Council Takes Key Step in Supporting Downtown Arena

In a move politicians hope will help Los Angeles “fulfill its destiny” as a business-friendly sports and entertainment mecca, a divided City Council on Friday gave the nod to a plan to build a $200-million downtown sports arena.

“The message out there to the world is, ‘Hey, we’re open for business.’ It’s way beyond sports,” said Steven Soboroff, a senior advisor to Mayor Richard Riordan and a proponent of the plan by the owners of the Los Angeles Kings to put a 20,000-seat facility next to the Convention Center.

“The important part of all this is not the arena, it’s what it signifies: The system can work,” Soboroff said. “It’s a little aggravation, it’s a little tsuris [Yiddish for ‘troubles’], but it can work.”

Though not a binding agreement, the council’s 11-3 vote outlines the framework for plans to use $70 million in public money to help acquire land and finance the arena, where the Kings hockey team and the Los Angeles Lakers basketball team would play about 90 games a year. The public investment would largely be through bonds the city would pay off over 25 years from a surcharge on arena tickets, parking revenues and taxes collected from the venue.

That long-term commitment, which could leave the city with mounting debt if the arena fails, soured one key lawmaker on the deal: Councilwoman Rita Walters, who represents the underdeveloped neighborhood around the site. She surprised observers by joining two longtime critics in casting ballots against the proposal Friday.

“The risk to the city may be very small indeed, but a risk there is,” Walters said. “I wanted this arena. I have been pushing for it, encouraging people to support it because of what I thought it would do for downtown. . . . Council members, I think this is very thin ice that we’re about to tread on.”

Not too thin to skate on for the Kings--or a city trying to make a comeback in the high-stakes game of professional sports, her colleagues countered.

“Few things worth getting are without risk,” Councilman Mike Feuer said. “At the core of our jobs as elected officials is determining when risks are worth taking and when it’s time to say having a vision of what could be is what ought to drive us. I choose to have a vision that sees Los Angeles as all that it can be.”

Councilman Mike Hernandez suggested that the arena could play host to a gala New Year’s Eve party, to end the era of Angelenos watching the ball drop on the other coast. Others said the city lacks facilities to compete for concert revenue with Inglewood’s Forum, Anaheim’s Pond and Universal Amphitheater, which is in unincorporated county area.

“We are a very fortunate city that we have the space and the opportunity to locate a facility like this at that critical area,” said Marvin Braude, the council’s senior member. “If we are to fulfill our destiny as a great city, as a prosperous city, we have to have that kind of a facility.”

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Arena supporters see it as a catalyst for economic development in the stagnant business district known as South Park, and an anchor for a sports and entertainment corridor that might eventually stretch from a renovated Coliseum--complete with a National Football League team--north to Dodger Stadium.

Business leaders and politicians also hope that it will provide a boost for the sagging Convention Center, which the city has had to subsidize to the tune of about $20 million a year, and finally lead to construction of a large hotel nearby so the center can accommodate larger, high-profile meetings.

“This arena proposal is about jobs, it’s about customers, it’s about visitors, it’s about more jobs,” said Karen Hathaway of the Central City Assn., which represents downtown businesses.

Even former Mayor Tom Bradley offered his praise in a letter to council President John Ferraro. Bradley termed the arena “a critical element in the pathway to a cohesive city with a strong economy, job growth and a decent quality of life for all its residents.”

But a pair of residents complained that environmental review of the project has been “woefully inadequate” and said people from the neighborhood--including those who live in 188 residences that would be razed--have been left out of the discussion.

“We’re not speaking in terms of numbers or dead, we’re speaking in terms of families and people who are going to be displaced from their homes and work,” said Richard Garay of the Pico-Union area.

Though Friday’s vote approving a 150-page memorandum of understanding was a crucial step that clears the path for construction of the arena to begin by summer’s end, it is not a binding agreement. Rather, it offers a blueprint for how such a transaction will be structured if the councildecides to give final approval.

Next, developers must submit plans to mitigate any environmental impacts and apply for a conditional use permit, then submit detailed financial documents and a specific lease agreement. Officials expect the matter to return to the council for an ultimate yea or nay in August or September.

“There are a lot of holes that are yet to be filled. There are a lot of answers we need,” admitted Councilman Hal Bernson, who supported the deal. “There is a risk in everything we do in business--and in government. . . . With caution, we need to move forward.”

Kings owners Philip Anschutz, a Colorado billionaire, and developer Ed Roski plan to spend more than $200 million to replace the Convention Center’s North Hall with a state-of-the-art arena, which they hope to open in time for the 1999 season. In addition to basketball and hockey games, the arena could host concerts, religious revivals and other events, perhaps as many as 200 times a year.

Roski and Anschutz have also recently launched a bid to return pro football to the historic Coliseum, and a spokesman said Friday’s vote would propel an expanding partnership with the city.

“It’s a big day,” said John Semcken of Majestic Realty, the developer. “There is strong support in the city to make this the entertainment capital . . . the sports center of the nation.”

Semcken denied rumors, reported Friday by The Times, that Roski and Anschutz are considering selling the Kings--and their option to buy 30% of the Lakers--to media mogul Rupert Murdoch, who is reportedly in the process of buying the Dodgers and has expressed interest in owning an NFL team in Los Angeles.

“There is going to be no change in owners” of the Kings, Semcken said. “Mr. Anschutz and Mr. Roski are committed to sports in Los Angeles, and to a growing sports empire, not a shrinking one.”

Semcken said, however, that Majestic has met with several major entertainment firms in hopes of spurring development around the arena, and would not comment on whether Murdoch’s Fox network was among them.

Team ownership was one of several concerns raised by wary lawmakers during the 90-minute discussion of the arena Friday. What if someone buys the Lakers and moves them out of town? What if the Kings go bankrupt (again)? What if Anschutz and Roski sell the arena, or end up defaulting on the bank loans they used to build it?

City officials could offer no guarantees, but told lawmakers that they were confident that revenues from the arena and surrounding parking lots would exceed projections. They repeatedly described the deal as “revenue neutral,” and said it would probably turn a profit after a few years. “The risk is prudent,” said city Chief Legislative Analyst Ron Deaton.

The crucial question is how the city would come up with $6.8 million a year to pay off its debt.

The developers plan to impose a fee on every arena ticket to raise $3.5 million for the city; in addition, the city expects to collect about $1.7 million a year from its parking lots at the Convention Center, and $1.3 million in business, property and sales taxes associated with the facility.

But the ticket fee could be challenged in court, forcing the city to ask voters to approve a special tax instead. If that fails, the developers have agreed to pay the city $1.75 million directly each year.

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If the arena is successful, city staffers predict an $11.4-million profit--$2.4 million in today’s dollars--over the next 25 years. But without the ticket fee the city would lose $32 million--$15.7 million adjusted for inflation--during that period, they said.

And what if the teams fail to draw large crowds to their games?

“You know darn well you’ve got nothing but flaws in this agreement,” Councilman Nate Holden said. “We’re not dumb. Certainly, the taxpayers are not dumb. We’ll be in debt from the very beginning. The numbers you are anticipating just aren’t going to happen.”

Lawmakers brushed off Holden’s strong rhetoric, but Walters’ complaints got far more attention.

To accommodate her concerns, the council approved her motion asking city staff to study possibly buying insurance for the arena bonds, which would probably cost about $1 million. But even that didn’t win her over.

Councilman Mark Ridley-Thomas, who is spearheading the drive to revive the Coliseum, had harsh words for his colleague.

“The ‘no’ votes were cautious to a fault at best, and completely myopic at worst,” he said after the meeting.

* PRIDE OF L.A.

Columnist Bill Plaschke says proposed sports arena in downtown is a risk worth taking. C1