Council Gives Initial OK to DreamWorks Studio Deal : Business: Lawmakers approve the project in principle, 13-1. But potential roadblocks still loom.

Affirming its commitment to bringing the ambitious, star-powered DreamWorks SKG studio complex to a stretch of vacant land near Marina del Rey, the Los Angeles City Council on Tuesday approved the project in principle amid hopes that it will lead to a rejuvenation of the city.

The 13-1 vote, taken after nearly three hours of mostly celebratory speeches, sets in motion a complex agreement--including tax incentives worth up to $85 million--required to make DreamWorks a reality. But the hearing that preceded the vote hinted at some of the controversies and potential roadblocks that await the project as it continues through the lengthy approval process.

The council acted one day before city officials and DreamWorks founders Steven Spielberg, Jeffrey Katzenberg and David Geffen were scheduled to publicly inaugurate the project at a splashy news conference at Playa Vista, the massive, mixed-used development project taking shape on marshy land not far from the beach near Los Angeles International Airport.

The DreamWorks project is envisioned as the anchor of a vast new mini-city of homes, shops and businesses linked with the most technologically advanced communications network in the world.

DreamWorks sources told The Times that today’s announcements will include firm leasing commitments from four major tenants--IBM, computer graphics firm Silicon Graphics, telecommunications giant GTE and special effects house Digital Domain--totaling about 600,000 square feet.

Added to the estimated 350,000 square feet DreamWorks will use, the committed space comes to nearly 1 million square feet, the “critical mass” DreamWorks principals believe they need to get the project off the ground.

In addition, DreamWorks is firming up commitments from USC and UCLA for offices. USC wants to set up a facility related to multimedia research, with UCLA planning ambitious projects that include an elementary school similar to the Seeds University Elementary School operating on its Westwood campus. UCLA also wants to use the project’s touted fiber optics network for a medical care study.

Another 600,000 square feet of the 3.2-million-square-foot complex will be devoted to sound stages, television studios and other facilities historically found on a studio lot, including the world’s largest sound stage.

All told, DreamWorks sources say, the commitments from DreamWorks and the other tenants to date should account for about 4,000 jobs. City officials estimate that the project will also generate about 8,000 construction jobs over the years it is being built.

The tenants committing to the site, as well as some that are prospective tenants, all have close ties to DreamWorks and its partners. GTE will wire the Playa Vista development with fiber optics technology.

DreamWorks sources are betting that the studio’s Westside location and campus-like setting for filmmakers will attract producers, directors and other talent.

“Do you think they would rather be in Burbank, or on a lake near their homes?” asked one DreamWorks official. Another said DreamWorks expects the locale to become a “chic Hollywood address.”

The news conference, whose participants are to include Gov. Pete Wilson as well as Mayor Richard Riordan and Councilwoman Ruth Galanter, is expected to continue the celebratory mood that accompanied much of Tuesday’s council session on the project.

Katzenberg, supported by several prominent business leaders, described Spielberg’s “dream” of “building a studio for the 21st century” and promised that the project would cement Los Angeles as the media capital of the world and would “forever change” how the rest of the business world perceives the city.

Riordan, making a relatively rare appearance in council chambers, hailed the project as “a landmark achievement” and a turning point for a city that has been considered hostile to business interests at great cost to its own sagging economy.

He emphasized that the tax breaks and other incentives offered to the entertainment moguls will be extended to other firms that bring well-paying jobs, high-quality development and new tax revenues to the city.

Galanter called the project “one of the most innovative things this council has tackled” in the eight years she has represented the area. Environmental groups went to court repeatedly to challenge previous proposals for the Playa Vista site, which includes threatened wetlands areas.

Several council members said the current proposal is far better than any of its predecessors in that it will include restoration of part of the wetlands and have a less substantial impact on traffic, air pollution and other environmental issues.

But there were signs of potential trouble.

Councilman Nate Holden, who cast the only “no” vote, attacked the proposal for having no guarantees that blacks and other minorities from the poorer sections of town would have a fair shot at the jobs and other perks that DreamWorks is expected to generate.

When Galanter reminded Holden, one of three blacks on the 15-member council, that the city will have plenty of opportunity to work out these and other details of the project in the coming weeks, Holden shot back.

“You have ‘dissed’ my community . . . and for that reason I’m going to ‘dis’ you,” Holden fumed. “If you don’t make a commitment early on, there will never be one.”

Several opponents passionately raised issues that have come up before, primarily environmental concerns and questions about the tax breaks aimed at making the site more attractive to DreamWorks. One man read a list of campaign contributions made to several council members over the years by Maguire Thomas Partners, the developer, which has been involved in many other projects in the city, including the restoration of the Central Library downtown.

Outside City Hall, others expressed worries about the project. Several neighboring cities, including Santa Monica, Beverly Hills, Culver City and West Hollywood, have raised concerns about increased traffic and other problems that might affect their residents and business climates.

State Sen. Tom Hayden (D-Santa Monica) also has suggested that city officials may be moving too quickly.

Saying he believes the studio proposal could be an improvement from a previously suggested project that he had opposed, Hayden nonetheless called for “a very strong cautionary note and very thorough hearings.”

“In the best scenario, this could be a considerable improvement and in the worst scenario it could reinforce the problems we already have in Los Angeles,” Hayden said.

In a related action Tuesday, the council also authorized the sale of surplus Department of Water and Power property in Glendale where DreamWorks plans to build its animation division. The unanimous vote came after considerable discussion of whether the $5.1-million sale price was high enough. City officials said it was, given the considerable expense the firm would incur in removing old water wells and detoxifying the soil.

Times staff writers Nancy Rivera Brooks and James Rainey contributed to this report.