Birth of Anaheim Arena Defies Naysayers’ Logic : Facility: A franchise deal with Disney’s Mighty Ducks hockey team made gamble pay.

The Anaheim Arena was born at a power lunch six years ago at Le Meridien Hotel in Newport Beach.

A well-known entertainment attorney picked the names of two Anaheim city councilmen blindly from a telephone directory and invited them out. Then, over veal Parmesan, he proceeded to sell them on his idea of building a world-class sports arena here, despite the financial and political risks.

“I didn’t know these men at all,” said attorney Neil Papiano, recalling the lunch on Sept. 17, 1987. “I just knew Orange County was ripe for an arena and Anaheim was the most forward-thinking sports town in the West.”

Councilmen Fred Hunter and William D. Ehrle, who met with Papiano, embraced the idea and became ardent supporters in moving it from meal-time chatter to a reality.

“What we talked about that day is basically the same deal we ended up with,” Papiano said.

This week’s grand opening of the impressive $121-million glass-and-marble facility, surrounded by palm trees, is testimony to Anaheim’s reputation as a “can do” city, civic leaders boast.

While other cities simply meet, Anaheim meets and moves.

“That’s our spirit,” Hunter said. “If you say we can’t, we’ll show you we can.”

But such an aggressive attitude can be costly, and the evolution from idea to sports citadel was not easy.

There have been a flurry of lawsuits to stop it and cutthroat battles with Santa Ana and other Southland cities over who would build the first arena.

Along the way, political careers were soiled; Ehrle is convinced the arena gamble largely cost him reelection to his council seat last fall.

Through it all, residents have harshly criticized city leaders, saying they bet millions of taxpayers’ dollars on a boondoggle that would be lucky to attract tractor pulls and ice shows. Naysayers predicted disaster because Anaheim lacked a major league hockey or basketball franchise to be the arena’s financial engine, and pointed to the virtually empty $138-million Suncoast Dome stadium in St. Petersburg, Fla.

The Suncoast Dome has been operating without a major sports tenant for three years. The public has taken to calling it the “Dumbdome and the biggest white elephant in the world,” said its general manager, Jerry Oliver. “The last three years haven’t been much fun.”

It was not until last March, when the Walt Disney Co. signed an agreement to bring its new Mighty Ducks franchise to the Anaheim Arena, that public sentiment shifted. City leaders suddenly seemed like skilled municipal operators rather than the town goats.

“Whenever you build a sports facility (without a tenant) it’s iffy at best,” Oliver said. “Anaheim is fortunate its gamble paid off. Ours hasn’t been as successful.”

That’s a Catch-22 for cities trying to attract a professional franchise. Most cities want a commitment from a team before building an arena, and most teams will not commit unless there is an arena to call home.

In Anaheim, there are still those who question the gamble, saying the arena will not be a success without a pro basketball franchise.

“Hockey is only half the pie,” said Councilman Irv Pickler, the only consistent “no” vote on arena issues.

“I still think that we put too much on the line. . . . I’m glad things worked out the way they did, but there’s still a risk,” added Pickler, who noted that the city must pay its partners in the project up to $7.5 million if no professional basketball team is found in the next eight years.

Said Hunter, the council’s most avid proponent of the project: “Wait and see, we’ll get a basketball team in there too. Let the naysayers talk, they’ve been doing it for years.”

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Building an indoor sports arena in Orange County was first seriously talked about in the mid-1980s, when private developers approached the cities of Santa Ana and Anaheim.

The area seemed ripe. More than 5 million people lived within an hour’s drive of those cities. Freeways crisscross the county, major airports are close and many residents are sports-minded and have a lot of disposable income.

“It was too good to pass up,” said Papiano, the Los Angeles lawyer whose clients include actress Elizabeth Taylor and former jockey Willie Shoemaker.

When Papiano began thinking what city would be the best, “Anaheim was the first to pop into my mind. . . . They have the (California) Angels, the (Los Angeles) Rams. It’s a sports-minded city.”

But even before Papiano had gathered investors for the project, another set of entrepreneurs--called the Westdome group--had wooed the city of Santa Ana with a similar arena proposal. When Anaheim officials agreed to work with Papiano, it sparked a fierce competition between the two cities to build the first arena. Additionally, there were arena discussions in San Diego and Burbank going on as well.

For Anaheim and Santa Ana, the two concerns were where to build and how to finance.

By 1988, Anaheim officials were surveying the city by helicopter looking for sites. They settled on the seven-acre parcel at Douglass Road and Katella Avenue as the perfect spot.

That land, however, was the site of a German social group, called the Phoenix Club. Like most things about the arena endeavor, the city struggled to get the land.

Club members thought the city purchase offer was too low and lengthy negotiations went nowhere.

Frustrated, Anaheim City Manager James D. Ruth met alone with the club’s president and board members in July, 1989. “We sat in the Phoenix Club beer garden and worked the whole thing out in just a few hours,” Ruth said. In a deal that cost the city about $5 million, it bought the parcel and built the Phoenix Club a new lodge elsewhere.

There were other problems, including a series of lawsuits, among them one by the Los Angeles Rams, who were concerned about parking conflicts, and a mobile home park, whose residents did not want the arena for a neighbor.

The legal battles resolved, Anaheim broke ground in November, 1990.

While Anaheim was pushing ahead and gambling, Santa Ana’s effort was going nowhere. City officials had trouble deciding on a site and their arena partners were balking.

“It was a difference of philosophies,” said Tony Guanci, who headed the Westdome group. “We wanted a commitment from a team before we risked the money to build.”

For Anaheim, getting a sports franchise was a problem to be addressed later.

As far as financing, Papiano and the city reached an agreement early. Papiano had pulled together a powerful group of investors--the New York-based firms Ogden Allied Services and the Nederlander Organization, both with solid experience nationwide in sports, entertainment, food service and arena construction.

That group agreed to build the arena, pay for it and then deed it to Anaheim in return for a 30-year lease. The city provided the land. The revenues would be shared by the companies, the city and sports tenant.

But the part that worried taxpayers the most was a stipulation that obligated the city to pay its partners $2.5 million annually for eight years if neither a professional hockey nor basketball team became tenants. That amount was reduced by $1 million annually, once the first professional team moved in.

To Hunter, who continued to spearhead the project as mayor, and Councilman Ehrle, it seemed a pittance, compared to the potential economic benefits and having its partners pay the $121-million bill.

Nevertheless, the city’s financial obligation became political fodder that helped defeat Hunter and Ehrle in last November’s city elections.

“People could not see the total picture,” said Ehrle, who lost his council seat while Hunter was defeated as mayor. “Politically, it killed us because they didn’t think we would get a (sports) team.”

Ironically, it was just a month later that Disney shocked the sporting world and others, announcing it had acquired an expansion hockey franchise and wanted to put it in the Anaheim Arena.

Overnight the arena became the toast of the town. The impression of Anaheim was also changed. It joined an elite group of cities that could boast major league baseball, football and hockey teams.

Although Disney announced its intentions in December, it took months of negotiations to work out a deal that would satisfy the city, its partners and Disney. Under that agreement, Ogden--which financially backed the project--was allowed to add about $18 million in hockey franchise fees and facility improvement to the existing project cost of $103 million, making the project a $121-million package.

As part of the agreement, the city was absolved of financial liability for the first three years.

For the city, the deal looks like another golden gamble. City economists say the arena, with the hockey franchise, will annually generate as much as $90 million in total spending countywide.

“Hey, you’ve got to give them credit,” Guanci of the now-defunct Westdome project said. “They rolled the dice and won. I think it’s fantastic.”

ANAHEIM ARENA

A user’s guide to the new Anaheim Arena. Section Y

* “Unbelievable building” is the result of attention to comfort, detail. Y1

* Graphic artist David Puckett looks at arena from all angles. Y4-5

* Places to go for food and drink, before arena events or after. Y7

Anaheim Arena Debuts

* June 17: Ribbon-cutting ceremony, dedication and media tour.

* June 18: Public open house during the day. VIP reception at night.