Arena Developers Adopt a Strategy of Disclosure
Hoping to avoid the delays and uncertainty of a proposal that would require them to submit their project to voters, developers of a new sports arena downtown adopted a posture of nearly full disclosure Wednesday, one intended to convince the public that they can be trusted and that, therefore, a vote is unnecessary.
The developers released redacted copies of previously private agreements between themselves and their chief tenants, the Lakers and Kings, and reiterated their pledge to guarantee that none of the $70 million in municipal securities they are counting on to help finance their $300-million project would be at risk.
Removed from the contracts was the dollar amount that the Kings and Lakers would receive from the arena company, which the developers said was properly private because it does not affect city taxpayers.
“There are not taxpayer dollars at risk in this transaction any longer,” said arena official John Semcken.
But the moves were not enough to satisfy the developers’ most important audience and most ardent critic, City Councilman Joel Wachs, who said he will still go ahead with plans to sponsor an initiative that would require that this and all future sports stadium developments that rely on public funds be submitted to voters.
Under current law, such stadiums need only be approved by the City Council, where the arena deal is believed to have majority backing.
Wachs said he remains skeptical that the guarantee being offered is ironclad and is also skeptical of the developer’s claims that having to wait for a popular vote could kill the project.
“That is the classic technique of teams used across the country,” said the San Fernando Valley councilman, who has positioned himself as a populist interested in looking after the public purse. “ ‘Give us what we want or we’re leaving,’ or ‘Give us what we want or you’re going to kill the deal.’ And that is how they have developed a history of blackmailing city after city after city.”
Wachs said he believes that the current offer of a guarantee is meaningless--from a company whose only asset would be a highly mortgaged arena--and would be useless to taxpayers in the event of a default.
Questioned about what sort of guarantee he would find acceptable, Wachs suggested that only a legal instrument such as a letter of credit, for which the developer had set aside the $70 million, would do. “If they did that, I don’t think they would really be using city money,” he said.
The developers said Wachs has it all wrong. In a letter to council members dated Wednesday, they said they were willing to take out a “total guarantee . . . satisfactory to the city in all respects"--an insurance policy with “a nationally recognized financial institution or insurer” to cover any defaults.
Wachs said through a spokesman late in the afternoon that he had not yet received a copy of the letter from the developer. He said he would send a copy provided to him by The Times to his lawyer for review.
Faced with Wachs’ campaign and the possibility of having to submit the arena plans to a vote, the developers Wednesday launched what they called an “education” offensive, featuring a full-page ad in The Times headlined, “We’ll Build Civic Pride,” and a news conference at which they expressed contrition for not having earlier made public the contracts between them and the Kings and Lakers.
Releasing the contracts had been at the the heart of a campaign for full disclosure by Times columnist Bill Boyarsky.
“I think that the columnist is probably right,” said Kings President Tim Leiweke. “We’ve made some mistakes here. I’ll take the blame for some of it.”
Leiweke said some deal participants had been reluctant to make public agreements that were part of an overall deal that is still being negotiated.
He and others connected with the arena cast the mistake as an innocent public relations blunder rather than an attempt to conceal pertinent details from the public.
They said they planned to take out at least one more newspaper ad, become frequent visitors to talk shows and try to mobilize sports fans to come to their defense.
Lawyers working for the developers said the inch-thick contracts obligate the Kings and Lakers to stay in Los Angeles and play in the arena for 25 years.
Each team could terminate its lease only if the developer failed to perform specific deeds, most of which--selecting a site, coming up with plans and making certain payments--have already been done, the officials said.
Other outs occur if the developer fails to begin construction within eight years and open the arena within 10.
Developers hope to begin construction next January and open in September 1999.
But if Wachs qualifies his initiative for the ballot with a signature-gathering campaign, it would probably not come to a vote until next June. Another vote on using city funds specifically for the arena might not be held until next November.
Arena officials said the delay could be fatal, in part because eminent domain powers, which the City Redevelopment Agency plans to use to acquire the arena site, expire in December 1998.
Leiweke said the delays could add $35 million to $50 million to the project’s costs and that, if the developers decide to fight Wachs’ initiative, “we will have to spend an additional $5 million to $10 million.”
Given those projections, the Kings’ president said, “If 30 days from now, this initiative is alive, we’ll have to ask whether we still want to go forward. It’s a dangerous question. . . . I think our owners may decide to go elsewhere.”
Semcken said the “the transaction is not financially feasible” unless public money is used to float bonds.
* THE SPIN: An initiative on the sports arena plan sounds like a good idea, but it isn’t. B1
* BILL PLASCHKE: With all the money guaranteed, the city should allow arena deal to go through. C1