Arena Builders Ready to Offer Debt Guarantee

The developers of downtown’s new basketball and hockey arena have decided to sweeten their proposed deal with City Hall by guaranteeing repayment of all $70 million in bonded indebtedness, which Los Angeles will assume as its part in the project, knowledgeable sources said Thursday.

Their decision followed City Councilman Joel Wachs’ midday announcement that he will campaign for a ballot initiative requiring voter approval of any professional sports project involving public financing.

Top-level officials involved in the arena negotiations--speaking on the condition of anonymity--said the developers, who own the Los Angeles Kings, now are willing to rewrite their agreement with the city. The revised pact would require the Kings to pick up 100% of the city’s tab for repaying the bonds--about $6.8 million annually for 25 years--if a planned surcharge on tickets is ruled illegal under a recently passed statewide ballot proposition and city revenues from the arena fall short.

“It makes an A-plus deal an A-plus-plus deal,” said one high-ranking city official who asked not be identified.

“The present deal is a great asset,” Los Angeles Mayor Richard Riordan said when told of the developments. “But if the deal can be improved, I’m all for it.”

While the change would almost certainly quell any hesitation about the project inside City Hall, it would not exempt the arena from voter approval, if Wachs’ initiative qualifies for the ballot and is passed.

Wachs, who has been the project’s most outspoken critic, said Thursday he would welcome an ironclad guarantee of the city’s investment. But even if the existing agreement is revised, he said, he will press ahead with the initiative--partly as protection against the Kings’ owners changing their minds, and partly to lay the groundwork for handling future sports facilities proposals, such as the plan to build a professional football stadium inside the Los Angeles Memorial Coliseum.

“It’s not only about them, it’s about all future deals,” Wachs said. “The threat of an initiative will always produce a better deal. The voters drive a tougher deal. You can imagine how good the deal will be if it actually goes to the ballot.”

Wachs was quick to claim credit for pressuring the Kings into the improved deal, but sources involved in the negotiations said discussions on a guarantee for the $70-million civic investment have been led over the past week by City Council President John Ferraro.

“We’ve had city staff continually negotiating with the arena people,” Ferraro said in an interview, refusing to provide any details. “About a week ago, I made a suggestion to see if we could make it an even better deal for the city.”

Asked what the suggestion was, Ferraro declined to comment “until we see the deal.” Told of the Kings’ plan to guarantee repayment of the bonds, he said only: “Of course it’s a good thing.”

“None of us are going to talk about Joel’s press conference or any other issues until tomorrow,” Kings President Tim Leiwicke said late Thursday. “Councilman Ferraro has had a conversation, and will continue to have conversations with us.”

George Mihlsten, an attorney for the developers, and John Semcken, a spokesman for the development company set up by the Kings’ owners, did not return calls seeking comment.

Before Thursday’s developments, arena proponents had described the deal as “revenue neutral” for the city, with little--but not zero--risk to the public purse.

Kings owners Ed Roski and Philip Anschutz plan to spend $240 million to build a state-of-the-art arena for their team and the Los Angeles Lakers near the city’s struggling Convention Center. The city’s contribution would come in the form of $70 million in new bonds to help purchase surrounding land for parking lots and other future development.

Under the existing agreement, the Kings would impose a ticket surcharge that would be paid to the city to cover the debt. In case such a surcharge is deemed illegal under Proposition 218, which passed last November, the owners promised to support a special city tax on arena tickets to fill the gap. And if voters rejected such a tax, the team had promised to cough up 50% of the annual debt payment directly, leaving the city to pay the other half, either with tax revenue gleaned from the arena or with general fund money.

Wachs and several other council members had balked at such a prospect, saying they wanted a guarantee. According to well-informed sources close to the deal, the Kings are now willing to give that guarantee.

“The arena company would guarantee to cover the shortfalls of city revenue,” one highly placed source said.

Councilman Nate Holden, who has joined Wachs in voting against the arena project several times, said a deal with guaranteed repayment of the public investment “is much better” than the one previously on the table, but still not good enough.

Holden said he opposes the Kings’ plans to knock down the Convention Center’s North Hall, and a provision in the deal allowing arena owners access to signs on the Convention Center itself. He also said he remains worried about traffic mitigation.

“It’s better for the public to not to have to pay the money, but there are other glitches in there,” he said in an interview. “There’s a lot associated with this project that one must do that they’re not prepared to do. They won’t accept the fact that it’s a problem until after they start playing there.”

The change makes City Council approval of the project a virtual slam-dunk, but raises new questions about whether city negotiators and politicians drove a hard enough bargain to begin with.

“Whatever we are going to get is going to come because we’re doing what we’re doing,” Wachs said. “It doesn’t take a Ouija board to figure that out.”

At a noon news conference on the City Hall steps, Wachs said he will file papers Tuesday to place the initiative on the June ballot. He said he has lined up “an army” of 500 volunteers to collect the 61,000 signatures required to qualify a ballot measure, and will raise and spend $50,000 to $100,000 on the campaign.

“There are no questions in my mind that the voters would like the right to vote on it,” he said. “Then it will be up to the developers to give them a deal they can support.”

Councilman Mark Ridley-Thomas, a key arena backer and leader on the Coliseum project, called Wachs’ approach “myopic” and said it would have a “chilling effect” on future projects in the city.

He said elected officials, not voters, should have control of economic development projects in the city because they are more likely to see the wisdom of investing in depressed neighborhoods.

“What it does is put a very foul odor it the air,” Ridley-Thomas said of Wachs’ approach. “Trying to negotiate, trying to work out a development deal in the environment that he is suggesting is impractical, and I suspect it will substantially retard development and revitalization in the areas that need it.”

Times staff writers Bill Boyarsky, Rick Jaffe and Ted Rohrlich contributed to this story.