Wachs Softens Stand Against Arena Accord

City Councilman Joel Wachs said Thursday that he will back away from a plan that could doom a new sports arena downtown if developers can convince him that their pledge to guarantee repayment of public funds is ironclad.

Declaring that his only goal is to see that tax money is not lost to wealthy sports entrepreneurs, Wachs said he is not opposed to deals in which sports stadium developers use public money as long as that money is not at risk.

He criticized as too vague a public pledge the arena developers made Wednesday to buy what amounts to an insurance policy to guarantee repayment of the public funds.

But if the developers can work out a more detailed pledge that satisfies him, Wachs said, he will exempt them from his proposed initiative requiring that sports stadium projects relying on public funds be approved by voters.

The developers say the delay in the process that a public vote would bring would probably kill their project. The law now requires only City Council approval.

The San Fernando Valley councilman, who has emerged as the arena deal’s leading critic, canceled a planned trip to Europe next week in order to work on acceptable language for the repayment guarantee and offered, in an interview, to meet with the developers.

“If we’re both people of good faith, then this is accomplishable,” the councilman said.

Arena developers greeted Wachs’ statements as a hopeful sign.

“We have made a commitment [to] provide for zero risk to the taxpayers of the city of Los Angeles, and if all we need to do is demonstrate that to Councilman Wachs, it sounds like a very positive movement,” said L.A. Arena Co. Vice President John H. Semcken III. “It sounds like we will soon be under construction.”

The arena, which would provide a new home for the National Basketball Assn.’s Lakers and the National Hockey League’s Kings, has been eagerly supported by downtown business and city political leaders as a way to breathe new life into Los Angeles’ core.

But Wachs has staked out a position as a critic of its proposed financing. Developers want to construct the $300-million facility near the Convention Center with the help of $70 million in city-issued bonds. Their plan is for the bonds to be paid off at the rate of $6.8 million annually, for 25 years, with sales and property taxes, parking revenues and ticket surcharges.

Developers say they will generate enough money to pay off the bonds.

But Wachs has posed the question: What if they do not?

“I am not against the arena,” Wachs said in an interview at his City Hall office. “I am against subsidizing it. They all along have said you should subsidize it because it’s going to have all these wonderful benefits. And I’ve said all these wonderful benefits are just promises. . . . I’m not willing to go on faith.”

Faced with a City Council inclined to support the project, Wachs this week announced plans for an initiative that would take the issue to voters by requiring an election before any professional sports facility could receive a public subsidy.

Arena developers then announced that they would guarantee to make up any shortfall in funds needed to pay off the city’s bonds.

Wachs took credit for their move, saying he has been asking for it for a year. “This wouldn’t have happened but for the initiative. I know that,” he said.

Arena officials did not dispute his assessment, but said other factors were also involved.

“I think it would be more fair to say that we have been pressured by several levels of the City Council including Councilman Wachs,” Semcken said. “We have been in discussion about providing a guarantee for several weeks now.”

Semcken said arena officials had been reluctant to provide a guarantee because they believed that the risks to the city were minimal and did not justify developers taking on the additional costs that arranging for a guarantee would entail.

Their proposal Wednesday would amount to an insurance policy for which they would pay a “nationally recognized financial institution or insurer” an unspecified fee in return for its pledge to make up any shortfall in repayment of the bonds.

Wachs indicated that he was pleased that the developers were not offering to secure the debt by pledging their arena company--which he derided as an entity likely to be a “shell” whose only asset would be a highly mortgaged sports facility.

But he said their offer still has too many unknowns.

“I have to know that it is not something that has enough loopholes so they can drive a truck through it later on,” he said. “I have to know the money is there . . . not that there is some promise and I’ve got to go sue you for it.

“Now, if there’s no taxpayer money at risk . . . boy, terrific, let them come. But I don’t want to be fleeced.”

Drafting acceptable language will be difficult, Wachs said. He was scheduled to leave at his own expense next Wednesday for a trip that included a four-day conference in Austria on art and technology, he said, but canceled it so he could get the advice of city and independent lawyers and financial experts familiar with professional sports contracts.

Time pressures are acute. Wachs has already submitted the language of his proposed initiative to the city attorney and city clerk and is awaiting their approval, expected within days. Once they approve it, he will by law have only 120 days to gather 61,170 signatures to qualify it for the ballot.

If his initiative is to qualify for the earliest possible election in June 1998, he cannot even use the full 120 days because his statutory deadline for turning in the signatures will be Dec. 24.

Revising the language of the initiative to exempt sports facilities that use public money but guarantee the funds will cut further into his signature-gathering time. Before he can gather any signatures, he will have to resubmit the initiative to the city clerk and city attorney, who will have 10 days to approve it.

In a written statement, Wachs said he would delay “for at least a few days” circulating petitions so revisions can be drafted.

Developers, meanwhile, say their timeline is dominated by the scheduled expiration of the Community Redevelopment Agency’s eminent domain powers--needed to acquire land for arena parking--in December 1998.

“We wouldn’t take out a loan basically for a $300-million building if we didn’t know we were going to be able to get the land for parking,” Semcken said.

Developers say that having to wait for voter approval next June would force them to delay construction--now scheduled to begin in January--and probably kill the deal. They hope to open the facility in September 1999.