answer questions about his decision.

The Department of Commerce official who negotiated the simple-interest loan told The Times that, although the founda tion had signed a contract, the arrangement was “very unusual” and could result in the state losing its money if the nonprofit foundation balked at repayment or went out of existence. The disclosure prompted legislators to insert special instructions in the state budget requiring the foundation to pay compound interest and put up “a letter of credit, collateral, or other negotiable form of security” to back the loan.

“I hope everything goes well, but that is a risky deal,” said Sen. John Seymour (R-Anaheim), one of the legislators who ordered the special budget language. “I certainly wouldn’t do it with my own money, and therefore I think it is wrong to do it with taxpayers’ money, without collateral.”

Added Assemblyman John Vasconcellos (D-Santa Clara), who was told of the veto this week while attending a legislators conference in Nashville: “It shows he (Deukmejian) has no concern for fiscal responsibility. He wants to take money from the poor and needy and give it to the rich and fancy.

“I thought we had done a fair thing that required what the state should have done in the first place,” said Vasconcellos, chairman of the powerful Assembly Ways and Means Committee and one of the acknowledged budget experts in the Capitol.

“I thought we had done a classy job that everyone thought was fair and smart,” Vasconcellos said about the special budget language requiring the collateral. “But George Deukmejian isn’t big on fair and smart.”

Deukmejian spokeswoman Susan Trowbridge said Wednesday that the governor would have no comment on his veto or in reaction to the criticisms before a press conference he has scheduled for today.

Despite Deukmejian’s veto of the collateral requirement, foundation officials said they will press ahead with plans to come up with some kind of security to help allay legislative fears about a default when the loan comes due in 20 years.

“We’re looking at what alternatives are available to meet the concerns that were stated,” David Nielsen, foundation executive vice president, said this week. “We recognize it was a concern during the (budget) discussions, and we’re pledged to work on it.”

The foundation broke ground this summer on an all-season training complex that is expected to have 1.5 million square feet of outdoor playing fields, as well as 250,000 square feet of dormitories, eating facilities, storage rooms and gymnasiums when completed by the end of 1992--too late to be of help for the Summer Games in Barcelona. Title to the complex will be turned over to the United States Olympic Committee in January 1993, Nielsen said.

Backers say the year-round training complex will feature state-of-the-art, high-speed photography equipment and computerized simulators to help athletes perfect their performances. They also say it will be a boon to tourism and economic development in the South Bay.

Several prominent individuals and companies in San Diego and Southern California either support or have a financial stake in the proposed complex.

Shopping center magnate Ernest Hahn, Atlas Hotel executive C. Terry Brown, Great American Development Co. executive Peter Hall and Copley Newspaper Editor-in-Chief Herbert G. Klein serve on the foundation board and executive committee.

Wells Fargo Bank has extended a $2-million line of credit to help the foundation pay its daily expenses, according to the latest public records filed with the Registry of Charitable Trusts in Sacramento. Newspaper publisher Helen Copley is the foundation’s biggest benefactor, donating at least $300,000 to help the project get started, the records show.

The Koll Co. has been hired as general contractor to oversee the construction of the complex. The grading contract has just been awarded to San Diego-based R. E. Hazard Contracting Co.

The complex will be built on 154 acres donated by EastLake Development Co., a partnership that includes the politically powerful J. G. Boswell Co. agribusiness firm based in Los Angeles. The land is next to the former Otay Ranch, recently purchased by the Baldwin company, a large Orange County development firm. The training center will bear the name of Arco, the Los Angeles-based oil company that donated $15 million to the foundation.

Campaign records show that these and other corporations involved in the training center have been financial supporters of Deukmejian as well. The firms and their executives have given Deukmejian at least $272,100 since 1985, according to a review of campaign statements and an analysis provided by LegiTech, a computer tracking firm.

In addition, Hahn has personally lobbied the governor about the project. He gave Deukmejian an aerial tour of the site in November, 1988, while flying the governor as his guest to a San Diego Chargers-San Francisco 49ers game.

The aerial tour was the first attempt to interest state officials in the training center proposal. Months later, the sports foundation came to Sacramento looking for money from the Legislature to help with its fund raising.

Their efforts were rewarded with a bill passed during the waning hours of the 1989 session mandating a $15-million state loan to the nonprofit group. The bill called for the loan to come out of the general fund, but to be repaid through the sale of special Olympic training center license plates, which cost $132 a set.

Legislative critics branded the financing scheme a “sham,” and the Department of Motor Vehicles estimated that it would take 142 years to sell enough plates to repay the $15 million.

Heeding such warnings, Deukmejian signed the bill but only after making an unusual demand that the foundation sign a contract to pay off the loan if the license plate sales went bust.

Yet the written agreement with the foundation, a contract consummated in June, failed to provide financial safeguards. Jack Stewart, Department of Commerce chief deputy director who negotiated the contract on behalf of the state, disclosed there were no provisions for collateral and that it was “a possibility” that the state could be out the money if the foundation folded without making a repayment.

The admission prompted loud protests from legislators, who were locked at the time in a bitter budget battle over an expected $3.6-billion shortfall of revenues. They inserted the special budget language requiring security only to find this week upon their return to work after a brief recess that Deukmejian had vetoed the collateral stipulation. The governor wrote in his veto message that the legislative mandate for collateral was “unnecessary.”

“I can’t say what went on in the governor’s head, but I find there’s a long distance between his veto message and reality,” Seymour said. “No doubt about it, it’s a bad deal.”

A spokesman for the Department of Motor Vehicles said Wednesday that Californians have purchased only 133 sets of the new Olympic Training Center plates, yielding $17,822. He blamed the sluggish sales on the fact that the tags have yet to be minted and that an ambitious sales promotion, sponsored by the foundation, has yet to begin.